Buckle Up and Think Different

The Big Story: Dow tumbles 1,160 points in worst trading day since June 2020

Portfolios of all shapes and sizes have taken a beating this year, more volatility is likely and there doesn’t seem to be consensus as to what will – or should happen and who should do what. “The issues between markets and the Fed may have less to do with an eye toward self-flagellation and more to do with a growing mistrust of the institution.”

The Other Big Story: AHA urges Supreme Court to protect hospitals from unconstitutional FTC actions

What it Means for Healthcare Providers

Two connected takes on the events of the last few days:

• This week’s market nosedive will be an added challenge for health systems counting on their investment income to buttress finances after a weak first quarter, the evaporation of pandemic monies, and real time patient volume and supply chain struggles.
• If one solution these systems consider is consolidation for scale and financial strength, the now fully appointed Federal Trade Commission must be part of their careful calculations. “Buckle up,” says the US Chamber.

Rock, meet hard place.

Of course, the consolidation of health systems is pursued for many reasons and can take many forms. Some come from a position of relative strength to build future-focused platforms. At other times, it’s a matter of sustainability, if not survival.

But in many ways system mergers of all stripes have never been more difficult to accomplish. More and more groups are taking shots, sometimes well-earned, at healthcare mergers.

Among the chorus: The Department of Justice, state attorneys general, insurance companies, labor unions and the FTC – highlighted recently by the never-shy healthcare industry guru Paul Keckley. “The FTC will be healthcare’s biggest headache until 2025” he writes.

In short, there have never been more or sharper questions asked about healthcare acquisitions – and more people asking the questions – in the very moment some systems will need it the most.

When the questions are asked, you need good answers. Compelling answers. That’s your story.

In previous commentary, we’ve shared how healthcare leaders considering or pursuing a transaction should use the power of communications to increase buy-in and even generate advocacy for the deal and, hopefully, smooth the way through state and federal regulators. The takeaways:

• Know your mission and the value you provide.
• Tell the story of how you fulfill that mission.
• Talk about what will and won’t change.
• Talk about the good that can come from a deal.
• Explain the alternatives if the deal doesn’t go through.

But. Before leaders can tell that story effectively, they must have the right mindset. It’s one that parallels an idea we so often hear from entrepreneurs: The willingness to recognize a disconnect between their service and what the market actually wants, and pivot accordingly. It’s being ok with the fact that the existing plan doesn’t work in the current environment and then, rather than doubling down, taking action to address the situation.

Becoming comfortable – or at least ok – with that disconnect between plan and environment comes upstream of communicating about a transaction, and it allows leaders and boards to give themselves permission to change.

Only then can leadership provide a complete and transparent recounting of the situation, rather than speaking in talking points that feel constrained and secretive. That in turn allows them to show why change is needed.

If getting to that point feels problematic, kick start the process with questions about the situation. For example:

• What is success? Is it staying independent or is it delivering the best possible care?
• What is our organization? Is it a brick hospital or is it a provider of healthcare?

The answers, hopefully, are the second options. Right there, that reframing of the market and the mission might help the story about a transaction fall into place, letting leaders better make the case for it.

So our advice this week is to reframe. Too often, we see the story of a deal lack the core issue: What will be lost or what critical opportunity missed without the partnership. For a physician practice, perhaps what will be lost is that precious time spent with patients. But for struggling hospitals, what will be lost is care in the community. Pretty sobering.

But it’s a compelling message because it’s sobering. And it’s one that needs to be told, despite the discomfort behind it. A shift in thinking might just help make it a little easier, and authentic, and compelling, to tell.

This piece was originally published over the weekend in our Sunday Quick Think newsletter. Fill out the form to get that in your inbox every week.