The Big Story: Dealmaking, regulatory scrutiny expected to ramp up
“Law firms were asked which kinds of legal services were most in demand at the time of the survey, with the option to select multiple categories. In response, nearly 90% of firms pointed to legal assistance related to mergers and acquisitions.”
Be thoughtful, not shy
A 2-minute read
By Tim Stewart
Bankers, attorneys and consultants rejoice! Healthcare M&A is hot again. The level of activity on partnerships is nearing pre-pandemic levels, which is an important marker because it also serves up a before and after on the perception of healthcare providers among the public.
As Modern Healthcare reported, “The tax law’s looming Medicaid reimbursement decreases and expected enrollment reductions are affecting dealmaking in two main ways.” Those are: “redeploy[ing] capital in other sectors” and “buying facilities in markets that complement their footprint” in order to achieve some efficiency of scale.
There are other ways the environment is dramatically different for health systems than it was in 2019. A one-sentence recap: After reaching unprecedented levels of public appreciation during the pandemic, hospitals and health systems have spent the last several years watching their standing among the public deteriorate to the point where a very strong majority believes that hospitals put profits over patients. Announcing a new partnership risks foregrounding the business of healthcare – those very real and very important reasons noted by Modern Healthcare – when people least want to hear more about healthcare as an industry. They’d much rather hear about healthcare as, well, providing care and positive impact.
The investor John Templeton is credited with coining the phrase, “The four most dangerous words in investing are: ‘this time it’s different.’” The meaning behind that caution applies to this moment in healthcare partnerships. Too often, excited organizations announce their plans using the pre-pandemic playbook and insist that This Time really is different, and the promise of This Deal will actually be realized.
This changed environment demands a changed approach. The variations of “Better Together” campaigns that dominated the 2010s (and that our firm definitely had a hand in) are not going to meet the 2020s moment. Access to a wide array of information means consumers are savvier in some ways, less savvy in others. Physicians, nurses and entire teams have been through too many wringers to count. And our industry has a battered reputation when it comes to prioritizing the needs of the people we serve. This era calls for different approaches that speak directly to where people are and how we hope to serve them in the future.
Describe what’s really happening: Your deal announcement needs to price in the skepticism people have about why and how health systems make decisions about their future. Platitudes about shared culture and mission are not enough. Your people inside and outside your walls need real examples of how those cultural imperatives are lived in both organizations, and how that shared culture sits alongside the operational and business motivations for your partnership. Acknowledging that things are difficult is uncomfortable. No need to overshare but pretending like a deal is happening because things are perfect won’t resonate. Which leads to…
Don’t be afraid of telling people your rationale: The pressures facing healthcare providers are very real and well-documented. Physician and nursing shortages will only be exacerbated over the next decade as the “Silver Tsunami” of baby boomers gets older and requires more and more complex care. Set against the reality of declining reimbursement from Medicare and Medicaid and exacerbated by the effects of last year’s HR 1, the status quo is not sustainable for even many currently healthy hospitals. Yes, it’s a political environment and each organization should be thoughtful about when and how it wades into policy-related conversations. But we also know there is enough – and in some cases a lot of – public agreement to get the conversation started.
Actually execute in the areas that will make a real difference: Ask ChatGPT if hospital mergers are good for patients (you know your patients will) and you will not be surprised to learn that the robot says costs often go up. It will also say that positive impacts on quality of care, access and care coordination are inconsistent. Which is to say that you can define meaningful progress in these areas, but you have to work to actually get there. The inconsistency is reflected in institutional exhaustion with the integration process, leaving so many dreams in strategic PowerPoint decks unrealized.
Speak in clear language, not boardroom language: Let’s make explicit what’s been implied throughout the above. You can do the work, measure the work and even talk about the work. We’d advise going one better and actually communicate about the work. The details need to be presented to your many key audiences in ways they can understand and connect with. Jargon won’t land. Technical details that don’t address their needs or concerns won’t land. Too much emphasis on what it all means for your organization without balancing that with what it means for them… won’t land.
The landscape and underlying pressures necessitating big change aren’t going away any time soon. And there’s only so much any one leader can do to change those, anyway. Getting ahead of the story – really, defining the story – will go a long way in avoiding the unnecessary and entirely manageable pressure that comes from your specific deal.
Contributor: David Shifrin, Isaac Squyres
Image Credit: Shannon Threadgill
