The Impact of a Hospital Merger and Acquisitions on Personnel and Hiring
The business of medicine is dynamic and under constant revenue assault. Government and private insurance remittances are declining in the “pay-for-procedure” revenue models. Years ago, survival instincts were catalyzed, as moderate sized private practices gobbled up sole practitioners. Regional practices bought moderately sized practices. Hospitals raided private practices to eliminate competition from specialists who were in private practice but utilized the hospital’s facilities. Hospitals began merging with other hospitals. Large national hospital groups began rapidly adding specialty hospitals to optimize their “portfolio.”
Meanwhile, consumers’ (patients) inability to pay their over-sized deductibles and co-payments is endemic. Currently, the federal government has no interest in further tinkering with healthcare legislation. The mid-term elections are just a few months away. Until there is an outcome that offers one or the other side of the spectrum a realistic opportunity to lead change it will not happen.
The Beginning: Announcement of a Hospital’s Merger or Acquisition
Institutions take on the culture and behavior unique to them. Oftentimes the harsh realities of “medicine in the trenches” is never fully and accurately communicated to hospital leadership and board members. Trustees and Boards work from a “Top Down” business metric. Synergies beget financial savings. Practitioners are just fungible chess pieces to be moved around a board to produce a desired financial outcome. Ever-larger institutions are formed, with considerably smaller profit margins, in an attempt to survive. Strategic Business Models looking ten years into the future are better described as fantasy. Reality is getting through this fiscal year with as small an operating loss as possible.
There are several definitive and defining steps once a hospital announces a merger or acquisition.
- Employees panic. Morale drops. It is reasonable for all employees to feel vulnerable and at risk of elimination. The very purpose of a merger is to eliminate duplication of services and efforts. People are expensive. Aside from some very special equipment that is depreciated over time, people are the costs. The more specialized and highly trained, the more they cost.
- Rumors. Those truly “in the know” at the most senior levels of an organization are obliged not to leak tactical decisions and plans. Not surprisingly, not every human can keep a secret. Some even begin posturing and colluding for their own career survival. There are, ultimately, no secrets.
- Superior talent will always be employable and sought after. They will be the first to be approached and picked off. If the day-to-day working environment becomes toxic they will leave. A poorly executed and controlled merger leaves inferior talent in the working ranks and on the payroll.
- Investment Bankers and Finance/Accounting teams take over the process. An immediate hiring freeze occurs. This portion of the transaction always lasts significantly longer than anyone imagined. During the required due diligence something untoward and hidden for years or decades surfaces. Accounting can be a mystery, wrapped in an enigma until it is exposed. Expectations for huge productivity gains originally anticipated are reduced and become a bit more moderate in scope.
- The work of providing healthcare must go on. Sick people exist and always will. Since much of the premier talent has abandoned ship and the hiring freeze is in place the hospital reverts to locums’ tenens. This is a devastating real expense increase that hurts the transaction if it is drawn out.
- Eventually, the new entity commences business and is ready to work its new brand and strategic plan.
The Middle: Assessment of the Current Landscape
The new organization assesses its talent and labor shortfalls and begins an aggressive hiring plan. Leadership should quickly have clear and identifiable data on the new patient census, payment streams and the medical talent required.
What can current management do before the inevitable happens? How can they make a transaction seamless, with the least possible “Brain-Drain,” while keeping talent acquisition costs as low as possible? HR departments, long before a business event takes place, must perform regular and deeply penetrating employee reviews. Not just about whether the job is done satisfactorily – but what unique skills and talents does this person possess? Is this skill set critical to what makes this hospital unique and profitable? Would I seek to steal this professional away if I did not already have them here?
The cream of the crop should know the benefit they offer the organization and be made to feel confident that they are not a hired hand–they are the institution. If your key performers know their significance to the facility and are made a part of the process of combining operations, there will be less flight. Committees should be formed with key specialists and rank and file to discover and offer management active “on-the-ground” recommendations of potential cost savings. The worker bees know where the bodies are buried. The CEO does not!
The End: Strategy for Future Success
Get through the finance portion of the deal as fast as possible. Once the new CEO is named, he/she should have his executive team and Org Chart ready to roll immediately. Combining and staffing must begin.
STOP wasting vast sums of capital on locums and short-term band-aids to operate. Instead, hire a professional third-party Recruitment/Retainment Firm. Highest quality talent acquisition is mission critical. Start fresh, start fast. Trying to save nickels by insisting on In-House Recruiting only will cost you dollars. Jobs go unfilled for far too long. The moderate fee for a high quality vetted candidate is one month’s locums pay. A professional and well established independent firm is the facility’s greatest ally and secret weapon. They know who in your organization may leave. They know where the best, and proven, talent is currently working nationwide. A third party can fairly and accurately reflect the new institution’s brand and mission objectively. Candidates have a natural apprehension for post-merger sales pitches.
Partner with MedSource Consultants Today
Partner with a respected and well-experienced Healthcare Recruitment/Retainment Specialist before, during and after the shock of merger news. Keep your great talent. Reduce per diem expenses. Build a new brand rapidly. Get access to the nation’s best talent and thrive.