Thursday, May 26, 2011

HSPH students analyze hospital mergers

Those nice students from the Harvard School of Public Health turned in their paper about hospital mergers, and they were kind enough to send me a copy. It is entitled,"Leading by Leveraging Culture in Hospital Mergers," and the authors are M. Marianne Jurasic, Ryota Konishi, and Katherine Sullivan. Their research led them to a number of lessons and recommendations. Here are some excerpts (cites omitted):

If hospital mergers are such great opportunities from an economic perspective, why do many notable failures litter the landscape and the pages of academic journals? Despite similar commitments to patient care, safety, and improving health, no two health care organizations are exactly alike. Thus culture clash between merging organizations is inevitable. It is our contention that one reason many hospital mergers fail is because hospital leadership fails to anticipate and address the impact of culture clash on the outcome. By being aware of the acculturation process in the new organization, management can have a positive influence on the merger process.

We recommend merging entities examine how their cultures differ prior to the merger. The merging entities should consider how much they value the preservation of their own culture and also their perception of the attractiveness of their merging partner. This analysis will enable them to determine whether their cultures will undergo integration, assimilation, separation or deculturation. If the two merging entities agree on their mode of acculturation, there will be less acculturative stress present and a more successful implementation of the merger.

We also recommend the development of a comprehensive plan for cultural integration. Despite the persistence of small and imminent problems, a long term goal and vision for the merged organization is necessary. In order to communicate management’s commitment to this vision, quick and decisive actions regarding any post-merger reorganization and consolidation are required. For example, prior to their merger, HP and Compaq recognized that they had had very different cultures. To address it, they anointed 650 part-time internal "cultural consultants." Early and comprehensive intervention by management provides a way to ensure that a uniform culture develops. Management can exert its influence on culture through socialization activities that include seminars, cultural and behavioral training, and provision of incentives for desired behaviors and social activities.

A final recommendation is that management communicate that voluntary employee departures are a normal part of building a new culture. It is important to accept that some conflict and dislocation is a part of the process, and not to lose focus on overall strategic goals. Mergers are inevitably accompanied by change, and this change can be stressful and frightening. The departure of individuals leads to “wash out” of extreme cultural differences and paves the way for new employees to join the group who are more susceptible to enculturation. Poor communication during mergers may intensify stress among the members of the organization because of the uncertainty they feel regarding their future. It is for this reason that various methods of communication are necessary to ensure there exists exemplary information transfer between all members of the organization.

The cultural implications of hospital mergers is not a relic of the hospital merger frenzy of a decade ago. Rather, ongoing health care payment reform in the United States, which will attempt to shift the payment system from fee-for-service to pay-for-performance or global payments system in order to improve the quality of care and reduce overall medical expenditures, creates a similarly uncertain financial operating environment for hospitals today as existed in the 1980’s and 1990’s. Given the high likelihood of increased hospital mergers going forward, hospital managers now have a the opportunity to learn from past mistakes and address issues of culture clash in the combined entity before, during, and after the merger takes place.

7 comments:

Beverly said...

From Facebook: I hope the hospitals are listening, but I am not optimistic. Other priorities tend to drive mergers, such as panic.

Anonymous said...

Here is the lesson as I see it. Successful managers become so convinced of their own infallibility, that they fail to assess the true sentiments of the front line employees -- a sure path to failure.

Anonymous said...

Very good post. Are the authors making this paper available? Will it be published in a journal sometime in the near future?

CMorton said...

How is hospital culture measured? If there are measurement tools, can you write about them? Are different hospital units/departments measured separately for comparison? What research has been done looking at how culture in a unit affects outcomes? I'm especially interested in obstetrics departments where culture/values drive practice quite a bit.

Has the concept of 'organizational maturity' gained much adherence in hospital management/organization literature? Thank you.

Sully said...

Hi, Katie here, on behalf of the team. @ 11:18 - we are in the process of making this available on SSRN, but are still waiting for permission from one of our informants. I will post another comment here when it goes up.

Sully said...

@ Cmorton - in the paper we discuss a framework developed by McKinsey for measuring culture in the M&A context. A basic description is available here: http://bit.ly/jNndCV

I'm not sure what research is out there on department-level context. Our paper focused on the managerial/leadership culture in hospitals because a macro-level view was more consistent with our coursework.

FWIW, our informants reported differing rates of department-level integration, so cultural compatibility quite likely varied by department. Our point is that it is leadership's role to anticipate that these conflicts will arise and have a comprehensive plan for dealing with them prior to merging.

Katie Sullivan said...

We are pleased to announce that our student paper, "Leading by Leveraging Culture in Hospital Mergers" is now available to download via the Social Science Research Network (SSRN):

http://ssrn.com/abstract=1881771

Best,

Katie, Marianne & Ryota