5 Challenges When Hospital Systems Merge

Hospitals Face Challenges when Merging with Other Systems

  • Physician Retention and Recruitment
  • Efficiency of Supply Chain
  • Autonomy of Units
  • Clash of Corporate Cultures
  • Regulatory Compliance

The health care environment has been going through a consolidation phase as hospital merger activities increased significantly in the last few years according to Healthcare Finance News. These transactions are typically driven by financial concerns, such as enhancing access to capital, improving operational efficiency with shared resources and bolstering profit margins when possible. Hospitals need capital improvements to incorporate new technologies and improve systems that focus on ensuring that patients receive quality care in a safe and supportive environment. However, a hospital merger is bound to highlight existing stress points.

1. Physician Retention and Recruitment

The roster of physicians plays a significant role in the reputation of the hospital. Retaining the top health care providers is a primary concern when a merger is announced as professionals tend to see this corporate strategy as a sign of instability and seek employment elsewhere. It is also difficult to attract the best physicians when the facility or the hospital chain is in a state of flux.

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2. Efficiency of the Supply Chain and Other Processes

It is not uncommon for hospitals, even within the same system, to use different supply chain, inventory management applications and different suppliers. Integration of these systems and processes will contribute to a successful merger. Financial and systems experts recommend an information technology audit even before the merger is finalized to determine the most efficient way to integrate different systems that accomplish the same goals. IT integration is a particularly difficult issue as it involves a broad range of functions, including records management, accounting processes, and compliance protocols.

3. Autonomy of Units

The organizational charts of hospitals do not always conform to a standard template. Some providers may be involved with other units in the same or different capacity. Some departments and units may be given some autonomy for the sake of expeditious decision-making, especially on critical care issues. When different facilities merge, an attempt at centralization may compromise these arrangements, affecting the ability of frontline providers to make critical decisions.

4. Clash of Corporate Cultures

Organizations develop their own vision and corporate culture that may have little to do with top leadership. History and growth experience are some of the factors that define corporate culture, and mergers tend to highlight these differences. Corporate culture may have an impact on organizational processes an decision-making. When there are glaring differences in corporate values, this could slow down, if not completely derail, effective integration of the organizations undergoing consolidation.

5. Regulatory Compliance

Health care is one of the most regulated industries by necessity, and regulatory compliance is a top concern in healthcare management. Each organization develops a system of ensuring compliance, auditing operational strategies and redirecting resources to ensure positive and productive patient encounters. It is challenging for hospitals to merge different practices and visions even when the goals are the same. Compliance, quality assurance, and safety protocols are often established, enforced and monitored as committee efforts, and ensuring that the newly consolidated organization ends up with a coherent and efficient compliance system will take time.

The healthcare industry is coming to terms with the reality that a hospital merger may be exactly what the doctor prescribes for financially challenged facilities. Consolidation of hospitals may eventually lead to more efficient practices, improving operational viability in the process, but many challenges regarding personnel management, strategic policies and federal compliance will need to be addressed as one of the early priorities to ensure a smooth transition to an integrated hospital system.

Source: Healthcare Finance News

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