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Lessons from a failed healthcare merger

Leaders behind what would have been a billion-dollar healthcare merger recently announced plans to walk away from the deal. The merger of the two community focused healthcare systems would have resulted in an $11.5 billion system. The announcement provides an opportunity to review went wrong with this transaction and avoid similar issues.

#1: Charitable organizations operate a little differently

Many hospital systems operate as charitable organizations. When this is the case, a merger deal can require a couple of extra steps. In this situation, the law required the state Attorney General to review the proposed merger and acquisition deal because the charitable organization was selling a majority of its assets. Although approval was not required, those behind the deal still needed to go through the process of having the review complete.

#2: Culture considerations

Bringing together two organizations can mean combining two different work cultures. In this deal, physicians voiced concerns that the two workplace cultures were too different to merge successfully.

Ultimately, the larger healthcare center stated it chose to abandon the merger with the network of healthcare providers. Leaders note that the decision was the result of the mutual decision that they could best serve their community by remaining independent.

Healthcare leaders can apply these same principles to proposed mergers. Reviewing and preparing for both the logistics of the deal, like the additional steps required when a charitable organization is involved, as well as the cultural considerations to better ensure a smooth transition can mitigate the risk of the deal falling apart in the future.