How to Manage the Post-Merger Integration of Physician Groups
Many physician owners spend months of time and effort closing merger transactions but they stumble when it comes to post-merger integration.
Closing the deal is a major milestone, but it’s the post-merger integration process where the real value is created. It may be difficult to believe, but the post-merger integration can be even more complicated than the deal itself.
Communication is critical during the post-merger integration process and the two groups need to share documents easily. The information must be transitioned seamlessly throughout. The whole integration process has to meet the physician owners’ expectations for key timelines and capturing synergies in growth and costs.
Conducting post-merger integration at a high speed is one of the most critical elements to a deal’s success. Taking proactive action within the first 100 days after closing the deal can significantly realize merger synergies. Practice administrators working in concert with a seasoned consultant must develop a well-structured plan for their post-merger integration efforts to vastly improve their odds for a successful outcome.
The complexities of post-merger integration
Many physician owners spend months of time and effort closing merger transactions. However, they stumble when it comes to integration. Oftentimes, buyers significantly underestimate the level of involvement in a successful integration effort.
Common post-merger mistakes include:
- Failing to properly assess the resources to integrate and operate two businesses
- Not addressing “people issues” and cultural differences of the physician groups
- Losing focus after the signing of a deal
- Not acting promptly, allowing key personnel to leave both organizations
- Overloading management with integration responsibilities outside their scope of expertise
These mistakes lead to a lack of synergies and a significantly slower integration effort. This lack of speed during integration tends to compound the mistakes.
Speed is of the essence
Physician groups that move slowly during the integration process are vulnerable both financially and competitively. The announcement of a merger between two groups creates uncertainty among employees of both organizations. It fuels anxiety-filled discussions about who will stay and who will be let go.
Without proactive and effective communications, employee morale will suffer. Even worse, those key employees that you hope to keep may jump ship to competitors or other organizations.
The turbulence of an announced merger can give competitors a perfect opportunity to call on your referring physicians and even patients. The community at large can spread all kinds of unconfirmed “alternative facts.”
A slow response to retention initiatives (retention of employees, patients, and referring physicians) during a merger can leave competitive doors open too wide for too long. Decision-making must be streamlined for the integration effort to move forward.
The completion of a few “quick win” integration tasks will bolster confidence in the team leadership. It will also keep the process moving forward. For example, one of the first things to accomplish is a staff meeting to discuss key human resource issues such as payroll schedule and benefits transition.
A plan of action for post-merger integration
Strategic integration decisions should be put in place prior to the completion of due diligence because these strategic decisions may influence the deal terms and structure. It’s important to identify these details and include them in the deal agreement before closing.
Ideally, a 100-day integration plan is implemented when the deal closes. This should include identifying tasks to be completed, known issues, milestones, and planned timelines for completion.
Following the deal’s closing, detailed planning sessions should begin with functional department members of both practices. In the beginning stages, joint meetings are essential to establish relationships between representatives of both practices.
Once initial on-site discussions are completed, subsequent discussions leveraging virtual meeting technology can take place. The two together will result in more efficient time utilization and reduced travel costs.
If you think of a physician group merger as a marriage, then you can see there is still a lot of work left to do after the wedding day. Yes, it’s the day in, day out effort of the marriage that takes patience and thoughtfulness. It also tends to get messy. Compared to a marriage, the wedding is easy.
Post-merger integration is critical to realizing the value of a deal. It’s also highly complex, taking place under severe time pressure, and happens in parallel to running the core business. That makes it one of the most challenging initiatives physician owners and practice administrators will ever undertake.
After a merger takes effect, strategic communication is central to the integration of the two physician groups into a more effective single entity. Thoughtful, planned communication shares important information internally (e.g. staff) and externally (e.g. patients, referring physicians, etc.). It also builds trust and helps maintains motivation in a time of relative uncertainty.
Practically, it can reduce the impact of rumors and help to unify different parts of the new, joint medical practice. By definition, this requires change communication.
Effective communication during the post-merger phase is required to:
- Ensure a common understanding of the business case for the merger and the vision for the future;
- Help people understand and internalize change;
- Keep the organization focused on patients and productivity;
- Reinforce desired behaviors;
- Promote cultural alignment;
- Help with retention and motivation of key talent;
- Control the rumor mill.
Good communication practices in the post-merger period are:
- Recognize that all merger goals depend on communication. Employees have to be persuaded to believe in the vision and to act to bring it about. This is a communication task.
- Know the communication goals. At all times, with all stakeholders, the goal for the communication needs to be kept in the forefront of the mind.
- Managers need to be aware of the logistical and cultural factors necessary to communicate with staff in all locations.
- Be flexible. Bring the best combination of communication techniques to bear on the situation and be prepared to adjust according to feedback.
- Dialogue is the richest form of feedback, but not the only one.
- Always communicate. Non-communication is still communication because it sends negative messages.
- Follow a framework to help manage the complexity. Understand all stakeholders, know the goals, write a plan, craft messages positively and effectively, select media carefully. (Compare the difference between “We don’t expect any staff reductions,” and “There will be no staff reductions” and even better, a more positive “We all have important roles to play in the future.”)
- Check senior managers’ commitment to the message and their ability to communicate it consistently, firmly and honestly.
The bottom line
The secret to post-merger integration success is to focus on the strategic objectives of the deal, accelerate synergies, and build a high-performance medical practice. In order to be successful, a merger must be followed up with a detailed course of action.
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Nick Hernandez, MBA, FACHE, is the CEO and Founder of ABISA, a consultancy specializing in solo and small group practice management. He has consulted with clients in multiple countries and has over 20 years of leadership and operations experience. His emphasis has been on developing and maintaining a strong relationship with physicians and identifying areas for business opportunity and support. He holds MBA degrees in both Operations Management and Information Technology & E-Business Management from Wake Forest University. He is also Board Certified in Healthcare Management and has been named a Fellow of the American College of Healthcare Executives.
Originally published at https://thedoctorweighsin.com on July 1, 2019.