Mergers and acquisitions (M&A) continue in the health and human service field at a rapid pace. Future sustainability is the big driver of M&A with integrated care, value-based reimbursement, and new competition challenging the margins of organizations in the field (see 24% Of Health Care Executives Say Integration Was The Top Driver For Mergers & Acquisitions and 71% Of Health Care Provider Organization Leaders Believe Mergers & Acquisitions Will Increase). There were 90 hospital/health system mergers in 2018 and literally hundreds of mergers, acquisitions and affiliations in other sectors of the health and human service field (see 2018 M&A In Review: A New Landscape Takes Shape).
The question for executives of specialty provider organizations is – how to know when your organization is ready for some type of affiliation and, if so, how to find the right partner. That question was the focus of the session, “Are You Ready For A Merger Or Affiliation? How To Prepare Your Organization To Find The Right Partner” at The 2019 OPEN MINDS Executive Leadership Retreat. The session featured three executives with ‘hands on’ M&A experience—Mandy Fauble, Ph.D., LCSW, Executive Director, Safe Harbor Behavioral Health of UPMC Hamot; Jeremy Klemanski, President & Chief Executive Officer, Helio Health, Inc.; and Jeff Klimaski, President & Chief Operating Officer, The Columbus Organization. The executives had three key insights to share with other specialty provider organization executives:
- Consider your competitive market positioning and infrastructure
- Plan for payer and health plan contracting when creating merger plans
- Use mergers and affiliations to ‘fill the holes’ in your service offerings
Consider your competitive market positioning and infrastructure – Identifying major market factors and assessing your organization’s competencies and infrastructure help inform the decision to merge, acquire, or affiliate. Dr. Fauble explained that Safe Harbor Behavioral Health of UPMC Hamot was small and operated in a state that had a new Certified Community Behavioral Health Clinic demonstration grant, a push for more VBR, and physician recruitment issues. Due to the organization’s size and lack of infrastructure, Safe Harbor executives agreed to be acquired by a larger organization with the technological infrastructure needed to meet the demands of the environment. “Where I was finally won over was the ability to do transformational things,” Dr. Fauble explained, “We came out on the other side better positioned to do our mission and meet our contemporary environment demands”.
Plan for payer and health plan contracting when creating merger plans – Gaining size in terms of revenue and number of consumers served is crucial to finding a seat the table with health insurers and other stakeholders. Columbus Organization executives believe the best way to position themselves with payers is, which is why Columbus actively seeks M&A partners. Mr. Klimaski explained that, when seeking partners, the company looks for organizations that have a strong reputation in the market and a critical mass of consumers to increase the organization’s footprint.
Use mergers and affiliations to ‘fill the holes’ in your service offerings – Helio Health began acquiring and affiliating with other organizations after company executives identified a gap in the available mental health services in central New York. Rather than take the time to develop mental health service lines, Helio Health chose to acquire that capability. Mr. Klemanski explained that organizations should have a very clear strategic plan and reason for M&A. Without the “why,” organizations will find the process much harder and are at risk of affiliating with an organization that might be a bad fit. For Helio Health the strategic target is not a revenue number, instead the focus is on having a specific geographic and service line target. Ultimately the goal is to meet an unmet care need with quality, evidence-based care.
Take a look at our recent coverage of mergers, acquisitions, and affiliations:
- Letter Of Intent Signed By RWJBarnabas Health & Trinitas Regional Medical Center
- Grove City Medical Center & Allegheny Health Network Sign Affiliation Agreement
- Signify Health & Remedy Partners Announce Merger
- First Step Of Sarasota & Coastal Behavioral Healthcare Announce Merger
- Croix Hospice Acquires Hometown Hospice & Homecare
- Planned Parenthood Of Wisconsin Announces Merger With Essential Health Clinic
- Thomas Jefferson University Acquires Temple University’s Fox Chase Cancer Center
- Robins’ Nest Inc., Cape Counseling Services & NewPoint Behavioral Health Care Combine To Form Acenda Integrated Health
- Consolidated Care, Inc. Acquired By TCN Behavioral Health Services
- Southern Kentucky’s Largest Behavioral Health Care Organizations, LifeSkills, Inc. & Pennyroyal Center, Announce Merger
And for more, save the date for The OPEN MINDS Mergers, Acquisitions, & Affiliations Summit: Best Practices For Non-Profit Health & Human Service Organizations – A Centerstone & OPEN MINDS Collaboration on October 26, 2020 in Las Vegas, Nevada.