When executives of health and human service organizations have made the strategic decision that they need a “partner” (see Thinking Of MA&A? What Should You Be Thinking About?, M&A To Build Scale & Market Diversity: A Q&A With David Guth, Centerstone and 10 Keys To A Successful Merger & Acquisition Strategy), the question is-what’s next? The decisions that need to be made are what kind of “partnership” and what “partner.”
Over the past two years, we’ve written about a wide range of collaborations. From mergers and acquisitions, to affiliations, to administrative services organizations, to formal partnerships, to joint ventures, to collaborative services lines. But whatever the model, the crucial decision for executive teams is finding the right partner. Even with the right strategy, the right model, and the right implementation plan, the wrong partner can doom the best of plans.
I got some great advice about finding that right partner in the session, “Finding The Right Organization For Your Merger, Acquisition Or Affiliation”, at last year’s 2018 OPEN MINDS Mergers, Acquisitions, & Affiliations Summit. The session featured two executives with very different organizations—Craig Albers, President & Chief Operation Officer, Mercy Health St. Charles Hospital; and Frank Baumann, Chief Operating Officer, BayMark—who had strikingly similar advice.
Mr. Albers spoke of the recently completed merger of Mercy Health with Bon Secours (see Bon Secours, Mercy Health To Merge & Create Fifth Largest Catholic Health System In The U.S.) and their new telepsychiatry partnership with Lighthouse (see Lighthouse Telehealth Begins Partnership To Provide 24/7 Inpatient Psychiatric Coverage For Mercy Health). Bon Secours Mercy Health is now the fifth largest Catholic Health System in the United States with an estimated $8 billion in net operating revenue, $293 million in operating income, and more than 10 million consumers across 43 hospitals spanning seven states.
Baumann spoke of his work at Baymark, a portfolio company of Webster Capital, which has seen several high-profile M&A in recent months, including the acquisitions of Canadian Addiction Treatment Centres which included 72 opioid treatment programs, 19 pharmacies and 1 residential treatment center located in Ontario (see BayMark Health Services Acquires Canadian Addiction Treatment Centres).
They had four key pieces of advice for executives—do a self-assessment, do a general search, seek strategic agreement, and pace yourself.
Do a self-assessment—A timely assessment of possible partnerships starts with getting your own house in order. This means understanding your service gaps and weaknesses, and deliberately seeking a partnership that can offer solutions to those problems. Mr. Albers explained:
We want to partner with organizations that have an advanced model that we can bring in and get that up and running quickly. We will look at strategic location for access points and new locations. Or new services we don’t have at all, or they have the technology that we don’t have. Mercy Health has a tech arm, and a lot of times we will pilot partnerships either within one of the regions or one of the facilities to see how that process works.
Do a broad search—Identifying possible partners starts as a general search, but eventually must move from the “theoretical” to the specific. This is about building a better, stronger organization through your partnership. Can a potential partner achieve this? Mr. Baumann explained:
We look for two opportunities. We look at states that we want to be in, where there is need. And then there are opportunistic opportunities that come up when we get a phone call that offer a possibility to work with someone. We are very specific in the addiction arena, so we talk to everyone. It’s a matter of getting out and getting to know them, understanding their philosophies to see if they are a fit or a match. The personalities must work, and the people must work.
Seek strategic agreement—Another way of understanding whether you have strategic agreement is to ask, can you depend on the other organization’s leadership, service lines, profitability, geographic service area, customer markets, operational competencies, and positioning? There needs to be an agreement among your team about the drivers behind your plan, and there needs to be an agreement with prospective partners. Mr. Albers summed it up, noting, “A lot of any evaluation is to make sure that it’s going to be a win-win, and make sure it’s a good fit.” Mr. Baumann explained further:
Transactions are very expensive and take a lot of time and money. It’s good to know that there is a basis for this, before spending lots of money. Over several meetings, we want to understand what this will look like, and what the full valuation might look like. We don’t want to waste our time, or your time. Don’t lose focus on the most important thing. Then we may do some light due diligence, and then we do a letter of interest. After that, it’s very serious and we do deep due diligence. We have regulatory folks to understand the state requirements. We have a group that does a financial review for us. And we also talk about and understanding reimbursement.
Pace yourself—Mr. Albers and Mr. Baumann’s final advice on the day was not to reach too high, too quickly, and don’t do anything until you have done a thorough assessment of your own organization. Mr. Albers closed with sage advice—be honest about what you want and what you can do.
For some examples of the wide range of partnerships and partners, don’t miss our recent coverage:
- Fundamental Advisors & Senior Care Development To Form $1 Billion Skilled Nursing Joint Venture
- New $8 Billion Health System: Bon Secours, Mercy Health Finalize Merger
- Amgen, Magellan Rx Partner To Improve Consumer Care For Chronic, Difficult-To-Treat Conditions
- Kindred Healthcare & Netsmart Partner To Create Next Generation Post-Acute Platform
- OhioHealth & Select Medical Expand Joint Venture To Operate Physical Therapy Centers In Central Ohio
- BrightSpring & PharMerica Merge To Form Comprehensive Health Services Company
- Boston Children’s Hospital & 2nd.MD Form Virtual Care Partnership
- Walgreens Launches Next-Day Prescription Delivery Service With FedEx
- Bain Capital Builds New Home Health Platform, Arosa+LivHOME
- Walmart & Anthem Collaboration Allows Over-The-Counter Products At Walmart
For even more on this important conversation, mark your calendar now for The OPEN MINDS Mergers, Acquisitions, & Affiliations Summit: Best Practices For Non-Profit Health & Human Service Organizations – A Centerstone & OPEN MINDS Collaboration, on August 12, 2019 in Long Beach, California.