Academic journal article Frontiers of Health Services Management

Integration: An Inclusive Approach to Provider Affiliations

Academic journal article Frontiers of Health Services Management

Integration: An Inclusive Approach to Provider Affiliations

Article excerpt

ACQUISITION. MERGER. AFFILIATION. These terms, as explicitly and implicitly defined by Zuckerman and Rice, are helpful constructs for healthcare leaders as they consider options for bringing together provider organizations. Those terms may be too limiting for some organizations, however, as my organization learned in our recent affiliation with a large regional provider system in northeastern Wisconsin. As we began to consider long-term options for our community's independent 25-bed critical access hospital, we viewed our situation much as Rice describes: an opportunity to engage a future that otherwise looked dire.

We eventually assumed the more analytical approach Zuckerman articulates, weighing the risks and benefits, studying the financial implications, planning for consolidated operations, exercising due diligence around the final transaction. However, between those first steps of considering options and those down-the-road steps of intense assessment, we had a lot of ground to cover - ground that required the roadmap of experience, perseverance, and goodwill. It also required a new way of thinking about a new relationship, a relationship that began by planting seeds of trust and respect. Those seeds sprouted in an affiliation of shared partnership that we called integration.

THE INSIDE STORY

After leading two affiliations in four years, I'm more aware than ever that the process is nuanced and not easily reduced to a series of predetermined tactics or a tidy legal document. Bringing together two provider organizations, especially when they've been fierce competitors in a small town, is complex and challenging beyond the important considerations Rice and Zuckerman raise. In both transactions I've participated in, and especially in the most recent affiliation of Shawano Medical Center (SMC) with ThedaCare, the success of the affiliation has hinged on building the relationship. More than any other factor, the quality ofthat relationship determines the success of die affiliation.

Before arriving in Shawano, Wisconsin, in July 2009, 1 was the chief executive officer of a community hospital in Minnesota that was part of a large healthcare system. There I led several joint ventures and oversaw the development of an integrated healthcare campus that included a large competitor system. Because the deficits recentiy plaguing our field affected Minnesota several years before they hit Wisconsin, I also had a keen awareness of die tenuous situation many community hospitals face in a struggling economy.

As Zuckerman and Rice point out, SMC faced factors common to many small hospitals in a changing field: a lack of access to capital, an aging hospital, a diminishing operating margin (we had achieved only a four percent operating margin three times in the prior 10 years, and had not even managed three percent in five of those ten years), the inability to continue offering competitive compensation, and heavy use of emergency department services that drove bad debt and charity care.

We were also challenged by fierce competition with ThedaCare, a community-owned, four-hospital provider system based in Appleton, 45 miles south of Shawano. With a long history of offering physician services in the community, the recent construction of a large clinic and ambulatory surgery center in Shawano, and extensive hospital and ancillary services a short drive down the highway, ThedaCare was clearly here to stay.

That intense competition, coupled with national healthcare reform and Wisconsin's growing state budget deficit, added to our fragile situation. We were nearing conditions for the perfect storm. I was hired because of my experience in forging relationships. Our board knew our future was on die line. We had been courted by ThedaCare and by competitors in nearby Green Bay.

I was in my new role only a few months when I realized that SMCs competition with ThedaCare was the primary driver behind our precarious position in the marketplace and our own budget deficit. …

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