Get Ready: M&A Activity is Beginning to Accelerate
While there are many uncertainties around how the health system will emerge from this pandemic, it is certain that the financial impact on providers will be significant. The CARES Act provided some immediate relief, but there is consensus that it didn’t even come close to stabilizing the system. Many places have been able to resume elective procedures and preventive and diagnostic care that helps provide more stable revenue, yet, the impact of the last few months has created an environment that is ripe for a surge in mergers and acquisitions. Smaller systems, rural hospitals, and independent practices are likely to need a partner to help sustain them, and large systems are likely looking to expand their footprint and market share.
Early on, there were a few examples of canceled plans. After a definitive agreement, Michigan-based Beaumont Health and Ohio-based Summa Health called off their plans to form a $6.1 billion system. Advocate Trinity Hospital in Calumet Heights, Mercy Hospital & Medical Center in Bronzeville, South Shore Hospital in South Chicago and St. Bernard Hospital in Englewood had planned to join forces as part of a $1.1 billion project that included building at least one new hospital and up to half a dozen community health centers.
However, recently we’ve seen an uptick in M&A activity. In the Midwest, Advocate Aurora Health and Beaumont are in discussions to merge into a system that serves Wisconsin, Illinois and Michigan. In Wilmington North Carolina, New Hanover Regional Medical Center is being courted by Novant Health, Duke Health, and Atrium Health. And in the northeast, Lifespan and Care New England Health System have resumed after the two stopped negotiations last summer. There are undoubtedly many more conversations happening in executive suites and board rooms — with both those looking to acquire and those hoping to be acquired.
Like California, some states are taking steps to create tighter regulations on such activity, and there has been some criticism about health systems that took CARES Act money engaging in these transactions. But, there is general consensus across the industry that this trend will continue.
What this means for communicators
As systems are reengaging on M&A activity that was planned pre-COVID-19 or currently looking for partners, there are several considerations communicators should be thinking about:
- Communicate through the lens of value and stability.
- It’s natural for internal stakeholders and community members to hear about partnerships or acquisitions and think, “What’s in it for me?” Emphasizing improved quality, increased affordability, expanded access to care, and better financial stability within the context of the current landscape will help people connect to the partnership’s value. Communicators don’t have to shy away from being transparent about the financial challenges and why this path will allow them to manage the COVID-19 crisis and future pandemics. Without creating unnecessary fear, you can paint a picture of the alternative to an acquisition — one where many systems otherwise might lose a valuable healthcare resource — or capital plans may need to delay. In a time when many are facing economic hardship, it’s also important to share positive economic benefits for local communities.
- Leverage the standing of the health system in seeking stakeholder and community support.
- Healthcare providers have proven their importance and value in communities in unprecedented ways over the last few months. Communities have shown up to support healthcare workers — and they’ve shown up for their communities — risking everything to fight the pandemic. Putting provider voices forth in an authentic way can help win stakeholder and community buy-in for a new path forward.
- BUT that goodwill can also quickly be forgotten.
- As communicators, we know reputations must be nurtured. Just because providers are enjoying tremendous community support now, doesn’t mean it will stay that way. This is especially true if there is a breach of trust or a lack of transparency. This can be in the form of not engaging the community for input, substantial executive compensation and severance packages, significant cuts to the workforce, etc.
- Start with internal audiences.
- We always counsel clients to focus on internal audiences first when announcing an acquisition. But this is even more critical right now since staff have been working tirelessly to treat patients with COVID-19 and support financial recovery from the last few months. Any effective communication plan will need to clearly articulate the benefits to staff and allay any fears of additional layoffs as part of this transaction. Messages of stability will resonate with this audience.
As we move closer to what we hope is the other side of the pandemic — or at least a window of relief before a potential resurgence — with a foreseeable increase in M&A activity, communicators must have a seat at the table. As protectors of the brand, your voice will be essential to ensure that everything starts with the value to the community — to protect the organization's reputation and to deliver on your mission — regardless of whether your system is buying or selling.