Mission Matters Merger In the 1980s, two healthcare organizations with distinct
ID: 392916 • Letter: M
Question
Mission Matters Merger
In the 1980s, two healthcare organizations with distinct cultures attempted a merger that soon ran into trouble. How, and why, are mergers difficult? Consider the following history.
In 1975, Idaho Falls, Idaho, had two hospitals: Community Hospital of Idaho Falls and Idaho Falls Hospital. The first was managed by a community board and the latter was controlled by Intermountain Health Care (IHC), a regional healthcare system based in Salt Lake City, Utah, more than 200 miles away. To control costs of duplicate management and services, the two hospitals merged in 1978 to form the Idaho Falls Consolidated Hospitals, with two campuses: Parkview and Riverview.
However, the merger dissolved in 1984, and the board of the Community Hospital of Idaho Falls asked Hospital Corporation of America (HCA) to manage the Parkview facility and eventually replace it with a new healthcare facility. Local physicians wanted a single regional medical center, and eventually IHC and the Idaho Falls Community Hospital boards signed an agreement to build a joint venture hospital managed by HCA. In 1985, ground was broken for the HCA Eastern Idaho Regional Medical Center (EIRMC), which opened its doors to patients on December 22, 1986. The 1,074 employees of Parkview and Riverview Hospitals were terminated at midnight on December 21, 1986, and hired by EIRMC one minute later. The members of the medical staff no longer had to cross town to see their patients at two facilities. Significant savings to the community and reduced healthcare costs were predicted.
Although IHC controlled only 49 percent of the joint venture, it expected a collaborative relationship. Senior leaders of IHC trusted that HCA would work with them to maintain reasonable hospital charges and develop appropriate services for the Idaho Falls community. As one leader later reflected, he thought a handshake and promise would suffice.
However, almost immediately, the differences in missions arose and quickly became pronounced. What HCA and IHC thought was good for the community and for themselves appeared incompatible. As a for-profit, HCA's managers immediately focused on reducing costs and increasing prices. IHC, on the other hand, desired cost efficiencies, but nothing as austere as those pursued by the HCA. It also wanted prices to remain lower. But IHC did not manage the facility and only had influence at the board level.
Employees also struggled to work together. The cultures of the two previous hospitals had been very different. Turnover increased and conflicts erupted. These issues and differences became very clear when the board, which was made up of HCA and IHC leaders, was presented with the first EIRMC budget. The profit expectations were more than double what IHC would earn in one of its solely owned facilities. The CEO of IHC wanted this merger to work, but could it?
Questions
Why is the merger having difficulty? What factors cause mergers to fail?
How does having distinct missions affect how an organization structures its processes and outcomes?
What could be done to solve the problems? Is merging a for-profit with a not-for-profit doomed to failure?
Can organizations with such different missions merge? If so, how? (Walston 146-147)
Walston, Stephen L., PhD. Strategic Healthcare Management: Planning and Execution, Second Edition, 2nd Edition. Health Administration Press, 2018-01-09. VitalBook file.
Explanation / Answer
1. Any merger is not only a merger of 2 or more companies, but also it’s a merger of its respective work culture, work ethics, future vision and mission of the company as well. While these are the common areas or attributes which are absolutely put under the test or challenge for initial few years after the merger, but there are other small yet important factors which arise after the merger but take a front seat in deciding the course and fate of the merger and future performances of the join collaboration such as difference in common mission, different style of governance, Lack of communication, inter-team bonding, dearth of strong leadership and other trivial issues. If any of the above factors gains prominence, then it directly leads to differences, tension and sometimes call offs from the ongoing collaboration.
2. Primarily distinct missions and Visions are the signature attributes or quality of any company and at the same time make it unique from other companies. After the merger, despite sharing a common vision and mission, many a no. of times, companies fail to realize this obligation and still try to steer or impose its own vision in join set up as well. This act or deed sometimes doesn’t please the other partner or put the directors of the other company at unease. Ultimately, these things start affecting the organizational structure and also the business outcomes due to the too much of subtle differences in the though process.
3. There are a lot of companies who make a good profit, post merger and mergers are intended to make profits as it’s a cumbersome activity and it takes years to decide or select the partners for the merger. Primary reasons for the mergers are to capture the market space for a particular product or services so that consumers can totally focus on their brand of items or services. It also helps the companies to make a strong foothold and monopoly in the consumer space. Despite having a clear vision before the merger, sometimes mergers fail, just because of failing to realize the obligation and being adamant on following the policies and work culture of a particular company, thereby ignoring the aspirations and expectations of the other partner. Hence understanding and respecting each other’s work ethics and showing some professional maturity can certainly help the merged entities to gain business momentum and can sustain in a long run.
4. Considering the above case of merger between Community Hospital of Idaho Falls and Idaho Falls Hospital, they seem to be a natural partner and hold a great promise of doing good business post merger. Had it been two totally different entity, practical problems could have been plenty but here merger should have gone well, had the board of directors would have shown little bit of professional maturity.