Mergers and acquisitions in the healthcare space.

Mergers and acquisitions: Transforming the healthcare landscape.

Mergers and acquisitions in the healthcare space have been on the rise over the last several years and industry analysts expect that trend to continue. During a merger or acquisition, organizations can be at risk as the multiple entities condense their systems. It’s important for everyone involved to be aware of how their customers, clients and relationships can be impacted.

A merger is the coming together of equal entities, whereas an acquisition is when a larger organization obtains one or more smaller entities. When either one occurs, there are three steps that follow:
 

1. Rationalization of the organizational chart: The new singular entity will likely only have one CEO, one CFO, etc. Decisions must be made to streamline the org chart of the new entity. This process can take up to a year.
    
2. Rationalization of the technology portfolio: All core systems are now redundant — they can have two electronic medical record systems, two banks, two or more solution providers — and must be reduced. Because of the complexity of these systems, completing this step can take 18-24 months.
    
3. Rationalization of the corporate accounts: The combined entity inherits all corporate accounts, but because the first two steps take priority and can last up to three years, often this third step never gets fully completed.

“That third step is where CommerceHealthcare® has good success stories on the revenue cycle side,” said Ward Svarvari, Senior Healthcare Relationship Executive. “We can provide a lot of value by performing the account rationalization for them. Centura Health is a perfect example. By the time we talked to them, they had seven tax IDs and 47 lockboxes, plus 47 accounts to go with those lockboxes. We came in, did the work for them, and took them from 47 lockboxes and accounts to seven — one for each tax ID.”

Similar opportunities exist in the Health Services Financing (HSF^®) space as well. In a recent example, a large health system acquired a small struggling hospital that was a Commerce customer. Even though this hospital was suffering financially, their patient financing program (done through Commerce) was performing significantly higher than that of the large health system. The large health system approached Commerce and is in talks to roll out an HSF^® program throughout their whole organization. By providing consultative value, our goal is to make success stories like this more common.

“We have experience and work consultatively with them to really understand their business, and they don’t always get that with other banks,” said Christine Tanos, Specialty Healthcare National Relationship Manager.

“We’re not just a transactional banking partner,” said Svarvari. “If we provide value and world-class service and have strong relationships at multiple layers within the organization, we can better position ourselves to come out the winner in the rationalization conversations.”

CommerceHealthcare® solutions are provided by Commerce Bank.