After hitting a record high of 115 transactions totaling $63.2 billion in 2017, mergers and acquisitions in healthcare continued to make headlines this year.
Two of the biggest driving forces behind this trend are rising healthcare costs and decreasing operating margins, says Staci Roberts, Senior Vice President for Cielo, the leading provider of Recruitment Process Outsourcing solutions to the healthcare industry.
Yet recent research suggests that healthcare organizations aren’t seeing the cost savings they expected from mergers or acquisitions. According to an August 2018 paper from The Wharton School at the University of Pennsylvania, hospitals being acquired are achieving an average of just 10% of the projected total cost savings, while the savings for those on the acquiring side are practically nonexistent.
Roberts points to several reasons for the disparity, notably difficulties in merging separate procedures, departments, and technology platforms. There often is a lack of clear accountability during the integration of the two health systems, which causes delays in both timing and in realizing the benefits of the merger. The challenge of accountability and ownership impacts every department during M&A, including HR.
It’s not uncommon for HR functions to be left out of initial integration discussions. Roberts says there are even situations when the two HR departments are advised to not communicate with each other. “This can create an environment of fear or competition, rather than one of joint ownership and partnership. It is important then that HR leaders find a way to work with the executive team to gain support in opening lines of communication between the two HR departments.”
Roberts recommends HR leaders consider these three key actions to successfully navigate a merger or acquisition:
1. Reach out to your peers at the other system to create alignment, and advocate for HR to have a role in the pre-planning process.
“I think you have to find HR leaders who can look at both HR functions with the goal of finding a balance between the two health systems,” Roberts says. “Create a productive way to have those discussions about HR technology systems, process and procedure, employee compensation and benefits and so on, and make decisions prior to the actual go-live of the merger.” By partnering and recognizing the value your peers can bring, you will increase your credibility overall and help drive tangible results earlier in the process.
2. Outline the strengths and opportunities of each system’s HR function, and create an integration and change management plan.
“When speaking with HR leaders who face this type of change, we work to help them step back and look at the bigger picture to see the role they can play as a positive change agent,” Roberts says. “While M&A can be a stressful thing to go through, it does provide HR leaders a huge opportunity to elevate their career and grow their influence.”
3. Consider partnering with an outside organization with expertise on how to operationalize the plan in an efficient manner.
An outsourced partner, such as an RPO provider, will have navigated mergers and acquisitions before and will know how to make it as smooth a transition as possible. Their presence and support can ease whatever internal politics may arise and help all parties focus on the benefits. According to Deloitte’s 2018 Global Sourcing Survey, 33% of the 500 executives from leading organizations surveyed said they have either used or explored using outsourcing to speed up M&A integration, while 88% also said they planned to maintain or increase their level of HR outsourcing in the future.
Facing a merger or acquisition can be challenging, or even intimidating, but with some foresight and planning, it is also an opportunity for HR leaders to truly impact the future and leave their mark on an organization.
A version of this article originally appeared in HRO Today.