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MERGERS AND STRATEGIC ALLIANCES: JOB SMART SYSTEM IS STRUCTURE WHICH FOLLOWS STRATEGY by Dr. D Kearney

Hospitals: Throughout the 1990s, mergers and strategic alliances (MSA's) were frequent among hospitals. From 1994 to 1996, of the 5200 hospitals in the United States, 2153 were involved in a total of 649 mergers, acquisitions, lease arrangements, joint ventures, or partnerships. Concurrently, one of the striking characteristics of the new big business of health care is that everyone began getting into everyone else's business.  While pharmaceutical houses used to manufacture just pills, they now are assuming risk in patient care. Physicians who used to be paid more to do more are now paid more to do less. And hospitals that used to provide inpatient care are now managing risks per insured patient life During this period, health care trends, including the emergence of managed care, helped alter the traditional demand for hospital beds and services and led to business decisions that contributed to MSAs. This activity was precipitated in part by the institutions' need to reduce operating expenses, gain negotiating power for managed care contracts, achieve cost savings from economies of scale, access capital, and reduce unused capacity.

As a result, MSAs are complex processes that bring about changes at both the organizational and individual levels. At the organizational level, there may be changes in the basic mission of the hospital, resulting in new structures and functions. At the individual level, the organizational changes may lead to job restructuring, layoffs, and changes in the administration of patient care. Prevailing themes among workers who have survived mergers include stress, fear, and uncertainty. Employee stress may be heightened by a lack of confidence and trust in the managers' ability to manage the merger. In a 1997 American Medical Association confidential survey of hospital, staff (at all levels of employment) reported increased stress, decreased morale, and lowered quality of patient care in institutions undergoing MSAs.

Job Smart System’s API model of Assessments, Planning, and Implementation can assist merger efficiencies and reduce the employee stress through clear strategies that support MSA's as they progress through their evolution to an merged system.  

 

Newly merged hospital networks tend to evolve through five stages.  These include:

1. Loose affiliation.

2. Administrative (e.g., marketing, human resources) service consolidation.

3. Cultural integration, particularly of physicians.

4. Clinical (e.g., cardiology and other specialties) service consolidation.

5. Closure of inefficient and redundant services.

 

Job Smart System uses the Assess, Plan, and Implement Model to 

1.    Strengthen staff to service affiliations with clear competency based job descriptions for each management, clinical, and facility area

2.    A. Strengthen Human Resources consolidation with software supports to recruitment, selection, and retention of staff in key areas of services with tiered teams. B. Strengthen administrative consolidation of marketing and public relations and finance and information services.

3.    Strengthen the cultural integration of staff with diversity training on OLD MEETS NEW (JSS Training) organizational norms

4.    Support the clinical services consolidation with time management, ergonomic analysis, and environmental design

5.    Support closure of inefficient and redundant services with planned implementation. 

 

Matching the Mission 

 

Using Job Smart Systems Assess, Plan, and Implement strategy specific missions can be evolved from   

Horizontal mergers involving freestanding hospitals, acquisitions involving hospital chains, the formation of hospital networks, joint ventures, joint operating agreements and strategic alliances 

To likely efficiencies associated with horizontal integration and with vertical integration between health insurers, hospitals and physician groups

Internal to individual organizations Job Smart System can assess

 

  1. Duplication of services in all management, clinical, and facilities areas.     
  2. Pricing baselines by determining hospital revenue and dividing it by the total number of inpatient days to get a measure of price of inpatient hospital care
  3. Quality of Care and Pricing: Using both the DRG and MDC classification systems: the diagnostic related group, or DRG, for individual medical procedures, and the major diagnostic categories (caesarian sections and cardiovascular surgeries) and MDC, that lumps closely related DRGs into one group of related services (diseases and disorders of the digestive system, nervous system and circulatory system) to assess the effect of pricing and patient quality of care on solvency
  4.  Hospital overhead load
  5.  Savings for combined operations (physical plant and supplies)
  6.  Savings on administrative expenses Patient Administrative /HMO Costs     

 

Plan

 

1. Management Improvements for Human Resources, Marketing and Public Relations, Tiered Management Teams and Employee staffing administrative services for finance and information systems.

 

2. Elimination of duplicate services that have high physical plant overhead that requires duplicative staffing, technology, and equipment

 

3. Information systems needed to achieve true integration

 

4. Hospital Utilizations 

 

5. The competitive effects of joint ventures among hospitals to sell a broad geographic network product to statewide and regional insurers.

 

 

Implement

 

1. Use of staffing and physical plant changes in the way care is delivered in order to engender customer loyalty

 

2. Physicians and hospitals commitment to work under capitation and the fundamental incentives of delivering quality patient care

 

3. Consolidation of operations to spread fixed costs over a greater number of patients which brings average costs down

 

4. Market power in the face of managed care companies who are consistently trying to negotiate lower prices

 

5. The competitive effects of joint ventures among hospitals to sell a broad geographic network product to statewide and regional insurers.

 

Transitional Milestones

 

1. Present the results of our analyses to staff attorneys and economists at the Federal Trade Commission, the Department of Justice (data for anti-trust questions on adequate competition in the post-merger world), and state attorneys general and state departments of insurance.

2. Write reports that demonstrate the likely efficiencies associated with horizontal integration and with vertical integration between health insurers, hospitals and physician groups

3. Work with hospital boards and state agencies on the types of hospital mergers that are permitted under certificate of public advantage legislation and on the type of monitoring and regulation that would be required post-merger

Outcomes

Job Smart System helps merging firms to

1. Organize offerings of services that create success by costing productivity, safety, and quality as an effect of hospital mergers

2. Increase staff focus on productivity, safety, and quality outcomes

3. Increase patient focused outcome measures that go beyond the cost of treatment to figure in the impact on patients well being

4, increase buying power and more efficient use of fixed assets

5. Increase bargaining power with managed care plans

6. Decrease the consumer perception that they are in a delay, linger, and wait medical system that makes money from the total denial of services patients consider useful

In conclusion , Job Smart Systems goal is to create cooperation not conflicting business imperatives. Job Smart Systems is a management strategy that uses consultant expertise and software efficiencies  to communicate and support  best practices strategic coordination. JSS is committed to quality from each business perspective e.g. Joint Commission accredidation,public policy ,institutional, organizational, staff, and consumer levels .

Invitation To Discover Job Smart System Benefits 

JSS Is Our Proprietary Job Smart System > Your Best Practice Advantage

Our JSS/Dashboard Matrix Services Employ:

An On Demand - Fully Supported [RSR] Recruitment-Selection-Retention Intelligence Software; Providing Licensed Users of Variable On Line JSS Packages  & Professional Consulting Time For Training & Evaluation.

JOB SMART SYSTEM MERGER ASSESSMENT AND RISK ANALYSIS

CHECK ALL THAT APPLY

 

[ ] Restructuring reasons are valid for pricing and geography

[ ]Consolidation commitment to trim administrative functions, marketing, finance, public relations, and human resources.

[ ]Prop up a weaker facility that may not survive if left on their own but adds value

[ ]Resist market forces that would otherwise lead to closure and clinical consolidation.

[ ]Reorganize clinical services

[ ] Purchase physician practices to ensure a ready supply of patients to strengthen market share

[ ]Reduce overlapping market area

[ ]Increase efficiency

[ ]Create economies of scale

[ ]Improve quality of care

[ ]Reduce duplication of services and equipment

[ ]Reduce over-supply of beds and facilities

[ ]Consolidate services and facilities,

[ ]Respond to competition for quality improvements,

[ ]Hospital board is motivated to optimize patient care without cutting corners.

 

POSITIVE OUTCOMES YOU ARE COMMITTED TO ACHIEVING 

CHECK ALL THAT APPLY

 

[ ]Patients are better off

[ ]Physicians are happier

[ ] Staff in all areas of the facility are happier

[ ] Staff in all areas of the facility are more efficient

[ ] Union is on board with support to changes

[ ] Staff in all areas have the resources necessary to achieve quality of care

[ ]Facilities are used efficiently cardiology, obstetrics, behavioral health, and psychiatry

[ ] Services in DRG communities make better sense than they did before, or would ever have without the merger, from a policy viewpoint

[ ]Significant progress in improving efficiency

[ ]Economies of scale are valid for purchasing supplies and medical devices in bulk

[ ]Fundamental changes have occurred in terms of total hospital capacity or consolidation of specialized services.

[ ] Hospital has gained strength through size and improvement in their bargaining power in negotiations with health plans and can better resist price cuts

[ ]Increased ability to compete for managed care and other health plan contracts

[ ]Increased coverage of broad geographic territory to offer a full range of services;

[ ]Consolidation of many administrative functions, such as marketing, finance, public relations, and human resources, which results in substantial savings

[ ]Integration of cultures that promote discussion among physicians to create services that encourage collaboration and exchange of ideas

[ ] Creation of system-wide medical information systems

Creation of medical protocols and guidelines to improve quality of care

 

POTENTIAL NEGATIVE INCENTIVES  Check all that exist

[ ]Size of the merger will actually hamper downsizing in a geography

[ ] Motivation is grabbing market share or [ ] improving the stock price.

[ ]Lower quality of care by reduction in staffing

[ ]Higher prices

[ ]Hospital rate regulation will hamper solvency

[ ]Hospital system will be rewarded for maintaining multiple facilities and services, rather than consolidating or eliminating duplicative services

[ ]Protecting inefficiency and excess capacity rather than reducing them

 

STAYING AHEAD OF THE CURVES What resonates with you ?

 

·         Mergers by both suppliers (hospitals, physicians) and purchasers (health plans, insurers) which lead to a market place with only a few large players—may weigh in the balance of producing a kind of          [ ]equilibrium or  [ ]stalemate of buyers and sellers. Health plans need the hospital systems in order to ensure enrollees access to a large portion of providers, and the hospital systems need the health plans to assure a patient base. [ ]No one seems ready to end the arm wrestling. 

·         [ ]Employers need to be educated on wellness and prevention. They have not been pressuring for downsizing the hospital system, for several reasons: a few years of deceleration of health care costs that is now escalating again. [ ]Employees’ and unions’ continue to push for a broad choice of providers. [ ]This plus the fact that many business leaders are on the boards of their community hospitals and therefore have conflicting interests.

·         [ ]Employers, who want a leaner and more efficient hospital industry, will need to be less passive about the structure of that industry. If they actively try to reduce redundant capacity and channel their employees and their families to hospitals with the best performance records, they will incur some opposition. This will happen not only within the health care industry, but also from employees used to wide-open access. If employers are not willing to take such risks, however, they are unlikely to see much change in the near future. As such, they now feel that they are buying hospital care from a more concentrated and less responsive industry.[ ]

·         [ ] Senior medical staffs THAT continue to resist mergers and change and try to protect their "fiefdoms" are a barrier to consolidation of services, which are integrated across disciplines.

·         [ ]Money continuing to be misspent on advertising, buying physician practices, requiring physicians to admit to selected hospitals, and other tactics that waste money should be noted and eliminated as waste.

·         [ ]Money should be spent on better training for nurses, more nurse FTEs, clinical tiers that work, and improved data systems.

·         Competition is positive and but has negative curves that can take away from good patient care. When hospital systems decide how to spend their money it often results in the need to cut corners. One of the misperceived easiest things to cut is usually staffing levels or other things that directly affect patient care. [ ]Staffing FTE's needs to be carefully evaluated by productivity, safety, and quality standards.

·         The federal government will continue to guard against anti-competitive behavior in the hospital industry in light of the dramatic consolidation that has occurred. In particular, the prospect of large and medium-size market areas being dominated by just a few e.g. three major hospital systems—or even two—has led to higher monitoring by the Federal Trade Commission and the U.S. Department of Justice. They will continue to monitor markets carefully to determine the consequences for the local health economies. These agencies continue to try and will eventually establish clear criteria for determining whether meaningful competition exists. [ ] Mergers must have a remedial action plan, which should be taken when appropriate.

·         [ ] Policy makers will eventually see that they should not rely on mergers to reduce excess capacity and produce efficiencies in the short term. Some state representatives now are looking at other ways to encourage reduction in duplication of services, oversupply of beds, and so forth. If purchasers want the excess capacity in the system reduced relatively quickly, they will have to take steps on their own to pressure for change—through their contracts with health plans and providers—rather than relying on the hospital industry to do this on its own.   

·         Many states are contracting with health plans—or in some cases, directly with provider systems—for health benefits for their own employees’ and for Medicaid recipients. In their negotiations with plans and providers, states continue to establish criteria based more on how provider systems foster quality improvement and the efficient use of services and facilities. [ ] The trend seems to be to place less emphasis on requiring that provider systems have the most inclusive networks of hospitals and physicians. This is a state-by-state initiative.  

[ ] States could encourage private employers to promote efficiency in the health care industry by developing and sharing methods of measuring quality and efficiency or by collaborating with private employer groups for more selective purchasing. This type of cooperation is occurring today in Minnesota, Missouri, California, and Massachusetts.

 


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