News & Insights
Sep 14, 2020
The impact of COVID-19 and the economic downturn has pressured independent hospitals, rural hospitals and smaller health systems in particular. Despite the immense challenges, independent facilities and their Boards should take this time to best position for the near- and long-term.
In light of this, Waller partnered with Kaufman Hall to develop a guide for healthcare leaders, The Health System Growth Imperative: Charting Opportunities During the Pandemic and Beyond. Here are some practical tactics and recommendations from the report for charting your future course.
Prioritize your organization’s strategic planning. This can often be done in the form of a special retreat or a series of education sessions that convenes the Board and members of the C-Suite for a focused, holistic and honest discussion on the organization’s future.
Outside advisors can provide critical perspective on macro trends, competitor dynamics and issues that are specific to your unique market. They can also provide an independent view of the future state of the organization. Consider both business and legal issues so that you can be prepared for potential unforeseen risks down the road.
Board members in particular will want to ensure that they have satisfied their duty of care when making significant decisions, such as the decision to pursue M&A activity or a partnership, for their organizations. That means engaging M&A advisors, strategic consultants and financial consultants to ensure the hospital or health system is receiving fair value for its assets or investment in the partnership and guide the transaction process on an efficient and effective track. The sooner these advisors are brought to the table, the stronger your chances of a favorable outcome.
Consultants can guide you through this process, which can often involve a baseline projection and model analysis and other similar internal assessments. Remind your Board that this level of understanding is a vital aspect of their fiduciary duties. This is also a good time to have tough conversations regarding the reality for many independent hospitals that continued independence comes at the cost of diminished quality of care, services and expertise, or in some cases, closure.
As boards of trustees and management teams consider a strategic transaction, they should have a clear vision of their goals in connection with the transaction. In addition, they should make a list of the key drivers for the transaction and rank the importance of each factor. For example, such drivers could include:
It’s important to assess the existing and expected market conditions when evaluating these drivers. The need to understand the national, regional and local context by which decisions will be made and paths of execution will be pursued is critical to appreciate the new and emerging market reality, by which success or failure may result.
A full options assessment, in which you approach the market and see what potential partners might be willing to do for you, can be a low-risk way of determining whether organizational shortcomings can be addressed by forming partnerships outside of the system.
Even if your hospital or system is performing well operationally and financially amid the pandemic, you should still be engaging with other systems to determine how you may mutually benefit one another through partnership.
The pandemic has shifted markets fundamentally, and talking to other parties does not have to mean a loss of control for your organization. Explore new modes of collaboration. It could be as simple as identifying opportunities for clinical affiliations of key service lines to enhance and broaden their service lines or developing clinically integrated networks that could provide a broader network of services while increasing the quality and access of care. Or, a partnership could be considered that is more fully integrated and transformational in nature, such as a membership substitution or joint venture.
Be bold. The pandemic is a reminder that an independent hospital’s #1 priority is the healthcare of the community. Leverage these challenging times to create lasting change for your community, ensuring high-quality, low-cost healthcare for generations to come.
For more insights, read the full report here.
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