A Walk in the WildernessA Walk in the WildernessExploring the “River of Doubt”Exploring the “River of Doubt”

Linda Shively, President & CEO, Baldwin Family Health CareLinda Shively, President & CEO, Baldwin Family Health CareJohn MacLeod, President & CEO, Mercy Hospital – CadillacJohn MacLeod, President & CEO, Mercy Hospital – Cadillac

Mike Zdrodowski, COO, Baldwin Family Health CareMike Zdrodowski, COO, Baldwin Family Health Care231-745-2743231-745-2743

lshively@familyhealthcare.orglshively@familyhealthcare.org

……in 2005in 2005

Baldwin Family Health CareBaldwin Family Health Care Lake and NewaygoLake and Newaygo 2005 budget of $14.3 million2005 budget of $14.3 million Medical, dental, behavioral health and Medical, dental, behavioral health and

supportive servicessupportive services 100,000 encounters100,000 encounters FQHC since 1967FQHC since 1967

……in 2005in 2005

Wexford Medical GroupWexford Medical Group Wexford and MissaukeeWexford and Missaukee 2005 budget of $11.4 million2005 budget of $11.4 million Medical and specialty careMedical and specialty care Ancillary servicesAncillary services 50,000 encounters50,000 encounters RHC owned by hospitals since 1999RHC owned by hospitals since 1999

Statement of Purpose and Statement of Purpose and Expected OutcomesExpected Outcomes

The Mercy Hospital Cadillac Board of Trustees The Mercy Hospital Cadillac Board of Trustees evaluated strategic options related to the employed evaluated strategic options related to the employed physician network.physician network.

This advisory group was formed to review the This advisory group was formed to review the available options, to assess the associated benefits available options, to assess the associated benefits and risks from the hospital and the community and risks from the hospital and the community perspective, and to obtain input and/or commitments perspective, and to obtain input and/or commitments from the relevant parties.from the relevant parties.

A recommendation will be made to the Board as to A recommendation will be made to the Board as to which option best fulfills the mission purpose and the which option best fulfills the mission purpose and the financial requirements of Mercy Hospital Cadillac.financial requirements of Mercy Hospital Cadillac.

WMG performance mandatesWMG performance mandates

Clear direction has been given by the sponsor Clear direction has been given by the sponsor organizations that WMG must operate at organizations that WMG must operate at breakeven.breakeven.

There are two constants that must be observed There are two constants that must be observed in achieving this mandate:in achieving this mandate: WMG must continue its open access policy.WMG must continue its open access policy. WMG will receive no additional funding from the WMG will receive no additional funding from the

sponsors.sponsors.

Organization structure optionsOrganization structure options

Private practice modelPrivate practice model Convert the group to physician ownershipConvert the group to physician ownership

Employed modelEmployed model Maintain current structure and relationshipMaintain current structure and relationship

Federally Qualified Health Center modelFederally Qualified Health Center model Obtain designation as federal granteeObtain designation as federal grantee

……we knew going into this…we knew going into this…

Consistently high rate of merger and acquisition Consistently high rate of merger and acquisition failure. Studies 30-40%, 60-70%failure. Studies 30-40%, 60-70%

The risk of this partnership failing because the The risk of this partnership failing because the cultures of the partners could be incompatiblecultures of the partners could be incompatible

The process of combining is costly, complex and The process of combining is costly, complex and time consumingtime consuming

Management would have to devote substantial Management would have to devote substantial efforts to the integration in addition to spending efforts to the integration in addition to spending time on regular operational matters or other time on regular operational matters or other strategic opportunitiesstrategic opportunities

Seeking partners, growth and the acquisition process Seeking partners, growth and the acquisition process was not new for Family Health Care. was not new for Family Health Care.

19881988 Baldwin Teen Health CenterBaldwin Teen Health Center 19891989 White Cloud -- Benson siteWhite Cloud -- Benson site 19991999 Ashby CenterAshby Center 20002000 White Cloud -- Wilcox SiteWhite Cloud -- Wilcox Site 20022002 White Cloud PharmacyWhite Cloud Pharmacy 20042004 Grant site purchasedGrant site purchased 20052005 New Grant site openedNew Grant site opened 20072007 Great Lakes Family Care Great Lakes Family Care

(Cadillac/McBain)(Cadillac/McBain) 20092009 White Cloud Teen Health CenterWhite Cloud Teen Health Center

Pre-ConditionsPre-Conditions We believed that new challenges in a changing We believed that new challenges in a changing

environment were on the horizon –shrinking resources, environment were on the horizon –shrinking resources, new market demands, and different patient needs.new market demands, and different patient needs.

Family Health Care was determined not to spend it’s share Family Health Care was determined not to spend it’s share of the Community Choice Michigan “wind fall” but was of the Community Choice Michigan “wind fall” but was determined to determined to investinvest it in our future.it in our future.

Board completed a similar due diligence and analysis stage Board completed a similar due diligence and analysis stage described by Munson/Trinity and decided our investment described by Munson/Trinity and decided our investment in the future would be a partnership with Great Lakes in the future would be a partnership with Great Lakes Family Care. Family Care.

The model of partnership that made sense for both parties The model of partnership that made sense for both parties was the acquisition model.was the acquisition model.

This partnership was different from our past history:This partnership was different from our past history: Large (gaining 150+ employees)Large (gaining 150+ employees) Not a “fire sale”Not a “fire sale” Both organizations had long organizational histories (40 years and Both organizations had long organizational histories (40 years and

20+ years)20+ years) Both organizations had deeply imbedded, strong culturesBoth organizations had deeply imbedded, strong cultures Geographic challenges – Cadillac is 45 miles from Baldwin and the Geographic challenges – Cadillac is 45 miles from Baldwin and the

workforce is spread across 95 miles and eleven locationsworkforce is spread across 95 miles and eleven locations Initially the HRSA Project Officer was concerned due to history of Initially the HRSA Project Officer was concerned due to history of

other health center failures with acquisitionsother health center failures with acquisitions

Despite these challenges, Despite these challenges,

we embarked on the adventure!we embarked on the adventure!

Corporate CultureCorporate Culture Common beliefs, values, tradition and world viewCommon beliefs, values, tradition and world view

Creation of a sustainable joint corporate culture plays Creation of a sustainable joint corporate culture plays a decisive role in the success of a partnershipa decisive role in the success of a partnership

Meshing two corporate cultures may be the biggest challenge in Meshing two corporate cultures may be the biggest challenge in any integrationany integration

Key task is convincing the involved employees of the strategic Key task is convincing the involved employees of the strategic reasoning for the partnershipreasoning for the partnership

Integration processes are associated with hardship for individual Integration processes are associated with hardship for individual employeesemployees

CommunicationCommunication ““Always in the wilderness, friends proclaim their presence; a silent Always in the wilderness, friends proclaim their presence; a silent

advance marks a foe”advance marks a foe” Signaling cooperative intentions is crucial to understanding the Signaling cooperative intentions is crucial to understanding the

other side’s perceptions, avoiding hostile assumptions and making other side’s perceptions, avoiding hostile assumptions and making early agreements that become the foundation for trustearly agreements that become the foundation for trust

In nearly every study of failed mergers or alliances, In nearly every study of failed mergers or alliances, miscommunication or lack of communication is one of the primary miscommunication or lack of communication is one of the primary culpritsculprits

Effective communication is vital in a major change initiativeEffective communication is vital in a major change initiative Support through training and accountabilitySupport through training and accountability

Communications PlanCommunications PlanA. All-staff meetingA. All-staff meetingB. Weekly UpdatesB. Weekly Updates

1. Transition Team Info1. Transition Team Info2. Leadership Open Letter2. Leadership Open Letter

a. Q&A Processa. Q&A Processb. Plan for Face Timeb. Plan for Face Time

-Why did we do this?-Why did we do this? -Jobs – still have one?-Jobs – still have one? - Who’s my boss?- Who’s my boss? - Time frame- Time frame - Work groups- Work groups

C. Leadership Road ShowC. Leadership Road Show

D. Patients & CommunityD. Patients & Community1. Enhanced Benefits to Patients1. Enhanced Benefits to Patients

2. Media2. Media

E. Employee Focus GroupsE. Employee Focus Groups

F. Board Communications (Talking Points)F. Board Communications (Talking Points)

Diffusion of IdeasDiffusion of Ideas

0

5

10

15

20

25

30

35

Innovator EarlyAdapters

Early Majority Late Majority Laggards

Series1

Not Static!

Synergy

Ingredients Needed to Ingredients Needed to Merge Two CulturesMerge Two Cultures

1. Emphasize complementary strengths1. Emphasize complementary strengths• Integration stage – when shifting, focus on resources and Integration stage – when shifting, focus on resources and

don’t forget the reasons behind the partnership – combining don’t forget the reasons behind the partnership – combining the strengths of each partner the strengths of each partner

• Concentrate on integrating the best aspects of each partner Concentrate on integrating the best aspects of each partner not arguing over whose way of doing things is better – find not arguing over whose way of doing things is better – find common groundcommon ground

• Leadership must constantly emphasize the strengths of each Leadership must constantly emphasize the strengths of each organization if they expect their direct reports to do the organization if they expect their direct reports to do the samesame

• Emphasize new possibilities and new perspectives --- vision Emphasize new possibilities and new perspectives --- vision for the futurefor the future

2. Common Mission2. Common Mission

Engagement of all staff in the newly emerging Engagement of all staff in the newly emerging organization and missionorganization and mission

Our strategy: Development of corporate values that Our strategy: Development of corporate values that are used as behaviors to accomplish the mission and vision are used as behaviors to accomplish the mission and vision ---all staff participated – all generated ideas of ideal ---all staff participated – all generated ideas of ideal organization, drilled down to common themes, themes organization, drilled down to common themes, themes identified as values, then established as corporate values.identified as values, then established as corporate values.

3.3. Realignment of roles and responsibilitiesRealignment of roles and responsibilities• Issues of how to divide work and power are complexIssues of how to divide work and power are complex• Better to hammer out agreements about the division of Better to hammer out agreements about the division of

responsibilities beforehand, then live up to those responsibilities beforehand, then live up to those commitmentscommitments

4.4. TrustTrust• Any time two groups are brought together, both must Any time two groups are brought together, both must

juggle competing loyalties, distinct cultures, and lack of juggle competing loyalties, distinct cultures, and lack of rapport at the same time that the workload increases rapport at the same time that the workload increases because of the integrationbecause of the integration

• Trust does not exist between organizations, it occurs Trust does not exist between organizations, it occurs between peoplebetween people

• Trust can be established only through experience and Trust can be established only through experience and time when people take pains to ensure that they deliver time when people take pains to ensure that they deliver what the other expectswhat the other expects

• Time must be provided so trust can flourishTime must be provided so trust can flourish

5. Acceptance5. Acceptance In a partnership between two organizations, both must In a partnership between two organizations, both must

accept the uniqueness of the other organization and the accept the uniqueness of the other organization and the differences from each otherdifferences from each other

If either partner cannot comprehend that its way of If either partner cannot comprehend that its way of doing business is not the only way and appreciate the doing business is not the only way and appreciate the approach of the other organization, the resulting friction approach of the other organization, the resulting friction will doom the combinationwill doom the combination

The partnership is strengthened by honoring traditions The partnership is strengthened by honoring traditions while “taking leave of some things”while “taking leave of some things”

Issues of grieving and loss of prior organization and Issues of grieving and loss of prior organization and work lifework life

6. Forgiveness6. Forgiveness In most successful partnerships, both sides work In most successful partnerships, both sides work

intensely to fulfill their end of the dealintensely to fulfill their end of the deal But in reality neither partner full understands what it’s But in reality neither partner full understands what it’s

getting itself intogetting itself into Rarely does the collaboration play out exactly as it was Rarely does the collaboration play out exactly as it was

envisionedenvisioned There will be mistakesThere will be mistakes Whether those mistakes are greeted with recriminations Whether those mistakes are greeted with recriminations

or flexibility could determine whether the partnership or flexibility could determine whether the partnership gets bogged down, reach it’s full potential or failsgets bogged down, reach it’s full potential or fails

7. Unselfishness7. Unselfishness Unselfishness means doing what’s best for the Unselfishness means doing what’s best for the

organization (patients) regardless of the consequences organization (patients) regardless of the consequences for a particular department or individual, i.e., transfer of for a particular department or individual, i.e., transfer of resources to a different department resources to a different department

Be alert for “turf protection” not in line with the best Be alert for “turf protection” not in line with the best interests of the new organizationinterests of the new organization

Role modeling – leaders who are poor partners Role modeling – leaders who are poor partners themselves do nothing to inspire collaboration in their themselves do nothing to inspire collaboration in their followersfollowers

Without these ingredients, partnerships that began as Without these ingredients, partnerships that began as a “merger of equals” or a building of “strength upon a “merger of equals” or a building of “strength upon strength” can degenerate and distract from the strength” can degenerate and distract from the business at hand. As with a partnership between two business at hand. As with a partnership between two people, an organizational alliance that lacks these key people, an organizational alliance that lacks these key elements is worse than no alliance at all.elements is worse than no alliance at all.