Hospital M&A activity has been increasing recently, and when these transactions are public knowledge, opposition from the physician community (as well as the hospital staff) to such types of transactions may also be a side effect. Physicians are vital to the operation of a hospital, and any resistance from the physician community, could be a tremendous obstacle, either slowing down the transaction or causing the potential buyer to pull out of the deal. Hospital administrators, along with their advisors, should do their best to foresee any opposition and manage physicians’ expectations through the transaction process.
There are many potential concerns that the physician community may have regarding a transaction. Specifically, physicians, like most people, are probably fearful of change. In an M&A transaction, the process can often be a stressful time because of the changes in the organization, which can include an unknown – a new operator. If a new operator wishes to add (or subtract) certain services, hire additional physicians, modify the approval process for new equipment or medical devices, or institute a new arrangement that is historically different than the current norm, those physicians may question or push back on the proposed deal.
While opposing physicians usually do not have any legal authority to stop a deal, they may be able to exert their influence with other stakeholders. For example, the physicians could request a hearing with a state oversight committee, make medical staff transition planning difficult or create an environment of mistrust during the approval process, thereby causing months of delays. Also, the opposition may be so strong and/or vocal that the potential buyer could become worried about their relationships with the physicians post-closing and eventually, lose interest in the transaction.
4 Tips for Managing Potential Physician Resistance
- Retain experience. Administrators should engage experienced advisors (attorneys, healthcare consultants, bankers) early in the process. Experienced advisors can assist in foreseeing problems and help strategically guide their client through the process to closing.
- Ask around. Engagement can be a powerful tool. Hospitals may want to ask their top admitting physicians about their thoughts early in the process regarding a possible transaction. This may help determine how supportive the physician community, as a whole, feels about the transaction and could result in the creation of powerful allies. At a minimum, it can help in the process of evaluating where concerns may be strongest.
- Communicate. When a hospital is not transparent, rumors may percolate throughout the organization, which can easily become embellished and have disastrous effects. While the administration may have valid reasons for not sharing certain information, the more about the transaction that is communicated, the more comfortable the physicians should be with their job security and in supporting the transaction. Physicians may even be a good resource to help deliver the hospital’s message to the hospital staff.
- Communicate Again. Very often people do not hear the message the first time it is delivered. The more you communicate with physicians, the better chance that they will listen and understand the importance of the transaction for the hospital. However, it is important for the administration to communicate elements of the transaction carefully, and while the administration can attempt to address the physician community’s concerns during negotiations, the administration should not promise too much. Administrators may attempt to reach their audience in multiple ways such as setting up in-person meetings and sending out regular emails from the CEO.
It should be noted that there are some risks associated with being transparent, and sometimes there are compelling reasons to avoid disclosing too much about a transaction too soon. Most notably, physicians may be unhappy with the deal terms. Overall, hospital administrators should always focus their message on the future positives of the transaction for the physician community. Approaching hospital transactions in this manner will hopefully lead to a healthy dialogue between administrators and physicians about the transaction rather than ignoring concerns (legitimate or otherwise) that ultimately ends with a code blue.