Stronger Together: Merging to Serve the Community

Abstract

JUST THREE DAYS before the deadline for an agreement to be signed, I stood before the staff at Riley Hospital in Meridian, Mississippi, to confirm the rumor that had been swirling for many months - their hospital was being acquired by Anderson Regional Medical Center. I said to them, Welcome back to a community-based hospital, and cheers erupted in the room. That momentary high was the culmination of long months of painstaking research, analysis, negotiations, and decision making, It was also the launching point for the complete integration of the two facilities and their staffs and services - a process that continues today. As Zuckerman and Rice point out, mergers and acquisitions require long-term planning, a clear vision of achievable goals, and the support of key stakeholders within the institutions and throughout the community. Both Anderson Regional Medical Center (ARMC) and Riley Hospital have deep roots in the Meridian area, and both bear the names of their founding doctors. In 1928, Dr. William Jefferson Anderson bought an old hospital and renamed it Anderson Infirmary. The hospital evolved into Anderson Regional Medical Center and is now a 260-bed acute care hospital with a $250 million budget, an annual payroll of $60 million, and 1,338 employees. Riley Hospital, founded just two years later in 1930 by Dr. Franklin Gail Riley, grew into a 140bed acute care hospital with 373 employees. In January 1998 Riley was acquired by Health Management Associates (HMA) and became the only general acute care medical surgical for-profit hospital in the area, with ARMC and neighboring Rush Foundation Hospital retaining not-for-profit status. In early 2010, we were apprised that HMA was interested in selling Riley Hospital. Both of our hospitals essentially served the same area of eastern Mississippi and western Alabama - 172,999 people in our primary service area and 155,803 in our secondary service area. With heart disease and cancer among the most prevalent and dangerous diseases affecting our population, ARMC had already developed a strong heart health and treatment program and the only cancer center in the region. We had also embarked on a program to establish and develop a number of clinics to serve patients in our largely rural areas. But Riley offered some excellent services that could help broaden and strengthen the services we could offer - inpatient rehabilitation, a wound healing and hyperbaric oxygen therapy center, a long-term acute care hospital program, and a pain management center. We engaged a law firm experienced in acquisitions, a financial consultant specializing in mergers and acquisitions, and an architectural firm charged with analyzing the existing facilities. LESSONS FROM OBSTACLES IN MERGERS AND ACQUISITIONS During premerger planning, due diligence, and regulatory processes and implementation, we encountered obstacles and challenges that reflect a number of the issues raised by Zuckerman and Rice, and our experiences may be helpful to others in the healthcare field as they consider their own mergers or acquisitions. Engage the Best-Qualified Consultants While tins may seem patently obvious, healthcare executives and boards of directors are no different from otiier management professionals - we tend to hire consultants with whom we are comfortable and who have a track record of excellent service with our institutions. But the fact is that a consultant who has performed admirably in another arena may not be the best choice in the very specific world of mergers and acquisitions. A mistake in the choice of consultants can be costiy and time consuming and may result in poor planning decisions. I was convinced that a law firm I had worked with on a previous acquisition project at another hospital was the most qualified agency to lead ARMC through the maze of the acquisitions process. But some of our board members were equally convinced that another firm would be the best choice. …