1

Change Management during Mergers and Acquisitions in Health Care: Case

Study Analysis

The current trend in the health care industry is increasingly shifting towards

quality and safety. As such, change is inevitable and indispensable in this industry

(Kastor 2010a). The issues of quality and safety link inextricably with change

management. The essence of this process is to prevent and mitigate the harms from

health system deficiencies. In addition, ineffectual care delivery procedures expose

patients to the risk of adverse clinical events (Harrison 2011). Kastor (2010b) has

indicated that health care involves multiple patient handoffs and numerous interfaces

within a complicated setting. It is imperative for health organizations adapt to internal

and external transformations to optimise the care processes.

The health care industry is currently experiencing unprecedented challenges.

The escalating medical costs, coupled with increased competition have placed the

majority of hospitals in a precarious situation (Kastor 2010a). On the other hand, the

remarkable advances in technology and scientific discoveries have revolutionized the

health care sector. Most health facilities are now struggling to rationalize the

consumption of resources while at the same time providing safe and quality care

(Leemore 2009). Consequently, the consolidation of hospitals through mergers and

acquisitions (M&A) has become a prevalent feature in the industry. Conversely, the

integration process raises critical concerns regarding the management of the change

process (Haas-Wilson & Garmon 2011).

The purpose of this report is to highlight the best practices that will facilitate

the merger between Al Razi Hospital and Ibn Sina Hospital. The consolidation of the

two health facilities is essential to deliver safe and quality care more efficiently.

Conversely, this process will be challenging considering the capabilities of each

2

hospital. In the first instance, the Al Razi Hospital has automated the care delivery

processes by incorporated sophisticated technologies into its practice. By contrast, the

Ibn Sina Hospital still employs outdated and manual systems to deliver health care.

Thus, the merging of these organisations will present practical obstacles. In addition,

the managers and employees of both hospitals are apprehensive about the merger.

The pertinent concerns raised above necessitate the effectual management of

the merger to achieve positive outcomes. The M&A will affect all the employees and

functions of both hospitals. It is essential to develop and implement feasible strategies

that will facilitate the formations of the new entity (Al Karama) seamlessly. This

report provides crucial insights that will enable the management and employees to

adapt to change. The report will particularly emphasise the role of leadership during

the transformation process. Secondly, the ensuing discussions will explore the

Kotter’s Change Management Model. This theoretical framework will provide the

guidelines for implementing the change successfully.

Strategies for Optimising the Merger

One of the principal challenges encountered during mergers and acquisitions is

the resistance to change. Poor communication, coupled with the uncertainty about the

future exacerbates this issue (Creasy, Stull & Peck 2009). Harrison (2011) has argued

that inadequate preparations during the formative stages increase the risk of failure. It

is critical to prepare and lay a firm foundation for the transformation and integration.

According to Monge and Poole (2008), communication becomes imperative

immediately after organisations decide to merge. The top management in both the

hospitals should provide sufficient, accurate and detailed information about the

impending change.

3

The majority of executives have the tendency of making unilateral decisions

without consulting their subordinates. Budawar, Varma and Katou (2009) have found

out that employees resist change when the line managers fail to involve them in the

decision-making and planning processes. The hospital CEOs should address the

concerns of their respective employees prior to formalising the merger. The managers

should provide the reasons for the merger in an explicit manner (Leemore 2009). This

information should include the rationale for the merger, as well as its benefits and

implications. Denison, Adkins and Guidroz (2011) have asserted that employees

become less distracted and sceptical when they have access to both accurate and

sufficient information.

The merger between Al Razi Hospital and Ibn Sina Hospital is momentous

considering the diverse background of each organization. Consequently, the flow of

information within and between the hospitals will be essential during the premerger

period. The two health facilities should establish a single chain of command to

facilitate efficient communication between the hospitals (Harrison 2011; Leeemore

2009). A lead agency will facilitate the smooth flow of information and feedback in a

single direction. This authority will also ensure the assimilation of the hospitals’

departments and cultures in a flawless manner (Isern & Pung 2007). Conversely, the

success of this strategy will depend on the structures of organisation and governance

(Kastor 2010a).

The merging of the two hospitals will lead to the formation of a new entity, Al

Karama Hospital. This transition necessitates the change agents to develop clear

organizational and governance structures of the new hospital. The first implication of

mergers is the realignment of roles, functions and departments. Fischer and Rush

(2008) have identified this task as the most difficult one during and after the merger.

4

For instance, the rationalisation of the staff, departments and procedures will cause

fear and discontentment among the employees. Creasy, Stull and Peck (2009) have

warned against making significant changes to the staffing responsibilities and roles in

the first six months of the post-merger.

The merger between the two hospitals will present challenges but provide a

fundamental opportunity to optimise and modernise capabilities. The type and scope

of the consolidation will depend on the objectives (Fischer & Rush 2008). In this case,

the Ibn Sina Hospital will benefit significantly from the technological capabilities of

the Al Razi Hospital. Vertical integration is the most common form of mergers that

enhance the delivery of health care services (Kastor 2010b). The Mayo Clinic is one

of the organisations that exemplify the model of vertical integration (Kastor 2010a).

The hospitals should consider a number of issues regardless of the type of

consolidation.

First, it is imperative for the hospitals to audit and take stock of their

technological and expertise portfolio. The purpose of this process is to identify the

opportunities for streamlining or eliminating redundant systems (Harrison 2011). The

two hospitals have different processes and care delivery pathways. The change

proponents should evaluate these aspects comprehensively to identify strengths and

weaknesses. For example, the technological incompatibility of these two hospitals

will influence staffing decisions. It is essential to emphasise the experience and skills

set of every employee, including their place in the new organization (Haas-Wilson &

Garmon 2011). In-house training will play a fundamental role in bridging the

technological gap between the hospitals (Denison, Adkins & Guidroz 2011).

Second, the lead agency should incorporate the human resource function into

the strategic decisions. Harrison (2011) has found out that most organisations do not

5

involve human resource managers in the decision-making processes during the

process of mergers and acquisitions. The merger will automatically alter the

employees’ position, job titles and reporting relationships. As such, it is imperative to

work closely with the HR and line managers to address these concerns (Creasy, Stull

& Peck 2009). The line managers will particularly play a critical role because they are

more conversant with the needs and preferences of the employees (Haas-Wilson &

Garmon 2011)

Thirdly, the transformation process should not undermine the new hospital’s

financial performance and current operations. Budawar, Varma and Katou (2009)

have found out that organizations often shift their focus from the daily operations to

the consolidation process. The elemental concern is that such decisions slow down the

momentum of change. In addition, the quality and safety of health care services suffer

the greatest during the initial stages of the post-merger (Kastor 2010b). Thus, the lead

agency should consider establishing efficient systems that will be useful to monitor

the performance, consistency and quality of the new hospital. The management

should also empower the staff to identify and report any gaps in the care delivery

pathways.

The task of running systems and processes smoothly in a post-integration

environment is both complicated and daunting. This phase requires skilled leadership

and efficient communication (Fischer & Rush 2008). The two aspects are essential to

measure the progress and make adjustments constantly. The scope of responsibility

and leadership increases after the consolidation process. According to Harrison

(2011), the post-merger process increases the number of employees and complexity of

processes. Thus, leadership capabilities and skill sets are crucial to manage the post-

transformation phase. Denison, Adkins and Guidroz (201) have underscored the

6

significance of outsourcing expertise to complete and sustain the change initiative

quickly.

Change Management Leadership

The increasing demands for safety and quality have made change management

(as opposed to stability) a norm in health care (Kastor 2010a). Seniors and Swailes

(2010) have asserted that the adaptation to both external and internal transformations

is a critical success factor. The efficient management of the change process is

essential whether the transformation is structural or procedural (Fischer & Rush

2008). Health organisations fail to accrue the benefits of new technologies and

innovations because they do not implement them successfully. The majority of

managers are still making strategic decisions unanimously. Nonetheless, the

autocratic style of leadership is inconsequential during the implementation of new

strategies and procedures (Spector 2007).

The top management should adopt the transformational leadership style to

ensure that the post-merger process succeeds. Transformational leaders are both

influence their followers to achieve organisational goals (Pieterse, Caniëls & Homan

2012). The previous discussions have highlighted resistance as one of the barriers to

effectual change management. Accordingly, the management team should share their

visions and goals with the employees through consultations and active engagement

(Monge & Poole 2008). Isern and Pung (2007) have underscored the significance of

open and continuous sharing information before and after the merger. These processes

will enable the managers to get regular feedback and involve the clinicians in

decision-making processes.

The merger between the two hospitals presents practical leadership challenges.

The reconciliation of two different organisational structures is a critical concern for

7

the new management. The principal issue is that the health facilities were previously

competing and separate. Each hospital had adopted independent norms of delivering

care. Denison, Adkins and Guidroz (2011) have affirmed that culture can be a

significant source of conflict and disagreement. The CEO and top managers of the

newly created hospital must develop viable strategies that will facilitate seamless

integration among the employees. The administration should not only be strong but

also nimble and committed. The absence of both attributes will escalate the risk of

failure (Ford & Ford 2010).

The intricacies inherent in the health care system increase the threat of cultural

conflict during hospital mergers and acquisitions. Burke (2008) has argued that the

association between people after the merger determines whether the process was a

success or not. The transformative leaders should respect the dignity of the employees

even as they challenge them to shed-off deep-rooted traditions and practices (Isern &

Pung 2007). It is apparent that the employees from the Ibn Sina Hospital have adapted

to the culture of using manual systems. Thus, the new CEO should provide training

opportunities to ensure a smooth transition to the automated approaches. The

management can achieve this goal by fostering employee exchanges between the two

hospitals before finalising the merger (Pieterse, Caniëls & Homan 2012).

In addition, the CEO should espouse value-based and visionary leadership.

According to Monge and Poole (2008), this leadership attribute mandates managers to

articulate an appealing and clear vision. Spector (2007) has also asserted that an

organisation cannot transform successfully in the absence of explicit goals. The top

management should reinforce the intrinsic values of the hospital’s vision and mission.

In addition, there is a need to build strong transactions teams to steer the vision

forward (Ford & Ford 2010). Fischer and Rush (2008) have recommended the

8

selection of a few people with requisite skills and competencies. The manager can

then add others as the process evolves. Conversely, the success of these procedures

requires the CEO to select the most appropriate change management model (Burke

2008).

The Application of the Kotter’s Change Management Model

The successful implementation of change requires pragmatic leaders who can

anticipate and respond to both internal and external transformations adequately.

Nonetheless, the change process is slow and challenging (Spector 2007). A number of

theoretical frameworks have evolved over the years to conceptualise the integration of

change into management practices. Kotter is one of the prominent scholars that have

provided crucial contributions in the understanding of organizational change. The

Kotter’s Change Management Model has identified eight steps that the health care

organisation can employ to manage change. Kotter has organised these phases into

three distinct phases (Kotter 2008).

The first category involves the development of an environment for change.

The initial step at this phase is to create the urgency for change (Kotter 2008). The

hospital administrators should prepare all the employees to respond to the impending

merger. The management can use case studies and clinical scenarios to justify the

need for the consolidation. Secondly, the managers should subsequently form a team

that will oversee the ensuing processes (Isern & Pung 2007). Kotter has emphasised

the selection of people that posses the right skill sets. Thirdly, both the manager and

the guiding team should formulate a good vision statement that maps the future

direction of the new hospital. The vision should be concise and clear (Spector 2007).

The second phase of the Kotter’s model focuses on enabling and engaging the

entire organisation. The first activity of this step entails communicating the

9

consequences of the change (Kotter 2008). The news of the merger will certainly

cause anxiety among the clinicians of both hospitals. The guiding team should

develop a system that will facilitate the dissemination of timely and accurate

information. Secondly, the change agents should engage the stakeholders in a

continuous dialogue. The employees and line managers will not respond to the merge

in the same manner (Leemore 2009). As such, it is essential to ensure that everyone is

included in the process. The guiding team should encourage the change initiates to

participate in decision-making processes (Pieterse, Caniëls & Homan 2012).

The final phase of the Kotter’s framework deals with implementing and

sustaining the change. According to Kotter (2008), change is not a static but rather a

continuous process. This assertion is indispensable because the health care system

faces new challenges that necessitate immediate and constant transformations (Kastor

2010a). The newly formed hospital will continue to encounter a myriad of

organizational and operational challenges during the post-merger period. The CEO

and the guiding team should develop monitoring and evaluation systems to identify

the gaps and opportunities for continuous improvement. It is imperative to note that

this model is an iterative approach (Kotter 2008).

The Kotter’s Change Management Model has brought to the fore six pertinent

issues. First, the creation of a sense of urgency motivates people to appreciate the

need for change. Second, the recruitment of powerful change agents is essential to

counter resistance. Third, the change agents must develop an explicit vision and share

it with subordinates through open communication channels. The mangers should

identify and address concerns to minimise the risk of failure. Fifth, the change process

can only be meaningful if the employees assimilate the transformations into the

10

organisational culture. Most importantly, the guiding team should manage transitions

efficiently.

The most difficult stage of the change process is transitioning from the status

quo to the new system. Conversely, Bridges (2009) has formulated a Transitions

Model that organizations can employ to navigate through the change process

successfully. This framework contains three components: the past (certainty), the

neutral zone (ambiguity) and the future (hope). The organizations that concentrate on

the past do not grow because they cannot leave their comfort zones. By contrast,

focusing on the future presents endless opportunities for transformation. Finally, the

people and organizations that operate within the neutral zone are more likely to move

back to the past (Burke 2008). Thus, the management and employees of the new

hospital should focus on the future to optimise the change process.

Conclusion

The process of managing a merger is both a science and an art. The essence of

this assertion is that intricate nature of change management. Although transformations

are inevitable in the contemporary world, the complexity of the health care system

complicates matters. The increasing shift towards quality and safety has provided the

rationale for hospital mergers and acquisitions. Conversely, this strategic decision can

be both beneficial and detrimental to the delivery of services. On the one hand, the

integration of services plays a fundamental role in enhancing the efficiency of care

pathways. On the other hand, poorly managed mergers and acquisitions undermines

the delivery of optimal services.

The consolidation of hospitals will continue to receive more attention

considering the financial distress in the public sector. In addition, the increasing

demands for quality and safety necessitate the integration of health care services. As

11

such, it is imperative to optimise mergers and acquisitions through the effectual

management of change. The preceding discussions have proposed feasible strategies

that the two hospitals can employ to facilitate the transition. This report has

emphasised the significance of planning and communication during the change

process. The change agents should ensure that all the employees and other

stakeholders assume an integral part in the planning, implementation and evaluation

phases.

Reference List

12

Bridges, W 2009, Managing transition: making the most of change, 3rd edn, Da Capo

Press, Philadelphia.

Budawar, S, Varma, A & Katou, AA 2009, ‘The role of HR in cross-border mergers

and acquisitions: the case of Indian pharmaceutical firms’, Multinational Business

Review, vol. 17, no. 2, pp. 89-110.

Burke, WW 2008, Organization change: theory and practice, Sage, Thousand Oaks.

Creasy, T, Stull, M & Peck, S 2009, ‘Understanding employee-level dynamics within

the merger and acquisition process’, Journal of General Management, vol. 35, pp.

21–42.

Denison, DR, Adkins, B & Guidroz, AM 2011, ‘Managing cultural integration in

cross-border mergers and acquisitions’, Advances in Global Leadership, vol. 6, pp.

95-115.

Fischer, K & Rush, T 2008, ‘Staffing after mergers and acquisitions: a human

resource management study’, Journal of Business Case Studies, vol. 4, no. 12, pp. 29-

35.

Ford, JF & Ford, LW 2010, ‘Stop blaming resistance to change and start using it’,

Organizational Dynamics, vol. 39, no. 1, pp. 24-36.

Haas-Wilson, D & Garmon, C 2011, ‘Hospital mergers and competitive effects: two

retrospective analyses’, International Journal of the Economics of Business, vol. 18,

no. 1, pp. 17-32.

Harding, D & Rouse, T 2007, ‘Human due diligence’, Harvard Business Review, vol.

85, pp. 124–131.

Harrison, TD 2011, ‘Do mergers really reduce costs? Evidence from hospitals’,

Economic Inquiry, vol. 49, pp. 1054–1069.

13

Isern, J & Pung, A 2007, ‘Harnessing energy to drive organizational change’,

McKinsey Quarterly, vol. 1, pp. 16-19.

Kastor, JA 2010a, ‘Failure of the merger of the Mount Sinai and New York

University hospitals and medical schools: part 1’, Academy of Medicine, vol. 85, no.

12, pp. 1823-1827.

Kastor, JA 2010b, ‘Failure of the merger of the Mount Sinai and New York

University hospitals and medical schools: part 2, Academy of Medicines, vol. 85, no.

12, pp. 1828-1832.

Kotter, J 2008, A sense of urgency, Harvard Business School, Boston.

Leemore, D2009, ‘Estimation and identification of merger effects: an application to

hospital mergers. Journal of Law and Economics, vol. 52, no. 3, pp. 523-550.

Monge, P & Poole, MS 2008, ‘The evolution of organizational communication’,

Journal of Communication, vol. 58, pp. 679-692.

Pieterse, JH, Caniëls, MCJ & Homan, T 2012, ‘Professional discourses and resistance

to change’, Journal of Organizational Change Management, vol. 25, no. 6, pp. 798-

818.

Senior, B & Swailes, S 2010, Organizational change, Pearson Education, Upper

Saddle River.

Spector, B 2007, Implementing organizational change: theory and practice, Pearson

Education, Upper Saddle River.