Mergers and other consolidations between community hospitals and major teaching hospitals can be mutually beneficial in today's competitive managed care environment. The process for integrating previously separate institutions, however, can also be fraught with difficulties and profound risks.

David Altman of the Lewin Group discusses the major issues involved in mergers and acquisitions in the report, Key Issues in Community Hospital/Academic Medical Center Consolidations. This report, which is part of the work of The Commonwealth Fund Task Force on Academic Health Centers, explains the motivations and principles involved in mergers and consolidations, assesses options and the critical issues that must be addressed, and provides lessons derived from institutions that have recently consolidated.

Altman suggests that any effort to merge hospitals begin with an assessment of the strengths and weaknesses of the institutions and the advantages each brings to the other. The factors he addresses include the institutions' size and economic strength, market position, community position, and ability to innovate.

The report also reviews the critical issues that form the foundation for negotiations on the integration of two institutions. These issues include the institutions' mission and culture, governance and leadership, organizational structure, financing, medical staff, clinical service programs, and education programs.

Altman concludes that the history and missions of hospitals are as important to the consolidation process as are their service lines and balance sheets. Institutional leaders entering this complex process must expect the unexpected, and be armed with a clear sense of vision to achieve successful consolidations.

Critical Processes for Consolidators

Questions institutions should ask themselves and their potential partners before beginning a consolidation are listed in an appendix to the report. Included are the following critical processes consolidators should follow:

• Preparation. Hospital administrators must have a clear sense of mission, a strategic plan, a firm sense of goals for partnership relationships, and criteria potential partners should meet.
• Process design and management. Development of a vision, agreement on business objectives, and preparation of the initial agreement are important.
• Analysis. A compelling case analysis to identify risks, returns, and opportunities should be conducted.
• Design. Both partners must agree on such factors as ownership structure and governance, physician and faculty organization, and clinical configuration.
• A business plan. The plan should consider such factors as timing, maintaining ongoing operations, commitment of resources, and monitoring the consolidation progress.

The full report is not available at this time.