Mergers and acquisitions are widespread across the healthcare sector and have a direct impact on philanthropy. Whether it is a health system acquiring a community hospital as part of a larger growth plan or two health systems merging to improve healthcare services across a region, such significant institutional changes require foundations and development teams to adapt thoughtfully and efficiently in a fast-changing environment.
Based on decades of experience in the healthcare sector and witnessing firsthand countless mergers and acquisitions across the country, CCS offers the following lessons learned to help healthcare leaders in philanthropy seize new opportunities and navigate unforeseen challenges during this process.
Look Inward & Prioritize Communication
Moving forward with the new, shared corporate identity from the start is important, as changes are easier to make when the merger is first announced rather than many months or even years afterward. Initial steps to accomplish this include:
- Define a unified brand and marketing strategy that highlights the benefits of coming together.
- Do your due diligence and take inventory of what communication and messaging assets exist across institutions. Be prepared to answer the question: how will the newly merged entity better help our patients, their families, and our staff?
- Ensure that digital content, website(s), and materials between the two entities are aligned from the start.
- Plan for the appropriate, unified constituent outreach, starting with internal stakeholders, such as your Board and staff, and then including external stakeholders like major donors, grateful patients, and third-party event leaders.
Prioritizing communications and refining the message to your audience is imperative, but remember, one message does not fit all. Internal audiences will want to know more about the structure and mechanics of the merger, but it is best to keep these communications at a high level. With external audiences, focus on the benefits of the merger to patients, their families, physicians, and staff.
Define Leadership Structure & Clarify Roles
Merging leadership to form a single operation can be tricky and difficult, especially when the leaders and staff of each institution are popular among their constituents and donors. However, trying to preserve separate cultures across entities can leave a team vulnerable to a fragmented and disorganized environment.
Creating a single combined organizational structure to support the new institution is essential to success. Clear decisions about leadership and staff structure allow merged teams to understand their respective roles and to work collaboratively as their institutions come together. Institutional leadership should be clearly defined at the top and designed to be collaborative, not competitive. Remember, everyone is on the same team now. The new organization chart should encourage teamwork and communication. Additional considerations for establishing a healthy, unified team include:
- Begin the alignment of operations, policies, Board responsibilities, donor societies, etc. as soon as possible to prevent any imbalances between the two organizations. Clever philanthropic leaders will take advantage of the impending merger to revise outdated policies, transition ineffective leaders and volunteers, eliminate inefficient legacy projects, and create new philanthropic initiatives.
- In one case study, CCS worked with a health system in Boston following a community hospital acquisition to slowly dissolve the hospital foundation Board and integrate key Board members into the main foundation Board of Trustees for the entire system. To maintain local trust and a smooth transition, the system updated its foundation Board bylaws to require a specific number of representatives to sit on the local hospital Board. This revision also generated greater connectedness and philanthropic opportunity at the local level.
- Prioritize performance metrics and volunteer committee operations in the newly established structure to ensure expectation setting, continued growth, and professional development. Leadership should continuously measure success and be open to needed changes throughout the first year.
- In another case study, CCS worked with an academic healthcare institution in the Central U.S. region to support the merging of two separate development teams into one. Three key questions asked early on to inform the appropriate transition timing and approach included: What staffing structure do we need to support a unified effort?; Does the team have the necessary tools for success?; Do we have the right talent?
Engage Top Donors in the Process
Having previously made significant investments in the merging organizations, top donors will appreciate getting information in advance of any public announcements. Let the donor pyramid guide the sequencing of your communications – start with top donors first!
To ensure better coordination of top donors, the integration of (or collaboration between) the two institutional database systems is important to implement as soon as possible. Have a plan to reach out to key stakeholders as the merger is being announced and provide periodic updates afterward. Create a schedule for periodic communication but be careful not to over-communicate. Drawing constant attention to the merger may make it appear that difficulties exist. Periodic updates are welcome and assure donors that the process is going smoothly. Finally, the merger may present an opportunity to engage your top donors in a new way.
In another case study, CCS worked with a health system in New Jersey following the acquisition of a community hospital to help local hospital leaders inspire local donors to think bigger about their impact at the system level. In addition to supporting their community hospital directly, donors learned how their gift could have an elevated impact across the system.
Anticipate Pitfalls
Moving too quickly or too slowly can cause challenges. Rushing the merger of philanthropic efforts can cause confusion and frustration among donors and staff alike. Waiting too long can cause the entrenchment of leaders, the continuation of inefficient foundation workflows, the duplication of efforts, and help to perpetuate separate philanthropic cultures within the merging institutions. What’s the right speed? Of course, it depends on the size and scale of the organizations. That said, CCS offers the following sequence and general practice for consideration:
| Time Period | Considerations |
|---|---|
| Pre-Merger | – Communicate with internal stakeholders – Audit each foundation’s strengths and opportunities – Create branding and marketing materials |
| Early Merger | – Integrate the database – Align foundation and Board policies – Create new organizational structure with clear and collaborative responsibilities – Prioritize communications with external stakeholders |
| Mid-Merger | – Consider sharing services for efficiency and enhanced coordination (gift processing, communications, human resources, planned giving, annual fund appeals, etc.) |
CCS has experience helping healthcare organizations navigate mergers and acquisitions and a host of other challenges. If you are undergoing a merger or acquisition, email us to discuss how to apply the concepts in this article to your individual case.
