Why Healthcare Mergers Fail and How to Prevent a Costly Collapse

A small community hospital merger began with hope. Being acquired by a larger health system could be a lifeline, and it was assumed that their arrival would be welcomed, even celebrated. Instead, staff felt stripped of identity and autonomy. “We thought they’d see us as saviors,” the acquiring CIO later admitted. “They saw us as dictators.” The change was top-down and abrupt with little communication or cultural sensitivity. Trust eroded quickly as a result and turnover soared. Halfway through, the organizations pulled the plug, unwinding the deal entirely. It was a costly, painful lesson that I see playing out all too often across the country. 

Hospitals and health system acquisitions reached record highs in recent years, with a significant proportion of those acquisitions (~30%) involving a party in financial distress, according to Kaufman Hall’s recent year-end report. Some mergers fall through, but of those that do come to pass, most do not end up delivering the promised improvements in care delivery, patient experience, or cost, and many even report a decline in those measures.

Despite the good intentions and strong leaders at the heart of these would-be transactions, not to mention the need for stronger healthcare systems in rural or underserved areas, many healthcare mergers fall short of expectations, and some mergers collapse entirely. Why? Mergers fail not because they are bad business but because of unrealistic expectations and a lack of planning around key foundational details. 

The recipe for merger success sits right under our noses, in routine operations and departments that don’t always show up on acquisition project plans or financial ledgers. But executing it well takes diligence, attention, and proactivity. 

Anatomy of a healthcare merger

Mergers are about much more than logos, budgets, and EHR transitions. They are about people and culture as much as finances and operations. Yet, after years of leading acquisition projects, I’ve learned that these areas are often overlooked or under-considered in transition plans. We know that things like leadership, culture, and talent planning are critical to any organization’s success, especially in a field like healthcare where the team’s technical and medical expertise are indispensable assets. So why not prioritize those things when managing organizational change as significant as an acquisition?

A successful healthcare merger must include personalized rollout plans for all operational areas, proactive talent planning, leadership and mission alignment, and consideration of the resources needed to address it all successfully. While you may have a plan for integrating your EHR, the unseen reality is that teams will blend, roles will change, cultures will clash, and team members will leave, whether you have created a plan to deal with it or not. 

The success of your merger will depend on that plan and its execution.

Why healthcare mergers fail

Organizations frequently underestimate the complexity and importance of integrating people, cultures, and processes. Acquiring systems often treat post-merger integration as a legal, operational, or IT checklist and ignore the human side of change. However, the less tangible aspects of operations are the ones that can make or break the transition. 

In my career, I have stepped in to help get numerous mergers over the finish line. In the process, clear factors have emerged that distinguish projects that are on track from those that need serious righting of the ship to succeed.   

• Lack of focus on people and culture: Organizations often prioritize legal and IT integration over human integration. Failure to consider cultural differences between merging entities leads to friction, distrust, disengagement, and turnover.
• Leadership misalignment: Mergers often stumble when the leadership of both organizations don’t share a unified vision or clear future roles. When leaders don’t see a place for themselves, they tend to obstruct or disengage from the process because they are distracted and can’t help execute on anything they are assigned as leaders.
• Overlooking change management: A failure to plan and communicate change in all areas of operations and culture leads to confusion, resistance, and turnover. Simple missteps, like impersonal technology rollouts, can burden and alienate staff.
• Resource constraints and poor planning: Many organizations are under-resourced for handling M&A complexity, especially in rural or underfunded settings. IT and operational leaders are stretched thin trying to merge systems while running day-to-day operations.

The reason these elements can be so lethal is because they are easy to overlook and difficult to measure. On top of that, these factors can also be unpredictable since each organization has its own unique culture that takes time to understand, and members of leadership that bring unique strengths (and blind spots) to the table. Acquisition plans must solve for these issues if they are to be successful.

How to avoid merger breakdown

Getting your merged organization to a place where it has checked the technical boxes required to provide care is one thing. Engaging a team and carefully calibrating a shared culture that enables success and top-tier patient care is entirely another. 

The good news is that we can learn a lot from both failed and successful mergers. After seeing numerous different approaches, project plans and best practices over time, this is what the successful ones have in common.

• Start early and holistically: The teams that engage experts before the ink on the deal is even dry are able to shape planning, not just post-deal execution. They consider culture, governance, people, and operations from day one.
• Invest in communication: Transparent messaging, consistent updates, and clear answers to “what’s in it for me?” and “what happens next?” help build trust and buy-in across all departments and employees. Tried and tested change management principles provide an effective communication framework.
• Use a playbook and customize it: Organizations that take advantage of established best practices and then customize them for each department are more successful. This step enables leaders with both clear expectations and flexibility to take unique processes or teams into account. 
• Consider unique characteristics of rural and small systems: Rural hospitals have unique needs and often lack resources. Mergers must preserve local identity and talent while offering access to broader capabilities. They must also find ways to utilize their unique (and often cross-functional) skillsets to create career growth opportunities for valuable talent.

Rewriting the story of M&A outcomes

If all of this sounds like an immense investment of time and resources, that’s because it is. And it should be given high stakes. Failure to invest the time and resources to plan and communicate change in all areas of operations and culture leads to confusion, resistance, and turnover. Simple missteps, like impersonal technology rollouts, can burden and alienate staff. Unfortunately, many organizations are under-resourced to effectively handle the complexity of M&A projects, especially in rural or underfunded settings. Dedicating additional resources to support IT and operational leaders ensures that systems and cultures are merged successfully while running day-to-day operations.

The alternative to these investments is much more costly for the parties and communities involved. Successful mergers don’t just consolidate services. They unify people around a shared mission to serve their patients. If we want to see lasting success in healthcare M&A, it’s time to stop leading with checklists and start leading with people. Invest in managing it intentionally and proactively, not just for the sake of the business but for the sake of the patients and communities you serve.

Photo: Dmitrii_Guzhanin, Getty Images

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