Community Hospitals Integrating With Other Organizations

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The current trend in the medicine industry has seen hospitals- in most cases community hospitals- integrate with other organizations for different reasons. The most common reasons for integration are service consolidation and also the degree of ownership. This gives rise to two different forms of integration that are based on the above two; integration based on degree of ownership includes acquisition, merger, joint venture, alliance, network, and virtual organization while integration based on service consolidation includes horizontal integration and vertical integration. This paper looks at merger and joint venture as they have been used in this industry. The benefits that have been accredited to the above two are noted and the limitations of the same highlighted.

In business the term merger refers to the joining of two or more financial entities to form one solid firm. This definition is not too far from the context in the medicine industry. As opposed to the cases of acquisition where a parent company acquires the shares of another company, mergers involve consolidation of all the assets and liabilities of two or more firms in the medicine industry to form one company.

In most cases this is done so as to; create a more solid asset base, increase the customer base, diversify areas of expertise and also to form a more solid competition front. The new arrangements require change in management where in most cases the former directors of the old firms form the board of directors. The directive of such hospitals hence forth is received from one single head and the financial records are consolidated into one. The process requires liquidation of the previous firms and revaluation of all the assets (IOM, 2001).

There are cases of both successful and unsuccessful mergers. For a merger to succeed some issues have to be taken into effect. The management has to make sure that all the tertiary level services have been handled properly. The involvement of top level managers in these services is very much needed. Also needed is the effective transformation of the cost cutting procedures that are laid in the merger into reality. Otherwise the managers will lack the importance of the merger. It is also important that the top management makes sure that all other targets like the attainment of the market base and higher service provision are attained.

An ideal case of a failed merger is Hershey Medical Center (HMC) and Geisinger Health System (Geisinger) merger that were dissolved towards the end of 1999. While the intentions of the merger were all positive, the merger always had a lot of conflicts. The staff on both sides usually found themselves taking sides and creating two constituencies in an event a conflict occurred (Cuellar & Gertler, 2005). Moreover, the theoretical cost cutting did not materialize into reality as well as the presence of practitioners mistrust among the staff of both sides (Sidorov, 2003).

In business, the term joint venture refers to a situation where two or more companies come together for the purpose of doing a certain business and continue with their normal activities upon completion of the task. In hospitals this is common where hospitals are undertaking specialized treatment and health care. The integration usually involves the parties appointing a manager for the purpose of the joint venture so as not to affect the normal running of any of the hospitals involved. The venture manager usually gets directions from both the managements after much consultation (Watch, 2005).

It is the tendency of hospitals in a joint venture to have high trust on one another. This is specifically so considering that the ventures are common in specialized treatments and undertakings. One of such undertaking is a research, when there is an outbreak of a new disease; hospitals opt to bring together their professionals to seek a solution. Such a case that is delicate and equally important to all the hospitals involved. Each of the professional has to prove that his or her company’s choice was worthy and also work hard towards achieving a solution with highest efficiency and least side effects. With such a group, cases of sabotage or intentional mistakes aimed at the down fall of the venture are on the minimum (IOM).

However, there have been cases where joint mergers have either failed their targets of ended prematurely. This is usually where the joint venture involves offering of services that are also offered in the same hospitals. Such ventures are common in times of disasters and in undeveloped areas. In such instances there are a lot of mistrusts as each of the hospital may have intentions of having the joint patients as their own. Also –and especially in less developed areas – each of the hospitals may have prospects of opening a fully owned branch at a later date. Thus the hospitals view each other as future competitors (Sidorov, 2003).

The modalities involved in mergers are different from those involved in a joint venture. One, the targets in both arrangements is different, while joint ventures are for a specific event and or time; mergers are long term and aimed at unforeseeable future. The are also some common features in both; one they involve two or more hospitals coming together, and two they are aimed at providing better services to the community as well as cutting down the cost of services.

As we have that noted joint ventures have a higher degree of efficiency as compared to mergers. However it is note worthy that the integrations are used in diverse situations. The government has laid down strategies to be used in any of the integration method that hospitals may choose to follow. This has been done in efforts to reduce the number of failed integrations. The community hospitals have found the laws of mergers favoring them and the trend show that many have indeed formed mergers with other organizations some of the them religious groups and non governmental organizations. The mergers have lead to these hospitals being absorbed into the customs of the organizations that they merge with. More community hospitals are expected to follow the trend in the near future (Watch, 2005).

Any mode of integration in the hospital industry has got its own benefits and limitations. The fact that there are some mergers that have failed and joint ventures that have ended prematurely without achieving their purposed intentions should not be used as a reason of demonizing the idea of integration. This only calls for any hospital management to be cautious when getting involved in any of them. It is worth noting here that the other integration criteria mentioned in the introduction part have their own salient features that could not be discussed in this limited space.

Reference List

Cuellar, A. & Gertler, P. (2005). How the Expansion of Hospital Systems has Affected Consumers. Health Affairs. 24 – 213. Web.

Institute of Medicine [IOM]. (2001). Crossing the Quality Chasm: A New Health System for the 21st Century. Washington, DC: National Academies Press. Web.

Sidorov, J. (2003). Case Study of a Failed Merger of Hospital Systems. Web.

Watch, M. (2005). Religious Health Restrictions. Web.

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Community Hospitals Integrating With Other Organizations

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