Hospital Mergers and Acquisitions

Amanda HeadshotBy: Amanda Fiore

Has your local hospital merged or been acquired recently?  For an increasing number of us in the U.S., the answer is yes.

There has undoubtedly been a surge in hospital transactions over the past few years. Not only has the number of transactions increased, but also the variety of deals. From mergers to acquisitions, to joint operating agreements and joint ventures, one thing remains the same across the board: there has been and continues to be an influx in the formation of health systems in the United States. In 2015 alone, there were 100 transactions in hospitals and health systems and this trend of healthcare consolidation continues to rise.

This trend can be fueled by strategic, economic, regulatory pressures, or a combination of all. For example, a hospital may acquire a competing hospital to increase their share of voice in the market place, or a hospital may acquire smaller hospitals in the same geographic location to gain local strength and better service the local community’s needs.

Regardless of why a hospital decides to merge with another under the umbrella of a larger health system or chooses to acquire a smaller hospital to add to their portfolio, these transactions are likely to result in branding challenges. One of the first challenges a parent organization will face after a merger or acquisition is bringing all individual parts together under a unifying brand. It’s no small task to unify brand identity across a number of hospitals used to determining their own path toward building identity and generating awareness.

Strategically, of the challenge involves asking the question how these separate entities with differing brand strategies, products and services will come together to rally around the parent company. This parent brand has thought long and hard about acquiring smaller brands and must think about how to strategically market its increasing brand portfolio to its target audience. With the addition of hospitals to the health system, what do they bring to the table? What does this health system now have to offer that it didn’t before?

Instead of skimming the surface of existing financial, product and business strategy materials, marketing leaders must dive into the mindset of the target audience to best approach branding their growing health system. This means conducting research surrounding the perception of the merger and/or acquisition. Do consumers believe the merger will better serve the community or will it increase the cost of health care? Are there positive insights that can shape the campaign messaging or can any negative feedback be addressed in the branding strategy and/or creative? Are new treatment capabilities brought to the table?  Knowing how the consumer believes the merger or acquisition will impact them is important to the overall brand strategy.

In addition, marketers must evaluate if the acquired brand strategy aligns with the parent brand’s strategy. If so, does it make sense to combine the branding or keep the individual hospitals separate? Most times, parent brands will opt to integrate the acquired brand’s strategy with the parent brand’s overarching strategy, with the goal of communicating the new umbrella brand in such a way that it increases awareness and preference among the target.

St. Francis Hospital and Health Centers in Poughkeepsie was a small 243-bed, community hospital with strong religious affiliation and a lacking medical reputation. It serviced the mid-Hudson Valley region, including small towns some of which crossed the line of poverty. After experiencing financial difficulties and ultimately filing for bankruptcy, St. Francis was out on the market to be scooped by a larger parent company, Westchester Medical Center. The pairing was somewhat like the odd couple. Here Westchester Medical Center, a 652-bed regional teaching hospital with a strong medical reputation and wide array of service lines, was going to acquire a hospital less than half its size and located 60 miles north.

However before doing any brand planning work, marketers got out into the community measuring the consumer’s perceptions and thoughts regarding the merger. The research conducted led to the vigilant yet strategic, rebranding and renaming of St. Francis Hospital. In May 2014, St. Francis was renamed MidHudson Regional Hospital of Westchester Medical Center, illustrating the expansion of the hospitals services and offerings and its alignment with the parent organization Westchester Medical Center.

This is a successful case of a hospital transaction gone right. With valuable insights and thought out, strategic thinking, branding hospitals after acquisitions and mergers can make all the difference in effectively communicating the brand’s vision and achieving their goals.