A large health system across two states in the midwest had taken steps to acquire a large cardiology practice. Over a six month period, the two parties retained an attorney to assist them with the integration effort. Yet, after six months and a number of false starts, it became clear that neither party had the necessary expertise.
Timeline expectations had not been managed, and the existing Professional Service Agreements and Management Service Agreements were viewed as unsuccessful by the parties involved. The practice side did not recognize, track, or report RVUs (Relative Value Units). In addition, because of the time lost in false starts, both the health system and the practice were adamant about pushing hard to get a deal done before the whole relationship disintegrated. Pressures were high and a lot was at stake for everyone involved.
On the health system side, they knew they didn’t have the time or expertise that they were looking for. Hospital executives were also looking for the objectivity of a third party evaluation and for someone to keep the project and the deliverables on track.
The parties involved wanted to make it work, but they were not sure if they could
The hospital group and the practice group were not sure if they had put a deal together that worked for both parties. At the heart of the matter was establishing fair compensation based on an objective set of financials, verses what the physicians thought they were worth and what the system thought they were worth.
The cardiology practice was very complex because they had some physicians who were clinical and others who had an academic role and were involved in training students. Many of the physicians did not believe in RVUs. In fact, they never tracked or reported RVUs. Without this data, all of the previous attempts made to develop financials were inadequate. The internal and external systems that the practice operated in were far too complex.
At a fundamental level, the physicians believed that there was not an understanding or appreciation for their contributions to the system. They felt undervalued. On the health system side, there was a sense that the executives wanted to pay for value, but no one could really identify what that really looked like. The chasm created by these competing perspectives threatened to derail the deal entirely.
From chaos to a flawlessly executed integration
When Paragon arrived on the scene, there was no time to waste. The negative momentum that had been established by the recent failures and false starts needed to be overcome quickly. The Paragon consultants quickly addressed this by rapidly developing a realistic work plan. Paragon executives met with the hospital system and physicians, and employed an extremely detailed due diligence checklist. Extensive interviews and tours identified what everyone was looking for.
The Campaign Room. Paragon actually set up a integration campaign room at the client site. Being physically on premises allowed them to review hundreds of documents in real time during the course of operations so they fully understood the system. Paragon held weekly meetings with three or more specific cross functional teams within the health system and the practice. These teams ensured that the provider base conversion, the acquisition process, data requests, IT, human resources, and finance issues were executed flawlessly according to plan.
Meaning Financials. Paragon put extensive work into developing meaningful financials that supported the integration. They developed extensive service line, practice, and hospital financials. On the practice side, RVUs had to be developed from scratch. On the health system side, an economic impact to the hospital and health system with multiple scenarios was developed. This helped hospital executives understand where they had flexibility in structuring the deal, and ultimately gave both parties a platform to structure a deal that worked for everyone.
Because of the tight timeline, the financials were developed as an iterative process and shared with key stakeholders as they were being developed. Because of the trust Paragon was able to establish, they were able to create a more flexible, real time collaborative environment that shorted the timeline and improved the quality of financials they were able to produce.
Six months later, financial forecasts are spot on
Despite the rocky start, the integration tracked exactly how it was planned. The financials are currently performing as forecasted. The provider base conversion happened as planned and groups on both sides are working together exceptionally and are happy with the outcomes.
It was a text book integration. But textbook integrations don’t come from text books. Quite the opposite. They come from experience. Each of the Paragon consultants that worked on this project brought 20+ years of experience working on the hospital and consulting side. It’s this depth and breadth of experience that allow them to anticipate where the problems are going to be and how to set clear, realistic expectations with clients. It was this track record of success that allowed them to create financials that were robust enough to accommodate all of the complexity of the systems that were integrating. It’s this kind of experience that makes the difference between a false start and a flawlessly executed integration.
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