Module 05 Project - Proposal and Final Submission

Running head: MERGERS AND FINANCIAL ISSUES 1

MERGERS AND FINANCIAL ISSUES 5

Mergers and Financial Issues in Healthcare Organizations:

A Case of Centegra Health System

Keri King

Introduction and Topic

Mergers and Financial Issues in Healthcare Organizations: A Case of Centegra Health System

Introduction

It is commonplace for healthcare facilities to face financial issues in the course of operations. A challenge, however, arises in the approach employed to address the issues in a bid to render the firms to be profitable again. Reliance on experts during the financial crisis and compliance to experts’ counsel may lead to the recovery.

Topic and Case

The case chosen is on Centegra Health System, while the topic is on mergers of healthcare facilities. The author provides that mergers and acquisitions among healthcare facilities have become rampant over time. Notably, the strategic decisions are meant to improve the financial fortunes of healthcare facilities involved. The anticipated enhanced financial performance does not, however, happen all the time and firms that chose the decision, sometimes, face financial challenges.

Financial Issues outlined in the Case

The healthcare facility mentioned previously announced plans to merge with Northwestern Memorial Healthcare firm in 2016. A year later, however, Centegra faced myriad multiple financial issues. Some issues of concern in the context were the opening of a new facility at a suburb, closure of an acute care unit, and multiple cases of uncompensated pay. The financial issues seemed to be beyond the capacity of the healthcare facility, the response to which it sought the services of a financial consultancy firm by the name Warbird. The chief executive officer of the healthcare firm believed that the financial issues that the firm faced were significant. To address the challenge, the organizational head sought broad performance improvements that touched on factors such as revenue improvements and increased labor productivity (Dimitropoulos, 2017). Consulting efforts culminated in the formulation of financial objectives to render the healthcare facility profitable within two years. Indeed, the healthcare facility exhibited signs of improvement within four months of Warbird’s operations, whereby the former beat the prediction for losses in 2018 by $10 million. The firm’s financial performance led to the prediction of profits in 2019. It is at the point that both Centegra and Northwestern Memorial Firm announced the implementation of merger plans, which had seemingly been put on hold to allow the former time to address the financial issues that it was facing.

Perspectives of Financial Challenges

The perspective of the financial issue was that it could be solved upon the employment of appropriate methodologies. It is for the reason that Centegra Healthcare Facility sought services of a reputable consultancy firm, the CEO of the former having a list of achievements that he wanted the latter to attain. The consultancy firm, on its part, believed that the financial crisis could be solved with appropriate planning and organizing endeavors (Hayward, 2016). As an illustration, the expert team formed six teams that consisted of directors and other employees. The teams were to form charters and establish the objectives to make within two years. Furthermore, the consultants believed that holding the teams accountable could potentially enhance commitment to the course.

Relevance to Financial Management

The case presents essential insights into the financial performance of healthcare facilities. An essential insight is that the facilities should not rush into signing merger agreements at a time when they experience the financial crisis as individual financial issues may be transferred to the new establishment. In the case, the two firms suspended the planned merger for the duration of at least two years pending Centegra’s resolution of the financial issues. The other insight is that healthcare facilities should seek the services of experts whenever faced with financial issues. In the context, conforming to experts’ counsel may potentially lead to turning around of a firm’s financial fortunes. As an illustration, Centegra sought the services of Warbird when faced with financial issues. In like manner, the action team formulated by the consultants decided to outsource revenue cycle management. The other observation is that a firm should be prepared to undertake radical measures in an attempt to improve financial performance (Ginter et al., 2018). In the case study, the six teams arrived at the decision to reduce staff members although it could adversely affect some employees through the loss of jobs.

References

Dimitropoulos, P. E. (2017). Performance management in healthcare organizations: concept and practicum. In GeNeDis 2016 (pp. 11-19). Springer, Cham.

Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2018). The strategic management of health care organizations. John Wiley & Sons.

Hayward, C. (2016). Healthcare facility planning: Thinking strategically. Health Administration Press.