How to Assess Cultural Fit in a Merger

The experience of one regional health system highlights the importance of using a structured process to evaluate cultural compatibility before agreeing to merge.

Culture is considered a subjective concept during a merger or acquisition, but no one doubts its importance. Healthcare mergers have failed because the cultures of the two organizations were just too different.

But what if you could objectively measure culture early in the due diligence process to assess fit and gauge post-merger outcomes? That was the approach taken by CHRISTUS® Trinity Mother Frances Health System (TMFHS), a faith-based, not-for-profit health system in Tyler, Texas.

In 2015, TMFHS—then known as Trinity Mother Frances Hospitals and Clinics—found itself in an enviable position. As a mid-size regional health system with strong operational and financial performance, it could afford to shop itself to any number of potential business partners.

TMFHS knew that even though it was in a position of strength, a strategic partnership could supply the efficiencies of care and the expanded market that would help the organization meet its five-year goal of succeeding in population health. TMFHS also wanted to find a way to preserve the heritage of its faith-based care and ensure it could execute on its bold vision to be not just a market leader in East Texas but a leading resource to support the community’s health and well-being in the years to come. Leaders recognized the value of the investment and intellectual capital that affiliation with a large national system would bring.

Embarking on a Cultural Assessment

TMFHS considered proposals by 19 suitors before narrowing the list to just two finalists. That’s where the cultural assessment came in. The goal was to dig deeper into key areas in search of the type of cultural compatibility that would ultimately allow the organization to achieve its vision.

TMFHS’s criteria included partnership between hospital administrators and physicians; investment in leadership development; commitment to employee and physician engagement; respect and appreciation for the health system’s Catholic heritage; accountability and transparency at all levels; consistency and reliability in brand promise; and a hard-driving, high-value performance orientation. In all, the organization identified a list of 20 “must-have” items.

“It was so important to get this right that we wanted to identify a disciplined approach to assessing culture,” says Steven Keuer, MD, president, CHRISTUS Trinity Clinic and chief medical officer, CHRISTUS Trinity Mother Frances Health System.

The assessment consisted of two parts. First, an online survey tool was used to collect responses from four levels of leadership (C-suite, directors, managers/supervisors, and physician leaders/other stakeholders) at TMFHS and each of the two finalists. The 13 questions assessed opinions on everything from the organization’s commitment to serving patients and its commitment to spirituality and core values to its adaptability and commitment to continuous improvement. Survey findings were aggregated and synthesized to identify areas of cultural alignment and misalignment.

Next, on-site interviews were conducted to delve into the survey findings, with two days spent at the corporate office and at an associated hospital site with a similar profile to TMFHS for each of the two finalists. The interviews included all of the key stakeholders: board members, executive team members, next-level leaders (including religious and mission leaders), key physician leaders, a mix of clinical and administrative frontline staff, and community stakeholders.

A list of structured questions was used in focus groups as well as in one-on-one interviews between TMFHS executives and board members of the two finalists. These questions focused on mission and values, goals and teamwork, physician engagement, communication and transparency, and change management.

Culture Trumps Financials: Lessons Learned

TMFHS ultimately determined that both organizations would be a strong cultural fit, with each offering different strengths and opportunities. Leaders agreed that no acquisition would move forward without approval from all three of its constituencies: Trinity Clinic, the Sisters of the Holy Family of Nazareth, and the system’s board.

Ultimately, TMFHS selected CHRISTUS Health despite the fact that the offer from the other finalist was more than $800 million higher. In the end, culture wasn’t just a tiebreaker; it was the most important factor in the deal.

Here are a few of the lessons learned during the cultural assessment process:

Diagnose before you treat. Data matters in assessing culture. That’s why a two-phased, objective cultural assessment (i.e., the online surveys and focus groups described earlier) is recommended. By clearly identifying the priorities of key stakeholders from the two finalists and matching those against TMFHS’s strategic plan and “must-have” wish list, cultural fit could be confidently predicted based on identified indicators.

All voices need to be heard. Stakeholders value different things. For example, as a Catholic organization, the Sisters of the Holy Family of Nazareth placed great value on their legacy. While they felt an affinity with nuns in the Order at CHRISTUS Health, they were less confident about the degree to which they would have input in realizing their vision with the other organization.

Physicians, on the other hand, were most interested in their autonomy and maintaining the collaboration with leadership that they had enjoyed at TMFHS. Meanwhile, the board’s priority was ensuring that the community continued to have a voice in the system’s strategic direction and that local and regional needs weren’t subordinated by the system. Depending on the lens through which stakeholders looked, the value of the deal differed greatly.

Engagement is crucial. TMFHS created a rigorous steering committee comprised of approximately 20 diverse stakeholders who met regularly to share information and insights. (See the exhibit below for recommendations on whom to include.) Because individuals were both engaged and transparent about their activities, the group was a powerful force in ensuring the process moved smoothly—at a structured pace that still allowed members to think both broadly and deeply about the recommendations. A culture of deep trust facilitated the collegial sharing of differing opinions and ultimately resulted in a unanimous decision to choose CHRISTUS Health.

Engagement Matters: Who to Include on a Steering Team

Site visits facilitate medical staff buy-in. “The opportunity for conversations between our physician leaders and their counterparts in the hallways or over lunch was particularly helpful,” Keuer says. “As a physician, you’re automatically included in a club of professional respect. So when we asked questions like, ‘What’s it like to be a physician here?’ ‘Do you feel supported in providing safe, high-quality care to your patients?’ ‘Is there pressure to keep support staff low?’ we heard unguarded answers. And that’s important to us because our integrated model depends on close collaboration between the hospital and physicians.”

Once visiting CMOs and physician leaders felt comfortable and confident in shared priorities, they became invested in the success of their recommendation. That created ownership of the process and set the stage for post-merger success. They were also proactive in sharing their opinions with their TMFHS colleagues, thereby facilitating buy-in from the rest of the medical staff as well as close collaboration between the hospital and physicians to optimize quality and safety for patients.

Active communication relieves organizational anxiety. TMFHS’s CFO played a vital role in considering how post-transaction consolidation activities would proceed and in communicating that information to potentially affected employees. Through operational planning with her counterpart at CHRISTUS, she understood the pending changes in the accounting and payroll functions and was able to explain how these changes could benefit the enterprise. Employees understood early how they would be impacted.

Since the Merger

It’s no secret that regional and national market dynamics are constantly changing in the healthcare industry. And TMFHS isn’t immune. Since the merger was finalized almost a year ago, payer-contracting changes and increasing competition have created new financial pressures. In addition, the organization has lost several key leaders, creating some short-term operational challenges. Still, TMFHS is already realizing many of the gains envisioned upon its acquisition by CHRISTUS Healthcare.

For example, the organization is expanding its footprint in Tyler with the construction of a new hospital, growing its market share in East Texas, and rapidly increasing the number of primary care providers that see patients in the area. TMFHS is also developing a system of coordinated care with an increased focus on ambulatory services to prepare for population health management.

“The future is bright,” Keuer says. “Because we were so diligent about identifying a strong cultural fit early on, we’ve been able to successfully navigate challenges along the way. Our partnership with CHRISTUS is advancing our vision to create healthy lives for people and communities.”

B.G. Porter, MBA, is president and CEO, Studer Group, A Huron Solution, Pensacola, Fla.

Paul Panico, PhD, MBA, FACHE, is coach, Studer Group, A Huron Solution, Pensacola Fla.