Mergers and Acquisitions in the NHS

Mergers & Acquisitions. NHS develops an acquired taste.

3 min read

Posted 01.12.13 by Ben James

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Mergers and acquisitions are firmly on the agenda for the future but have had a patchy record in the health service. The HSJ gathered an expert roundtable to wrestle over what makes M&A marvellous – and appalling. Article written originally by the HSJ By Andy Cowper

The discussion began with roundtable chair and HSJ editor Alastair McLellan asking what made a good case for mergers and acquisitions in the NHS.

HR consultant Julia Whitehouse suggested that most mergers were for financial reasons, rather than service driven. She raised the common risk of rushing mergers, with insufficient care and attention to what made an effective, successful merger. Good reasons were about financial balance and recovery, hopefully, to improve quality with service change to benefit patients.

“I don’t think there’s any such thing as mergers in healthcare: it’s virtually all acquisitions. Few organisations merge for fun; normally one (and sometimes both) are in clinical or financial distress.”

Sir Robert Naylor, Chief Executive of UCLH

He emphasised that trusts’ economic situation will drive mergers. Trusts with failing clinical standards came under huge pressure to merge.

He added: “There’s clearly far too many provider trusts in urban areas: London has 42 but I don’t think there’s a case for more than about 12. There are too many ‘small and struggling’ on the periphery of London. The big problem since 2003 is that FTs need a failure regime. Far too many were being subsidised for failure: bailed out by the centre.

“Politicians must face up to the need to change the shape and structure of providers. So far, they haven’t, which has led to many decisions I don’t understand about clearly failing trusts.” Sir Robert said that “the two drivers of acquisitions are economic situation and financial viability of one or more
organisation and inability to maintain clinical standards”.

Ben James, a partner at Hunter Healthcare reflected that, in an NHS emphasising choice, patients’ experience of providers may in time prove important to M&A-type reconfiguration, demographically and geographically.

Catherine Davies described her organisation Monitor as “agnostic” over what defines a good merger or acquisition:

“There’s no fixed view. We’ll look at the impact on patient choice and competition, and analyse that. I agree with Robert that all such deals tend to be acquisitions in the end.”

Catherine Davies, Monitor

Ms Davies defined a key driver as improving service to patients: “It often starts with two trusts entering a service level agreement together, who then find (or are told) clinicians are very loyal to their own trust, so they need structural change to get a common culture and certain benefits.

“It can also lead to better or more stable management (of which there’s a high turnover), and having a different management team come into a combined trust can bring financial benefits and facilitate rollout of best practice. Another case for change would be to get the ability to achieve FT status more easily by improving clinical and financial standards.”

Roundtable Participants

Dr Mark Goldman management consultant and former chief executive of Heart of Birmingham Foundation Trust
Lucy Moore associate, Deloitte Consulting (restructuring expert)
Sir Robert Naylor chief executive, University College London Hospitals Foundation Trust
Bob Ricketts director, provider transition, DH, and commissioning support strategy and market development director, NHS Commissioning Board
Catherine Davies executive director of co-operation and competition, Monitor
Professor Naomi Fulop University College London, author of major
study on NHS mergers
Matt Tee managing director, Reputate communications, former director of government communications, Cabinet Office
Julia Whitehouse HR consultant and former interim director of HR, Barts Health Trust
Gavin Johnstone managing partner and founder, Hunter Healthcare,
which provides executive talent to the healthcare sector
Ben James founding partner, Hunter Healthcare
Alastair McLellan HSJ editor (roundtable chair)