$6.4B Henry Ford, Beaumont Merger Failed on Cultural Hurdles

John Commins, for HealthLeaders Media , May 23, 2013

Baumgarten says Henry Ford's improving balance sheet means the system could keep merger plans on the back burner for a while.

"Henry Ford has remade itself in the last couple of years with some success. Their profitability is much improved over where it was five years ago. It is mostly because of two things: one was the opening of the new West Bloomfield Hospital, which is a prosperous suburb of Detroit; and second was they closed what had been a money-losing (Henry Ford Macomb Hospital-Warren). Their medical group is in good shape. They have their own Health Alliance plan, which about 18 months ago acquired a Medicaid HMO in Detroit, which is strengthening their position. Henry Ford is thinking they're in pretty good shape."

If there is a lesson to be learned from the failure of the merger, Udow-Phillips says that key players in both systems have to be on board. "It is more than just two leaders wanted to come together, and I know the boards wanted to come together. But you saw in the physicians at Beaumont last week came out publicly in opposition to the merger so for any hospital the cautionary tale is to make sure that your physicians are aligned."

"The other message I would take from this is Beaumont and Henry Ford are two very strong institutions with a lot of history and strength in their markets. What you see more in mergers with hospitals is a very weak hospital merging with a strong hospital."

Baumgarten says the breakdown "is just a reminder of how difficult it is to engineer a merger of this scope."

John Commins is a senior editor with HealthLeaders Media.
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1 comments on "$6.4B Henry Ford, Beaumont Merger Failed on Cultural Hurdles"

Mary K Parker (5/28/2013 at 4:19 PM)
If cultures of hospitals vary widely, it's no surprise the leaders would call this off. McKinsey & Company wrote in "Perspectives on Merger Integration" that "when integrating companies are in the same or similar businesses, their top executives tend to assume they are 'just like us' and dismiss the need for deep cultural analysis." According to McKinsey, most mergers are doomed from the beginning[INVALID]-roughly 70% of all mergers fail. In a way, it's probably good that this merger didn't go through at this point due to the widely disparate cultures.




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