COMMENT
requirement and sharing good practice. This is most appropriate for functions with a large variable component. 2) Remove one of the functions, strengthening the remaining function to deal with increased workload. This is most appropriate for functions with only a small variable component. 3) Outsource the whole function. The merged organisation’s new size may make the outsourcing of the entire function cost effective.
Whatever approach is taken, there are opportunities for efficiency.
• If separate clinical services are considered as one unit, excess capacity can be reduced;
• Reconfiguration of services reduces the need for duplicate on-call service, overnight staffing and some specialist roles;
• Shared best practice between a larger group of consultants allows greater comparison of productivity and quality between the two organisations and between consultants;
• Larger buying power should result in a reduction in procurement costs; • Reducing the number of sites from which the merged unit operates;
• A larger pool of staff should reduce reliance on locums and agency staff; • There are significant gains to be made from administration, including shared management, shared medical records and economies of scale;
• As property, plant and equipment are removed, soft facilities management expenditure reduces significantly; • Diagnostics is a key area of opportunity that is already seeing large opportunity through federation. Pathology costs have a high fixed element, and as such large increases in workload can be accommodated for a small increase in cost; and
• Many aspects of the back office can be rationalised through merger and resultant economies of scale.
The challenge
transactions in the UK, we see the following seven elements as essential to driving consolidation success and achievement of consolidation goals.
While the cited bene- fits of consolidation – such as cost reduction, improved access to capital, clinical scale and improved market position – seem at- tractive, the reality of achieving such benefits is often far more challenging than anticipated at deal conception. Over the past 20 years, most have failed to meet initial expectations.
Making such consolidations work to achieve promised cost savings, clinical scale advantages and market position improvement requires careful pre-deal assessment of compatibility and a holistic and rapid post-deal integration across key dimensions, which often don’t get the attention needed until it is too late.
Our point of view
Through our experience, and after having reflected on 20 years of health system
“Clinician cultural alignment and buy-in is perhaps the single most important element that drives integration success.”
Clarity around
International experience shows that any plan to merge or take over trusts benefits from a management model being in place in one that you can replicate in the other. This is vital where one trust is being merged because of ex- isting problems, as we believe that little change is often made below executive level to address the known issues through ensuring that ap- propriate performance management and other management systems are put in place. The merged entity needs to plan to quickly put in place its key elements – performance manage- ment; demand and capacity planning; opera- tional grip processes; financial and budgeting controls; rostering; and non-core back of- fice functions (payroll etc).
Deals are often con- ceived around back office and fixed-cost reduction opportuni- ties. While these are
important financial contributors, these cost reductions alone rarely lead to consolidation success.
the clinical and
commercial model beyond the cost side is paramount. This means a proactive and realistic plan for the consolidation of key elements such as the medical staff organisation, management and staffing models, care delivery models, service rationalisation, commissioner contracting and employer relationships, IT infrastructure, and patient perception. Too often it’s a pro forma that shows savings and a combined market share number that rationalises the deal. This, coupled with the Continued overleaf >
national health executive Sep/Oct 14 | 21
© Sophy Smith
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