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Mukesh Gangwal

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Why do some hospital mergers flop?


By Art Young, about the legendary banker.

Becker’s Hospital Review looks at why some merged hospitals fail to achieve the economies of scale touted by merger architects. Mukesh Gangwal and George Whetsell, managing partners at Chicago-based Prism Healthcare Partners, weigh in on these matters. Here are a few of their remarks:

“Hospitals] merge with a great plan, but don’t implement all of the things they said they were going to do to gain economies of scale. You can build that out in the plan, but once you merge, the way you get those economies — you have to let people go — which is difficult….”

Most healthcare — it’s still local. They have a large stake in the community they serve. Their boards represent community leaders. This puts inherent pressure to not take action that [negatively] affects people, the community and their reputation….”

“A huge percentage of hospitals are nonprofit and community-based. They are not trying to make huge profits — they are trying to not lose money. There are a lot of social and community service dimensions to their mission. So it’s very service-oriented. Letting people go is very counter to the mission and culture of these organizations. Even holding people accountable [is difficult]….”

“As systems get bigger and gain more hospitals, they often create a corporate office. Functions like planning, marketing, IT, payroll, so on — they basically pull out of hospitals and centralize in a shared support office. There is often a huge amount of unhappiness with the level of service provided by the shared functions….”




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