The Death Spiral of a Health Care System

 In this blog entry, Judith Swazey author of Merger Games, recounts the unfolding of a medical merger that provides truth can be stranger than fiction.

             Merger Games conveys the often unexpectedly dramatic nature of the events that my colleagues and I chronicled from 1994-2003 in a study of a medical merger. That research, and the “reads like a novel/should be made into a movie” book that it generated involved the historic acquisition and union of two medical schools in Philadelphia, The Medical College of Pennsylvania (MCP) and Hahneman University by the nonprofit Allegheny Health Care System. We detailed the fate of the merger process when, after a series of voracious acquisitions under the dominion of its CEO, Sherif Abdelhak, Allegheny financially imploded, becoming the country’s largest nonprofit health care organization to declare bankruptcy. The bankruptcy, in 1998, led to the fire-sale purchase of Allegheny’s Philadelphia-area holdings by the Tenet Health Care Corporation, with management and then full control of the medical and other health science university schools by Drexel University. Allegheny’s death spiral also triggered a cascade of state and federal investigations, lawsuits, and civil and criminal indictments.

            The MCP/Hahnemann/Allegheny story has its own particular elements, especially in its cast of players and their organizations and the effort to fuse two medical schools. The lengthy merger process, still underway when the bankruptcy took place, was a tumultuous, tension-ridden, often acrimonious affair. It involved turf wars between the faculties, staff, students, and graduates of the previously separate medical schools, between the medical school and other schools in the  Allegheny University of the Health Sciences, and between the schools and the corporation; educational problems and stresses for the medical students, who called themselves the “merger guinea pigs;” and clashes between the historically ingrained organizational cultures of MCP and Hahnemann, and, most prominently, between the powerful cultures of the academy and the corporation. Riveting as this story is, it is not unique.

             Mergers are rampant, in non-profit and for-profit sectors of health care and in small and large businesses and corporations. Moreover, the merger landscape is littered with failures. Some 60 percent of business mergers reportedly fail; finances are the most frequent reason, followed by an irreconcilable clash of organizational cultures, whose importance is seldom recognized and dealt with before and during an attempted union Mergers, in short, share many common characteristics and patterns that are documented and illuminated in Merger Games. There are lessons to be learned for those considering or undertaking a merger about what a complicated, lengthy, conflict-ridden undertaking this usually is, and why mergers, akin to marriages, may succeed with a great deal of hard work, may have a broken engagement, or end in a divorce.


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