Simione™ Healthcare Consultants

Partnerships and Affiliations: A Happy Marriage or an Ugly Divorce?

Whether seeking new solutions, greater financial stability or a new strategic direction, more and more home care and hospice agencies are taking the proverbial “walk down the aisle,” choosing one or more business partners who share their goals to improve business performance and the bottom line.

"Every agency can identify important reasons to affiliate with other health care organizations,” says Kristy Wright, RN, BSN, MBA, FAAN, Director, Simione Healthcare Consultants, “and the most important decisions rest in choosing the ‘right’ partner and sustaining a level of commitment and flexibility to implement and manage the relationship over time.”

Whether independent or already part of a growing network, home care and hospice agencies are recreating unions with other agencies, hospitals and health networks, long-term care facilities and managed care organizations and physician-hospital organizations.  “The couplings vary and depend upon the needs, philosophies and expectations of each party. No matter what the affiliation looks like, it requires clear communication around shared objectives to create a symbiotic union that will endure over the long haul,” Wright explains.

Preferred Provider Agreements are typically the easiest to implement, because they can stabilize referrals without interrupting the provision of services or existing referral patterns. “They allow agencies to get better acquainted while retaining their name and brand identity, and do not involve licensure, regulatory or accreditation rework,” Wright says, “It’s a great way to start a ‘relationship’” but these arrangements cannot guarantee referral volume, and do not bring the economies of scale of a more ‘serious’ relationship.” 

Contractual Relationships also allow agencies to retain their identity and avoid licensure, regulatory or accreditation rework, bringing potential financial benefits without impacting the financial security of the parent company/network.  “While sometimes confusing for patients and referral sources, these agreements also may foster service fragmentation, cause disagreements in clinical protocols, and fail to provide the economies of scale that a more formal union would facilitate,” Wright explains.  “By itself, a contractual relationship will not resolve financial, competitive and services issues that may exist for the agency involved.”

Management Services Organization offers the benefit of standardized quality, compliance and educational standards, and some economies of scale with no licensure or regulatory implications.  The MSO allows each entity to manage its own referral sources.  According to Wright, the drawbacks of this option include limitations on achieving day to day operational efficiencies and difficulty determining referral assignments through a centralized intake process, as well as brand confusion, overlapping geography and a level of competition that may have all parties wasting time on differing strategies and marketing efforts.

Wright suggests that a Merger/Partnership/Joint Venture will provide more opportunity to maximize economies of scale, giving agencies and their partners more flexibility for cost control, greater consistency with financial, operational and quality data, and more leverage to draw on the strengths of each organization.  “With this higher level of commitment, each entity can eliminate duplication within operations and services, standardize policies, promote best practice for financial and clinical operations, and present a unified message to referral sources,” Wright says, “and this improved organizational structure may also create opportunities for future business relationships.”  The downside may include the need for start-up and ongoing funding, issues with vesting and benefits for existing staff, loss of current name and branding, and confusion among referral sources that may lead to some leakage of referrals to competitors.  “When a new union is formed, so are new friendships and new competitors.  Your choices in creating this new partnership effect everyone around you, so plan carefully and keep monitoring the landscape for resulting challenges and opportunities,” adds Wright.

Along with the many benefits of a “marriage” between home care/hospice agency and another provider, Wright suggests that many issues constitute red flags or “deal breakers” in considering an affiliation.  Some of the common areas often under contention are:

  • Organizational mission and values

  • Ownership

  • Governance

  • Profit vs. non-profit

  • C-Suite positions

  • Capital startup requirements

  • Assignment of Accounts Receivable and liabilities

  • Surviving provider number(s)

  • Change of ownership regulations

  • Payroll, benefits and vesting of employees

  • Name and location

  • Current vendor contracts

  • Philosophical differences

Beyond the Proposal

Once a home care/hospice organization has identified the right partner, both entities should be working to develop an implementation plan that includes all of the necessary resources to strengthen the relationship and focus on collective goals for success.  Wright suggests the formation of an executive steering committee, selection of a project manager with appropriate experience and authority, and appointment of a core team with functional sub-groups that represent key areas of work such as legal, human resources, operations, finance, information technology and marketing. “The steering committee sets the strategic direction and monitors progress, the core team establishes framework and compiles a detailed plan, and the functional subgroups determine specific action plans,” Wright explains, “All parties should be focused to integrate the systems, processes and people of both organizations. This structure will help teams assign accountability, set targets and milestones, determine dependencies, and define actions for moving forward in ways that build consensus and trust.”

Wright cautions would-be partners to ask many questions of each other in the courting phase of affiliations.  Some Dos and Don’ts include:

  • Know the culture of both organizations

  • Always have a detailed plan

  • Never assume the plan is final

  • Identify the risks before you start

  • Don’t forget the communication plan

  • Engage with all stakeholders

  • Don’t blame

  • Don’t make assumptions about what people know

Critical Success Factors for Business Bliss

According to Wright, executive leaders and Boards of Directors set the tone for success by demonstrating and maintaining a commitment to the strategic purpose of a new affiliation or partnership.  Beyond that high-level support, the other factors that are critical to success include:

  • Adequate funding

  • Buy-in from both parties

  • Retention of key staff

  • Adoption of a single set of policies and procedures that reflect best practice

  • Clear and organized orientation of staff to the new entity’s policies and procedures

  • Unification and standardization of information technology and systems

  • Branding of the new entity

  • Clear and consistent internal and external transitional messaging to minimize staff turnover and loss of referrals

“Communication is central to the integration process so that both parties are engaged in the challenges of living with an affiliation as it occurs,” Wright says, “No one should be carrying the full weight of the relationship for the long haul.  Working together will create a shared accountability, fostering trust and a growing commitment that can make the partnership thrive well beyond original expectations.”

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