Partnership Trends and 4 Mistakes to Avoid During Negotiations
In a time of stretched resources and increasing needs, partnerships among health care providers and insurers, companies and community organizations are increasingly important to shape the health care ecosystem rather than simply reacting to it. The following examples show how some hospitals and health systems are taking alternative, less costly paths to expand their market reach and advance innovation.
Novant Health recently entered into a partnership agreement to deliver orthopedic and bariatric care to Carrum Health members in North Carolina.
The move is notable for a couple of reasons. Novant Health is the first Carrum Health Center of Excellence partner in the state. Second, Carrum’s value-based platform negotiates directly with providers to offer up-front bundled payments to self-insured employers. Patients typically don’t incur any out-of-pocket costs related to their care — no deductibles, co-pays or unexpected bills — and they receive a 30-day warranty on each procedure, including any costs associated with care.
In a partnership with Gozio Health and WELL Health, UNC Health is integrating Gozio-powered wayfinding with the WELL Health patient communications platform to create a more integrated digital experience for patients. The result has been a 443% increase in mobile downloads and interactions with a consumer-facing digital front door.
The Emerging Interconnected Market
Health care is rapidly evolving toward a more interconnected market. Shifts in care delivery, regulations and the expectations of hospitals and health systems are creating new opportunities and imperatives for incumbents and new entrants, notes a recent McKinsey & Company report.
Many larger players traditionally have turned to mergers and acquisitions to build new businesses and access new capabilities. However, this approach isn’t financially feasible for everyone. Developing joint ventures, alliances and other partnerships is an increasingly important option for many because of lower capital requirements to drive innovation.
While this latter approach can provide access to new capabilities, increase speed to market and achieve capital, scale and operational efficiencies, McKinsey cautions health care leaders to be aware of some common pitfalls.
4 Partnership Mistakes to Avoid
1 | Framing a Deal without Clarity on the Vision and Strategic Plan
The first step in any partnership is to define a future-state vision and detail the strategic plan. This should include the combined value proposition, core value drivers and its scope.
Don’t make the common mistake of deferring too many decisions in the interest of “not complicating” the deal-making process. Deal-breakers can be considered after partners align on the full value creation potential. It is imperative to align with your team on any non-negotiables that may prevent the parent organization from meeting its strategic goals or delivering on its core mission.
2 | Defining the Operational and Governance Plan Before Clarifying the Business Plan
Organizations often struggle with the appropriate level of depth for the business plan. It needs to be sufficiently granular to achieve alignment on key issues, but not so detailed that it becomes an execution or implementation plan. The plan can address the most important aspects of governance required to deliver on the thesis of the partnership, including board structure, critical decision rights, operations, organizational structure, etc.
Straying into detailed process mapping and integration planning is not necessarily useful and can slow progress in reaching a deal. Focus the plan on required major actions to unlock the full value potential, even if some may be considered deal-breakers.
3 | Lack of Leadership or Consistent Accountability
Deal owners, the point people of accountability, are more likely to be effective if they have the authority to make decisions quickly and are supported by a core set of deputies who help drive forward the partnership assessment. Deal owners will be more successful if they maintain a consistent focus on the partnership, commit a consistent amount of time to it and work closely with their counterparts rather than at arm’s length.
This commitment, particularly early in the process, helps each party develop trusting relationships, maintain a relentless focus on the partnership’s key value drivers and ensure partnership momentum.
4 | Failing to Build Long-Term Agility into the Partnership Structure
Strong partnerships often have built-in agility to adapt investment and operational rules that anticipate change. Clear exit procedures also are beneficial in case unwinding is required.
Investing the time up front to identify how a partnership can be agile — to add partners or capital or even to unwind — can reduce the risk to all organizations in the long run.