The Good Merger
Skip to content
Jun 1, 2015

The Good Merger

By Kellogg Insight | Based on the insights of Leemore Dafny

When two healthcare companies merge, it is often assumed (or publicly touted) that the marriage will generate measurably better outcomes or lower overall costs. But “the harsh reality is that it is difficult to find well-documented examples” of such results, according to a recently published article in the New England Journal of Medicine by Kellogg School professor Leemore Dafny, Ph.D., and Thomas Lee, M.D. All too often, mergers are simply intended to reduce competition—and that’s all they accomplish.

How can we improve the status quo? Drawing from best practices from across sectors, Dafny and Lee (scholars who once found themselves on opposite sides of the healthcare merger issue) propose several solutions.

1) Define success in advance of proposed healthcare mergers, before the mergers are consummated. It will always be tempting to put off changes that are disruptive. “Making these goals explicit not only helps stakeholders and regulators to assess the merits of a proposed deal, but it also creates public commitments that can facilitate the execution of those plans after the merger occurs.”

2) Leave no stone unturned. As in other sectors, parties should ultimately propose mergers “only after hard-nosed considerations and analyses of efficiencies” have been conducted. After all, if a merger doesn’t even add value on paper, how will it succeed for the community?

3) Evaluate outcomes based on “real and measurable improvements in cost or quality.” A lack of details is a major red flag.

You can read the entire article here.

Dafny and Lee will also be discussing innovation in healthcare leadership in a webinar on June 4. Register for free here.

Trending

Editor’s Picks

A mentor puts capes on proteges.
Careers

Podcast: How to Be a Great Mentor

Plus, some valuable career advice that applies to just about everyone.

Kids decide whether to buy water or soda.
Marketing

A New Way to Persuade Kids to Drink More Water and Less Soda

Getting children to make healthy choices is tricky—and the wrong message can backfire.

Computational Social Scientists discuss solutions.
Innovation

How Can Social Science Become More Solutions-Oriented?

A conversation between researchers at Kellogg and Microsoft explores how behavioral science can best be applied.

An entrepreneur enters an established company.
Innovation

Buying a Company for Its Talent? Beware of Hidden Legal Risks.

Acquiring another firm’s trade secrets—even unintentionally—could prove costly.

Careers

Take 5: Tips for Widening—and Improving—Your Candidate Pool

Common biases can cause companies to overlook a wealth of top talent.

Drug innovation at a pharmaceutical company
Innovation

Everyone Wants Pharmaceutical Breakthroughs. What Drives Drug Companies to Pursue Them?

A new study suggests that firms are at their most innovative after a financial windfall.

Careers

4 Key Steps to Preparing for a Business Presentation

Don’t let a lack of prep work sabotage your great ideas.

Healthcare workers meet in a hospital corridor.
Healthcare

Video: How Open Lines of Communication Can Improve Healthcare Outcomes

Training physicians to be better communicators builds trust with patients and their loved ones.

A man tries to improve OR scheduling.
Operations

Here’s a Better Way to Schedule Surgeries

A new tool could drive savings of 20 percent while still keeping surgeons happy.

Voters who do not trust each other.
Politics & Elections

Why Economic Crises Trigger Political Turnover in Some Countries but Not Others

The fallout can hinge on how much a country’s people trust each other.

A clerk scans brand trademarks.
Marketing

Building Strong Brands: The Inside Scoop on Branding in the Real World

Tim Calkins’s blog draws lessons from brand missteps and triumphs.

two coffee growers harvest beans
Economics

How the Coffee Industry Is Building a Sustainable Supply Chain in an Unstable Region

Three experts discuss the challenges and rewards of sourcing coffee from the Democratic Republic of Congo.