Best Practices for Navigating Hospital and Health System Transactions

Hospital and health system executives are currently facing one of the most active consolidation markets in decades, driven by the challenges and opportunities presented by national and state healthcare reform. With a vast body of state and federal laws complicating the transaction process, it is crucial for executives to navigate the process carefully. Here are 20 best practices to help guide hospital and health system executives through successful transactions.

1. **Conduct a preplanning process:** Before meeting with potential partners, consider the hospital’s goals and objectives.
2. **Be systematic:** Keep the process technical to avoid getting caught up in emotions.
3. **Use experienced advisers early:** Engage experienced transaction advisers in the preplanning phase to explore all potential options.
4. **Build a strong team:** Choose key team members at the beginning and add others as the process develops.
5. **Slow down, spend time on partner selection:** Apply due diligence and a systematic method when selecting a partner.
6. **Allow decision making to evolve:** Explore all options and refine objectives during the process.
7. **Run a competitive process:** Create competition to evaluate transaction options effectively.
8. **Focus on fundamental goals:** Put core issues in perspective and focus on achieving fundamental goals.
9. **Write a detailed letter of intent:** Emphasize detail in the letter of intent to outline the transaction.
10. **Do not get distracted by peripheral issues:** Keep core issues in mind during discussions.
11. **Look to the hospital’s mission for inspiration:** Consider the hospital’s principles and mission when addressing issues.
12. **Keep lines of communication open:** Maintain clear communication to avoid misunderstandings.
13. **Keep the interests of stakeholders in mind:** Stay aware of stakeholders’ interests when dealing with transaction issues.
14. **Use competition as leverage to negotiate price and terms:** Competition can help negotiate the best price and terms during a transaction.
15. **Expect to give and receive full disclosure during due diligence:** Be prepared for thorough due diligence to streamline the process.
16. **Document transaction steps:** Document strategic goals, objectives, and the competitive process for a defensible deal.
17. **Manage confidentiality:** Protect sensitive information to avoid jeopardizing the deal.
18. **Design an integration strategy:** Plan integration to capture positive synergies post-transaction.
19. **Prepare for questions from regulators:** Practice pre-transaction diligence to address potential regulatory reviews.
20. **Craft transaction message carefully:** Control messaging and present the transaction as a solution to stakeholders.

By following these best practices, hospital and health system executives can navigate the complex transaction process successfully and achieve their desired outcomes.