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A tale of two systems: a personal account of a successful consolidation.

This isn't a "tale of two cities." it's a tale of two Catholic health care Systems in one city. For nearly a century, we were vigorous competitors. We were forced to consolidate our operations in 1987 as a result of the consolidation of our national Health Care sponsors. This is a detailed account of how that consolidation was achieved.

Our tale begins when the Penrose Health System and SL Francis Health System, both in Colorado Springs, Colo., were informed by our respective sponsoring organizations, the Sisters of Charity Health Care Systems (SCHCS) of Cincinnati, Ohio, and the Franciscan Healthcare Corporation (FHC) of Colorado Springs, that they intended to consolidate their national health care operations. Penrose and St. Francis Hospitals are located in the only city where the two sponsoring organizations overlapped.

Many people within each system compared this consolidation to a "shot gun wedding." Three hospitals (two a part of the Penrose System, one in the Franciscan System) separated by 7 miles were brought together and instructed to cease competing and become one..."for better or worse, for richer or poorer." The advantages were obvious. Bringing the two systems together in one city would bring immediate market strength, improved geographic dispersion, increased service scope, and economies of scale for both operations and management. In March 1987 the local consolidation agreement was signed, to become effective July 1, 1987. The ink was hardly dry on the consolidation agreement when top management of the two organizations closeted themselves to begin planning the implementation. A variety of special tasks and extra effort would be required to successfully accomplish the process.

The new Penrose-St. Francis Catholic Healthcare Board was established. Its first order of business was to appoint as the CEO of the new system the previous CEO from the Penrose Health System and then to appoint a planning committee. This committee in short order produced a revised mission statement for the combined organization, along with a draft "shared values" document. The development of this document was an extremely important process. The document was designed to illustrate the organizations' commonalities and defined the new corporation's business aims. This information was made available to management, employees, the medical staff, and volunteers through many vehicles. It was written and distributed in several formats. There was no secret about what the new organization stood for and what it wanted to achieve. Input into the actual language was encouraged and was included in multiple drafts that were distributed and discussed. First Steps

Initially, a slow and methodical process of integrating programs, systems, facilities, and staff that would make the adjustments easier for all was proposed. The different staffs would get to know each other during the first year, plan together during the second, and implement any major changes in operations during the third. It was quickly apparent that this would take too great a toll on the organizations in morale, confidence, productivity, and missed opportunities.

Immediately, a special group of middle managers was freed from normal responsibilities and assigned to begin an inventory of all existing services and programs among the three facilities. Additionally, a select group of top-level executives was assigned as the transition team, chaired by a physician executive and composed of four people: the president/CEO, one vice president (who had already committed himself to leaving for a new position elsewhere), and two others handpicked by the president. They met weekly to analyze the inventory and invent the structure, business purposes, and staffing for the new organization. They were also responsible for managing the process of consolidation and its impact on employees, management, and physicians. The Board also considered using outside consultants to order and guide the process of consolidation. After much discussion arid review of several proposals, they decided that internal staff, with appropriate special support and the occasional use of outside help, would be more acceptable and efficient. This was an important cultural decision, because these few managers on the transition team would now have the authority to craft the new organization.

The Human Side of the Merger

The entire management team began by "taking tea" together in small work-related groups. These group meetings, held off site, were designed to bring together all supervisors and middle managers from the three hospital facilities whose work groups or functions were similar (i.e., laundry, radiology, laboratory, etc.) to get to know each other before making major changes and to begin to understand the different cultures of the two organizations. Everyone was polite. The future was rarely discussed. We chatted about family, home, and travel.

These small informal gatherings for supervisors were followed by a combined management retreat and planning workshop where the new environment was sketched out and some war stories were told by outside speakers who had first-hand experience with hospital mergers. This all-day session, also held off-site, was the first public recognition that massive changes lay ahead and that there were currently more executives and managers than the new organization would need. Realistic expectations for the outcome of the consolidation were discussed and set. The managers looked around the room, wondering who ... when?

The We/They

Syndrome Surfaces

It was soon after the management retreat that "taking tea" ceased to be fun. The handwriting was on the wall, and delaying the inevitable wasn't perceived as kind. Employee anxiety at all levels was evident, and the "clash of cultures" became more tangible. Differences surfaced. Now there were values attached. "We are more like a family. They are cold, all business." "We have to run our departments like an efficient business where we are accountable for goals, objectives, and results. They treat theirs like a mom and pop' store operation." "We have always found time for the personal touch. They are too busy and self-serving to spend their time that way." "They are burdened with debt. Why do we have to be burdened with a loser?"

These we,(they" comparisons, coupled with lack of information and involvement, could have greatly damaged and slowed the process involved in integrating the two organizations. Remarkably, that didn't happen. Tea" sessions were transformed into work groups to examine operations from a systemwide perspective and to make recommendations about the advantages of either consolidating respective services/programs or keeping them separate. The groups examined how efficiencies could be achieved and how costs could be shaved without jeapordizing quality patient care and monitored attitudes and progress.

Top management moved to help relieve the complex and confused emotions expressed by staff at all levels. Honest, open, straightforward communications, both written and oral, were kicked into high gear. Employee meetings were held on all shifts, every month, by the president and the chief operating officer. Internal newsletters explained to employees who the new we" was, what changes had occured, and what changes were likely to occur in the near future.

The Ax Falls

The only unknown was who would be around to implement the new organization plan. This source of anxiety had potential for paralyzing every level of the organization. By the spring of 1988, a "downsizing" was obviously coming and the transition team announced it would occur within a month. This "planned downsizing" was communicated to all employees and medical staff in a general way, before being announced to the media. The communication included statements about the general scope of the downsizing, the number of positions affected, the rationale for the action, and support that would be offered for terminated workers. From the perspective of public relations, it was thought best for the organization to then make its statements to the press and get the bad news out of the way." There had already been inquiries from the media about "mass layoffs" and "hospital closings." During this time, "gallows humor" was widespread and productivity was minimal. The transition team met frequently; secrecy was absolute.

The initial downsizing plan, shared with internal and external publics, called for achieving approximately $3 million in cost savings in personnel and other overhead expenses as well as eliminating or minimizing duplication of various services and programs.

One month after the initial announcement, the downsizing began. Department heads were notified first. Within a matter of three days, everyone directly affected was notified. Each manager, supervisor, and employee met his/her respective boss." Some were assured that they had a place in the new organization; others were told that the new structure could not accommodate them. Termination of employment was immediate.

It was emotional and stressful. Some were angry, bitter, hurt. Others were agreeable. All those who were terininated received excellent severance benefits and outplacement counseling to help them locate new jobs. Those leaving were never characterized as "losers." However, the survivors felt guilt and apprehension. There was the guilt that we survived, while many longtime friends and co-workers didn't. There was the apprehension expressed by survivors who found themselves caught up in the challenges and opportunities that the consolidation was creating, wondering out loud whether they were worthy of the trust being placed in them, and finding it exhilarating and stimulating.

The actual downsizing was slightly less than originally predicted. As it turned out, instead of a 4.5 percent reduction affecting 150+ positions), the combined work force was reduced by 2.7 percent (80 positions). In a letter to all employees, followed by media interviews, Sister Myra James Bradley, Prcsident/CEO of Penrose-St. Francis Healthcare System, explained that "we were able to keep the number of layoffs under the initially estimated total, while stiff achieving our overall financial objectives, because of attrition, the implementation of a hiring freeze, and employee transfer or reclassification activities undertaken by various departments over a one-month period."

Management was affected the most by the downsizing. Of a total of 317 managers (department heads/supervisors), 46 managers (14.5 percent of the total management staff) were terminated. Many more were reassigned or demoted to supervisory positions. In all, 40 percent of the management team had job reclassifications or were terminated.

The Organization Shuffle After that fateful day, the tension began to subside. There were assurances that the cutbacks were finished and that plans were under way by the Human Resource Department to bring together employees from all three hospital facilities to begin improvements in a consolidated employee salary/benefits program. The staff began on the longer term transition as members of a system.

The focus now was directed to the organization's structure. Downsizing was out and the "organization shuffle" was in. The intent had been made clear-to flatten the organization, eliminating unnecessary levels of hierarchy until the organization was a "lean, mean health care machine." The organization chart seemed to change almost daily. Vice presidents were moved to offices among the facilities to diffuse past loyalities and create new allegiances. Department heads, now responsible for activities at all three sites, became eligible to have the initials MBDA (management by driving around) after their titles. Their offices were also moved to various of the facilities. No corporate office was created to separate the operations people from management.

Meanwhile, more than structure was clinging. Some "early wins" were identified. These successes at achieving higher levels of service, more efficiently and at lower cost, were widely touted as examples of what was possible. Communication remained intense.

There was a sense of urgency about demonstrating the benefits of consolidating various programs and systems to internal and external publics. A feeling of forging new ground began to permeate the organization. Taking risks and experimenting with ideas that heretofore had been theory became expected. Most everyone, from those in the executive suite to line employees, had the opportunity to get involved. Employees came to understand that they would either succeed together or fail separately. Management incentives in the first year were focused primarily on group performance and less on individual success. A second retreat for managers, now a much smaller group, was held for 1-1/2 days in fall 1988 at an isolated mountain retreat center. There the team prepared to work together. They found that they shared many of the same concerns, beliefs, and attitudes. The retreat focused on the unanswered questions and on the tasks that lay ahead to make the consolidation work. Managers went back to work feeling more compassion for and camaraderie with their peers.

Where Are We Today?

In the second year of the consolidation, things are still changing-not as rapidly as at first, but still with regularity. One of the things that seems to have changed the most is the acceptance by most that change is a natural and inevitable part of life. At employee meetings held in March 1989, top management was amazed, and pleased, to discover that the majority of employees felt relatively content. They said that they accepted that things would never again be as before; they were busy and they were feeling some excitement in being a part of a dynamic, successful, caring organization. A systemwide employee survey, conducted in the spring of 1990, asked employees a series of questions about satisfaction with benefits, supervision, and working conditions. The results revealed considerable healing among the majority of employees. Few "cultural" issues were raised; more commonalities were revealed. The biggest issues identified related to benefits, especially health and pension. There was no significant difference in the level of concern voiced between the two previously separate organizations. The issues raised early in the consolidation process surrounding job security and separate identity were noticeably absent from the responses and comments.

For those few who are still grieving about the loss of the past and fearful about the future, there is only the consolation of accurate information and the opportunity to be involved in some of the decisions that affect their work. For some this will never be enough, but for the majority, the new organization has demonstrated more strength and fairness than expected. r-3
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Title Annotation:merger of Penrose Health System and St. Francis Health System in Colorado Springs, CO.
Author:Guthrie, Michael
Publication:Physician Executive
Date:Nov 1, 1990
Words:2302
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