I had previously asked for help on this case study, but the answers given are scrambled and difficult to understand. Can someone else please help me answer the questions at the end of this case study?

Hospital Consolidation: CASE HISTORY/BACKGROUND: Healthcare providers have a dynamic relationship with their local and regional markets that requires them to balance organization and community interests when making decisions that affect the healthcare marketplace. Strategic initiatives have long-term impacts on healthcare organizations and their stakeholders, including patients, physicians, payers, and the publicand stakeholders expectations must be considered in connection with these decisions. This case discusses important healthcare industry issues and trends, including forces that shape a healthcare organizations mission, vision, and market-based strategies for growth and development.

INTRODUCTION In many ways, the 2014 holiday season was no different than any other, and, thankfully, Dallin Burnham enjoyed the traditional music, decorations, and seemingly endless social gatherings that accentuated this time of year. Yet this year is different, and Burnhamchief executive officer (CEO) of Kimball Hospitalis anxious. Three months earlier, Burnhams Rocky Mountain-based healthcare systemThe Great Western Hospital Corporation (Great Western)initiated discussions with his hospitals chief rivalTanner Medical Center (Tanner Medical), a county-owned, freestanding, not-for-profit hospital. The purpose of these discussions is to decide if the two hospitals should form a joint venture to offer services, or if they should consolidate or merge; acquisition is another possibility. The December 31st deadline to initiate formal discussions or walk away is looming. Burnham understands that his personal recommendation to his corporate supervisors and community-based board could greatly influence their decision to proceed with discussions and, perhaps, negotiations. The alternative is to continue the more than 40+ year history of offering competing and often duplicative healthcare services to the community. Burnhams recommendation and the ultimate decision regarding joint ventures, acquisition, consolidation, and/or merger could be the most important local healthcare market decision in a generation, or more. The results would affect the lives of healthcare professionals and the nature and quality of healthcare services for years to come.

MERGER, ACQUISITION, AND CONSOLIDATION TRENDS In many ways, the local market mirrors the healthcare issues and challenges observed nationally, including an increasing trend toward affiliations, hospital mergers, acquisitions, joint operating agreements, and other organizational forms that is accelerated by healthcare reform and myriad organizational and market forces. Similarly, in the decade preceding the deliberations between Great Western and Tanner Medical, the hospital industry had undergone a wave of acquisitions, mergers, and consolidations that transformed the hospital marketplace. By 2005, the rate of such activity had increased nearly tenfold over the rate five years previously. He also noted that the more important advantages to hospital mergers, acquisitions, or consolidations include access to capital, avoidance of non-value-added duplication of expensive healthcare services, and leverage when contracting with insurers, suppliers, and employers. Mindful that such organizational actions are rarely a panacea, Burnham identified concerns or potential disadvantages, including increased costs and prices, and decreased quality following reduced competition. The difficulty of merging longstanding cultures and operating systems is another major concern. As he reflected on potential strategic actions to facilitate hospital, corporate, and community needs, Burnham reasoned that Tanner Medical cannot merge with Great Western because their sizes are so disparate. Tanner Medical cannot merge with Kimball because Kimball is owned by Great Western and is not an independent facility. Isnt acquisition the only course? Once acquired, either hospital could be merged or absorbed into the other since both are part of the same corporate entity. After that, clinical programs as well as ancillary and support services could be rationalized.

LOCAL MARKET AND DEMOGRAPHICS Prattvilles high desert community of 60,000 has supported two competing hospitals for over 70 years. Approximately 75 percent of clinical programs and services are duplicative; nearly $40 million per year in potential hospital-based services are lost due to physician referrals or patient self-referrals to other medical centers 50 to 150 miles distant. In early 2012, and continuing through mid-2014, changes in leadership and governance at Prattvilles hospitals set the stage for the negotiations that followed. These changes included new hospital board chairs, hospital administrator/CEOs, Blade County commissioners (Tanner Medical), and regional and system-wide leadership at Great Western. Moreover, each hospitals plans to introduce or expand duplicative services have caused Burnham to ask himself three questions: Is our hospitals mission focused on what is right and best for our service area, or Great Western? Would an acquisition, merger, or consolidation involving Kimball Hospital and Tanner Medical improve access and quality and reduce cost of healthcare to Prattvilles service area? Should some form of acquisition or consolidation of hospital operations occur, is Kimball Hospital (Great Western) or county-owned Tanner Medical better positioned to assume ownership and management of the communitys consolidated healthcare system? Mindful of the changes in local and central office leadership, and troubled that each hospitals strategic plan calls for more and more duplication of hospital servicesincluding OB/GYN, imaging, clinical laboratory, cardiology, surgery, and pediatricsBurnham contacted his supervisor at corporate and suggested they revisit the idea of hospital cooperationincluding reviewing the merits of a potential merger, acquisition, or joint venture of selected clinical programs. Talks regarding acquisition, merger, or consolidation failed in 1993; hospital leaders and their community boardsincluding corporate executives at Great Westernconsidered those options again in 2000 without success. The 1993 talks failed primarily because both hospitals were performing reasonably well financially. In 2000, lack of trust and goodwill between local boards, dislike and distrust between the hospital administrators, and physicians desire to pit one hospital against the other doomed any hope for success. When similar discussions began in 2014, Great Western was mindful of its long-standing and public commitment to the community, including Kimball Hospitals employees. In recent years, corporate leaders emphatically restated that, notwithstanding Kimballs poor financial performance, Great Western is in Prattville for the indefinite future. Yet Great Westerns leaders are cognizant of important political and marketplace realities. OTHER

PROVIDER AND COMMUNITY CONSIDERATIONS Since being formed in 1985, Great Western has established a 20+ hospital system in three contiguous states with sophisticated central office support services, including health information technology, central purchasing, laboratory, laundry, marketing and advertising, physician recruitment, and quality and risk management. The systems focus on evidence-based medicine has resulted in reduced costs and improved quality and has received national recognition for its work. Local ownership and control allow staff and supporters of Tanner Medical to tout the hospitals ability to chart its own courseindependent of out-of-state executives who may not share the communitys healthcare goals. Tanner Medical enjoys a measure of system support through its affiliation with Voluntary Hospitals of America, the nations largest not-for-profit hospital association. Importantly, and for various reasons, local physicians generally favor and support Tanner Medical over Kimball. This is reflected in the nearly 2:1 ratio of annual admissions to Tanner Medical over Kimball. It is theorized that, despite Kimball/Great Westerns reputation as a high-quality, low-cost provider, area physicians resist the corporations centralized and system-wide approach to planning and delivering care. Indeed, many physicians had relocated to Prattville because of its laissez-faire approach to medicine, including the relative nonexistence of managed care, or insurance mechanisms that limit physician autonomy and reimbursement.

Table 9.2. Selected financial, operating, and other indicators: Kimball Hospital and Tanner Medical Center (fiscal year 2014) Kimball Hospital Tanner Medical Center Hospital ownership and control GWHC Blade County Ownership type 501(c)(3) corporation County government Licensed beds 110 150 Total patient daystrend (20122013-2014) 10,15010,92512,775 24,24025,38023,725 Average daily census 35 (40% of bed capacity) 68 (55% of bed capacity) Annual gross patient services revenue $49 million $97 million Annual net patient services revenue $31.5 million $54.6 million Market share 26% 52% Annual marketing/advertising budget $141,000 $310,000 Net operating income percent for 201220132014 (3%)*-(5%*)-(2%)* 2%-4%-6% Total debt N/A (consolidated w/GWHC) $73 million Financial reserves (savings) N/A (consolidated w/GWHC) $9 million Employed physicians 8 0 Percent of local physicians who primarily admit to this hospital 35% 65% Service lines unique to hospital in service area Cardiology, acute rehabilitation Pediatrics, neonatal level II, cancer Percent of physicians who favor hospital merger or consolidation 80% (fall 2014 Kimball/Tanner medical staff surveys) Public preference for local (versus out-of-area) ownership and control 68% (spring 2014 Kimball Hospital community telephone survey) *Note: (3%), (5%), and (2%) are negative numbers. A TIME FOR DECISION As chief executive, Burnham is also the chief market manager and promoter for his hospital. Positioning his organization for immediate and long-term growth and financial success is an ever-present and demandingmandate; orchestrating a well-balanced, integrated community-wide healthcare system to improve access, cost, and quality of care to the entire Prattville service area is no less important. Burnham understands these two imperatives are inherently in conflict, which adds complexity to the decision-making process. Burnham believes the time is right to combine the communitys two competing hospitals. He also believes the leadership, financial resources, and other strengths of Great Western make Kimball Hospital and Great Western the best choice to own and manage the new entity. Yet Burnham understands his communitys preference for local ownership and control and the physician communitys long-standing reluctance to embrace Great Westerns philosophy and approach to organizing and delivering care. Great Western executives and Kimball Hospital community board members are experienced and capable executives and community leaders, but they are looking to Burnham for guidance in this matter.

QUESTIONS:

1. What key organizational and marketplace issues likely reopened the door to a potential hospital merger, acquisition, consolidation, or joint venture between Great Western/Kimball Hospital and Tanner Medical?

2. Can Burnham balance the interests of his community with the interests of his employer? Suggest ways Burnham might achieve this balance.

3. From a patient and community perspective, what are some pros and cons to acquisition and consolidation of Prattvilles community hospitals?

4. Use this case to identify and describe the forces that shape a hospitals mission and vision. Describe the forces that shape a healthcare organizations growth and development.

5. Who are the key decision makers and other stakeholders (individuals and groups) in this case? Identify their concerns regarding merger, acquisition, and/or consolidation. What are their relative positions of power and influence in effecting a decision to merge, acquire, or consolidate? 6. Do you recommend acquisition and consolidation of Prattvilles two community hospitals? Why, or why not? What options short of acquisition and consolidation should the hospitals consider?

7. If you recommend acquisition/consolidation, which organ