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Joel Allison and Robert Pryor, M.D. began a year-long journey last week that is critical to the success of the planned merger of Baylor Health Care and Scott & White.  They are studying a seven-letter word:  CULTURE.

Yes, they are conducting an in-depth analysis to determine if the two systems are culturally compatible to merge, creating the largest not-for-profit health system in Texas, which would become one of the largest in the nation.  The new entity will be called Baylor Scott & White, with more than 34,000 employees, 42 hospitals, more than 350 other patient-care settings and $6.7 billion in annual revenue.  Allison will be CEO of the new company and Dr. Pryor will be the chief operating officer.

Their commitment to exploring cultural compatibility is based on their joint realization that culture eats strategy every time. 

To me, this disciplined approach is even more noteworthy because there will be virtually no overlap of territories, meaning that this is not about making hard choices of service line consolidation or choosing one systems’ executives over another.  Moreover, the respective medical staffs will remain independent.  All of this suggests that these two talented executives are truly thinking through the values and ego issues, both more critical to the success of the new enterprise than most people realize.

For more than one reason, this merger makes a lot of sense, strategically speaking.  They are already collaborating on quality improvement, which is important.  But Scott & White has an insurance product, Baylor does not.  Scott & White has already scored some big wins in the so-called domestic medical tourism market – Walmart selected Scott & White, along with four other national health systems to provide cardiac and spine treatments to the company’s employees with no co-payment or travel costs.  Walmart said it selected those health systems because they showed they could produce high-quality outcomes for a negotiated bundled payment rate for specific procedures.  Domestic medical tourism will transform competition for patients from local markets to a regional and national platform.  Baylor’s emphasis on quality and standards of practice will fit nicely with this strategy.  Clearly, the axiom that all healthcare is local is being challenged.  

As a boutique recruiter that emphasizes value through innovation, service and lower costs, I have made an excellent living by preaching that bigger is not always better.  And I would still make that argument when it comes to market consolidation, but this time, it seems to be a smart move, something both Joel Allison and Dr. Pryor are known for.

© 2012 John Gregory Self