Case: The case for this week is: ‘The Merger of UCSF Medical Center and Stanford Health Services”, which is included in the HBSP case/reading packet. This is the story of a merger of two large academi

Running Head: THE MERGER 1

The Merger

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1. What environmental and market forces were UCSF and Stanford Health dealing with in the early 1990s? Compare the positioning of these hospitals.

The two hospitals were located far apart by 40 miles and were both faced with challenges in the mid1990’s. Managed-care plans denominated the bay area during the time, powerful employer purchasing groups, and large physician groups. The groups managed to reduce reimbursement rates and the utilization of hospitals. An American Medicaid program called Medi-Cal, cut hospital payments and convinced people to enroll in care plans. The cost for education and Medicare payment would be reduced, which caused a great impact on the two hospitals. Cutting the cost would affect Stanford and UCSF because they had higher costs compared to other hospitals because they dealt with tertiary and quaternary patients. They also increased the cost of training and education, which was profitable for them. Therefore during the period, they experienced losses (The Merger, n.d.).

2. What were the strategic rationales for this merger?

Given that the two hospitals had competed against other hospitals and not just themselves, they thought that by merging, they would create a bigger market share. The two hospitals were powerful in terms of their services, and by joining forces, they sought themselves to be more powerful as one. By merging they would distinguish themselves from the community and leave their competitors far behind. A small increase in the market share and contribute great revenue to the hospital.

3. How would you expect this merger to create value?

I expect the merger to create a bigger market share that would create even more value in terms of service delivery. I would expect the hospitals to provide quality care for patients with complex illnesses and make great deals with the insurers to ensure for their safety.

4. Evaluate the implementation of the merger?

The merger would be implemented if votes were for their support. Before the merger, analysis and reports were done to analyze the situation and establish whether the merger would be beneficial or if it would bring loses. The reports were all in support of the merging. The plan was to reduce the operation and financial expenditures and increase the total revenue they receive. The votes were concluded well, and support was for the merger to take place, but the problem was that the employees were unhappy because some of them could be laid off and lose the benefits they received from the unions (The Merger, n.d.). The merger experienced profits at first, but after getting more loses, it led to the breaking of ties.

References

The Merger of UCSF Medical Center and Stanford Health Services PH1-015