By Christine Zalar, MA
Consolidations, mergers and acquisitions continue to hold value in today’s complex health care marketplace, often delivering favorable economies of scale, increased operational efficacy and improved financial results. At the same time, they usually result in a loss of identity and control for some of the parties involved – and no chief, CEO or board of directors happily cedes authority to another organization’s leadership. But there are ways EMS agencies and other medical transportation services can achieve similar benefits, maintain independence and provide a high level of service in the face of limited resources or increasing competition.
EMS organizations may elect to avoid complex relationships with other entities because of a strong desire to remain independent or because their legal structures, such as local or county government ownership, create a barrier to considering a merger or consolidation. While the competitive environment can be a catalyst for improving performance, the thought of formally engaging with a competitor or a neighboring service can cause great pause. For these providers, maximizing alignment without relinquishing ownership may be attractive.
A Strategic Regional Organization is a business relationship that allows organizations to find sustainability and enhance performance, while retaining ownership interests. Finding the right organizations to align with is the key to success, as is ensuring that the partnerships will improve financial performance through economies of scale.
Health care systems have engaged in multiple types of business relationships to expand their regional services and networks – including SRO strategies. The SRO has provided an effective option for public hospitals that otherwise are unable to merge or be purchased by a competitor.
EMS SRO benefits and motivators
The EMS Strategic Regional Organization can add substantial value through fostering interdependence and sustainability while still allowing organizations to enjoy autonomy. Some key motivators for developing an EMS Strategic Regional Organization include:
- Improving operational effectiveness.
- Implementing strategic cost reductions.
- Creating a larger geographic area for services by developing a regional marketplace.
The economic realities of low volume and revenue recovery combined with high fixed costs can make providing adequate EMS service, especially in rural areas, challenging; quite simply, it’s a math problem.
For urban EMS providers, it may be a different type of math problem, especially for agencies dependent on increasingly strained municipal funding. In each case, leveraging fixed costs while maintaining independence is worth exploring.
Forming an EMS SRO
The formation of an SRO begins with two or more EMS organizations identifying a shared vision of operational and financial goals. The driving force behind the relationship might not be the organization’s financial or operational strength, but each agency’s desire to improve. Typically, the organizations begin by conducting a methodical assessment of how economies of scale can be achieved, perhaps by sharing resources or eliminating redundancy.
Often, EMS SROs initially involve finding efficiencies in the provision of support services: shared communications centers, vehicle maintenance shops or training facilities; centralized purchasing of operating equipment or supplies; or unified patient billing and collection services. EMS agencies and the communities they serve often do not see these functions as critical to the identity of the organization, making collaboration in these areas easier. As deeper SRO relationships are explored, integrating unit deployment strategies to support expanded geographic coverage or peak demand periods can directly contribute to operational effectiveness.
To be successful, EMS organizations considering the Strategic Regional Organization model must assess their cultures to assure alignment and compatibility, build a foundation of mutual respect and trust and clearly define governance and control in areas that will be integrated in the business relationship. Transparency with employees and customers, including initial and ongoing communication internally and externally as well as measuring and reporting performance, needs to be prioritized. Finally, employee engagement in the transition plan objectives and milestones will go a long way toward building a successful SRO.
Just as important, early discussions between parties must address how to dissolve the SRO if necessary. There may be “friendly” reasons to separate all or certain aspects of the EMS SRO, so the forward planning need not carry a negative tone.
Forming an SRO can feel like a significant risk for leaders of EMS entities who are accustomed to managing all operations internally and adhering to strict boundaries, both geographic and operational. But for today’s EMS agencies, whether they are public or private, for-profit or non-profit, collaboration may be the most effective way to become sustainable and to achieve their most important goal of providing the best service to their patients.
About the author
Christine Zalar, MA, is a founding partner at Fitch & Associates. She is responsible for the firm’s long-term management services contracts and leads the air medical consulting services division. Contact her directly at czalar@emprize.net.
