Strategic Partnerships Mergers and Acquisitions

How a New Jersey health system’s integration effort helped leaders navigate the COVID-19 pandemic

January 22, 2021 12:48 am

Health system leaders whose integration efforts were interrupted by the COVID-19 pandemic shared their story in a session at HFMA’s Digital Annual Conference on July 15.

Stephanie Fendrick, senior vice president and chief strategy officer from Virtua Health, and Michael Capriotti, vice president of integration from Virtua Health, were joined by Tim Shoger, a senior vice president at Kaufman Hall to discuss how the New Jersey health system acquired and began to integrate Lourdes Health System in 2019. Bringing Lourdes into the Virtua system was a strategic move that helped bolster both organizations’ services, Fendrick said.

“We definitely expanded the comprehensiveness of the services. We brought together two health systems that really complemented each other in terms of the clinical services that were offered to the community,” she said. The move also helped Virtua become the largest employer in South Jersey, she said.  

Core elements

Four core elements provided a framework for the integration process.

  • Operational integration took place in two phases. The first included strategies to prepare for Day 1 post-closing, and the other included plans to get from Day 1 to full integration.  
  • Strategic integration was a similar two-phase operation.
  • Branding gave the newly formed organization an opportunity to take a step back and look at its value proposition to the community. Research was completed to find where each of the legacy organizations excelled and where they fell short to maximize the opportunities of the acquisition.
  • Cultural integration began on Day 1.

Various teams worked on different aspects of the integration with the Integration Management Office as the central group that tracked the status of all the teams and helped teams work together.

Goals, process and establishment of baselines

The longer an integration takes, the harder it becomes, so one important factor in the integration from the beginning was to be quick and efficient, Capriotti said.

“Inefficiencies become ingrained in culture, and it becomes very challenging for operational leaders to think about what a new organization would look like. So for us, starting integration as quickly as possible was very important,” he said.

Setting clear goals and objectives was a key step, according to Capriotti.

“We wanted to take the best of both organizations. We didn’t want to just assume the Virtua way was going to be the way we were going to do things,” he said. Leaders considered where the opportunities were and how the organization could track them, setting short-term and long-term goals and strategies.

Cost savings was a key driver in formation of strategies, Fendrick said. One example was in radiation and oncology. In one geographic area, the new Virtua Health now had two radiation and oncology centers in close proximity, so the older one was closed, and operations were consolidated in the other. Overall, Virtua Health identified nine to 10 different initiatives, saving about $3 million per year, she said.

The COVID-19 challenge

Capriotti also commented on the new challenges the COVID-19 pandemic created for the new organization.

“[Our integration efforts] came to a screeching halt when COVID-19 hit,” he said. For a few months, Virtua Health focused on navigating the pandemic but restarted integration efforts in May with a conversation with leaders about how to do it smartly.

“We didn’t want to go to our operational leaders and say, ‘I know you’re in the middle of a pandemic, but you need to get integration going again,’” Capriotti said. Health system leaders wanted to be realistic about which initiatives needed to be pushed and which ones should wait. For example, the organization backed off from integrating supply chain in this time period because they were thinking about sourcing PPE and other things they needed as they prepared for a surge, he said.

Integration efforts paid off when Virtua Health was considering its strategy for financial recovery, Capriotti said. The culture of collaboration and discussing opportunities and challenges, as well as establishing goals and processes, has helped Virtua Health stay on track with its integration as well as minimizing the hit caused by the pandemic.  


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