You’ve done deals before, and you’ll likely do them again. But never like this.

COVID or no COVID, transactions are often a critical, even required, strategic imperative. What’s changed today is the level of challenge: The new environment will make it harder to get deals across the finish line.

The market is telling us that many deals will be pursued over the coming months to achieve both growth and service preservation. At the same time, deals being contemplated before the pandemic are continuing. Providers in stronger financial positions, as well as those with weaker balance sheets and pending debt covenant obligations, are dipping a toe into the market to see what options are out there. Private equity and venture capital firms  who are seeing many pre-pandemic theses validated around home health, tech-enabled care and efficiency tools will be looking to double down where appropriate.

In short – thanks to financial pressures caused by the pandemic, the value of creating scale and the ability to move from a position of strength – buyers will be in hot, though careful, pursuit.

But pause on that. Just because a deal may be pursued doesn’t mean it’ll be a breeze to close. Buyers are cautious, and there are many new questions to sort through. Such as valuations. Do you base them on pre-COVID realities? Or on the way things stand today? And how is the deal being financed? Can you commit the cash? Or do you need to navigate a challenging debt market? For privately-backed providers, do you deploy capital or use it to hold steady until the economy fully recovers?

The questions don’t stop there. Beyond those business challenges, is intensifying public scrutiny of potential deals as we slog through America’s continuing emotional and political quagmire. As such, the need to create a compelling vision and tell a powerful story to both internal and external audiences has never been stronger.

Why is it going to be hard?

The public doesn’t have all the information…

We see no shortage of noise and confusion about healthcare today. Nuance is lost when conversations about the business and delivery of care take place. “Why,” people ask, “is my hospital still laying off staff even after getting government money?” Or, “How can Health System X talk about buying Hospital Y when they don’t even have the money to keep all their staff?”

What is obvious to an industry insider – that the operating budget differs from long-term funding mechanisms for transactions – is anything but to the public. That confusion is understandable and dangerous. Dangerous because it provides the opening for a dominant, negative narrative to take hold in which provider organizations are viewed as more focused on money than people, or where they are abusing public funds or many more perceptions. It doesn’t matter whether that story is accurate. It is compelling and emotional and can therefore easily gain traction.

…But they’re alert and monitoring intently

People are paying attention to healthcare. And they know much more than they did even a few months ago. Healthcare providers are at the center of current events, and the public, the media and community leaders feel more connected than ever to the hospitals around them. People care deeply about what’s happening with hospitals and think they understand it all.

For example, in one public meeting to discuss a potential hospital acquisition by a regional system, multiple community members expressed concern that partnerships in general have not reduced healthcare costs. It goes to show that consumers are getting educated on the business of healthcare. Last year was filled with in-depth media reports on billing practices, and healthcare has remained a major topic in political discussions. Add the last several COVID-19 months to the mix, and it is undeniable that this industry is front and center in the public’s mind like never before.

Staff is watching closely

We can’t forget about internal audiences. As we often point out, nurses, doctors and staff can be a provider’s biggest advocates – or most powerful detractors. Time and again we hear of healthcare providers that overpromise or fail to make the case regarding an impending change and end up the target of anger from people within their own walls. Fact is, team members have already been whipsawed by COVID-19, navigating patient surges and often reduced compensation. “Why now?” is going to be at the top of everyone’s list of questions.

Changes to compensation, staffing levels, standard operating procedures and even management style will all be watched closely by the people affected. Mixed messages will not sit well. The result can be increased scrutiny by the media and public, activity from unions and questions or pressure from regulators and political officials. All told, these can make a deal much harder to complete or even shut it down all together.

Accomplishing the goal

The type of deal and the parties involved will, to some extent, dictate the approach necessary. Hospitals and health systems should look to principals of political campaigns for building support and executing a successful deal:

• Define the win
• Own the message
• Cast a vision
• Build internal support
• Be responsibly transparent
• Expect opposition

In contrast, transactions involving private equity tend to be, well, more transactional. A political campaign approach isn’t particularly powerful when it comes to health services companies because the deal tends to happen in more of a closed system. That doesn’t mean the parties involved should just plow ahead with no regard to questions – especially internal ones.

Health services companies are particularly well-suited to help other providers – both organizations and individuals – define and accomplish their goals in very practical ways. These companies often rely on or provide technology and processes that streamline operations and help deliver more efficient care.

That value goes right to the heart of the challenges faced by clinicians today. They need “support, time and space” to “figure out their personal new normal,” according to one physician and executive we spoke with. Providing the resources to make their work a bit easier – especially in the current moment of uncertainty – is a powerful benefit that health services companies can use to show the value of a deal.

Throughout this volume of Art of Change, we look at specific tactics leaders can use to communicate throughout a transaction. We explore trends in partnerships – including what’s happening with hospital M&A and where private equity  is looking to deploy capital.

Regardless of the type of partnership or the organizations involved, we’ve learned that those leading the charge should recognize two imperatives:

• People don’t have all the information no matter how closely they’re paying attention.
• The key question is always, “What does this mean for me?”

Approach the communications around a transaction with that in mind, and success will come far more easily.

Illustrations by Shannon Threadgill