A Partnership of Equals: Early Lessons from Mergers of Similarly Sized and Positioned Health Centers

California’s Federally Qualified Health Centers (FQHCs) are responding to several important policy changes and reforms aimed at improving health care for the state’s diverse communities. They must develop new capabilities and expand existing ones while continuing to struggle with historical limitations around workforce and organizational infrastructure. Mergers between FQHCs can offer a path to achieve the organizational infrastructure, scale, and reach required to meet these demands and provide high-quality, culturally responsive care to all patients.

While FQHC mergers in California have historically involved a financially at-risk FQHC turning to a larger and more stable one for acquisition, California is increasingly seeing similarly sized and positioned health centers exploring mergers. These “mergers of equals” present unique opportunities and challenges.

This issue brief explores two mergers of similarly sized FQHCs in California in the last two years. Each offers some broader reflections and themes that may be applicable to other FQHCs exploring merger opportunities with similarly sized and positioned partners. These include:

• Scale to deliver value and impact. Enhanced financial sustainability matters but may not be the driving force to explore a “merger of equals.”
• Leveraging service strengths. A merger presents an opportunity to leverage the service strengths of each partner across a wider set of sites and geography.
• Organizational culture. A merger of similarly sized and positioned FQHCs presents a more complex challenge in aligning operations and developing a shared organizational culture.
• Shared identity. Crafting a shared organizational identity that reflects the expectations of both organizations in a merger of equals requires similar thoughtfulness during planning.
• Executive leadership. The growing wave of FQHC CEO retirements in the next several years presents a natural inflection point and opportunity for organizations to explore a merger.
• Trust and partnership. Trust, honesty, and communication, particularly between the CEOs, represent an essential ingredient to a successful merger decision and transition.
• Facing hard decisions early. Surfacing key sticking points early, such as identifying the continuing CEO, organizational name and identity, and surviving corporate identity, may pave the way for a successful merger process.
• Growing capability, not reducing staff. Many equate a merger with staff downsizing or efficiencies. For the mergers highlighted in this paper, as with many other FQHC examples, the merger did not result in staff reductions.

In summary, a merger of equals may pose distinctive considerations related to organizational culture, identity, or executive leadership continuity, but may also present unique promise to elevate the future impact and influence of FQHCs.