In August 2016, Atromitos’ President, Michealle Gady, received a call from the Executive Director of North Carolina-based Northwest Community Care Network who asked, “Do you know what a value proposition is?”
That simple question was the beginning of a remarkable working relationship.
But first, some background.
In 2012, North Carolina Medicaid experienced a significant cost overrun and the Governor and General Assembly determined that the best way to control cost growth in Medicaid was to move the Medicaid program from a primarily fee-for-service model to a risk-based managed care model administered by private health insurance companies. This transformation from fee-for-service to risk-based managed care would have a significant effect on certain community-based organizations (CBOs) that contracted with the state, under its Enhanced Primary Care Case Management (EPCCM) program, to provide care management and practice support to patients and providers enrolled in Medicaid. By 2015, the Governor signed a new law that would terminate the states EPCCM program and implement managed care by July 2019.
In response to this dramatic change, two of these CBOs – Northwest Community Care Network (NCCN) and Partnership for Community Care (P4CC) – took steps to find ways to align so that they could provide care management and practice support services in a more cost-effective manner. At first, the two organizations worked together on discreet projects, sharing staff and resources, to make the project more affordable. Over time, they entered into a shared staffing agreement, through which the organizations shared administrative staff, such as the Finance Director and Medical Director, thereby reducing administrative expenditures and beginning to integrate and align the two organizations. Individual Boards of Directors govern the two organizations. To further help align the two organizations, they created a Strategic Alliance Advisory Committee consisting of representatives from each of the Boards of Directors. The Committee monitored the steps being taken by leadership to find the best path forward to assure the organizations’ sustainability and advised the leadership in the process.
NCCN and P4CC identified different ways that they could more formally come together, from a strategic alliance to a merger. It was during these discussions that the Committee advised the leadership to identify the value proposition for the relationship and structure that the two organizations wanted to pursue.
That’s where Atromitos comes in.
First, it is necessary to know what a value proposition is. A value proposition is a clear, specific, concise, and easy to understand statement that identifies the value of something. To help NCCN and P4CC build the value proposition, Atromitos developed a process to help the leadership first identify what they really wanted to achieve through a formal relationship. The reality is that far too often, organizations jump to the conclusion that they must merge to achieve their desired outcome. That isn’t always true—and it’s not the only option for organizations to achieve desired outcomes. Atromitos began the process by first bringing the leadership team together and asking them what they ultimately wanted to achieve.
With that information, Atromitos built a decision matrix that the leadership team could use to evaluatetheir options. A decision matrix is known by different names – Grid Analysis, Pugh Matrix Analysis, Multiple Criteria Decision Management tool. Whatever you prefer to call it, the decision matrix is a tool that allows a decision-maker to evaluate different options against specific criteria and come to a decision when there isn’t an obvious choice.
For NCCN and P4CC, Atromitos identified the different corporate relationships or structures that they wanted to evaluate. From a strategic partnership to a full merger. We also identified the key criteria that they needed to explore to make the right decision. These criteria broke down into important categories: Costs, Operations, and Strategic Objectives. We clearly defined each of the corporate structures, categories, and criteria that the leadership would evaluate. We came to consensus on each of the definitions, assuring that the members of the leadership team were evaluating the same things. Within the decision matrix, we developed a scoring rubric that would help the leadership evaluate subjective criteria in a numerical way, thereby facilitating the decision-making process. When one corporate structure scores higher than the others, it makes it easier to see the distinction among options that may appear, on the surface, to be equally good.
Each member of the leadership team individually scored the different corporate structures against the criteria before coming together to discuss the results, where each member of the team explained their scoring rationale. Through this facilitated discussion, each member of the leadership team learned a little more and gained new perspectives from their colleagues. At the end of this round of evaluation, Atromitos and the NCCN and P4CC leadership teams eliminated some of the potential corporate structures. This left us with three structures to evaluate. We then met with the Strategic Alliance Advisory Committee and explained the process the leadership team was following to make an informed decision. The Committee provided helpful feedback and recommendations that were incorporated into the decision matrix. We further refined the decision-making process to include key questions for each criterion that the leadership team was evaluating.
We also estimated the formation and operating costs of the final remaining structures under consideration. The leadership team again, individually, scored the different corporate structures. In both rounds, one corporate structure rose to the top: a joint venture.
Understanding the Joint Venture Options.
A joint venture can take a variety of forms, depending on the intent of the parties. Upon the decision to pursue a joint venture, Atromitos worked with the leadership team to identify the different ways in which NCCN and P4CC could form a joint venture and help the leadership team identify the structure of the joint venture. For example, Bamford, et al categorized joint ventures in four ways:
Consolidation Joint Venture: the value of integration comes from a deep combination of existing business
Skills-Transfer Joint Venture: the value comes from the transfer of some critical skills from one organization to the other and vice versa
Coordination Joint Venture: the value comes from leveraging the complementary capabilities of both organizations
New Business Joint Venture: the value comes from combining existing capabilities, not businesses, to create new growth
It may be the case that a joint venture is a combination of two or more of these forms. In addition, the joint venture can take a variety of structures. These include:
Jointly Owned Corporation
Limited Liability Company (LLC)
Because a joint venture can have significant legal nuances, especially for non-profit corporations, which NCCN and P4CC are, the leadership began to work closely with counsel to understand all the legal implications and the steps the two organizations needed to take to assure they remained in compliance with state and federal law, and that they structured a joint venture appropriately.
Atromitos continued to work with NCCN and P4CC to clearly identify and articulate the primary intent of the joint venture, as the primary intent would significantly affect the structure of the joint venture. Through a facilitated process, P4CC and NCCN identified the primary intent of the joint venture to formalize the business relationship between the two organizations and to drive efficiencies, standardization, and business development. Through a series of facilitated discussions, guidance from counsel, and input from the Strategic Alliance Advisory Committee, NCCN and P4CC leadership settled on a new business joint venture in the form of a North Carolina Limited Liability Company that is governed by a Joint Operating Agreement that establishes equal ownership of the joint venture between NCCN and P4CC.
Don’t forget what got this all started.
Now, back to the value proposition. Atromitos began by defining what a value proposition is: A statement that explains the benefit of something – a product, a service, corporate structure, or business approach – as compared to an alternative, the problem it seeks to address, and how it is distinctly better. We then helped the leadership team understand that at the core of any successful corporate integration is a well-defined value proposition that clearly and simply communicates the intended benefits of the integration. Failure to understand where the value resides almost always results in failed integration.
Google “how to build a value proposition” and you will find any number of resources for how to do this. But, at the core is assuring that you do the work and that you are honest with yourself through the process. Atromitos:
Built a comprehensive set of assumptions that helped clearly define the problem that the leadership intended to address through forming the joint venture
Carefully evaluated the identified solution – the joint venture – against identified criteria, in conjunction with the assumptions that defined the problem, with legal counsel to assure it was the a legally viable and sustainable solution, and under guidance from the Strategic Alliance Advisory Committee
Determined the level of effort involved in successfully implementing the solutions as compared to what NCCN and P4CC would gain from doing so (in other words, a cost-benefit analysis)
Presented the problem, the solution, and the identified value to staff, senior leadership, and the Strategic Alliance Advisory Committee and determined if they agreed with the value identified by leadership.
At the end of this work, which was carried out over a 6-month period, the leadership of NCCN and P4CC had:
Identified the corporate structure that they would pursue
Built a solid set of assumptions that informed the decision-making process
Established a value proposition for the corporate integration
Made a well-researched, clear case for change
Received approval by each organizations’ Board of Directors to proceed with the joint venture
Each of these results is a tremendous achievement individually. However, what the leadership team also achieved throughout this process is more intangible, but incredibly important to the success of the joint venture:
Trust– through this intentional, transparent process the leadership engendered trust among themselves, with their senior leadership, and with the Boards of Directors.
Confidence– because the leadership was so thorough and careful in their evaluation and didn’t just flip a coin or decide based on their gut, they have confidence in their decision and strong evidence that they can point to explain their decision
Fortunately for Atromitos, our work with NCCN, P4CC and their joint venture was only just beginning. In Part 2 of this case study, we will describe the steps we took to help the joint venture take form, launch, and successfully operate.