Two large home-health care organizations, both headquartered
in Southern California, had been fierce competitors.
Homedco and Abbey Healthcare group decided that rather
than continuing to compete, they could strengthen
their market positions by merging to create one large
firm, Apria Healthcare Group. Together, they planned
to expand their home health services nationwide as
the effects of managed care spread.
Yet three years later the Stock value of Apria
had declined by 25 percent, and earnings fell.
How far Apria declined was soon evident; when efforts
began to find another company to take over the
firm, few buyers were interested. What happened
was primarily due to operational problems caused
by the merger. Those issues had not been resolved
because of internal conflict between ex-Homedco
and Abbey Healthcare executives and employees.
Ultimately, the Board of Directors, which was evenly
split, accepted the need to remove Timothy Aitken,
former CEO of Abbey Healthcare, and have Teremy
Jones from Homedco as CEO.
It was obvious from the beginning that the organizational
cultures were very different. Whereas Homedco had
a more formalized structure with more centralized
decision making, Abbey Healthcare had very decentralized
decision making and branch managers had significant
authority. Also, merging computer and billing systems
by using the Abbey Healthcare system meant that
employees from Homedco had to be trained, which
did not happen fast enough. As a result, numerous
billing errors and the resulting complaints and
phone calls from unhappy customers overwhelmed
Apria customer service departments.
To save costs and eliminate duplication of Jobs,
about 14 percent of the employees in the combined
company lost jobs. But the greatest numbers of
those cut were former Abbey employees. For those
remaining, it appeared that most Homedco managers
were not affected as much as the Abbey Healthcare
managers. For instance, only 6 of 21 regional managers
were formerly with Abbey Healthcare, which caused
most of the best performing Abbey sales representatives
to quit. Even changing some basic HR policies caused
problems. For example, when Homedco HR policies
were extended into Abbey offices, a new dress code
and time recording procedures irritated many former
Abbey workers. A significant number of them left
in the first year. The level of conflict was so
severe that employees from one firm referred to
those from the other company as “idiots” and
refused to return phone calls from employees with
the other firm. Finally both Aitken and Jones left
the firm, and a new executive team has been struggling
to rebuild Apria. Instead of being a healthy merger,
it turned into the “merger from hell”.
