Introduction

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Many mergers and reconfigurations of NHS trusts have taken place in recent years. Since 1997, 99 mergers of trusts have taken place; 14 in London (Department of Health, personal communication, 2001). These include horizontal mergers of acute hospitals, mental health trusts, and community health services trusts. More recently, primary care groups have merged to create primary care trusts.¹ Reconfigurations have often been contentious politicallythey even provided the focus in one constituency during the general election of 2001.² This led to the establishment of the independent reconfiguration panel, which aims to adjudicate on proposals about mergers and reconfigurations to "take the politics out" of such decisions.³

There is a range of drivers for trust mergers. One aim is to achieve economic gains: firstly, by taking advantage of economies of scale and scope (especially with regard to management costs),⁴ and secondly, as a result of rationalising the provision of services by reducing excess capacity to treat patients.⁴ Some people assume that clinical quality improves as usage of specialised units increases,^5-7 quality of medical training increases,⁸ and staff recruitment and staff retention become more effective.⁹

Political drivers for mergers include facilitating hospital or service closures, securing financial viability of smaller organisations, and (on the part of providers) ensuring increased negotiating power and a survival strategy by pooling resources and enlarging the organisation in response to challenges from purchasers of services.¹⁰ For mental health services, the belief that mental health trusts with a single focus can provide higher quality services has provided additional impetus for mergers. ^{11 12}

Sceptics of mergers argue that the evidence for benefits of horizontal mergers is patchy, contradictory, and often based on managers' beliefs about the benefits. ^{4 10} Unintended consequences and potential drawbacks of mergers receive less attention. These include disruption of services as a direct consequence of mergers, diseconomies of scale, and problems with staffing, service integration, systems integration, and working practices, as well as issues of equity and access to services. ^{4 10 13}

We studied the processes involved in and impact of trust mergers. We performed a cross sectional study of the drivers and objectives of trust mergers, a management cost analysis, and an in depth, longitudinal, qualitative case study of four recent mergers in London.

	Methods

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We studied the process of merger in a cross sectional study of all nine trust mergers and reconfigurations in London which became established in April 1998 and April 1999. These involved the dissolution of 25 constituent trusts and the creation of 11 newly merged trusts. We also conducted in depth, longitudinal case studies of four of these mergers, established in April 1999.

Cross sectional study
The cross sectional study comprised an analysis of the public consultation documents for the nine proposed trust mergers and semi structured interviews with 14 managers in seven health authorities associated with the trusts. One future health authority refused to participate in the study. We aimed to identify the "stated" and "unstated" (not publicly stated) objectives of each merger.

Case study
In the case study, we studied one merger involving acute care trusts, one involving mental health trusts, and two involving community NHS trusts over a two year period in the second and third years after merger. These particular mergers were chosen to reflect the range of trust types and geographical areas.¹⁴ The case study aimed to explore the process of merger in depth, to assess how well the mergers' objectives had been met, and to determine the intended and unintended consequences of the mergers.

We report our findings from the first round of data collection, which took place in the second year after merger. During this stage, we interviewed a range of stakeholders from inside and outside the trusts. We interviewed 22-26 people per case (96 interviews in total). A core group of informants was interviewed in every case. From inside the trust, this included at least six board members. From outside the trust, this included

• Senior regional office representative
• Chief executive or chair of primary care group or primary care trust
• Director or assistant director of social services
• Chief officers of community health councils
• Chief executives of "sister" trusts.

Other informants were found through a snowballing technique (this entails identifying initial interviewees, who go on to recommend other people for interview).¹⁵ We asked interviewees about the drivers for merger, the processes involved in the merger, and their assessment of the merger's impact on a range of issues related to service delivery, including objectives set before the merger.

Five members of the project team independently read the interview reports to ensure the analysis was reliable. We analysed data by creating a preliminary framework based on the theory behind the study and by organising responses around other themes that emerged from the data. ^{16 17} The project team discussed emergent themes and agreed on those to be included.

Savings in management costs for the four trusts in the case study were estimated by comparing the actual costs (as reported in audited annual accounts for the first two years after the merger) with an estimate of the costs if no merger had taken place. A control group of eight trusts not involved in a merger or major reconfiguration (any change in income >20% in successive years) since 1995-6 was used to predict the costs if no merger had taken place. We treated 1997-8 as the base year, and we predicted management costs and income for the eight unmerged constituent trusts for 1999-2000 and 2000-1 on the basis of the control trusts' costs and income (as reported in their audited financial accounts). We used a sensitivity analysis to test the effect of different assumptions on the relation between income and management costs. The post-merger trusts used in the case study did not simply amalgamate the services of their constituent trustssubstantial increases and decreases in income associated with changes in provided services were seen. We adjusted the estimated savings in costs in 1999-2000 and 2000-1 to account for differences between actual and predicted incomes by using the different levels of variable costs produced by the sensitivity analysis.

	Results

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Stated and unstated drivers
Stated drivers (from public consultation documents) gave the official view of the background to and reasons for the merger, as well as the favoured organisational structure. These included a need to make internal savings in management costs and invest savings into services for patients, to safeguard specialist units and guarantee developments in services, to ensure that quality and amount of services provided were maintained in the light of external policy drivers that put additional pressures on services, eg Turnberg report,⁸ and to improve conditions and career prospects for staff and solve recruitment and staff retention problems. For acute trusts, there was a need to respond to various service and policy reviews that recommend concentration of some acute and specialist services. Community and mental health trusts were responding to beliefs that trusts' cooperation with local authorities would be better if coterminosity was achieved (that is, that the new trusts would cover the same geographical area as the local authority). Community trust mergers aimed to support development of primary care.

Unstated drivers were concerned with specific local issues about one or more of the constituent trusts and were as reported by key stakeholders during interviews. These included a need to impose new management regimes on trusts perceived by health authorities or regional office as "undermanaged" or "lacking control," to negotiate reductions in accumulated deficits of one of the constituent trusts (because new organisations could not be expected to carry the burden of deficit from the start), and to respond to lobbying from stakeholdersincluding central government, influential institutions, and pressure groupson behalf of one or more constituent trusts. "The organisational merger was mixed up with the future of the [trust's] site, although this went through a separate consultation process . . . subsequently, there was a lot of negotiation around the conditions of the merger" (health authority interviewee involved in an acute trust merger).

Impact of merger on service delivery
The results from all four cases showed that the mergers had a negative effect on the delivery and development of services (box 1). Interviewees from inside and outside the trusts reported that the loss of managerial focus on services during the merger had some detrimental effects on patient care. Service developments were delayed by at least 18 months, and senior management had underestimated the timescale and effort involved in the mergers. Some positive effects of mergers on service developments were reported; these related, for example, to the fact that there would be more clinicians in smaller services to run them effectively (box 1).

Trust sizedoes it matter?
A range of advantages and disadvantages of large trust sizes was reported. Although the advantages were mostly stated objectives of the merger, the disadvantages were unintended consequences.

The benefits of larger organisations created by mergers include the presence of a larger pool of professional staff; this enables organisations to develop large teams of specialists, which allow clinical excellence to be achieved. Previously fragmented specialist services become unified and enhancedfor example, the child and adolescent mental health services in mental health trusts. Community trust managers thought local authorities paid more attention when trusts became larger. In the mental health trust, the increased size was thought to facilitate cross fertilisation of ideas. Increased opportunities for staff training were an immediate and tangible benefit, and professional networks were enhanced by the increase in the number of professionals.

The drawbacks included the fact that staff felt that senior managers had become remote, and service managers felt cut off from the services that they were managing. Staff in the acute trust felt that senior managers did not devote enough time to them and that their needs for help from the managers were ignored. Respondents originating from smaller trusts felt a loss of the informality and familiarity of the previous organisations and a decrease in the autonomy of services and local decision making. Large trusts were seen as unresponsive and slow to make decisions. External stakeholders were concerned about the ability of large trusts to oversee continued quality of services and patient care. Agencies used to having direct access to senior management had to deal mainly with middle managementthis compromised strategic developments in some areas of service. The larger geographical area covered by the merged trusts increased travelling time between sites for managers. Internal communication was negatively affectedprocesses of communication were viewed as incoherent and slow in merged trusts

Management structures
Changes in the trusts' management structures created tensions within staff groups and between clinical staff and management. Although the competition for management posts followed NHS guidelines, the new senior management team tended to consist predominantly of staff from one of the constituent trusts; this created the impression of a "takeover" for many staff (box 2). On the positive side, mergers provided individual staff and services with an opportunity to emerge from the constraints of previously stagnating services and management organisations.

Staff recruitment, retention, and morale
Findings to date have not revealed a substantial improvement in staff recruitment or retention during the early stages of mergers, despite this being a prominent stated driver. Benefits to staff of mergers included improved systems of clinical supervision, more coherent professional management, and the advantages of programmes of appraisals, training, and career development that have been implemented. Clinical and managerial staff, however, emphasised the stress caused by the perceived imposed uncertainties and changes and the increase in workload associated with the process of merger.

Organisational culture
Respondents used the term "culture" to highlight the differences between the organisations and to explain conflicts of values and priorities. Differences in culture related to attitudes to innovation and risk takingan outcome or process orientationand patterns of communication (box 2).

Financial issues and management cost analysis
Interviews with finance managers indicated that the clearest source of potential savings from the merger was the £500 000-£750 000 that was associated with reduced numbers of members of management boards in the merged trusts. Finance managers were less convinced that other savings were achieved within the first financial year, and they had no clear evidence that savings were reinvested into services. Instead, they thought the mergers highlighted hidden financial problems in the constituent trusts and revealed differences in funding and staffing of services across the merged organisations.

Our cost analysis indicates that reductions in management costs after the mergers were less than the estimated target savings of £500 000 a year. Regression analysis of the results from all 49 London trusts in 1997-8 (excluding teaching hospitals and single speciality trusts) indicated a strong linear relation, with the variable element of management costs estimated at 4.9% (95% confidence interval 4.5% to 5.4%) of income. On the basis of the actual variable costs in the control trusts, average management cost savings were calculated as £178 700 (-£20 300 to £377 800) in the first year after merger and £346 800 (£5300 to £688 200) in the second (see table). The savings were not consistent between the trusts in the case studies, and they were sensitive to changes in the variable cost assumptions used in the sensitivity analysis.

	Discussion

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The formation of large organisations through mergers had benefits and drawbacks. Benefits were mostly stated objectives of the mergers, but drawbacks arose during the process of merger and were not considered when the decision on whether to merge was made. When mergers go ahead, drawbackssuch as reduced accessibility for external stakeholdersneed to be resolved by the people implementing the merger.

Some research has investigated whether mergers should take place (in terms of the optimal size of hospitals).¹⁸ Much less research has investigated what happens after hospitals have merged,⁴ and even less has looked at the consequences of merging organisations that provide mental health or community health services. Argyris and Schon differentiated between an organisation's "espoused theory," which tends to be explicit, and an organisation's "theory in use" (actual pattern of activity), which tends to be tacit.¹⁹ They argued that low congruence between the two largely accounts for the organisation's identity.

We analysed two types of drivers for mergers: "stated" driversas set out in the formal consultation documents ("espoused theory")and "unstated" driversrevealed through interviews with trust and health authority staff ("theories in use"). Both types of drivers are important to understand, as they provide the context for the merger processparticularly where "unstated" drivers conflict with "stated" drivers (which may leave the organisation unclear about its objectives). The "unstated" objectives highlight the political context within which mergers take place. Whether the independent reconfiguration panel will be able to "take the politics out of" these decisions remains to be seen.

Restructuring
For all four cases, the merger brought about a period of organisational restructuring and intensive introspection that set them back in terms of developments in the organisation and services by at least 18 months. The amount of time needed for restructuring was underestimated by the people who initiated the mergers and by those who implemented them. Such delays are important unintended consequences of mergers that must be taken into account in future plans for reorganisation.¹³

Cultural differences
Differences in cultures between merging organisations seem to be an important barrier to bringing organisations together through a merger. Particular aspects of organisational culture cited in our studysuch as attitudes to innovation and risk taking and whether an organisation has more of an outcomes or process orientation, and patterns of communicationare highlighted as keys to the future direction of health services.²⁰

Trust size
Larger organisations were expected to be able to provide better opportunities and facilities for staff, and this was expected to solve problems with recruiting and retaining staff. Our study shows that the merger had no positive impact on the recruitment and retention of clinical staff. In some cases, the mergers exacerbated the problems of recruiting and keeping managerial staff; they often left to avoid organisational disruption.

Management costs
Average savings in management costs of £178 700 in the first year and £346 800 in the second year after merger did not meet the clearly stated objective of reducing management costs by £500 000 a year. These numbers should be treated with caution because of the small sample size and sensitivity of the analysis to assumptions about the relation between management costs and income, but our data support predictions that reductions in management costs after mergers would be small.²¹ The smaller calculated savings can be explained in part by the use of a control group of trusts in the analysis. Between 1997-8 and 2000-1, management costs in the control trusts increased by 3.6% and income increased by 26.7%. We adjusted the estimated savings for the trusts used in the case studies to account for this general decline in management costs (as a proportion of income) reported by trusts not involved in mergers.

The low savings in management costs achieved, particularly in the first year after the merger, suggest that the implementation of mergers needed more management support than had been anticipated. Merged organisations thus need to set realistic objectives in terms of savings in management costs by taking into account the amount of managerial input needed to implement the merger. The possibility of cost savings and changes in efficiency in areas other than management costs was not explored, because this was not a stated objective of the mergers and because comparative cost data for all of the different types of trusts included in the analysis are lacking.

Timing of study
We analysed the drivers and consequences of merging healthcare organisations for the two years after merger. Our study was commissioned after the mergers had formally taken place. Ideally, research on mergers and reconfigurations should begin before the mergers take place. This would be very challenging to achieve in practice, however, as it could be argued that the process of merger begins as soon as discussions about merger begin. Findings presented in this paper are "interim," in the sense that they provide a picture of the impact of mergers at a relatively early stage in the life of the new organisation. Other studies in the United States and the United Kingdom showed that the results of mergers are disappointing and that it takes a long time for positive results to show. ^{13 21 22} Our study may have been performed too soon after mergers to judge whether or not they met their objectives, given the length of time taken to achieve considerable change in healthcare organisations. The results from the second stage of our data collection for the case study, which took place during the organisations' third year of operation (data are currently being analysed), may show that the merged trusts are closer to meeting the mergers' objectives. The longer the timeframe used, however, the more difficult it is to attribute effectsfor example, the impact on service developmentsto the merger process, given the context of a turbulent environment of change within the NHS.

Conclusions
It is important to understand the unintended consequences of merger and to set realistic objectives for these reorganisations. Our findings have implications for other NHS organisations that are experiencing reorganisationsuch as the development of primary care groups into primary care trusts and the merger of health authorities into strategic health authorities.²³