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How to Lead a Successful Physician Group Merger

July 9, 2018 BY Alanna Moriarty

How to Lead a Successful Physician Group Merger

Physician group practices hold an ideal spot in the healthcare market. Practices are generally smaller than traditional hospitals, and usually focus on a single specialty. This allows providers greater flexibility in many aspects, including services provided to patients, hours of operation, charity care spending, and more. Specialists can also benefit from employment in a group practice, surrounded by providers in the same field that fosters cooperation rather than competition. Smaller physician practices in particular can adapt to the evolving needs of the healthcare marketplace faster than hospitals and health systems due to their size and limited offerings without compromising care coordination and delivery.

Most Recent Physician Group Mergers & Acquisitions

  1. Internal Medicine Associates (FL) absorbed by Millennium Physicians Group (FL)
  2. Southern Indiana Rehabilitation Hospital (IN) purchased by MedEquities Realty Trust (TN) 
  3. Advantia Health (VA) acquired Fairfax OB-GYN Associates (VA)
  4. USACS Front Range Emergency Specialists (CO) acquires three Colorado physician groups
  5. Capitol Pediatrics (NC) joins University of North Carolina physicians network

Fig 1 Data from Definitive Healthcare

However, in the era of mega-mergers and frequent facility acquisitions, many physician group practices are looking to combine resources and increase their imprint on the local market. The popularity of retail and urgent care clinics is a constant source of competition for group practices, spurring physician group mergers across the country. Mergers and acquisitions allow practices to improve care offerings and diversify the specialties of employed physicians, attracting new patients without increasing costs. By merging or partnering with other physician groups, practices can effectively compete with hospitals, clinics, and other local care providers.

Areas of Focus in Physician Group Mergers & Acquisitions

It's easy for physician group leaders to get caught up in the minute details of a merger and forget to ask essential questions that align with the goals of all involved parties. In addition to the obvious details like business strategy, the cost of the partnership or acquisition, and location, there are other aspects to consider when combining two or more physician group practices. We've compiled a list of categories that can be overlooked in the hustle and bustle of physician group mergers.

  1. Leadership and Culture
    Does your practice leadership have the same goals as your staff? 
    Have you gotten input from physicians, administrators, and other staff members on what they hope to see from this partnership?
    Are you clearly defining and communicating your expectations of staff and the practice as a whole?
    Practice leaders are advised to purposefully involve providers and staff members throughout the merging process to ensure that employees are invested in the project.

  2. Independent Physicians
    Did you assess the quality of independent physicians and providers associated with the practice?
    Could these providers be successfully integrated into the new practice, or do they work better as independent practitioners?
    Are independent physicians in direct competition with group practice members for patients, or are they collaborative?
    All providers should be aware of changes occurring within the group practice, including policy on independent physician contracting and their relationship to full-time practitioners.

  3. Revenue Cycle and Reimbursement
    Are billing and collections tasks completed in-house or are they outsourced? Is the existing method efficient? Will the existing method continue to be efficient for a larger practice?
    What is the payor mix of each practice? How does this affect total revenue?
    How will each party reconcile policy on charity care, patient follow-up and collections?
    As a practice expands, it can be difficult to ensure that administrative tasks are scaled up to be as efficient is possible to avoid a negative impact on revenue.

  4. End Goal
    Has each party fully expressed their shared values and expectations for the merger?
    Are all stakeholders fully on board with the end result?
    Have you identified the additional resources your new, larger practice will be able to take advantage of?
    It is absolutely vital to the success of a physician group practice that leaders identify the strengths and weaknesses of each party as well as the new opportunities and pitfalls that will result from the merger.

  5. Information Technology (IT)
    Do both parties use the same electronic health record (EHR) and practice management systems?
    Are the existing systems efficient and easy to use?
    Will staff members and providers receive training before the completion of the merger to ensure technological competency?
    Healthcare IT is complex from both an installation and user standpoint, yet it is vital to the success of a modern group practice. Make sure providers and staff are using new and existing technologies in the most efficient manner to reduce confusion and maximize providers' time.

Physician group practice mergers carry significant risk, particularly when it comes to financials. For more information on reducing physician burnout and managing patient care, check out the Definitive Blog!