Navigating Physician Practice Mergers: A Three-Phase Roadmap

Dec 13, 2023 | Healthcare

In the dynamic landscape of healthcare, physician practice mergers have become a strategic imperative for many practitioners. This transformative journey typically unfolds in three key phases: Due Diligence, Contract, and Implementation. Each phase plays a crucial role in shaping the success of the merger.

Due Diligence Phase: Crafting a Unified Game Plan

The Due Diligence phase is the foundation of a successful merger. Here, an exhaustive analysis of information from all practices involved takes place. The goal is to identify and preserve the strengths of each practice, ensuring that the best elements survive the merger.

Physicians entering the merger must be ready to compromise, considering compatibility in personalities and various aspects of the practices. Electronic medical records, software, staff, and vendors are meticulously evaluated. The key is to select the best components from each practice, fostering a cohesive and efficient merged entity.

Contract Phase: Formalizing the Blueprint

While the Due Diligence phase sets the game plan, the Contract Phase formalizes it. This stage involves legal intricacies, solidifying agreements reached during due diligence. It is a critical step to ensure clarity, transparency, and alignment of expectations between the merging practices.

Implementation Phase: Launching the Merged Entity

The Implementation Phase marks the initiation of the merged entity. Proper training on software, processes, and procedures is paramount for a seamless start. Efficiency can be gained by consolidating overheads from multiple practices into a single entity.  For example, the new entity will likely need less support staff and only one billing company.

Tough decisions may be required, especially concerning staff selection. Often it is necessary to prioritize skills over loyalty. The collective skills of the retained staff contribute significantly to the success of the merged practice.

Practice mergers are often driven by growth or transition strategies. The desire for cost savings, achieved through consolidation of overheads, is another common motive. While bigger is not always better, a larger practice is often in a better negotiating position with insurance companies.

While mergers in all industries are delicate, the healthcare sector, in particular, requires careful consideration of electronic medical records, staff dynamics, and vendor relationships. If you find yourself navigating the complex terrain of physician practice mergers, our office is here to offer expert guidance.

Article contributed by Terri L. Marakos CPA, CHBC

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