Assess whether acquisition makes sense for your practice

February 6, 2019

Five questions managers and physicians should ask and answer before jumping into acquisition. 

"We said yes because the hospital offered us a 'sweet deal.'" 

This was said by a senior surgeon and long-time client who called to report that operational integration had taken a nosedive just a few short months after his practice was acquired. Patients were waiting for hours. The manager they'd brought along had just been fired. Staff struggled to use the hospital's billing system, which was not designed for practices. And established patients were outraged at the new "facility fee" charges. 

The physicians had been so enamored of the financial aspects of the hospital's 'sweet deal' they didn't stop to consider the operational and cultural changes that came along with it. The result was a disaster that took more than a year to unravel.

If your private practice is solo or a small group, you've probably grown to appreciate the ability to more or less do what you want, how you want, and when you want. If you jump into acquisition for purely financial, or other wrong reasons, you may be in for a shock. Here are some questions for managers and physicians to ask before taking the leap. 

1. Why are you making this move? 

This is an essential question. "We want someone else to handle the business detail" is not a good answer. Frankly, if you are seeking acquisition because the physicians don't like the business side of the practice, they are in for a big surprise. The new masters of your practice's universe-whether a hospital or private equity group-are unlikely to let them off the hook. Have physicians neglected coding and documentation guidelines? Do they overlook report review and monthly meetings? All could spell trouble with a new owner. 

2. Are you really ready to follow new rules?

Once acquired, you will be expected to act and comply with rules, protocols, and regulations. These include showing up on time, starting office hours as scheduled, and submitting charges promptly. And you'll need to follow all rules, even if they don't entirely make sense or are potentially detrimental, from the practice's perspective. 

Our firm reviewed two orthopaedic practices where the acquiring hospital moved the X-ray unit out of practice suite and onto another floor. The orthopaedic patients had to “take a number,” because other specialists in the building referred patients to the X-ray unit too. Patients would disappear downstairs and sometimes not return until an hour later. Imagine what that did to the schedule! But the hospital now owned the machine and the revenue, so administrators made the rules.

3. Are you prepared to give up the business tasks you enjoy?

Some physicians appreciate being involved in certain business aspects; for instance, employee selection. But under a new regime, hiring tasks are the responsibility of human resources. Their assessments may differ from yours.

Think carefully about certain aspects of the practice's business affairs that you and the physicians truly enjoy. Maybe it's technology selection or clinical protocol development. Although you may have some input on these in a larger organization, it's unlikely you'll be a decision-maker. 

4. Will you be able to tolerate organizational layers and little ability to impact decision-making?

You'll need to accept both in a large organization. 

Consider the practice that had to abandon a customized orthopaedic software system for Epic. After years of using a technology platform that met their needs and had features they desired, Epic wasn’t as effective and slowed them down. But they had no choice in the matter.

In another case, the physicians' experienced practice manager was let go and the hospital filled the position with someone who was marginally competent and had no decision-making authority. This manager couldn't even address minor issues such as calling an exterminator. She had to call her manager, who had to call a director for approval. Meanwhile, there were bugs in the exam room. True story.

And, one frustrated doctor recalled being required to produce the same number of RVUs, but was given fewer exam rooms and less-skilled staff to do it.

5. Is this a culture you want to work in?

Make sure you consider the business and clinical philosophy, strategic vision, leadership, and governance issues of any acquirer you consider. The leading reason practices break apart and physicians pull out of hospital employment to return to private practice is lack of cultural fit. This hasn't changed in our firm's 30+ years of working with physicians. If you don't like the way the organization does business now, you'll like it even less when you are amongst its ranks. No amount of a 'sweet deal' can overcome the nagging feeling of being part of place that doesn't align with your personal philosophies or support your professional goals. 

Karen Zupko is the president of consulting and education firm KarenZupko & Associates, Inc., which has been advising physicians to succeed in the business of medicine for more than 30 years.