How to Avoid Missteps in Medical Practice Mergers

May 9, 2012

All too often, the lure of reduced costs precludes the make-or-break proposition - is the practice merger feasible?

Many practice mergers are approached ineffectively. For example, although one of the goals of any merger is to lower the costs of practice, this should not be an initial agenda item. All too often, the lure of reduced costs precludes the make-or-break proposition - is the merger feasible? Here is an explanation:

Step One in Merger Planning: Feasibility of the Merger

The primary goal of any proposed merger is to determine the key issues of physician compatibility. These include:
• Income and expense sharing
• Governance and decision-making

If income and expense sharing cannot be agreed upon, then the merger should not be implemented.

Additionally, the physicians must be presented with a framework for governance (i.e., who will be the primary leaders) and decision-making (what is the voting procedure?). If these cannot be agreed upon, again, the merger should not proceed.

These feasibility issues require:
• Separate impartial input from each of the involved physicians to determine their preferences
• Analysis of the current income and expense-sharing plans

Appropriate study should lead to a determination of compatibility. For example, in one of our merger studies, one of the two groups was hard-charging, took little time off, and had high take-home rewards for the physicians. The second group was more slow-paced and valued time off with consequent lower take-home. This study pointed to the unlikely success of a merger.

If the study points to recommendations of compatibility, the merger could then proceed to the next phase. If not, then the merger could be called off without unnecessary time involvement. Furthermore, most of this feasibility study can be conducted privately.

Without involvement of the separate staffs, you can minimize the uncertainties and anxieties that a proposed merger can create.

Step Two: Laying the Framework

If the merger is considered feasible, then it can proceed to the second phase, which would include:

• Determination of staffing requirements;
• Probable redesign of jobs and job descriptions;
• Analysis of billing, appointment scheduling, and EHR systems requirements;
• Analysis of physician and patient scheduling needs;
• Determination of space needs and possible relocation;
• Methodology: Includes interviews with all involved physicians and non-physician staff; review of job descriptions; study of staff task lists; review of current practice management and patient medical records systems; study of current and proposed office spaces; and out-patient services to be provided.

This results in more effective implementation of merged cultures, staffing, and systems.

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