Are you ready for a practice merger?

Are you ready for a practice merger?

It’s no secret that smaller medical practices have struggled financially in recent years. In response, many have merged with colleagues or sold out to large clinics or hospitals. If you’re growing weary of “going it alone,” ask yourself the following questions before going into merger talks.

Am I ready to give up some control? For doctors who are in solo or very small practices, suddenly having to share decision making (or give it up entirely in certain areas) is reason enough to say no to a merger opportunity. If you’re not prepared to have someone else control things like scheduling, staffing, which computer system you’ll use, and what your benefit package will look like, then you might be better off working toward making your small practice efficient enough to survive current conditions rather than joining forces with others.

Do I play well with others? If you make the leap to practicing in a larger organization, you’ll find yourself with new colleagues, some of whom may not turn out to be your favorite people. If you tend to get along with the majority of people the majority of the time, you’ll probably do fine in terms of building and maintaining relationships in a group setting. On the other hand, if you often find yourself thinking that other doctors are not quite as competent as you are or do not have a strong enough work ethic, proceed with caution.

Will I really be better off financially in a larger group? It’s easy during the early stages of a merger talk to become seduced by ideas like having group purchasing power and greater leverage during negotiations with third-party payers. But the devil is in the details. Before inking a new partnership or employment deal, scrutinize the numbers carefully and prepare several financial projection scenarios (best case, most likely case, worst case) to determine if-and by how much-better off you will be if you merge.

What will happen to my staff? This is an issue that should be brought up early in any merger discussion you engage in. Assuming you have a good relationship with your current staff and want to see them stay employed, you’d want to negotiate a deal that ensures them a reasonable degree of job security for a specified time period.

Do I have the patience for the negotiation? Merger talks can go on for weeks and weeks, and often for months. You’ll sit through interminable meetings, review a gazillion documents, and be subjected to endless legalese. There may be times when it looks like the deal will fall through (and it might) or times when you’ll want to throw in the towel. As merger talks unfold with glacial speed, keep in mind that the measured pace of the process is actually good because it means that (hopefully) no stone is being left unturned.

Am I prepared to spend money on the merger? Depending on how a potential merger is presented and structured, you may need to hire a consultant, attorney, and/or accountant to help walk you through the process. These services are not inexpensive. Couple that with the time you’ll have to take away from your practice to do research and attend meetings, and it’s easy to see how merging with another group or even working out an employment deal with a hospital can take a bite out of your bank account. This is not to suggest that you should not consider a merger just because it will cost something at the outset. That’s the cost of doing business.

For more information, Google “medical practice merger” and you’ll find a plethora of articles on the subject, along with contact information for consultants who specialize in the process. The Medical Group Management Association (MGMA) Web site also has a downloadable merger due diligence checklist tool that you might find helpful.

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