Preventing Physician Merger Hiccups

By Reed Tinsley, CPA, CVA, CFP, CHBC
Medical Practice Broker, Physician CPA, Healthcare Consultant, Value Analyst, Author, Speaker  

So, you’ve decided to enter into a physician medical practice merger. Congratulations, you’ve completed tireless hours of feasibility analysis and carefully chosen your new partners. However, your work is far from over. Beyond this groundwork is the intensive task of planning how to actually merge. The managers have to work out what’s going to happen when they switch the lights on in the new group. How they’re going to answer the phone, handle EMR’s, billing, employee benefits, and day-to-day medical practice operations. 

Although a consultant or merger facilitator can help groups with such decisions, my recommendation is to in Tinsley Medical Practice Brokers on your team. We brings years of valuable consultant experience that you can put to immediate use. I also suggest the new partnership form a committee or work group—or several within a large merger—that will meet regularly for at least six months before the expected go-live date. Work group members should include administrators, managers, physicians, and select staff members. 

These key individuals are charged with analyzing each group’s employee manuals, processes, and finances to arrive at uniform policies and procedures that make the most of each group’s strengths. For example, the committee may discover that group A has the highest collection percentage and decide to adopt its process for collecting copays. 

Even assuming each group has well-matched cultures and values—essential to any merger success—this part of the merger process is time-consuming and arduous. Although committee members may find it grueling, physician and staff member involvement in this work is essential to their accepting the subsequent changes. 

Hold regular meetings 

Regular physician involvement is a key factor in a merger’s ultimate success. This helps the merger process improvement by identifying problematic processes early on before they become entrenched in the new entity. 

Handle staffing issues early and honestly 

Some of the biggest eggshell territory relates to staffing, especially when it comes to deciding managers’ and administrators’ roles in the new practice. Problems often arise when physicians avoid the subject until after the merger is effective. I often find doctors don’t want to deal with hard decisions, so a lot of times they say, ‘We’ll work it out,’ and this usually doesn’t work. Conversely, some doctors insist up front that the office manager from their original group will oversee the entire practice. However, that puts the other practices in a difficult position because they have to say yes to something they haven’t had a chance to evaluate. 

Pick a Managing Partner 

Before going live, select a managing physician chosen by the other doctors. This is helpful, because not only does the practice administrator have a go-to person, but the doctors also have a go-to person. This helps alleviate a great deal of day-to-day business interruptions. 

Commit to stick: 18-24  

Mergers are often compared to marriages; an analogy I believe fits to a tee. The first step to success is choosing one’s partner carefully. If you think you’re going to change your partner after you get married, good luck with that dream. This doesn’t work in marriages and certainly doesn’t work with medical professionals. 

Be realistic. There will be difficulties. Count on it. The need to communicate, compromise, and improvise to make things work will become an invaluable skill. There may be times when it seems the merger is doomed.  I recommend groups commit to not invoke any out-clause in their merger agreements for at least 18 months, preferably two years, without financial penalty. This allows a “settle-in” period without forcing hurried decisions. 

As soon as the shine wears off, the practice might make a bad decision and lose some money, or somebody gets mad and says, ‘I’m going to take my ball and going home,’ the merged physicians have to have something that forces them to work through that issue and any other other issues that may arise in the future.