Here are eight things to know about physician practice mergers, presented by McGuireWoods.
1. The market is consolidating. Merger and acquisition activity doubled in specialty physician practices between 2008 and 2012, according to a study from Moss-Adams.
2. Hospital employment is on the rise. Last year, 53 percent of physicians reported being employed by a hospital or medical practice, up from 44 percent in 2013, according to a 2014 Physicians Foundation study.
3. Solo practices are dwindling. Just 35 percent of physicians owned an independent practice in 2014, down from 49 percent in 2012, according to the Physicians Foundation study.
4. Many physician practices must choose between going lean and selling their practice to a hospital or non-physician-owned business. To stay independent and small, many physician groups are finding they need to cut costs and become more efficient to remain viable.
5. However, for those who value an individualized, autonomous environment, the challenges of a retaining a small practice may be a worthy trade-off. Many physicians prize autonomy and fear consolidation would force a standardized practice environment, diminishing their authority to make decisions.
6. For those interested in large-scale investments and better vendor rates, consolidation is a good option. Consolidation allows for large-scale investments such as adopting a more updated electronic health information infrastructure. Larger practices also have the bargaining power to secure better vendor and payer rates.
7. Physicians should consider several factors before consolidating. While considering consolidation, it is important to establish the leadership and governing process of the new practice in writing, contractually determine a compensation structure, allocate premerger liabilities and prepare a process in case the consolidation doesn't work out, including noncompete clauses for physicians who leave and provisions to dissolve the consolidation agreement.
8. Consolidation is a six-step process. If a practice is poised to consolidate, it should work through the following steps:
- Target practices for consolidation.
- Assess if the selected practice fits in terms of culture, finances, market goals, noncompete restrictions, physician restrictions and liabilities.
- Sign a letter of intent to establish a plan and timeline for negotiation.
- Conduct due diligence between organizations to pinpoint potential risks to address in the final agreement. Relevant documents are typically drafted at this point.
- Close the deal, exchange documents and transfer funds.
- Transition facilities and infrastructure, appoint leaders and inform patients of the deal.
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