The number of practice mergers is on the rise – in ophthalmology and throughout the healthcare industry – and motivating forces show no signs of abatement.

If you see a practice merger in your future, be sure to take your time and do it right. Too many ophthalmic practice co-owners get caught up in merger mania and subsequently suffer for it. They instruct their attorneys and accountants to merge their practices, but after the deed is done they often end up dissatisfied. In some cases they even dissolve the merger.

You can increase your chances for success by choosing the right merger partners, planning carefully and marketing the new practice to patients and referral sources. Let’s look at these success factors in more detail.

The primary reason for a merger is to gain strength in numbers or clout. But there are other good reasons, as well.

• Wide range of services. This is increasingly important in ophthalmology, because patients are comparison shoppers who value convenience. The healthcare plans they belong to measure customer satisfaction and adjust provider contracts using that information.
  Increasingly, the ophthalmic practice that offers the widest range of eyecare services – from comprehensive vision examinations to surgery and eyewear – wins the best managed care contracts and the most patients.
• One-stop shopping. Ophthalmic practices also merge to build complete eyecare practices. Why refer outside of your practice when you can provide those services in-house?
• Geographic expansion. Increased size gives practices access to new geographic markets. It also allows practices to protect their market share against new competitors.
• Greater ability to raise capital and increase financial leverage. This growth facilitates adding new offices, purchasing new and expensive technologies (such as surgical lasers), building an outpatient surgery center, subspecializing and bringing in new associates.

Everyone must benefit from the merger, even if the gains aren’t entirely equitable. You can increase your chances of a successful match if you:

• Evaluate the contributions every potential partner will make to the post-merger practice
. Be objective, fair and demanding. A merger that only or unfairly benefits one party may be doomed to failure.
• Make sure all parties are personally and professionally compatible
. Be aware of the amount of time you’ll spend with your partners in the office, the operating room, the surgery center and other medical and business environments. Practice styles and personalities should work to your mutual advantage.
• Discuss practice philosophies and management styles, including each potential merger partner’s philosophy of medicine and payment. Does each partner participate in the same managed care plans?
Do any perform pro bono or clinic work? Would you describe your practice styles and level of surgical aggressiveness as the same? Don’t expect anyone to change his or her personality or style for the sake of the merger. Partners must trust each other’s business and medical judgments. Be sure to discuss any reservations thoroughly.

Once you’ve identified your potential partners, you need to focus on planning. Consider the following issues:

• How will equity owners divide practice income?
• How much time off and sick leave will each equity owner and ophthalmologist receive?
• What if a partner is out sick, dies or becomes disabled?
• What if the merger doesn’t work out and you want to split up?

Draw up a realistic agenda and meeting schedule to discuss these and other issues. Identify the individual steps needed to achieve the merger and assign concrete dates to your objectives. Be honest and accurate in setting your goals so you don’t create unrealistic expectations.

Next, resolve issues surrounding the day-to-day operation of the offices. Topics of discussion should include:

• How will you rotate your schedules?
• Who will manage the new entity day to day?
• Which office will be the main office? Does one partner have a large office that could easily house the new merged practice’s main office?
• Would it be appropriate to close one or more of the existing offices or realign staff positions to realize cost savings?
• Which offices will do billing, vision testing and specialized procedures?
• How will you make sure patient charts are at the same office as the patient?
• What are the logistical possibilities for an eyewear lab, surgery center or other ancillary services?
• Are there types of ophthalmic services that one merger partner performs that the others commonly refer out?
• Are computer and billing systems compatible?
• How will the staffs be integrated?
• Will your increased size trigger additional legal requirements regarding personnel policies, benefits or employment terminations?

Commit your plans, goals and objectives to writing to determine the financial, legal and management directions of your merged practice.

Like any major change, a merger can be unsettling. Anxiety over the merger can run especially high among the members of the merging staffs. Often, individual staff members believe their jobs will no longer be needed after the merger.

Frequently, this fear originates with office managers, who recognize that the post-merger practice will only need one manager. Even if your new group has multiple sites, you should appoint only one overall manager, although multiple site managers may report to him or her. When this happens, fear often spreads among all merging staff members.

How you notify staff of your potential merger and of the re-designation of responsibilities is critical. Take time to tell your staff about the merger in a casual setting and stress the positive benefits of the merger. Arrange a time when all the staff members from each practice can get together to meet each other in a neutral environment, such as at a dinner.

It’s important that your staff members feel they have your loyalty and that they can communicate their questions and concerns directly to you – while they’re building loyalties to the new merged practice.

With two or more practices coming together, you’ll likely have different personnel policies, such as vacation allowances, time off and disability and fringe benefits. You must reorganize and synthesize them into a single overall practice policy.

You’ll also have new staffing requirements, with some positions eliminated and others multiplied. Draw up new job descriptions and redesignate positions to match the work that needs to be done. It’s also important that you develop a good system for employee evaluations and merit increases.

Don’t underestimate the difficulty your staff will have in coordinating the flow of patient and billing information, meshing and rotating the partners’ schedules and adapting their own work schedules to the practice’s new staffing needs. Tell your staff to anticipate but not be frustrated by these problems.

Ophthalmologists may also be traumatized by the merger process. Until mutual trust develops, you’ll likely experience the anxiety that comes from newly shared decision making, new lines of authority and new rules. The merged group may decide to do things differently from the way you’ve done them before. Your schedule may shift, your coverage may change and you may no longer have full responsibility for the practice.

It’s difficult to give up old patterns and systems. However, with time and effort, developing new and improved ways of doing things works to everyone’s benefit. Place emphasis on appreciating the benefits of your merger and your merger colleagues, while you give each other time and reasons to trust each other.

Decision making is one of the most difficult and critical issues to address when preparing to run a merged practice. Owners of the original practices are usually owners in the merged practice entity and named to its governing body. However, if you have to call a meeting with all equity owners in attendance every time you need to make a decision, nothing will ever be decided.

For day-to-day decisions, consider a less democratic concept. For example, a group of two to five ophthalmologists should consider appointing a managing partner. The managing partner runs the practice on a day-to-day basis, and reports back to the group for all mid-level and higher decisions. Often, the managing partner will have time allocated out of his or her practice schedule to handle the affairs of the merged entity.

Groups of five or more ophthalmologists should consider creating an executive committee, a team of two or three ophthalmologists responsible for leadership of the post-merger practice and for day-to-day decisions. It’s also important for the executive committee to work to build consensus for its decisions, and to foster decision making and promote relevant ideas. Of course, this should not obviate the equity owners’ votes on important issues regarding goals and direction of the post-merger practice.

You must also select a practice administrator. Determine how much experience this person will need. Larger groups require administrators with high-level qualifications and possibly even experience in an industry outside of health care.

Although the temptation may be strong, be wary of promoting one of your individual office managers to head the entire group. This not only subordinates one manager to the other, it also sends a message to your staffs about which practice may get preferential treatment.

If you do choose an existing office manager as your practice’s administrator:

• be aware of the broader implications
• communicate the rationale behind this choice to all employees
• make every effort to answer their questions and address their concerns as soon as they are raised.

It’s important that the administrator’s involvement be synchronized with your planning. Early involvement minimizes the need for ophthalmologists to handle the more mundane details of the merger. It also allows more time for planning the budget, identifying synergies, and finding and implementing other strategic activities. On the other hand, don’t hire an administrator until you are relatively sure the merger is actually going to happen.

The administrator should help the equity owners assign broad areas of responsibility among themselves and track the implementation of the merged group’s objectives. For example, one clear objective for a group practice administrator is to fully integrate the merging ophthalmologists and thus present a "group" image to the community.

No matter how successful the original practices were at promoting themselves, you can’t coast along without marketing the merged group. Why?

• first, because you need to overcome any hesitation or negative reaction to the merger in the medical, optometric and lay communities
• second, because you should build on the new opportunities your merger creates to become even better than you were individually.

Effective promotion of the merged practice requires a well- thought-out game plan, composed of concrete objectives in achievable time frames. (See "Promoting Your New Practice" )

Your marketing strategy should focus on the following two long-term goals:

• developing name recognition for the new merged group and its ophthalmologists
• getting the word out about the benefits of your merger to those who most need to know about it – your referral sources and your patients.

Remember to finalize and integrate the new name for the merged practice and use it on all promotional materials. Publicize any new phone numbers and update your listings in telephone directories, community directories and other resources.

Mergers are high-risk, high-return ventures. The challenges you face may be numerous and complex, but the rewards can be significant.

Success requires careful preparation: comprehensive research and discussion before the deal is struck; thorough planning to implement the merger; and finally, anticipation of and quick response to the array of problems you’ll face in the early weeks and months of the new merged practice.

Make it a point to discuss reimbursement issues at your merger planning sessions. This will enable you to anticipate the actual financial results of the merger, and make budgeting more accurate and effective. Issues to consider include:

• Which third-party payers will the new entity participate with?
• How will contracts or joint venture arrangements with entities not party to the merger be affected? Will those contracts be assignable to the new entity?
• What effect will the merger have on the overall reimbursement profile?

Once the merger is complete, it’s important to notify referral sources, friends and patients of your new status. Here are some suggestions for getting the word out:

• On your merger date, send a written notice to all of your referral sources and friends.
• One week after the merger, send a different notice to all of your patients during the past 4 years.
• Assign someone to write the announcements, develop a mailing list, address the envelopes and have the announcements printed and mailed.

When notifying each group – patients, referral sources, friends, hospital or surgery center administration, para-professionals and so forth – focus on the unique benefits your merger offers to that group.
For example, when notifying your patients, highlight added conveniences such as:

• longer office hours
• additional locations
• decreased waiting time for an office visit
• the greater range of ophthalmology subspecialties.

Develop a new patient information brochure to highlight these strengths.

When addressing referral sources and the medical community, take advantage of your size to offer greater flexibility in scheduling, hospital coverage and sharing call time.