Best Practices

To merge or not to merge?

Strategies for assessing your future position in health care.

By Dana Jacoby

Dana Jacoby is a senior consultant with BSM Consulting, an internationally recognized health care consulting firm headquartered in Incline Village, Nev., and Scottsdale, Ariz. More information about the author, BSM Consulting, or content/resources discussed in this article are available at the BSM Café at www.BSMCafe.com.

Today's rapidly changing health-care environment — featuring ongoing implementation of the Affordable Care Act, value-based payment adjustments, and introduction of Accountable Care Organizations — has many physicians entertaining the possibility of entering merger or acquisition talks with other practices or institutions.

Reasons abound as to why medical practices might consider a consolidation strategy, among them:

• Achieve economies of scale for better leverage in managed-care negotiations.
• Gain competitive advantages.
• Recognize ancillary service profitability or acquisition.
• Obtain optimal financial resources or human-resources management.
• Achieve better physician multi-group/specialty alignment.

Valid reasons all, but a merger is not a guaranteed cure for what ails your practice.

LOOK BEFORE YOU LEAP

When determining short- and long-term options around the viability of a merger or acquisition, physicians and practice administrators should take the following steps:

• Evaluate the mission, vision and goals of the practice in comparison with those of a potential partner. Determining whether your mission is best supported independently or in partnership with another practice is a critical first step in the process. The more honest and forthcoming you are about your mission, vision and goals, the more apt you are to have a solid foundation for discussions related to a potential merger or acquisition strategy.
• Assess market factors, position and competition. You need to analyze and evaluate important market factors when contemplating consolidation with another group. Comparing patient demographics, geography and your respective competitive landscapes can fundamentally adjust your consolidation road map.
• Analyze financials — past, current and future forecasts. Include all financial forecasting, capital and operating expenditure analyses, valuations of capital equipment and real estate portfolios in merger-acquisition discussions. Risk mitigation discussions should take place as you begin to assess the viability of a financial partnership. Lastly, it is important to discuss how financial incentives and physician relationships will align with new financial goals.

POSITION FOR THE FUTURE

Diligent practices are always looking at ways to position themselves to best meet future challenges and opportunities. Investigating the feasibility of a merger or acquisition will help a practice gain a much clearer picture of itself, its position in the local market. It also may result in a go-forward merger-acquisition strategy.