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Preventing physician merger hiccups down the road

BY REED TINSLEY, CPA, CVA, CFP, CHBC

So you have decided to enter into a merger. Congratulations, you have completed tireless hours of feasibility analysis and chosen your partners with the utmost care. But your work is far from over.

Beyond this groundwork is the intensive task of planning how to merge. The managers have to work out what is going to happen when they switch the lights on in the new group, and they have to plan how they are going to answer the phone, how to handle medical records, billing, employee benefits, and day-to-day operations.

Although a consultant or merger facilitator can help groups with such decisions, I always recommend forming a committee or work group—or several for 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 perhaps some staff members.

These 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 the groups have wellmatched cultures and values—essential to 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 major factor in a merger’s ultimate success. This helps the merger process because problematic processes are often found and talked about early to find solutions.

Handle staffing issues early and honestly

Some of the thorniest 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 do not want to deal with hard decisions, so a lot of times they say, ‘We will work it out,’ and it usually does not 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 have not had a chance to evaluate.

Pick a Managing Partner

Before going live, always select a managing physician chosen by the other doctors. That is helpful, because not only does the practice administrator have a go-to person, but the doctors also have a go-to person. It helps alleviate a lot of the little things that can be taken care of on a day-to-day basis.

Commit to stick it out for two years

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 are going to change your partner after you get married, good luck.

Next, realize that there will be difficulties, and you will need to communicate, compromise, and improvise to make it work the best that you can. There may be times when it seems the merger is doomed, I recommend that groups commit to not invoke any out-clause in their merger agreements for at least 18 months, preferably two years, without financial penalty.

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