For physician practice management (PPM) organizations going through an acquisition processes – whether by a physician group or a private equity firm – one idea should remain top-of-mind: integration must start before the closing.
The Harvard Business Review states that 70 to 90 percent of acquisitions fail because of integration issues, noting that “companies that focus on what they are going to get from an acquisition are less likely to succeed than those that focus on what they have to give it.”
Working toward a smooth transition for employees from day one will not only help boost morale, but also contribute to the value-add of your PPM. With that in mind, below are four key considerations to help implement an efficient and effective integration strategy, ensuring a seamless transition before, during and after the deal is done:
- Put Your People First – As we explored during our annual PPM/ASC Symposium back in March, the first step and greatest challenge in practice integration is ensuring cultural compatibility. For practices with workers that have different working styles and expectations, merging could cause friction points and potential turnover for those dissatisfied with the new conditions. Ensuring systems are in place for immediate employee inclusion is critical. This can begin with something as simple as including them in all-staff communications and keeping them up to date of what’s happening at the company. Feedback systems where merging workforces can share their insights and recommendations can also help employees feel heard and appreciated.
- Ensure Revenue Systems Are in Place – Financial processing is a complex but necessary step that absolutely needs to be in place before merging. For provider compensation, those involved in these transitions should work to achieve consistency of models, parity, visibility and accuracy from day one. There should also be a clear and consistent model for revenue recognition, with the revenue cycle maintaining performance during the transition process. Consistent pre- and post-close reporting, as well as management of financial performance and KPIs, are also necessary boxes to check in advance of the merger.
- Infrastructure is Critical – Protocols need to be in place on a systemic level for structural/contractual integration. That includes addressing IT connectivity and network interface requirements, vendor contracts and procurement, and real estate leases and facilities. These make up the workplace framework, and while they can be easy to overlook, ensuring infrastructure is sound and ready to go will allow employees to begin work as soon as possible.
- Don’t Overlook HR Systems – Another crucial aspect is to ensure that Human Resources capabilities are also integrated. Payroll and benefits systems should be up and running by the time an employee merger takes place. In order to ensure things go as smoothly as possible, it’s important to keep in mind potential speedbumps and address them well in advance. For example, section 409A of the Internal Revenue Code can impact equity structuring in certain situations, so it’s important to reference it when making key equity decisions for executives.
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