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:

  1. 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.
  2. 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.
  3. 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.
  4. 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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In partnerships, the key to success lies in communication, understanding, and involvement. This certainly applies to PPMs, which learned in the 1990s that an “us versus them” mentality between physicians and the management companies can lead to economic turmoil.

To avoid a similar fate, those in charge of managing a PPM must understand the needs and desires of those leading the boots-on-the-ground patient operations. Working closely with physicians and establishing what they need is crucial to aligning incentives, which leads to happier employees and a better return on investment. It is incumbent upon the PPMs of today to learn from the mistakes of 20 years ago and foster healthy, receptive relationships with physicians. It is also important to truly integrate acquired practices, so that the physicians really feel part of a single integrated system and not part of an independent affiliate of the PPM.

All of this can be done using the following five strategies:

Ensure Integration: Immediately, post-closing, ensure that the PPM’s integration team takes real steps to integrate the acquired practice’s business into the PPM. Consolidate systems and processes, so that the practices and PPM are deeply intertwined and not loosely affiliated. Proper integration up front is key to ultimate success.

Enlist Input: As PPM owners understand, physician input is traditionally tied to physician ownership. However, this type of ownership is becoming rarer. In 2017, the proportion of patient care physicians with an ownership stake in their medical practice dropped below 50 percent for the first time. In light of this shifting landscape, it’s important for PPM owners to remember that diminishing physician ownership should not also foster diminishing physician input.

Build Trust: When acquiring a practice, listening to physician concerns is critical, as lack of trust or understanding can often be the greatest hurdle when finalizing a deal. Addressing the needs of the physicians, whether through linking compensation to practice profitability or divvying up equity, shows you’re invested in their well-being. This can, in turn, help reduce physician resentment and drive post-transaction performance.

Keep Open Communication: Once an acquisition takes place, it’s necessary to maintain a regular line of communication with physicians. Some PPMs employ a physician leadership board, where feedback and discussion takes place in a more formalized setting. However, physician input can (and should) also be gathered on an ongoing, informal basis. Regardless of the method, maintaining an open dialogue and responding to physician ideas will improve alignment and strengthen the relationship between management and physicians in the immediate term.

Set Joint Goals: Looking ahead for ongoing, post-deal success, it’s important to set a clear vision for future goals and implement an achievable growth strategy. Goals should be oriented toward improving conditions for physicians, as well as doing what works best for the practice overall. The vision should go beyond what will bring the most equity and return, and also include what will most benefit those who keep operations running every day.

To stay up to speed on all of the regulatory challenges and growth opportunities in the PPM space, as well as the health and life sciences industries overall, bookmark our “Health & Life Sciences News” blog and connect with us on LinkedIn.

The PPM industry is by no means immune to the ebbs and flows of a traditional marketplace. Since the consolidation bubble burst in the 1990s, PPMs have gone from practically extinct to a once-again substantial component of the health care delivery system. But with greater influence comes more pressure to respond, and adapting to today’s complex operating environment requires those in the PPM industry to ensure they are building the foundational structure needed to help practices adapt to external factors and achieve long-term success.

Here are three defining aspects of today’s complex PPM environment, as well as several important considerations to help navigate environmental uncertainties and create a better patient experience.

  1. Physician satisfaction and expectations are changing: As millennial doctors enter the workforce, they’re driving a sea change in terms of job expectations. With better work-life balance as a top priority, many young physicians are looking to be employees rather than employers, joining an existing practice instead of starting their own. Therefore, communicating what a PPM has to offer in terms of long-term incentives, rather than short-term profit margins, will be crucial to drawing in younger doctors and building a foundation that will last into the future.
  2. Reimbursement strategies are evolving: Payer models and expectations continue to shift. Patients are being folded into a system that’s evolving from fee-for-service to value-based reimbursement models. As of now, the federal government is the biggest source of health care reimbursements in the country, but how legislative changes to reimbursement frameworks will impact a PPM largely depends on the type of PPM in question. For example, dermatology providers will see a different impact on their billing, coverage, and procedure coding and documentation than medical oncology providers. PPMs are also increasingly being asked to consider the value they add to a practice, and having a solid reimbursement strategy can enhance that value.
  3. Legislative and regulatory restrictions may continue to shift: Recent surveys suggest that health care is top-of-mind for midterm election voters, regardless of political affiliation. Under the current administration, we’ve seen legislative focus on the Affordable Care Act, as well as access to generic and experimental medication, but have seen little legislative attention paid to PPMs. While the Affordable Care Act predicted the shift from fee-for-service to value-based care, it did not provide concrete regulations. Thus far, shifts to value-based care have been mostly voluntary among health care payers and providers. Whether that changes will be worth keeping an eye on.                                                                                                                                              It will also be worth keeping an eye on antitrust action, particularly with consolidation and collaboration happening at every corner of the health care space. In years past, most physician practice transactions have not been large enough to garner attention from federal antitrust authorities, like the Federal Trade Commission (FTC), as one Health Affairs paper cites. But as the trend towards consolidation continues and collaboration becomes key to transformation, expect to see more federal oversight.

While there are no concrete predictions in this industry (or else we could have safely avoided the pitfalls of the ‘90s), we expect that the factors above will influence future PPMs in some capacity. Just how much is the million-dollar question.

To stay up to speed on all of the regulatory challenges and growth opportunities in the PPM space, as well as the health and life sciences industries overall, bookmark our “Health & Life Sciences News” blog and connect with us on LinkedIn.

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The health care field is evolving at light speed, adapting to changing patient, physician and payer expectations. This is particularly evident in the physician practice management (PPM) and ambulatory surgery center (ASC) industries. We gathered recently in Nashville, Tennessee for the 2018 Physician Practice Management & ASC Symposium to explore and discuss these changes – from what’s improved in the PPM industry since the bubble-burst of the late 1990s to the challenges that lie ahead.

We had more than 500 attendees at the conference – from PPM/ASC executives, private equity professionals and investment bankers to provider-side representatives and fellow attorneys. With so many knowledgeable minds in one place, there was no shortage of learning opportunities around the critical business, transactional and regulatory issues facing the PPM/ASC industries today.

We saw one overarching theme surface during both sessions: running a PPM or ASC is more like running a co-op than a business. Therefore, in order to deliver meaningful value, there needs to be an honest and reciprocal relationship between management and physicians. In other words, there needs to be collaboration and input from all parties.

With that, here are our five key takeaways for bringing value to a PPM/ASC practice:

  • Understand today’s physicians, not those from the ‘90s: Today’s physicians are younger and leave medical school with more debt, but they also expect a more comprehensive work-life balance than Gen Xers did. As a result, they may be willing to work for large, established practices instead of starting their own or joining a small independent practice. Aligning this idea with the reality of increased regulation and administrative tasks means that appealing to the newest generation of physicians doesn’t necessarily mean selling the idea of a PPM, but rather how a specific agreement can add value in a differentiated way.
  • Gather physician input: Whether you’re running a PPM or an ASC, soliciting input from the physicians who run the day-to-day clinical operations is of the utmost importance. This should happen from the outset of the relationship and continue even after the deal is done to foster a workable, successful environment over the long-term. Multiple Symposium panelists touched on how the greatest barrier in acquiring a practice can be lack of trust and understanding. It’s worth going the extra mile to get to know the physicians you’ll be working with. After all, they’re going to be your partners, not only in the management of the practice, but in its overall success as they are revenue generators.
  • Allow for autonomy: Part of developing a strategic partnership with physicians lies in mutual trust. A PPM/ASC that micromanages its physicians signals distrust, which creates an unhealthy partnership. As discussed during the “Delivering on the PPM Value Proposition” panel, one of the two major ways to entice groups that don’t have a “for sale” sign up – aside from valuation – is ensuring that once signed, physicians will continue to have a certain amount of autonomy in their everyday work. When it comes down to it, the daily work of physicians is the practice of medicine, not the administrative tasks.
  • Ensure a smooth transition: As noted during our “Closing is Just the Beginning” panel, acquiring a PPM or ASC is not easy when considering all the logistics to overcome. From financial to personnel to cultural integration, all are important considerations when bringing a new practice under your wing. Cultural integration, in particular, was the consensus among the panelists when discussing the biggest barrier to a smooth transition. Make sure physicians feel welcome, included and comfortable with this arrangement, whether you’re at the deal-making stage, the transition stage or the daily work stage. PPMs must continue to be actively involved and bring value, or there will be physician resentment down the road.
  • Be open to partnership opportunities: When asked about their willingness to partner with health systems and hospitals during the “Getting ASC Deals Done in Today’s Competitive Environment” panel, the consensus among the participants was that if it improves conditions for physicians, it is worth considering.

We want to thank all of the panelists and attendees at our 2018 Physician Practice Management & ASC Symposium this year for contributing their thoughts and allowing us to leave the conference a little bit smarter on today’s PPM and ASC industries. We’re looking forward to next year.

Be sure to stay up to speed on all of the regulatory challenges and growth opportunities in health and life sciences today by bookmarking our Health & Life Sciences News blog and connecting with us on LinkedIn.