The basic rules of mergers, acquisitions and joint ventures to establish physician success

Key thoughts:

• Physicians have much at stake when they are thrust into an environment of mergers, acquisitions and joint ventures.
• Maintaining physician productivity and loyalty requires swift and clear executive action, adequately resourcing the marriage, and having a clear commitment to prioritizing patient care.
• The sustainability and growth of the venture ultimately depends on ensuring that physicians are successful through the transition.

The age of consolidation is having a profound effect on how we practice medicine, whether it be vertical (within the businesses supply chain), or horizontal (expanding the footprint of direct patient care). This has the potential to increase critical mass, leverage efficiencies, grow connectedness and ultimately smooth care coordination. But physicians are particularly vulnerable to theses M&A’s and JV’s due to transitions in leadership, changes in organizational structure, an unclear mission/vision, and risks to their referrals, compensation and livelihood. Ultimately the success of the venture depends on physician productivity during these changing circumstances, and the ability to achieve physician loyalty through the transition has clear effects on its sustainability.

The following is a partial list of basic principles that should be valued in the context of their effects on physicians [1]:

1. Only buy into a market where you can be the top 1 or 2, otherwise you’ll always be the underdog. This will threaten the ability to leverage insurance contracts, and physician referrals.
2. Be careful buying into an aging facility, since you’ll never be able to make it new and it will siphon resources from patient care.
3. When you take on a new venture be sure it’s adequately resourced or it’s sure to fail. This includes re-branding, and updating equipment and operations they may have been neglected.
4. Large scale JVs have many components that need to fit for it to work, so be sure that the joining cultures are compatible.
5. JVs can fail far easier than M&As.
6. Quickly define the new organizational structure so that people will understand where they fit in and how to get things done.
7. Announce the leadership from the beginning, and avoid turnover. There needs to be a clear vision of the new venture, with ownership starting at the top.
8. Identify the greatest power-brokers in the existing culture and work to engage with them before they lead a talent drain.
9. Communicate frequently and effectively, and be open to discuss new ideas. In the right environment, virtually everyone has useful information to contribute.
10. Early branding and marketing is not just good business, it’s a celebration of the new identity.
11. Seek to build a common culture but be patient. Like raising children this requires daily effort, multiple tactics, and time to mature.

Consolidation involves change and uncertainty, which is unsettling to physicians who by nature want predictable outcomes. Following these basic principles is only a starting point. Avoiding physician turn-over and building both internal and external confidence will lead to the most successful venture.

[1] Derived from comments presented by Scott Becker at the 8th Annual Meeting in 2017, the Managing Healthcare Delivery program at Harvard Business School in 2011, and personal observations over the last 25 years.
This column is part of a series devoted to clarifying and enhancing the physician-health system relationship. Dr. Ken Altman is Chief of Otolaryngology at Baylor St. Luke’s Medical Center in Houston, TX. He is also Secretary/Treasurer-Elect of the American Academy of Otolaryngology – HNS, and past-President of the American Laryngological Association.

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