“When physician practices are faced with the prospect of having to devote more time and money to regulatory compliance, while enduring reductions in Medicare and Medicaid reimbursement rates, they become increasingly receptive to selling their businesses,” Mr. Kerby said in a press release.
Mr. Kerby explained five things for hospitals to consider before buying a physician practice.
1. The seller’s motivation. Practice groups can face high costs for things like malpractice insurance, employee benefits and EMR systems. Does the group have the resources for these expenses, or do they need a capital infusion?
2. Nonfinancial factors. There may be a chance that physicians or staff members may be unhappy with an employment deal and would leave if it went through. Also consider compensation structure or history of fraud.
3. Primary care or specialty practice? Mr. Kerby advised that acquiring a practice may become part of a larger strategic decision, such as forming an accountable care organization.
4. Post-merger integration. The hospital should have an administrator or team that serves as a liaison between physician groups and the organization. The person or team needs to be able to work on behalf of both groups and negotiate issues fairly and effectively.
5. Cash-flow considerations. There may be cash-flow delays that buyers should be prepared for, according to Mr. Kerby, depending on if the acquisition is a stock or asset purchase. A stock purchase allows buyers to assume the tax ID of the physicians and then allows them to start billing under the credentials immediately. In an asset purchase, buyers usually have to “re-credential” the physicians, according to Mr. Kerby. That process can take months.
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