Constant changes in the healthcare industry, along with an aging physician-owner population eager to ramp down heavy workloads, have caused many providers to consolidate, either through merger or sale of the practice to another group, or transitioning an ownership stake in the practice to another individual.
This consolidation has taken on many forms, including:
- Practices of similar sizes merging together to form larger platforms;
- Large practices acquiring smaller ones and bringing them under their umbrella; and,
- Practices of various sizes exiting ownership and selling their stake to other providers, health systems or practice management companies.
Regardless of which type of transaction you might be considering, some of the elements to think about are:
- Your rationale for the merger/transition. As an owner of the medical practice, think about what you hope to achieve through this transition and what this transaction means for the long-term future of the practice as well as yourself. Among other things, a merger may provide more leverage for negotiation with payors, more buying power with vendors as well as new operational efficiencies. Beyond these, it is also important to think about how a transaction can help the practice navigate the challenging healthcare environment in a more effective manner. You should try to understand what the different parties in the transaction bring to the table in terms of expertise and what gaps will need to be filled, and how the transaction might further enhance the operations, performance and reputation of the practice.Clarity on what you personally hope to achieve can also help you decide what type of transaction and what type of groups are best suited for your situation. Is your intention to retain ownership and be actively involved in managing the practice, or would you rather transfer ownership while continuing to practice, or perhaps simply transfer complete ownership and retire?
- The financial projections. To make an informed decision on how to move forward, it is important to understand the financial implications of a proposed merger. This can be done by developing financial models incorporating current operations of the practices involved as well as new revenue opportunities that may be realized post-merger. At the same time, don’t forget the costs associated with the changes to the organization, whether they are initial start-up capital or working capital needed to manage through the transition period or potential cost-savings from economies of scale and more efficiencies.
- Establishing governance. When considering a merger/transition, thought should be given to developing a sound governance structure that meets the needs of the parties involved, while still allowing the organization to be nimble enough to be able to make the decisions needed to effectively operate. This should also include provisions for if and how the groups part ways, if the new arrangement doesn’t seem to be working out.
If you are examining opportunities to transition the ownership of your private medical practice, either through merger or outright sale, the professionals at CIG Capital Advisors can help you evaluate the marketplace and make the right decision for your practice, patients and financial future. Contact us to schedule a complimentary consultation appointment and receive personalized guidance on your next strategic move.