Insights

Articles & Briefings

All Articles & Briefings

The Dos and Don’ts of Physician Practice Acquisition

General Hospital is continuing to grow its employed physician network by not only recruiting physicians to join its established practices but also by acquiring independent practices. The hospital’s leadership has spent time identifying the drivers of its physician network and developing a comprehensive strategic plan to meet community needs, address the competitive environment, and comply with current and anticipated payor requirements. An executive team with appropriate ambulatory care experience has been recruited, including a chief medical officer that the physicians seem to trust and respect. But General Hospital is encountering operational challenges with its acquired practices. These challenges include high rates of turnover among clinical and office support staff, poor adoption of the electronic medical record (EMR), and inconsistent and inefficient work flows.

The acquisition of independent practices by hospitals as a strategy for physician network growth is becoming increasingly mainstream. As a result, various recommendations and tools have become prevalent in terms of evaluating which practices to acquire and how to ultimately complete the transaction; common practice is for an organization to allocate most of its effort to this acquisition planning. But once the documents are signed, it is important to understand how to introduce and integrate these practices into the physician network and the overall health system; therefore, best practice is to increase the overall level of effort so that proper attention can be paid to post-transaction planning. In reality, acquiring the practices is the easy part; ensuring optimal and consistent performance and the subsequent achievement of strategic goals are the hard parts.

The physician network will benefit in the long term if more effort is allocated to practice integration in advance of the acquisition date.

All too often, physicians view a hospital employment arrangement as little more than a change in the source of their paychecks. They still intend to operate as independent providers on a day-to-day basis with a certain sense of autonomy about what happens within the walls of their practices. The reality is that all practices must be comprehensively assessed for operational effectiveness and that changes are inevitable; physicians must give up some control once they become part of the larger enterprise and allow these changes to occur. In the short term, physicians may be resistant and frustrated, but over time, they will recognize and appreciate the improvements that alleviate the administrative burdens of running a private practice.

In our experience, there are three critical components in effectively on-boarding an acquired practice: practice orientation, practice manager proficiency, and EMR planning.

The Dos and Don’ts of Physician Practice Acquisition

The details outlined in the initial term sheet and, ultimately, the final contract don’t address the cultural shift faced by private practices or the need for potentially swift and significant operational changes. But the goals of the employed physician network will never be fully realized unless the hospital sets accurate expectations from the start, consistently follows through to ensure operational effectiveness, and commits to having the right people in place to lead these efforts.

This Executive Briefing was written by Miranda Mooneyham, Manager, and Michelle Holmes, Senior Manager. To learn more about this briefing and issues related to the physician network enhancement service line, please contact one of the authors or Kevin Forster, Principal, at kforster@ecgmc.com or John Whitham, Principal, at jwhitham@ecgmc.com.