5 Problems That Could Spoil Your Practice Merger

George Conomikes

Disclosures

February 27, 2013

In This Article

Introduction

Is merging your medical practice with another is worth the inevitable growing pains?

When done correctly, a marriage of medical practices can result in lower overhead costs; more downtime for the partners, but with no drop in income; better access for patients; and new revenues from ancillary services, such as office-based procedures, laboratory tests, optical services, and dispensing of hearing aids. A larger practice can also serve as a powerful recruiting tool, as many of today's job-seeking physicians prefer the steady income and flexibility that bigger groups can offer.

However, even the most well-intentioned mergers can be fraught with potential danger. We've encountered common missteps that can stand in the way of an effective merger. Being aware of them ahead of time -- and taking immediate corrective action -- can save you money and headaches down the road.

1. Merging More Than 2 Practices

It's difficult enough to merge a couple of practices, each with its own unique way of doing things. Joining at the same time adds a much thicker layer of complexity. Merging or more is darn near impossible. As you can imagine, the more variables that are involved, the more problems and the more risks.

Three urology practices in central Texas learned this lesson the hard way. The groups retained their separate locations because each represented well-defined neighborhoods with important clusters of referring primary care physicians. To lead the merged practices, the doctors selected one manager as their new administrator. The other 2 managers were kept on as managers of their respective offices.

The result was that the administrator continued to devote his main efforts to managing what was his own practice. Consequently, there was no long-range planning and no thought given to cost savings or changes that could make the merged practice more efficient. In reality, this was a merger in name only, with 3 separate fiefdoms.

After some justifiable resentment began to fester among the 2 other managers, we were called in to sort things out. We quickly determined that new management was needed. First, a more highly qualified administrator was hired, with the goal of replacing the 3 highly paid managers with 3 more reasonably compensated ones. This person worked hard to improve the performance of the combined group.

Within a few months, this administrator had increased the speed in which the phones were answered; scheduled the urologists in such a way as to keep all of them busy seeing patients; and assigned billing personnel to their own specific payers, which improved the rate of collections and lowered the practice's accounts receivable.

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