Amerger of medical practices can provide significant and long-term benefits to a rheumatology practice. However, before becoming engrossed in the potential synergies and desire to expand your patient base, there are a number of difficult decisions and legal issues that must first be addressed. After these decisions are identified and considered, the prospective merger sometimes fizzles—the perceived uncertainties and difficulties of actually carrying out the merger eclipse the initial excitement. However, do not fear a merger that makes sense from a business and personal standpoint. This article will address some of the key benefits, frequent sticking points, and issues that should be considered by any physician group contemplating a merger.
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Explore This IssueMay 2012
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Merging two or more existing practices can offer considerable benefits to all parties involved. Among the benefits are:
- Better utilization of expensive resources (e.g., electronic health record system, the newly hired associate physician’s salary);
- Expanded referral opportunities (however, there are legal limitations);
- Increased attractiveness to recruit physicians;
- Pooling of capital and financial resources;
- Greater leverage with payers;
- Cost savings through economies of scale (e.g., volume discounts on supplies);
- Improved lifestyle through shared patient rounding and on-call coverage; and
- Improved utilization of physician extenders (e.g., physician assistants, nurse practitioners).
Considerations and Issues
Mergers can dissolve almost as quickly as they are formed if the parties have not carefully composed a cohesive plan of merger. The prospective partners should sit down and discuss the subtle details of the merger up front. It is too often the case that the deal closes and the partners later realize that they have fundamental disagreements on important details—or worse yet, there is so little coordination that few, if any, of the potential advantages of a merger are realized. Here are a few of the key details to be discussed and agreed upon before the merger proceeds.
Should the new entity be a limited liability company (LLC), professional corporation (PC), or other entity type? Regardless of the form of entity (and being slightly overly simplistic), there are two primary options when considering combining practices. Let us use the hypothetical example of a proposed merger between Acme Rheumatology and Acme Medical Center to outline the two options. The first option is for Acme Rheumatology to merge into Acme Medical Center, with Acme Medical Center as the surviving entity (or vice versa). Acme Rheumatology ceases to exist and the owners of Acme Rheumatology exchange their ownership interest in Acme Rheumatology for an ownership interest in Acme Medical Center. The premerger assets and liabilities of Acme Rheumatology are assumed by Acme Medical Center. Thus, Acme Medical Center holds the assets and liabilities of both practices.