What is a Medical Practice Acquisition?
A medical practice acquisition is when one party, also known as the acquirer, buys a medical practice from its current owners. The acquirer may be the owner of another medical practice and be looking to expand their operations.
The acquisition may include the assets of the medical practice, which can include equipment, supplies, client lists, real estate, and other types of assets. They may also choose to hire the current staff to continue running the practice.
Medical practice acquisitions can be structured in many ways, and it is always recommended to work with a lawyer that has a background in medical transactions. They will be able to identify and negotiate the most important terms of the deal, as well as handle legal due diligence, which may include reviewing certain vendor contracts, employment contracts, and other regulatory issues that may be important.
Steps to Ensure a Successful Medical Practice Acquisition
Medical practice transactions can often be nuanced and complex. However, following these six steps can easily promote a positive outcome in such acquisition processes.
- Ensure a Cultural Fit. Cultural alignment between the health system and the physician group is important for a successful partnership. The physician practice and the organization are aligned at the outset of transaction discussions culturally. This process can help mitigate all kinds of last-minute deal-breakers or other conflicts
- Develop a Thoughtful Strategy. Health systems need a thoughtful strategic rationale for pursuing a medical practice acquisition. This must be done keeping in mind that each acquisition opportunity will have its own unique merits and risks. Interested parties must also understand all costs associated with a medical practice acquisition. This helps ensure the particular transaction supports a specific organization’s financial goals.
- Understand the Total Investment. The total investment for a medical practice acquisition often depends on the particular alignment structure. This structure is decided between a health system and an independent medical practice. The total investment comprises multiple components under an employment model with an associated acquisition of several clinical assets.
- Perform Due Diligence. The interested parties must conduct preliminary and confirmatory due diligence in conjunction with establishing the purchase price and compensation package. This process helps identify all financial, operational, and legal risks associated with the acquisition practice investment.
- Maintain Regulatory Compliance. When contemplating all kinds of medical practice acquisitions, everyone must be mindful of the regulatory environment to avoid potential civil or criminal penalties. This also involves seeking legal counsel in the respective transaction process. This helps ensure that all forms of payment comply with the associated rules and regulations of the United States.
- Establish an Integration Plan. Transaction execution is the major goal for all health systems. The latter often considers the acquisition of a physician practice during any phase of their implementation. However, an effective and efficient post-close integration plan is also important here. It helps ensure the respective medical practice’s financial and operational processes function properly to avoid disruptions after the particular transaction.
Eligibility for a Medical Practice Acquisition
All parties must make sure to enhance the physical appearance of the medical practice. Waiting room furniture or worn carpets will always not make a good first impression. That is why it is also helpful to know what types of attributes are important to all buyers.
The following important qualities are what make the practice of medical acquisition attractive to acquisition candidates:
- The practice must align with the strategic goals of the respective buyer. This is often with respect to market share, specialization, and how care is delivered;
- the practice must deliver managed care and handle risks associated with managed care;
- the practice must have a good compliance program;
- the practice’s financial information must always be well-documented;
- key practice leaders must stay following the acquisition;
- productivity must be high across all providers;
- an established non-physician provider program must be in place;
- the practice must have a history of providing profitable ancillary services;
- the practice must have good payer contracts and
- the practice must have implemented an electronic health records system to be compatible with all buyers.
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Aspects to Consider During a Medical Practice Acquisition
A medical practice acquisition process must become successful in the first go so that all parties benefit through its outcomes. The things to consider here include:
- Retaining the Appraiser: The medical practice can decide to retain the respective appraiser. The interested parties must discuss internally under this scenario. Such an appraiser can help improve the operations and profitability of the practice.
- Paying the Appraiser: A second approach for the respective buyer is to retain and pay the particular appraiser. This is the most desirable approach for most medical practices because it can save the practice a huge amount of money. However, a few practices may express a concern over the objectivity of the respective appraiser when the associated buyer is paying. This can be a legitimate concern for the healthcare sector.
- Retaining the Appraiser Jointly: A third approach is for the medical practice acquisition buyer and the seller to retain the appraiser jointly and then split the related fees. The parties need to be aware that the total cost may be higher in such scenarios. This is usually because of the need to fully explain all that is being done to both parties as a part of the acquisition process. Another consideration is that a few acquisition parties may often require an unequal amount of time. It involves splitting the total fee may not be entirely fair.
- Getting the Appraiser Separately: A final way to approach the valuation for the medical practice acquisition is for the respective buyer and the seller each to retain an associated appraiser. All appraisers must meet to discuss the associated results and reconcile any differences in value. This usually happens after both appraisers have completed their evaluations. The approach can be expensive at times, but it eliminates any concern the parties may have about the objectivity of the same type of appraisal.
Key Terms for Medical Practice Acquisitions
- Purchase Agreement : A contract that allows both parties to address potential issues, regardless of which side of the sale they are on. It often lays out the terms of purchase to prevent different problems before their occurrence.
- Purchase Price: An important factor that determines the success of a medical practice acquisition. Healthcare transactions are often subject to regulatory scrutiny because the price paid for all kinds of medical practices must be consistent with fair market value (FMV).
- Stock Purchase: The purchaser acquires assets, like furnishings and accounts receivable as well as liabilities, like obligations to employees and other malpractice actions.
- Asset Purchase : The particular stock purchase plan or process that happens as a part of the wider medical practice acquisition strategy.
- Acquisition Cost Per Patient: An important healthcare marketing strategy that helps understand how much it costs to acquire a new patient. It usually happens through various marketing channels. It is also a starting point for tracking the success of a person’s healthcare marketing efforts.
Final Thoughts on Medical Practice Acquisitions
All interested parties must develop and adhere to thorough and thoughtful instructions for medical practice acquisitions. It is important for different health systems to execute their strategic initiatives for the same reason. Moreover, health systems can manage the process with the right experience and plan in place, while medical practice acquisitions can often be challenging and complex. Several interested parties look forward to exploring such partnership opportunities. They assist healthcare organizations or physicians in delivering quality and patient-centric care to ensure continued success.
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