Evaluating a Practice Merger
Veterans will confirm that there is no perfect practice merger, but by following the signposts and avoiding the pitfalls, it is possible to craft a merger that works well for both parties. Nicole Palmer, CPA, has shepherded dozens of practice mergers in her role as client support for Management Services Network, Charlotte, NC, and she shared the good and bad reasons to merge, preevaluation suggestions, and merger pointers and caveats at the recent RBMA conference, Physicians and Administrators: Managing a Radiology Business from the Top, February 23, 2008, in San Francisco. Before getting started on a merger evaluation, it is imperative for the practice administrator to have physician involvement from the outset, Palmer advises. She offers the following components of a successful merger.
- Have a clear vision of what the new practice will be, whether it is a larger regional player or a teleradiology provider.
- Avoid dissonance over compensation, including salaries, bonuses, vacation, time off, and accountsreceivable buyouts. “If a group agrees to something they are not happy with, you are probably not going to succeed,” she says. Two merging groups should achieve compensation parity within 12 to 18 months into the merger, she cautions.
- Create a working governance structure. “You are probably going to adopt one of the groups’ governance structures, but be sure to get it resolved in advance,” Palmer says.
- Appoint a strong physician leader. It is not always the larger group that has the better leader, Palmer notes. This could be a reason, in itself, to merge.
- Seek a similar or shared culture. Dramatically different practice cultures are a prescription for failure.
- Maximize integration. Palmer recommends that imaging-center operations, billing, and administration all be merged. “Devise an integration plan before the merger,” she advises.