Culture and the Practice Merger

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Radiology groups merge for numerous business reasons, but an economic case alone rarely makes for an optimal merger. To achieve the type of highly functional, profitable and high quality single unified entity most merger partners desire means dealing with the difficult task of getting two separate groups of people to come together and begin to do more than simply act as one. They must begin to think of themselves as one unified team.

That internalized group identity is best described as the group’s culture. Culture can be tricky to define and even harder to measure. Consider how you would describe yourself. It is much easier to start by describing your

physical attributes, like hair, eye color and height. It is much harder to describe who you are as a person. Likewise, when potential merger partners sit down, it is much easier to describe their groups by number of radiologists and subspecialties represented than to describe what the culture of the group is.

Sometimes groups are so eager to merge that they opt to skip over difficult questions like cultural compatibility in pre-merger discussions for fear that it will derail their merger plans, explains Will Latham, a consultant based in Charlotte, N.C. This is a mistake.

A common complaint of groups that struggle after a merger is that they  feel that they were deceived. “They weren’t,” Latham says. “They just didn’t talk about it. It is kind of like a couple that didn’t talk about having kids and then after they got married one of them says ‘I would like to have 10 kids,’ and the other says ‘Well, I don’t want to have any.’”

Frank J. Lexa, M.D., MBA, radiologist, practice consultant and medical director of the ACR’s Radiology Leadership Institute, concurs with Latham about the importance of culture. “Culture is easily one of the biggest reasons you can have failure of a merger or end up with a situation where the groups should get divorced but they don’t,” he says.

Merger Fever

With so much riding on cultural fit and compatibility, why rush into a merger? Part of the reason is that radiology groups today are under intense pressure to merge, say experts interviewed for this article. In addition to the important advantage of economies of scale that has always been there, now there is the need for bigger IT budgets and resources to meet increasing regulatory requirements. Another driver is the growing desire by hospitals and health systems to work with larger entities that can offer them more subspecialties and their own in-house overnight coverage.

Overall marketplace consolidation also should not be discounted. With payors and hospital systems getting larger and larger, radiology practices that wish to have any leverage in negotiations need to get larger as well, notes William F. Muhr, M.D., president and CEO of South Jersey Radiology Associates, Vorhees, N.J., which two years ago merged with another well established New Jersey radiology group called Booth Radiology to form a 52-physician group with 37 partners.  “In a consolidating market, you want to remain as much as you can on equal footing with those entities that are consolidating,” he says.

Meeting the demands of the customer is also a very important driver of mergers, explains Robert Epstein, M.D., of University Radiologists in New Brunswick, N.J. This is part of the reason University Radiologists merged with one 12-member group 18 months ago and another 18-member group on January 1, 2016.  “When your goal is to provide subspecialization seven days a week and 24 hours a day, and there are so many subspecialties, you need to get to a critical mass of radiologists,” Epstein says.

Sometimes hospitals and health systems even dictate to groups that they must merge in order to provide the system-wide standardized service and practice metrics the larger entity needs. This can be a challenging situation because the hospitals and health systems may neither understand the cultural differences between the groups nor fully appreciate the importance of these differences.

“If the groups can’t get along with each other, it is very hard to provide value to the institution you are trying to serve,” Lexa says.

Over plan, over communicate

Practices need not be a perfect cultural match for a merger to work, and even hospital system “arranged marriages” can turn out well. However, the practices do need to have an honest discussion about what the cultural differences are between them and figure out if those can be overcome in time,