Merging? Issues to consider.

Physicians are continuing to consolidate, as predicted. Here are a few issues you should focus on when considering a merger with another medical practice:

  1. Careful review of compensation differences.  You need to look at everything including salary.  Car allowances, coverage for insurance, meetings, disability, other personal fees covered by the practice, etc. typically differ by practices.
  2. 401(k), profit sharing, and healthcare plans need to be looked at carefully and a plan for integration be established.
  3. Practice Valuation Model - If you are merging in a similar practice this should be easy.  If you are merging in different disciplines like Gyn Onc or Rad Onc, the perspectives on a valuation model will likely differ significantly.
  4. Salaries for staff are likely different and need to be carefully reviewed.  It may force you to cap some salaries if they differ from your standard ranges.
  5. You will need to involve the lawyers but work to keep them out of detailed discussions.  They will end up costing you a lot of money if they are involved each step of the way.
  6. Establish a timetable with some slack time but stick to the schedule.  It is easy in busy times to defer meetings and analysis but without a schedule, the process can drag on and on.
  7. If there are going to be any staffing changes that result in the merger, get these agreed upon in writing before the merger is consummated.  This applies to other key items as noted above.  If you do not have agreement in writing that certain changes are going to happen, human nature will impact this process and you will have to continue to fight for some of the changes that were agreed upon as part of the merger in the first place.
  8. Establish a post merger plan and timelines for integration of billing, IT, and other services before the merger is complete.  This way you have given those involved a expectation of the changes to come versus individuals interpretations.
  9. Establish a compensation plan for after the merger.  You may have to establish new departments with their own cost centers that drives differing compensation if you become more multi-specialty.
  10. The easy work is the merger and getting final agreements signed.  The hard work comes afterwards so be prepared for surprises.  You will need to assure your key leaders are involved and informed and hold the course.

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