Why aren’t more physicians merging? There are benefits!

There is a myriad of strategic options for physicians who want to increase their capability to address and control what is occurring in today’s healthcare market. One “scared” option is to run towards hospital employment. But I believe a better option is to expand the size of your practice by merging with another practice and/or medical group. Physicians who merge their practices usually hope to gain a number of benefits. These often include many of the following:

  • Improved negotiating power with managed care organizations and
  • Preservation of clinical autonomy;
  • Freedom from handling the “business aspects” of their practices;
  • Increased access to capital needed to expand services;
  • Access to human capital and management expertise to improve performance;
  • Increased opportunities to collaboratively manage patient care;
  • Enhanced lifestyle with better call coverage, scheduling, and support
    services; and
  • Improved opportunities to increase sources of revenue through expansion
    of services such as ancillaries and the use of physician extenders.

However, I find that market realities are typically the major impetus for most practice mergers. Physicians merge their practices to improve their position in a market that is changing or that they anticipate will be changing. Practice mergers generally improve the practices’ positions in the market by
providing the size, geography, and infrastructure necessary to compete more effectively. The increased size and clout gained by a medical group as the result of a merger can also influence relations with hospitals and other organizations in the community. But even on a more basic level, a group is more
likely to survive managed care’s continued shakedown on physician reimbursement simply because it has greater clinical, operational, and management capabilities than a solo practitioner or small group.

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