The Costs and Risks of Merging Physician Practices

While there are benefits to be gained, there are also costs/risks: 

-      Putting a merger together requires a significant amount of time from both the physicians and their administrative staff. Mergers often take six to twelve months to complete, and there are many issues to be discussed and decisions to be reached.

-      Professional costs (attorneys, accountants, consultants) are not insignificant. While professionals will seek to provide "ballpark" estimates at the beginning of the process, these estimates can change depending on the ability of the merger participants to negotiate and reach conclusions.

-      Many significant changes will (should) be required by all involved. It is not feasible to merge and keep everything the way that it was. Some level of operational integration will be required and this requires compromises by all involved.

-      It might not work. Anecdotal evidence indicates that 50% of all merger processes do not end in a merger. In some instances, this is a positive development as groups may not have the same long-term goals. In others, the lack of a disciplined effort to reach a decision results in people becoming frustrated with the lack of progress and dropping out.

-      External stakeholders might be uncomfortable with the merger. For example, hospital management may not be enthusiastic about a merger between hospital-based physicians. 

Even with these costs and potential negatives, many physicians have experienced that the benefits outweigh any risks. So move forward with your merger process and take control of your future.

About the Author

Reed Tinsley CPA

This article is written by Reed Tinsley, a Houston, TX-based CPA with over 30 years of experience advising physicians and medical practices across Texas and the United States. Reed holds certifications as a Certified Valuation Analyst (CVA), Certified Healthcare Business Consultant (CHBC), and Certified Financial Planner (CFP), specializing exclusively in the healthcare sector. He is a published author, nationally recognized speaker, and trusted advisor to physicians on accounting & tax, practice management, and financial planning. Schedule a Free Consultation.