There have always been mergers in medicine and dentistry. Over the past ten years, the frequency of mergers between small and medium sized practices has increased. The questions everyone asks is "why" and "what would I (we) get out of it?" The reasons for merging one's practice vary considerably. Some may want the security of a group, some may be looking for an exit strategy, some may want to join the competition, and some may see a larger group as their best defense against the constant pressure of lower reimbursement rates. Whatever the reasons, it is best to have a complete understanding of what being in a group will mean before the merger takes place.
If these are your main reasons for merging, consider NOT merging:
- To reduce your expenses
- To increase your profit
- To decrease your administrative problems
- To have more time off
- To negotiate higher reimbursements from payers
- To have a strategic presence in the community
These are some of the realistic outcomes of a merger:
- A larger patient base - larger market share
- A larger referral base
- More economies of scale
- More time off
- Increase the utilization of your own OR/ancillary equipment and testing
- Easier to bring on another provider
- Make it more difficult for your competition or reduce the chances that a new practitioner will open in your area
- Offer more services
- Increase quality of life - vacations, time off, coverage…
- Increase security through a written agreement for a buy out in case of death or disability and retirement.
- Build up leverage to negotiate with hospitals, vendors and payers
- Ability to receive payment for your equity
The two most important concerns in any merger are control and compensation. When we work with clients who are considering a merger, we develop the governance documents (shareholders agreement, employment agreement including the compensation formula and buy sell). At the same time, we analyze the operations of the practices and suggest ways to carry out a smooth transition, even if the new entity will operate from multiple sites.
We also have implemented many mergers.