Physician Strategy News: May '08
Practice Acquisition – Part 3 The Acquisition is Complete: Now What?
After months of careful due diligence and challenging negotiations the contract is signed and the hospital finds itself with a new employed physician, financial obligations, employees, management responsibilities, exposure, and opportunity. Now what? And the million dollar question: Who will manage the "what" for a smooth transition?
As transition issues multiply, so, too, the potential for problems: poor financial performance, the risk of patient dissatisfaction and possible defection, the cost of disgruntled employees, and the list goes on. Successfully planning and implementing a smooth transition from private to hospital-owned practice is critical and requires a significant time commitment by knowledgeable staff or outside expert resources. The transition can easily require some 200 hours, and can be as involved as establishing a new practice, or even more so, depending upon the amount of change to be introduced.
The following presents a list of key areas to address in the planning and implementation processes:
- The Purchase Agreement dictates everything. It is the reference guide; key components of the practice and how they are to be handled are defined within the agreement – memorize it.
- Disposition of old Accounts Receivables. What does the Purchase Agreement dictate in terms of responsibility? If the old entity is responsible, you don't want to utilize the new entity's time, resources, or equipment in managing these accounts.
- Custodial Agreement for Charts. Will the new entity be responsible for only active charts or all previous charts? There are various financial and legal ramifications to consider.
- Establish a Practice Cost Center. Expenses begin immediately. Notify the hospital purchasing department and verify that the cost center is established.
- Negotiate the Property Lease in the legal name of the new practice entity.
- Alert Major Payers. Start this process the day the Purchase Agreement is signed. Invite them for a site visit, review credentialing, update provider IDs as required for new corporate entity, etc.
- Transfer Business License into the name of the corporate entity that has acquired the practice.
- Property Liability Coverage will need to be written under the new corporate entity.
- Utilities and Alarm Response, etc. will need to be transferred to the new corporate entity.
- Clinical Labs and Other Diagnostic Providers. Notify of the acquisition, change in practice name, and other details that might affect patient and report flow.
- Banking Arrangements. This must be managed carefully, so that changes coincide with the legal change in entity.
- Written Inventory. Create an inventory spreadsheet listing ALL furnishings and equipment purchased with the acquisition and tag them. This will help to avoid the potential for disagreements down the road. Be aware of any personal property mixed in with the acquisition property.
- Marketing. Review Yellow Pages listings and newspaper advertisement contracts and revise as appropriate. Decisions will tie to the level of publicity desired and the new entity's capacity and ability to deliver services as promised.
- Print Identity. Will there be a new logo and practice name that ties to the corporate owner? Names are legal entities and research will be involved. Early in the process you'll want to order signage, business cards, letterhead, envelopes, appointment cards, and prescription, referral, and other business forms.
- Patient Charts. Are charts paper or electronic? If paper, are they filed alphabetically or numerically? How will you make charts compatible with new systems and processes?
- Communications to Patients. Determine the new entity announcement and welcome message to establish a positive impression regarding the acquisition and continuation of commitment to patient health and wellbeing. Will there be an Open House and/or Free Screenings, etc? Send written communication to all patients sufficiently in advance of any change. Communications are key to retaining the patient base.
- Physical Office Space. Does the physical space impede patient flow, staff efficiency, meet corporate standards, etc? Does the physical space require a remodel or change in location? Will any changes delay the start date?
- Absorption of Staff. Transitioning private practice staff into the large corporate employee family can be a very delicate task, made more so if the change involves the assimilation of multiple physician practices with differing philosophies and cultures. Success requires a thorough knowledge and understanding of what will change as a result of the transition and a careful handling of staff orientation. There will be new policies and procedures and benefit structures to adopt and accept. And, if there are "problem employees", the opportunity presents itself to bid farewell.
- Acquired Employee PTO Distribution. Does PTO carry over or does it start at "0"? How is acquired employee tenure handled?
- Computer/IS Needs. Will the information system be replaced? Who will perform the analysis? What are the training issues? What are the conversion issues? What are the hardware/software requirements?
- Office Preparedness. Even minor changes in operating procedure can create a considerable amount of work. Once required changes are identified, a significant portion of implementation will reside in hand holding, training, coaching, and team building. And remember to plan for celebrations.
- Establish the Profitability Report. The profitability report will include the specific goals and expectations contrasted with monitored results and outcomes. How the monitoring will occur, the thresholds for consequences, defined consequences, both positive and negative, and communications must be defined and agreed to on the front end.
- Operational Budget. It must be established, communicated, and accountabilities assigned.
- Physician/Provider Meetings. During the transition period, at least monthly and perhaps more frequent meetings will be required between the physicians and regional director. It is absolutely critical to keep the physicians involved and informed.
It is recommended that you allow 120 days to complete the transition process. This means setting the effective date for employment 120-150 days in the future. This approach will help to insure that the practice is successfully melded into your organization.
"Practice Acquisition – Part 1", February 2008
"Practice Acquisition – Part 2", March 2008
If you'd like more information contact Dan Topp, Senior Consultant, DTopp@healthcarestrategygroup.com or by calling (941) 979-8270.
