Physician Mergers and Due Diligence

Physician Mergers

Opportunities, dealing with present marketplace conditions or looking to the future has prompted many physicians to explore merging their practices with other physicians or even sell out to organizations such as hospitals. Whatever the reason, you need to identify early on those factors that make any combination succeed or fail.

At the beginning of the merger process, you must identify, discuss, and resolve ALL the potential deal-breakers. This might include issues dealing with leadership, compensation, retirement plan, personnel, and vendor selection. In many merger situations, the participants often lack realistic expectations about the financial impact of integration. They tend to overestimate the new group’s ability to achieve significant economies of scale. They overestimate the ability to negotiate with third party payers. Oftentimes people forget that mergers can increase overhead in the short run.

Importance of Due Diligence

This is why the Due Diligence phase of the merger process is so critically important. There are so many issues that must be looked at and addressed during due diligence. I believe this is also why every merger needs to engage a facilitator to help with addressing these issues and help move the merger along (or be honest with the physicians and tell them merging would be a colossal mistake!)