Hurry, Let’s Acquire That Physician Group Before Someone Else Does.

There is as much energy in the market to buy doctors as there is to purchase an IPad 2. Hospitals, private equity firms and 2.0 practice management companies are all in the hunt. The later two possessing much better access to capital and possibly more longer-term orientation.

From the hospital perspective, it starts with the making the numbers work. There are typically assumptions about the P&L that illustrate how the acquisition will result in additional volume from physician referrals, as well as expense reductions through the consolidation of back room functions. Fairly straightforward, right? Not necessarily so.

Over and over, those with Blue Suits and White Coats fall in love too quickly. While they talk about differences in their vision, how their respective business have been run, how success has been measured and rewarded, the cultures that exist in their organizations, most of this is forgotten or put in the parking lot to deal with after the integration process. It is all about securing one’s financial future. Yes, but…

The transaction is now closed. The hospital acquirer has sold this deal to their Board based on a set financial assumptions. Someone is put in charge of integration and charged to ensure the integration produces the financial results. Now, the fun begins! Leaders on both sides begin to argue about how they interpreted discussions about integration priorities, timelines, metrics and results. This continues for several months and those financial benefits are not realized. Finally, whether from fatigue or Board pressure, integration actually begins. Physician leaders feel they were bullied and loyalties are questioned. Health system leaders question the integrity and loyalties of physician leadership.

Sound familiar? If not, I bet that you added a couple of critical steps before closing the deal.

First, your due diligence process included an objective and rigorous assessment of the practice’s culture. In all likelihood, you engaged an outside resources to help with this; a different resource than the one leading the financial due diligence. This, as well as a description of the hospital culture, was all shared with leadership of both organizations in a very transparent manner. As a result, differences were understood and identified in the beginning and served as the basis to pinpoint readiness to come together. Secondly, a small work group of leaders from both organizations were charged with developing a 12-18 month integration plan. This was also vetted with key stakeholders and modified prior to closing.

On day one, expectations were understood. That is not to say all was rosy. There were certainly challenges of change management. However, these were anticipated and managed appropriately.

Twice this week, I was brought into conversations where if these two steps were included, physician and hospital leadership would be sleeping better. No matter how obvious, people still miss the point and fall in love too quickly!

I’ll leave you with this:  Always remember, falling in love is whole a lot cheaper than getting a divorce…and for some hospital CEOs this might be the second divorce!