Think before you leap into a merger

Practice Management. By Julie A. Jacob, AMNews staff. Aug. 27, 2001.

Romance isn't the only area of life that can lead to a wedding. In business, groups with compatible goals and interests often decide to wed.

In other words, they merge.

Physician practices are no exception to this rule. Although physician practice merger activity has slowed slightly over the past few years, physician practices accounted for 19% of all merger and acquisition activity in the health care industry last year, according to Irving Levin Associates Inc.'s Physician Medical Group Acquisition Report.

But before two or more physician groups begin the lengthy and costly merger process, it's important for the groups to determine if a merger is really in their best interests, stress experts on physician practice mergers.

The more research that the physician groups do before starting the formal merger process, the more likely it is that the groups will make the right decision on whether to merge and avoid a painful, costly breakup a few years down the road.

"The No. 1 thing is that the groups have to have a clear, absolute understanding of why they want to do it. They need to test that and ask if their expectations are appropriate and can they achieve them [by merging]," said Darrell Schryver, a managing principal with the Medical Group Management Assn.

Physicians, especially ones who work in small practices, often want to merge their groups because they think it will help them achieve more leverage in their negotiations with managed care plans, said Reed Tinsley, a CPA with Reed Tinsley and Associates in Houston and co-author of the AMA Press book Physician Practice Mergers. [...]