Medical practice acquisitions are on the rise in no small part due to the implementation of the Patent Protection and Affordable Care Act. Whether you represent a hospital that wants to acquire a primary care patient practice or a primary care physician who wants to sell your practice, there are some important things to consider before approaching a potential buyer or seller.
Buyers and Sellers Goals
Often buyers and sellers have different reasons for pursuing medical practice acquisitions, so it is vital that each party have a clear understanding of what they wish to achieve by acquiring/selling a private medical practice. One of the main goals of buyers, usually hospitals or large healthcare networks, is to expand their services and increase their market share. Sellers, most often primary care providers, want to increase reimbursement rates, reduce the costs of maintaining a practice and devote more time to practicing medicine. Ideally, both parties will have the ultimate goal of providing higher quality, more affordable treatment options to patients. The key is to make sure the culture and organization of both the buyer and the seller are in alignment.
In terms of medical practice acquisitions, legal implications refer to due diligence. Due diligence is the process wherein the buyer and seller conduct an in-depth appraisal of the assets, liabilities and commercial potential of each party’s operation. It is intended to highlight the positive and negative aspects of each organization in an attempt to ensure both parties in the acquisition process are adequately informed. Items reviewed during the due diligent process include:
- Financial records
- Corporate and company records
- Information Systems and Technology
- Employment and Human Resources
- Legal and litigation
Understand that during the medical practice acquisitions process, the inner workings of each party’s business will be exposed for review. The more organized and profitable your business, the better the chances of a successful merger.
Both parties will save time and money in the long run by putting their individual deal-breakers on the table at the beginning of the process. Examples of potential deal-breakers can include the following:
- Non-compete and non-disclosure agreements
- Unreasonable sale prices expectations
- Financial arrangements for referrals and referred physicians that may pose legal issues for the hospital but be perfectly reasonable for medical practices
- Disagreements as to patient care and how the practice operates
Both the hospitals physicians should seriously contemplate these three areas before either commits to the medical practice acquisitions process.