We often talk about health care as Déjà vu. Yes, we did this “acquisition” business 20 years ago, and maybe 40 years ago, and here we go again. It’s the same, but it’s so different. In the past it was about market share. “Employe them ‘Docs so we can control the admissions.” Lots has changed over the 40 years, but what we do see is that payers in all sorts of scenarios are looking to better control – or perhaps establish” a different way to provide health care. A good bit of this is because the way care to paid has been changing. Remember that nearly 50% of all Medicare beneficiaries are enrolled in managed care (Medicare Advantage programs). This is the same group that wanted nothing to do with managed care. That change in attitude isn’t just with Medicare beneficiaries. An important feature in this current movement is the aging of our physician population and the hurdles of staying in business.
That doesn’t mean that every practice will or should be ready to be acquired. But is also means that the acquiror needs to have a much better understanding of: (1) how do medical practices really work (and its often not as you believe); (2) how will the transition really happen easily (depends on…); and (3) what are you really acquiring?
Medical practices for the most part have been running on their own -often with far less formality than larger organizations. More often a practice will measure success in terms of dollars in the bank and if the physicians are earning fair wages. The sophistication that larger (investor) organizations use to measure financial performance is often not measured at all, even if their management software can support it.
So, bottom line: learn about the practice before you buy it. It doesn’t just magically happen or work. The financial analysis generally used is important, but the really important part is the way the practice functions: the culture will stay – will it fit your expectations?
Kohler HealthCare Consulting performs many due diligence reviews every year. Beyond the Income Statement and Balance sheet – the culture, the compliance, the functioning.
