Job security is an ongoing issue for medical practice leaders who work in independent practices that have been acquired by hospitals or health systems. While some debate whether hospital acquisition of independent groups is real or overblown, the question of future employment success sits squarely on the shoulders of practice professionals. David Taylor, MHA, FACMPE, FACHE, past MGMA Board co-chair and vice president, regional services, CoxHealth, Springfield, Mo., and Kenneth T. Hertz, FACMPE, principal consultant, MGMA Health Care Consulting Group, discuss the issue of self-empowerment, knowing how to distinguish skill sets in a new environment and the ways in which MGMA members can set themselves up for success — or failure — in these circumstances.
Taylor and Hertz, who have acquired groups and worked for groups that have been acquired, respectively, give tips for success in every environment and share specific examples of how practice leaders can create self-fulfilling destinies during acquisition or alignment negotiations.
Q: As practices consider acquisition or alignment, what is the best way to ensure that practice managers have every employment option available to them?
Hertz: What practice managers have to do — in collaboration with physicians in practice — is to start at the foundational level and ask a lot of questions, such as:
- Why are we even wanting to take a look at this possible merger, acquisition or purchase?
- What do we expect out of it?
- What are the deal-breakers?
- What are the things that are so critical and important to us that they could bust up any kind of a deal?
- If I’m a specialty group, how many groups in the same specialty will you acquire?
In addition, we have to know and understand what’s happening in the industry. When you’ve seen one arrangement, you’ve seen one arrangement.
David, when you acquire a practice, your system does extensive due diligence. What have you seen in terms of the practice doing its due diligence in looking at the hospital system? The reason I ask is that when we work with practices, we encourage them to ask a lot of questions and learn as much as they can about a system, particularly as it relates to culture and vision. But what do you see practices typically doing when they look at being acquired?
Taylor: I think the questions [a practice leader should ask include]:
- What will change? What won’t change?
- What do I need out of the agreement?
- What does the hospital or health system want or expect?
- How do physicians make decisions, and what’s the structure for that?
- How does someone become a physician leader in your organization?
When it comes to assessing culture, you need to have some understanding of the existing arrangements with employed physicians. I would encourage conversations between the group that is considering acquisition with existing physicians we acquired years ago or recruited in recent years. What’s their take on being here with the system? There are indicators [of successful integration], such as physician turnover. If the number is less than 5% or 6%, that tells you that physicians are relatively happy. If it’s above that, I’d question why people are coming and going.
There are operational things that maybe most physicians are interested in, such as:
- Can I hire and fire my own staff?
- Who negotiates health plan rates?
- If I need equipment, what’s the process?
- If I’m coming into the hospital, can I keep the name of my group or is that going to change?
- How will compensation be determined?
Q: What are some things practice managers can do to position themselves for future employment with a hospital or health system? What are some things that might hurt them?
Taylor: If you want to be an administrator here, you need to consider whether you are seen as helpful or seen as a barrier. What is your mindset going into this from a cultural standpoint? Clearly, working in our environment is very bureaucratic — it takes a lot of people to make a decision and it takes a long time to make decisions. And if you’re in a small- or a midsize practice, you might have a lot more control. Maybe it’s a little more nimble and so you’re going to give those things up.
[Editor’s note: Taylor added that during negotiations, a health system will judge practice managers on the following aspects of their behavior and relationship with the group’s physician owners]:
- If the system asks for information, how is your response? Is it slow? Are you guarded with data?
- How is the communication? What are you willing to share? When are you willing to share it?
- Do you have the trust of your own physicians? When you’re not in the room, what are they saying about you?
- Are you a key and integral part of that group or is this a way for them to part ways with you that you’re not aware of?
We’re interested in people who have revenue cycle skills — skills relevant to the specialty we’re bringing in that can help our group move forward.
Hertz: Some of this relates specifically to a group I worked with last year that was considering acquisition. I went in and did an operational assessment. There were some issues with the practice manager [and] as they began the process with the hospital system, the administrator set up roadblocks — didn’t deliver information on time and didn’t provide accurate or thorough information. The doctors thought she was trying to protect the practice from being acquired. That notion of “We’re going to be independent if it kills us or puts us out of business” is common out there. I don’t think the practice administrator is being helpful in that way, not doing anything that helps the practice, physicians or themselves in the future. What the hospital is looking for and what it takes to remain independent is to be a successful practice — a highly skilled practice in all of the core techniques and areas that it takes to run a practice. It seems to me that that’s how you can remain independent and become attractive to a hospital system.
Taylor: If you continue to add more fuel to the fire [fear of acquisition], come from a negative or emotional perspective and provoke the physicians, those are signs that [future employment with the system is] not going to work in our environment.
Q: Is selling an independent group to a hospital or health system a death knell for practice administrators? How common is it to retain practice managers who have worked diligently to keep a practice independent and successful?
Hertz: I don’t think it has to be a death knell. The key is to learn new skill sets — hone and fine-tune your skill sets. If you’re in a practice of two or three or four doctors, it may be that a system keeps an administrator or practice manager and asks that administrator or manager to manage three small practices. That’s what I did when I went from being in a private practice to working for a large health system. I went from managing one practice with five doctors to managing nine different practices in a small geographic area.
Taylor: If in the negotiations with health systems you’re not helpful, you won’t have a role here. On the front end, find ways to make yourself helpful, ways to show skill set, experience. Stay above the emotion. From my perspective, specialty experience is key. Billing within these different specialties can be tricky. We have a billing group of about 70 people and we could use more expertise there [and in] technology. You could also be helpful in future acquisitions. If your transition into the larger system was smooth, maybe you become a point person for future acquisitions. We have 22 to 24 different specialties, so if you’re bringing a new specialty on and that [practice leader] has that skill set, they can make a name for themselves. There are more opportunities.
Q: Would you give some examples of positive situations when your system hired a practice administrator from the group that was acquired?
Taylor: [We are looking for] individuals who are candid and honest with you, stand up for physicians to negotiate the best deal but realize they’re only going to get so much out of it and are willing to go back to physicians and say, “This is what we have to agree to [for a compromise].” There are times when there will be pushback. But at the end of the day, the common goal is to bring groups together. More of the managers or administrators who have come to our organization through acquisitions during the last five years have stayed than have left. They might not be managing that practice but moved to human resources, billing or technology when they had strengths and interest in those areas.
Hertz: The key here is to have people who are skilled and competent, they’re good communicators, and they can adapt to culture changes. A lot of the responsibility for this relies on MGMA members to educate themselves, find out what’s happening in the marketplace, read, listen, go to seminars, expand your skill set and do your due diligence when you look at becoming part of the system. Find out about the system so you can say, “I understand you have this service or that service. Here’s what I have to offer.” It’s up to the administrators. This is not a death knell; this is a new opportunity.
Q: What are some of the common misperceptions you have seen during acquisition discussions — surprises that might prevent success?
Taylor: To go into this thinking nothing is going to change is probably unfair and should never be stated in any of these conversations. If I’m a group being acquired, I would expect a lot of things to change — from nametags to pay rates to the sign on the door, processes and policies. I think the first hurdle is compensation: how it is calculated, what physicians are comfortable with. And then there’s the issue of valuation. If a group has a surgery center, there’s going to be more discussions and consultants and lawyers involved versus buying exam tables and chairs and setting values for those. You should also talk about how staff will be treated. In some instances, we find [physicians] would prefer that staff not come along, so we become the bad guy in that discussion or negotiation. In other instances, they want to protect certain individuals. [Other points groups should consider:]
- Are we buying the accounts receivable? We would probably prefer not to but have done so on occasion.
- How do you value the accounts receivable?
- Is the group in a lease in one of your buildings?
There are all kinds of points you can get hung up on.
Hertz: I think it comes down to communication. Sometimes in these negotiations, you find poor communication within the practice. The doctor who is negotiating with the hospital isn’t bringing information back to the group or the information is not 100% complete. Due diligence is critical. I think a lot of confusion comes from not asking the right questions, not knowing what you really expect and understanding what the real deal-breakers are. If the hospital contract says you have to work 50 weeks out of the year and you’re only allowed two weeks of vacation, it doesn’t necessarily work to say, “I’m a big producer and I know they’ll make a special arrangement for me.” You have to ask a lot of questions. There should be no surprises.
Q: What resources would you suggest to help group practices prepare?
Taylor: The action plan template we walk through has 30 or 40 elements on it — probably could have 100. We assign someone to all those steps to integrate you into our group. One of the greatest resources is to have physicians talk — what life is like under our tent. Is that something they think they could live within versus having run their own practice for the last 15 years?
Hertz: Good advice. It’s like checking references. This is one of those life-changing experiences where you have to check references. We also suggest that practice leaders talk with the onboarding people who will handle the transition so they understand the timeline, how things happen, who is responsible and when things will occur.
We also suggest getting the staff and doctors involved. It’s fascinating to me how many practices don’t get staff input on these things. It’s important to be transparent, ask for their input and find out what their concerns are. If you bring everybody together and pool everybody’s brainpower, there’s a whole lot more that we know than not knowing what we don’t know.
Look who’s talking:
David Taylor, MHA, FACMPE, FACHE, past MGMA Board co-chair and vice president, regional services, CoxHealth, Springfield, Mo., has 25 years of experience managing hospital-owned practices in large integrated delivery networks.
Kenneth T. Hertz, FACMPE, principal consultant, MGMA Health Care Consulting Group, has nearly 40 years of management experience and held numerous leadership positions in small and large healthcare organizations and large integrated systems.
