Health care reform is forcing the market to consolidate, and in New Jersey, that means independent physician practices will find increasing pressure to join hospital networks or large physician groups. For these physicians, thinking beyond the walls of the practice will help in getting the best value during consolidation transactions.
“Practices have to think strategically, because hospitals certainly are,” said James Robertson, partner in the health care practice at McElroy, Deutsch, Mulvaney & Carpenter LLP. “Hospitals want to develop a network of providers around their institution and even extending beyond their primary service area, because it’s all going to be about market share and access to patients.”
When health care reform is fully implemented, Robertson said, “some practices, depending on the specialty, might be able to stand alone … but most practices are not. You’re either going to be part of a larger network of providers, or you’re going to be out of business.”
Robertson, who generally represents hospitals in these transactions, added that physicians should no longer be waiting on the sidelines when it comes to participating in consolidation activity, because as more and more practices get absorbed by larger groups, physicians will have less and less bargaining power.
Robert Charlton, who leads the health care practice for Nisivoccia LLP, added that proactive analysis of a practice will help physicians determine which strengths to play up during negotiations, and which weaknesses can be addressed before being evaluated by a potential partner.
“Doing a rough calculation of value, the lowest level of service that could be performed in terms of value” is a good starting point, according to Charlton. “I think they would want to look to see how they compare to their industry peers.”
Charlton said things like high staffing or low patient populations are addressable issues that could be solved before a transaction — if they are not last-minute decisions.
“It won’t happen overnight,” Charlton said. “A lot of times, we have people come looking to sell their business and looking for changes immediately. Some of these things are strategic kinds of changes that do take time.”
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