South Florida Hospital News
Tuesday February 25, 2020
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April 2012 - Volume 8 - Issue 10

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Five Important Steps to Take Before Selling Your Practice to a Hospital

According to the Medical Group Management Association's Physician Placement Starting Salary Survey: 2011 Report Based on 2010 Data, more than 65 percent of established physicians and 49 percent of physicians hired out of residency or fellowship were employed within hospital-owned practices.
 
Many factors are influencing the renewed trend toward physicians selling their practices to hospitals: changes in reimbursement driven by healthcare reform, lack of leverage in negotiating managed care contracts, and costly conversion to electronic medical records and technology upgrades, all of which increase overhead costs for managing a practice.
 
As Vice President of Operations for Holy Cross Medical Group, I have been actively involved in hiring physicians and acquiring practices for Holy Cross Hospital in Fort Lauderdale. The medical group currently employs more than 150 physicians who range from being in their first decade of practice to those who have been employed with the Holy Cross Medical Group since its inception in 1993.
 
Selling a practice is a major step and should be entered into only after careful consideration. Here are five important areas that should be addressed before deciding to sell:
 
Create your team - It is important to assemble a team of individuals who can look after your interests and help facilitate the sale. This can include, but is not limited to, an attorney, accountant and valuation expert. It is also important to identify internal key players, such as physician leaders and influential office personnel, who will interface with the prospective buyer and help build synergistic relationships.
 
Get it together: The prospective buyer will perform due diligence, therefore, it is vital to conduct an internal review of any legal issues or potential litigation, billing audit, medical records documentation, managed care contracts and other contractual agreements, office and equipment leases, service agreements and employee job descriptions and current compensation.
 
Do the numbers: The compensation agreement is a cornerstone of any sale and it is important to project if there is a quantifiable advantage to selling your practice. Agreements may include productivity and performance criteria as well as terms of employment.
 
Understand the future environment: It is important to have a realistic understanding of what will change in your practice following the sale, such as billing, coding and documentation requirements. Get a clear understanding of how day-to-day activities in the office and patient care expectations may change. Understand what practice information will be shared on a regular basis. Clearly discuss how the hospital will integrate the practice into its service lines and if there will be marketing and referral support. It can be helpful to get feedback from other physicians whose practices have been acquired by the prospective buyer.
 
Creating an exit strategy: Although every young couple goes to the altar hoping to one day celebrate a golden anniversary, not every marriage ends happily and divorce is an option. Discuss an exit strategy with the buyer that offers both sides a way to end an unproductive arrangement. This should also be put in writing and should clarify the logistical issues and benchmarks for determining if it is appropriate to end the relationship.
 
Negotiating to sell a practice is part of a journey you begin with the hospital buyer. Make sure you have a roadmap prepared.

James Desmarteau, Vice President of Operations of Holy Cross Medical Group, may be reached at (954) 351-7871 or Jim.Desmarteau@holy-cross.com.

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