- Posted Monday October 27, 2014
Is it a question of surviving? Can a merger result in lower overhead costs? Perhaps a more balanced life style for the GP partners whilst maintaining that their income cannot drop? These are questions you are faced with when making the decision to merge or not to merge.
Of course the positive results can be better access for patients and new revenue streams for being able to provide additional services; but what does it look , feel and ultimately end up like? Some managers think that their new larger practice can now also serve as a powerful recruiting tool, a well laid out surgery and a super team that is focused on being the best.
So are there any potential dangers?
Do they just start out as common mistakes? How do we become aware of them ahead of time, take immediate corrective action and also save money & stress further down the road? Usually there is a thick layer of complexity, and each practice will have its own unique way of doing things.
Some practices want to maintain their locations, so the complexity and pain starts here. What about the Managers: who will remain, who is transferred, what HR advice do they need to take? Is it to be a merger in name only? Or is there a long programme involving planning, with some well thought out projections for cost savings and other changes that could make the merged practice more efficient? Perhaps this is the very time that consideration needs to be given to streamlining.
There is more pain when employees are unhappy. No one likes change, especially professionals who have employees they favour because they get the job done. In reality, a merger usually requires jobs to be redesigned to fit the needs of the new larger practice, so what is the pain relief?
Will jobs be safe?
If job descriptions for your staff up to date it makes it easier to match employees to their skill and create effective new job descriptions for them within the merger. Some practices have employees who have a large skill set whilst others have fixed duties; you need to understand who can do what. All added pain when discussions start around merger.
A big area of concern is usually the lack of communication with the staff, so it is also important to give them an overview of what is happening when merging, including them in the process. Although many merger plans include the intention of eliminating redundancy and the costs associated with duplication of facilities, equipment and staff training, sometimes a plan can include some elimination of some full time employees once the merger is completed.
Some managers have indicated that due to the cost of the merger and the complexity of actually combining cultures and operations of two or more practices, that even the well planned merger might not realise significant economies of scale in the first year.
What are the benefits?
Patients now have more and more choices about which practice they would ideally like to be with and marketing has returned to great importance for practices. Obviously the larger the group, the larger marketing budget to go with it! This generally results in a greater return if done well.
To be a success practices need access to more money and they can do this if they pool their money to be more effective and strategic about the way forward. What’s also important is the marketing of the Lead GPs’ and the diverse skills of the whole team.
A merger offers opportunity for a group in this position to merge with a group of similar culture, and can provide good strong leadership to the new entity. This can also lead to a stronger Management team if, for example, one practice has a more qualified manager.
Mergers also allow groups the opportunity to attract highly skilled management teams and this could be used in putting them into challenging areas where they can perform to the best of their abilities.
Furthermore, systems can be improved by merging (i.e. management systems, purchasing systems and upgrading clinical systems) with the cost spread across the group practices.
In short, Practices are left with new partners who they can count on to assist them personally, financially and most importantly clinically. They can share their knowledge base, experience and learn from one another while on a mission with the same purpose.
Achieving a successful merger
More and more now you will see an increase in group practice mergers on a regular basis. It’s evident that practices want to survive and be successful in the coming years and that they must make some changes both culturally and situational.
So what road do you go down to achieve a successful merger?
- To achieve operational cost savings you could consolidate the management function of the practices. The partners of course need to decide who is ultimately responsible for running the new practice and the extent of that authority. Look at the critical areas such as multi sites and who would have overall responsibility for management issues.
- Some mergers still want to maintain their own cash flow systems and still be regarded as independent, but this eliminates any potential cost savings of consolidated work. Some merging practices employ an ‘independent other’ to maintain the accounting records of the practices; they can in turn report directly to the owners.
- Make sure any existing Lease arrangements are resolved.
- One of the benefits of merging successfully is also to negotiate more favourable banking and lending terms due to the extended list size. Take advantage of this at the early stage of merger and look at several banks. This is particularly important if continued growth is included in the practices five year development plan, offering new services and possibly employing more skilled professionals to achieve the ultimate goal.
What are the advantages to partners?
- Share the ‘On Call’ duties
- Maximise on their capacity
- The risk is shared
- Division of staff – gain more experienced staff
- Have better systems in place
- Better buying power for more equipment & resources
- Innovative work and offer new services
- Better location and building
- Improved work life balance – experienced staff and management equals efficiency
- Higher list size – positive finance increase.
For advice on employment issues relating to Practice mergers email our advice line or take a look at the HR guidance on the First Practice Management site.