Happily Ever After?

14 Jul Happily Ever After?


HAPPILY EVER AFTER??                

After months of courting the physician practice and competing with multiple suitors, your hospital has successfully won the heart of the independent physician group. You both take a leap of faith and settle on a long-term partnership. The physicians want relief from the regulatory issues and administrative duties of running the practice which are becoming more and more complex. They want help on data management and production and to stop worrying about how to bill, collect and divide practice revenue.   They want to practice medicine. They want to be paid fairly for their education and efforts and simply to help people. You want to secure their relationship with you and draw them into a closer partnership for meeting community health needs.

Now that the documents are signed, the cash has been transferred, the champagne is cleared away, the lawyers and the consultants have headed home, it’s time to operate as a family.

Often the choice for a long term partner for physicians comes down to dollars and cents. Which party can protect or improve practice compensation for the longest period of time. We would like to think governance, compatibility and culture are all key criteria in the decision making process, but oftentimes, this is not the case.

Hopefully as the deal has been rolling along and coming to closure, the hospital has been working with the physician team on important transitional issues. Below are some of the key questions that should be dealt with pre-close for a successful post-close integration:

  1. Payor contracts: Can they be assigned? Whose contracts will be retained? The payors would like to have “survival of the lowest paying contract”. In any event, where the contracts are not assigned, the physicians need to be (re)credentialed by the hospital’s provider entity and steps need to be taken with the provider numbers in order for the that entity to be able to bill and collect for the services provided by the physicians post close. This can be a 90-120 process for non-governmental insurers and needs to be handled concurrently with the transaction. If this is not handled effectively, cash flow could be curtailed for 3-4 months until the process is completed. Most commercial insurance contractual terms do not allow for retroactive billing (Medicare and Medicaid may, in some circumstances), so effectively the patients could be seen at no cost to the insurer but at a significant cost to the new provider organization if arrangements are not handled carefully.

This can put an enormous amount of financial pressure on the new partnership. The hospital will take the financial hit and the new budgets everyone vowed to live by will already be just a memory. This could be the first sign of marital discord.

  1. EHR Concerns: Will the physicians and their acquired staff be expected to learn a new system? If so, how will learning the new system impair production and collections? If there is an impact, who suffers the financial consequences both long and short term? Have stop gap measures (such as staff and physician training sessions, additional support) been implemented to mitigate these issues? Has this potential landmine been addressed up front? If not, once again, happily ever after is at risk.
  2. Budgetary Issues: Is your new spouse accustomed to living within his/her means? Does your new spouse balance the checkbook? This issue gets down to some nitty gritty questions of priorities such as investment in service line additions, risk, staff support and so on. Hopefully, the couple has had some detailed discussions about money!!
  3. Staff: The post transaction issues related to staff can be the touchiest. They range from who is staying, who is going, and to who do I report to? Dealing with these matters clearly and timely is very important for long term organizational success. Bringing the staff together as early as possible and having a new hire orientation is important. The staff will worry about compensation, benefits, whether they have a job, their role and who is their boss. Answering these questions pre-close will go a long way to successfully managing the staff transition.
  4. Culture: Did you have the discussion pre-marriage about if he gets to keep the velvet wall hanging of the dogs playing poker? Can her mom stop by unannounced? What about values/ethics based decisions? Similarly, cultural issues arise post-transaction that rarely have been addressed before the deal is inked. There are some broad brush cultural issues involving corporate values and mission. Hopefully, these drivers have been discussed and are aligned.   Cultural issues can be as simple as the wall hangings in the physician’s office don’t match corporate taste. Other important issues include protecting pre-transaction staff, asking for vacation time, differences in opinion on billing and coding, not being able to add new service lines without permission, who is the physician accountable to from a clinical, HR, manager perspective. Obviously, there will be many more culture clash questions no matter how well prepared the newlyweds are.

Six months, one year, post salary guarantee, can the relationship stand the test of time? Sometimes the marriage is about money, but the long term prospects of the marriage end up not being about money at all. The longevity of the relationship hinges on just how good of a fit were the partners to begin with. Was there trust and cooperation working toward common goals with a vision and a mission. The soft stuff matters.