Crowe Horwath: Several considerations when acquiring a physician practice

By Rob Starr, Content Manager, Big4.com

Crowe Horwath LLP, one of the largest public accounting and consulting firms in the U.S., examines factors that hospitals and private equity firms should consider before making their next acquisition.

The seller’s motivation. Physician practice groups can face looming costs for employee benefits, malpractice insurance and required innovations like electronic health records. Staying up-to-date with information technology, third-party billing and changing preauthorization requirements can also overwhelm some practices.

Cash-flow considerations. Buyers should be prepared for possible cash-flow delays, depending on whether the acquisition is structured as a stock or asset purchase. As well, some buyers prefer to add primary-care practices to provide their hospitals and specialists with additional sources of patients; others look to augment their capacity in medical specialties, which tend to have higher reimbursement rates.

Most hospitals have an individual or team dedicated to serving as a liaison between physician practice groups and the rest of the organization. This administrator or team needs to be able to work on behalf of both the hospital and the physician practices and be able to negotiate issues effectively and fairly. Buyers looking at the deal should consider who could fill this role.

Ron Ralph, a partner in Crowe’s Audit practice comments:

“The market for the acquisition of physician practice groups is robust. As more medical groups are bought out, the price for those remaining on the market may increase, especially as hospitals and private equity firms compete for a shrinking pool of talent,” he said. “Buyers that treat targets fairly throughout the acquisition process, and especially during negotiations, stand a good chance of achieving their goals and improving their competitive position for the years ahead.”