I. The Impetus for the Surge to Merge

A. Directives of Patient Protection and Affordable Care Act of 2010 (PPACA)

1. Reduce costs while improving quality of care

2. Improve care coordination

3. Improve patient outcomes

4. Assign responsibility for patient populations

B. Increased expenses

1. Electronic Health Records (EHR) and Practice Management Systems (PMS)

2. Expensive equipment and drugs

3. Facilities, space, and personnel

4. Compliance

C. Declining reimbursement and changing payment structures

1. Pay-for-performance and value

a. Fee-for-service with pay-for-performance

b. Value-based modifier

c. Meaningful Use

d. Physician Quality Reporting System (PQRS)

e. Merit-based Incentive Payment System (MIPS)

2. Alternative Payment Models

a. Capitation (PMPM) / global capitation (percentage of premium): withholds / risk pools

b. Bundled payments / episode of care

c. Shared savings and shared risk models (eg, ACOs) 

II. The Benefits of Mergers and Acquisitions

A. A seat at the table

B. Maintaining patient base and referral sources

C. Economies of scale and shared expenses

D. Group purchasing

E. Clinical trials

F. Access to payer contracts

G. Ability for success with risk contracting

H. Attractive to ACOs, CINs, Patient Centered Medical Homes I. Attractive to private equity investors

III. Merger Options

A. Fully integrated (standard merger / acquisition)

1. Merger / acquisition vs. organic growth

2. Financial and clinical integration

3. One tax ID number (TIN)

B. Care center / division-based affiliation model (mega groups)

1. Single entity (single TIN) comprised of multiple “care centers” or “divisions” (eg, physician practices) that provide treatment to patients

2. Parent entity (mega group) employs all physicians and staff.

a. Common payroll and benefits structure

b. Common billing and centralized management

3. Care center / division maintains a level of autonomy.

a. Physician compensation

b. Buy-ins and payouts

c. Office hours, vacations

d. Restrictive covenants

e. Decisions to hire / fire

4. Care center decisions are subject to some degree of approval by mega group.

5. Care center pays portion of collections to mega group for overhead corporate expenses.

IV. How to Merge Successfully and Compliantly

A. Some loss of control

1. There must be some commonality; autonomy within reason.

2. Stark and antitrust concerns

B. Changes to benefits programs

1. Common 401(k) and retirement plans

2. Investment advisor group

C. Addressing staff resistance

D. It’s still work.

1. Combining PMS, billing systems, and EHR (or at least getting them to communicate)

2. Renegotiating all payer contracts

3. Details, details, details