In today's health care environment, it can be tempting to accept an offer to become part of a vertically integrated organization, primarily due to the financial support that comes with such a move. However, there are some important considerations to take into account before doing so in order to ensure that your practice doesn't get lost in the parent company.
One factor to consider is the size of your medical practice relative to the size of the potential parent organization. The larger in proportion the company you're considering joining is relative to the size of your existing practice, the greater the chance of your small office becoming lost. Since smaller practices typically provide less income for the overarching organization compared to larger integrated groups, your practice's negotiating power may be severely restricted if you join a much larger company. Research the other practices in the corporation as well as its overall size before proceeding with negotiations so you'll know how your practice will fit into the existing structure if a sale takes place.
Given that the parent organization will be footing the bill for your practice's expenses, your physician(s) can expect to lose significant power in terms of decision-making once you've been vertically integrated. This stands to reason – the parent company is taking the risk, so it will have control. But it's still a good idea to speak to physicians at length who've already been integrated so you're prepared for the new company culture. It can be very jarring for doctors with an entrepreneurial mindset to work within a bureaucracy.
A vertically integrated organization should provide a stable income and offer new opportunities for your office, physician(s), and staff – but you'll need to get details on exactly what those opportunities will be. Look at the company's existing promotional materials and employee benefits (including time off). Find out exactly how expenses, such as rent, payroll, an EMR system, etc. will be paid. Make sure that what the corporation has to offer is really better than what your practice can get on its own. If the parent company uses an outdated EMR system, for example, your practice's existing efficiency could be severely compromised.
The sale of your practice to a parent company will mean the purchase of all of your assets by the company. After the sale takes place, every piece of equipment in your office, from computers to exam tables to office chairs to telephones, will be owned by the corporation. You'll no longer decide when additional or upgraded equipment is purchased. Negotiate the best price you can for your assets, and be sure that your contract includes anticipated replacement dates for your current equipment. Visit medical offices owned by the company to be sure they aren't suffering from outdated, inefficient or inadequate equipment.
Don't allow any changes, such as the installation of new equipment or the hiring of additional staff, to be made while you are in negotiations to become absorbed by a vertically integrated organization. Be sure you have a complete understanding of all aspects of your purchase contract, including non-compete agreements and how your physical location will be maintained, before signing on the dotted line. The decision to become part of a vertically integrated organization could be extremely positive for your practice, but it should be made with extreme care.
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