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How to prepare your practice for a merger or acquisition

Medical Economics JournalMedical Economics August 2023
Volume 100
Issue 8

Private equity firms are looking to acquire physician practices with growth potential. Here are seven tips to make sure you’re ready when the right opportunity arrives.

Doctor cupping hands over words key performance indicator ©


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Private medical practices are a hot commodity right now as private equity firms narrow their focus on merger and acquisition (M&A) opportunities. With medical services continuing to shift from hospital environments to outpatient facilities, health care investors are looking for practices that can expand their current network and capabilities. In fact, 60% of health care investors surveyed by KPMG said they expect M&A activity to increase this year, with behavioral health, cardiology, and orthopedic practices at the top of the list.

If you are a physician who owns and operates a private practice, there is a good chance you have already received interest from a private equity firm. The current uptick in health care M&A activity offers physicians on the brink of retirement a strategic—and lucrative—option as they transition to their next phase of life. But the idea of entering into a merger or acquisition can feel overwhelming, especially if your primary goal is to step away from work versus creating more responsibilities for yourself.

Preparing your practice for a potential M&A deal doesn’t have to be a major burden on you or your staff. Essentially, all you need is access to accurate, compelling data that enables investors to quickly realize the true value of your practice. Here’s a quick guide to help you get started.

Spotlight the performance indicators that matter most

Private equity firms love data. They want financially stable private practices with measurable growth potential, and they want to see key performance indicators (KPIs) that reinforce your practice’s financial health. Of course, any audit that precedes a merger or acquisition would involve a review of your practice’s financials, but it takes more than showing the bottom line to prove your practice’s true value.

Patient demographics

Because investors are looking for strategic deals that broaden their range of health care offerings, they want deep insights that go beyond revenue. Patient demographics are a great place to start: Where do your patients live? What is the average age of your patient population? Gender, race, and all the other demographic details that enable you to better care for your patients give private equity firms a full-scope view of your practice’s patient population.

Clinical outcomes

Investment firms want to know how successful your practice is at treating patients. Clinical data that highlights patient outcomes not only enables you to see what’s working, it makes clear your practice’s full capabilities, underscoring the very reason you’re a prime candidate for a merger or acquisition.

Patient satisfaction

If you want to know just how good you are at patient care, the best people to ask are your patients. Conducting quick patient satisfaction surveys following appointments and medical services is an effective way to gather critical data that proves your practice is a cut above the rest. Patient survey results can easily be turned into impactful charts that highlight your practice’s best qualities from the patient’s point of view.

Billing reports and payment trends

Revenue, relative value units, and general billing reports are integral to any merger or acquisition deal. But to set your practice apart from the competition, you have to go deeper into your practice’s financials when vying for a merger or acquisition opportunities. For example, do you know your patients’ preferred payment options? What about the average time between when you issue an invoice and receive payment? Or which services bring in the largest portion of revenue for your practice?

Being able to hand over billing and payment trend reports shows that you’re not only tracking revenue but monitoring important details that impact your practice’s financial health.

Productivity data

As crucial as it is to show the output of your practice’s work, it is just as important to monitor how the work gets done. Productivity data highlights how your practice streamlines workflow processes and boosts efficiencies across the organization, from patient messaging and appointment scheduling to wait times, rooming flows, and other daily operations. Tracking your practice’s productivity also lets you know where your biggest bottlenecks may be happening, allowing you to course-correct any shortcomings.

Clinical Interoperability

One of the most challenging parts of acquiring a practice is integrating patients’ clinical data into a new EHR. Being able to break down the structure of your data is key to a seamless data conversion and migration process. Most EHR systems can archive or export data, but having a cloud platform equipped with a robust export process will give you a competitive advantage during an investor’s due diligence process.

Data + dashboards = deals that benefit physicians and investors

Ultimately, the less effort it takes to acquire your practice, the more promising of a candidate you become to investment firms. Practice owners that document and track their most impactful KPIs are one step ahead of their competition simply by having levers in place to monitor various business functions.

By implementing technology that allows you to pull important data into intuitive, easy-to-use dashboards, you’ll have the tools you need to showcase your practice’s true value. Moreover, having a 360-degree view of your practice’s most important KPIs is integral to managing a successful private practice even if you’re not looking to be acquired. The only way to get your house in order is by tracking the data that has the biggest impact on your practice’s financial future.

Amanda Hansen is president of AdvancedMD, a provider of medical office software

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