In today’s volatile healthcare market, smaller physician groups are looking to be acquired, while larger ones may want to expand their reach by making an acquisition. Best practices for both include increasing risk management practices and enlisting a competent insurance broker to help maximize the medical practice’s valuation.
Today’s complex regulatory healthcare environment makes it increasingly difficult for small specialty medical practices to manage administrative requirements efficiently. Many want to focus on the practice of medicine instead of the business of medicine.
At the same time, increasingly complex reporting and compliance requirements have made it difficult for smaller, independent healthcare practices to survive — and thrive. For the robust medical group with capital to spend, the time may be right to consider acquiring a smaller, well-run healthcare practice.
Positioning your medical group as a good risk to acquire another practice
When considering acquiring a medical group, remember that the seller may have a number of offers and will be looking for the right medical group to join. Among other factors, they’ll want to know that their acquiring entity’s risk management program will help reduce losses and deliver lower insurance premiums. They’ll want to ensure that post-acquisition, their physicians will not encounter additional insurance expenses, resulting in reduced profitability and decreased value for the acquired entity.
To help position a medical group as an attractive suitor, buyers need to structure their professional liability program to include the following features:
The acquiring practice’s insurance broker will be the intermediary between the medical practice and the insurance carriers, communicating and quantifying the group’s risk management initiatives and losses. To ensure that the acquiring practice achieves optimum value and is positioned to provide the most competitive coverage structure, the acquiring practice’s broker should:
Positioning your firm as a good risk for acquisition
The goal of medical group consolidation is to create the highest value for both the buyer and seller.
The buyer is looking for assurance that the medical group under consideration understands and values good medicine and sound risk management practices. In order to become a “good risk,” medical groups need to consider implementing the following best practices:
In order to help clients achieve optimal valuation, the insurance broker working with the medical practice should implement a risk management program that includes the following:
When both a prospective buyer and seller engage in an effective risk management program that rewards good medicine, it earns the group the lowest responsible insurance premium. This ultimately increases profitability for both the buyer and seller - in the short term and years down the road.
For more financial insight concerning your practice, read on here!
About the author:
Roy Musgrove, MBA, Managing Director, is a risk management executive with global insurance brokerage HUB International.