Merging medical groups.

When your group practice begins to consider either adding physicians or merging with another group (or groups), it is imperative to approach the process on a sound business basis and to have a well-thought-out plan. Most physician groups do not have a history of successful mergers. Some physicians have experienced aborted attempts at mergers, while others have come to their present groups from large groups and may have negative impressions. There is little likelihood that there is a resident expert in structuring and managing the merger process. This lack of experience can lead to spending far more time than is necessary, to provoking disorder, and possibly to making a decision that is not based on a strategic plan or good business practices. Collegial, professional organizations must spend much more time in planning and facilitating mergers and acquisitions than other businesses because the success of the enterprise is so dependent on relationships among members of the group and because all of the members usually have a voice in the decision-making process.

Getting a Tortoise Out of the Starting Blocks 

The first issue for the team designated to manage the merger (board, president, committee, or whoever is managing the process) to evaluate is: Why are we considering a merger, and why now? A good answer to that question is much harder to develop than it may seem at first glance. However, without a good answer all of the work that follows may be wasted. It is of the utmost importance to have a sound, clearly articulated business goal that the merger will help achieve. The reasons listed above (better patient coverage, in-group referral,. a larger financial base, a collegial environment. shared overhead, professional management, and packaged negotiation) may be helpful in developing a clear, sound, mutually agreeable rationale for a merger.

After a clear reason for a merger has been formulated, the process of developing a set of criteria for evaluating potential merger candidates can begin. These criteria should be developed prior to considering any specific group. (If the process has progressed beyond this stage, criteria should still be developed, probably as part of an independent activity outside the ongoing search--don't let the urge to merge run the process!) The more specific, objective, exclusive, and explicit the selection criteria can be made, the better and easier the search, the evaluation of potential candidates, and final decision making will be.

An important outcome of the selection criteria will be understanding and acceptance of the criteria by all members of the current group. No one should be surprised by decisions that the committee makes, and implicit in its charter should be the authority to take action.

Good criteria will also provide clear direction about when and how to make the decision not to merge with a particular group. The best business decisions are made when there are clear "go/no-go" criteria and when these criteria are not compromised. The objective criteria that have been developed should drive the decision.

An important area that is often neglected is involvement of the members of the administrative and support staff. Rumors will be running wild as soon as discussions about a possible merger begin. The best way to deal with them is to make as much information as possible available to those who have a legitimate interest in the process. Additionally, administrative staff will have very valuable inputs into the process, inputs that can come from no other source.

Dancing with Porcupines 

The second issue that must be resolved is: When a potentially good match has been identified, how should we approach the group that we believe would fit into our strategic plan?

* Should initiation of contact develop from an existing friendship or social or personal relationship?

* Should there be a formal meeting at which a presentation is made?

* Should a letter containing a general proposal be sent?

* Should the initial contact come from a third party?

* How much confidential information are you prepared to divulge, and how soon?

* What are the real reasons for the proposed merger, and how will both groups benefit.

* How can you broach the difficult and very personal financial issues (debt, expensive equipment, ownership, compensation, and administrative overhead) that will certainly arise?

* How do you ensure that both parties approach the discussions from a position of strength?

The answers to this set of questions will be different for each potential merger candidate, and they must be given careful consideration before an initial approach is made. If the initial contact is mishandled, the entire courting ritual can be endangered or subverted. How do porcupines mate? Very carefully!

The Snakes in the Nest

The next issue that must be dealt with is: How are we going to present our decision to the rest of our group? Again, what seems to be a simple issue can derail the entire process if it isn't handled with some finesse and delicacy.

If you have developed clear criteria that are understood and accepted by everyone, this step should be simple and easy. But now is the time when hidden agendas and unstated concerns may begin to emerge. Don't be surprised or offended. Consider resistance to be a good sign that you are finally getting full involvement.

Address the concerns that you know specific individuals have--changes in the status quo, finances, life-style, technical proficiency, status and relationships, and family. Involve those with special concerns about the merger in the merger process. This is not done to coopt them but rather to ensure that divergent opinions are well represented. Invite them to participate on special committees, encourage them to review all of the work that is being done, ensure that they are invited to all of the meetings that are held, and ask them to present ideas and proposals to the entire group.

Getting All These Animals Together

The fourth issue is: How can we make the merger actually happen? It is important to consider and plan for a number of things that will be different as a result of the merger. The degree of importance of these factors will vary from one merger to the next, but the following is a minimal list of the things that need to be considered and planned for:

* A wide range of subtle things will be different for both groups. Two different cultures will be joined together.

* Communication will become more difficult, will become more subject to confusion, and will take longer.

* New, more formalized ways of resolving conflict will need to be developed.

* Some people will gain status, some people will lose status, and some people will lose autonomy.

* The current way of managing business will be changed.

* Existing committees, organizational structure, and governance will have to be changed. More physicians will need to be involved in management jobs.

* Support staff will need to be informed of all of the steps in the process and be included in the actual transition.

* Because economies of scale and improvements in operational efficiency are among the hoped for outcomes of the merger, some members of administrative and support staff may lose their jobs.

* The "outside world" will need to be told.

* The merger should be the cause of, and a reason for, celebration.

Focusing on the Forest Instead of the Leaves

It is vital to have good legal and financial representation during a merger. However, many of the most difficult issues that arise in a merger are interpersonal, structural, and organizational in nature, and these areas may need professional assistance also. Having mastered the material in this short article, you will probably be tempted to go it alone. But, unless you learn new medical procedures from reading journals, it may be a wise decision to consider getting help from an outside group of organization specialists. The savings in time, frustration, disruption, and emotionally laden decision making will almost certainly save far more than such assistance will cost.

Figure 1. SJMC Radiology Report Turnaround Time 

[ILLUSTRATION OMITTED]

Ronald B. Pickett, MS, is an organization effectiveness consultant in San Diego, Calif. John Martz, PhD, is a management consultant in Portland, Ore.