Best Ideas for Successful Orthopedic Practice Mergers


The 20th Annual Spine, Orthopedic + Pain Management-Driven ASC Conference was an opportunity for experts to come together and discuss the best ideas for successful orthopedic practice mergers. 

This session was moderated by Jakob Emerson, Associate News Director and Payer Issues Editor of Becker's Healthcare, and featured three experts: Randy Zarin, Senior Vice President and Chief Strategy Officer of Orthopedics at UTHealth Houston; Alejandro Fernandez, MBA, CMPE, Chief Executive Officer of Synergy Orthopedic Specialists; and Richard Searles, Managing Director of Merritt Healthcare Advisors. The panelists discussed their insights on successful orthopedic practice mergers, and shared their experiences and advice to attendees.

Key Takeaways:

  1. Cultural Fit is Crucial in Orthopedic Mergers

Cultural fit is important when evaluating potential merger partners within orthopedics. It includes assessing financial stability, strategic alignment with the original practice, and understanding why the merger is happening. The most common reason mergers fail is due to a lack of cultural fit, so it is important to make sure that any new partners can live within the existing structure and culture of the organization. It is also important to have an integration plan in place to ensure a smooth transition.

  1. Younger Doctors may be More Entrepreneurial and use Technology

Younger physicians can be more entrepreneurial and pushback against private equity, so you have to be careful when you do a merger or acquisition. The younger generation of doctors may not understand the complexities of getting into investments because they grew up with technology. It's important to explain things in a way that they can understand. They may also need to be reminded that they will have to work hard to get what they want and that their expectations may not be met right away. It's important to be open to different networking opportunities and to understand the challenges that come with working in an academic center.

  1. Buying Shares and Moving Procedures to Office Setting

The administrator of an orthopedic practice is considering buying out a plastic surgeon in order to bring more revenue and volume into the practice. He can also use his negotiating power to get better payer contracts for the practice since it brings business away from the hospital. He should consider moving some procedures to the office setting in order to get better rates from payers when he goes back to them.

  1. Beware of Paying Attention to Financial Details and Potential Payer Contracting Issues

We are contemplating having some doctors that are outside of the group buy out their shares in order to give us more flexibility with succession planning. We are looking at buying them out at a fair market value, which could be three to five times earnings, depending on the operating agreement. We also need to take into consideration any potential payer contracting issues that could arise from changing ownership.

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