7 Points on the Successful Merger That Created OrthoTexasWritten by Laura Miller | July 12, 2011
Michael Schwartz, MD, board president of OrthoTexas, discusses seven points on the recent merger between his group and three other small orthopedic practices in Texas to form one large group.
1. Deciding whether to continue in a practice setting or seek hospital employment. When the pressures of running a small group practice became too great for four small orthopedic practices in Texas, they decided to merge with one another instead of seeking hospital employment. "There are a lot of people who want to see group practices go away, but I don't think the patient is best served when the physicians are employed," says Dr. Schwartz. "I think the best medical decisions are made when the doctors and patients sit down and make the decisions together. There still has to be room for individual treatment in healthcare, and I don't think that happens when physicians become employees."
The physician partners agreed that they would rather be associated in a large group of physicians than employed by another agency because they trusted their fellow physicians to look out for them more than other providers or the government. "I'd rather throw my hat in with the other doctors because we all have the same goals," he says.
2. Tough healthcare environment impacted the decision to merge. Ten years ago, if one of the orthopedic groups tried to merge with the others, they most likely wouldn't have been successful. However, the pressures of a slow economy and uncertain future post-reform set the stage for a successful merger. "There are more regulations and expenses, and reimbursements are going down while expenses are going up, so a lot of practices are getting squeezed," says Dr. Schwartz. "Additionally, there are several redundancies within multiple orthopedic groups that can be solved by merging into a larger practice, which means each group becomes more efficient."
For example, the groups can save on overhead expenses because they have greater purchasing power. The healthcare insurance for practice employees is also a huge expense for practices, which become much more manageable in a large group setting. The single group has a greater amount of negotiating power than the four small groups had as individual entities, thus they can receive a better rate for insurance coverage.
3. Convincing surgeons to move in the same direction was initially problematic. One of the biggest challenges Dr. Schwartz and the other physician partners faced was bringing everyone from all four practices on board and moving in the same direction. "Everyone was used to being part of smaller practices and being heavily involved in the management decisions," he says. "When you have a large group, you can't have all 25 physicians involved in every decision or you'd get nowhere. You have to establish a board of physicians with representatives from every group and meet often to make sure everyone has the same goals."
Bringing the different physicians together was difficult because they had been rivals for years, competing for patients in the same community. After the merger, these competing physicians suddenly became partners striving for shared success.
4. Promoting common goals helped with physician buy-in. It's important for physician partners in large orthopedic practices to have the same goals and share in each others' success. When Dr. Schwartz met with the other physician leaders to iron out the merger, it was important for everyone to understand that nobody was trying to take advantage of anybody else or profit from the other groups. "If we all worked together, we would benefit," he says. "A big part of the growth process was getting used to that idea. We're looking at this as a merger; this is for the benefit of us all. The merger will allow us to exist in the new healthcare environment in a better way than any of us could have in our individual groups."
After the initial meetings about the merger, the lead representatives from each practice went back to their respective partners and talked about the discussions. It was through these channels that the leaders were able to share their ideas with their partners and create a culture of trust and togetherness.
5. It took time to work out a solid partnership agreement. While the idea of a merger between the four groups was bouncing around early, it took a long time for the concept to come to fruition. "There were a lot of meetings and discussions that provided face time for people to get to know each other and become comfortable with their future partners," says Dr. Schwartz.
6. Larger group now offers more orthopedic services, leading to better care. Before the merger, Dr. Schwartz's group didn't have a spine surgeon, and when former patients needed spine care he would have to refer them away. Now, he can refer these patients to the two spine surgeons who are part of the larger group and the patient can easily transfer records from one subspecialist to the next.
"We have access to the physicians who focus on more areas now than any of the groups originally had," says Dr. Schwartz. "When patients need a specialist at another location, they don't have to copy the medical records because they are already in our system. Additionally, if a patient calls our office for orthopedic services we've always provided and we don't have any availability, we can search through the numerous other physicians' schedules to get the patient in."
7. Number of large orthopedic practices will likely increase. Due to the regulatory and cost pressures associated with running an orthopedic practice, Dr. Schwartz sees mergers between smaller practices as a safe medium between private practice and hospital employment. "The pressures on a private practice will build and it will be difficult to compete with physicians who are employed by hospitals," he says. "A larger practice gives you the ability to work with insurance companies on a more fair reimbursement, form a good relationship with hospitals and be able to negotiate healthcare insurance and overhead expenses."
The larger practice setting can also provide economic benefits for the physician partners. "There are definite economies of scale that we can bring together as a large organization, which in turn allows us to increase our visibility, provide better services and take advantage of efficiencies to better serve the patient," he says. "If we can take the cost-benefit and provide better service for our patients, everyone benefits."
Learn more about OrthoTexas.
Related Articles on Orthopedic Practices:
6 Best Practices for Effectively Managing Large Orthopedic Practices
5 Factors for Long-Term Stability and Growth of Orthopedic Practices
6 Challenges for Orthopedic Physician Practice Leaders and How to Overcome Them
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