Before Acquiring a Physician Practice, Evaluate These Revenue Cycle Management Factors

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We’ve been in the business of assisting clients in managing their practices for a long time, and we can’t remember a time when everything seemed so geared toward mergers and acquisitions. We hear on a weekly basis from one of our clients who is either thinking about merging, being acquired or acquiring a physician practice.

Almost $3.2 billion was spent to acquire physician groups in 2014, and the healthcare trend shows no sign of slowing down. Acquisitions help health systems diversify and stay competitive in certain service areas without needing to build a venture from scratch. Why reinvent the wheel when you can acquire a wheel and keep rolling along, right?1

We’ve witnessed a lot of health systems jumping onboard the acquisitions train too fast, though. Adding a physician practice or other fee-based practice could have serious implications for your organization’s revenue cycle management. Make sure that your potential acquisition also has strong revenue cycle practices.

Your Potential Acquisition Should Employ Revenue Cycle Management Best Practices

We always advise our clients to conduct thorough assessments of potential additions. Everything from the management culture to systems matters for revenue cycle management and the fit should be right. Otherwise, you could spend a lot of time fixing problems with your new crown jewel instead of watching the acquisition boost your revenue.

Your evaluation should cover, at a minimum:

  • Professional revenue cycle management. As you add this practice to your system, the practice’s billing operation will become more complex. Does the billing operation already have a professional and capable revenue cycle manager in place, or is it working with a revenue cycle management partner? If not, or if it currently relies on a lower-level billing manager who might not be able to implement your billing systems, anticipate needing to hire or train.
  • ICD-10 preparedness. This deep into 2016, everyone is already on the new ICD-10 coding system, but taking a look at how well your potential acquisition prepared for this situation could speak volumes about their overall revenue cycle management. Did the practice have a clearly organized process? Were all stakeholders involved in preparation and training, including physicians, staff, and payer partners? If the practice still seems to be struggling with this or isn’t sure of the key metrics to evaluate if the transition was successful, you might have to make up some of the shortfalls yourself.
  • Systems for compliance. As a larger entity, you have a lot more at stake if one of your physician practice acquisitions fails a compliance check. As a larger entity, you also know intimately the delicate balance between promoting practices that maximize revenue but also adhere to regulatory compliance measures. At an underperforming or poorly organized physician fee-based practice, this balance may not be reflected in its operations, putting you at higher risk.2
  • Optimized payer contracts and relationships. One of the easiest ways for a fee-based practice to optimize revenue is to implement regular checks and adjustments for physician fee schedules and contracts. Your potential acquisition practice should have systems in place to check explanation of benefits documents and payer contracts. Catching changes and tweaking your rates in response can prevent huge revenue loss.
  • Electronic health records (EHR) systems. The implementation of a fully integrated EHR system has become an absolute benchmark of organizations who value efficiency and maximizing revenue while also providing the best possible patient experience. An adequate EHR also allows you to more seamlessly integrate your potential acquisition into your billing system.3

What to Do If Your Potential Physician Practice Acquisition Falls Short

If your potential acquisition fails on some or many of these points, you should consider carefully whether you’d still like to make an offer.

If you still plan to make an offer, you should work with a revenue cycle management consultant to assess what steps you might take with your new acquisition should the practice accept your offer. This can include additional training for existing management, new hires geared toward revenue cycle optimization, or a concrete plan for implementing the principles of your own revenue cycle management at your new physician practice.

Acquisitions shouldn’t be taken lightly. Physician practices can be expensive — physician salaries and benefits can be high, and you’re also taking on additional overhead like office space.

If you end up needing to implement EHR systems, compliance systems, reverse the impacts of poor ICD-10 preparation or other unintended costs, acquiring a new physician practice could prove quite costly to your business.4

We often see organizations jumping on the bandwagon too fast. We would caution our clients to be as careful with vetting the revenue cycle management of potential acquisitions as they’ve been building their own systems.

Physician Revenue Navigators is a leading healthcare revenue cycle management partner, supporting healthcare organizations of all practice types in all aspects of a healthy revenue lifecycle, including coding, billing, contractual adjustments, collections, HIPAA compliance and more. Contact us to learn more about how we can assist your organization with evaluating a potential acquisition or in any other revenue lifecycle matter.

Show 4 footnotes

  1. Molly Gamble and Benjy Sachs, “60 Statistics and Thoughts on Healthcare, Hospital and Physician Practice M&A,” July 22, 2015, http://www.beckershospitalreview.com/hospital-transactions-and-valuation/60-statistics-and-thoughts-on-healthcare-hospital-and-physician-practice-m-a.html.
  2. Benjamin C. Colton and David A. Wofford, “6 Essential Elements for Physician Revenue Cycle Management,” HFM Magazine, Sept. 1, 2013, http://www.hfma.org/Content.aspx?id=19144.
  3. Thomas J. Cuccia, “Practice Acquisitions: What Physicians Need to Know,” July 24, 2014, http://medicaleconomics.modernmedicine.com/medical-economics/content/tags/buying-practices/practice-acquisitions-what-physicians-need-know?page=full.
  4. Beth Kutscher, “Making Physicians Pay Off,” Modern Healthcare, Feb. 22, 2014, http://www.modernhealthcare.com/article/20140222/MAGAZINE/302229986.

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