When physician practices merge or integrate with hospitals or health systems, healthcare leaders say integration of practice teams and compensation are the biggest challenges. Trust ranks well down the list, according to a recently released HealthLeaders Media Intelligence Report. In reality, though, trust is at the heart of successful mergers of physician practices—and lack of trust contributes greatly to failure.
In "Physician Compensation: Shifting Incentives," 28% of healthcare leaders ranked integration with existing physician teams as the most challenging area for an acquisition. Compensation was the next concern; 23% of financial leaders cited integrating the acquired and acquiring practices compensation model, while 14% said the compensation expectation of the acquired physicians was the biggest issue. Trust was the number three hurdle (cited by 19%) of respondents), with governance issues (11%) rounding out the survey.
But integration, compensation, and governance issues in an acquisition all boil down to trust. Not only can an untrustworthy reputation (whether true or false) sour practice acquisition negotiations, it can ultimately slow the strategic growth of an organization.
"Physicians generally go into practice to be their own bosses; to be able to control their own destiny. As the world has changed around them, they realize that their original view of destiny is different from the reality and they're looking for ways to enhance their long-term future," explains Tom Gallagher, president and CEO of Seton Ventures and Alliances for the Austin, TX–based Seton Healthcare. Having completed numerous acquisitions over the years, not-for-profit Seton Healthcare is now the largest provider in Central Texas, consisting of five medical centers, two community hospitals, and two rural hospitals.
"There are lots of partnerships in terms of workshops at the hospital for physicians, but the physicians don't generally have a financial tie to the hospital. Trust is a more difficult commodity with that kind of a relationship," adds Gallagher.
Integration of physician practices depends a lot on trust. It's easy to get off on the wrong foot.
"There needs to be some sort of consistency in the deals. Though each deal is a little bit different, if you're bringing in a group of cardiologists and their deal is totally different than the last cardiology group's deal, you're going to end off with a big problem," says Robert Garrett, president and CEO of Hackensack University Medical Center in Hackensack, NJ. A not-for-profit teaching and research hospital, HUMC is the largest provider of inpatient and outpatient services in the state.