Practices can be financially successful and still not be ready for a network transaction.

Before discussing value, compensation, or contract terms, both parties need to understand what they are actually getting into.

That means understanding the drivers of current practice performance — services, patient volumes, provider production, referrals, staffing, reimbursement, operating costs, and the resources required to sustain the business. But the numbers don’t tell the whole story.

Owner pride, leadership, and determination, staff commitment, and the culture that has helped make the practice successful are key to its future.

The assessment needs to answer two questions:

What makes this practice successful today?
What will it take to make it successful within the network?

That means jointly considering what services and patient volumes are realistic, what resources will be required, how the physician and staff will participate, and whether the expectations of the practice and the network are aligned.

A useful pre-transaction assessment isn’t simply an exercise in determining value. It’s an opportunity for both parties to understand the business, recognize what makes it work, and determine if and how those strengths can be carried forward within the proposed relationship.

What I’ve Learned…

The most useful assessment is completed before the parties become committed to terms. It gives both sides an opportunity to understand the business, test their assumptions, identify potential problems, and develop a realistic plan for network participation before those issues become post transaction surprises.

Healthscope Decision Briefs share practical observations to help physicians, healthcare organizations, and their advisors make better-informed business decisions before important commitments are made. If you’re contemplating an important healthcare business decision, I’d be pleased to have a confidential discussion.