Medical practice acquisitions: Curb risk with data continuity
Authors: Jon Tanis
June 27, 2024 / 3 min read
When acquiring a medical practice, continuity of analytics and metrics post-close through onboarding and data integration is critical. Don’t let lack of visibility impact revenue recognition, risk forecasting, or your ability to manage essential financial and operational issues.
Picture the scenario: You’ve relied on a skilled transaction advisory team during due diligence to identify potential issues with your target medical practice acquisition. You’ve gained a full picture of the practice or group at a granular level, and the data aligns with your business intelligence (BI) language, which facilitates acquisition analysis. And then, following the last quality of earnings report, the analytics go dark until you get the keys and take the new portfolio company live on your own systems.
Between six and nine months will likely have lapsed, with data and analytics nowhere near the level of detail you had during the diligence process. Not only do you lose the continuity of metrics from pre- to post-close, you also lose the ability to make accurate forecasts and to manage the business effectively.
Sure, you can cobble together piecemeal information from spreadsheets and manually -packaged reports. But these typically won’t provide current, accurate, or comprehensive data with which to stay abreast of the financials, pinpoint issues, or make sound decisions. This is a tremendous liability. It can impact your ability to mitigate risks and take advantage of opportunities called out during due diligence. It can keep you from noticing operational details that might have fallen through the cracks.
You can cobble together piecemeal information from spreadsheets and manually -packaged reports. But these typically won’t provide current, accurate, or comprehensive data.
Understand acquisition risks in the absence of analytics
To manage and grow a new acquisition effectively, decision makers need uninterrupted financial and operational visibility into the new entity from the close date until the practice is fully integrated with the buyer’s electronic medical record system, practice management system, and overall BI environment.
To manage and grow a new acquisition effectively, decision makers need uninterrupted financial and operational visibility into the new entity.
In the absence of visibility, a lot can go unnoticed in several months’ time. Changes or unforeseen delays in payer contracts or provider credentialing, for example, can lead to major performance gaps, delays in reimbursement, and potential regulatory issues, penalties, or fines. Operational changes can lead to unrecognized declines in provider days, resulting in fewer available billing hours. Contracts discontinued without the practice realizing can lead to costly payer changes and revenue cycle disruption.
Practice management or service line changes can cause shifts in your composition of physicians, procedures, and payers, leading to unexpected losses in earnings. Inconsistencies in coding changes can lead to inaccurate billing and absence of time-sensitive remediation. Don’t let your medical group or private equity firm get caught with costly surprises because you didn’t have the right analytics, metrics, and key performance indicators to consistently manage the business from the time you close the deal until integration.
Don’t let your medical group or private equity firm get caught with costly surprises because you didn’t have the right analytics.
Leverage due diligence efforts until onboarding
To have effective reporting in place to manage essential financial and operational aspects of the medical practice, it’s crucial to establish key metrics early on. You likely spent significant resources evaluating your target acquisition during diligence; leverage those efforts. Ensure you’re able to capture the information necessary to continually monitor the acquisition. This applies from the last quality of earnings report and close date until you fully integrate the entity.
Consider using your transaction advisory team to provide continuous reporting following due diligence until you complete onboarding the new medical practice. Make sure your diligence provider has the data at the right level of granularity from the diligence process and is nimble enough to report, quickly, metrics aligned with your platforms and KPIs. This provides you and other key decision makers with meaningful information until you fully transition to your own systems.
Consider using your transaction advisory team to provide continuous reporting following due diligence until you complete onboarding the new medical practice.
Recreate revenue recognition to feed into reporting
Make sure your transaction advisory team can fully recreate your revenue recognition as well as the reporting structure and apply it retroactively to the acquisition’s data to feed the information directly into your ongoing reporting systems. Consider the orthodontics group that recently applied complex revenue recognition modeling for its platform and produced KPI calculations for purchased medical practices — allowing them to gain near real-time visibility from the start of diligence through close, streamlining the integration of the group’s new acquisitions. Or consider the large dental group that leverages the analytics platform of its transaction advisory team. The group benefits from ongoing quality of revenue and KPI reporting as it works through the full integration of a recent acquisition.
Enable a seamless transition to full acquisition data integration
Partnering with a transaction advisor with an advanced analytics platform can help you leverage the work you did during the diligence process to maintain insights from the time you receive the latest quality of earnings until you take the keys. Stay on top of operational issues, oversight, and financial reporting. Ensure a smoother transition and minimize surprises. Establishing the right information as a function of diligence enables you to roll it forward at the frequency you require until it’s fully integrated with your BI strategy — and the overall strategic vision for your portfolio.
