Buy a Florida Medical Business?
The healthcare industry, normally blocked
with high barriers to entry, is more accessible than ever to buyers. Many
smaller private practices are looking to be acquired or to merge with other
firms, due to rising costs from regulatory reform, declining reimbursement
margins, harrowing malpractice rates, overhead, and rising employee benefit
costs. With such a negative laundry list, many buyers would question the
sanity of getting involved in an industry that is undergoing such a transformation.
However, for the right buyer, the changes present in this sector offer a
compelling opportunity to compete with hospitals. Given the quantity of potential
targets,people who plan to buy a Florida Medical Business have the opportunity
to cherry-pick practices, combine resources to generate economies of scale,
and produce highly competitive offerings to traditional hospital-based care.
Hospitals have long recognized the benefit of acquiring
smaller healthcare practices. The Medical Group Management Association estimates that over 50%
of physicians are now employed by hospital owned practices. Unfortunately,
many institutions had difficulty successfully integrating the acquisitions
during the healthcare merger craze of the 1990s, due to lack of a long-term
strategy and poor management planning (e.g., poorly negotiated employee contracts,
paying premiums for practices, etc). The Patient Protection and Affordable
Care Act (PPACA) passed in March of 2010 continues to encourage the consolidation
of physician networks with hospitals, under the guise of Accountable Care
Organizations (ACO), with the goal of creating organizations that can be
easily regulated and allow central management of medically provided services.
While this has the benefit of eliminating the administrative
hassles and
financial realities that small practices are looking to escape, it also presents
the very real consequence of making it difficult for doctors to practice
medicine with the same degree of freedom. Not only will doctors have to work
under the red tape of the physician networks owned by the hospitals, but
ACOs may also eliminate the bedside feel patients receive in private practices,
compared to traditional hospital-based settings (depending on how the institutions
are ultimately designed).
The passing of PPACA has been a driving force in the
healthcare mergers and acquisitions trend. Although the Act comes with much uncertainty, many strategic
buyers and capital management groups are focusing on the positive anticipation
of 32 million additional people receiving health insurance and their need
for a healthcare provider. According to research by Irvin Levin Associates,
Inc., there was a 65% increase in the amount of financing for healthcare
M&A between the first quarter of 2010 ($32.9 billion) and the first quarter
of 2011 ($54.4 billion).
While this includes healthcare technology sectors,
such as pharmaceuticals and biotechnology, hospital consolidation is still
a multi-billion dollar M&A category; the top ten hospital mergers and
acquisitions in 2010 had an estimated value of approximately $3.8 billion.
This consolidation offers many benefits, including larger market shares,
improved negotiating power with insurance companies and vendors, and cost-side efficiencies.
Non-hospital buyers may be missing a golden opportunity to control a portion
of this multi-billion dollar industry and help to shape the future of the
healthcare landscape. A 2011 Executive Insights study found that corporate
executives and private equity respondents agree that the healthcare industry
offers one of the most significant opportunities for growth this year. Both
sets of respondents also agree that there is a market shift coming down the
pipeline that will soon favor sellers. With the market currently favoring
buyers, the time is ripe for interested parties to buy
a Florida Medical Business.
Buyers who understand the intricacies of healthcare
practice management will
be better able to merge practices and manage a larger, single entity like
any other regulated business, if they would buy a Florida Medical
Business. This consolidation will refocus
the intellectual assets of the business, allowing physicians to practice
medicine and shifting the administrative strategy for all consolidated practices
to a single source. While the PPACA theoretically applies a similar theory
for development of ACOs, private practice administration will likely be more
efficient (due to its more manageable size) than larger scale hospital networks.
Additionally,
the economies of scale of a consolidated healthcare practice will help to
achieve greater profits than any private practice would achieve alone. For
instance, the PPACA requires that healthcare facilities implement an electronic
medical records system. This endeavor generally has a base cost and a cost
per doctor, as well as additional expenses, such as information technology
(IT) help and maintenance expenditures. On the scale of a single private
practice, the implementation of such a system is cost-prohibitive. However,
a larger, consolidated practice would have a lower overhead expense as more
doctors shared the base cost of implementation and IT fees.
There is an opportunity in healthcare for a buyer to
acquire and centralize
the costs of physician practices and essentially compete with hospital-based
care. While the PPACA is pressing for ACOs, hospitals may find this transition
to be riddled with challenges, from burdensome regulation to unhappy physicians
and patients. The consolidation of smaller healthcare practices provides
an opportunity for a buyer to provide an alternative healthcare source to
the millions of additional individuals who will be searching for healthcare
services in the coming years.
