The healthcare industry continues to evolve at an accelerated pace, and as a result, M&A activity has increased year-over-year with many platforms seeking to drive value capture through i) increasing economics of scale and purchasing power, ii) expanding geographically into new or adjacent markets, iii) growing patient census, iv) expanding into new services lines and v) improving patient access and outcomes.
A main driver of consolidation is the ability to achieve cost reductions by reducing back-office redundancies. Once an acquisition is consummated, the acquirer can improve the target’s operations by leveraging its MSO capabilities, support, and technology infrastructure. Integration is key since the combined business has to deal with a presence in multiple markets, a larger and more diverse patient base, a more complex revenue cycle, and a high level of people and operational complexity. Growth synergies also exist by leveraging the platform’s organic growth playbook and marketing approach to increase patients served and deliver quality outcomes.
Acquisitions are typically the quickest way to enter a new geography or market compared to organic growth since you are gaining immediate access to payor contracts and a patient base.
Another catalyst for M&A is to add or expand service lines and ancillaries. To learn more about the benefits of this type of expansion can be seen in our Ancillary Services post.
Finally, there’s an opportunity to retain an equity stake in the MSO and see an exit bring a part of a larger more established platform.
This is the final part in a 5-part series on scaling a multi-site physician services practice. Subscribe to our email list or follow us on LinkedIn and Twitter for updates on our latest blog posts. To go back to our series overview, click here.