'Umbrella' mergers offer practices most benefits of a full link-up but with lower initial risk

The partial-merger option lets practices test the merger waters, yet it remains easy to reverse. It also allows orthopedists in the same market to work together vs. competing.

NEW YORK — Orthopedic practices seeking to offset shrinking reimbursements and rising costs should consider joining forces with neighboring orthopedic groups, said Jack M. Bert, MD, an orthopedic surgeon from St. Paul, Minn.

Combining forces through a merger can reap significant economies of scale for orthopedic practices, including boosting ancillary service income, strengthening negotiating power for reimbursement contracts and reducing overhead, Bert said.

For many orthopedic practices, however, merging can seem daunting and risky. But by harnessing what Bert called an "umbrella" merger, practices can take gradual steps towards a full-fledged merger, enjoy important benefits of a full link-up, yet reserve the option to back away with little hassle, Bert said. Using this partial — or umbrella — merger approach, two medical practices can share income and expenses without a full-fledged union by meeting two requirements: (1) share a common provider number; and (2) share a pension plan. He made his comments here Nov. 11 at Orthopedics Today NY 2006, a Comprehensive CME Course, sponsored by Orthopedics Today and Vindico Medical Education.

Under so-called umbrella mergers, two orthopedic practices might share a combined-practice governing body yet they can still allow local offices to make decisions regarding office size, income distribution, recruiting and most other key considerations, Bert said. One of the biggest attractions of the relatively low-risk umbrella mergers is they offer orthopedic surgeons a way to work together rather than competing against each other, Bert said.

Bert's practice, which includes 20 orthopedic surgeons, recently negotiated a 12% increase in clinical relative value unit (RVU) reimbursements for the surgery center his practice co-owns with a hospital, and a 20% increase for in-office surgery center facility fees, he said.

A key to his bargaining success: a willingness to walk away from the table if necessary, Bert explained. Many practices could never even consider such a hard-nosed move, but he said his group's large size in the market helped make it work.

Umbrella mergers also help increase patient volume or "through-put," Bert said, adding that larger practices generally have an easier time meeting many business challenges, such as capital expenditures, thanks to better cash flow. One key to success for these larger organizations: high-quality administration, particularly for overhead cost control, he said.

For more information:
Bert, Jack M. Ancillary services available to the orthopedic surgeon. Presented at Orthopedics Today NY 2006, A comprehensive CME course. Nov. 11-12, 2006. New York City.