Book Excerpt: Elements of a Successful Oncology Transaction

Issues that are commonly identified as a result of the practice assessment include:

• Lack of alignment between compensation and productivity
• Declining compensation and/or productivity over time
• A high level of midlevel services (e.g., infusion management) and/or other services that do not support a work relative value unit (WRVU) compensation model
• High level of outside physician compensation
• Varying compensation plans between employed and shareholder physicians
• Antiquated or poorly maintained capital equipment
• Practices with a large debt load
• Abnormal supply costs relative to production levels

The initial financial review is a critical first step in transaction discussions, but the due diligence process should be ongoing. Due diligence efforts related to implementation planning will begin once a term sheet and/or letter of intent has been finalized. This could include a third-party evaluation of the group's practice (if applicable) and potentially a fair market value (FMV) review of the proposed compensation plan.

In addition, there will be a number of other considerations if integrating the group into the hospital (e.g., space planning requirements for provider-based billing compliance). Many of these considerations are outlined in the following sections.

To facilitate this process, though, it will be important to share the implementation timeline with the physicians so they understand the process as well as the rationale behind what may seem like excessive data requests.

Involving one or more of the physicians in the implementation will help ensure that the physician group continues to be educated about the key issues being evaluated.

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The full book is available here: Oncology: Strategies for Superior Service Line Performance.  

Oncology: Strategies for Superior Service Line Performance by ECG Management Consultants, Inc. is published by HealthLeaders Media.