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A large, multi-specialty medical group was facing some complex business challenges in 2009 when its board of directors met to contemplate the future of the organization. First of all, the group was facing increasing difficulty with persuading new physicians to buy into the group’s shareholder structure, which was limiting its growth potential. Second, the directors realized they needed additional capital in order to build their organization in a way that would best allow them to adapt to changing market forces and emerging business opportunities. And third, given the rising importance of achieving benchmarks for quality outcomes while also meeting cost containment requirements and the group’s desire to participate in such evolution to the system, it was clear that the group needed to partner with an established health center. Faced with these challenges, the board’s conclusion was that they needed to integrate with a hospital partner if they were going to thrive and meet their goals in the future.
The medical group retained Sinaiko Healthcare Consulting, Inc. to assist them with navigating the waters that lie ahead. Jeff Sinaiko, the president of the firm, took on the role as lead advisor and enlisted the support of a cross-disciplinary team of professionals from Sinaiko who could provide the client with the expertise and counsel they needed. The Sinaiko team executed a three-phase consulting effort for the group’s board of directors:
• Strategy Review – Sinaiko reviewed the group’s proposed business strategy in order to confirm their views, reality-check some of their assumptions, and recommend next steps for how to pursue an integration with a hospital partner.
• Evaluation of Partners – The Sinaiko team conducted an analysis of the various options the group had available for potential strategic partners, including a careful evaluation of how the organization might be aligned with each of the two primary potential partners.
• Recommendations – Sinaiko made a formal presentation to the group’s board of directors regarding our analysis and then made a concrete series of recommendations.
Transaction
Once the board of directors made the decision to go forward with an integration and to pursue discussions with the specific two-hospital regional medical center chosen, they asked Sinaiko to advise with respect to the negotiations of the financial and operational terms for the transaction. Sinaiko worked closely with the outside lawyers on the structuring of the agreement and worked with the independent accounting firms on the fair market valuations. Jeff Sinaiko served as the group’s lead negotiator. In addition, the Sinaiko team advised on the creation of a new physician compensation model for the group’s doctors, which is now part of their post-transaction employment agreements. Sinaiko also advised the group on various crucial operational aspects of the transaction prior to its closing in late 2009. |
