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Deal or No Deal? Acquisitions of Small Practices by Hospital Systems and Academic Medical Centers: Aligning Two Cultures

In recent years, it has become increasingly common for academic medical centers and other hospital systems (hereafter, AMCs) to acquire small medical practices at sites not necessarily close to the large practice’s main campus or facility. If done correctly, such acquisitions can have numerous benefits to both the parties and the surrounding community. For example, such arrangements may enable the academic practice or hospital system to establish teaching or outreach sites for some of its programs, thus providing benefits of more sophisticated health care programs to smaller communities. In turn, the acquired physicians may gain the benefits of centralized management, flexibility in work schedules, improved technologies, and more stable compensation and benefit programs, among other benefits. Finally, there is the lessened compliance risk afforded by employment relationships. 

Most practitioners and compliance professionals understand the general nature of these types of trans-actions, including the type of due diligence advisable and other considerations and documentation necessary prior to closing. Although there may be “nothing new under the sun” in this regard, each transaction brings with it unique business and cultural issues stemming from the type of acquisition, nature and personalities (corporate or individual) of the parties to the deal as well as the location of the practice(s). If not managed appropriately on the front end, these business and cultural issues could become compliance and management problems on the back end. In other words, it is possible that parties operating separately in an entirely legal and compliant manner prior to an acquisition could face compliance issues after closing without adequate care and attention.

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