CASE STUDY
To Sell Or Stay Independent: Helping An Independent OBGYN Practice Decide
CLIENT PROFILE
A large Midwestern obstetrical and gynecological independent medical practice with more than 70 years of experience providing women’s health services across multiple locations and communities.
THE OPPORTUNITY
As a provider of independent women’s health services to multiple health systems in their region, this practice had both the demand and the flexibility to explore various alignment opportunities with each. They were approached by one such local health system regarding a potential merging of their practice into that system’s women’s division, including the sale of the operating entity to the local health system. But before they could determine if this partnership was the best fit among all their other health system options in the region, they needed to first decide whether to sell in the first place – or if remaining independent was the wiser choice.
THE SOLUTION
MMG was able to provide a dual solution to the practice shareholders. First, the team helped them determine if a sale of the practice made financial sense based on their current financial position, as well as their long-term projections. Secondly, we helped vet their health system suiters to determine the optimal choice from a financial, operational and personal/emotional perspective.
When assessing the practicality of a sale, MMG worked closely with the group over a period of three months to conduct initial due diligence on their own practice. What we discovered was that, even though the practice’s volumes and number of providers had remained consistent, their revenues had decreased by almost 20 percent over a five-year period. With the continued increase in practice expenses, declining reimbursement and ongoing recruitment and retention issues, the long-term financial sustainability of the group was not reasonable. An alignment with another system was in the practice’s best interest.
After presenting these findings to the practice stakeholders, MMG shifted gears to focus on evaluating the various health systems in play, meeting with each to learn about their unique offers for the practice, their long-terms goals in women’s health and their visions for the employees and shareholders involved. Each system was able to present the practice with a Letter of Offer (Letter of Intent) prior to any exclusivity clauses being in place. And the MMG team collaborated with the shareholders to determine the best route based on the offers presented.
THE OUTCOME
Once the practice decided which system to align with, MMG worked over a four-month period to ensure that all aspects of the deal were completed, including the work involving the legal teams of both the practice and the purchasing health system.
Thanks to MMG’s years of experience in Transaction Advisory engagements and close collaboration with all parties involved, the practice and shareholders were able to successfully complete their asset purchase agreement and employee agreements in order to close the transaction on time.
Post-transaction, the shareholders and staff of the practice are adapting well and grateful to have made the right decision at the right time, with the right partner.