The Art of the Deal
is a book that could have been written by the folks at Florida Cancer Specialists (FCS). The group has acquired 37 practices in its history and 27 since 2009, said Brad Prechtl, CEO of the operation, which over its 32 year history has expanded from Naples and Tampa to Central Florida, Orlando, the Gulf Coast, and most recently, the Panhandle. “In 2009, we had 45 doctors and 17 locations,” Prechtl said in a discussion of FCS’s merger trajectory at the 2016 Community Oncology Conference in April. FCS now has 93 locations, around 200 physicians, and many nurse around 200 physicians, and many nurse practitioners and other providers. “It’s not that we had a specific strategy for growth,” Prechtl said of the early days of expansion, “but we knew that bringing physicians together was going to benefit the patient and ultimately keep community oncology together.”
FCS has honed its merger strategy into a finely tuned regimen that goes from due diligence to planning to implementation and follow-up, all in a period as short as 120 days. Not every practice makes the cut, but for those that do, the advantages in terms of economies of scale and enhanced patient offerings and compensation can be “incredible,” Prechtl said, posting many numbers on the screen for the benefit of an audience of numerous industry professionals. One byproduct of FCS’s expansion is that group malpractice premiums have declined 64% on average since 2009, dropping to $7300 from $22,000 per physician for up to $3 million of lifetime coverage.
Prechtl’s presentation could have been a sales pitch for joining his organization; and doubtless, there are many reasons for oncology practices to be thinking about mergers or sales of their operations these days. Prechtl explained that the revenue efficiencies FCS has been able to achieve have given his partner oncologists enormous reason to feel more confident about their competitive standing in their communities. “We’ll see 60,000 new patients this year alone. We’ll have over 1 million follow-up visits. We’re trying in the state of Florida to bring practices together to keep independent oncology alive and well,” Prechtl said.
Based on modeling of independent practices considering joining FCS. Source: FCS
The typical merger begins with senior management going out to meet with a prospective group of physicians, Prechtl said. “There has to be a lot of diligence on the front end. We also do a compliance review.” Physicians are told what will happen to their practice when they join, how their employees will be affected, how the electronic health record (EHR) conversion will be managed, and what will happen to legacy benefits and accounts receivable. Prechtl said FCS aims for a high degree of transparency in its dealings, though appropriate levels of confidentiality are maintained: “We don’t share what groups we’re talking to or what groups are coming in.” Similarly, FCS wants to be careful it has all relevant data before making a decision about bringing a practice into the fold. “It’s very important to do due diligence so that we’re not going to put the FCS reputation at risk by bringing in somebody who’s not going to meet the standards that we have,” Prechtl said.
Physicians are presented with a range of compensation models, and compensation can start right away, beginning with a $25,000 monthly draw per physician to tide them over until the practice under the group umbrella breaks even. In addition, prospective merger partners are given an income assessment that compares what their practice made in the previous year with what they would have earned as full partners in the business during the same period, Prechtl said.
Physicians still manage their own call schedules and vacation time, as long as FCS has appropriate staffing for its patient flow. The extensive, centralized back-office functions liberate many physicians from having to spend as many hours on management as before. Overall governance of the operation is handled by a board of directors who are geographically distributed to represent a fair cross-section of the practices. FCS will buy drug inventory but will not assume accounts receivable or purchase real estate.