Why I Sold My Practice to a PPMC

This doctor cashed out only 3 months ago, long after problems at PRG scared many doctors away from considering corporate ownership of their practice assets. Does he know something you don't?

Popular wisdom suggests that you shouldn't even think of selling your practice assets to a corporation anymore. Recent history has led some to believe that if you sell you might:

End up with inflated stocks in exchange for your hard-earned assets.
Never see the benefits of the better practice management you were seeking.
Spend more time in court than in your clinic.

Despite these lessons, however, I forged ahead with the sale of my practice. Maybe I'm crazy - but I don't think so. My experience has been positive, and I expect it to continue to be, even though I'm fully aware of the pitfalls that have hurt other doctors who've pursued this option.

You can sell your practice assets and come out ahead - if the deal is right and you take measures to protect your interests.

Why take the risk?

Some doctors sell to PPMCs as a step toward retirement. Many others sell for protection against such threats as decreasing reimbursement and managed care's exclusionary modus operandi. Because problems in the PPMC arena, however, many of us no longer feel any protection will be available through a PPMC.

But ask yourself: Are the unfortunate outcomes of first generation PPMC development the result of a flaw in the idea behind a PPMC? The poor Wall Street performance of these groups may be due to excessively fast growth, inadequate due diligence or inability to provide the management services doctors expected. But nobody should blame the PPMC concept.

From my experience, I've concluded that the success of this kind of move depends on two things:

Picking the right PPMC
Ensuring your needs are met and interests are protected.

Watching it work

The simple fact is, all physician practice management companies are not alike. Here's how I ended up deciding to sell my practice to Omega Health Systems in August of this year.

Back in 1989, I accepted the position of Medical Director at MediVision, one of the early eyecare networking corporations. Management at MediVision had built its own practice-associated ambulatory surgery centers (ASC). The group was actively networking with ophthalmologists and optometrists, negotiating volume discounts with vendors and evaluating managed care options. MediVision was monitoring emerging technologies and holding annual ophthalmic medical symposia. I was impressed by how well prepared this organization was to adapt to the ever-changing nature of patient care.

Then, in 1990, MediVision was purchased by Medical Care International (MCI). MCI's expertise and interest was specifically in ambulatory surgery centers, so shortly after the purchase they began selling off the eye practices they'd bought, while maintaining the ASCs.

Although I hadn't planned to buy the practice I was in, I felt that I had little choice. Fortunately, MCI's president was Don Steen, a gentleman who conducts business ethically and treats doctors respectfully - not like "cogs in the machine." I was able to buy the practice from MCI at a fair price, on manageable terms, in 1991.

As time went by, I realized more and more how the model of eye care delivery I had experienced at MediVision made sense. I decided to look for another opportunity to be part of that kind of group.

Finding the right PPMC

When I began looking for a PPMC to join, I found that different companies approached doctors and the marketplace in very different ways. Some were simply intent on buying up practices indiscriminately. Others were only willing to offer stock as payment for the practice. Knowing what I was willing to accept and taking the time to research the possible candidates made a big difference in my final choice.
Here are some of the things I was looking for:

A history of careful, not hasty growth. Successful PPMCs survive, and thrive, through slow, careful growth. One sign of thoroughness and caution is the time it takes to complete a sale. Between the time of our first discussions with Omega and the signing of the documents, almost a year elapsed. A friend told me the process took him 2 years. Of course, this can be tedious, but it's reassuring to know that the PPMC you'll be partnering with does its homework.

A business plan. Is the PPMC in question just thinking about making a quick buck? Or is it moving carefully, following a well-thought-out business plan?

Positive experiences from doctors who had already made the same move. I spoke to other doctors who'd gone through the selling process at the company I favored; their positive stories told me I was on the right track.

A history of picking compatible doctors. Some companies have simply signed up every practice in sight. This can result in doctors who despise each other - or who have totally different philosophies about eye care - being asked to work together. The outcome is usually disastrous. A company that chooses its doctors with compatibility in mind is far more likely to be successful.

A good management team. Consider the personalities and circumstances of the people at the top. Omega's president, for instance, is a bright and reasonable man who's married to an ophthalmologist. This gives him a unique understanding of, and interest in, ophthalmologists. He knows that earnings growth alone won't sustain increased stock value unless you have happy doctors, and he knows that ophthalmologists and optometrists can both benefit from networking.

Protecting your interests

Once you've found a PPMC that you believe will deliver on its promises and stand the test of time, proceed cautiously.

Don't act on the basis of fear. Many doctors in the past made their choices with a sense of panic: If I don't take action, I'll be put out of business by the competition. As you might guess, this attitude increases the likelihood of making a poor choice. And a poor choice will put you out of business a lot faster than the competition.

Pick an experienced attorney. Having an attorney with experience in this area is crucial, even if he or she hasn't previously dealt with the particular PPMC you've chosen. (Every deal is somewhat different anyway.) I found my attorney through a referral from one of the doctors I spoke to at Omega when I was researching the company.

Make your practice a desirable purchase. As I mentioned, the best PPMCs are looking for doctors and practices who are compatible. If you're determined to compete with O.D.s, or if you see them as enemies, you're not likely to arouse the interest of the companies who believe O.D.s have an important role in eye care. When I began negotiating, my practice didn't have an optical shop at any location, and I was well aware of the benefits of networking and referrals because of my past experience. These were major selling points from Omega's point of view; their philosophy and my practice were a good fit.

Let your reps represent you. Rely on your representatives to actually represent you, not just be your consultants. As much as possible, let them do the actual face-to-face negotiating. Your attorney, CPA and administrator can be invaluable in facilitating a deal because they can be more objective and less emotional. This can help you avoid a confrontation with your intended future partners.

Use discretion before the papers are signed. I kept my staff and associates apprised of the progress of the discussions and notified them of the signing of a letter of intent. However, I emphasized that while we were in discussions, we were only "engaged" to Omega - not yet "married" - and that a letter of intent didn't guarantee that we'd reach a final agreement.

I recommend avoiding discussing the matter with patients altogether. They're usually skeptical of corporate involvement in a medical practice. I only discuss the PPMC arrangement if a patient asks about it.

Be careful when it comes to stock. While I have faith in Omega, I have less faith in the whims of Wall Street. I don't know whether investors will evaluate individual companies as they should, or give up on PPMCs as a class, based upon the poor performance of some. For that reason, I was unwilling to accept the majority of payment in stock and I needed protection on the value of the stock I did receive. Omega was accommodating on these issues.

Protect the things - and people - that matter. I'd heard horror stories about PPMCs cutting jobs and employees' pay after acquisitions. I'm very fond of my staff, so I insisted upon my employees being guaranteed jobs without reduction in pay. Omega agreed to these terms.

Outlook: good

PPMCs aren't likely to go away. And the unfortunate results of poor PPMC business policies and ignorance may lead to much more savvy management from other companies in the future. In fact, many PPMCs are doing well right now.

I believe I will continue to succeed in my new situation. In the meantime, Omega officials expect me to continue to work hard for the practice and deliver excellent patient care. They won't be disappointed. If I get the management services and added value I've been promised - and I have every reason to believe I will - I won't be disappointed either. OM

Dr. Straus is a clinical instructor at Tulane Medical Center in New Orleans, and Medical Director of Straus Eye Center in Metairie, La. He's a graduate of State University of New York at Buffalo School of Medicine and he completed a fellowship in cataract and anterior segment at Manhattan Eye, Ear and Throat Hospital in New York City.