Published: Apr 24, 2024
Revenue Cycle Management

How MSOs Optimize Provider Group Performance After New Acquisition

Suzanne Delzio
Suzanne Delzio
8 minute read
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Merger and acquisitions consultancy Deloitte characterizes mergers and acquisitions as creating an alloy. 

“Alloys are useful because blended elements are often stronger than their component parts, and they’re valuable because they make better tools.” 
- Deloitte, “M&A Done Right” 

When management services organizations acquire provider groups, they envision strengthening and optimizing them. 

Despite good intentions on both sides, however, harmonizing two organizations, each with distinct cultures, technologies, successes, and talent pools can be an enormous challenge. Often, parties “don’t know what they don’t know,” creating a breeding ground for miscommunications and assumptions.  

When the two metals aren’t joined carefully, the resulting product can break. 

As Carl Friedrich, Managing Director of Scale Healthcare explains

“MSO success or failure is often the byproduct of poor process planning before the deal ever gets struck. Sometimes all the parties who come together to form an entity have the best of intentions, but they fail to address fundamental alignment early on…”

Here, you can review all the areas where you can align at the outset so that you avoid frustration, resentment, and even chaos. 

Establish transparency on both sides

There are many areas in the provider acquisition process where clarity and honesty are required. Start on a positive note by delineating the extent of the benefits you bring. 

Clarity point #1: broadcast benefits of the partnership to all provider levels

Management services organizations (MSOs) and private equity that win buy-in at the beginning grease the wheels for requests later.  Share these key benefits down to front-office staff level. In meetings, emphasize that you aim to bring: 

Financial investment: Emphasize that capital infusion expands facilities, purchases new technology, and hires additional staff, all of which can help the practice grow, ease staff burden, and improve patient care. 

Operational efficiency: MSOs bring administrative and operational support so that providers can focus more on patient care and administrative staff can get some support. This can include everything from billing and collections to HR and IT services.

Payer/supplier negotiation leverage: Staff will be relieved to learn that their organization will finally get some firepower behind them. Being part of a larger group brings bargaining power in negotiations with payers and suppliers. Better contract terms, lower supply costs, and improved reimbursement rates enhance the practice’s profitability.

Access to advanced technology: Healthcare is finally catching up to the automation and AI revolution. But provider groups can lack the experience to select which tools will free their practices from time-consuming manual processes. MSOs and private equity firms tend to have experts to help practices make this shift. They can offer a fast way into the latest medical technologies and IT systems, all of which enhance patient care and practice operation. 

Risk management & compliance: MSOs can help manage risk by ensuring compliance with regulatory requirements and handling malpractice insurance and other legal issues. This reduces the burden on providers and can protect against potential financial liabilities.

Market expansion: Backed by MSOs or private equity, providers can open new locations or acquire smaller practices, two moves that lead to more patients and higher revenue.

Professional development: Share the resources you’ll bring for training and professional development. Emphasize that you aim to ensure that staff have the tools they need to stay up-to-date with the latest medical practices and technologies. 

Strategic guidance:  Private equity firms and MSOs can bring their experiences with other provider groups and practices to the current one. When a practice must navigate challenges or seize opportunities, the MSO can provide guidance based on real-world knowledge.

Recognize the physician group's value as well

Make sure to also acknowledge the benefits the practice or physician group brings to your entity. These possibly include: 

  • greater market share
  • an established patient base
  • clinical expertise and specialty knowledge that round out your group
  • strong reputation
  • innovation and research opportunities
  • access to value-based care arrangements or ancillary services like imaging centers or outpatient surgery centers.

By revealing how the physician group contributes to the growth, diversity, and competitiveness of your portfolio, you demonstrate your appreciation for it. All involved perform better when they  know they’re valued. 

Clarity point #2: goals and motivations

Sharing your MSO’s goals in acquiring the practice or provider group goes even further in avoiding confusion, frustration, and delays.  

Typically, as an investor, you are looking for a gain on your investment. After all, according to a study published in Health Affairs Scholar, more than half of acquired practices get resold to other private equity firms or MSOs within three years. Staff at provider groups are well aware that this could be your goal. It's best to be transparent about it.

The provider group is often looking for capital, which can either go to owners, get invested to capture growth opportunities or be used to stabilize the organization. 

Separate focuses can muddy communication as both sides may hear what they want to hear. For instance, the management services organization may say, “We want to focus on growth.” The owner interprets that as capital pouring into the business when the MSO’s plan was pulling money out. Chaos and bad sentiments follow. 

MSOs can also overlook sharing their goals (or asking the practice owner to) with all their clinicians, administrative, and other staff. All stakeholders must understand the motivations behind the shifts ahead.

Present these to all clinicians and staff. Collaborate from top to bottom of the organization to generate a unified culture upfront. Each staff member should have a role in every one of these goals. The MSO, former owners, and even the staff themselves can document how they plan to contribute to all goals. Financial rewards can go further than simply emphasizing a “team player” approach. If a front desk staff member realizes that scheduling 10 more appointments for the week results in a bonus of $300, goals are more readily accepted. By engaging all staff early on, you give everyone within the organization “skin in the game,” which helps correct problems before they occur. In fact, when the voices of those scheduling patients, performing revenue cycle management, and billing are not part of the conversation, crises arise.

If one of your goals is to sweep in more net revenue through the recovery of underpayments, walk through a demo of how this powerful software tool automates that process here: 

Clarity point #3: expectations

Before the acquisition is complete, the MSO or PE firm must share its expectations for providers and staff in several areas. Clarity for all of these expectations helps secure a smooth integration and successful operation post-acquisition. These are some of the areas you should set up to avoid problems downstream.

Communication standards: Delineate your vision of open and effective communication between you and the stakeholders at the physician group or practice. 

  • Who will be involved?
  • Who reaches out to whom?
  • Will there be regular meetings? What’s the frequency? 
  • What types of documentation and reports will you expect at these meetings? 

Operational standards: It’s typical for an MSO in acquisition mode to juggle 10 or more EHRs, not to mention the other tools in all of their acquisitions’ software stack. The goal is to standardize EHRs and all software tools.MSOs vary on how quickly the providers must transition to the MSO’s preferred tools. For some, it’s months. Others accept more ramp-up time. 

MSOs must also make their standards for compliance with billing practices clear. Share protocols for chargemaster use and updating. 

Finally, the MSO must share its established processes for patient care and administration. Again, transition time varies. 

Quality of care and access to services: Let the clinicians and administrators know how you expect them to maintain or improve the quality of care and administrative accuracy while also enhancing access to services. Your pre-closure diligence process may have turned up issues that must be rectified. Make a list of these issues and explain that you expect to see progress in every area. 

Financial accountability: Your pre-closure diligence process most likely uncovered areas of revenue leakage or out-of-control costs. This includes efficient management of resources, maximizing revenue through proper charge capture, and reducing denials by ensuring accurate coding and billing practices. Make it plain that providers and staff must understand and contribute to the group or practice’s financial goals. Of course, this assumes you have established all of the benefits your partnership will bring to each individual. 

Cultural integration Staff and providers are expected to align with shared group and MSO values and mission. Successful cultural integration affects morale, employee satisfaction, and retention, all of which are crucial for long-term success. 

Continuous improvement and adaptation: Emphasize that you expect providers and staff to be open to training, new technologies, and improving processes as dictated by evolving healthcare standards and regulations. 

These expectations are designed to ensure that the acquisition not only expands the MSO's capabilities but also enhances the overall effectiveness and efficiency of the provider. 

Clarity point #4: pathways to growth

Again, coming in like the big bull elephant and dictating the practice’s way forward does not bode well for the long-term success of the partnership.  

Instead, the pathways to growth take exploration and a meeting of the minds on the part of both parties. Further, the two of you may vary on strategic goals and the operational strengths of the provider group. Consider these growth pathway options and work with your new partner and its staff to determine the pathways with the most potential. 

Expansion of services: Expanding the range of medical services can include new specialties, investing in state-of-the-art medical technology, or incorporating advanced treatment options that can attract a broader patient base. Of course, it takes research into the needs of the community to determine the appropriate path. You wouldn’t want to expand obstetrician services in an area with a high senior population. 

Geographic expansion: Expanding a provider’s presence to new locations can bring unique specialties to communities without previous access. Of course, gauging demand is a necessary next step. 

Operational efficiency:  With IT and RCM experts on staff, an MSO or private equity firm can introduce advanced management practices, invest in new IT systems, and streamline administrative processes to reduce costs and improve service delivery. These steps can reduce the need for FTEs, and increase patient throughput which boosts revenue. 

Diversification: Diversifying into other healthcare-related ventures such as outpatient care, specialized clinics, or even wellness programs can also be a growth pathway. This helps to spread risk and leverage new market opportunities.

Value-based care initiatives:  Would the provider group benefit from an ACO structure? Shifting towards a value-based care model that prioritizes outcomes is increasingly favored by payers and government healthcare programs. Value-based healthcare models top our list of revenue cycle management trends in 2024 here.

Establishing and executing the pathways to growth requires solid protocols. Consider sharing these ideas using:  

  • Strategic workshops and meetings help outline mutual goals and assess the feasibility of different growth strategies.
  • Data analysis and market research that uncover market trends, patient demographics, and competitive dynamics provide the rationale behind proposals.  In your pre-closure due diligence, you should have conducted comprehensive market research to identify growth opportunities.
  • Financial modeling that predicts the outcomes of various growth strategies. These models consider factors like investment costs, potential revenue increases, and ROI.
  • Consultations with industry experts also provide backup for your inclinations as well as valuable insights into effective growth strategies and potential pitfalls.
  • Feedback from stakeholders (clinicians, staff, even community) helps ensure your growth strategies align with the needs and expectations of those directly impacted.

Clarity point #5: the state of the group or practice

If the business is losing money, everyone needs to know. Scale Healthcare's Friedrich (linked above) urges MSOs and private equity executives to educate all at the organization on its financial situation and how it got to that point. When pointing out mistakes providers have made, emphasize that these will need to be corrected so they’re not repeated. Acquiring entities can temper this message by sharing the opportunities the provider group has. It should also encourage all in the organization to contribute solutions that can help. 

At the same time, explain that your side will own up to its mistakes and try to correct them as soon as possible. Encourage providers and staff to share concerns quickly rather than sidestepping them or using a band-aid approach to avoid them. Share how you would like them to communicate with you. 

Without an open approach, you risk creating a “circle the wagons” environment where provider owners side with their team and MSO executives blame providers for all revenue leakage and increasing costs. An antagonistic relationship makes for poor working conditions on both sides and most likely sub-optimal revenue.  

Clarity point #6: a shared integration plan

Sourabh Hajela of CIO Index explains that an acquisition can be,

“the start of a new era of growth and opportunity…[but] up to 70-90% of mergers and acquisitions fail to achieve their intended goals, primarily due to ineffective post-merger integration.” 

Investing the time upfront in your integration plan can keep your organization in the 10 to 30 percent of MSOs that reach their goals. 

Integration plans should be developed with a clear understanding of the above strategic objectives and desired outcomes of the merger or acquisition. By aligning business strategies, organizations can ensure that integration efforts are focused on achieving common goals and driving long-term value.

Integration plans should also outline specific objectives, timelines, and milestones for different integration activities. They should consider the cultural, operational, technological, and financial aspects of the integration. By aligning integration plans with the overall business strategy, organizations can allocate resources effectively.

Keep in mind that every single acquisition has unique strengths and weaknesses that threaten to undermine success to post-deal closure in unpredictable ways. If your management team doesn’t have the time or bandwidth to accommodate a tuck-in, locations will underperform. Fast acquisitions can lead to you having a large group of practices where the physician owners left before buy-in from remaining providers and staff is achieved. Further, an incomplete transition plan can leave you holding long-term leases, superfluous employees, and insufficient patient volume. 

Document all clarity points with a business plan

Demonstrate your commitment to collaboration by working with the provider group to document shared goals, expectations, pathways to growth, and challenges in an official business plan. Make it clear that you intend to follow this plan.  

Creating a business plan together ensures that both the acquiring firm and the physician group align. It also charts the course for strategic planning that considers the strengths, weaknesses, opportunities, and threats of the combined entity. It provides a roadmap for achieving short-term and long-term objectives, essential for guiding the organization post-acquisition.

Where you can, include financial projections. These help set realistic expectations regarding revenue growth, profitability, and cash flow. In addition, outline the operational changes needed to integrate your two entities' technology, staff training, and new protocols.  

Creating a business plan is not just a bureaucratic step; it is a strategic tool that helps ensure the union’s success. It provides clarity and confidence about the future direction of the organization and helps ensure that the integrated entity remains compliant with healthcare regulations and standards. This collaborative approach maximizes the chances of a successful partnership and sustainable growth.

Pitfalls both MSO and provider groups must keep on their radar 

Pushing new acquisitions before stabilizing current ones

Scale Healthcare's Friedrich cautions MSOs and private equity against leaping ahead to a new acquisition before the current one is stabilized. He explains,

“One of the biggest mistakes that MSOs make is that they need to follow a very basic formula post-integration, post-close. [This formula is:] stabilization, followed by optimization, followed by growth. What happens is platforms often skip ahead to growth before they’ve conquered stabilization and optimization, and it’s often driven by business development’s responsibility to grow the platform. As such, growth becomes the enemy of stabilization.”

Frenetic acquisition before stabilization prompts a race to the bottom, with the acquiring entity finding only practices and provider groups with diminished potential. Don’t assume that one acquisition with a good return can be repeated ad infinitum. Don’t push growth over performance.

Key stabilization steps: 

1. Financial assessment and support: Start your partnership by providing the financial support to stabilize operations. Address debt, provide capital for overdue maintenance, or invest in technology upgrades. this move will reassure provider group professionals the most.

2. Execute quality control and service continuity: Maintain or improve the quality of care during the transition. Monitor and manage service delivery closely to ensure patient care does not suffer. This might involve interim management or the introduction of quality assurance protocols.

3. Streamline operations: Identify areas where operations can be optimized without disrupting the provider’s core services. Consider administrative tasks such as billing, scheduling, and compliance procedures. Streamlining these processes can improve efficiency and reduce costs.

4. Integrate cultures: Respect for the provider group’s existing culture and practices builds trust and cooperation. Where change is necessary, implement it gradually and with clear explanations of the benefits. We cover several change management strategies in this post.  Establishing a comprehensive strategy for managing change not only smooths bumps in the integration, it protects patients.

5. Determine where training is needed: Invest in training and development programs for staff to boost morale and align skills with the new operational goals of the organization. Training in new technologies, procedures, or customer service can enhance performance and job satisfaction.

8. Engage with staff and clinicians: Understand concerns and insights from all staff and clinicians. Effective leadership engagement can foster a sense of inclusion and buy-in for the transition.

9. Monitor and Adjust Integration: Continuously monitor the impact of the integration process and prepare to adjust or even delay. Use feedback from staff, patients, and other stakeholders to refine strategies and operations.

By focusing first on these stabilization efforts, an MSO or private equity group can create a solid foundation for future growth and development. Once the provider is stable and integration is well underway, you can unleash more aggressive business development strategies.

A managing MSO team member with insufficient healthcare experience

Too often the manager assigned by the MSO is not sufficiently familiar with healthcare processes and challenges can spark frustration at the provider organization. Whenever possible, bring in someone with business intelligence related to the provider’s specialty or the services that the healthcare entity provides. Prepare them for the unique aspects of RCM for MSOs.  

A provider owner who lacks business experience

Evaluate the business acumen of the provider owners. Watch for indications that they think the money is easy to come by. Point out any poor management spots and delineate the changes that must be made to avoid revenue loss in the future.  

Poor staff and public perception

Recently, news outlets have covered studies showing that private equity and MSO-backed healthcare organizations prioritize profits over patient care. Addressing these concerns with the concrete ways you will maintain fair prices and safe practices puts everyone’s mind at ease.

The truth is that when PE firms amass high market shares in local physician practice markets, they do have the flexibility to raise prices. The Washington Post reported on a study conducted by the American Antitrust Institute and others. The study found that, in markets where PE firms own 30 percent of a specialty market, they tend to raise prices significantly. 

More alarming are the reports that patient care declines once private equity takes over. One new study led by researchers at Harvard Medical School published in December 2023 in JAMA, examined 600,000 hospitalizations at 51 private equity hospitals and more than 4 million hospitalizations at 259 non-private-equity hospitals. They found that after a hospital was acquired by private equity, Medicare patients experienced a 25 percent increase in hospital-acquired complications. Patients also sustained 27 percent more falls and 38 percent more bloodstream infections caused by central lines. Get out ahead of this news before it's sprung on you.

Again, take steps to allay provider and staff fears. Should you be dealing with a specialty group, you can emphasize that the Harvard study examined hospitals. Reassure stakeholders that you have protocols in place to maintain and even improve patient care standards. As far as pricing, you can remind them that you’re simply bringing prices up to market levels in an inflationary economy. 

Provider Defensiveness

MSOs and private equity executives can run into trouble when a legacy CEO at the healthcare organization is not a good steward between private equity or the investor and the providers. Instead, this individual defends their clinicians and staff rather than executing on the established business plan. Failure to cover all the clarity points listed above and a lack of a business plan can create bad will, underperformance, stressful situations, and even financial stressors that lead to a disruption in the business.


Although bankruptcy can be a reorganization play, it’s bad for reputation. 2023 saw a wave of bankruptcies at private equity-owned healthcare organizations. Among these are:

  • Envision Healthcare (KKR)
  • Center for Autism and Related Disorders (Blackstone)
  • YesCare/Tehum Care Services/Corizon (Flacks Group, Perigrove Capital)
  • Air Methods (American Securities)

17 or 21 percent of the 80 healthcare organization bankruptcy filers in 2023 were owned by private equity firms.  While this news can raise alarms at your acquisition, you can confidently explain that  it’s not outside operations or management breakdowns behind the PE-owned bankruptcy rates. In most cases, these bankruptcies occurred because debt and interest rates failed to go down as expected. Where in the fall of 2023, most economists were predicting seven Fed rate cuts in 2024, many now say we’ll be lucky if we get two. With strong employment, the cost of borrowing has remained elevated. Private equity deals tend to be highly leveraged, exposing them to a higher risk of bankruptcy. 

Consider, too, that 80 bankruptcies out of 20,500 total U.S. healthcare organizations account for .39 percent of all US healthcare companies - not even one percent.  20,420 remained out of bankruptcy court. So while 2023 was a record year for healthcare bankruptcies (with more coming in 2024), it doesn’t necessarily indicate a trend. In fact, with most economists agreeing that the Fed will cut interest rates this year eventually, borrowing costs will decline, making bankruptcies less likely. 

Make the most of your acquisitions

Steel and bronze are two alloys favored because of their superior strength. Will the alloys you create with the practices you acquire reach that level of fortitude?  By taking the above steps, you guarantee that your investment grows into a consistently profitable money-maker or a target for acquisition.  

One way to extract the most revenue from your new acquisition is to use automation to sweep in underpayments from payers. If you’ve been watching the headlines recently, you’ll have seen that TeamHealth recovered $10 million and Envision Healthcare won $91.8 million, both from UnitedHealthcare, in underpayment judgments. Judges in both cases scolded UHC for failing to make adequate and contractually agreed-upon reimbursements. Dozens of Alabama hospitals and providers are now preparing to battle Blue Cross for $5 billion in underpayments. 

We helped a large orthopedics group automate inefficient, manual workflows so they could sweep in $10 million in underpayments

We did it by unleashing our software tool RevFind, which scrutinizes each reimbursement against contracted rates, highlighting any discrepancies and notifying staff for immediate action. RevFind also facilitates the comparison of your reimbursements with national benchmarks, including Medicare’s. This tool also equips you with insights for proactive negotiation and guides you through the process of identifying systemic root causes to avert future underpayments.

Schedule a demo to see how RevFind empowers your underpayment recovery efforts and helps MSOs keep payers honest in their reimbursements.

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