Becker's Hospital Review

29 CFO / FINANCE 5 Guidelines for Small Urgent Care Centers to Follow When Negotiating Terms By Morgan Haefner A s the healthcare ecosystem becomes increasingly consolidat- ed, small urgent care centers must prepare for new transaction opportunities. In this value-based payment environment, large urgent care providers are purchasing smaller centers to manage costs and dip into addition- al revenue. However, it's easy for owners of these small centers to feel overwhelmed when larger entities approach them with specific trans- action inquiries. "Hospitals are calling on urgent care centers all the time, and more of- ten than not, doctors are not prepared for that call," says Luis de la Prida of Vertess, an M&A advisory firm that specializes in small to mid-market companies. Mr. de la Prida spoke with Becker's Hospital Review about how urgent care centers can pursue mutually beneficial business deals. Here are five steps urgent care centers should take when negotiating terms. 1. Make time for preparation. Mr. de la Prida says there are five things urgent care centers should do to get ready for a sale. He com- pares the preparation to a typical physician visit: First, urgent care centers must "schedule a checkup" to determine the status of their business' "vital signs" — or its profitability, practice pro- file and staff continuity, he says. Second, Mr. de la Prida says centers should "document the chart." For urgent care center owners, this means locating documents like year- to-date financial statements, payer contracts, tax returns and payroll reports. Next, he says centers must "perform diagnostics," or pinpoint the value of the urgent care center. e center should then "recruit a team," or a transition group that con- sists of a broker, M&A adviser, attorney and accountant, among other specialists. Lastly, Mr. de La Prida says centers should "start the plan," and review goals to determine the best path forward. 2. Be aware of who is buying. Mr. de la Prida says it's imperative for urgent care center owners to look beyond the first hospital or or- ganization seeking a transaction. He says "a key part of negotiating is figuring out the [buyers'] goals" so a center can position itself within a deal that adheres to its own ambitions. Mr. de la Prida noted hospitals and large urgent care buyers acquire smaller urgent care centers to meet consumer demand and create a dif- ferent revenue stream. If the smaller center wants to relieve administra- tive burden or seeks greater financial stability, transactions with larger buyers may be an option. Other buyers, like payers, can be useful for controlling the cost of services. 3. Discern key steps in the M&A process. Mr. de la Prida says the M&A process includes six key phases: exploratory, data gathering, marketing, negotiation, due diligence and closing. He says understand- ing and evaluating exit options, assembling all vital documents, con- ducting buyer research and engaging with multiple buyers are just a few key steps to successfully negotiate terms. 4. Identify transaction terms. When urgent care centers are pre- paring to sell, Mr. de la Prida says the first question owners oen ask is, "How much can I sell for?" However, he cautions the answer to this question is complex, usually a range and "not necessarily the most im- portant item." Instead, he advises centers to think about other contractual terms, such as accepting a lower purchase price in exchange for higher salary ben- efits. In addition, he says it is important to understand the transaction's structure, whether it be a merger, stock purchase or cash purchase. 5. Negotiate like a "pro." Mr. de la Prida says nailing down terms and knowing the price at which an urgent care center is comfortable selling are important for negotiations. Although centers need to "yield strategically" when it comes to negotiating terms, Mr. de la Prida also suggests issuing the first offer, if possible. "A lot of the time the person who throws out the numbers sets the tone" of the deal, he says. Mr. de la Prida also says center owners must re- member it's "OK to walk away" from a transaction. n 3 RD ANNUAL HEALTH IT + REVENUE CYCLE CONFERENCE September 21-23, 2017 | Hyatt Regency | Chicago, Illinois 150 Speakers from Hospitals and Health Systems – 255 Speakers Total THE BRIGHTEST CIOS, HEALTH IT AND REVENUE CYCLE EXPERTS IN HEALTHCARE REGISTER HERE www.beckershospitalreview.com/health-it-revenue-cycle-conference/ Registration@BeckersHealthcare.com OR 800.417.2035. KEYNOTES BY George W. Bush, 43rd President of the United States of America Sugar Ray Leonard, Boxing Legend, Successful Entrepreneur and Author, The Big Fight: My Life In and Out of the Ring

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