Culture’s Role in Successful Radiology-market Consolidation
On September 4, 2013, Zotec Partners completed its planned acquisition of Medical Management Professionals (MMP) and created one of the largest revenue-cycle–management and practice-management companies in the country. The consolidation of the two companies mirrors the consolidation occurring in the primary industry that they serve—radiology—and was motivated by similar factors, according to T. Scott Law, founder and CEO of Zotec Partners. “Organizations are coming together not just to get bigger, but to get better,” Law says. “MMP has an excellent reputation of being high touch with its clients, while Zotec Partners is known for being high tech; combining makes both of our organizations better. This deal will enable us to support our radiology customers as their marketplace continues to mature: We will be able to offer them enhanced levels of personal service as we continue to develop billing and business-intelligence technology. Our customers and the professionals who serve them will both possess powerful data and analytics tools to conduct business and make informed decisions.” Making a Match The consolidation in the radiology market has been influenced by a multitude of considerations, Law says. “Being bigger gives organizations a wider, more diverse range over which to spread their costs, and being bigger equals more power in contract negotiations, in hospital-administrator negotiations, and in attracting the most talented physicians,” he notes. “Our strategy has been similar: I would describe it as planned opportunism. We want organic growth, but we have a several-step process that governs our growth model.” Planned opportunism means pursuing consolidation exclusively with ideal partners, he explains. “You do not force a business to sell because you are willing to offer a high price for it, and you do not buy a business just because you want to increase in size,” he says. “Mergers/acquisitions need to be appropriate and strategic. With MMP, we waited patiently until the time was right, when we both felt there was an ideal opportunity to pursue acquisition.” Evaluating potential partners for mergers/acquisitions is a multifactorial process, Law says, but culture is, far and away, the most critical consideration. “Ours is a close-knit industry,” he observes. “You always know the people who are trying to do things correctly and the people who are not—the ones who are in it for a quick buck; who have Wall Street money behind them; or who bring the industry a quick flash of brilliance, but no sustainability.” He continues, “Our two companies were founded around the same time, and we have watched each other grow, over the years,” he continues. “We know that our cultures fit together. The same goes for the radiology practices we work with: When they are seeking a partnership with another practice or hospital, the most important consideration is whether they can see the cultural fit.” Combining Cultures Law says that his process for assessing the culture of a prospective partner can be summarized as evaluation of the five Ps: passion, predictability, perspective, people, and persistence. “You want to see people with the most passion for their disciplines in every area of the business,” he says. “You want quality people, with excellent formal and experiential educations, and you want them to be persistent in making their cases, in believing in what they are doing, and in demonstrating that they have the fortitude to work through any problems that may arise.” Even when the two organizations are not as familiar with one another as Zotec Partners and MMP were, the negotiation process still provides an ideal environment in which to evaluate culture, Law says. “When you start negotiating with another company, even on something as simple as a nondisclosure agreement, you start to get to know its management team and how it makes decisions,” he says. “How is the organization structured? How much does it protect its employees and accommodate their perspectives? Are its predictions about the business accurate? These things make a huge difference.” In the Zotec–MMP deal, Law adds, all such indicators were positive. “The quality of the people I have met from the MMP side, throughout this process, has been a breath of fresh air,” he says. “They have discipline and passion to a high degree.” In a similar way, he says, the dealmaking process affirmed the wisdom of the Zotec Partners investment in its billing and revenue-cycle–management technology. “It has reaffirmed what I always thought—that our technology is unmatched. This deal marries two great worlds—the best of service and the best of technology. It will mean better, faster, cost-effective results for our clients, and that is a value proposition I am excited about,” Law concludes. Cat Vasko is editor of ImagingBiz.com and associate editor of Radiology Business Journal.