Rationalizing Assets Doesn't Only Mean Selling Them

health systems margin improvement physician groups tactics Oct 19, 2026

What It Costs You Monday — a 10-part series on healthcare margin at the operating level. Start with Part 1: The Opening. Previous: Part 2: The "Immediately" Problem. You're reading Part 3: Both Directions.

Strategy two on the list reads: rationalize assets based on realistic expectations and no heroic assumptions or confirmation bias.

I agree with every word of that. It is also only half of the thing.

Rationalization can mean getting rid of assets. It can just as easily mean rationally taking them in — and right now, that is where more of the opportunity sits.

"The discipline isn't in the decision to acquire. It's in what you do the day after."

THE QUESTION I'D START WITH

Is there volume or revenue coming out of your practices that you are not capturing today but could? If you own the assets, and you own that specialty in that market, is there a way to leverage it that you are not using?

That is a different question from what should we sell, and a lot of organizations never reach it, because the divestment conversation is the louder one.

THE PRESSURE HAS A DIRECTION

It is worth noticing which way this is all running. A shared pot that everyone is drawing down pushes the smaller players toward the bigger ships.

I have watched a lot of physician practices come to health systems asking for employment or partnership. I have been part of those conversations, and it is still happening. Physicians cannot keep pace with their own cost structure and hold their compensation where they want it, so they come looking for coverage.

Which means acquisition opportunities will keep arriving whether or not you went looking for them. The only real question is whether you are ready to handle one well.

THE DISCIPLINE IS THE DAY AFTER

You have to go and find every way to optimize the practice you just took on. You need more revenue out of it or less cost in it, and in practice it usually has to be more revenue.

That means looking at 340B economics. At your payer contracts against theirs — you probably hold the better ones. At upper payment limit or DSH money available to you because of your hospital status. At what can be insourced: additional imaging, additional labs. Be disciplined about bringing things in house.

None of that happens by itself, and none of it happens in year three. It happens in the first few months or it tends not to happen at all.

WHAT IT LOOKS LIKE WHEN THE HUNT DOESN'T HAPPEN

I have watched exactly that.

A cardiology practice we acquired produced somewhere between $1.5 and $2 million in margin in its first year under the hospital, structured under a professional services agreement. Three years later I took over leadership of it and went looking for that margin. By the way we were calculating it at that point, the practice was generating about $50,000 a year.

Nobody did anything wrong in any single year. The agreement was reasonable, the numbers were good, and then the practice was largely left alone. The full story is in The Red Queen's Trap, Part 4 — including the part that matters more, which is that active management brought it back to nearly $1 million inside a year, and back near the original $2 million the year after.

That is the thing to sit with. Drift is not neutral holding. It is active decay — and it is often reversible far faster than it accumulated, if somebody actually runs the scan.

ONE DISTINCTION WORTH HOLDING ONTO

Buying volume is not the same as building capacity.

Acquiring a practice takes on volume that already exists, with revenue that already exists, on assets somebody else already paid for. Building a new site creates fixed cost and hopes volume follows.

Both get described as growth. They are not remotely the same risk, and the next piece in this series is about what happens when an organization confuses them.

FIVE QUESTIONS WORTH ANSWERING IN WRITING

What revenue is walking out of practices we already own that we could be capturing?
For the last practice we acquired — can anyone name what we did in the first ninety days to optimize it?
Have we checked our payer contracts against the ones that came with it?
Which of our acquired assets has nobody looked at closely in over a year?
When we say growth, do we mean volume that exists or capacity we are about to pay for?

The practice did not need a different market, a different payer environment or a different physician group to go from $50,000 back to $2 million. It needed somebody paying attention.

Ready to talk about where your organization stands? Book a free strategy session · Connect with me on LinkedIn, where this series runs.

DR Advisors — Physician's Trusted Advisor