One Tax ID, Many Locations: When to Merge and How to Keep P&Ls Honest

Doctors CFO
Oct 8
2 min read

A Dermatology Group’s Crossroads

ClearSkin Dermatology had three thriving locations, each with its own tax ID. It worked—until the partners decided to bring lab work in-house. Denials were rising, payers kept shifting the rules, and the hassle of running three separate entities was holding them back.

Consolidating under one tax ID felt like the obvious answer. It streamlined lab billing, smoothed credentialing, and simplified operations.

But within months, a new problem appeared: the P&Ls blurred. Managers couldn’t tell if their site was carrying its weight. Partners argued over allocations. Financial clarity, once sharp, had gone cloudy.

The Spark Behind Consolidation

Every multi-location practice eventually faces the same question: do we keep separate tax IDs, or merge into one?

The trigger usually isn’t accounting—it’s clinical infrastructure. Labs, billing, and payer compliance are easier under one entity. A single tax ID can mean fewer denials, faster credentialing, and smoother workflows.

That’s the upside. The cost is clarity. Once everything flows into one general ledger, it’s dangerously easy to lose sight of how each location is really performing.

Where Practices Get Burned

A common mistake: merge first, figure out reporting later. Revenue and costs pool together, and suddenly managers don’t trust their P&Ls. Without guardrails, every “why is this site underperforming?” conversation turns into guesswork.

The good news: this is fixable with the right design up front.

Building Honest P&Ls After a Merge

Think of post-merge accounting as a two-step filter:

Tag everything — use class tracking or service-line markers so transactions stay tethered to a location.
Allocate the rest — shared costs won’t split themselves, so you need a clear, written policy.

The goal isn’t perfect precision—it’s decision-useful numbers.

The Art of Allocation

The credibility of your P&Ls rests on the bases you choose. There isn’t one perfect answer, but there are wrong ones.

Collections % → works best for patient-facing support staff
Headcount → fits administrative overhead
Square footage → fits rent and facilities

Most practices blend across buckets. The key is to publish your rules and revisit them twice a year. Transparency beats complexity every time.

Pitfalls to Avoid

Assuming structure = efficiency. A single tax ID doesn’t reduce patient demand. You’ll still need staff to answer phones, see patients, and process claims.
Letting history disappear. Keep access to old payroll and billing vendors for at least a year. Audits and credits always arrive late.
Ignoring culture. Mergers don’t erase unpopular clinic days or the need for balanced review solicitation. Rotations and consistency matter.

The Scorecard Reset

After a merge, the metrics that matter don’t change:

Open Days
Visits per Open Day (VPOD)
Average Patient Charge (APC)
Adjustments rate
Review velocity

The best way to keep leaders honest is a monthly revenue bridge that shows exactly how Days, Visits, and APC contribute. Even under one tax ID, the performance levers stay visible.

Training for the New Normal

Merging isn’t just accounting—it’s a behavior shift. Long trainings won’t stick, but weekly micro-learning (short quizzes + 5-minute refreshers) will. That cadence builds habits, especially around coding, allocation, and new policies.