At the 18th Annual Ambulatory Surgery Centers Conference in Chicago on Oct. 28, Kristian Werling, JD, partner, and Gretchen Townshend, JD, associate at McGuireWoods explained some of the key issues physician and ASC leaders need to consider before they sell their practice to a hospital.
1. Understand the spectrum of hospital integration. A practice could have several reasons for selling or partnering with a hospital, ranging from the high costs of new technologies like electronic health records to the bundled payments and accountable care organizations structures within healthcare reform. Mr. Werling said practices must be able to understand the entire spectrum of hospital integration before jumping to sell its practice to the hospital.
Full integration is when the practice is sold to the hospital, but there are other options, Mr. Werling said. Service line co-managements, ancillary service joint ventures and other affiliation agreements could be precursors before an outright hospital purchase. "Sit down with the hospital or partners in the group and ask, 'Do we have other options of what we need?'" Mr. Werling said.
2. Be cognizant of the anti-kickback statute and the Stark Law. The Stark Law and anti-kickback statute must be at the forefront of all physicians' minds once they have decided that selling the practice is an attractive situation, Ms. Townshend said. Anytime physicians enter into a financial relationship, they need to make sure they do not have vested interests with referrals or elsewhere because intent, especially with the Stark Law, does not matter.
3. Value of the practice and compensation of physicians must be fair market value. If a practice does decide to integrate with a hospital and confidentiality agreements are signed, then due diligence begins, Ms. Townshend said. An evaluation firm runs through historical productivity numbers, compensation figures and a proposed purchase price, and finding fair market value on the overall practice as well as the physicians' new compensation figures as hospital employees are two of the most important components of these transactions.
"Fair market value is the name of the game when it comes to these transactions," Ms. Townshend said. "Eighty to 90 percent of this effort is making sure the amount paid to acquire the practice is fair market value and that compensation going forward is within a range of fair market value."
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1. Understand the spectrum of hospital integration. A practice could have several reasons for selling or partnering with a hospital, ranging from the high costs of new technologies like electronic health records to the bundled payments and accountable care organizations structures within healthcare reform. Mr. Werling said practices must be able to understand the entire spectrum of hospital integration before jumping to sell its practice to the hospital.
Full integration is when the practice is sold to the hospital, but there are other options, Mr. Werling said. Service line co-managements, ancillary service joint ventures and other affiliation agreements could be precursors before an outright hospital purchase. "Sit down with the hospital or partners in the group and ask, 'Do we have other options of what we need?'" Mr. Werling said.
2. Be cognizant of the anti-kickback statute and the Stark Law. The Stark Law and anti-kickback statute must be at the forefront of all physicians' minds once they have decided that selling the practice is an attractive situation, Ms. Townshend said. Anytime physicians enter into a financial relationship, they need to make sure they do not have vested interests with referrals or elsewhere because intent, especially with the Stark Law, does not matter.
3. Value of the practice and compensation of physicians must be fair market value. If a practice does decide to integrate with a hospital and confidentiality agreements are signed, then due diligence begins, Ms. Townshend said. An evaluation firm runs through historical productivity numbers, compensation figures and a proposed purchase price, and finding fair market value on the overall practice as well as the physicians' new compensation figures as hospital employees are two of the most important components of these transactions.
"Fair market value is the name of the game when it comes to these transactions," Ms. Townshend said. "Eighty to 90 percent of this effort is making sure the amount paid to acquire the practice is fair market value and that compensation going forward is within a range of fair market value."
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