Given increased integration activity amongst physicians and hospitals and the increased amount of governmental resources targeting such relationships, we have put together a short piece that is an overview of questions that should be asked from a regulatory and business perspective with respect to physician-hospital relationships. Many, if not most, of the questions are also applicable to surgery centers.
We have also noted six key questions being asked by ASCs.
1. 13 Key Questions — Hospital/ Physician Relationships
The following 13 questions can be used as barometers to help assess legal compliance from a Stark Act, Anti-Kickback and Tax Exempt entity perspective. The core laws apply whether the physician is to be employed, co-managed or integrated with a hospital through other affiliation models.
1. Is the relationship truly needed? E.g., is a medical director necessary for the position? What value will this position add? Has the position been manufactured as an excuse to provide compensation to physicians?
2. Is the position and payment wholly unrelated to referrals or the intent to retain business? If any one purpose of a payment is in exchange for referrals, it can be deemed unlawful.
3. How comparable is the position to other positions in the hospital when it comes to specialties of lower financial value? I.e., is a position only funded because it relates to high value or volume specialties?
4. How comparable is the position to those at competing hospitals?
5. Is the payment fair market value? If so, what evidence supports this? Is there a third-party valuation or objective, external evidence to defend the value?
6. Has the relationship between the hospital and the physician been approved by internal parties who are unrelated to the outside parties involved? I.e., is the physician who will receive such payment not part of the committee or board approving such payment?
7. Does the relationship meet a Stark Act exception and an anti-kickback safe harbor? If a non-employment arrangement, is the relationship set to pay a fixed aggregate amount per year and not vary per the year? Many safe harbors require that aggregate payments be set in advance.
8. Can a rebuttable presumption under the Internal Revenue Code be obtained that the relationship doesn’t create private inurement or excess benefit?
9. Has the hospital’s compliance officer, or legal counsel, approved the relationship?
10. Is there a contracting file with legal and valuation approval? Has there been a comprehensive and detailed review of legal concerns?
11. Will the relationship be viewed in the context of an organization that has a culture of compliance?
12. Is there a short memo that supports the true need for the relationship?
13. Can this relationship be considered standard for the system, or is it highly creative and unusual?
2) 6 Key Questions Being Asked of ASCs
In the ASC context, six of the key current questions being asked are:
1. Can the practice or ASC profit from anesthesia and pathology?
2. What will co-management pay?
3. Should we sell our ASC or practice? To a hospital or national chain?
4. How can we price shares to sell to new physicians?
5. Can we stop partners from becoming hospital employees?
6. What place does our ASC have in an ACO?
Should you have any questions about these issues or any other subjects, please contact me at (312) 750-6016 or at sbecker@mcguirewoods.com.
Very truly yours,
We have also noted six key questions being asked by ASCs.
1. 13 Key Questions — Hospital/ Physician Relationships
The following 13 questions can be used as barometers to help assess legal compliance from a Stark Act, Anti-Kickback and Tax Exempt entity perspective. The core laws apply whether the physician is to be employed, co-managed or integrated with a hospital through other affiliation models.
1. Is the relationship truly needed? E.g., is a medical director necessary for the position? What value will this position add? Has the position been manufactured as an excuse to provide compensation to physicians?
2. Is the position and payment wholly unrelated to referrals or the intent to retain business? If any one purpose of a payment is in exchange for referrals, it can be deemed unlawful.
3. How comparable is the position to other positions in the hospital when it comes to specialties of lower financial value? I.e., is a position only funded because it relates to high value or volume specialties?
4. How comparable is the position to those at competing hospitals?
5. Is the payment fair market value? If so, what evidence supports this? Is there a third-party valuation or objective, external evidence to defend the value?
6. Has the relationship between the hospital and the physician been approved by internal parties who are unrelated to the outside parties involved? I.e., is the physician who will receive such payment not part of the committee or board approving such payment?
7. Does the relationship meet a Stark Act exception and an anti-kickback safe harbor? If a non-employment arrangement, is the relationship set to pay a fixed aggregate amount per year and not vary per the year? Many safe harbors require that aggregate payments be set in advance.
8. Can a rebuttable presumption under the Internal Revenue Code be obtained that the relationship doesn’t create private inurement or excess benefit?
9. Has the hospital’s compliance officer, or legal counsel, approved the relationship?
10. Is there a contracting file with legal and valuation approval? Has there been a comprehensive and detailed review of legal concerns?
11. Will the relationship be viewed in the context of an organization that has a culture of compliance?
12. Is there a short memo that supports the true need for the relationship?
13. Can this relationship be considered standard for the system, or is it highly creative and unusual?
2) 6 Key Questions Being Asked of ASCs
In the ASC context, six of the key current questions being asked are:
1. Can the practice or ASC profit from anesthesia and pathology?
2. What will co-management pay?
3. Should we sell our ASC or practice? To a hospital or national chain?
4. How can we price shares to sell to new physicians?
5. Can we stop partners from becoming hospital employees?
6. What place does our ASC have in an ACO?
Should you have any questions about these issues or any other subjects, please contact me at (312) 750-6016 or at sbecker@mcguirewoods.com.
Very truly yours,