Upload
truongdiep
View
220
Download
1
Embed Size (px)
Citation preview
Super Groups: Legal Issues Associated with the Formation
of Large Multi-site Medical Groups
a presentation
at Fornos of Spain Restaurant, 47 Ferry Street Newark, N.J.
by:
Michael F. Schaff, Esq.
WILENTZ, GOLDMAN & SPITZER, P.A.90 Woodbridge Center Drive
Woodbridge, NJ 07095
732-855-6047
May 22, 2012
I. Overview
• Changes in the Health Care Environment
• Physician Associations– Are Super Groups the
Answer?
• Traps for the Unwary: Assessing prospective Groups
• Questions & Answers
II. Changes in the Health Care Environment
• Managed Care
– market penetration
– provider panels
– reduced fees
– consolidation
• Greater Efficiency forced by Market
– reduced fees
– reduced staff
– reduced overhead
– greater patient volume
II. Changes in the Health Care Environment
• Regulatory change & uncertainty
– Accountable Care Organizations
– Medicare/Medicaid will change
– Reimbursement Changes
III. Physician Associations OPTIONS
• Employment in private practice; no ownership
• Employment by hospital or other entity
• Solo practice
• Group Practice– small; 2-5 Drs.
– medium; 6-15 Drs.
– large; 16- 25 Drs.
– Super Groups; 26+ Drs.
III. Physician AssociationsYour CURRENT SITUATION
• What do you want?
– personal needs
– financial needs
– career needs
• Current Likes & Dislikes
• Characteristics
– age
– culture
– personality
III. Physician AssociationsWHAT ALTERNATIVES EXIST?
• All’s Fine
• Sell Practice & Retire
• Sell Practice & Work
• Contract Away Administration– Management Service
Organization (MSO)
– Physician Practice management Company (PPMC)
– Join Hospital
• Merge or Combine Practice– Into existing Super Group?
– Start a new Super Group?
III. Physician AssociationsMAJOR CONSIDERATIONS
• Compensation– How much will you make?
• Group Practice– Rights & Obligations
– Control?
• Centralized Management– Benefits
– Costs
IV. Traps for the Unwary:Assessing Prospective Groups
Why Form or Join a Group Practice?
• Significant Benefits
• Improved Negotiating
• Increased Revenue Sources – Ancillary Revenue
• Economies of Scale
• Shared duties & info.
• Coverage
• Practice risks
• Retirement
IV. Traps for the Unwary:Assessing Prospective Groups
Why Form or Join a Group Practice?• Significant
Disadvantages
• Reduced Control
– medical
– financial
• Possible change in compensation structure
• Increased Costs- Higher Overhead
• Culture “shock”
IV. Traps for the Unwary:Assessing Prospective Groups
“Culture Shock”• Different styles
• Demographics– age
– specialties
– culture/ethnicity
• Decision Making
• Support staff
• Office Policies
• Integration of Information Systems– Practice management systems
– Electronic Health Records (EHR)
IV. Traps for the Unwary:Assessing Prospective Groups
Business Issues• Administrator & Management
• Staff Satisfaction
• Advisors
– legal
– accounting
– consultants
• Quality of Payer Contracts
IV. Traps for the Unwary:Assessing Prospective Groups
Honeymoon Period
• May ease transition
• Disassociation planning
• Cost/profit center accounting
IV. Traps for the Unwary:Challenges in Combining Groups
Legal Hurdles• Anti-trust laws
– limits mergers that reduce competition– limited exemption for health care professional coalitions– Concerns about the use of “pseudo-merger” to engage in illegal
price fixing – Must do an analysis of increased market power vs. benefits of
integration– There is a PULL between integration requirement vs. desire for
independence• control (decision making)• sharing of profits and losses• clinical, operational and marketing integration
IV. Traps for the Unwary:Challenges in Combining Groups
Legal Hurdles
• Self-referral law “group practice”requirements
– centralized billing & management
– single taxpayer ID
– general sharing of overhead
• Pension plan rules require coordination of plans
• Taxability of transaction– be careful; structure may have significant tax ramifications
IV. Traps for the Unwary:Assessing Prospective Groups
Level of Integration
• Partially Integrated Medical Group “PIMG”
– cost/profit centers
• Fully Integrated Medical Group “FIMG”
IV. Traps for the Unwary:Combination Models
• Top to Bottom Merger is a complete merger.
• Division Model is a way to allow existing groups to retain control over various existing elements of their practice, such as staff and billing.
• Leasing Assets vs. Merger or Contributions– tax issues
IV. Traps for the Unwary:Division Model
• Operation as a single legal entity with a single billing number and payroll (referred to as the “LLC”)
• Several divisions (one for each existing group) that are not separate legal entities.
• Operational control over each division by governance at the division level– each division determining their own method of
division-level governance
– but subject to the LLC final approval
IV. Traps for the Unwary:Division Model (con’t)
• Billing and collection is done in the name of the LLC
• Buy/sell terms and obligations at
– Division-level (for Division Assets) and
– Centralized Level (Common Asset Level)
IV. Traps for the Unwary:Division Model (con’t)
• Cash distributions: – allocated to divisions based on agreed upon mechanism
• allocation of division-specific costs and revenues to the division
– concerns STARK LAWS & distribution of DHS Revenue unless division has >5 members
• allocation of common overhead costs to all divisions based on agreed upon formula
– per capita vs. per division vs.per owner vs. per FTE vs. revenue vs.# of staff
– allocation of distributions at the division level determined by division-level governance
IV. Traps for the Unwary:Division Model (con’t)
• Joint exposure to liability – malpractice
– overpayment
– billing fraud, etc..
• Assets may be kept in existing entities owned by members of a division and leased to the LLC– lease payments will be allocated to the division (should be a wash
for the Members of the division)
– unwind provision allows for termination of leases during “honeymoon period” or beyond
– bank loans secured by an exiting group’s guarantees continue to be secured by those member’s guarantees
IV. Traps for the Unwary:Payor Contracting
• In general, payor contracts would be at the LLC level
• While existing contracts with third party payorsmust be reviewed in the due diligence process, if the combination of the groups is accomplished by creating the LLC as a new entity (and not by merging the existing entities into the LLC), the pre-combination contracts should not apply to services provided through the LLC.
IV. Traps for the Unwary:Assessing Prospective Groups
Determination of Ownership
• Value of existing practices
• Adjustments?
• Equal?
• Other?
• Significance of Ownership– control, compensation
& equity
IV. Traps for the Unwary:Assessing Prospective Groups
Allocation of Control• Centralized Control
– Executive or Management Committee
• Control at Division Level for daily items
• Protection for minority members
• Corporate ethics
• Business decisions
• Medical decisions
IV. Traps for the Unwary:Assessing Prospective Groups
How is Compensation Determined?• Cost/income allocation
– division level
– full integration
• Activities & status
– production
– seniority or ownership
– non-medical activities
• Mechanics
– formula
– committee
IV. Traps for the Unwary:Assessing Prospective Groups
How can Employment be Terminated?• Voluntary withdrawal
– retirement
– honeymoon period
• Without Cause
• Cause
– loss of license, etc...
• Disability
• Different Standards?
• Appeal Procedure?
IV. Traps for the Unwary:Assessing Prospective Groups
Post-Termination Payments• How Determined?
– Business Valuation
– Formula
• How Allocated?– Ownership Interests
– Teermination/Deferred Compensation (Tax issues)
– Restrictive Covenant
• Funding Issues
IV. Traps for the Unwary:Assessing Prospective Groups
Applicability of Restrictive Covenants
• Area and Duration
• Prohibited activities
• Liquidated Damages Vs. Injuction
• Trial period affect
IV. Traps for the Unwary:Assessing Prospective Groups
Agreements with Related & Unrelated Parties
• Management
• Employment
– Non-medical staff
– Medical staff
• Billing & collecting
• Equipment Leasing
• Real Estate
• Labs & ancillary services
IV. Traps for the Unwary:Assessing Prospective Groups
Agreements with Related & Unrelated Parties -- Concerns
• Who owns entities?
• Are certain members benefiting disproportionately?
• Are non-members benefiting? Are terms “arms length”?
• Do transactions comply with laws & regulations?
V. QUESTIONS AND
ANSWERS
Super Groups: Legal Issues Associated with the Formation
of Large Multi-site Medical Groups
a presentation
at Fornos of Spain Restaurant, 47 Ferry Street Newark, N.J.
by:
Michael F. Schaff, Esq.
WILENTZ, GOLDMAN & SPITZER, P.A.90 Woodbridge Center Drive
Woodbridge, NJ 07095
732-855-6047
May 22, 2012