Healthcare

Among the models found in the healthcare market, joint ventures (JVs) can benefit organizations that have an interest in pursuing a service together. Examples of services operated in JVs include the following:

Recently, thousands of medical transcripts detailing the medical histories of children and adults, as well as notes made by doctors and psychiatrists, were publicly listed on an Internet search engine. Without proper encryption, confidential and extremely personal information was exposed to anyone who wanted to access it.

Today’s urgent care center has become a highly regarded primary care delivery model, sought after by physicians, group practices, hospitals, and management companies because of its unique appeal to providers and patients and its prospects for continued profitability. With busy emergency rooms and longer wait times for primary care clinic appointments, the urgent care center (UCC) gives low-acuity patients a convenient option for affordable primary care. For physician groups, the UCC appeals to the suburban market segment and patients who prefer a no-appointment-necessary format and short wait time for minor injuries or illnesses. For hospitals, the UCC relieves expensive emergency departments and represents a primary care entry point into the system.

Have you taken a look lately at the statistics that tell the story of the future of health care in the U.S.? It’s sobering. The outdated payment model is just one part of the challenge. Between baby boomers retiring and overloading the system with aging patients that need more care, and the doctor pipeline dwindling, there is a fundamental need to change the delivery model before it crashes. 

Medicare turns 50 this week with a number of substantial challenges in its future, and its overall success may be one of the largest contributing factors. When Medicare was created in 1965, nearly half of all seniors in the United States were uninsured. The program covers 55 million people today, providing medical care to one in every six Americans.

C-Suite executives and physicians are inundated with accounts of qui tam litigation and settlements with the Department of Justice over hospital payments to physicians, which serve as a reminder of the risks of payments in excess of FMV. Without going into a detailed legal analysis, it’s safe to say that in most transactions and compensation arrangements between hospitals and physicians who have the ability to refer patients to the hospital, FMV is a requirement for compliance with the most often used exceptions under the Stark law and safe harbors provided by the federal anti-kickback statute.

The ambulatory surgery center (ASC) market has seen a lot of growth and success since first arriving on the scene over 40 years ago. While the ASC market has grown significantly over this time, that growth has slowed in the last 10 years and ASCs now appear to be operating in a “maturing” market. At the same time we are seeing rapid change in the market where ASCs operate and many of these changes may have a significant impact on the value of ASCs. Below are some of those areas that could have tremendous impact on ASC values.

Stipends (or subsidy payments) are an area we are seeing a lot of activity in lately. It is not uncommon in the market for hospitals to subsidize physician groups in order to ensure physician compensation at market levels, particularly in markets that are heavily impacted by low reimbursement rates. From a compliance standpoint, one of the biggest issues is whether or not the subsidy payment represents fair market value (FMV). While it may seem straightforward, taking a physician group’s historical income statement (or in cases of a start-up venture a financial statement projection) at face value for paying a stipend is a bad idea. Why? Because without dissecting the various components you don’t really know what drives that number. You don’t know if market factors contribute to the loss, if the practice’s loss is due to internal operating characteristics or, as in many cases, a combination of both. So what do you look for? Below are three critical areas of any group’s income statement that should be examined, and if necessary adjusted, to determine true market driven subsidy needs.

Two days into the 2015 Annual Meeting, two important fair market value (FMV) and commercial reasonableness (CR) issues stand out as worthy of emphasis, as they resonate in almost every discussion on hospital/physician deal compliance.

Bold and provocative keynote speaker Ezekiel J. Emanuel presented top trends in healthcare to more than 1,400 members on day one of the AHLA Annual Meeting in Washington, D.C. Of the mega trends Emanuel predicted, we anticipate the following three trends will impact the healthcare industry sooner rather than later.

As you know by now, the U.S. Supreme Court issued an opinion yesterday allowing subsidies in states using the federal healthcare exchange. In other words, the decision was a big win for the ACA. Details of the opinion in King v. Burwell are available from many sources, so I won’t rehash them here. I plan to discuss the effects of this ruling in greater detail in a later blog. Today, I would like to offer three brief observations from yesterday’s decision.

There have been several times over the years when a hospital client has contacted me asking me to determine fair market value in response to an offer from a competitor attempting to hire or exclusively contract with the hospital’s physician(s) or physician group. In some cases the competitor has offered the group compensation that far exceeds existing compensation. Many times the first question the client asks is for us to prepare a FMV report that supports the competitor’s offer price, or in some cases exceed it. This is often where the problems begin. 

“I only want you to tell me what the doctor’s practice is worth. I will worry about her salary. Why do you care about compensation anyway?”

This is a common response from clients when we ask for post-acquisition physician compensation as an input to determine fair market value of the physician’s practice in a potential acquisition. Hospitals sometimes try to compartmentalize physician practices by looking at the value of the business apart from the value of the physician’s services. Because medicine is a service-based industry, however, value is largely dependent on income from physician services, and physicians expect compensation for such services. Therefore, you cannot consider the value of a physician practice without considering the value, or cost, of its primary income generator, the physician.