Investment deals with physician groups and management service organizations require careful structuring and scrutiny due to state and fendearl laws and contractual pitfalls
RESTRICTION
Most states bar nonphysicians from owning or controlling physician practices or employing physicians.
RESPONSE
Private equity firms generally invest through management services organizations that support the practices, which receive fees for their services.
REQUIREMENT
The management services organization should not charge a management fee tied to the practice’s net profit but instead should charge a flat fee, said Gary Herschman, an Epstein Becker & Green attorney. The practice also must retain control over all clinical matters, said Yale Bohn, a Pepper Hamilton attorney.
RESTRICTION
Most states bar unlicensed individuals or business entities from sharing in a medical practice’s professional fee income, called fee splitting.
RESPONSE
Private equity firms and management services organizations must carefully structure management fees.
REQUIREMENT
Private equity firms and management services organizations generally should avoid tying management fees to a percentage of practice revenue.
RESTRICTION
State and federal anti-kickback laws generally bar any remuneration in exchange for patient or healthcare business referrals.
RESPONSE
Carefully structure management fees.
REQUIREMENT
Again, it’s safer for management services organizations to charge fixed fees for their services, and the fees should be set at fair market value, Herschman said.
RESTRICTION
Federal fraud and abuse law bars medical providers from ordering medically unnecessary services or procedures for Medicare or Medicaid patients.
RESPONSE
Pay close attention to the structure of productivity and billing measurements for physicians.
REQUIREMENT
Avoid creating incentives that pressure doctors to provide medically unnecessary care.
RESTRICTION
Private equity firms generally mandate that physicians sign noncompete agreements that limit or bar the doctor from practicing in a specified region or even in the same state if they leave.
RESPONSE
Physicians should review terms carefully to protect their ability to continue practicing medicine after they leave.
REQUIREMENT
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