February 23, 2005
The healthcare community is entering a new era of partnering as physicians and hospitals continue to search for the right balance in ownership or participation in healthcare facilities, service lines, and ancillary revenue income streams.
The scene has changed dramatically, however, from the surge of mergers and acquisitions in the last decade. Not only have market conditions changed, but new models have emerged in physician/hospital transactions and ventures.
Critical Considerations for Hospital/Physician Ventures and Transactions
In an HFMA Audio Webcast earlier this month, Roger Strode, senior partner with Quarles & Brady, Milwaukee, outlined the key strategic, business, physician relations, and legal questions to ask when considering a venture or other transaction involving physicians:
Strategic
- What do we want to accomplish with a venture with our physicians?
- What percentage of the service line market do we currently control?
- Where is this service line going in the next 3-5 years?
- Can we increase our market share with a joint venture?
- What is our exit strategy?
Business
- What is the cost/benefit of doing nothing?
- How will the deal be financed?
- How will the venture be reimbursed?
- How will the venture be managed?
- Will there be a "halo" effect that will produce additional volume for the hospital?
Physician Relations
- Are we prepared to partner with physicians...really prepared?
- How will the venture affect physicians who are left out of the deal?
Legal
- How will the venture be taxed? What impact will it have on our tax-exempt status?
- What are the certificate of need requirements or restrictions?
- Have self-referral concerns under the Stark laws been addressed?
- Have reimbursement arrangements been clearly defined and passed legal review?
- Have structural issues, including type of legal entity, governance, and capitalization passed legal review?
With a clear picture of your entity's business needs and strategic goals, careful planning, and a willingness to work cooperatively with your business partners, it is possible to craft mutually beneficial business partnerships.
SOURCE:
Physician-Hospital Joint Ventures: Splitting up the Health Care Pie -- Emerging Models, Business and Legal Issues, February 3, 2005, HFMA Audio Webcast
Additional Resources
- Splitting the Healthcare Pie: Real-World Strategies to Develop Effective Hospital/Physician Transactions and Ventures, HFMA Spring Seminar (March 14, San Francisco, CA)
- HFMA Principles & Practices Board Statement No. 20: Healthcare Mergers, Acquisitions, and Collaborations
- HFMA Principles & Practices Board Statement No. 19: Transactions Among Affiliated Entities Comprising an Integrated Delivery System
- From the hfm online archive (Available to HFMA members only. Not a member? Join today!)
1. Strengthening Hospital-Physician Relationships, December 2004
2. Healthcare Joint Ventures: A CFO Primer, October 2004
3. Dividing A Trillion-Dollar Pie, April 2004
4. OIG Targets Contractual Joint Ventures, September 2003
- Hospital-Physician Joint Ventures: Federal Regulatory Requirements, 2004 Annual National Institute session recording
If you have questions or comments about HFMA Wants You to Know, contact editor Laura Noble.
HFMA Wants You to Know ISSN: 1540-0697. Volume IV, Issue 4. Copyright 2005, Healthcare Financial Management Association. All rights reserved.