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Steps 3, 4, 5, 6, and 7 in Doing a Healthcare Deal (Correctly)
Step 3 – Identify the governmental agencies that have authority over the deal
- Are there any notices or approvals required?
- What are the licensing requirements?
- Will a change in control occur?
- Is a new provider application/number needed?
- Is a CON needed? An inspection?
- What effects will the deal have on any accreditation needed by the parties?
- What is the timing of agency requirements vs. closing the deal?
Step 4 – Identify the third party payors that will be involved
- Are the services to be performed as a result of the deal reimbursed by Medicare?
- Medicaid?
- Other federal or state programs?
- Commercial payors?
- What credentialing/provider applications are needed?
- Do any payors have special requirements that must be satisfied before closing the deal?
Step 5 – Identify the due diligence requirements
Remember that a healthcare deal starts like any other deal, and the parties must do their basic due diligence about each other
- Entity organization and ownership
- Legal authority
- Financial statements, assets and liabilities, liens
- Contracts and commitments, leases
- Employees and benefit plans
- Taxes
- Insurance
- Litigation
Step 6 – Identify the healthcare due diligence requirements
- Licenses and requirements applying to transaction
- Equipment and inventories
- Cost reports, inspections, regulatory correspondence
- Quality of care, malpractice claims/insurance
- Patients records, EHR compatibility, billing software
- Managed care/provider agreements, liability, assignability
- Subcontractors/suppliers
- Stae law requirements
- Fair market value
- Commercial reasonablenessFair market value and Commercial Reasonableness — These are the critical underpinnings of every healthcare deal. What is being given, what is being received, and is it commercially reasonable?Get an opinion from a qualified healthcare valuation expert to support the FMV.
Step 7 – Document the Deal
- Documentation is a critical step in protecting the parties, achieving the goals of the deal, and meeting compliance requirements. Stark Exceptions and Anti-Kickback Safe Harbors impose specific requirements on deal documentation.
- Should the parties enter into a nonbinding letter of intent/memorandum of understanding?
- Pros – helps the parties determine whether there has been a meeting of the minds prior to devoting substantial time and expense and helps manage expectations and reduce surprises.
- Cons – can consume an inordinate amount of time prior to due diligence being completed and lock the parties into unrealistic positions.
Next time — How to screw up the deal that everyone wants.
Justice Department Hits Physician Owned Distributorships (PODS)
For the first time, the Department of Justice (DOJ) has fired a shot at a
physician owned distributorship
(POD). In the case, the DOJ suit claims that the ownership interest of a neurosurgeon in a spinal surgery device distributorship has caused him to perform unnecessary surgeries.
PODs have been the source of considerable controversy for years. A couple years ago, they caught the attention of Congress. The Office of Inspector General of the Department of Health and Human Services (“OIG”) has even issued a Fraud Alert making clear their dislike of PODs and sending a clear shot across the bow of those who are in that industry. In 2006, the Office of the Inspector General of HHS and CMS expressed major concerns about PODs, and cited concerns about “improper inducements.” At that time, the OIG stopped short of prohibiting them, but called for heightened scrutiny. CMS itself has stated…
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Phoning It In – Florida’s Brand New Telemedicine Law
By:
Jackie Bain
Until recently, the State of Florida has successfully avoided regulating telemedicine to account for advancements in technology. In 2003, the State issued standards for telemedicine prescribing practice for medical doctors and doctors of osteopathy, but has not formally revisited its position in light of increasingly common telemedicine practice in several states – until now.
Florida’s forestalling has officially come to an end. The State recently enacted new physician standards for telemedicine practice, and the State legislature is presently considering further regulation. These new standards do not impinge upon the prior standards for telemedicine prescribing practice, but are issued in conjunction to it.
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Steps 1 and 2 (of 7) in Doing a Healthcare Deal (Correctly)
Step 1 – Describe and Understand the Deal
- Why?
- What is it that is hoped to be accomplished?
- Why is that a good outcome?
- Does it make sense? I.e., is it commercially reasonable?
- Is the deal more than just about referrals and money?
- What happens if a regulator “follows the money”?
- How will the deal affect others – patients, employees, physicians, competitors, the community, etc.?
- What are the tax effects?
- Engage legal, accounting, valuation, and other professional consultants early in the process to review the proposed deal.
Step 2 – Identify the Parties to the Deal
- Who is involved (medical professionals, background)?
- Why are they involved?
- What do they bring to the deal?
- When did they get involved?
- Who got them involved?
- What does each party hope to achieve?
- Are the goals reasonable?
- Are the goals legal and ethical?
Dos and Donts of Deal Making in Healthcare
Last week, I presented at a webinar sponsored by the American Association of Orthopaedic Executives. The topic dealt was “2014 Healthcare Compliance.” You can access the entire PowerPoint presentation at SlideShare.
I spoke about the dos and don’ts of healthcare deal making. The focus was on deals with physicians, but the concepts are applicable to deals involving all types of healthcare providers. Below I summarize my Rules of Thumb for healthcare deals:
Rules of Thumb for Healthcare Deals
- RULE #1: Just because a proposed deal makes sense and would be appropriate in a business other than healthcare, doesn’t mean it’s legal. (Corollary — Just because everyone is doing it, doesn’t mean it’s legal.)
- RULE #2: Determining the legality of a healthcare deal can be complicated, time consuming, expensive, and inconclusive.
- RULE #3: The risks of doing an illegal healthcare deal far outweigh the benefits.
- RULE #4: Get professional help early in the deal.
In subsequent posts, I will discuss steps in the deal and ways to screw up the deal.
Back to Posting on the Good, the Bad, and the Ugly of Healthcare and Healthcare Reform
It’s been several months. Where has the time gone?
I have been watching the unraveling of the foundations of the Affordable Care Act. I have been depressed that the unraveling is coming from the President.
Then I saw the Republican “Plan” and I had hope. Oh, yes, they can’t stop talking about repeal, but that’s not really what their Plan is about. It is about improving.
It has always been my belief that our Republican elected representatives, patriotic men and women of good will, would adopt many of the same positive aspects of Obamacare, if they thought about it and shook themselves free of the closed and narrow minded of their constituents. Access to health insurance, no preexisting conditions … I mean, who does not support these items in Obamacare?
Implementing is where the Republicans always fall short, because they refuse to take any step that would look like our government is actually governing. A Republican omelet must look like a pan with eggs rolling around in it, since they have no stomach for breaking any.
I have hope that moderates of both parties follow the mandate they have had but have refused to acknowledge as they listened to the ranting of the flatworlder/Tea Party members.
By the way, in case you wondered …
Ohio Decides to Expand Medicaid
As reported in “Action of Ohio Controlling Board on Medicaid Expansion” posted on Bill of Health, a blog sponsored by the Petrie-Flom Center at Harvard Law School:
On Monday, October 22, at the urging of Governor Kasich, the Controlling Board of the Ohio Legislature voted 5-2 to accept $2.5 billion in federal funding to expand Medicaid in the State of Ohio. Under the laws of Ohio this action was valid.
Illuminating an illness without end: Fellows Friday with Jennifer Brea
Could someone without healthcare insurance and only showing up at an ER, looking for charity care, ever have been diagnosed or treated appropriately?
The Need for Physician Leadership Development
It is critical now that medical practices take the steps needed “to retain, develop, and align [its] medical staff to meet the challenges of a fast-changing and highly competitive healthcare landscape.” Good physician leaders can help achieve those goals. This is the message in a recent post from Physicians Practice, “Medical Practices Must Focus on Physician Leadership Development.”
Equally important, however, is the need for physician leaders to see and develop opportunities as a result of forces in the very fast moving healthcare environment outside of their own medical practices.
Questions, like the following, are constantly swirling around medical practices, and I fear they are as often ignored as they are avoided:
- Should we align with the hospital?
- Should we join a large physician group?
- Should we develop our own super group?
- Should we join the hospital sponsored clinically integrated network?
- Should we start our own network?
Hospitals and venture capitalists have the money, the time, and the leadership to develop and pursue healthcare business opportunities, and they are doing so. They are taking the lead in presenting answers to these questions. Physicians are at a disadvantage, because they rarely have the money or the time or, unfortunately, the leadership to be proactive in evaluating and accepting or rejecting opportunities as they present themselves.
If survival as independent practices is the goal, then in this highly competitive business environment, physician leadership has never been more important. This has been the message of many physician practice commentators, including Kevin Pho, M.D. on his blog, as well as physician leadership training programs like the one done at the University of Cincinnati.
No one is waiting for physicians to step. When they do, they can control their professional destiny. When they don’t or can’t, others will be in control.
Sore from being Kicked
Republicans make a lot of hay pointing out how health insurance premiums available on the health insurance exchanges have increased for many Americans. Where this is true (and is not true in all states), it is the result of many factors. Some of the increase is the result of more benefits being provided as required by Obamacare, some of the increase is the result of the prohibition against denying coverage because of pre-existing conditions and related protections under Obamacare, and much is the result of bad decisions (both historically and recently) by state legislatures or governors or both. Some of these decisions were made for the sole purpose of hurting the implementation of Obamacare — e.g., refusing Medicaid expansion, not setting up a state exchange, not exercising authority over insurance rates, etc.
No one wants to pay more for the health insurance they already had. Some increase may have been inevitable. However, we should make sure to place much of the blame on short-sighted political shenanigans aimed at thwarting healthcare reform at the expense of people. I have written before about Florida’s Governor Rick Scott and his campaign of lies and deceit against Obamacare which many Florida Cabinet officers and Department heads and State Legislators have endorsed. Apparently, Wisconsin’s Governor Scott Walker is just as bad — health insurance premiums for Wisconsin residents will be 79% to 99% higher than those for Minnesota residents because of him.
Yes, there have been some pretty horrendous computer network issues at the exchanges that have frustrated and dissappointed those seeking to get health insurance.
But can’t we all agree that there is a difference between the unintended (even negligent) computer snafus on the one hand and the deliberate behavior seeking to do harm on the other? As Oliver Wendell Holmes, Jr. wrote in The Common Law, “Even a dog distinguishes between being stumbled over and being kicked.” Frankly, I’m a little sore from being kicked.
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