Transcript Physician Practice Affiliation and Acquisitions and Risk Management

Physician Practice Affiliation and
Acquisitions and Risk Management
Joel Schuessler and Greg Hinesley
May 12, 2016
Georgia Society for Healthcare Risk Management Annual
Meeting
Agenda
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Outline of General Process
General Legal Principles
Acquisition Models
Pre-acquisition evaluation points
Post-acquisition integration points
Questions
General Acquisition Process
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What is your overall strategy in acquisition?
• What are your specific goals in pursuing employment of physicians?
• Do you have the 5Cs in place?
• Competency
• Capital
• Competition
• Comparable Alternatives
• Communication
Why are you considering acquisition of a particular physician practice?
• Payment Reform
• Community Need
• Hospital/Physician Integration and Alignment
• Existing referral patterns
• Technology consolidation
General Acquisition Process
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What do you know about the practice?
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Negotiate the deal
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Past experience with physician(s)
Initial Discussions
Due Diligence – will it happen early, will it happen late, do you need an NDA?
Basic acquisition structure – assets vs. entity purchase
How is purchase price being determined?
How will ongoing pay be determined?
Set physician expectations
Set executive expectations
Close the deal
Integration
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Post closing – put the employment model into place
General Legal Principles
• Major Healthcare Regulatory Schemes
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Stark Law
Anti-Kickback Statute
Antitrust
Corporate Practice of Medicine and CON
HIPAA
• Liability Principles
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Impact of acquisition structure on past liability
Vicarious liability
Insurance coverage
• Employment Related Issues
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EEOC/DOL
Pension/Retirement Plans
Basic Acquisition and
Affiliation Models
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Space and equipment leases
Call coverage agreements
Medical directorship agreements
Co-management agreements
Professional services agreements
Sale of equipment/asset purchase
Stock/entity purchase
Basic Acquisition and
Affiliation Models
• Space and equipment leases
• Call coverage agreements
• Medical directorship agreements
• Can carry varying degree of regulatory risk – Stark, Anti-Kickback
Statute, etc.
• Carry relatively low additional liability risk
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Generally structured as leases and/or independent contractor agreements.
Each party retains responsibility for own acts
Require physician to carry appropriate professional liability insurance
Medical director agreements typically require hospital to provide coverage for
medical director, but services should be administrative not clinical
Basic Acquisition and
Affiliation Models
• Co-management agreements
• More significant integration and alignment
• Typically one or more physicians will agree to provide management
services for a clinical service line
• More significant regulatory risk – need to be well vetted and
reviewed by legal advisors and fair market value consultants
• Liability risk can be higher for physician entity because of
responsibility taken to actively manage hospital services
Basic Acquisition and
Affiliation Models
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Personal Services Agreements
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Common structure to “straddle” line of employed vs. independent
Common structure is for physician or physician group to agree to provide professional
services on behalf of hospital entity.
More common when significant ancillary services are part of the acquisition – large
capital equipment, surgery centers, etc.
Pros
• May be easier to unwind if physicians and hospital decide to part ways
• Gives physicians ability to tell colleagues they remain independent
• Can encourage integration
• Limited risk to hospital for past acts of physicians
Cons
• Can carry high degree of regulatory risk
• Carries risk of vicarious liability concerns for hospital under agency theories
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Basic Acquisition and
Affiliation Models
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Asset Purchase with Employment
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Most common approach to practice acquisition.
Common structure is for hospital to purchase assets of practice and couple with
employment agreement
Pros
• If well managed, gives highest degree of integration between hospital and
physicians
• Creates “owners” vs. “renters”
• Less risk to hospital for past acts of physicians than stock purchase
Cons
• Can carry high degree of regulatory risk based on structure of both $$ allocated
to asset purchase and to on going compensation
• Harder to unwind if hospital and physician are not a good fit
• Increases liability risk for hospital on an overall basis – vicarious liability
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Pre-acquisition Evaluation Points
• Develop your due diligence check list EARLY – before you get
to basic agreement on outlines of deal terms.
• Will this be a phased acquisition – i.e. purchase agreements
signed with continuing due diligence after or is it done at the
time of signing?
• What is the anticipated deal structure?
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Pre-acquisition Evaluation Points
• Asset and stock/entity purchase due diligence questions:
– What specialty is the physician in to evaluate general risk patterns?
– Do you have a loss run or other information on past claims? Have you or others on
the deal team spoken to other physicians in the community about practice
patterns?
– Do you understand their current insurance structure?
– Will you be asked to pick up a retro date for past acts, or will the physician come
“clean” to you? Have the physicians diligently reported any claims or potential
claims?
– If you are not paying for tail or picking up a retro date, is the physician required to
continue coverage or buy his/her own tail?
– How is your current insurance program structured?
• Are you self insured? Will you place the physicians in that program?
• If you have a large self insurance retention, how will physician claims be addressed?
• If you commercially insure the physicians – will you have a gap between commercial insurance
and excess?
• Will adding the physician(s) impact your premiums and/or actuarial analysis?
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Pre-acquisition Evaluation Points
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Asset and stock/entity purchase due diligence questions:
– Equipment
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What is the age of equipment?
Is there deferred maintenance? Is it safe to continue using for patients?
– Staff
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What staff will come over as a part of the transaction?
How has staff been trained? What is the mix of licensure – are staff potentially performing tasks that they are
not licensed for?
– Medical Records
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How will old medical records be retained and accessed – continuity of care concerns
– Contracts
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What contracts are being assumed?
Are there unique or unusual contractual provisions that will impact your potential exposure post acquisition?
Stock/Entity Purchase:
– You are acquiring all liability for past acts – due diligence requirements are much higher
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Post-acquisition Integration
• Partnership with operational teams to evaluate processes
• First touch with new physicians should be positive
– Non-hospital based practices likely have processes that will need revision
and analysis – don’t freak out!
• Develop a risk assessment tool to be implemented shortly after
onboarding
– How soon after initial employment will first touch be?
– Frequency of auditing – once, multiple times, annually?
– Who will complete the assessment – risk mgmt staff only, risk mgmt and
practice, practice self assessment?
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Post-acquisition Integration
• Risk Assessment Topics to Cover:
– Patient rights and Advance Directives – presence and quality of forms,
documentation processes
– Privacy – appropriate HIPAA forms, appropriate storage of charts and
patient information, office practices to ensure confidentiality of
discussions
– Cultural Competency – availability of translation, language assistance and
hearing assistance services
– Medication use and safety – processes for medication reconciliation,
storage, preparation and use of any in-office medications and vaccines,
documentation of medication and vaccine administration, drug sample
inventory and use processes
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Post-acquisition Integration
• Risk Assessment Topics to Cover:
– Informed consent – processes for obtaining consents, documentation
of consents
– General Safety – appropriate equipment available for patient
population (children, bariatric, etc.), processes for chaperones during
intimate examinations, routine assessment (and resolution of any
identified concerns) of equipment function and environmental safety
factors
– Credentialing and competency – processes for assessing competence
at initial hire and on an ongoing basis
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Post-acquisition Integration
• Risk Assessment Topics to Cover:
– Office practices – policies on cancellations and missed appointments, phone triage
practices, telephone advice and follow up practices, follow up on lab and other
diagnostic exam results, documentation of patient interactions with staff other
than physicians
– HIM – timely, accurate, complete documentation, practices for ensuring
appropriate access to records when needed clinically, processes for ensuring no
inappropriate access to records for confidentiality purposes
– Communication and teamwork – processes and practices on communication of
clinically significant information, general working environment, staff willingness to
voice concerns
– ADA
– CLIA
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Questions?
Comments
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