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Archive for December, 2012

Physician Integration – Some Things Never Change

Tuesday, December 11th, 2012

Physician integration has been around since the early 1990s; at least I have been working on integration transactions since then.  There was a ground swell of integration transactions in the mid 1990s during the “great Clinton health care reform scare.”  I have a post coming soon that will bring back some memories for some of you from those early days of integration.   I was recently reflecting on how physician integration has transformed over the years.  There are some new laws out there and we have more to go on for legal guidance when structuring provider organizations.  On the other hand, a lot of what lies at the core of physician integration, the part where the “rubber meets the road,” has stayed fundementally the same.  Those physicians and groups who have not already thrown the towel in with a major health care system are looking for ways to stay independent.  In many cases, their best bet is to integrate with other independent providers.

Here are a few insights from a health care attorney that has been involved with physician integration for longer than he cares to mention:

  1. Federal and state antitrust laws are still the primary laws governing the structure of these organizations.  Without antitrust laws, physicians would stay in separate groups and just band together informally to contract with managed care plans.
  2. You still need to be clinically or financiallly integrated in order to pass the antitrust “sniff test.”
  3. There is more definition regarding what it takes to become clinically integrated than there was “back in the day.”  That is the good news.  The bad news is that it is probably more difficult to clinically integrate than we thought it would be back in the 1990s.
  4.  Group practices without walls are now called “divisional models” groups and come in all shapes, sizes and forms.  They are still the same thing; but someone thought it would be “cooler” to call them “divisional mergers.”
  5. My guess is that a lot of the “divisional mergers” are actually “failed mergers” waiting to be called out because they have only a very minimal amount of actual integration.  A lot of people are trying to slice the pie to thin and we might just see some of these models be put to the test in the near future.  Some of the new divisional model groups are integrated on a shoestring and the FTC is beginning to look at their structure to determine whether they are truly a “single actor” for antitrust purposes.
  6. The Stark Law has expanded to govern treatment of designated health services in integration transactions.  Back in the day, when we first started doing these transactions, the Stark Law was new and only applied to one line of service, clinical laboratory service; that is unless you were lucky enough to be in a state like Florida that had its own anti-referral law.
  7. Compliance issues have come to the forefront as a significant part of these integration transactions.
  8. Just like back in the olden days, there are plenty of people out there who will tell you exactly what you want to hear.  They usually have something to gain from you moving forward into a combined group; even if the combination is on a shoestring.  I am tempted now to go into a “you might just have an antitrust issue” tirade at this point.  But I will hold off on that for a later post.

 

Compliance Issues In Health Care Mergers and Acquisitions

Tuesday, December 11th, 2012

There is a current trend in the health care industry toward mergers and acquisitions.  As providers consolidate, acquisition issues, such as due diligence, become major issues.  Transitional attorneys are well versed in the routine of transactional due diligence.  Health care and compliance attorneys are often asked to become involved in defining the appropriate scope of health care compliance due diligence in the context of a merger and acquisition transaction.

The structure of the contemplated transaction has a major impact on the scope of due diligence that should be performed regarding health care compliance areas.  Where the Medicare provider number of the acquired organization is part of the deal, robust audits of billing and compliance practices is necessary to identify any potential false billing or overpayment claims.  In this type of transaction, the acquiring provider will certainly have successor liability for all matters that took place (or did not take place) with respect to the provider number prior to closing.

Even when the provider number is not acquired, the transaction needs to be structured in a way that minimizes exposure to successor liability under state law.  Even when structured in a manner that insulates a provider from past liabilities, as a practical matter, the past methods of doing things will be carried on the acquiring entity following the acquisition.  Billing practices will carry forward for some period of time.  Referral relationships may exist without a written agreement being in place as required under state law exceptions or safe harbor rules.  It will take some period of time to identify specific problems that might be carried forward into the new organization, even under the most robust compliance program.

 In any event, the compliance perspective should be involved to provide insight as part of every health care acquisition.  The scope of compliance needs to be appropriately scaled to reduce potential risk exposure to the acquiring organizations.

For more information regarding health care mergers and acquisitions, contact John Fisher, II at Ruder Ware.

John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
500 First Street, Suite 8000
P.O. Box 8050
Wausau, WI 54402-8050

Tel 715.845.4336
Fax 715.845.2718

Ruder Ware is a member of Meritas Law Firms Worldwide

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