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CONFIDENTIAL Health Care 1 Scott Becker, Partner McGuireWoods LLP Presented to: Webinar September 26 th, 2007 Webinar September 26 th, 2007 Joint Ventures.

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Presentation on theme: "CONFIDENTIAL Health Care 1 Scott Becker, Partner McGuireWoods LLP Presented to: Webinar September 26 th, 2007 Webinar September 26 th, 2007 Joint Ventures."— Presentation transcript:

1 CONFIDENTIAL Health Care 1 Scott Becker, Partner McGuireWoods LLP Presented to: Webinar September 26 th, 2007 Webinar September 26 th, 2007 Joint Ventures and Physician Hospital Integration - Core Items

2 CONFIDENTIAL McGuireWoods LLP – Health Care 2 Joint Ventures and Physician Hospital Integration - Core Items I.Types of Models – Minimum to Maximum Integration II.Types of Providers III.Recent Legal Issues

3 CONFIDENTIAL McGuireWoods LLP – Health Care 3 Joint Ventures and Physician Hospital Integration - Core Items I.Types of Models – Minimum to Maximum A.Minimal Integration Models. We generally view the following as minimal integration models. This generally means that the arrangements are short term and generally do not require the development of partnership agreements or require extensive capital contributions. i.Medical Directorships. This involves an agreement with a physician or physician group who will provide various services to the venture, i.e., administrative services, training of employees and staff, etc., in exchange for a set fee. ii.Management Contracts. These are situations where either the hospital would manage a physician practice or a physician would manage a department of the hospital or some other effort on behalf of the hospital. iii.Gainsharing Efforts. Gainsharing usually involves the hospital and physicians working together to achieve cost savings in purchasing for certain surgical procedures or other procedures and then sharing those savings between each other. While a minimal integration model, these efforts take a great deal of time and effort to put together.

4 CONFIDENTIAL McGuireWoods LLP – Health Care 4 Joint Ventures and Physician Hospital Integration - Core Items I.Types of Models – Minimum to Maximum iv.Under Arrangement Joint Ventures. In the traditional under arrangement joint ventures, a hospital simply buys an existing service from a physician group or similar entity and then bills for the services. This is differentiated from the more extensive under arrangement ventures being put together today and noted below. iv.Part-Time Employment Arrangements. Here, the hospital or a related party employs physicians on a part time basis to provide services to the hospital. iv.Independent Contractor. Here, like an employment agreement, the hospital typically contracts directly with a physician and has him or her provide services on the hospitals behalf. In other independent contract arrangements, such as hospital-based independent contractor arrangements, the physician provides services and bills third parties. Often, there is very little economic difference.

5 CONFIDENTIAL McGuireWoods LLP – Health Care 5 Joint Ventures and Physician Hospital Integration - Core Items I.Types of Models – Minimum to Maximum B.Medium Integration Models. We generally view the following as medium integration models. They require more work and effort to put together than a minimum integration model and often require capital contributions and the development of various partnership type agreements. i.True Joint Venture. Here, the physicians and hospital joint venture to be the actual provider of services. The joint venture provider is developed together. The provider of services bills third party payors and Medicare. This is a typical or traditional model for a surgery center. ii.Equipment, Real Estate or Infrastructure Joint Venture. Under these types of joint ventures, the physicians and hospital jointly invest in an equipment joint venture or real estate joint venture. Then, this venture leases equipment or real estate to either a physician group or a hospital group or both. iii.Under Arrangements Joint Venture. Under this scenario, the physicians and hospital will often put together a much fuller under arrangements venture than under the minimal integration under arrangements. Then, this joint venture will include everything except the provider number and license. Rather than providing services to third parties and commercial payors, it will provide its services to the hospital and the hospital will bill its services as hospital outpatient department services to third parties. These types of under arrangements and joint ventures involve several regulatory risks. Nevertheless, they have become increasingly common and popular.

6 CONFIDENTIAL McGuireWoods LLP – Health Care 6 Joint Ventures and Physician Hospital Integration - Core Items I.Types of Models – Minimum to Maximum C.Full Integration Models. There are also several complete integration models which include the following: i.Income and Employment Through Hospital Directly. The typical full integration generally includes full and complete employment of the physicians. Here, the hospital directly employs physicians. This has the benefit of satisfying the Fraud and Abuse Statute employment safe harbor and the Stark Act employment exception. ii.Hospital Employs the Physicians Through a Subsidiary. Here, the hospital creates a subsidiary company and employs the physicians through the subsidiary. Again, this provides the hospital with increased control of its ability to provide services over time and to control the physicians services. iii.Professional Corporation or Foundation Model. Under this type of scenario, the hospital provides services through a captive or related professional corporation that employs the physicians. Here, we note certain recent IRS private letter rulings regarding UBIT in practice corporations owned by hospitals..

7 CONFIDENTIAL McGuireWoods LLP – Health Care 7 Joint Ventures and Physician Hospital Integration - Core Items II.Types of Providers A.Ambulatory Surgery Centers – Non Stark B.Imaging – MRI and CT - Stark C.Linear Accelerators – Stark D.Specialty Hospitals – Stark but exception currently E.Cardiac Catheterization - Non Stark but Certain Codes F.Dialysis – Non Stark

8 CONFIDENTIAL McGuireWoods LLP – Health Care 8 Joint Ventures and Physician Hospital Integration - Core Items II.Types of Providers B.Non Stark i.True Joint Venture - ASC, Dialysis, Specialty Hospitals but SCHIP Caveat ii.Medical Director iii.Management iv.Some Under Arrangements

9 CONFIDENTIAL McGuireWoods LLP – Health Care 9 Joint Ventures and Physician Hospital Integration - Core Items II.Types of Providers C.Stark i.Medical Director ii.Management Agreement iii.Under Arrangement iv.Equity versus Real Estate Joint Ventures v.Growth in full integration models vi.Equipment, real estate, lease

10 CONFIDENTIAL McGuireWoods LLP – Health Care 10 Joint Ventures and Physician Hospital Integration - Core Items III.Recent Legal and Regulatory A.ASC Payment - 65% of HOPD - Good and Bad – Depends on Acuity of Cases B.Stark – Possible Changes MPFS i.See Exhibit A C.SCHIP Bill regarding Physician Owned Hospitals

11 CONFIDENTIAL McGuireWoods LLP – Health Care 11 Business Departments Capital Markets | Energy & Utilities | Health Care | International | Land Use & Environmental Mergers & Acquisitions, Securities & Corporate Services | Real Estate Transactions | Tax & Employee Benefits | Technology & Business Litigation Departments Antitrust & Trade Regulation | Business & Securities Litigation | Complex Commercial Litigation Environmental Litigation/Toxic Torts | Government Investigations | IP Litigation/Patents | Labor & Employment Product Liability & Litigation Management | Restructuring & Insolvency ATLANTA BALTIMORE CHARLOTTE CHARLOTTESVILLE CHICAGO JACKSONVILLE LOS ANGELES NEW YORK NORFOLK PITTSBURGH RICHMOND TYSONS CORNER WASHINGTON, D.C. ALMATY, KAZAKHSTAN | BRUSSELS, BELGIUM McGuireWoods LLP THE END


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