Medical group acquisitions by hospitals will likely continue at a significant rate. Through these acquisitions, physicians can achieve efficiencies and economies of scale that may not be available to independent practices. While an acquisition offer might come as a welcome opportunity, the process involves a series of complex issues that can seem overwhelming. There are many steps that physician practices can take to help them seize opportunities and minimize issues that might delay or derail a deal.
  • Preparing the Existing Entity Most doctors choose their career because they want to practice medicine, not run a business. Physicians considering an acquisition should make sure that their corporate records are in order. This includes ensuring that required filings have been made with regulatory agencies and that necessary documentation reflects the decisions of the practice's directors, shareholders, members, or managers.
  • Establishing the Management Structure Groups that are being acquired must address how future decisions will be made. Governing documents should clearly spell out who will make decisions and the input of the acquiring entity.
  • Understanding the Elements of an Acquisition Agreement Every acquisition requires an acquisition agreement, which serves as a road map for the transaction and describes in detail the valuation of assets, the collection of accounts receivable for services provided by the physicians prior to the acquisition, the handling of liabilities, employees retention, indemnification of claims arising before the acquisition and insurance to cover those risks.
  • Understanding the Importance of Employment Agreements The parties to an acquisition should enter into a compensation agreement with each physician involved in the acquisition. This agreement should specifically address the duties of the individual physician, including the number of hours the physician is expected to spend seeing patients, office locations covered, supervision of other physicians or staff, administrative duties and call coverage responsibilities. Furthermore, the types of benefits provided to physician owners should be set out in detail. Finally, any non-competition provisions should be carefully addressed.
  • Tackling Regulatory Issues Physicians should consult with their advisors to determine whether the acquisition will require new Medicare and Medicaid provider numbers, CLIA filings or other governmental filings. Parties to an acquisition will also want to ensure that they are in compliance with the Stark Law, as well as other federal and state anti-kickback regulations.
  • Reviewing Other Existing Contracts It is also important to review other existing agreements to determine whether any action is necessary as a result of the acquisition. For example, an acquisition may require re-credentialing with managed care companies, or a notice to the landlord may be required for the lease to be assigned. Bank documents, such as loans or lines of credit, may also require attention prior to an acquisition.
  • Poised for Success The acquisition of a physician practice can ultimately result in tremendous rewards for all parties involved. But with all the variables to consider, it is wise to make sure that physicians understand all of the components of an acquisition to ensure that the acquisition benefits all parties involved.
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