Another payer-related issue that is important to understand is that rates set by payers in payer contracts are often case specific. When there is a change of control in ownership, the payer may terminate the existing contract and create a new contract with the practice, which may have different reimbursement rates. Therefore, a potential buyer must realize that rates may change and should anticipate this change when determining whether or not to invest in the practice.
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September 2016
“A critical first step in any healthcare transaction is to understand the licenses that the practice has and the specific processes necessary to transfer the licenses or obtain new ones.” —Stephen M. Harris, Esq.
Regulatory Filings and Licenses
Another critical and often intimidating process involved in a healthcare transaction is navigating the regulatory filings necessary to operate the practice. Often, when a medical practice is purchased or changes ownership, new licenses need to be issued by the appropriate state, county, or agency. These licenses often require a lengthy application, which can include anything from a description of the types of services the medical practice will provide to background checks and fingerprinting of each individual owner.
Each state, county, and agency has very specific time frames during which new licenses must be obtained, sometimes even before the transaction can close. Therefore, a critical first step in any healthcare transaction is to understand the licenses that the practice has and the specific processes necessary to transfer the licenses or obtain new licenses, depending on what the state, county, or regulatory agency requires. This analysis is often quite complicated, so employing an individual or firm who has experience with your specific type of transaction or who has experience with the specific licensing entity or agency you are seeking licensure from may be extremely valuable.
Anti-Kickback and Stark Law Concerns
Another issue associated with a healthcare transaction is whether the sale violates any federal or state laws, including the Anti-Kickback Statute and the Stark Law.
The Anti-Kickback Statute (under 42 U.S.C. §1320a-7b(b)) prohibits anyone from offering, soliciting, paying, or receiving anything of value to induce referrals of items or services covered by federally funded healthcare programs, including Medicare and Medicaid. The purpose of the statute is to ensure that physicians’ medical decisions are based on the needs of individual patients instead of improper incentives or drivers.
The Stark Law (under 42 U.S.C. §1395(nn)) is a set of regulations that prohibit physician referrals of designated health services under Medicare and Medicaid to an entity when a physician (or his or her immediate family members) has a direct or indirect financial relationship with that entity, unless the referral fits into a specific exception outlined in the regulations. Multiple exceptions to the Stark Law include referrals made to other physicians in the referring physician’s group and in-office ancillary services.