Local Office Blogs

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June 1, 2016

Information security presents a particular challenge to hospitals, physician practice groups, ambulatory care centers and other healthcare organizations. Unauthorized users have shown high interest in healthcare records and data, and according to the Ponemon Institute, the cost of breached healthcare data can be upwards of $363 per record. Additionally, healthcare organizations have rigorous compliance requirements they must regarding protection of patients’ sensitive data.

Securing information from hacker groups and staying compliant with federal agencies requires a robust risk management strategy. A key component of any risk approach is to focus on the areas of highest interest to your organization. The Health Insurance Portability and Accountability Act (HIPAA), information technology and physical loss of data number among the three most common information security risks healthcare organizations are up against. Steps should be taken to evaluate these three areas and the processes your organization is using to manage them. Read the full article.

September 1, 2015

Several of our past articles have focused on hospital employment of physicians and the related issue of physician compensation.  As we are all aware, any compensation arrangement between a hospital and physician must meet a litany of regulatory constraints, mainly those implicating the Stark Laws, the Anti-Kickback Statute, and the IRS regulations of not-for-profit entities.  Often, hospitals find the easiest way to avoid problems with Stark and the Anti-Kickback Statute is to meet the employment exception.   However, we have encountered a number of situations where a traditional employment model does not meet the needs of the physicians or the hospital.  In this article, we will discuss an alternative to traditional employment of physicians, a Professional Services Agreement ("PSA").  A PSA relies on the personal services exception and is gaining popularity for reasons discussed below.

Overview of a PSA Relationship

A PSA model allows a physician practice to remain intact, while assigning to the hospital the right to bill and collect professional fee-for-service revenue. The hospital then compensates the physician practice for the clinical services at a Fair Market Value rate.  As a result, the hospital becomes the practice's sole source of professional revenue and the hospital is then responsible to negotiate contracts and collect payments from third party payors and patients.

Typically, all clinical providers (physicians and non-physician providers) remain employed by the physician practice. The structure of the PSA payment can be customized to the needs of the parties, but is generally based upon work relative value units ("wRVUs") and a defined conversion factor, as agreed upon by the parties. It is important to consider what items will be reflected in the wRVU conversion factor. The rate can be set to include only compensation for professional services rendered, or can be "built up" to include consideration of benefits such as payroll taxes, retirement benefits and malpractice. 

In addition to professional clinical services, the hospital may choose to contract for support services and overhead from the physician practice. Support services and overhead can be structured in a variety of ways to allow the necessary resources to provide clinical services.  For any such services or costs contracted through the physician practice, we typically see a Management Services Agreement or other contract.

The hospital has the option of purchasing hard assets from the practice, or leasing them, at fair market value.  Likewise, the hospital can either employ the non-clinical staff directly, or lease them from the physician practice. In addition, the hospital can directly assume overhead expenses, such as rent, utilities, billing fees, supplies and malpractice, or reimburse the physician practice for appropriate expenses. Such expenses can be reimbursed based upon actual invoice cost, set at a "not to exceed" reimbursement, or can be paid directly by the hospital. Any expense that will not be directly controlled by the hospital should be addressed in an agreed upon budget and reviewed annually. 

Reasons to Consider a PSA

Many physicians are reluctant to enter into a full employment agreement for a variety of reasons. Some physicians find that PSAs are advantageous because they are able to keep their physician practice entity and maintain some level of control over the following:
• Distribution of physician compensation
• Retirement benefits and other discretionary expenses/benefits
• Leverage from other physicians and mid-level providers

In addition, similar to employment, the risk of collections is transferred to the hospital and the physician practice is insulated from payor contracting, payor mix and indigent or charity care.

Hospitals benefit from a PSA model because it allows them the opportunity to align with physicians in situations where employment has not been a viable option.  Hospitals often view the PSA model as a transitional model, with the hope of future employment. 

Compliance and Fair Market Value

Due to the numerous regulatory constraints discussed above, in addition to Fair Market Value considerations, it is critical to include legal counsel and valuators during the transaction process.

The PSA model is one of many alignment strategies available to physicians and hospitals. PSAs can take many forms, and contemplating the appropriate structure is complex. However, when appropriately structured, implemented and administered, PSAs may serve as a good alternative to traditional physician employment.

In future articles, we will expand on various strategies in aligning hospitals and physicians in the ever-changing, complex and highly regulated world of health care delivery.

The CBIZ Kansas City Healthcare group has more than 100 years of combined experience helping Hospitals and Health Systems form strategic relationships with their physicians. Our experience enables us to work with our clients considering the goals of the various constituents, in light of the regulatory constraints such as Stark, the Anti-Kickback Statutes and the IRS.

June 5, 2015

The Phoenix office is lucky to have Zandra O'Keefe, Managing Director in the Tax Department, on our staff. She is extremely knowledgeable and highly trained in the area of healthcare tax. She has worked hard to build out a successful healthcare segment that includes numerous physician-owned practices. Zandra spends a significant amount of her time tending to her current client base which includes keeping them up to date on the latest information regarding their taxes. She is routinely asked to author and/or contribute to multiple healthcare publications with her tax tips and updates. Please see below for a listing of her latest articles. Thanks Zandra for all you do!

Insight into Physician Employment Contracts

The Specifics of LLCs, LLPs and Corporations

5 Tax Tips Physicians May Overlook

For Questions, please contact Zandra at 602.650.6204 or zokeefe@cbiz.com.


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