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Management arrangement kosher?

January 17, 2013

Question:

Hi Jennifer,
 
I was approached by a management company interested in taking over my practice.  How do I know if what they are offering is kosher?  The terms they proposed sounds pretty good and I think working with them will lower my overhead significantly...  I would like to say yes to their offer.

Dr. F

Answer:

Dr. F, without having seen the proposal, I can relay you are treading in turbulent waters here.  Management arrangements are heavily scrutinized to ensure that the medical practice is operating properly and power and control over care has not actually shifted from the doctor to the management company.  These arrangements must meet specific parameters to even be considered compliant.  One such requirement is meeting a safe harbor under the Anti-Kickback statute which was created specifically for this purpose.  Under the Anti-Kickback statute a management arrangement must be set forth in writing, for not less than 1 year and the fee paid must be set in advance and constitute fair market value for the services rendered thereunder.  Failing to meet those parameters will have any such arrangement automatically classified as potentially improper upon review.  Another area of compliance concern is the corporate practice of medicine prohibition, which certain states such as NY and NJ have.  Under the corporate practice of medicine prohibition, only doctors are allowed to own a medical practice, which is meant to protect the integrity of the healthcare decisions - keeping profit presumably moreso out of the equation.  Insurance companies, particularly no-fault insurance companies, utilize the corporate practice of medicine to their advantage by challenging potentially violative practices as not being entitled to reimbursement where corporate interests are compromised.  Denial of reimbursement due to  improper structure is one issue, and another that arises when a practice comes under insurance company scrutiny is potential licensure and criminal ramifications, none of which are laughing matters. 

Bottom line, allowing industry, even health industry/management companies, into your practice may give rise to considerable liability if not structured properly.  While I have conveyed certain necessary structural parameters, I recommend having any potential arrangement reviewed by a competent healthcare attorney prior to entering into same.  And, if the arrangement does  not offer enough separation between practice and management company, do not risk the exposure - pass on the deal.  No matter how good the terms may sound, keeping your license and staying out of trouble is always the preferable outcome.  Contact me or Erica Youngerman (516 747 6700 x. 308) if you would like to review the terms.


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