Vascular Access Centers: A Complex Picture

bcbs lawsuitBy: Jeff Cohen

Vascular access centers are a common ancillary service offered by a variety of physicians, mostly nephrologists.  They provide a unique setting for patients requiring interventional vascular services in connection with things like oncology, dialysis, nutritional delivery, wound healing, pain management and more.  Unlike many surgical services, however, they are typically not provided via a surgery center, but rather as part of (and inside) the physician’s practices.

Establishing VACs in Florida typically involves compliance with corporate laws, “in office surgery” regulations and applicable self referral laws.  Since VAC reimbursement is generally better in an office setting than an ASC setting, they are normally established as a “physician practice.”  bringing in non-physician owners (such as large dialysis providers) will trigger the need to obtain health care clinic licensure (HCCL).  Moreover, structuring the ownership will typically involve formation of a limited liability company with either (1) multiple physician owners, or (2) a physician ownership group, plus a corporate owner/manager.  Control and restrictive covenant issues are particularly important, especially when a corporate “partner” is involved.  Normally, when the corporate partner invests a substantial amount of money, the physician owners give up a certain degree or leverage and income (e.g. via a management contract with the corporate partner).

Self referral issues typically arise in light of the Florida Patient Self Referral Act of 1992 (PSRA) and the so called Stark Law.  On the set up side, physicians need to consider applicable structure restrictions and patient notice requirements.  On the sale side, corporate owners are sensitive to the Investment Interest Safe Harbor and Sale of Practice provisions which drive not only structure (typically a new corp, since the VAC is often intertwined with a physician practice(s)), but also the amount of ownership help by physician owners.

On the “back end,” many corporate dialysis companies are looking to purchase existing VACs that are entirely physician owned.  Typically, those transactions involve the corporate entity buying a controlling interest.  Owner physicians negotiating for certain control rights will be essential.  Physicians also need to consider the “enterprise value” of the transaction, in the sense that these transactions not only entail the purchase of a going concern (the VAC), but also professional service fees (the value of which, over the long haul, can outstrip the ownership profit) and lease income.  In many instances, VACs derive income from not only facility fees, but also professional fees (where the interventionalist) is employed.  Finally, given how many VACs are intertwined with medical practices delivering a variety of services, disentangling the VAC from the practice can be tricky.

On a scale of 1-5, with 5 being highly complex, the establishment of VACs are a solid 3 (since the legal and business issues closely resemble those of surgery centers), but their sale or joint venture is a solid 5.

One thought on “Vascular Access Centers: A Complex Picture

  1. Reblogged this on Joseph Rugg's Health Law Blog and commented:
    Physicians are under a lot of pressure to improve their bottom line. In office procedures as described in this blog, as well as investments in surgery centers and other business ventures, all bring levels of needed regulatory compliance and increased regulatory scrutiny. From the business side, there are many stories of corporate partners from Hell! Before getting involved in any of these “opportunities,” physicians should work closely with their legal and financial advisors

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