Healthcare businesses are bought and sold every day! Though sophisticated people are fully aware of the risk difference between an entity sale and an asset sale, some do not understand the lingering nature of Medicare related liability.
When a legal entity (company, limited liability company, whatever) is bought, the liabilities of that entity are often assumed by the buyer. This is because buyers that purchase selling healthcare entities like the idea of keeping both term managed care agreements and the Medicare provider number intact. Keeping them intact can help ensure continual cash flow of the seller, but will also create Medicare liability to the buyer. Continue reading →
Super groups are in vogue as physicians do their best to reduce costs and enhance revenues. A “super group” is essentially a collection of previously separate competitors who have joined a single legal entity in order to achieve certain advantages. Those advantages tend to be (1) reducing overhead expense associated with economies of scale. Buying insurance for a group of 100 doctors should be far less expensive per doctor than a group of three doctors; (2) gaining leverage in managed care contracting. 20 groups of five physicians each cannot contract with a payer with “one voice” due to the antitrust restrictions, but a single group of 100 doctors can; and (3) finding new revenue sources. Small groups and solo practices cannot afford revenue producing services like surgery centers, imaging services and such. When practices combine, they have a greater patient base, which makes the development of new revenue sources feasible.
When a doctor joins a super group, she stops billing through her old practice (the “P.A.”) and starts billing through a new group (the “LLC”). The LLC has a tax ID number and a Medicare group number. And the LLC enters into lots of managed care payer agreements. Simply put, the doctor puts all of her eggs in the LLC basket. So what’s the risk?
When physicians depart super groups, they have to confront difficult facts, like:
It will take months to get a new Medicare provider number. If they haven’t billed through their “old entity” for a while, that number is gone. And getting a new number for the departing physician takes time, during which revenues associated with Medicare patients are lost (until the number is obtained);
It takes even longer to get on insurance plans. If the LLC is contracted (they usually are), how long will it take to get the P.A. fired back up? It can take as long as six months (and sometimes even more)? That means the departed doctor is out of network with all the plans! This exposes her patients to higher costs and may affect referral patterns. This alone can be crippling to a physician who has left the super group.
Leaving can also mean ending access to patient scheduling and electronic medical records. Many super groups do not ensure access to patient scheduling or billing to enable a departing physician to get back on their feet; and this can be devastating.
Super groups exist to benefit physicians. It makes no sense that they would be used to harm them, which is precisely what can happen (and sometimes does happen) if physicians do not pay good attention to the “back end” as well as they do to the “front.” That means things like—
Making sure that, wherever possible, the departing physician is afforded enough time to get back on her feet professionally. She will need time to get a new practice formed, to get a new Medicare provider number and to get back on insurance plans;
Ensuring the departing physician has adequate access to medical and scheduling records;
Carefully considering whether or not noncompetes make any sense. Some may say that it is important to protect the new practice (like the old one), but these are different sorts of practices. They are not built from the ground up. They are built because successful competitors who have been in business for years decided essentially to “loan” their practices to the super group in order to obtain certain unique advantages.
Super group arrangements continue to grow. Some of them even develop into fully integrated and sophisticated businesses. Physicians who join them have to consider all “angles,” not just how good it will be or can be when they join.