This article is Part I of a two-part series by WolfBlock lawyers on Health Law .
As a health care lawyer, I counsel clients regarding a number of issues, including physician employment agreements on behalf of physicians or physician groups and employment agreements on behalf of a potential employee to be engaged by a physician or physician group. I also advise clients with regard to the merger and de-merger of medical practices, and finally, I represent a number of New Jersey physician specialty organizations, including the Radiological Society of New Jersey, the Pathological Society of New Jersey, New Jersey Association of Freestanding Ambulatory Surgery Centers, and the New Jersey State Society of Anesthesiologists.
The primary health care-related issues with which I assist my clients are the strategic planning of physician practices and advising physicians on proposed regulatory changes affecting their practices. I counsel physician groups on planning not only to ensure a fair compensation system, but also to promote and encourage hard work and efficient utilization of resources within the practice. The health care industry is highly-regulated, and in order to be successful in this area, one must understand the regulations on both the state and the federal levels, as well as the tax implications when working with non-profit hospitals. Because of the tax exemption of hospitals, joint ventures require compliance with IRS tax exemption requirements.
One of the common mistakes physicians make is in acquiring equipment that has yet to be eligible for reimbursement under the federal and/or private insurance system. In addition, compensation arrangements are sometimes developed without regard to the regulatory implications of the federal and state anti-kickback laws and thus, if scrutinized, would bring the practice and/or its physicians into financial jeopardy.
I typically ask a new client, "Tell me, if you were king of the world, what would you want to do?" This question helps me understand what the client's real goals and motivations are, and then it is my job and responsibility to determine the most efficient and legal strategy to achieve the client's primary goal. I am also able to provide other ideas for the client to consider that will not only help the client reach his or her goal, but will enhance those goals and go beyond what the client thought was initially possible. Below are some questions I may ask of a client to help them consider some options they may not have previously thought of in their initial strategy:
Should outsourcing billing be considered?
Could hiring a part-time physician versus a full-time physician work?
Could hiring a physician assistant instead of a physician work?
Can the group bring in ancillary services (imaging) to generate additional income?
Does compensation reward appropriate behavior?
Health Care Deal Strategies
The first step I take is to determine what goals my client wishes to achieve in the transaction. I also must understand not only my client's goals, but also the other parties' goals with regard to the transaction. This step is important because in order to have a successful negotiation, it is important for both parties at the end of the transaction to be satisfied with the results. I accomplish that by asking the client many questions, as well as questions regarding the other party. I will also engage the other parties' counsel in a significant amount of discussion to assist in understanding what his or her client hopes to gain from a particular transaction.
When working with a client's health care matter, the factors that will most influence my strategy are as follows:
Whether my client is paying money or receiving money: How much and over what terms and conditions?
Are there any conditions that are precedent to the conclusion of the transaction?
Which New Jersey state agency's regulations will be affected by the particular transaction? (Will specific approvals be required, and will the timeframe to get these approvals affect the nature of the transaction?) These factors are extremely important because sometimes the clients do not understand that their timeframe to conclude the matter may not necessarily meet the timing affected or imposed by the applicable state agencies.
When working on health care matters, I prefer negotiating in a problem-solving, cooperative fashion, as opposed to a competitive fashion. That's because in a competition, there are always "losers" and "winners." I prefer to use a cooperative strategy to ensure that at the end of the transaction, both parties become winners.
Commonly Negotiated Items
When negotiating with an opposing party in an employment agreement transaction, the aspects that are most often openly negotiated are the amount of money being paid and over what period of time, the security/collateral associated with the particular transaction, and whether a restrictive covenant or post-termination restrictions will apply.
The risks involved in all deals involving health care law are very high. Because of the highly regulated nature of health care today pertaining to relationships within medical practices or health care providers, and because reimbursement is provided by governmental authorities, any error or mistake with regard to billing could result in serious fines and penalties and even incarceration. In order to circumvent these risks, we work very hard to let the clients know what they are up against and what the parameters are of the deals and transactions, and we stay in contact with the client post-transaction because of the ever-changing rules and regulations. It is incumbent upon us, as a health care attorneys, to advise clients if there has been any type of regulatory or legal change that would affect their business.
The most difficult aspect of determining the proper strategy in a health care matter occurs when the client is proposing a particular deal or transaction that may not necessarily be consistent with the applicable state or federal regulations. If this is the case, I carefully explain the state and federal implications of the deal to my client, then lay out all the options available that are consistent with the law.
The biggest mistake I've seen another attorney make in a health care matter is pretending to understand the inter-relationship between the state and federal rules and regulations and reimbursement policies by third-party payers. It never ceases to amaze me how some attorneys propose transactions on behalf of their clients that are clearly illegal to conclude. It requires me to explain to the opposing attorney that what he or she is proposing will only cause the parties to get into significant legal trouble. It then comes to me to restructure what the parties have proposed in order to make sure the transaction meets all applicable rules and regulations.
Once the deal is done, you really can't move on. You have to continue to monitor the changes so that you can advise your clients appropriately. Perhaps what was legal several years ago when the deal was originally structured may need to be restructured to be consistent with current applicable law. For example, this could be the result of changes in the reimbursement programs. When the self-referral laws change, the deal may need to be restructured.
John D. Fanburg is Managing Partner of WolfBlock's Roseland, NJ office and Chair of the firm's Health Law Practice Group. His broad experience representing major hospitals, diverse medical specialty groups and statewide physician specialty organizations provides him with in depth knowledge of all aspects of the business of healthcare. Mr. Fanburg's practice includes special emphasis on structuring non-profit healthcare providers, developing managed care networks, and advantageously using federal reimbursement policies and appeals.