JVs among Hospitals and Physicians
BY DAVID KRESSEL, SEPTEMBER 15, 2005
Yesterday we attended a panel discussion at Mintz Levin called "Show Me the Revenue: Joint Ventures and Alliances Among Hospitals, Physicians and Investor-Owned Companies". Although gainsharing is the latest method for physicians to improve their incomes and possibly lower healthcare costs, the most widely used vehicle to date is the JV between physicians and another equity partner, be it a hospital or some kind of management company.
The first segment focused on the benefits of JVs, as well as the typical specialties and assets involved in them. Notably, by slicing a specialty hospital or surgicenter into multiple LLCs, a hospital can share the financial benefits with physicians who, usually because their specialties can't be practiced outside of the hospital setting, will not work at the JV. The motivation for a hospital or academic medical center is that it helps it a) retain physicians and b) maintain its revenue from related hospital services.
The rest of the discussion focused on the details of planning and developing the JV. Without going into too many details, the theme was that there's nothing new under the sun in terms of the structures of the new entities. This is largely a result of three sets of regulations: Anti-kickback rules, the Stark laws, and, for nonprofit hospitals, IRS rules (Section 501(c)(3)) which must be followed to retain nonprofit status. Generally, there isn't much room for creativity when structuring these businesses. And if a lawyer tells you there's not much room for creativity, believe it.
