Case Study: OB/GYN Practice joins Regional Medical Center

Our client, a regional medical center in a small city, needed help managing a series of healthcare practice acquisitions.  Spurred by healthcare reform and changing reimbursement models, many local healthcare providers were seeking the stability that a larger organization like our client could provide, plus relief from an increasingly onerous administrative burden.

The sheer number of practices interested in being acquired had outstripped the capacity of the hospital administration.  The situation was compounded by a personal health challenge which reduced the availability of the hospital’s VP of Corporate Development.

Our role was to act as the proxy for the VP of Corporate Development, completing the negotiations and working through all the complexities needed to bring the practices into the hospital’s ambulatory clinic organization.  This is a synopsis of one of those deals.

Background

An OB/GYN clinic included two physicians, a nurse practitioner, and associated office staff.  It was located in a medical arts building next door to the hospital.  The clinic was an independent entity but all the providers had admitting rights and typically used the hospital facilities for medical procedures.

Key Aspects of the Deal

  • Full acquisition of the OB/GYN practice
  • Hiring/retention of the office staff
  • Employment of one physician and one nurse practitioner
  • Spin off of one physician who wanted to remain independent
  • Space sharing and staff sharing pro rata arrangement with independent physician (Stark Law)
  • Centralization of billing, facilities and technology management functions
  • Deployment of electronic medical records for all patients

Challenges

  • Stark Law – One provider wanted to stay independent to focus on Women’s Health rather than Obstetrics – we bifurcated the practice and established a pro rata space, equipment, and staff sharing arrangement in order to comply with the Stark Law.
  • Catholic ERDs – The hospital system is a Catholic entity, and as such, is subject to Catholic Ethical and Religious Directives (ERDs).  Given that the ERDs have specific application for OB/GYN, we reviewed past practices of the clinic and ensured that the physicians were trained on and supportive of the ERDs for post Close care.

Outcomes

  • Stable income and security for providers and staff
  • Access to hospital resources for recruiting of new physicians and staff to grow practice and handle planned retirement of lead physician
  • Access to more resources and technology
  • Seamless integration of care and medical records
  • Ability to utilize provider-based billing rules for Medicare/Medicaid reimbursement (higher revenue for the same services)
  • Increased revenue for hospital
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