Merging Practices. Including Existing Assets And ASCs. Integrated & Non-Integrated Organizational Models JOSEPH F. O LIVO JR C H A RLOTTE, N.C.

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1 Merging Practices Including Existing Assets And ASCs Integrated & Non-Integrated Organizational Models JOSEPH F. O LIVO JR PRESIDENT, PMC C H A RLOTTE, N.C.

2 A Introductory Primer of The Practice Affiliation Process and the Relationship with an ASC

3 The Problem with Health Care in the U.S.

4 U.S. Health Care Solutions Improved Performance Value Reduced Cost Improved Patient Experience Regionalization and Growth Innovative Health Care Organizational Models

5 It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change. Charles Darwin

6 Adapting to Change Through Innovative Organizational Models Integration (Merger) Care Center/Profit Center Clinically Integrated Network ( CIN )

Professional Limited Liability Company (PLLC) Member Managed Model Physician Owners Provider Contracts Personal Services Employment Agreement.

7 Professional Limited Liability Company (PLLC) Member Managed Model Physician Owners Provider Contracts Personal Services Employment Agreement. Payors NEWCO, PLLC Reimbursement From Payors Billing, Collection, Contracting Ancillary Services Lab--Pathology Anesthesia- Radiation Central Business Office (CBO) Master Practice Use Agreement Membership Interest in return for initial contribution Member Practice A (Division A) $$$ $$$ $$$ Management Contract Member Member Practice B Practice C Division (B) (Division C) Excluded from Transaction ASCs

8 Merger Structure Features Professional practices are members of the new entity ASCs and ancillary revenue projects (except in-office exception programs) not included in merger and new entity New entity single Tax ID Payor contracts assigned from practices to new entity Assets licensed from legacy practices to new entity Physicians must be re-credentialed under new Tax ID Compensation of physicians can be separately determined by practice group Revenue and costs allocated to divisions Decision making is entirely flexible

9 ASC Structure Features ASCs/Endoscopy Centers outside of transaction Staff of new entity leased to ASC (where possible) New entity manages ASC/management service agreement New entity bills for clinical services Evaluation of Affiliated Service Groups If affiliated, treated as single employer for retirement Divisional model Revenue and costs assigned to division with ASC relationship Single Ownership of all ASCs can be transitioned in future

10 Merger Regulatory Considerations Stark II regulations require that the merged group meet the unified business test to qualify as a group practice. Three requirements to meet this unified business test Centralized decision-making by a Board of Managers Consolidated billing, accounting and financial reporting Designated Health Services profits (lab/imaging) must be allocated evenly or by non DHS formula

11 An Alternative To The Practice Integration (Merger) Model No Merger Merger

12 Clinically Integrated Network (CIN)

13 What Is A Clinically Integrated Network (CIN) A CIN is defined as a health network or provider system working together, using proven protocols and measures, to improve patient care, decrease cost and demonstrate value to the market.

14 Clinically Integrated Network (CIN) Requirements And Objectives To Be Considered a CIN by the FTC, It Must: Increase Quality Reduce Cost and Waste Sustain Independence for Physicians Effectively Manage Utilization With a Healthcare Population Solution to State Wide and Regional Contracts

15 Why Develop or Join a CIN? Collective bargaining by physicians that compete with each other is considered anti-competitive. Prohibited except where they are financially or clinically integrated. Everyone needs to be in the same boat In a CIN, independent physicians can negotiate collectively with payers on reimbursement arrangements without merging practices

16 Participating Provider Agreement Operating Agreement Clinically Integrated Network MSO Services Protocol Development Standardization Contract Negotiations Practice 1 Practice 2 Practice 3 Member Member Member Quality Monitoring Indicators Data Trend Analysis No Change in ASC Relationship CIN is a Non Integrated Practice Model Based upon quality and cost physicians can contract as a unit

17 Merger? CIN? What is the Best Solution for Practice and the ASC?

18 It Must Meet Two Criteria to Succeed Today and Tomorrow in Health Care Change Adaptation

19 Merging Practices Integrating Merged Assets TO DD C. SHAFER V ICE PRESIDENT, IS N ASHVILLE, TN

20 Integration Makes Sense and Cents

21 The U.S. Health Care Solution Improved Performance Value Reduced Cost Improved Patient Experience Regionalization and Growth Innovative Health Care Organizational Models Mergers Clinically Integrated Networks

22 Historically management companies buy into a single part of the patient experience, breaking the relationship.

23 Why integrate? Clinic Pathology Patient Anesthesia ASC

24 Allows you to leverage technology to create efficiencies Creates scalability Support & maintain architecture Single point of resolution Intimate knowledge and relationship You can throw people at an opportunity, throw money at an opportunity, or you can get smarter.

25 Shared Information Registration & Scheduling HR & Payroll Procedure Note & H&P Quality Reporting Billing Components

26 EMR Surgical Anesthesia Pathology Note Note? Reporting and Quality Initiatives

27 Reporting and Quality Initiatives Interface Pathology

Super Groups: Legal Issues Associated with the Formation of Large Multi-site Medical Groups

Super Groups: Legal Issues Associated with the Formation of Large Multi-site Medical Groups a presentation at Fornos of Spain Restaurant, 47 Ferry Street Newark, N.J. by: Michael F. Schaff, Esq. WILENTZ,