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| Dear Friend,
The two purchase prices.
In a presentation in February 2024, Brian Boynton, head of the U.S. Department of Justice’s Civil Division, made clear that the government is prioritizing its focus on private equity deals in its search to ferret out healthcare fraud.
Boynton remarked that PE and venture capital investors “influence patient care by providing express direction for how a provider should conduct their business, or more indirectly by providing revenue targets or other indirect benchmarks intended to prioritize reimbursement.” Boynton stated that “if an investor knowingly engages in conduct that causes the submission of false claims, they may subject themselves to liability.”
For example, in 2021, the Massachusetts Attorney General announced a $25 million settlement by private equity group H.I.G. Capital and its acquired South Bay Mental Health Center, Inc. in connection with allegations that they caused fraudulent claims to be submitted to MassHealth, the state’s Medicaid program. Underlying the civil settlement were allegations that H.I.G., among others, knew that South Bay was providing unlicensed, unqualified, and unsupervised services in violation of regulatory requirements and caused fraudulent claims to be submitted.
Another example is the 2019 settlement announced by the DOJ in the amount of $21.36 million against a compounding pharmacy, Patient Care America, as well as its chief executive, its VP of operations, and private equity firm Riordan, Lewis & Haden. The case centered on allegations of kickbacks to outside “marketers” to target military members and their families for prescriptions for compounded creams and vitamins, which were formulated to ensure the highest possible reimbursement from TRICARE. In particular, it was alleged that the PE firm knew of and agreed to the plan to pay outside marketers to generate the prescriptions and financed the kickback payments to the marketers.
Certainly, the ability of healthcare ventures to raise capital and to permit existing owners to realize a profit on their investment is good for business in general.
However, the root of the problem is that, as opposed to long-term investors with true skin in the game in terms of investing in well run healthcare ventures, private equity, with its short term outlook, often not only overlooks existing healthcare fraud during the due diligence process, but is likely to stimulate it in its focus on short term profits.
The point for those looking to sell, especially for those looking to sell in part, selling to an investor class which is under special scrutiny comes with obvious danger: additional scrutiny.
As I’ve said many times, a seller has to consider two purchase prices: The first purchase price is the one that the seller receives. The second purchase price is the one that the seller pays by having sold to the wrong buyer.
You’re undoubtedly familiar with the concept of caveat emptor, “let the buyer beware”.
Physicians and other owners of healthcare ventures of all sorts should be equally aware of caveat venditor, “let the seller beware”.
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| | Tuesday - Thanks, Henry! If You Can or if You Can’t You’re Right. - Success in Motion
Watch the video here, or just keep reading below for a slightly polished transcript:
Henry Ford. You might love him, you might hate him. You might have a love/hate relationship with him and there are plenty of reasons for that.
One of the things he is famous for having said is that if you think you can or you think you can’t, you’re right.
Recently I was engaged in a LinkedIn conversation that started with some guy (who, exactly, is unimportant) who was bemoaning the fact that it was very difficult for anesthesia groups to recruit and retain physicians, that it was so difficult to negotiate with hospitals and that it was impossible to negotiate with managed care payors.
Someone commented that being an employee is the way to go. Of course this guy was an academic and that’s an entirely different sort of job.
Look, I’m not saying that times are easy right now for many groups because it is difficult to hire. The pendulum has swung to the side where employees have a lot of power. However, the pendulum will swing back and right now I’m working with groups which are successfully recruiting, and I’m working with other groups which are starting their own locums agencies, their success at recruiting having gone so well. I’m also negotiating the rates and terms of managed care agreements. For those who say they can’t be negotiated, well, they don’t know what they’re talking about.
Many people are happy being employees and I’m not saying that’s wrong, but others realize there’s a cap on one’s future if you’re an employee and that there’s not the same sort of cap if you become the employer, if you become the entrepreneur.
Is there more risk? You bet your ass there’s more risk. But for some that’s exciting. For those who understand that without risk, there's no reward, it’s certainly the way to go.
I can’t tell you what’s right for you. Only you can tell yourself what’s right for you.
If I can help you to get started or to keep moving forward, just let me know. It’s what I love to do and it’s what my practice is really about. |
| | Wednesday - Blowing up Your ASC Because of Confusion of Purpose - Medical Group Minute
Watch the video here, or just keep reading below for a slightly polished transcript:
Physicians (and others) considering forming a Medicare certified ASC have to be very careful about not confusing the ASC entity's purpose.
If they do, they may not only blow the federal Anti-Kickback Statute ("AKS") safe harbor on which they likely rely, they may destroy all of their Medicare claims by turning them into false claims.
Here are two of the ways that ASC organizers and operators cause the fatal explosion of their business.
Running Physician Services Through The ASC Entity
Most organizers of an ASC attempt to fit the business structure into the AKS's ASC safe harbor. The object is to protect the payment of distributions to the ASC's physician owners from prosecution as kickbacks.
Although there are several categories of standards (e.g., single-speciality ASCs, multi-specialty ASCs) under the safe harbor, all depend on the fact that the investment entity actually is an ASC.
As defined for Medicare purposes, an ASC must be, among other things, "a distinct entity that operates exclusively for the purpose of providing surgical services."
In turn, surgical services for Medicare purposes do not include physician services.
The problem is that there's a trend among some ASC owners to use their ASC entity to employ physicians. A prime example would be the direct employment of anesthesiologists - this is one of the variants of the so-called "Company Model" of anesthesia services through which surgeon-owners of an ASC attempt to capture a portion of anesthesia fees. Note also, that some ASC owners attempt to directly employ other physicians, even surgeons, in similar fashion.
Rendering physician services of any kind through the ASC entity causes it to no longer qualify as an ASC for Medicare purposes. No ASC means no ASC safe harbor. Even worse, no ASC means that any ASC claims to Medicare weren't actually ASC claims. They were worthless claims. Even worse, they were false claims.
Running Non-ASC Services Through An ASC Entity
In almost exactly the same manner, an ASC can blow its Medicare definition by expanding into a service line consisting of non-ASC services. For example, by performing diagnostic procedures other than those directly related to performance of a covered surgical procedure.
Once again, the facility is no longer an ASC either for safe harbor or for Medicare billing purposes.
Kaboom.
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| | | Listen to the podcast here, or just keep reading for the transcript.
I was sitting in an ASC lobby with my wife waiting for her to go in for a second pain injection after the one she received the prior week had failed. My wife commented that the only other patient sitting in the lobby was a woman who had been there with her a week before for a pain injection, too. I commented, perhaps jokingly, perhaps not, that I thought I had discovered their business model.
No, impossible! No physician would do that!
Perhaps you aren't familiar with Dr. William Harwin, who pleaded guilty on August 23, 2023, in connection his with criminal antitrust prosecution in U.S. District Court in Fort Myers, Florida, relating to his suppression of competition by agreeing to allocate chemotherapy treatments for cancer patients to his medical group, Florida Cancer Specialists & Research Institute, and radiation treatments to a competing entity.
In April 2020, Harwin’s group was charged for its role in the same criminal conspiracy and entered into a deferred prosecution agreement under which it admitted to conspiring to allocate chemotherapy and radiation treatments for cancer patients. Under the agreement, the medical group committed to pay a $100 million criminal penalty and to cooperate fully with the Justice Department’s ongoing investigation, which I’d guess is what led to Dr. Harwin’s guilty plea.
I represent physicians in transactions across the country and there are plenty of ways to make a profit and to do the right thing for patients. But don’t fool yourself into thinking that everyone does the right thing and that, just sayin’, someone’s business model might be encouraging repeat visits.
I shouldn’t need to remind you to stay on the right side of the line, but I do need to remind you to be careful with whom you deal because they might not be as careful about where that line is drawn.
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| | Help Us Help You With Helpful Content
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| | | | We all hear, and most of us say, that the pace of change in healthcare is quickening. That means that the pace of required decision-making is increasing, too. Unless, that is, you want to take the “default” route. That’s the one is which you let someone else make the decisions that impact you; you’re just along for the ride. Of course, playing a bit part in scripting your own future isn’t the smart route to stardom. But despite your own best intentions, perhaps it’s your medical group’s governance structure that’s holding you back.
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| In fact, it’s very likely that the problem is systemic. The Medical Group Governance Matrix introduces a simple four-quadrant diagnostic tool to help you find out. It then shows you how to use that tool to build your better, more profitable future. Get your free copy Free.
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| | | | Whenever you're ready, here are 4 ways I can help you and your business:
1. Download a copy of The Success Prescription. My book, The Success Prescription provides you with a framework for thinking about your success. Download a copy of The Success Prescription here.
2. Be a guest on “Wisdom. Applied. Podcast.” Although most of my podcasts involve me addressing an important point for your success, I’m always looking for guests who’d like to be interviewed about their personal and professional achievements and the lessons learned. Email me if you’re interested in participating.
3. Book me to speak to your group or organization. I’ve spoken at dozens of medical group, healthcare organization, university-sponsored, and private events on many topics such as The Impending Death of Hospitals, the strategic use of OIG Advisory Opinions, medical group governance, and succeeding at negotiations. For more information about a custom presentation for you, drop us a line.
4. If You’re Not Yet a Client, Engage Me to Represent You. If you’re interested in increasing your profit and managing your risk of loss, email me to connect directly. |
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