Because of their size and increased presence in the local health market, hospitals can often negotiate better rates with payers. If the hospital is mostly in the operating centre, the payers can treat the centre as a subsidiary of the hospital and perhaps be willing to increase the reimbursement to the centre accordingly. Non-profit hospitals often conclude that majority ownership is necessary to ensure that their charitable goals can be met. «One thing we want to do is make sure that the enterprise agreement contains provisions that give the hospital the right to do what is necessary to maintain its mission and not compromise exempt status,» says Gary. «This usually involves the incorporation of certain reserve powers into the enterprise agreement.» «It`s realistic to expect insurers to limit the upward trend over time,» says Gary. «We`ve already seen some of these efforts. Some insurers try to add language to contracts that give them the option, in case the operating centre adds a new majority partner, rather than buying a new one. The effectiveness of these provisions is not clear, but they nevertheless reflect efforts to limit tax increases. «The best thing would be for there to be reasons that go beyond the repayment increases to pursue a joint venture,» he advises.
«For example, partnering with a highly respected hospital in the community can significantly improve the reputation of the operations centre,» says Gary. «It can also facilitate better communication between doctors and hospitals, which can lead to other ways to coordinate care more effectively and effectively. These efforts are, of course, in line with the direction of health legislation and legislation. «Common formulas include a certain multiple of THE CSA`s EBITDA over the past 12 months, or only their «capital account» (or multiple of it). However, if the owner is terminated «for reasons» – such as the loss of a medical license. B, conviction of a crime, exclusion from Medicare, breach of contract, etc. – it is not uncommon for the purchase price to be reduced by 50% or more. If the owner violates the non-compete clause of the operating contract, we have also seen provisions on operating agreements that require repurchases for $1.00 or some other nominal amount,» he explains. «One thing that can be lost and cannot focus on transactions with related parties is transactions with related parties. Sometimes, people who promote the CSA may enter into long-term agreements with close parties on terms that might not be very favourable to the CSA (but favourable to the promoter). These types of long-term agreements include management contracts, long-term real estate leasing, loans and equipment leasing. An investor in a CSC must perform appropriate due diligence, ask questions and determine transactions with associated parties and whether they are available at fair prices and market value terms.
Enterprise agreements also deal with tax, financial and distribution issues. For example, how are revenues and losses distributed? How many reserves do you need? Schaff said. You can set up different affiliate classes for the hospital, doctor or management group. The enterprise agreement could create a five-member board of directors, in which the hospital could appoint a board member. This allows doctors to control day-to-day operations, with reserve powers, so that doctors cannot unilaterally authorize acts that could threaten the hospital`s charitable mission. «It is typical for the enterprise agreement to set out certain measures that can only be approved after a majority vote. This approach can benefit the majority hospital and physicians by ensuring that some important decisions require broad support from all homeowners,» said Herr.