Healthcare Business and Transaction Issues for Medical Practices and Medical Businesses

Healthcare Business and Transaction Issues for Medical Practices and Medical Businesses – Part Two

Physician and other healthcare practices have a variety of compliance, legal, business, and medical issues the practice needs to consider. Many of these issues overlap. An experience healthcare lawyer can guide you through this maize of complex decisions.

Some of the areas that health practices need legal advice on include:

  • The business structure for the medical practice. There are federal and state laws that govern when, if and how the practice can use a corporate structure, a partnership, or a proprietorship structure. The choice of structure also governs ownership, management and succession issues. In general, medical practices must use a medical corporation. Medical business such as medical device manufacturers and technical companies have a wider range of business structure choices.
  • Contracts. Employment, vendor, and business contracts can’t violate the Stark Law and AKS self-referral laws. The contracts also should help the medical practice maximize profits while also prioritizing the quality care that all patients deserve.

At Cohen Healthcare Law Group, PC, we also advice medical practices about the following issues:

  • Healthcare business dispute resolution
  • Health practice business formation (S-corporations, professional corporation, partnerships)
  • Healthcare business commercial leases
  • Employment & consulting agreements
  • Healthcare E-commerce and Internet issues
  • Licensing agreements & Intellectual property protection
  • Health practice Mergers & Acquisitions (M&A), including purchase and sale of healthcare practices & companies
  • Non-competition agreements
  • Non-disclosure agreements
  • Technology Agreements

What strategies are used to address the resolution of healthcare business disputes?

Every healthcare business should, at its inception and no matter what its stage of development, pay attention to ultimate exit issues – as well as to how the founders and principals can protect themselves in the event of a dispute. There are different types of disputes depending on who the dispute is with:

  • Disputes with business partners. Disputes can arise with suppliers, vendors, other medical practices, patients, insurance companies, and others about a variety of issues. These issues include payment, services, patient rights, and other monetary issues.

A physician’s time is valuable. Time in court means time lost providing care to patients. We help draft contracts that provide for alternate dispute resolutions such as:

    • Arbitration
    • Mediation
    • Negotiation

Through our long-term experience, we understand which arguments and strategies help to resolve disputes so that you can focus on your medical practice.

  • Disputes with regulatory agencies. Disputes may also arise when the FTC, FDA, or other federal or state agencies send out warning letters, file complaints, or take other legal actions. Medical practices and medical companies often must follow the dispute resolution requirements set forth in the laws and regulations that govern these agencies. Experienced health care lawyers work to take proactive measures so the practice:
    • Can minimize the compliance issues that are taken
    • Show that the health practice is indeed in compliance
    • Show that the health practice is working to achieve compliance
    • Can work to resolve legal actions through negotiation and settlement instead of lengthy court litigation

What are some of the factors medical practices and medical businesses need to consider when forming their business?

Whether you have a general practice, a specialty practice, a functional medical practice, a mental health practice; there are advantages and disadvantages to the business structure you can use. There are also federal and state guidelines that can help direct the type of business formation structure you use.

Biotechnology practices, MSOs, dietary supplement companies, cosmetic companies, and other companies that provide products for healthcare practices also need to choose wisely when selecting a business structure.

In general, medical practices that treat patients can’t pick and choose a busines structure like other businesses because the health, privacy, and protection of the patient comes first. The choice of structure is limited by laws such as – Business and Professions Code section 2400, within the Medical Practice Act, which provides in pertinent part: “Corporations and other artificial entities shall have no professional rights, privileges, or powers.”

Healthcare practices need to consider these federal and state laws, how the patient is served, how the entity can be dissolved so the patient’s rights are protected, and a host of legal, medical, and business factors.

“For example, we served as special counsel to a national law firm that represented a Fortune 1000 company engaged in a string of acquisitions of medical spas. We were called in as healthcare law experts to assess whether the medical spas had been formed, and operating, in a compliant way, or in ways that would leave the buyer vulnerable to regulatory scrutiny. In this role, we poured over the Articles, Bylaws, Minutes, vendor agreements, and other constituent documents and ultimately made recommendations that shaped the business go/no-go decision.”

Transactional compliance requirements

There are many other federal and state compliance issues that govern the business structure, sale of a business, and business operations that need to be reviewed with an experienced health care lawyer. Some of these issues include:

  • California does have restrictions on the types of practices physicians can form. For example, the Moscone-Knox Professional Corporation Act, requires that certain licensed professionals (such as physicians, psychologists, registered nurses, and physicians assistants) can only incorporate their business as a medical corporation.
  • Doctors, nurses, and other health providers do need to meet specific licensing requirements and credential requirements including Medicare and Medi-Cal certification.
  • When buying or selling a medical practice, there are specific requirements on how patients should be notified of the transaction so the patients can make informed choices about their health care providers
  • Employment and consulting contracts – which are discussed in detail in the next section.

Considerations when drafting employment and consulting contracts

Every medical practice relies on quality physicians and medical staff. There are many considerations that must be addressed that are unique to healthcare practices. At the top of the list is that that the agreements can’t violate Stark Law or the Anti-Kickback Statute. Our skilled lawyers explain when contracts violate these laws. We also explain that there are Stark Law exceptions and AKS safe harbors that can be used to overcome these prohibitions – if all the specific requirements such as that the agreements be in writing, the fees based on fair market value, and the arrangements are not be based on the volume or quantity of referrals, are met.

There’s a legal art to drafting and negotiating smart employment and consulting contracts. Just using standard forms you might pull off the Internet or that are used in non-health care sectors is asking for trouble including complaints, fines, penalties, and possibly the closure of your medical practice.

For example, Stark law provides the following exception for employment contracts:

“(c) Bona fide employment relationships. Any amount paid by an employer to a physician (or immediate family member) who has a bona fide employment relationship with the employer for the provision of services if the following conditions are met:

  • The employment is for identifiable services.
  • The amount of the remuneration under the employment is –
    • Consistent with the fair market value of the services; and
    • Except as provided in paragraph (c)(4) of this section, is not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician.
  • The remuneration is provided under an arrangement that would be commercially reasonable even if no referrals were made to the employer.
  • Paragraph (c)(2)(ii) of this section does not prohibit payment of remuneration in the form of a productivity bonus based on services performed personally by the physician (or immediate family member of the physician).”

Additional employment contract issues include:

  • The prerequisite licensing and credential requirements of the healthcare providers. Continuing healthcare education requirements also need to be addressed.
  • The range of services the healthcare provider can offer, what supervision of the new employee will be required, and daily expectations for treating patients should be set forth. Any limitations on the healthcare provider’s employment should be reviewed.
  • Other duties that are unique to the type of healthcare practice should also be analyzed and documented.

E-Commerce and Internet Issues

More and more, especially during the pandemic, healthcare practices are using E-commerce and he internet to provide services through telemedicine and to promote their practices to their patients through the Internet.

There are federal and state laws that regulate these businesses. Medical practices that use telemedicine need to understand such issues as:

  • Who can participate in a telemedicine conference
  • Whether communications between doctors and patients can take place when the doctors and patients are in different states
  • What types of information can be transmitted electronically – and whether those transmissions violate the Health Insurance Portability and Accountability Act (HIPAA)
  • Many other telemedicine issues

Companies that use E-commerce and the Internet need experienced healthcare lawyers who can advise the businesses on:

  • Corporate practice of medicine issues
  • FTC rules that regulate honesty when communicating with patients – through the medical practices’ marketing and advertising on websites and social media
  • FTC rules that regulate truthfulness when posting testimonials – such as indicating if someone is being paid to give a testimonial or received a discount to give the testimonial
  • Anti-kickback and fee-splitting issues
  • Copyright, trademark, and other intellectual property issues
  • Possible claims for unfair competition

Online documents such as the Terms of Use and Privacy Policy can necessitate special attention to the triangular relationship between the healthcare business, the healthcare providers involved (such as physicians, for example), and the user who is simultaneously the customer of the healthcare business and the patient of the clinician.”

Our skilled healthcare lawyers combine our knowledge of healthcare laws and regulations with our business knowledge – both of which have matured through our experience with many different types of medical practices and healthcare businesses.

What are the intellectual property protection issues and licensing agreement issues?

Businesses that invent new medical devices such as digital technologies, emerging healthcare products, cannabis ventures, dietary supplement companies, nutrition companies and other products and services want to protect their investments and research from competitors.

We negotiate and draft licensing agreements and contracts to protect your company’s copyrights, trademarks, trade secrets, and patents. There are different ways your IP rights can generate a large portion of your profits such as:

  • Assigning or licensing your IP rights to third-parties
  • Providing a subscription service platform for vendors and customers who use your technology and services

Other contracts include royalty-sharing agreements and technology agreements.

Our IP attorneys understand both the potential breadth and limitations of intellectual property protection and the specific ways in which healthcare entrepreneurs are moving the goal post of innovation, challenging regulatory paradigms while breaking past traditional categories.”

Mergers & Acquisitions

Medical practices need to understand the corporate practice of medicine lines. Skilled healthcare lawyers advise medical practices on a wide variety of legal issues including business formation, employment contracts, mergers and acquisitions, and employment contracts.

Medical practices and medical businesses should contact Cohen Healthcare Law Group, PC for legal advice on business formation and compliance issues. Our experienced healthcare attorneys help physician practices and medical companies with their medical requirements, business needs, and legal concerns.

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