Structuring Hospital Acquisitions of Physician Practices: Valuing, Negotiating, and Documenting the Transaction

Hospital acquisitions of physician practices continue to climb, driven by reimbursement pressures, physician shortages, and capital constraints. Because these transactions are complex and involve significant risk, careful planning and execution are critical.

When structuring and negotiating acquisition deals, counsel to healthcare systems and physicians must carefully consider regulatory hurdles, valuation, pricing, escrows, and indemnities.

Listen as our panel explains the key legal and business considerations with hospital acquisitions of physician practices, including applicable laws and regulations and fair market value considerations. The panel will offer strategies for negotiating and structuring the arrangements.

I. Key structural and legal considerations

A. Structuring the transaction

1. Principal purchase terms

2. Physician governance/management

3. Physician employment contract and ancillary agreements

4. Tax structuring considerations

B. Legal considerations

1. Federal fraud and abuse laws

2. State law considerations

3. Special considerations for tax-exempt purchasers

4. Legal aspects of determining fair market value

II. FMV and financial considerations

A. Physician practice consolidation trends

B. Valuation issues

C. Compensation models for physicians

D. Fairness opinions from independent financial advisers

The panel will review these and other important issues:

• What are the key legal and business concerns for hospitals and physicians considering a hospital acquisition of a physician practice?
• What nuances should counsel be aware of with respect to valuations in light of Stark law and challenges to certain valuation methodologies?
• How can acquisition deals be structured to ensure long term value for the hospital?
• What compensation models have been most attractive or successful for hospitals negotiating employment with physicians?