Healthcare financial management : journal of the Healthcare Financial Management Association
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Historically, healthcare organizations have been reluctant to admit mistakes because of potential legal liability. Admitting mistakes and taking corrective and compensatory action may reduce the likelihood of a lawsuit and, if a lawsuit is lost, may reduce the punitive damage award. Financial consequences involve admitting mistakes and incurring the associated compensatory costs or not admitting mistakes and incurring associated compensatory and punitive damages for the mistakes that are discovered later. Ethical consequences revolve around managers' duty to patients, the healthcare organization, and themselves and their families.
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Integrated delivery systems (IDSs) may find that forming an equity joint venture relationship with a physician group practice is the best way to integrate physicians into their networks. IDSs have a choice between two basic equity structures: affiliated group practice, in which a management services organization (MSO) handles all practice management infrastructure and the physician group is a physician-only organization; and integrated group practice, in which the physician group encompasses both the physician practice and the administrative infrastructure. The choice of equity structure and how it should be implemented hinge on several legal issues, including the existence of a corporate-practice-of-medicine statute in the IDS's state, compliance with the Federal antikickback statute and Stark laws, and various issues regarding the IDS's tax-exempt status. IDSs also should consider pragmatic issues, particularly those associated with aligning the economic incentives of the two partners.
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Hospital-physician integration alone will not help providers achieve the leverage and/or cost structure necessary to succeed under managed care. Hospitals first need to gain institutional dominance in their markets, facilitate the consolidation of physician groups, and create fair hospital-physician partnerships.
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Enforcing compliance with rules governing facilities financed with tax-exempt bonds recently has become an IRS priority. Integrated delivery systems (IDSs) that include such facilities, therefore, should take steps to ensure that the private business use of those facilities does not exceed the legal threshold amount, thereby jeopardizing the tax-exempt status of the bonds. Management contracts, research agreements, and leases are arrangements with the greatest potential to result in noncompliance. Instituting a compliance program to monitor the use of bond proceeds and minimize the amount of private business use of facilities over the bond term can reduce an organization's risk of penalty.
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Historically, group practices engaged in expensive buy-in and buy-out arrangements for their physicians. These arrangements often served the group's original physicians well, but left newer physicians with little equity in the practice when the older physicians retired. Many groups are restructuring their buy-in and buy-out arrangements to account for both a physician's original financial contribution to the practice and the physician's share of patient receivables. Groups also are setting up qualified retirement plans that are separate from their buy-out arrangements.