David is tasked with the preparation of a memorandum to the CEO about the joint venture between the hospital and the four surgeons. Some of the key points that he should highlight in the memorandum include the cost of the joint venture to the hospital, how the hospital will benefit from the proposed business, and the fact that the four surgeons may leave the hospital if the deal does not go through.
The joint venture might violate various legal and regulatory requirements. The issue of antitrust is one such legal and regulatory requirements that the joint venture might violate. For instance, the joint venture might result in price-fixing or market allocation concerns or monopolize outpatient surgical services in its local market. The joint venture might also violate the anti-kickback and fraud and abuse requirements, otherwise referred to as the Stark regulatory policies (Baum et al., 2015, p. 152). Some of the issues that may lead to the violations of the above requirements include whether the physicians who generate more volume will own more shares or not, the compensation relationships of the joint venture, and whether the ownership and compensation relationships will induce business referrals to the ambulatory surgery centre.
The new business might also violate HIPAA legal requirements. For example, it might fail to notify its patients of any form of breach of disclosure of confidential information, which is one of the recent HIPAA amendments (Fields & Becker, 2016). Additionally, the new business might fail to provide medical records at minimal costs to its patients due to the high costs involved in the provision of such records.
The proposed arrangement needs some changes to make it compliant with legal and regulatory requirements. For instance, the four surgeons should fund their share of the investment from sources other than loans. According to Becker et al., (2009, p. 15), physician investors should not pledge their assets, loan funds, or guarantee loans to be invested in ASCs.
Apart from the high initial investment, the hospital stands to gain a lot from the joint venture. For instance, it will receive thirty-five percent of the profits made by the new business. Additionally, it will retain the four surgeons, and, consequently, the high income that it currently earns from its surgical department. As such, David should recommend for the adoption of the joint venture.
- Baum, N., Bonds, R., Crawford, T., Kreder, K., Shaw, K., Stringer, T., & Thomas, R. (2015). The Complete Business Guide for a Successful Medical Practice. Cham: Springer International Publishing.
- Becker, S., Chacko, S., Lundeen, R., Moore, E., Szabad, M., Townshend, G., & Walsh, A. (2009). Ambulatory Surgery Centers: Legal and Regulatory Issues (4th ed.). Washington:DC: American Health Lawyers Asso. Retrieved from https://www.healthlawyers.org/Archive/Non%20Dues/out_of_print/Ambulatory%20Surgery%20Centers-%20Legal%20and%20Regulatory%20Issues,%204th%20Edition.pdf
- Fields, R., & Becker, S. (2016). 6 Key Legal Issues Facing Ambulatory Surgery Centers.Beckershospitalreview.com. Retrieved from http://www.beckershospitalreview.com/asc-turnarounds/6-key-legal-issues-facing-ambulatory-surgery-centers.html