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A Common Complication with Lease Arrangements/PSAs - Overhead in Multi-specialty Groups

Posted 3:14 PM by

Even though lease arrangements (aka, professional services agreements, or PSAs) for some specialists make financial sense for the individual MDs, an important challenge is figuring out how to integrate these arrangements in a multi-specialty setting. The issue is that the overhead a specialty pod absorbs typically is not compensated for by the hospital partner in a lease/PSA. The reason for this is that the hospital has certain obligations that frequently require it to take over some administrative and supervision functions.

One option that can help is to have the payments roll directly into the physician entity as opposed to directly to the individual physicians. This can help create a situation where it is easier for the practice to hold back a piece of the payment for overhead and the direct support it continues to provide. It can also help to try to expand the PSA to include other services flowing from the practice to the hospital. These items can include billing, scheduling and registration and other administrative items. This can help absorb the excess capacity that can occur as a result of the PSA and/or create a revenue stream to make the arrangement more palatable to the overall organization.

As always, the payments made in both directions must represent fair market compensation.

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Katz, Sapper & Miller’s Healthcare Resources Group serves healthcare providers, including physicians, hospitals and health systems, surgery centers, and long-term care facilities. Our team of healthcare professionals has the scope and depth to meet client needs. Learn more.

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