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Hospital Alignment without an Employment Agreement

Posted 2:55 PM by

For one reason or another, many physicians do not want to be employed by a hospital. For many, a co-management arrangement is the answer. The hospital and physician(s) enter into an agreement, where the physician(s) agrees to manage a specific department to improve performance. The co-management arrangement provides a formal structure to allow the hospital and physicians to work together to make operational decisions and improve performance. Hospitals are under pressure to respond to the economic incentives of healthcare reform.

The co-management model uses a business entity that is jointly owned by the hospital and the physician or physician group. A management agreement (contract) is established between the business entity and the hospital. A management fee associated with the contract is established for obtaining specific, measurable outcomes. The hospital pays the management fee to the newly formed entity in exchange for services delivered by the physician(s). It is important that the terms and conditions of the co-management agreement be reviewed by your accounting and legal teams prior to finalizing. 

Care must be taken in setting the fee structure of the co-management agreement. Stark laws and anti-kickback statutes must be taken into consideration. Careful attention must be paid to compliance issues. It is important that the fair market value (FMV) of the physician compensation and bonus structure be determined. Katz, Sapper & Miller’s healthcare team has expertise to assist with FMV issues.

About Us
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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