Focus on Health Care Valuation and Regulatory Economics Issues
Topical Editor for This Issue: Charles A. Wilhoite
Health Care Industry Regulatory Insights
Feature Article:
Insights into the Culture of Compliance: Special Challenges in the Academic Medical Center Setting
Michele M. Garvin, Esq., Ph.D., and Clinton D. Hermes, Esq.
This discussion explores why it is impossible to run a hospital in the United States today, particularly a tax-exempt institution, without regular access to experienced valuation and financial advisory firms.
Structuring the "Under Arrangements" Joint Venture
James M. Daniel Jr., Esq. and Kimberly H. Gillespie, Esq.
Corporate compliance programs are designed to ensure compliance with (1) federal and state laws and regulations, (2) best practices, and (3) the organization's mission. The challenge in implementing an effective compliance program is to integrate compliance activities into business activities. This presents a special challenge in an academic medical center (AMC) environment, where the teaching, clinical, and research missions are often not integrated from a business perspective and thus are separate from a compliance perspective. This discussion provides practical procedures to achieve that integration in an AMC environment.
Executive Compensation Issues at the Tax-Exempt Health Care Organization
James G. Rabe
The Internal Revenue Service has recently increased its efforts to scrutinize the reasonableness of executive compensation for tax-exempt entities. In response to this increased level of oversight, governing boards of tax-exempt entities should improve the due diligence and documentation performed to establish the reasonableness of key executive compensation. These due diligence and documentation procedures can be performed by retaining an independent financial advisor to provide a written reasonableness of executive compensation analysis.
Hospital Compensation of Employed Physicians-Hospitals Struggle with Compliance and Economics
John R. Holdenried, Esq.
Hospitals and physicians continue to seek business relationships that are mutually beneficial but that also comply with all applicable federal and state regulations. One such business arrangement is the "under arrangements" joint venture. This discussion summarizes both the practical procedures and the regulatory implications of such a joint venture arrangement.
Health Care Industry Taxation Insights
Practical Procedures for Tax-Exempt Health Care Entities to Avoid "Intermediate Sanctions" Related to Excess Benefit Transactions
Robert F. Reilly and Ashley L. Reilly
Tax-exempt health care entities are prohibited from entering into excess benefit transactions with disqualified individuals. Such excess benefit transactions include (1) payment of employee compensation in excess of reasonable amounts and (2) payment in excess of fair market value for goods and services. In response to such excess benefit transactions, the Service can impose the Section 4958 intermediate sanctions excise tax on the disqualified individual and on the tax-exempt entity managers. This discussion recommends practical procedures the tax-exempt entity can use to avoid the imposition of these "intermediate sanctions."
Health Care Industry Valuation Insights
The Valuation of Home Health Care Agencies
Bobbie J. Jenkins
Due to numerous demographic and economic factors, the demand for home health care agency services is expected to increase in the future. However, regulatory and reimbursement issues will force home health care companies to consolidate. This article discusses several of the factors that affect the pricing of home health care agency merger and acquisition transactions. And, this article presents a simplified illustrative example of one valuation method that is commonly used to value such agencies.
Are Hospital Acquisition Prices Going Up? The Results of a Willamette Management Associates Acquisition Pricing Analysis
Peter W. Ketchum
There has been recent debate in the health care industry journals as to whether hospital pricing multiples are increasing or decreasing. This article presents the results of a study of empirical data regarding recent hospital acquisition transactions. This article also discusses the factors that have affected the recent trend in hospital acquisition prices.
Joint Ventures Involving Existing Hospital Service Lines: A Variation of an Old Theme
Bernadette M. Broccolo, Esq., Max Reynolds, Esq., and Charles A. Wilhoite
This article describes the mechanics of a particular structure of hospital-physician joint ventures often called a "contribution venture." This article explains the economic and social benefits of such a joint venture to the hospital, the physicians, and the public. And, this article summarizes the regulatory and valuation considerations with regard to both the formation and the operation of a contribution venture.
Health Care Joint Ventures: Legal and Valuation Issues
Lisa Rediger Hayward, Esq., LaVerne Woods, Esq., and Charles A. Wilhoite
This article describes the numerous legal and valuation issues related to the joint venture of a not-for-profit entity and a for-profit entity. In addition, an illustrative example of a not-for-profit/for-profit joint venture valuation analysis is presented.
Willamette Management Associates Insights
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