Practice integration in gastroenterology
Although flexible in terms of location and specialty-based compensation requirements, the Stark Law requires that an IGP have two minimum features: 1) centralized decision-making with effective control over all of the IGP’s assets and liabilities and 2) consolidated billing, accounting, and financial reporting. In addition, the IGP must create a methodology for the allocation of income and expenses in advance of providing the services that give rise to the overhead expenses or produce the income. In other words, there can be no retrospective determination as to the allocation of IGP profits. To comply with the Stark Law, physicians cannot be compensated in direct proportion to their DHS referrals. An experienced IGP attorney should be involved in drafting those sections of the OA that deal specifically with ancillary services and the allocation of revenue and expenses.
Organizational structure
The steering committee must select an organizational structure that permits the IGP to accomplish its objectives. The committee must address the tension between the extent of autonomy retained by individual divisions and the operational and regulatory requirements imposed by the formation of a single taxpayer ID group. Some IGPs prefer a Super LLC model, which permits the constituent divisions to retain maximum autonomy while still achieving the benefits of a single group model. This model is commonly referred to as "easy in, easy out" because of the relatively low upfront cost of participation. However, the IGP’s steering committee is often unprepared for the inevitable challenges, personality conflicts, territorial claims, leadership failures, and logistical and financial stresses attendant to the formation and operation of an IGP. A Super LLC may also be more easily targeted by government regulators who may perceive this model as an "end run" around the requisite group practice elements.
The authors strongly advocate for a Care Center model that is developed through significant negotiation within the steering committee in which decision-making authority for the IGP is centralized through a Board of Managers empowered to make important decisions on behalf of the IGP, while decisions that primarily affect only one division can be made at the divisional level pending approval by the Board.
In this model, each division is responsible for paying its divisional overhead, while assuming a share of the company overhead, which is based on a predetermined formula. The distribution of a division’s net revenue to the individual member thereof (excluding DHS revenue) is decided at the divisional level through a divisional compensation plan. Formulas must be developed to determine how the profits from ancillary services such as imaging, laboratory, and pathology will be allocated. DHS income must be treated separately from professional revenue and cannot be allocated by DHS referrals but can be allocated by non-DHS productivity. The authors further advocate that some part of professional and/or ancillary revenue be shared equally by all partners just as physicians often do within their preexisting constituent practices. It is highly advisable that members and divisions commit to remaining together during the start-up for a predetermined period (12-36 months). A division that withdraws before the end of this period would be responsible for its percentage of IGP formation debt plus a predetermined amount of liquidated damages. By entering into this commitment, the newly formed IGP has the greatest opportunity to overcome the inevitable growing pains of creating a new entity.
Governing agreements
Although the legal structure of the IGP is governed by many factors including state law, for the purposes of this article, we will presume that the IGP will be a professional limited liability company. In all cases, there will be an overarching governance and management agreement for the entity, which will be designated as the OA. In most cases, there will also be a separate agreement between individual physician owners and the IGP and the professional limited liability company, usually titled a Member Services Agreement (MSA). At its core, the OA is the agreement between the IGP and each of its owner physicians (members) collectively. The MSA is effectively the employment agreement for the physician owners that governs the individual professional responsibilities and obligations of each member and the IGP. The OA will be heavily negotiated by the steering committee and will act as the by-laws of the IGP.
Among the many details to be addressed within the OA, the most critical include the following:
• The composition of the IGP’s various division cost centers.
• The method of allocating general overhead expenses to the various members.
• The method of allocating DHS revenue and expenses.
• The number and selection/appointment/removal/succession process of the steering committee members and transition to a governing board.
