Nontraditional Partnerships Part II: Timesharing in M&A
The Timeshare Arrangements exception to Stark Law permits the sharing of space, equipment, supplies, and services on non-exclusive leasing terms between healthcare providers. As an alternative to a full-time lease, timesharing makes it easier for physicians and hospitals to share resources on an as-needed basis and expand available services for patients without transferring ownership of properties.
So you’ve decided to timeshare or lease your physician practice to a healthcare system. Great! There are many reasons and benefits to doing so, but the tricky part is navigating the compensation arrangement in order to protect your interests as a business owner and maximize returns for your practice. Here’s what you need to know:
Set in advance the premises of the arrangement
- Timesharing grants a license, or permission, to the lessee to use space or equipment instead of possessory interest, with the leaser remaining in control of assets.
- Determine which resources are going to be shared with the lessee, how often these resources are shared, and for how long.
- Equipment, space, staff, items, supplies, and services should all be covered in this part of compensation negotiations.
Appraising your assets
- Timeshare compensation must be consistent with fair market value (FMV) and exclude volume and value of patient referrals.
- Get an accurate appraisal of fixed/capital assets (equipment), real estate (space), and business costs (staff and services) to know what you should be asking for in terms of compensation.
- Accurate appraisals of assets, with a timeshare or lease arrangement, helps avoid the high valuations of property and assets that could deter a health system from making an acquisition.
- Stark law exemption only covers flat-fee or time-based compensation to avoid incentivizing overutilization and patient steering.
- Use this in conjunction with the FMV of your assets to know how much to ask for in compensation negotiations with the lessee.
- Note that AHA is currently pushing for Stark Law reform and exceptions to better accommodate a coordinated, value-based care model and promote a team environment, so keep an eye out for these changes and how they may affect your arrangement.
Though working out leasing arrangements can be grueling and confusing for some, getting a better understanding of how much your interests and assets are worth can help protect your business and foster better relations with the health systems you’ll work with. To learn more about asset appraisal, go to www.manageresourcegroup.net
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