through the buyer of a practice, you may need to explore whether there is a phy- sician at a different practice who may have interest in buying into the ASC or you may need to bring in a different spe- cialty to continue the business.”

Legal Considerations

Succession planning needs to be addressed in an ASC’s operating agree- ment, Newman says. “The terms you establish for buy-in and buy-out must be consistent with requirements under fraud and abuse laws. You should have legal counsel with experience in these areas putting your operating agree- ment together with you.” Brown notes, “The operating agree- ment should include triggering events that dictate how the ownership can transfer to someone else.” Physicians with a professional

practice who want to attract new physi- cians to that practice may desire a right of first opportunity to transfer some of their interests to junior associates in the practice, Newman advises. “That helps the professional entity as well as the ASC. It will enable you to have a global succession plan that will allow for new physicians to populate your practice and come into the ASC.” The operating agreement should

clearly state what happens when a physi- cian owner exits the ASC, he says. “You are going to want a definition of what this physician will be paid and how long he or she will receive payments. You do not want someone to have an extended tail where he or she receives benefits and distributions for an extended period of time because that will eat away what you can do for younger physicians. On the flip side, you will also want to have a clear understanding of the path- ways for ownership. Who can bring new physicians into the ASC? What rights do existing owners have to object to new physicians?”

While it might seem like a good practice to distribute shares that become

If you are not constantly looking to grow the complement of physicians who utilize the ASC, the center will inevitably see a decline as physicians retire or leave for other reasons.”

—John Newman, Constitution Surgery Centers

available to those physicians who bring substantial case volume to the ASC, rewarding physicians for utilization can raise legal concerns, Newman notes. “In this scenario, you have to be very careful that what you are doing is not violating regulatory requirements.”

Significant Ramifications If physicians start to leave an ASC and there is no practical plan in place to replace them, an ASC’s outlook can quickly go from good to bad, Brown says. “You can be in a situation where you have a fairly profitable situation that becomes a marginal or unprofitable situation or can even get to the point where the life of the ASC is truly in jeopardy.” It is important to realize that poor suc- cession planning affects other individu- als besides physicians, Feldman adds. “Something often overlooked is hours

employees are able to work. If you have a partner who is a heavy producer and there is no succession plan, operational efficiencies are affected and you have to review all of your expenses, including hours employees are able to work. If you need to scale back hours, you may start losing valuable employees.” Succession planning should not be a one-time activity, Newman says. An ASC’s operating agreement should be revisited frequently. “Things are con- stantly changing in the industry and from market to market. You might need to revisit the operating agree- ment and your structure to address changing dynamics, their impact on particular physicians’ practices and issues with

individuals who may

have changed their practice profile or health situation. Succession planning is something you have to be looking at all of the time.”


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30