Shawn M. Riley heads the Cleveland office
of McDonald Hopkins and founded the firm’s
Business Restructuring Services Department.
For over 25 years, he has advised businesses in
a number of industries ranging in size from $10
million in revenue to multibillion dollar public
companies on strategic alternatives, including
acquisitions, sales, mergers, affiliations, refinancing,
recapitalizations, and restructurings. In the
healthcare industry, Riley has advised community
and rural hospitals and long-term care facilities.
Although resident in the Cleveland office, his
clients are located throughout the eastern U.S.
Rick Hindmand focuses his practice at McDonald
Hopkins on healthcare regulatory, data privacy,
cybersecurity, corporate, and transactional matters.
He represents physicians and other healthcare
providers and organizations in structuring group
practices, joint ventures, medical device companies,
ambulatory surgery centers, provider networks,
and ancillary services, as well as physician/hospital
alignment strategies and involvement in accountable
care organizations (ACOs). Hindmand’s services
extend to various corporate and transactional matters,
including practice acquisitions and managed care,
billing, management, employment, independent
contractor, and other service arrangements.
Flexibility to Respond
The 1990s saw a surge in hospitals
acquiring physician practices and hiring
physicians, followed by the wholesale
unwinding of that practice when the
hiring spree yielded mounting losses
rather than the expected benefits. The
sustainability of the current physician
employment trend ultimately will be
judged with the benefit of hindsight. In
the meantime, hospitals and physicians
should take care to minimize their
exposure and maintain flexibility to
respond to changing circumstances. J
1 See, Carol K. Kane, PhD, and David W.
Emmons, PhD, “New Data on Physician
Practice Arrangements: Private Practice
Remains Strong Despite Shifts Toward
Hospital Employment,” (2013).
2 Medicare pays more for various physician
and ancillary services when performed in
a HOPD than in a freestanding physician
office. This “provider-based” reimbursement
differential offers a financial incentive for
health systems to acquire physician practices.
It typically allows for increased compensation
to physicians, particularly if physician
compensation is related to collection for the
physician’s personally performed services.
This differential can apply even if the same
physician furnishes the same services to the
same patient within the same office, and
typically increases the patient copayment.
3 Press release available at hhs.gov/news/
4 42 U.S.C. § 1395nn.
5 42 U.S.C. § 1320a-7b(b).
6 31 U.S.C. § 3729-3731.
7 42 C.F.R. § 411.351 (“designated
health services” defined).
8 “Federal health care program” includes a
broad range of federally funded healthcare
programs, including Medicare and
Medicaid. See 42 U.S.C. § 1320a-7b(f).
9 U. S. ex rel Drakeford v. Tuomey,
976 F.Supp.2d 776 (D.S.C. 2013).
10 In March 2014, Halifax Hospital Medical
Center and its affiliated staffing company
agreed to pay the federal government $85
million and enter into a corporate integrity
agreement to settle allegations of improper
billing for services referred by six oncologists
and three neurosurgeons. The government
claimed that the compensation packages
were excessive or varied based on referrals
and therefore failed to satisfy any exception
under the Stark Law, thereby causing all
related billings by Halifax to violate the
False Claims Act. In November 2013, the
court ruled in favor of the government's
position that Halifax's incentive bonus
formula violated the Stark Law, because any
one of the oncologists could increase the
size of the bonus pool by simply making
more referrals, thereby increasing his or
her bonus based on those referrals.
11 42 U.S.C. § 1320a-7k(d).
12 42 C.F.R. § 411.357(f).
13 42 C.F.R. § 411.357(f).