You know, what I primarily was work with, you know, physician groups, ASCs, and they're sort of affiliated companies, management service organizations, real estate companies, and spent a lot of time working with those groups, figuring out how to just kind of run the business, but also how to, again, address emerging threats or opportunities, whether it's, you know, private equity, whether it's, you know, working with hospitals or health systems, you know, dealing with payers, you know, or looking at new technology. So, today's agenda, we're going to look at innovative business models, things that I'm working on with a number of my clients, trends I'm seeing in the marketplace, and a couple words about consolidation versus independence first. So, we're going to talk about practice-owned ASCs. Instead of having physicians invest through a separate investment entity or directly into the ASC, physician supergroups, both single specialty and multi-specialty, MSOs, and there's just a session on BSOs, but the legal issues, the structures, the basics, the same concept. Physician-hospital JVs, value-based enterprise arrangements, and also hospital-payer and physician arrangements. So, you know, the big question facing lots of groups is whether to sell or not to sell. I mean, PE is all the buzz. It has been for years. Some of you have probably talked to PE groups, have you sold to PE groups, maybe you're from a PE group here in the audience. Lots of people are thinking about whether to sell or remain independent, to sell to a PE group, or sometimes to a system that's not as common. The dollars that PE groups are throwing around are pretty significant. But often what I do is work with groups to figure out whether selling to PE is right for them, and lots of what I do is help groups try to remain independent. So, lots of the models we're talking about today work in the PE context or outside, but much of what I do is work with groups again trying to figure out how to enter into new arrangements to remain independent and thrive. So, the motivations for, you know, selling. Of course, there are recruitment challenges for some groups. There can be increasing overhead, you know, from technology. There can be declining reimbursement. Healthcare reform is always something that, you know, scares groups because it can result in lower reimbursement, increased compliance obligations. You know, selling to PE can increase access to capital, which can help you grow, help with recruitment, you know, help invest in technology. There's sometimes a perception of greater security if you, you know, merge or sell to another group with deeper pockets, deeper resources. And some groups are experiencing a reluctance of younger professionals to really, you know, buy into the practice, you know, they're, you know, become shareholders. So, you know, the pros of, you know, consolidating or integrating with another group, be it with, you know, another physician practice or with a PE group, is, you know, in theory, it can protect incomes, you know, at least in the short term. Of course, part of the PE transaction structure is usually a compensation scrape, so what you're doing is you're selling future earnings and, you know, and getting a payment today. But, you know, depending on the age kind of breakdown of the group, you know, selling to PE may or may not make sense. You know, you look at the future earnings, you could make staying independent and not selling, you know, add those numbers up and do a discounted cash flow analysis, figure out if selling to PE makes sense. Integration can also help with, you know, selling, you know, the hassles of owning a practice and allows physicians to really focus on practicing medicine and not running a practice. Now, the cons that lots of groups see when they're looking, thinking about selling to a PE group or, you know, merging with another physician practice, you know, there's a perceived lack of autonomy or independence. You join another group, you give up some autonomy, some independence because now there's a different governing board and a different, you know, other owners as part of the practice. There can be frustrations with inefficiencies in integrations or consolidation. There can be difficulty getting out of the marriage, right? If you integrate, if you merge, if you sell, the unwind can be painful, it can be expensive. And a lot of what we do is we're working on, you know, sale transactions or integrations, is really make sure we think about that prenup, how you unwind or spin out if the deal doesn't go well. So in terms of remaining independent, you know, the typical historical structure, right, for most physician practices, you know, there's a group of physicians, they become shareholders, you recruit new physicians. When you leave the practice, you get your shares of stock or your partnership interests bought out from the practice, right? And oftentimes, those buyouts aren't very significant, right? That is, you make a lot of money while you're practicing, but when you retire, the value of your stock, it's not an astronomical buyout, right? Compare that to a PE transaction, where some of the senior physicians, they sell, they can get a pretty big, you know, purchase price. So options to remain independent, you know, increased size. We talked about some of the pros and cons. That can be through organic growth, through recruitment. It can be through mergers. We're going to talk about a merger model that some of you are familiar with. I've worked with some of you on this model, and you might have thoughts when we get to the Q&A session of this. MSOs, again, there's a session just before this one on BSOs. It's the same basic concept. We'll talk about the MSO model. I've worked with a number of groups recently, both multi-specialty and ortho, only on spinning out MSOs to manage not only their own practice, but other practices, other ASCs, right, other consulting services. Of course, joint ventures, strategic alliances, you know, PSAs, ancillaries, other ways to bring income into the practice. So practice-owned ASCs. So the past three years or so, I've seen a pretty big uptick in interest in practice-owned ASCs. Again, the typical model is physicians will create a separate investment entity and invest in that to hold their equity in the ASC. They might invest directly in the ASC. But the practice-owned ASC model is getting some traction. And one of the primary reasons is because it allows production-based compensation, right? So people can really be, they can take the net income out of the ASCs to the compensation model and can be based upon production. It's more of an eat-what-you-kill system, right? So one of the challenges with some ASC models is how much do you share with partners, right? Some partners aren't quite, aren't productive as others. That creates tension within the practice, right? With the practice-owned ASC model, you can have 100% production-based compensation. So you're really paid on what you do at the center. You can have a hybrid model, where it's part production, part equal or based on seniority, or you have a lot of flexibility. You're not relying at this point under the NI Kickback safe harbor for ASCs, the one-third test you're all familiar with. You're relying on the employment-based statutory safe harbor under the NI Kickback statute. Again, one of the benefits of the compensation model, you have more flexibility. Again, how you compensate physicians for performing cases at the surgery center. But it also allows the practice to have really more control over ASC operations. You can align interest, right? So now it's a practice-owned entity that can help with contracting, whether it's direct to payer or some other model. The value of the ASCs can be included in the redemption amount. So when someone leaves the practice, some value of ASC can be part of the formula for figuring out their buyout from the practice when they retire. That can be quite significant, or you can keep it low. Again, I mentioned the one-third test. Those aren't technically relevant when you use this model, right? Because you're relying on the statutory safe harbor. You're relying on the employment-based safe harbor. That said, if you're in joint ventures with health systems or hospitals or an ASC management company, they're very familiar with the one-third test. They'll often expect to have something similar in the operating agreement as part of the negotiation, but it's not required from an NI Kickback compliance perspective, right? It's maybe it's belt and suspenders. You don't need the suspenders. You have the belt with the statutory safe harbor. You don't need the suspenders. You have the belt with the NI Kickback compliance. You have the belt with the statutory safe harbor, but when you're negotiating with health systems and hospitals, they often expect to see the one-third test. How many of you have practice-owned ASCs? Just curious. A question that comes up is how do we get from the current model, the traditional model, where it's physicians investing through an investment entity to a practice-owned ASC. We've been working a number of transacts. We're just really having the practice from a holding company. That holding company acquires interest from the physicians in their ASCs, right? So there's a transaction. The practice ends up buying the ASC interests from the physicians, and there's a question about ultimately who's responsible for that amount. You can take the amount paid for those interests and run that through the comp system, so really you can charge that cost back to the physicians who participate in a particular surgery center. It's sort of like the physicians are buying the ASC from themselves, right? That cost, that expense of buying the equity interests. Over some period of time, the physicians are going to participate in a comp system for a particular ASC. They can end up covering that liability or that cost. All right, physician supergroups. So you can have single-specialty or multi-specialty supergroups, right? Large physician practices. These often come together through mergers or different acquisition integration structures. At the end of the day, when you bring these groups together, you'll have one EIN, right? One EIN for the integrated or the merged practice. Again, this would be single-specialty or multi-specialty. Oftentimes when I've worked on these, there are separate divisions or profit centers. So you have three groups. They come together post-integration, post-merger. One legal entity with separate divisions. Each division representing one of the groups that joined or merged to this single entity. The integrations can include an MSO structure. Recently, some of the deals I've worked on have. And there can be varying levels of integration. And we'll talk about that in coming slides here. So the pros and cons of merging. This is a little bit of a repeat from before. But again, if you're larger, you have more groups coming together, more physicians. You can have better negotiating or political clout, right? You know, bigger. Often provides just more resources in terms of people or dollars to be more effective in negotiating. They're going to be sort of economies of scale. You can have better administrative help because you can divide and conquer more share responsibilities. There's sometimes an ability to offer more ancillaries. You have deeper pockets, more resources. And sometimes the public, for good reasons or bad, it can perceive bigger as better. So the con of the divisional structure. And we'll talk more in a second. So the divisional merger structure. The basic idea is you have multiple practices and they come together to merge. They merge into one entity. That can be through a typical statutory or legal merger. It can be through an asset contribution transaction. There are different ways to structure the actual way the groups come together. So I'm using merger loosely, but the groups come together. Again, after the transaction happens, after the closing, each group, each division or each practice is now operates as a separate division, a separate profit center. The assets and the liabilities of the group pre-merger, pre-integration are assigned to the new operating division for that group, that group of physicians, right? Physicians of each group, the owners of each group can become owners of the new integrated practice. Employees of the group are assigned to the new division. And that's the basic, basic structure. The goal is to really allow each group to operate with a lot of economy as a separate profit center. I mean, again, the revenue that's generated by that group, by that division, the liabilities of that division, it's really a separate profit center. So physician income is paid out, physician from division A is paid out of the revenue from division A. Buyouts from division A are paid out of the revenue of the assets of division A. Employee expenses, same thing, they're separate profit centers. You can share, you can have common assets, common liabilities, there's some of that, but it's, but again, the basic idea is the groups operate as separate profit centers. One of the cons you saw in the prior slide, two slides ago, is the question about what if a division has a massive liability and can't pay, right? So we, we set these structures up. So again, there's separate profit centers, each group's responsible for its assets, its liabilities, its acts, its omissions. And I've never had a situation where a liability of one group has spilled over to another group is responsible for the liability of another group. Spilled over to another group is responsible for the other group's, again, acts or omissions. But it's theoretically possible, right? So, you know, the False Claims Act can be quite expensive. There's a, there's a billion, billion coding issue with Medicare. You know, there's a lot of money that might go into paying off the government. But, you know, we do in the Shareholder Control Agreement, or other document that sets up this divisional structure, is have each group agree to indemnify the others if there's a divisional firewall breach. If the liability from A is the assets of, you know, Division B. Because again, to the outside world, these aren't separate legal entities. There's just one legal entity with separate divisions. But if someone's naming a lawsuit, investigation is the legal entity. So what if the assets aren't sufficient to indemnify the other division, the non-responsible division? You know, we often have some amount of personal guarantee baked into the arrangement. So physicians in one division, up to some dollar amount, agree to indemnify the other division. Again, it's a divisional firewall breach, and the assets of the division are insufficient to pay off that liability. I've never seen this happen. It's theoretically possible. We plan for it, and include provisions of the agreement to protect all of the groups. In terms of governance, I mean, the basic idea here is that each group has a lot of local autonomy, responsible for day-to-day practice decisions, right? Without a lot of interference or oversight from the other division or the board of directors, right, of the entire entity. But because of Stark, there has to be a centralized decision-making body, the board of directors that has certain authority over certain matters, right? So approving the budget, physician compensation, you know, hiring and firing of physicians, issuance of shares. And so there's certain things the board of directors has to have authority over to make sure the group satisfies the definition of a group practice under Stark, allowing the group to qualify for the in-office ancillary services exception. All right, so under the governing documents, the controlling documents, we always give the board the necessary authority. Now, in practice, you know, the board typically approves what the divisions recommend. They don't have a lot of reason to interfere with a recommendation of a division, given the fact that the groups operate as separate profit centers, right? So the board has oversight, and if they have a compliance concern or financial concern, they have the authority over certain matters to get involved as a practical matter. I haven't seen that happen too frequently. All right, so we talked about Stark and the reason we have the board of directors and certain authority. So the group can continue qualifying for the in-office ancillary services exception. Part of the due diligence to put these together is also looking at the comp systems for both groups, for all groups, to make sure they comply with the Stark rules on physician compensation. In terms of offering ancillaries, one thing that's nice about being under one umbrella is when you're referring into the entity and you qualify for the in-office ancillary services exception, you just have a lot more flexibility if you were two separate groups doing a joint venture. You just have more flexibility from a regulatory perspective to jointly invest in ancillaries. You know, antitrust, one thing groups can't do very easily without running a follow-up antitrust laws is engage in joint negotiation with payers, right, or price fixing. Very bad things can happen if the government decides you're engaged in unlawful per se violations of the price fixing prohibitions. Once you're part of one legal entity, even though you have multiple divisions, you're incapable of conspiring with each other because you're deemed to be one actor. One actor can't conspire with itself, right? So now these groups together can talk about, you know, prices and negotiate together all day long without any concern from a price fixing perspective under the antitrust laws. All right, moving on to MSOs. So I think some of you just probably sat through the BSO, MSO session. So, you know, high level MSOs can be designed in a variety of ways, right? You can have very narrow focused MSOs that focus on providing only certain services, fairly limited, fairly narrow, and they get compensated for providing those services. You can have MSOs that really run everything on the clinical administrative side, right? And they get paid a substantial fee for providing all the administrative support. Now, some of you might have MSOs, you've bumped into MSOs. If you've done private equity deals, private equity deals are typically about management service organization for regulatory reasons like the corporate practice of medicine. But we'll talk more about MSOs in coming slides here. So, one of the pros for MSOs, MSOs are part of PE deals, but they're also an alternative for some groups that aren't interested in pursuing PE, at least not now. So, having an affiliate management service organization, that can be owned exactly the same as the practice is owned by the same physician owners, right? But you have more flexibility. You can allow non-physician employees of the practice to own part of the MSO. You can bring in other investors, be it a system, a strategic investor. You know, I've worked a number of these MSOs where interesting strategic investors that put substantial cash and broad resource and their know-how to the arrangement. You can't provide that investment opportunity through the practice to a device company, to a payer, to other non-unlicensed physicians. The MSO allows you to bring in investors and partners in a way that you can't do directly through the practice. For physicians, sometimes a nice way for them to think about their estate planning. You know, they can transfer their shares in the practice to their children, to their spouse, but they can transfer equity in an MSO to a spouse, to their children. It's a nice way sometimes to capture that value that's been built up over time and transfer that to someone in the family. It allows for market expansion. Some clients I've worked with have created MSOs. And again, it turns around and manages their own practice, manages the affiliated surgery centers, real estate investment companies, does all of that work. But then, you know, the MSO can also manage other practices, other ASCs, other consulting services. Again, it can be narrow, consulting on very specific questions, or it can be very robust, really providing management services from A to Z for other practices or ASCs. Physician practices often have some limitations of what they can do in other states. MSOs can often practice across state lines, right? Another benefit is consolidated administrative functions of multiple practices. Now, I've worked on this with a couple of clients too, where you have multiple practices. They form an MSO that they jointly own, either through the practitioner or as individual physicians. And they can pool their administrative resources in one MSO. So they don't want to merge the practices. Again, they want to remain independent. They don't want to come together, but they want to work together in some way and share some of the administrative costs of running practices or ASCs. They form an affiliated MSO. And again, you can have different owners, what have you, but they share, they jointly own this MSO and provides administrative services back to their practices and can go out and provide service to other practices and ASCs. So some of the cons, of course. Whenever you bring groups together anyway, there can be cultural challenges, right? That can be true with a physician practice integration, bringing different groups under an MSO. There's a cause of failure to launch. If you put a lot of money and resource in trying to put together an MSO, it doesn't take off. Well, you just maybe waste a lot of time and money, right? So before you pursue any of these options, always make sense to make sure that you might make it to the finish line, right? And it's an idea worth exploring. The regulatory issues, and again, you probably heard about some of these last session, but what drives MSO structures for private equity groups, for retail clinics, for Target, for CVS, for Optum, is the corporate practice of medicine prohibition. So again, in 35 states or so, non-physicians can't own physician practices. So because of that, groups have used the MSO structure again because anyone can own an MSO, right? Target can, CVS can, private equity groups can, Optum can. The management service organization enters into an agreement with the practice, provides administrative services. Everything clinical stays in the practice, right? Physicians are employed there. Everything clinical is in the practice. The MSO is everything administrative. So it runs the practice. Everything non-clinical, it runs the practice. And an exchange receives a fee, right? It gets paid for providing all those services as expenses reimbursed. And in a typical PE model, basically after you pay physician's compensation, the other licensed professional's compensation out of the practice, you know, in a perfect world, everything gets swept out into the management service organization. That's the model. And how much you can pull out depends on the state you're in. There can be different limitations of how states regulate MSO-PC relationships. That's the basic idea. That structure is used to avoid the corporate practice prohibition. Fee splitting. You know, when you're putting MSOs together, you have to think about fee splitting. Are you splitting physician fees, licensed professional fees in a way that runs a follow-up state? Fee splitting prohibitions. You have to think about anti-kickback, Stark, not anti-trust as much, but, you know, also benefits issues. If you have people employed by the MSO, also employed by the practice, or different affiliated groups. I'm not a benefits lawyer. I work with benefits lawyers. You can get into affiliated service group issues, you know, control group issues. You just want to make sure you're thoughtful about this and engage benefits counsel or experts with benefits structure to make sure if you go down this path, you don't create an issue you were expecting. All right. Ahead. Again, this is the basic structure for an MSO in practice. Again, I described it, but for those of you who like visuals, there's the MSO on the left. And there's an administrative services agreement with a PC on the right. It's paid a management fee. And the licensed professional owners own the PC. They can also own the MSO, right? But the unlicensed people can't own the PC in most of the states in the country. All right. So the anti-kickback statute. We won't go deep on the regulatory issues. Happy to answer questions at the end, try to cover the models, and we can come back to some of this. So physician and hospital joint ventures and hospital investments in physician practices. So another model I've seen used more frequently is hospital investment in physician practices. Now, for some of you in this room, that's a non-starter. We would never allow a hospital to invest in your practice, right? I get that. For some of you, you would only do it if no one would ever know. I get that too. But what you can do under the Stark Law, and this is why it's an option from a regulatory perspective, and some groups have done it and not really announced it, is you can have basically a divisional structure that allows a hospital to invest in, well, the entire clinic, but oftentimes maybe just a particular service line within the clinic. The clinic can still be a group practice under Stark, still has its own EIN, still has its own payer contracts, and still can qualify for the in-office ancillary services exception even with a hospital owner, okay? The hospital's governance rights, financial rights, again, for those of you who are independent, you want to keep those as minimal as possible, which you can do under the governing documents. There's often an operating agreement or a control agreement. You really just define the rights of the hospital, both financial and in terms of governance, if they're going to invest in the practice. They can have limited governance rights. They will want to think about their reserve powers. If you've done hospital joint ventures, you probably talk about their tax-exempt status. They often ask for reserve powers over certain matters to protect their tax-exempt status. That can all be done in a way that still leaves most of the control over almost everything with the practice. This can be done, again, on the divisional model too. You can have divisions that are for different groups of physicians, different profit centers. You could have a division in that the hospital's only investing in one division. You can define that. Again, it could be the first service line, an ASC. It could be a variety of different structures. Obviously, what's important in that is making sure that you strike the right balance in terms of governance and financial rights for all the players and that you have an unwind. So if things don't go well, you don't like the hospital partner and the owner in the practice, there's a way to unwind and get them out and not pay too much in doing so. All right, so we've covered a bit of this. Well, let's kind of go over it again. So from a Stark perspective, this model works. It can still be a group practice. So all the physicians can still refer back to the practice and qualify for the in-office ancillary services exception. And I kick back in Stark. Of course, if you're issuing equity in a practice, you have to make sure it's fair market value for that numerous times, different compliance or legal sessions. Whatever the hospital pays for as interest would have to be fair market value. From a corporate practice of medicine perspective, in some states, the hospital might not be able to invest directly in the practice. They'll have to form a practice subsidiary that can do so or another type of investment entity. But in most states, there's a path where you can actually make this structure work. We talked about this. Again, you can really define the financial and governance rights. Where we've seen this used is a couple of ways. One, a physician and a hospital want to joint venture a certain ancillary covered by Stark. This is not a good way to allow joint ownership because of the Stark prohibition, unless you're in a rural area. If the hospital invests directly in the practice, there's sometimes a way to allow the parties to really strike the financial terms they would love to do, a true partnership splitting profits in some way using this model. We've also seen where a hospital wants to work with a clinic to establish a new clinic location and split the profits again. In some way, you have shared control. That can be done through this model where the hospital invests in the clinic. Let's see. The kind of lessons learned, again, this is often an unused strategy. Again, for the reason I mentioned sort of at the beginning of this section, lots of independent groups, there's just no way they want a hospital to invest in their practice, right? They're just culturally, they're just, right? And so I'm glad none of you threw anything in but I was just suggesting this. I saw a few eye rolls out there. I know some of you are dangerous with martial arts, so I say back. But this is a very viable model from a regulatory perspective and often allows the parties to really get the financial and governance terms they want in a joint venture that might otherwise be prohibited by the Stark law. Don't do this at home. It's pretty tricky to do it from a kind of Stark perspective, tax exemption, anti-kickback. You want to do it right. And just you want to issue shares directly from your practice because you heard this session over an hour in Orlando. Talk to your healthcare counsel, make sure you set this up the right way. All right, value-based enterprises. So lots of the sort of the old world, right? The anti-kickback statute, the Stark law, similar rules come out of DC at the state level. We're designed to keep groups apart, right? They're designed to keep physician practices apart, designed to keep physicians and hospitals apart, made it very hard to work together. With more of a focus on value-based care, the government has something called a regulatory sprint. They're aware of the barriers to groups working together to help improve, increase value, reduce costs. As they created a number of exceptions of the Stark law, safe hours and a kickback statute. Now there's other guidance from other parts of the government to allow groups to really work more closely together, right? In different ways so they can jointly work on value, reducing costs, and then share the fruits of the labor, right, share the money with all the participants in a way that is challenging but impossible under the Stark rules that predate these new exceptions. So value-based care arrangements, there's a lot of flexibility here. I mean, kind of the takeaway is if you're serious about working with a health system on improving value, reducing costs, there's a lot of flexibility under these new exceptions, relatively new exceptions. You know, some healthcare lawyers I've talked to don't want this cat out of the bag in their communities because they don't wanna be overwhelmed by practices approaching them, trying to propose new innovative VBE joint ventures. We might just share some of the hospital revenue with the practices if they put them together. But again, this is really a, value-based care arrangements, a broad umbrella of arrangements are covered. You can cover medical providers and payers. You know, there's a lot of flexibility. So I've covered that. How do you put these together? You have to have two or more participants, right? That's the basic idea, trying to achieve at least one value-based purpose. And that's defined very broadly. The participants get to define what that means. How are you going to improve value given a particular patient population in a community? There's a lot of flexibility. You know, that could be with respect to inpatient orthopedics, right? So practice wants to, you know, work with the hospital to find ways to reduce costs or improve value with respect to inpatient orthopedics. If the practice hits certain metrics or helps the group hit certain metrics, well, then now they can share in some of the inpatient revenue from the hospital, right? The procedures, high level. That's sort of economics. I mean, it has to be real and you have to actually have real metrics or real patient population. But there are opportunities here to collaborate on, you know, outpatient arrangements with other practices or with hospitals and health systems. In terms of the documents, you know, there are governing documents, of course. You work with your lawyers, you draft to find what the patient population, the target population, what's the value-based purpose? How are you going to measure it? When do you measure it? How do you share the money? I'm not going to go into all the details, but there's a lot of opportunity here. Some of the arrangements require the physician practice to take on some risk. Others, you don't have to, the practice doesn't have to take on a risk for the patient population, right? So it depends how you structure the deal. If the practice has to have some of their own dollars at risk in the arrangement. You don't have to have a separate legal entity to do a value-based enterprise. Sometimes there's a new LLC, you know, the hospital, the physician practice join, that's the value-based entity. You don't need that. You can do it virtually. It can just be the groups working together to really target a certain population to improve value, reduce costs, and then figure out how to, you know, share the money. So hospital payer physician arrangements. You know, another term we're seeing is really, you know, this is more innovative ways of payers, hospitals, practices to work, play all together in the same sandbox, right? So one model is United's going out there through Optum and they're acquiring practices, right? But that's not really what I'm talking about. It's really more independence, you know, independent practices working with payers. And sometimes I can use that same model I described earlier where the payer, depending on corporate practice prohibitions could sometimes invest in a practice. Sometimes they could invest in an MSO that works and manages the practice, right? So they're very innovative models being put together with payers too. This is outside of just contracting, right? And trying to get the best rates possible. It's a way to work more closely with payers strategically and sometimes increase revenue to the practice. Sometimes you have multiple players. And this, again, you have a hospital, you know, one or more physician practices and the payers work together in a joint venture. But again, there's lots of, you know, interesting arrangements being put together. And again, partnering with payers, again, might be a non-starter for many independent practices, but these deals are being put together. So these are pretty profitable for the practices. What's driving some of these innovative models? You know, where hospitals are investing in practices, payers are being more flexible working with practice and hospitals. Part of it is really payers are competing with PE for opportunities, right? There is a sort of a turf war really to capture physician practices, right? And Optum's doing a great job, one of the largest employers of physicians in the country. You know, PE groups are, you know, gobbling up physician practices, of course. And if you look at some of the charts you've probably seen, like all the groups that are falling under each of these silos, you know, PE, you know, Optum, you know, CBS, whatever, you know, payers don't wanna be on the side, you know, be left out in the cold. Physician practices wanna be thoughtful about who they partner with. Again, so they have the right kind of strategic relationships. And so some of these models are being driven by sort of competition to make sure payers, hospitals, practices have the right relationships, you know, with all these parties. Again, none of these are exclusive to PE, they can be done with PE groups and PE ownership too. But, and this is sort of one of the drivers. All right. Let's skip over these slides. I get to just take a pause for questions and everything I've been kind of zipping through. I have a few more slides on different models, but love to hear if you have questions on anything, the practice-owned ASCs, divisional merger, hospital investment in the practice, or anything else. Yeah. Is there any regards to the practice? So, yeah, so, I mean, the question you can't hear it was, there's any concern about future regulations to shut down physician-owned ASCs or slow it down in some way? Sorry, practice-owned ASCs. You know, I haven't heard that. I mean, there are always different groups, you know, healthcare economists looking at what's driving, you know, costs. But for the most part, the government has been very supportive of physician or practice-owned ASCs because, I mean, it's cheaper for the government and everything's going to get pushed to outpatient. So I haven't heard anything about that. Yeah. We don't own 100% of the surgery center. Can we take our partial ownership of that center and make it a practice-owned ASC? The answer is yes. And most of the deals I've worked on in the past couple years, it's been under that arrangement. Typically, you have to get the approval of the other surgery center partner under the governing documents. There's no transfer of your interest without everyone's approval. But, yes, you can. Yep. That's a good question. I don't have the answer. Maybe some of the audience does. Usually, when these issues come up, my clients would know, or there's some other consultant that has the data. All right. So, the other issue that comes up sometimes is network arrangements, CINs. And we've definitely worked on networks, too. And I think that the trend that I'm seeing more than CINs currently is really more VBE arrangements. So, if you have a lot of flexibility from a start perspective and a kickback perspective, you can do CINs and put them together. There's often more required in terms of integration, more limitations from a regulatory perspective. But again, that is a model you can look at. The other issue or option that some groups are looking at is how to monetize their data. Clinical data, physician practice data, ASC data is very valuable. I think, historically, too many groups or their lawyers, when looking at software agreements or agreements, whether it's with their EHR, their practice management service provider, review the contracts from a HIPAA perspective to make sure it complied with HIPAA, get a business associate agreement in place. But we're really thinking about the value of the data and how to monetize that. It's very valuable data. So, one word is, when working those contracts, make sure you understand the data rights, which you might be transferring or giving up. Some groups are finding ways to license that data or make it available to other parties and get paid for that. Some groups are doing that on their premises or on their servers. So, you're not actually sharing data with a software company that might have a new AI tool that they wanna train. They actually train it onsite at the practice or at the ASCs. So, the data never leaves the practice, never leaves the ASC. It's all trained and worked on at the practice level and the practice gets paid something for helping develop or train these AI models. For those of you who work with startups, that's a pretty common thing that we're seeing. That's another opportunity for a practice to innovate and find some new income streams. Obviously, it depends on how much data you have, the quality of the data. But for larger groups, there can be quite a bit there. So, I'm at the end of the presentation. I'm happy to entertain more questions now with the entire audience, or if you wanna walk up and chat. I will close by saying there are lots of interesting models. Of course, PE is all the buzz. It's the right call for some groups, right? Lots of the ones I talked about can work with the PE arrangement. And for those groups that aren't interested in PE, these are interesting models you can put together and sometimes realize more revenue or align incentives with the practice-owned ASC model, for example. But happy to answer questions. Hope to see you around. Thanks. Thank you.

healthcare industry

physician practices

ASCs

partnerships

private equity investments

value-based care

data monetization

regulatory compliance

AI tools