Physician Affiliations With Hospitals: Practical Tips for the Physician Practice When Entering Into a PSA

Due to the continuing uncertainties surrounding the health care delivery landscape, physicians are increasingly looking at alternatives to secure their survival. Historically, physicians have turned to their local hospital for assistance, and such avenue of recourse holds true in the current health care climate.

Recent discussions between physicians and hospitals have focused on various forms of affiliation structures, and a frequently discussed structure is based upon the ‘‘professional services agreement’’ (PSA) model. In simplest terms, the PSA model retains the basic structure of the practice, but bifurcates the clinical from the nonclinical component. Typically, both clinical staff (including the owner(s), associate physician(s), nurse practitioner(s) and physician assistant(s)) as well as nonclinical staff (including administrative personnel) remain employed by, and on the payroll of, the practice entity. The clinical personnel continue to perform medical services, however, the right to bill and collect for these clinical services are assigned to the hospital (or an affiliate). As compensation, the hospital pays the practice for the clinical services, typically based upon work relative value units (wRVUs). In addition, the nonclinical component of the practice will operate pursuant to an agreed upon budget. Pursuant to the budget, the hospital will reimburse the practice entity for its overhead. Practice overhead includes the following types of expenses: compensation and benefits for staff, office rental payments, equipment, utilities, supplies and other items, and all must be identified in the budget. The hospital will either purchase or lease the hard assets (and possibly medical records) of the practice. Additionally, in some cases, the practice will be paid a management fee or stipend.

This article identifies several practical considerations that physicians must consider prior to entering into the PSA model.

Originally published in BNA’s Health Law Reporter, 23 HLR 947, 7/17/14.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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