The Reformed Health Care Industry: Creative Structures and Alliances Can Yield Great Benefits, but Also Great Risks

Since the Affordable Care Act (the “ACA”) was enacted in 2010, the health care industry has been on the edge of its proverbial seat waiting to see which care delivery models are best suited to sustain all the changes: to consolidate or not consolidate; to affiliate or not affiliate; to sell or not to sell. These debates — all of which were regular topics of discussion at the recent American Health Lawyers Association annual meeting in New York City — are all worthy of far more than this brief overview of some of the routes various health care industry players have explored in transforming the health care market. But with these innovative models — some tried and true, some tried and failed under pre-ACA regimes — comes familiar regulatory risks and considerations of which industry players need to be ever- mindful.

Joint Operating Agreements -

Joint operating agreements act as “virtual mergers” that establish relationships between the manager or joint operating company (“JOC”) and the participating sponsors and providers. Joint operating agreements have gained popularity among smaller hospitals and health systems seeking to retain their separate existence, boards of directors, and certain governance authorities, while gaining economies of scale, payor negotiating strength, back-office support, and management of day-to-day operations. Smaller providers with limited personnel and resources can gain key efficiencies through joint operating agreements, such as sophisticated legal and compliance departments necessary to navigate the ever- increasing and complex intricacies of the health care regulatory minefields. A lack of expertise in the regulatory realm can quickly put a provider out of business as a result of massive qui tam judgments and increased government enforcement of fraud and abuse offenders.

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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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