Health systems that acquire physician groups take on compensation arrangements that carry Stark law obligations from the day of closing, according to an Oct. 12 blog post from Ntracts, a healthcare contract management company.
Here are five things to know:
1. Equity deals and mergers carry everything forward. In a merger or stock acquisition, the acquired entity often survives the transaction, so its contracts stay in place with the same parties. The buyer also inherits the entity’s liabilities, including past compliance issues.
2. Asset deals let buyers choose. Contracts do not transfer automatically in an asset purchase, according to the report. They must be assigned, often with third-party consent. Buyers can decide which arrangements to assume and which liabilities to take on.
3. Asset deals are not a clean slate. Every physician compensation arrangement set up after closing must meet fair market value and cannot be tied to referrals. That includes new employment agreements with physicians who join the acquiring organization.
4. Ownership-change clauses can require consent. Some contracts define a change in ownership as a transfer. Ntracts recommends reviewing the terms before assuming a contract carries over unchanged.
5. Not knowing is not a defense. The Stark law is a strict liability statute. An arrangement either meets an exception or it does not. Inherited arrangements carry the same obligations as ones the buyer’s own team signed, whether or not anyone has reviewed them.
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