Annapoorani Bhat, Consulting Principal and Office Managing Principal, PYA, and Jeanna Gunville, Shareholder, Polsinelli PC, discuss some of the legal and value considerations around service line carveouts and how they are working with their clients on these transactions. Annapoorani and Jeanna are speaking at AHLA’s upcoming conference, Advising Providers: Legal Strategies for AMCs, Physicians, and Hospitals, in New Orleans, LA. Sponsored by PYA.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
Annapoorani Bhat, Consulting Principal and Office Managing Principal, PYA, and Jeanna Gunville, Shareholder, Polsinelli PC, discuss some of the legal and value considerations around service line carveouts and how they are working with their clients on these transactions. Annapoorani and Jeanna are speaking at AHLA’s upcoming conference, Advising Providers: Legal Strategies for AMCs, Physicians, and Hospitals, in New Orleans, LA. Sponsored by PYA.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
Support for A HLA comes from PYA for nearly 40 years, PYA has helped clients find value in the complex challenges related to mergers and acquisitions, clinical integrations, regulatory compliance, business valuations, and fair market value assessments and tax and assurance. PYA is recognized by Modern Healthcare as one of the nation's top 20 healthcare consulting firms, and by inside public accounting as a top 100 accounting firm. Learn more@pc.com.
Speaker 2:Hey Gina, how are you today?
Speaker 3:Hey, Anna. All good. This is very exciting to be getting together in advance of the conference. I know we are , um, eager to reach out to the potential attendees in this short podcast and talk about , uh, A-H-L-A-A bit in this conference. And I understand this conference was the first a HLA conference you attended Exactly 10 years ago, Anna
Speaker 2:Mm-Hmm. <affirmative> , that is correct. And it has, I've so many fond memories of this conference. It was actually my first introduction to A HLA period when I joined , um, PYA and as you probably know, PYA , um, has been a sponsor of , uh, A HLA for many, many years now. And this conference was held exactly in New Orleans as well. So that was my first introduction to , um, cafe Dumont and Benet and all of that as well. So I have a lot of <laugh> memories of that. Um, it was , um, actually, you know, I think it was also the first time that I had sort of, you know, understood how folks come together, consultants, or in-house council , outside council , that we all come together and then we are able to share our experiences to the audience. So, you know, the next time I had met you, I thought about, okay, how, how would it be if Gina and I actually could present on, on topics at HLA ? And , you know, 10 years later we are still doing this together, which is really great.
Speaker 3:Absolutely. I , I couldn't agree more . I
Speaker 2:Was thinking , you know, I'm kind of rambling already, but I realized I don't think we have introduced ourselves to our listeners. So, Gina, do you want go ahead first?
Speaker 3:Sure. Uh, so I am Gina Gunville. I'm a shareholder with the law firm of polsinelli based in Chicago, but I work with clients across the country. Uh , clients include academic medical centers, health systems provider organizations, and a variety of healthcare providers. And I work with them on a variety of strategic transactions, partnerships, joint venture opportunities. Um , my practice is really focused on transactional work, supporting those transactions, as well as then identifying potential regulatory issues and then , uh, assuring you know, that the transactions close , timely, relevant to those regulatory timelines and needs that, you know, need to be met along the way in the course of those deals. And Anna, do you wanna introduce yourself?
Speaker 2:Absolutely. Yeah . So I'm Anna Bart . I'm a shareholder at PYA. Um, PYA is , um, you know, sort of what I would categorize as a healthcare consulting firm, but we are set up as an accounting audit tax practice as well. Um, but healthcare forms a , a vast majority of the work that we do. And within healthcare, you know, we support a whole host of range of providers. So whether it's academic medical centers , um, large health systems, physician practices , um, and we help with physician arrangements. So I specifically , um, lead our business valuation service line. So , um, like Gina , I do work in the transaction space as well, just helping our clients understand fair market value concerns , um, help make deals happen while providing independent objective feedback on fair market value considerations. Um , PYA overall , um, we also support our clients with, you know, their compliance needs, whether it's regulatory compliance, coding compliance, we have , uh, IT practice that focuses on security, HIPAA requirements, so on , so forth. And obviously anything related to strategy transaction support, we help that as well. Um, and I sit in Charlotte, North Carolina , um, and , um, have been with the firm for 10 years now. Um, so Gina, if you , um, wanna maybe talk a little bit about, I, I think this is, is this not the first time that both the physician hospital law conference and the A MC conference are actually going to be pulled together as one?
Speaker 3:That's right. Yeah, that's right. So, you know, we, we've referred to it a bit as the A MC conference, but historically , uh, both the A MC conference and the Physician Hospital Law Conference for HLA have been held at a similar time of year and A HLA now , um, you know, in order to create a more collaborative and excellent learning opportunity for attendees for those conferences, has combined those conferences together. And so the conference this year is called Legal Strategies for AMCs Physicians and Hospitals. And I'm really excited about this new format because I've attended both conferences separately, and I think it , there's, there's a lot of , um, you know , alignment there among attendees and there will be more faces at this conference, Uhhuh <affirmative> , I think, as a result to interact with. But I also think that the intimate nature of the A MC conference will be preserved. That's been a really nice environment when, as you mentioned, you've attended in the past and I've attended in the past. And I'm just looking forward to that, continuing with also this exciting change , um, and expansion to the formatting.
Speaker 2:Yeah, yeah, yeah, you're right about, you know, how intimate the A MC conferences were, but , um, I just looked at the , um, invite list as well, and there are gonna be so many familiar faces, it'll be such a great opportunity to, to be able to catch up with everyone as well. Um, so wanna talk a little bit about what we would be presenting on , um, at the conference? Gina, you wanna sort of kick us off , um, with that?
Speaker 3:Sure, absolutely. So this year we're speaking on service line carve outs. Our session is entitled a slice of the A MC pie , legal and Value Considerations around service line carve outs. And when Ann and I were looking at, you know, you and I at this possible topics, we chose this one , um, really is timely because of what we've been seeing lately as we've been working with clients on carve out transactions. And, you know, usually a client has identified a need to partner with an organization with some expertise for a certain service line. And while that concept isn't new, you know , as you know, pressures continue in healthcare , um, to rise with regard to controlling costs and improving reimbursement opportunities. And so we're seeing urgency there. As you know, leaders within AMCs are continuing to look for ways to reduce their overhead , um, eliminate items that aren't profitable on site and move them out of house , um, and out of higher cost facilities and really looking at relationships , um, that make better sense , uh, for their organizations. Long-term . Mm-Hmm, <affirmative> . And so, you know, and I just, I think it's great you and I, when we collaborate on different topics, it's so nice to information share as well as to what we're seeing from our clients, and then also share best practices in those transactions. And so that's what we're hoping to bring, you know, to our audience , um, as part of this session , um, as a way, you know, to help AMCs focus on their core businesses and strategies. Um, a couple of examples , um, that, you know, you and I were kind of discussing were, for example, carving out a hospice care services line to be managed by a trusted community partner or , um, for example, expanding a hospital at home program. And that ultimately we're kind working with our clients on, you know, those relationships that allow them to bring in some additional expertise and potential to improve , um, you know, reimbursement overall while, you know, controlling costs related to what they're carving out the service line that they're carving out. Mm-Hmm , <affirmative> . Um , and before I get into a little bit more detail about the outline, wanted to pause there, see if you had anything else you wanted to add on the kind of the choosing of the topic.
Speaker 2:Yeah, yeah, actually, it's, it's very interesting that, you know , uh, I , I know we, we titled it a MC , um, a potential for carve-outs, but actually it's, it doesn't matter whether it's an academic medical center or a , um, hospital system that's not affiliated with academic, right? Um, in, in all of these instances, there are going to be, you know , they're providing some service right now, it may fit within their , um, core strategy, but they may need a partner or maybe they discover that they're not the ideal people to provide that service . Somebody will do a much better job out there in the, in the community. And so they're trying to assess what's the next best step. And , um, you know, like those examples that you mentioned , uh, I've often sort of been brought in, our team has been brought in to , you know, perform a valuation for us. We wanna go ahead and do this, and they have some, something in their mind about next steps and , but then the valuation informs them, or , you know, maybe you wanna look at it a different way. So it's been very interesting for us to come in there as advisors and kind of start down one path and then try to , uh, discover all these , um, different creative ways to, to move forward as well. So I'm looking forward to , um, joining you to provide some real life examples for them, some case studies for our, our , um, audience as well.
Speaker 3:Absolutely. And just to give a, a very high level preview of some of the content , uh, you know, our panel involves an attorney and evaluation expert, and we, we think that that's really applicable in these transactions because they require, you know , effective deal management, understanding , uh, the legal and valuation considerations , um, because of their complexity. Um, and also understanding how to appropriately manage the pacing of the transaction to meet, you know, certain timelines and client expectations. And so really I think when we present together, we talk about that importance of , um, you know, the timing, your valuation correctly, getting all of your ducks in a row, so to speak , um, and understanding the challenge of identifying, especially with these carve out transactions , um, you know, all of the associated assets of the service line, especially understanding that when you're trying to carve something out , um, there's a potential for a lot of overlap and shared services , um, if, if the service line hasn't been operated within a separate division, for example. And , um, the driver for that from a legal perspective is, you know, for compliance reasons with our fraud and abuse laws that would require any contributions of assets be paid for at fair market value. And so that's a bit of a preview of, you know, some of the, one of the main legal considerations we're going to discuss during our panels , uh, federal anti-kickback statute of compliance, for example. And also we'll talk a bit about , um, you know, any applicable notification requirements within your jurisdiction. Um, for healthcare transactions generally, we have a lot of activity now on , um, you know, state , on a state by state basis with regard to , um, you know, notices and approvals that might be required for certain types of transactions. And depending on, you know, the threshold value of those transactions. And , um, so we'll cover , um, some of those , um, consent and approval requirements as well. And then , um, discuss, you know, licensing and permitting , um, in addition. Um, and then also too on the fair market value standpoint , um, we'll touch on , um, tax related considerations since , um, generally , um, academic medical centers where , you know, if we're talking about other , um, nonprofit health systems doing carve out transactions as well , um, their tax exempt organizations and as such would be constrained by certain tax laws. And so we'll plan to cover that substantively within our session as well. And then , um, and then also give the audience , um, from a practical standpoint , uh, a snapshot of what the transaction can look like from a drafting documents perspective. And so we'll touch on key areas within those documents that need to be addressed in the course of these transactions. Um, some examples of that , um, would be, for example, human resources related issues, when we're talking about carving out a service line , um, there could be many individuals that are providing multiple services , um, across service, different service lines within , um, the medical setting. And so figuring out, you know, which of which shared employees would transfer over as part of the transaction. Um, intellectual properties. Another , um, key that we'll talk about , um, the what type of , um, you know, branding or licensing is required , uh, with regard to carving out the service line. And, and so I, our hope is we'll give you a kind of a holistic view of what a service line carve out is , um, the things to be aware of when you're working on a transaction like that. Um, some, and some practical takeaways as to, you know, all the different , um, issues that need to be addressed within the course of your documentation, as well as then some subject matter experts that likely need to weigh in and then , um, hopefully give the attendees a , a really good sense of , um, what's possible and , uh, a way forward on those types of transactions. Um, and then Anna, do you wanna talk a little bit about , um, you know, from the valuation standpoint, what, what you might touch on within the session?
Speaker 2:Yeah, yeah, sure. Um, you know, the , you, you talked about fraud and abuse laws, how to make sure that the arrangement is, is , is within fair market value. I think , um, one of the key , um, ideas that, that I would like to share is there are gonna be several arrangements. You know, you may have a service line car out , but along with that transaction, it is quite common to see additional arrangements that are set up. So to your point around human resources, maybe there is a PSA or an MSA or some other kind of agreement that is set up. And then those agreements also need to be assessed for fair market value at that point, right? So there are several components, the ip, so branding or , you know, what is the fair market value price to pay to be able to co-brand, for example, under the new service line , um, that's being carved out. So, so we'll talk a lot about , um, that as well. So , um, I think you covered, you covered what we'll be presenting quite , uh, quite well.
Speaker 3:Well, we're, we , as I said, I think you and I are looking forward to it very much, and with that aim of , um, leading attendees a a bit more informed about, about what to be aware of. And then as you mentioned too , covering , um, kind of all of the different ways in which you need to assure that the terms of your , uh, definitive agreements support fair market value of the overall transaction.
Speaker 2:Yeah. Yeah. So are you gonna do anything fun in New Orleans or Gina?
Speaker 3:I, I hope so. I, you know, in addition to it being a fun time of year to visit the area around Mardi Gras , um, I, I always enjoy , um, the food. I mean, it's just a fantastic place to spend some time once our sessions are wrapped , um, meeting up with old and new friends and also to have taken the opportunity in the past to go on walking tours and learn a bit more about the fantastic city as well. So I will be getting to planning that part as soon as I think I get all my notes in order for this session. <laugh>
Speaker 2:<laugh> . Yeah , likewise, likewise. So I , um, am looking forward to this and , um, uh, really everybody, you know, feel free to come out to us and ask questions, and we look forward to many of you attending our sessions. I think we are doing it once in the morning and once in the afternoon on the Tuesday of the conference, is what I remember. So plenty of opportunities. And , um, I just wanna say I'm, I'm very excited and look forward to it.
Speaker 3:Same here. Uh , it's such a great organization, a HLA, and a great conference, and we, we are really looking forward to meeting everyone and seeing everyone there.
Speaker 1:Thank you for listening. If you enjoy this episode, be sure to subscribe to a HLA speaking of health law wherever you get your podcasts. To learn more about a HLA and the educational resources available to the health law community, visit American health law.org.