What are the options for structuring the transaction?
Acquisitions of physician practices are generally structured as asset acquisitions; however, in the case of practices organized as “C” corporations, a stock purchase or merger may be more appropriate, due to tax considerations. Often, a hospital will utilize a subsidiary organization to purchase the practice or facility, to help insulate the hospital from potential liability. Please note, however, that to the extent that a hospital wishes to obtain payment for the practice’s echo/nuclear or other technical component services under the hospital outpatient prospective payment system, it may be necessary for these services to be operated by the hospital itself, rather than a hospital subsidiary or other non-hospital legal entity, due to the provider-based status regulations. The same requirement applies if the hospital wishes to obtain a facility fee for the services that physician practices consider office visits—and that the hospital may wish to characterize as “clinic” visits.
