Determining Fair Market Rates for Provision of Cardiac Catheterization Services
Client/Profile
Community hospital
Challenge/Situation
To provide an opinion on a proposed “under arrangements” cardiac catheterization lab joint venture. The initial challenge was to determine the fair market rates to be paid by the hospital to the joint venture for the provision of cardiac catheterization services to hospital patients.
After this work was finished and the joint venture established, newly proposed federal legislation cast doubt on the legal viability of the “under arrangements” structure. Veralon was then asked to evaluate the financial feasibility of alternative joint venture structures.
Process
We performed the required market, cost and income analyses to support the fair market opinion on the “under arrangements” joint venture fee structure. After the change in federal law, Veralon evaluated the financial feasibility of restructuring the joint venture to operate either as an independent diagnostic and testing facility (IDTF) or as a provider-based entity.
Results
The results of this analysis indicated that the provider-based entity would be preferable. The hospital established this as the “fall-back” structure should the “under arrangements” structure be rendered illegal in the future. This has helped in retaining participating cardiologists and maintaining integration between key members of the medical staff and the hospital.
Nearly a year into negotiations between the medical staff and the hospital, the proposed federal legislation was enacted and the structure of the joint venture was changed to reflect the provider based alternative. By having agreement on a fall-back structure arranged in advance, the venture was able to continue despite the legislative changes. Participating cardiologists were retained on the medical staff and integration with the hospital was preserved.