Certificate of Need (CON)

A certificate of need (CON) is a legal document that is required in a number of states before proposed acquisitions, expansions, or facility creation. A federal or state regulatory agency must approve the need within the community for new health care facilities. This limits competition and makes existing centers more desirable.

Letter of Intent (LOI)

The Letter of Intent (LOI) is a legal document that outlines the agreement between two or more parties before an agreement is finalized. LOIs are not entirely binding, though they may contain provisions that are binding such as a non-disclosure agreement or “no-shop” provision. LOIs are used to: clarify key points of a transaction for all parties involved officially declare the parties are negotiating provide safeguards in case the deal collapses verify issues of payment for someone else (e.g. credit card...

Stark regulations

Stark regulations refers to the different phases of the Stark Law, which prohibits physician referrals to a center in which he or she has a financial interest. While it has several exceptions, this may impact the manner in which a physician owner of an ambulatory center can increase business.

Safe harbor regulations

Safe harbor regulations are provisions that permit certain conduct within a general standard. For example, in surgery centers, physicians might agree to a 1/3 safe harbor, using the center for at least one third of the cases they have that could be performed at that center.

What are some of the regulatory risks associated with physician recruitment and syndications?

Note that we aren’t lawyers, thus you need to work with your lawyer on this. This is from the perspective of an SEC registered and FINRA Licensed Investment Banker as well as a Securities Principle responsible for the supervision of Investment Bankers and their activities. You need to be aware that syndication involves the sale of securities-whether you are selling shares, or LLC Units or limited partnership units. Federal and state securities laws determine the manner in which the offering and sale of ownership interest must be conducted. Additionally securities laws control who can affect the sale of securities and how. There is a white paper and a few articles around this very important but not well understood law that are posted on the Ambulatory Alliances website. To ensure compliance with the securities laws, syndication almost always involve some form of disclosure documents, whether an offering memorandum, purchase agreement or similar instrument. The primary purpose of such a document is to fulfill the disclosure requirements of the Securities Act, while serving as a shield against any future charges of violating the antifraud provision of the securities laws. The documents will serve as an outline of the transaction and a tool for marketing the offering. The gist of the documents is to ensure you have an educated buyer, educated in the sense that they know what they are getting into. With secondary offerings, even though one physician is selling some of their shares to another physician you need to make sure that the second physician is fully informed by giving them copies of all of the original documents and updated documents such as current ownership percentages, updated financials including any debt instruments, updated disclosure documents etc. Additionally, we have seen some doctors trade these securities often. The securities laws as well as all of the transaction documents mimic the laws and state something along the lines of- you acknowledge that the purchase of the securities is for the investment intent and not for resale. The securities must come to rest in the hands of the investor. Different states have different interpretations or safe harbors so to speak as to how long a physician must own the security before they can resell it. That is why when we do a resyndication, before executing an exit strategy we make sure the securities have come to rest and we are very careful. In some cases around the above we have advised clients in certain situations that warrant it that they can write the state securities administrators and ask for a “no action letter”, which is a letter to the state securities administrator or SEC for that matter explaining the action asking if the staff...