As hospitals look to forge alignments with medical staff physicians and many “independent” physicians consider whether they want to become employees of a hospital or health system or remain independent operators of their own practice, a practice lease arrangement may provide a very attractive alternative. Under the typical lease arrangement the institution leases the practice, including the practices operations, premises, physicians and other professional staff.
In this arrangement the institution does not acquire nor does it employ the physicians, but it does gain many, if not all, of the material benefits of a practice acquisition and physician employment during the term of the lease. The arrangement also gives the physician(s) in the practice the opportunity to evaluate what it might be like to work with the institution in an employment arrangement without selling his/her practice and making the full commitment to employment. If either party prefers not to continue the lease arrangement beyond the lease term, the unwind is typically much easier than a typical employment or acquisition transaction.
The lease arrangement can also be used to successfully navigate through valuation issues that can arise with the acquisition of a practice that has historically generated significant ancillary revenue from services like infusion therapy or imaging services. Cozen O’Connor attorneys have experience establishing lease arrangements and stand ready to assist providers who might consider this alternative to physician acquisition and employment.