KSM Healthcare Blog

As the current wave of physician acquisitions grows, we are seeing some of our clients, both hospitals and physicians, wanting to and entering into clinical lease arrangements as an alternative to direct physician employment. 

The Basics

The general arrangement is as follows:

• The physician remains independent, but assigns the right to bill and collect for services provided to a third party, usually a health system.
• The health system, in turn, guarantees a clinical rate to the physician.
• Payment is generally paid on a production basis -- typically in a rate per wRVU fashion.

As always, the compensation paid under a clinical lease model must be consistent with fair market value. 

Physician Perspective

This has been a good option for physician groups that are not interested in an immediate sale, but want stability with respect to income and an opportunity to develop a closer working relationship with a health system. 

Health System Perspective

Health systems also get the opportunity to more closely evaluate the relationship. Sometimes this is an interim step towards a full employment arrangement / practice acquisition.  This can also be a good relationship structure for a health system if it has insufficient resources to acquire and/or manage a practice.

Conclusion

This type of physician compensation model has been successfully implemented in a number of markets for a variety of reasons, including the few mentioned above, but certainly in other situations as well.  Personally, I anticipate increased utilization of this type of arrangement in the market for the next two to three years.

If you have a question about this type of relationship or about a related fair market value opinion, leave a comment, email, or call me.