SERVING UP SHARES A physician's buy-in price must be consistent with fair market value.

Once you've attracted physicians to your surgical center and they've become regular users of your ORs, offering them ownership solidifies the connection by giving them the opportunity to participate in the center's decision-making and profit distributions. Selling shares of equity can be a straightforward process if you take the following simple steps.

Proper documentation
First and foremost, you should require the prospective physician-owner to enter into a confidentiality agreement so the center can freely share sensitive information with the physician. Consult with your legal advisors on what such a document should include. After confidentiality is established, there are 2 primary contracts to enter into with the physician: a purchase agreement and a governing document.

The purchase agreement facilitates the sale of ownership interest to the physician. With limited exceptions, a physician's buy-in price must be consistent with fair market value. In determining the purchase price, your ASC should consider its own debt, if it's carrying any, and whether the physician will be required to become a personal guarantor of it. The ownership percentage being purchased should not compensate the physician for past or expected utilization. And neither your ASC nor any existing owner should loan funds to the physician for his buy-in. Failure to comply with these rules could potentially raise kickback concerns.

The purchase agreement might also include an accurate assessment of the main economic risk factors your ASC faces, which lets the potential buyer make a fully informed decision. For example, changes in the center's relationship with a significant payor might impact future reimbursement. This disclosure will help to insulate your ASC against liability claims from the buyer in the event the facility doesn't perform as well as the buyer expected. If you're selling equity to multiple physicians, a more detailed confidential information memorandum might accompany the purchase agreement.

The governing document sets forth owners' ongoing rights and responsibilities. It addresses how decisions affecting your ASC are to be made, establishes restrictions on owners' abilities to sell their equities and identifies situations in which they may be repurchased by your ASC, such as death, disability or failure to satisfy the Anti-Kickback Statute's "one-third" tests. The governing document might be called an operating agreement in a limited liability company, a shareholder's agreement in a corporation or a partnership agreement in a partnership.

Ownership arrangements may also involve a non-compete covenant that further ties a physician-owner to your center. While this document generally cannot prevent them from performing procedures at competing centers, it can prohibit them from having financial interests there.

State licensure laws may also require your ASC to notify or obtain approval from 1 or more state agencies as part of the sale transaction. If a buyer is purchasing a 5% or greater share, your ASC must also file a CMS Form 855-B (change of information) within 30 days of the sale's completion. Consult your legal counsel for full information on the regulations in your state.