You are an attorney for Galactic Empire Health System. GEHS would like to enter into a physician-integration transaction with Luke & Leia Cardiology Associates, PC. LLCA employs 10 cardiologists, owns one office building in Tatooine, and leases office space in Endor. The Endor location also houses a diagnostic imaging lab. LLCA leases the imaging equipment from Yoda Medical Enterprises.
You have been asked to draft a memorandum that outlines the possible structures that could be used to effectuate the alignment transaction and assesses the legal issues raised in each of these arrangements.
Questions Presented:
1. Whether the employment model or physician lease arrangement could be used to effectuate the alignment transaction with Luke & …show more content…
In some cases, the compensation arrangement may be neither fair market value or commercially reasonable. Under the Employment PEM, the employment arrangement is protected by both the employee exception and safe harbor, which is satisfied so long as the physicians are treated as bona fide employees under applicable federal income tax rules. If the professional services arrangement fails to meet bona fide employee status, the arrangement will be protected if it meets the personal services safe harbor. With respect to the management and administrative services provided by the old practice entity to the new practice, the parties will be protected if the arrangement meets all the requirements of the personal services, office space and equipment lease safe harbors. All three of these safe harbors basically require that the arrangement is in writing, signed by the parties, and for a period of at least one year, and the amount is set in advance, is not based on the value or volume of referrals or other business generated between the parties, and does not exceed fair market