1.What are three of the key points David might highlight in his memorandum to the CEO about the joint venture? Which laws or regulations might this joint venture violate?
*Tri-County will contribute 70 percent of the capital needed for construction of the facility and purchase of equipment and initial supplies. The other 30 percent will be financed by the surgeons with a bank loan.
-All business issues and questions related to the ambulatory surgical center will be decided by a majority vote of the center’s managing directors. Three of the six positions will be occupied by representatives of the surgeons; the other positions will be occupied by representatives of the hospital. The partnership agreement will contain a binding arbitration clause in the event that a decision before the managing directors receives a tie vote.
*The hospital and surgeons will jointly develop a protocol addressing the types of surgical cases that should be handled on an inpatient basis at the hospital versus those that will be referred to the ambulatory surgical center. The hospital will be expected to promote the ambulatory surgical center and encourage medical staff members to make appropriate referrals. Also, profit margin thresholds will be established in advance for the ambulatory surgical center, and as these thresholds are reached, the division of profits between the hospital and the surgeons will be adjusted in favor of the hospital.
The Clayton Act and the Stark Physicians Self-Referral Law are two regulations that the joint venture may violate. The Clayton Act prohibits mergers, acquisitions, or joint ventures that threaten to substantially lessen competition or are likely to create monopoly. The Stark Physicians Self-Referral Law prohibits physicians from referring patients to certain health service providers with which the physicians have a financial relationship.
2.What changes, if any, in the proposed arrangement might be needed to keep the ambulatory surgical...