- 15 - design of a new, state-of-the-art Sutter Davis Hospital scheduled to open in September 1994. B. Negotiations Negotiations between SMF and physician representatives of UHMG began in 1993 and continued through most of 1994. The discussions covering the consideration that petitioners would receive for their medical practices were protracted and sometimes acrimonious. Unlike Foundation, Sutter Health was unwilling to pay anything for the intangible assets, or goodwill, that might be associated with petitioners' medical practices. Sutter Health was unwilling to do so for two reasons: First, and principally, because Sutter Health's management believed that doing so might constitute a crime under the Medicare and Medicaid antikickback statute, 42 U.S.C. sec. 1320a-7b(b), prohibiting payments for referrals of patients eligible for Medicare or Medicaid;12 and, 12 Sutter Health's nonprofit, tax-exempt subsidiaries, including SMF, provided substantial goods and services for which payment was made under Medicare and Medicaid. The Associate General Counsel of the U.S. Department of Health and Human Services had written a letter on Dec. 22, 1992, in response to a request from the Internal Revenue Service Office of the Associate Chief Counsel for Employee Benefits and Exempt Organizations for the Department's views concerning the application of the Medicare and Medicaid antikickback statute, 42 U.S.C. sec. 1320a-7b(b), in the case of transactions involving the acquisition of physician practices by tax-exempt hospitals and other health care providers. The letter, widely circulated in the nonprofit health care sector, had expressed the view that payments made in connection with the acquisition of physician practices that were in excess of the fair market value of the "hard assets" of the practice, including payments for goodwill, patient lists, or patient records, might be considered payments for patient (continued...)Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: March 27, 2008