5 PRSRT STD
U.S. POSTAGE
2007 Free Luncheon Seminars for Entrepreneurs
Free luncheon seminars will be held from 11:30 a.m. to 2 p.m. in Flaster/Greenberg’s Conference Center,
at 1810 Chapel Avenue West, in Cherry Hill. To register, contact Stacie Koch, at 856-661-2281;
e-mail firm@flastergreenberg.com; or register on-line at www.flastergreenberg.com. Seating is limited.
Tuesday, February 13, 2007
“Top 10 Mistakes New Businesses Make
in Employment Law — How To Avoid Them With
Your Business”
Speaker: Michael Homans, Esq.
Tuesday, March 13, 2007
“A Survival Guide to Protecting a
Good Name: How to Capitalize on
Your Brand or Business Name”
Speaker: Jordan A. LaVine, Esq.
Tuesday, April 10, 2007
“What to do When the IRS & Division of
Taxation Come Knocking”
Speaker: Alan H. Zuckerman, CPA, Esq.
Health Care Practice Group Services
◆ Sales and Acquisitions of Practices
◆ Starting a Practice or Business
◆ Employment Agreements
◆ Shareholder Agreements
◆ Admitting and Terminating Partners
◆ Lobbying
◆ Litigation and Dispute Resolution
◆ Fraud and Abuse and Other Regulatory
Advice
Tuesday, May 8, 2007
“Smart Business Moves —
What to Look for in Your Next Lease”
Speakers: Allen P. Fineberg, Esq. and
Steven H. Gartner, President,
Metro Commercial Real Estate, Inc.
Tuesday, June 12, 2007
“Dealing with First Employees: Stock Options,
Inventions, and Restrictive Covenants”
Speakers: Michael D. Homans, Esq.
and Elliot D. Raff, Esq.
◆ Licensing Board Representation
◆ Buying or Leasing Real Estate
◆ Ambulatory Surgical Centers and
Ambulatory Care Centers
◆ Medical Management Companies
◆ Internet-Based Healthcare Businesses
◆ Emergency Health Systems Development
◆ HIPAA Compliance
www.flastergreenberg.com
PAID HEALTH
LAW
Bellmawr, NJ
Permit No. 58
1810 Chapel Avenue West
Cherry Hill, NJ 08002-4609
Return Service Requested
REPORT
A Newsletter from the Health Care Law Practice Group WINTER 2007
Recent case underscores importance of
shareholders’ agreements
BY MARKLEY S. RODERICK was goodwill in the practice, but not much. The departing doctor
was owed something for her shares, but this was more than offset
When two or more doctors form a practice by money she owed back to the corporation. Various claims made
together, they naturally focus on things like by the doctors against one another and third parties were dismissed.
signing up with insurance carriers,
Based on our experience with similar situations, the case probably
maintaining relationships with referral sources
had consequences beyond those described in the judge’s opinion.
and, of course, seeing and treating patients.
For one thing, the dispute probably destroyed the personal and
Often, the physicians pay too little attention
professional relationships that brought the partners together in the
to the development of a Shareholders’
first place. For another thing, it consumed an enormous amount of
Agreement among themselves. A recent court
their time and energy, with a high financial cost and an emotional
case illustrates what can – and often does – go wrong.
cost (stress, anxiety) that cannot be calculated. Finally, it would not
The case involved three doctors who formed an orthopedic be surprising if the partners incurred legal fees in excess of $100,000.
surgery practice. At the beginning of his 33-page opinion, the judge
The lesson of the case was stated succinctly by the judge: “This
offered the following wistful summary:
case highlights the need for a shareholder agreement to be in place
The doctors appear to be gifted and talented physicians.
However, in their zeal to focus on their developing medical (continued on page 2)
practice, they appear to have paid little, if any, attention to the
business management aspects of their practice – the corporate
structure, office policies and controls, and particularly,
developing an agreement should there by a death, divorce, or Editor’s Note…
HEALTH CARE LAW PRACTICE GROUP departure of one of their colleagues. This case stands as a stark This issue of the Health Law Report
For additional information, please contact the lawyers listed below, and clear example for all doctors to heed the biblical discusses three very diverse issues
or the lawyer in the firm with whom you are regularly in contact. admonition set forth in Luke 4:23: “Physician, heal thyself.” resulting from two court decisions and a
new statute. Mark Roderick describes
Richard J. Flaster Stephen M. Greenberg Markley S. Roderick The doctors in this case were indeed highly trained, skilled, and the disaster that can arise if health care
856-661-2260 856-661-2261 856-661-2265 successful. They left the world of academic medicine to start a private
rick.flaster@flastergreenberg.com steve.greenberg@flastergreenberg.com mark.roderick@flastergreenberg.com practitioners do not have a carefully
practice with every indication that the practice would be lucrative. drafted Shareholders Agreement. Alma
Julie K. Assis Alma L. Saravia Laura B. Wallenstein Although they met with a lawyer to form a professional corporation, Saravia’s article discusses the
856-382-2255 856-661-2290 856-661-2263 for one reason or another the lawyer did not prepare a Shareholders’
overwhelming authority of the New
julie.assis@flastergreenberg.com alma.saravia@flastergreenberg.com laura.wallenstein@flastergreenberg.com Agreement. The consequences became apparent when one of the Jersey State Board of Medical Examiners
Kenneth S. Goodkind Thomas D. Scholtes Alan H. Zuckerman doctors decided to leave the practice and move to Mississippi. to discipline physicians, even if there was no patient harm.
856-382-2227 856-661-2266
856-661-2273 Questions immediately arose: Should the departing doctor Finally, Julie Assis, the newest member of our Health Care
ken.goodkind@flastergreenberg.com thomas.scholtes@flastergreenberg.com alan.zuckerman@flastergreenberg.com
receive money as a buyout? Was there “goodwill” in the practice Practice Group, covers issues that arise in the New Jersey
Vincent J. Nolan III Elliot D. Raff and, if so, how much? Was the departing doctor bound by a Advance Directives for Mental Health Care Act.
856-661-2275 856-382-2241
Our second in a series of three presentations designed for
elliot.raff@flastergreenberg.com
restrictive covenant if she decided to return to the area? Who owned
vincent.nolan@flastergreenberg.com
the accounts receivable? Had the doctors entered into an oral physicians and other health care providers, entitled, “Does an
contract about anything? Ambulatory Surgery Center Make Sense for My Practice” will
be held in our conference center on January 17th at 5:30
PRACTICE AREAS Meeting followed meeting, lawyers got involved, and eventually
p.m. More information can be found inside. This promises to
Alternative Dispute Resolution; Bankruptcy; Business & Corporate Services; Closely-Held Businesses; Construction Law; E-Commerce & Internet; the lawsuit was filed.
be an informative and helpful evening and we look forward
Emerging Business; Employee Benefits; Environmental Law & Litigation; Estate Planning & Administration; Family Law & Adoption; Health Ce; By the time the court sorted through the testimony, it is fair to to seeing you.
Intellectual Property; Labor & Employment; Litigation; Real Estate & Land Use; Redevelopment; Securities; Taxation. say that no one walked away happy. The court found that that there
Copyright © 2007 Health Law Report • Flaster/Greenberg P.C.
 2 3
New Law Encourages Documentation of Mental Health
Care Preferences
BY JULIE K. ASSIS
Individuals with mental health conditions
now have an additional legal tool intended to
help document mental health care
preferences and allow greater control over
care. The New Jersey Advance Directives for
Mental Health Care Act (the “Act”), passed
earlier this year, generally parallels New Jersey
medical advance directive law in language,
but contains notable distinctions in application.
Both types of advance directives “speak” for the individual when
he is unable to effectively communicate his wishes, due to either
mental illness or a physical condition. Both also allow an individual
to specify a person (called a “proxy”) to make medical or mental
health decisions on his behalf (a “proxy directive”).
When applied, however, the two laws are markedly different
because mental health directives are by nature intended for people
with non-terminal conditions. In contrast to the medical advance
directive law’s focus on an individual’s right to reject life-sustaining
treatment, the Act focuses on an individual’s right to control day-
to-day treatment decisions. The preferences an individual may
specify in a mental health directive include issues such as
commitment to a psychiatric facility, choice of physicians, treatment
modalities and medications.
The laws governing these two types of advance directives both
attempt to address the question of whether individuals should be
allowed to make medical decisions against the advice of their
physicians and established medical standards. Medical advance
directive case law limits an individual’s right to make potentially
harmful medical decisions to those situations in which (a) the
person has an underlying medical condition that will ultimately
result in death and (b) the person bases his or her decisions on a
wish to be free from medical intervention rather than a specific
intent to die. However, this is clearly inapplicable to mental health
advance directives.
In an attempt to include similar limitations, the Act provides
that an individual’s preference expressed in a mental health directive
can be overridden by a health care professional when he or she
determines that it would violate accepted medical standards, a court
order, or a statutory provision, or would endanger the health or life
of the patient or another person. Unfortunately, this provision is
written so broadly that it may severely limit the Act’s intended grant
of individual control. For example, a mental health advance
directive can be overridden when an individual specifies that he does
not wish to be given extreme treatment such as electroconvulsive
therapy, if his physician determines that withholding such treatment
would endanger his health.
Another difficultly with the Act involves the interaction between
an individual’s mental health directive and medical directive.
Health Law Report • Flaster/Greenberg P.C.
Potential conflicts may arise if instructions in the two directives
contradict each other, or if different proxies are named in the
directives without a specific description of each proxy’s scope of
authority. These concerns must be carefully considered when
drafting the directives.
Despite these limitations, a mental health directive can provide a
way for individuals with mental health conditions to document
treatment preferences and add legal weight to the patient’s wishes.
In addition, the Act has the potential to facilitate discussion and
heighten awareness of mental health issues—which may be exactly
the effect the New Jersey Mental Health Association anticipated
when lobbying for it. ◆
Recent case underscores importance of
shareholders’ agreements
(CONTINUED FROM PAGE 1)
at the outset so that the valuation upon leaving is determined by
consensus on day one of the firm and not imposed by a court.”
In truth, valuation is just one of the issues that should be
addressed by a Shareholders’ Agreement. Others include:
• How much money each doctor will contribute
• Ownership percentages
• The compensation of the physicians
• Management and decision-making
• Restrictive covenants (non-compete agreements)
• Time commitment
• Profit distributions
• Buy-sell issues (buyouts on death, etc.)
Dealing with these issues when a practice is formed takes a little
time, costs a little money, and can be a little uncomfortable, precisely
because the issues are important and the partners may come to the
table with different expectations. As the recent case illustrates,
however, the cost of not dealing with the issues is many times
greater. Physicians who start their business relationship on a solid
foundation are far less likely to encounter difficulty in the future. ◆
This report is for general use and information,
and the content should not be interpreted as
rendering legal advice on any matter. Specific
situations may raise additional or different issues
and such information should be coordinated with
professional legal advice.
4
Supreme Court Upholds Right of New Jersey Board of Medical Flaster/Greenberg invites you to attend a series of seminars and wine
Examiners to Discipline Physicians Even If No Patient Harm tasting receptions for physicians and other health care providers.
BY ALMA L. SARAVIA which reversed the BME’s penalty because it concluded that the
penalty was “excessive” and “unduly harsh” since there was no
“Does an Ambulatory Surgical Center Make Sense for my Practice?”
The New Jersey State Board of Medical patient harm. Wednesday, January 17, 5:30 p.m.
Examiners (“BME”) licenses more than
The BME appealed to the New Jersey Supreme Court and it Seminar Overview: Are you performing procedures in your physician groups; structuring compensation arrangements and buy-
33,000 physicians, podiatrists and other office? At the hospital in the outpatient area? In a surgery center of ins and buy-outs; developing billing compliance plans; and
held that the BME can revoke a physician’s license when it decides
professionals and it has broad statutory and which you are not an owner? If your answers are yes, you may be a designing qualified retirement plans for medical practices. He is
that he or she has committed numerous dishonest acts even when
regulatory authority over its licensees. candidate to develop and be an owner in a Medicare certified/State admitted to practice in New Jersey and Pennsylvania.
there is no patient harm involved. In re License Issued to Zahl, 186
During my years of representing physicians licensed Ambulatory Surgery Center. Find out the requirements for Richard Wagar, M.B.A., president of Surgery Center
N.J. 341, 895 A.2d 437 (N.J. 2006). Of concern to the Supreme
and other licensed healthcare providers an ASC and if it is the 2007 plan for your practice at a seminar on Management Services, Inc. (SCMS), heads a health care
Court was Dr. Zahl’s willingness to be dishonest in smaller matters, Wed., January 17, from 5:30 to 7 p.m., followed by a wine tasting
before the licensing boards, I have advised consulting/ management group that specializes in the development
which the Court thought demonstrated that he would be likely to and dinner reception from 7 to 8 p.m. in Flaster/Greenberg’s
clients that if a patient files a complaint against a licensee, he may be and management of ambulatory surgery centers. His experience
do the same in larger matters. Conference Center, located at 1810 Chapel Avenue West in Cherry
disciplined even if the patient was not harmed. Recently, the New with ASCs ranges from planning through financing, development,
Jersey Supreme Court reaffirmed the As mitigating evidence, Dr. Zahl had Hill, NJ. Registration begins at 5 p.m. construction and staffing, certification, licensure, accreditation,
concept that the BME may discipline a testified that he had made mistakes; but he managed care reimbursement contract negotiation, management
physician, including revoking his Recently, the New Jersey Supreme defended some of his actions as having been Speakers and facility billing. Since 1993, Richard’s group has provided
medical license, even though there was taken out of context by the BME. His Stephen M. Greenberg, shareholder at Flaster/Greenberg, services to over two dozen surgery centers in NJ, NY, PA and DE
Court reaffirmed the concept that the concentrates his practice in health care law, tax, and corporate legal and currently is managing four surgery centers in NJ and in the
no direct patient harm. patients had also testified that they were
BME may discipline a physician, services, including all types of business transactions, mergers and development stages with one in NJ and one in PA. He has
happy with the treatment he had provided.
including revoking his medical acquisitions. He has particular expertise in: mergers and acquisitions developed a proven turn-key model that results in efficient, cost-
Background Despite the mitigating evidence
of health care provider and physician practice groups; tax effective, profitable facilities.
license, even though there was no demonstrating that no patient’s health or
In implementing its mission to structuring of business transactions and corporate reorganization; Register today. For more information or to register, contact
direct patient harm. safety had been even minimally tax planning for individuals, estates and trusts; and employee
protect the health and welfare of the Stacie Koch at Flaster/Greenberg, P.C. at 856-661-2281; email
compromised, the Supreme Court noted that benefits. His special understanding of the health care industry
public, the BME is authorized to healthcare@flastergreenberg.com; or register on-line at
Dr. Zahl offered inconsistent testimony, encompasses: regulatory law and managed care issues; formation of
investigate the conduct of a licensee and www.flastergreenberg.com. Seating is limited.
lacked remorse at hearings and continued to exhibit a sense of practice entities and surgery centers; antitrust issues surrounding
deny, suspend or revoke his or her license. The BME is comprised
entitlement. The Supreme Court upheld the revocation of Dr.
of 21 members appointed by the Governor, including 12 physicians,
Zahl’s license and ordered him to pay costs of over $250,000, based
a podiatrist, a bioanalytic lab director, a physician’s assistant, a nurse
midwife, a representative of the Governor, the Commissioner of
on its contention that practitioners must demonstrate good moral How to Avoid the 10 Biggest Legal & Economic Mistakes Made
character in order to be safe to the public. in Physician Buy-Ins & Buy-Outs
Health and Senior Services and three public members. At the end
of 2005, Acting Governor Codey appointed ten new members to This Supreme Court decision does not mean that the BME will Tuesday, March 6, 5:30 p.m.
the BME and the new BME appears to be imposing more severe now automatically seek such a harsh penalty against a physician who
Seminar Overview: A professional practice usually has Speakers
penalties upon the licensees that it disciplines. has violated a regulation or committed fraud and who has not
three components of value: (1) net tangible assets (2) collectible
harmed a patient. However, it does reaffirm that a physician who Richard J. Flaster, shareholder at Flaster/Greenberg,
accounts receivable, and (3) goodwill. Whether fashioning buy-
Supreme Court Decision appears before the BME must recognize the BME’s substantial provides legal counsel to commercial and professional entities and
ins for new physician-owners or buy-outs for the existing
power. A cooperative approach with experienced counsel will their owners on matters involving taxation, pensions, estate
In 2003, four years after it filed a Complaint against Kenneth owners, the issues are the same, and the agreements should
usually result in a better outcome than taking an adversarial stance planning, negotiation and documentation of contracts. He has
Zahl, MD, an anesthesiologist, the BME found that he had properly reflect each component of value in the most tax-
against the BME. Once the BME has made a final determination, structured and documented numerous buy-in and buy-out
“willfully engaged in numerous dishonest acts over a course of advantaged structure possible. However, the parties often fail to
arrangements for his clients in the healthcare field. He has written
the authority of the court to overturn a penalty is limited and it will address the economic realities of the situation as well as to
years, including Medicare and insurance fraud and maintaining numerous articles and two books on tax law and regularly delivers
continue to be deferential to the BME. ◆ consider several important tax issues, which could materially
lectures on tax issues for professional associations. He is admitted
improper patient records.” The BME It voted to revoke his license
lower the net after-tax cost of the transaction.
to practice medicine and Dr. Zahl appealed to the Appellate Court, to practice in New Jersey and New York.
This issue is just one of the 10 most common tax and
Markley S. Roderick, shareholder at Flaster/Greenberg,
economic mistakes health care providers make in fashioning
concentrates his practice on the representation of closely held and
Office Locations buy-ins and buy-outs. These dilemmas and their solutions will
emerging growth companies, including companies in the health
1810 Chapel Avenue West 89 Headquarters Plaza North 8 Penn Center be discussed and reviewed, touching upon such topics as: how
care and technology industries. He frequently provides counsel in
Cherry Hill, NJ 08002-4609 14th Floor, Suite 1472 1628 JFK Boulevard to minimize taxation on the buy-in; what protections are
such areas as taxation, corporate and partnership law, business sales
Tel 856-661-1900 • Fax 856-661-1919 Morristown, NJ 07960 Philadelphia, PA 19103 needed; how to handle accounts receivable and goodwill; what
Tel 973-605-1799 • Fax 973-605-1344 Tel 215-279-9393 • Fax 215-279-9394
and acquisitions, start-up businesses, and venture capital. He is
protections should be built in for buy-out; how to provide for
2900 Fire Road, Suite 102A admitted to practice in New Jersey and Pennsylvania.
the cost of collecting the practice’s receivables, providing for the
Egg Harbor Twp., NJ 08234 441 East State Street 913 North Market Street, Suite 1001 Register today. For more information or to register, contact
Tel 609-645-1881 • Fax 609-645-9932 contingency of multiple concurrent buy-outs and how to plan
Trenton, NJ 08608 Wilmington, DE 19801
for the taxable gain realized on payments “In Kind” upon buy- Stacie Koch at Flaster/Greenberg, P.C. at 856-661-2281; email
Tel 302-351-1910 • Fax 302-351-1919
Tel 609-695-4000 • Fax 609-695-5111
out or practice break-up healthcare@flastergreenberg.com; or register on-line at
190 South Main Road www.flastergreenberg.com. Seating is limited.
Vineland, NJ 08360
Tel 856-691-6200 • Fax 856-696-8150
www.flastergreenberg.com Health Law Report • Flaster/Greenberg P.C.
 2 3
New Law Encourages Documentation of Mental Health
Care Preferences
BY JULIE K. ASSIS
Individuals with mental health conditions
now have an additional legal tool intended to
help document mental health care
preferences and allow greater control over
care. The New Jersey Advance Directives for
Mental Health Care Act (the “Act”), passed
earlier this year, generally parallels New Jersey
medical advance directive law in language,
but contains notable distinctions in application.
Both types of advance directives “speak” for the individual when
he is unable to effectively communicate his wishes, due to either
mental illness or a physical condition. Both also allow an individual
to specify a person (called a “proxy”) to make medical or mental
health decisions on his behalf (a “proxy directive”).
When applied, however, the two laws are markedly different
because mental health directives are by nature intended for people
with non-terminal conditions. In contrast to the medical advance
directive law’s focus on an individual’s right to reject life-sustaining
treatment, the Act focuses on an individual’s right to control day-
to-day treatment decisions. The preferences an individual may
specify in a mental health directive include issues such as
commitment to a psychiatric facility, choice of physicians, treatment
modalities and medications.
The laws governing these two types of advance directives both
attempt to address the question of whether individuals should be
allowed to make medical decisions against the advice of their
physicians and established medical standards. Medical advance
directive case law limits an individual’s right to make potentially
harmful medical decisions to those situations in which (a) the
person has an underlying medical condition that will ultimately
result in death and (b) the person bases his or her decisions on a
wish to be free from medical intervention rather than a specific
intent to die. However, this is clearly inapplicable to mental health
advance directives.
In an attempt to include similar limitations, the Act provides
that an individual’s preference expressed in a mental health directive
can be overridden by a health care professional when he or she
determines that it would violate accepted medical standards, a court
order, or a statutory provision, or would endanger the health or life
of the patient or another person. Unfortunately, this provision is
written so broadly that it may severely limit the Act’s intended grant
of individual control. For example, a mental health advance
directive can be overridden when an individual specifies that he does
not wish to be given extreme treatment such as electroconvulsive
therapy, if his physician determines that withholding such treatment
would endanger his health.
Another difficultly with the Act involves the interaction between
an individual’s mental health directive and medical directive.
Health Law Report • Flaster/Greenberg P.C.
Potential conflicts may arise if instructions in the two directives
contradict each other, or if different proxies are named in the
directives without a specific description of each proxy’s scope of
authority. These concerns must be carefully considered when
drafting the directives.
Despite these limitations, a mental health directive can provide a
way for individuals with mental health conditions to document
treatment preferences and add legal weight to the patient’s wishes.
In addition, the Act has the potential to facilitate discussion and
heighten awareness of mental health issues—which may be exactly
the effect the New Jersey Mental Health Association anticipated
when lobbying for it. ◆
Recent case underscores importance of
shareholders’ agreements
(CONTINUED FROM PAGE 1)
at the outset so that the valuation upon leaving is determined by
consensus on day one of the firm and not imposed by a court.”
In truth, valuation is just one of the issues that should be
addressed by a Shareholders’ Agreement. Others include:
• How much money each doctor will contribute
• Ownership percentages
• The compensation of the physicians
• Management and decision-making
• Restrictive covenants (non-compete agreements)
• Time commitment
• Profit distributions
• Buy-sell issues (buyouts on death, etc.)
Dealing with these issues when a practice is formed takes a little
time, costs a little money, and can be a little uncomfortable, precisely
because the issues are important and the partners may come to the
table with different expectations. As the recent case illustrates,
however, the cost of not dealing with the issues is many times
greater. Physicians who start their business relationship on a solid
foundation are far less likely to encounter difficulty in the future. ◆
This report is for general use and information,
and the content should not be interpreted as
rendering legal advice on any matter. Specific
situations may raise additional or different issues
and such information should be coordinated with
professional legal advice.
4
Supreme Court Upholds Right of New Jersey Board of Medical Flaster/Greenberg invites you to attend a series of seminars and wine
Examiners to Discipline Physicians Even If No Patient Harm tasting receptions for physicians and other health care providers.
BY ALMA L. SARAVIA which reversed the BME’s penalty because it concluded that the
penalty was “excessive” and “unduly harsh” since there was no
“Does an Ambulatory Surgical Center Make Sense for my Practice?”
The New Jersey State Board of Medical patient harm. Wednesday, January 17, 5:30 p.m.
Examiners (“BME”) licenses more than
The BME appealed to the New Jersey Supreme Court and it Seminar Overview: Are you performing procedures in your physician groups; structuring compensation arrangements and buy-
33,000 physicians, podiatrists and other office? At the hospital in the outpatient area? In a surgery center of ins and buy-outs; developing billing compliance plans; and
held that the BME can revoke a physician’s license when it decides
professionals and it has broad statutory and which you are not an owner? If your answers are yes, you may be a designing qualified retirement plans for medical practices. He is
that he or she has committed numerous dishonest acts even when
regulatory authority over its licensees. candidate to develop and be an owner in a Medicare certified/State admitted to practice in New Jersey and Pennsylvania.
there is no patient harm involved. In re License Issued to Zahl, 186
During my years of representing physicians licensed Ambulatory Surgery Center. Find out the requirements for Richard Wagar, M.B.A., president of Surgery Center
N.J. 341, 895 A.2d 437 (N.J. 2006). Of concern to the Supreme
and other licensed healthcare providers an ASC and if it is the 2007 plan for your practice at a seminar on Management Services, Inc. (SCMS), heads a health care
Court was Dr. Zahl’s willingness to be dishonest in smaller matters, Wed., January 17, from 5:30 to 7 p.m., followed by a wine tasting
before the licensing boards, I have advised consulting/ management group that specializes in the development
which the Court thought demonstrated that he would be likely to and dinner reception from 7 to 8 p.m. in Flaster/Greenberg’s
clients that if a patient files a complaint against a licensee, he may be and management of ambulatory surgery centers. His experience
do the same in larger matters. Conference Center, located at 1810 Chapel Avenue West in Cherry
disciplined even if the patient was not harmed. Recently, the New with ASCs ranges from planning through financing, development,
Jersey Supreme Court reaffirmed the As mitigating evidence, Dr. Zahl had Hill, NJ. Registration begins at 5 p.m. construction and staffing, certification, licensure, accreditation,
concept that the BME may discipline a testified that he had made mistakes; but he managed care reimbursement contract negotiation, management
physician, including revoking his Recently, the New Jersey Supreme defended some of his actions as having been Speakers and facility billing. Since 1993, Richard’s group has provided
medical license, even though there was taken out of context by the BME. His Stephen M. Greenberg, shareholder at Flaster/Greenberg, services to over two dozen surgery centers in NJ, NY, PA and DE
Court reaffirmed the concept that the concentrates his practice in health care law, tax, and corporate legal and currently is managing four surgery centers in NJ and in the
no direct patient harm. patients had also testified that they were
BME may discipline a physician, services, including all types of business transactions, mergers and development stages with one in NJ and one in PA. He has
happy with the treatment he had provided.
including revoking his medical acquisitions. He has particular expertise in: mergers and acquisitions developed a proven turn-key model that results in efficient, cost-
Background Despite the mitigating evidence
of health care provider and physician practice groups; tax effective, profitable facilities.
license, even though there was no demonstrating that no patient’s health or
In implementing its mission to structuring of business transactions and corporate reorganization; Register today. For more information or to register, contact
direct patient harm. safety had been even minimally tax planning for individuals, estates and trusts; and employee
protect the health and welfare of the Stacie Koch at Flaster/Greenberg, P.C. at 856-661-2281; email
compromised, the Supreme Court noted that benefits. His special understanding of the health care industry
public, the BME is authorized to healthcare@flastergreenberg.com; or register on-line at
Dr. Zahl offered inconsistent testimony, encompasses: regulatory law and managed care issues; formation of
investigate the conduct of a licensee and www.flastergreenberg.com. Seating is limited.
lacked remorse at hearings and continued to exhibit a sense of practice entities and surgery centers; antitrust issues surrounding
deny, suspend or revoke his or her license. The BME is comprised
entitlement. The Supreme Court upheld the revocation of Dr.
of 21 members appointed by the Governor, including 12 physicians,
Zahl’s license and ordered him to pay costs of over $250,000, based
a podiatrist, a bioanalytic lab director, a physician’s assistant, a nurse
midwife, a representative of the Governor, the Commissioner of
on its contention that practitioners must demonstrate good moral How to Avoid the 10 Biggest Legal & Economic Mistakes Made
character in order to be safe to the public. in Physician Buy-Ins & Buy-Outs
Health and Senior Services and three public members. At the end
of 2005, Acting Governor Codey appointed ten new members to This Supreme Court decision does not mean that the BME will Tuesday, March 6, 5:30 p.m.
the BME and the new BME appears to be imposing more severe now automatically seek such a harsh penalty against a physician who
Seminar Overview: A professional practice usually has Speakers
penalties upon the licensees that it disciplines. has violated a regulation or committed fraud and who has not
three components of value: (1) net tangible assets (2) collectible
harmed a patient. However, it does reaffirm that a physician who Richard J. Flaster, shareholder at Flaster/Greenberg,
accounts receivable, and (3) goodwill. Whether fashioning buy-
Supreme Court Decision appears before the BME must recognize the BME’s substantial provides legal counsel to commercial and professional entities and
ins for new physician-owners or buy-outs for the existing
power. A cooperative approach with experienced counsel will their owners on matters involving taxation, pensions, estate
In 2003, four years after it filed a Complaint against Kenneth owners, the issues are the same, and the agreements should
usually result in a better outcome than taking an adversarial stance planning, negotiation and documentation of contracts. He has
Zahl, MD, an anesthesiologist, the BME found that he had properly reflect each component of value in the most tax-
against the BME. Once the BME has made a final determination, structured and documented numerous buy-in and buy-out
“willfully engaged in numerous dishonest acts over a course of advantaged structure possible. However, the parties often fail to
arrangements for his clients in the healthcare field. He has written
the authority of the court to overturn a penalty is limited and it will address the economic realities of the situation as well as to
years, including Medicare and insurance fraud and maintaining numerous articles and two books on tax law and regularly delivers
continue to be deferential to the BME. ◆ consider several important tax issues, which could materially
lectures on tax issues for professional associations. He is admitted
improper patient records.” The BME It voted to revoke his license
lower the net after-tax cost of the transaction.
to practice medicine and Dr. Zahl appealed to the Appellate Court, to practice in New Jersey and New York.
This issue is just one of the 10 most common tax and
Markley S. Roderick, shareholder at Flaster/Greenberg,
economic mistakes health care providers make in fashioning
concentrates his practice on the representation of closely held and
Office Locations buy-ins and buy-outs. These dilemmas and their solutions will
emerging growth companies, including companies in the health
1810 Chapel Avenue West 89 Headquarters Plaza North 8 Penn Center be discussed and reviewed, touching upon such topics as: how
care and technology industries. He frequently provides counsel in
Cherry Hill, NJ 08002-4609 14th Floor, Suite 1472 1628 JFK Boulevard to minimize taxation on the buy-in; what protections are
such areas as taxation, corporate and partnership law, business sales
Tel 856-661-1900 • Fax 856-661-1919 Morristown, NJ 07960 Philadelphia, PA 19103 needed; how to handle accounts receivable and goodwill; what
Tel 973-605-1799 • Fax 973-605-1344 Tel 215-279-9393 • Fax 215-279-9394
and acquisitions, start-up businesses, and venture capital. He is
protections should be built in for buy-out; how to provide for
2900 Fire Road, Suite 102A admitted to practice in New Jersey and Pennsylvania.
the cost of collecting the practice’s receivables, providing for the
Egg Harbor Twp., NJ 08234 441 East State Street 913 North Market Street, Suite 1001 Register today. For more information or to register, contact
Tel 609-645-1881 • Fax 609-645-9932 contingency of multiple concurrent buy-outs and how to plan
Trenton, NJ 08608 Wilmington, DE 19801
for the taxable gain realized on payments “In Kind” upon buy- Stacie Koch at Flaster/Greenberg, P.C. at 856-661-2281; email
Tel 302-351-1910 • Fax 302-351-1919
Tel 609-695-4000 • Fax 609-695-5111
out or practice break-up healthcare@flastergreenberg.com; or register on-line at
190 South Main Road www.flastergreenberg.com. Seating is limited.
Vineland, NJ 08360
Tel 856-691-6200 • Fax 856-696-8150
www.flastergreenberg.com Health Law Report • Flaster/Greenberg P.C.
 2 3
New Law Encourages Documentation of Mental Health
Care Preferences
BY JULIE K. ASSIS
Individuals with mental health conditions
now have an additional legal tool intended to
help document mental health care
preferences and allow greater control over
care. The New Jersey Advance Directives for
Mental Health Care Act (the “Act”), passed
earlier this year, generally parallels New Jersey
medical advance directive law in language,
but contains notable distinctions in application.
Both types of advance directives “speak” for the individual when
he is unable to effectively communicate his wishes, due to either
mental illness or a physical condition. Both also allow an individual
to specify a person (called a “proxy”) to make medical or mental
health decisions on his behalf (a “proxy directive”).
When applied, however, the two laws are markedly different
because mental health directives are by nature intended for people
with non-terminal conditions. In contrast to the medical advance
directive law’s focus on an individual’s right to reject life-sustaining
treatment, the Act focuses on an individual’s right to control day-
to-day treatment decisions. The preferences an individual may
specify in a mental health directive include issues such as
commitment to a psychiatric facility, choice of physicians, treatment
modalities and medications.
The laws governing these two types of advance directives both
attempt to address the question of whether individuals should be
allowed to make medical decisions against the advice of their
physicians and established medical standards. Medical advance
directive case law limits an individual’s right to make potentially
harmful medical decisions to those situations in which (a) the
person has an underlying medical condition that will ultimately
result in death and (b) the person bases his or her decisions on a
wish to be free from medical intervention rather than a specific
intent to die. However, this is clearly inapplicable to mental health
advance directives.
In an attempt to include similar limitations, the Act provides
that an individual’s preference expressed in a mental health directive
can be overridden by a health care professional when he or she
determines that it would violate accepted medical standards, a court
order, or a statutory provision, or would endanger the health or life
of the patient or another person. Unfortunately, this provision is
written so broadly that it may severely limit the Act’s intended grant
of individual control. For example, a mental health advance
directive can be overridden when an individual specifies that he does
not wish to be given extreme treatment such as electroconvulsive
therapy, if his physician determines that withholding such treatment
would endanger his health.
Another difficultly with the Act involves the interaction between
an individual’s mental health directive and medical directive.
Health Law Report • Flaster/Greenberg P.C.
Potential conflicts may arise if instructions in the two directives
contradict each other, or if different proxies are named in the
directives without a specific description of each proxy’s scope of
authority. These concerns must be carefully considered when
drafting the directives.
Despite these limitations, a mental health directive can provide a
way for individuals with mental health conditions to document
treatment preferences and add legal weight to the patient’s wishes.
In addition, the Act has the potential to facilitate discussion and
heighten awareness of mental health issues—which may be exactly
the effect the New Jersey Mental Health Association anticipated
when lobbying for it. ◆
Recent case underscores importance of
shareholders’ agreements
(CONTINUED FROM PAGE 1)
at the outset so that the valuation upon leaving is determined by
consensus on day one of the firm and not imposed by a court.”
In truth, valuation is just one of the issues that should be
addressed by a Shareholders’ Agreement. Others include:
• How much money each doctor will contribute
• Ownership percentages
• The compensation of the physicians
• Management and decision-making
• Restrictive covenants (non-compete agreements)
• Time commitment
• Profit distributions
• Buy-sell issues (buyouts on death, etc.)
Dealing with these issues when a practice is formed takes a little
time, costs a little money, and can be a little uncomfortable, precisely
because the issues are important and the partners may come to the
table with different expectations. As the recent case illustrates,
however, the cost of not dealing with the issues is many times
greater. Physicians who start their business relationship on a solid
foundation are far less likely to encounter difficulty in the future. ◆
This report is for general use and information,
and the content should not be interpreted as
rendering legal advice on any matter. Specific
situations may raise additional or different issues
and such information should be coordinated with
professional legal advice.
4
Supreme Court Upholds Right of New Jersey Board of Medical Flaster/Greenberg invites you to attend a series of seminars and wine
Examiners to Discipline Physicians Even If No Patient Harm tasting receptions for physicians and other health care providers.
BY ALMA L. SARAVIA which reversed the BME’s penalty because it concluded that the
penalty was “excessive” and “unduly harsh” since there was no
“Does an Ambulatory Surgical Center Make Sense for my Practice?”
The New Jersey State Board of Medical patient harm. Wednesday, January 17, 5:30 p.m.
Examiners (“BME”) licenses more than
The BME appealed to the New Jersey Supreme Court and it Seminar Overview: Are you performing procedures in your physician groups; structuring compensation arrangements and buy-
33,000 physicians, podiatrists and other office? At the hospital in the outpatient area? In a surgery center of ins and buy-outs; developing billing compliance plans; and
held that the BME can revoke a physician’s license when it decides
professionals and it has broad statutory and which you are not an owner? If your answers are yes, you may be a designing qualified retirement plans for medical practices. He is
that he or she has committed numerous dishonest acts even when
regulatory authority over its licensees. candidate to develop and be an owner in a Medicare certified/State admitted to practice in New Jersey and Pennsylvania.
there is no patient harm involved. In re License Issued to Zahl, 186
During my years of representing physicians licensed Ambulatory Surgery Center. Find out the requirements for Richard Wagar, M.B.A., president of Surgery Center
N.J. 341, 895 A.2d 437 (N.J. 2006). Of concern to the Supreme
and other licensed healthcare providers an ASC and if it is the 2007 plan for your practice at a seminar on Management Services, Inc. (SCMS), heads a health care
Court was Dr. Zahl’s willingness to be dishonest in smaller matters, Wed., January 17, from 5:30 to 7 p.m., followed by a wine tasting
before the licensing boards, I have advised consulting/ management group that specializes in the development
which the Court thought demonstrated that he would be likely to and dinner reception from 7 to 8 p.m. in Flaster/Greenberg’s
clients that if a patient files a complaint against a licensee, he may be and management of ambulatory surgery centers. His experience
do the same in larger matters. Conference Center, located at 1810 Chapel Avenue West in Cherry
disciplined even if the patient was not harmed. Recently, the New with ASCs ranges from planning through financing, development,
Jersey Supreme Court reaffirmed the As mitigating evidence, Dr. Zahl had Hill, NJ. Registration begins at 5 p.m. construction and staffing, certification, licensure, accreditation,
concept that the BME may discipline a testified that he had made mistakes; but he managed care reimbursement contract negotiation, management
physician, including revoking his Recently, the New Jersey Supreme defended some of his actions as having been Speakers and facility billing. Since 1993, Richard’s group has provided
medical license, even though there was taken out of context by the BME. His Stephen M. Greenberg, shareholder at Flaster/Greenberg, services to over two dozen surgery centers in NJ, NY, PA and DE
Court reaffirmed the concept that the concentrates his practice in health care law, tax, and corporate legal and currently is managing four surgery centers in NJ and in the
no direct patient harm. patients had also testified that they were
BME may discipline a physician, services, including all types of business transactions, mergers and development stages with one in NJ and one in PA. He has
happy with the treatment he had provided.
including revoking his medical acquisitions. He has particular expertise in: mergers and acquisitions developed a proven turn-key model that results in efficient, cost-
Background Despite the mitigating evidence
of health care provider and physician practice groups; tax effective, profitable facilities.
license, even though there was no demonstrating that no patient’s health or
In implementing its mission to structuring of business transactions and corporate reorganization; Register today. For more information or to register, contact
direct patient harm. safety had been even minimally tax planning for individuals, estates and trusts; and employee
protect the health and welfare of the Stacie Koch at Flaster/Greenberg, P.C. at 856-661-2281; email
compromised, the Supreme Court noted that benefits. His special understanding of the health care industry
public, the BME is authorized to healthcare@flastergreenberg.com; or register on-line at
Dr. Zahl offered inconsistent testimony, encompasses: regulatory law and managed care issues; formation of
investigate the conduct of a licensee and www.flastergreenberg.com. Seating is limited.
lacked remorse at hearings and continued to exhibit a sense of practice entities and surgery centers; antitrust issues surrounding
deny, suspend or revoke his or her license. The BME is comprised
entitlement. The Supreme Court upheld the revocation of Dr.
of 21 members appointed by the Governor, including 12 physicians,
Zahl’s license and ordered him to pay costs of over $250,000, based
a podiatrist, a bioanalytic lab director, a physician’s assistant, a nurse
midwife, a representative of the Governor, the Commissioner of
on its contention that practitioners must demonstrate good moral How to Avoid the 10 Biggest Legal & Economic Mistakes Made
character in order to be safe to the public. in Physician Buy-Ins & Buy-Outs
Health and Senior Services and three public members. At the end
of 2005, Acting Governor Codey appointed ten new members to This Supreme Court decision does not mean that the BME will Tuesday, March 6, 5:30 p.m.
the BME and the new BME appears to be imposing more severe now automatically seek such a harsh penalty against a physician who
Seminar Overview: A professional practice usually has Speakers
penalties upon the licensees that it disciplines. has violated a regulation or committed fraud and who has not
three components of value: (1) net tangible assets (2) collectible
harmed a patient. However, it does reaffirm that a physician who Richard J. Flaster, shareholder at Flaster/Greenberg,
accounts receivable, and (3) goodwill. Whether fashioning buy-
Supreme Court Decision appears before the BME must recognize the BME’s substantial provides legal counsel to commercial and professional entities and
ins for new physician-owners or buy-outs for the existing
power. A cooperative approach with experienced counsel will their owners on matters involving taxation, pensions, estate
In 2003, four years after it filed a Complaint against Kenneth owners, the issues are the same, and the agreements should
usually result in a better outcome than taking an adversarial stance planning, negotiation and documentation of contracts. He has
Zahl, MD, an anesthesiologist, the BME found that he had properly reflect each component of value in the most tax-
against the BME. Once the BME has made a final determination, structured and documented numerous buy-in and buy-out
“willfully engaged in numerous dishonest acts over a course of advantaged structure possible. However, the parties often fail to
arrangements for his clients in the healthcare field. He has written
the authority of the court to overturn a penalty is limited and it will address the economic realities of the situation as well as to
years, including Medicare and insurance fraud and maintaining numerous articles and two books on tax law and regularly delivers
continue to be deferential to the BME. ◆ consider several important tax issues, which could materially
lectures on tax issues for professional associations. He is admitted
improper patient records.” The BME It voted to revoke his license
lower the net after-tax cost of the transaction.
to practice medicine and Dr. Zahl appealed to the Appellate Court, to practice in New Jersey and New York.
This issue is just one of the 10 most common tax and
Markley S. Roderick, shareholder at Flaster/Greenberg,
economic mistakes health care providers make in fashioning
concentrates his practice on the representation of closely held and
Office Locations buy-ins and buy-outs. These dilemmas and their solutions will
emerging growth companies, including companies in the health
1810 Chapel Avenue West 89 Headquarters Plaza North 8 Penn Center be discussed and reviewed, touching upon such topics as: how
care and technology industries. He frequently provides counsel in
Cherry Hill, NJ 08002-4609 14th Floor, Suite 1472 1628 JFK Boulevard to minimize taxation on the buy-in; what protections are
such areas as taxation, corporate and partnership law, business sales
Tel 856-661-1900 • Fax 856-661-1919 Morristown, NJ 07960 Philadelphia, PA 19103 needed; how to handle accounts receivable and goodwill; what
Tel 973-605-1799 • Fax 973-605-1344 Tel 215-279-9393 • Fax 215-279-9394
and acquisitions, start-up businesses, and venture capital. He is
protections should be built in for buy-out; how to provide for
2900 Fire Road, Suite 102A admitted to practice in New Jersey and Pennsylvania.
the cost of collecting the practice’s receivables, providing for the
Egg Harbor Twp., NJ 08234 441 East State Street 913 North Market Street, Suite 1001 Register today. For more information or to register, contact
Tel 609-645-1881 • Fax 609-645-9932 contingency of multiple concurrent buy-outs and how to plan
Trenton, NJ 08608 Wilmington, DE 19801
for the taxable gain realized on payments “In Kind” upon buy- Stacie Koch at Flaster/Greenberg, P.C. at 856-661-2281; email
Tel 302-351-1910 • Fax 302-351-1919
Tel 609-695-4000 • Fax 609-695-5111
out or practice break-up healthcare@flastergreenberg.com; or register on-line at
190 South Main Road www.flastergreenberg.com. Seating is limited.
Vineland, NJ 08360
Tel 856-691-6200 • Fax 856-696-8150
www.flastergreenberg.com Health Law Report • Flaster/Greenberg P.C.
 5 PRSRT STD
2007 Free Luncheon Seminars for Entrepreneurs
Free luncheon seminars will be held from 11:30 a.m. to 2 p.m. in Flaster/Greenberg’s Conference Center,
at 1810 Chapel Avenue West, in Cherry Hill. To register, contact Stacie Koch, at 856-661-2281;
e-mail firm@flastergreenberg.com; or register on-line at www.flastergreenberg.com. Seating is limited.
Tuesday, February 13, 2007
“Top 10 Mistakes New Businesses Make
in Employment Law — How To Avoid Them With
Your Business”
Speaker: Michael Homans, Esq.
Tuesday, March 13, 2007
“A Survival Guide to Protecting a
Good Name: How to Capitalize on
Your Brand or Business Name”
Speaker: Jordan A. LaVine, Esq.
Tuesday, April 10, 2007
“What to do When the IRS & Division of
Taxation Come Knocking”
Speaker: Alan H. Zuckerman, CPA, Esq.
Health Care Practice Group Services
◆ Sales and Acquisitions of Practices
◆ Starting a Practice or Business
◆ Employment Agreements
◆ Shareholder Agreements
◆ Admitting and Terminating Partners
◆ Lobbying
◆ Litigation and Dispute Resolution
◆ Fraud and Abuse and Other Regulatory
Advice
Tuesday, May 8, 2007
“Smart Business Moves —
What to Look for in Your Next Lease”
Speakers: Allen P. Fineberg, Esq. and
Steven H. Gartner, President,
Metro Commercial Real Estate, Inc.
Tuesday, June 12, 2007
“Dealing with First Employees: Stock Options,
Inventions, and Restrictive Covenants”
Speakers: Michael D. Homans, Esq.
and Elliot D. Raff, Esq.
◆ Licensing Board Representation
◆ Buying or Leasing Real Estate
◆ Ambulatory Surgical Centers and
Ambulatory Care Centers
◆ Medical Management Companies
◆ Internet-Based Healthcare Businesses
◆ Emergency Health Systems Development
◆ HIPAA Compliance
www.flastergreenberg.com
U.S. POSTAGE
PAID HEALTH
LAW
Bellmawr, NJ
Permit No. 58
1810 Chapel Avenue West
Cherry Hill, NJ 08002-4609
Return Service Requested
REPORT
A Newsletter from the Health Care Law Practice Group WINTER 2007
Recent case underscores importance of
shareholders’ agreements
BY MARKLEY S. RODERICK was goodwill in the practice, but not much. The departing doctor
was owed something for her shares, but this was more than offset
When two or more doctors form a practice by money she owed back to the corporation. Various claims made
together, they naturally focus on things like by the doctors against one another and third parties were dismissed.
signing up with insurance carriers,
Based on our experience with similar situations, the case probably
maintaining relationships with referral sources
had consequences beyond those described in the judge’s opinion.
and, of course, seeing and treating patients.
For one thing, the dispute probably destroyed the personal and
Often, the physicians pay too little attention
professional relationships that brought the partners together in the
to the development of a Shareholders’
first place. For another thing, it consumed an enormous amount of
Agreement among themselves. A recent court
their time and energy, with a high financial cost and an emotional
case illustrates what can – and often does – go wrong.
cost (stress, anxiety) that cannot be calculated. Finally, it would not
The case involved three doctors who formed an orthopedic be surprising if the partners incurred legal fees in excess of $100,000.
surgery practice. At the beginning of his 33-page opinion, the judge
The lesson of the case was stated succinctly by the judge: “This
offered the following wistful summary:
case highlights the need for a shareholder agreement to be in place
The doctors appear to be gifted and talented physicians.
However, in their zeal to focus on their developing medical (continued on page 2)
practice, they appear to have paid little, if any, attention to the
business management aspects of their practice – the corporate
structure, office policies and controls, and particularly,
developing an agreement should there by a death, divorce, or Editor’s Note…
HEALTH CARE LAW PRACTICE GROUP departure of one of their colleagues. This case stands as a stark This issue of the Health Law Report
For additional information, please contact the lawyers listed below, and clear example for all doctors to heed the biblical discusses three very diverse issues
or the lawyer in the firm with whom you are regularly in contact. admonition set forth in Luke 4:23: “Physician, heal thyself.” resulting from two court decisions and a
new statute. Mark Roderick describes
Richard J. Flaster Stephen M. Greenberg Markley S. Roderick The doctors in this case were indeed highly trained, skilled, and the disaster that can arise if health care
856-661-2260 856-661-2261 856-661-2265 successful. They left the world of academic medicine to start a private
rick.flaster@flastergreenberg.com steve.greenberg@flastergreenberg.com mark.roderick@flastergreenberg.com practitioners do not have a carefully
practice with every indication that the practice would be lucrative. drafted Shareholders Agreement. Alma
Julie K. Assis Alma L. Saravia Laura B. Wallenstein Although they met with a lawyer to form a professional corporation, Saravia’s article discusses the
856-382-2255 856-661-2290 856-661-2263 for one reason or another the lawyer did not prepare a Shareholders’
overwhelming authority of the New
julie.assis@flastergreenberg.com alma.saravia@flastergreenberg.com laura.wallenstein@flastergreenberg.com Agreement. The consequences became apparent when one of the Jersey State Board of Medical Examiners
Kenneth S. Goodkind Thomas D. Scholtes Alan H. Zuckerman doctors decided to leave the practice and move to Mississippi. to discipline physicians, even if there was no patient harm.
856-382-2227 856-661-2266
856-661-2273 Questions immediately arose: Should the departing doctor Finally, Julie Assis, the newest member of our Health Care
ken.goodkind@flastergreenberg.com thomas.scholtes@flastergreenberg.com alan.zuckerman@flastergreenberg.com
receive money as a buyout? Was there “goodwill” in the practice Practice Group, covers issues that arise in the New Jersey
Vincent J. Nolan III Elliot D. Raff and, if so, how much? Was the departing doctor bound by a Advance Directives for Mental Health Care Act.
856-661-2275 856-382-2241
Our second in a series of three presentations designed for
elliot.raff@flastergreenberg.com
restrictive covenant if she decided to return to the area? Who owned
vincent.nolan@flastergreenberg.com
the accounts receivable? Had the doctors entered into an oral physicians and other health care providers, entitled, “Does an
contract about anything? Ambulatory Surgery Center Make Sense for My Practice” will
be held in our conference center on January 17th at 5:30
PRACTICE AREAS Meeting followed meeting, lawyers got involved, and eventually
p.m. More information can be found inside. This promises to
Alternative Dispute Resolution; Bankruptcy; Business & Corporate Services; Closely-Held Businesses; Construction Law; E-Commerce & Internet; the lawsuit was filed.
be an informative and helpful evening and we look forward
Emerging Business; Employee Benefits; Environmental Law & Litigation; Estate Planning & Administration; Family Law & Adoption; Health Ce; By the time the court sorted through the testimony, it is fair to to seeing you.
Intellectual Property; Labor & Employment; Litigation; Real Estate & Land Use; Redevelopment; Securities; Taxation. say that no one walked away happy. The court found that that there
Copyright © 2007 Health Law Report • Flaster/Greenberg P.C.
 5 PRSRT STD
2007 Free Luncheon Seminars for Entrepreneurs
Free luncheon seminars will be held from 11:30 a.m. to 2 p.m. in Flaster/Greenberg’s Conference Center,
at 1810 Chapel Avenue West, in Cherry Hill. To register, contact Stacie Koch, at 856-661-2281;
e-mail firm@flastergreenberg.com; or register on-line at www.flastergreenberg.com. Seating is limited.
Tuesday, February 13, 2007
“Top 10 Mistakes New Businesses Make
in Employment Law — How To Avoid Them With
Your Business”
Speaker: Michael Homans, Esq.
Tuesday, March 13, 2007
“A Survival Guide to Protecting a
Good Name: How to Capitalize on
Your Brand or Business Name”
Speaker: Jordan A. LaVine, Esq.
Tuesday, April 10, 2007
“What to do When the IRS & Division of
Taxation Come Knocking”
Speaker: Alan H. Zuckerman, CPA, Esq.
Health Care Practice Group Services
◆ Sales and Acquisitions of Practices
◆ Starting a Practice or Business
◆ Employment Agreements
◆ Shareholder Agreements
◆ Admitting and Terminating Partners
◆ Lobbying
◆ Litigation and Dispute Resolution
◆ Fraud and Abuse and Other Regulatory
Advice
Tuesday, May 8, 2007
“Smart Business Moves —
What to Look for in Your Next Lease”
Speakers: Allen P. Fineberg, Esq. and
Steven H. Gartner, President,
Metro Commercial Real Estate, Inc.
Tuesday, June 12, 2007
“Dealing with First Employees: Stock Options,
Inventions, and Restrictive Covenants”
Speakers: Michael D. Homans, Esq.
and Elliot D. Raff, Esq.
◆ Licensing Board Representation
◆ Buying or Leasing Real Estate
◆ Ambulatory Surgical Centers and
Ambulatory Care Centers
◆ Medical Management Companies
◆ Internet-Based Healthcare Businesses
◆ Emergency Health Systems Development
◆ HIPAA Compliance
www.flastergreenberg.com
U.S. POSTAGE
PAID HEALTH
LAW
Bellmawr, NJ
Permit No. 58
1810 Chapel Avenue West
Cherry Hill, NJ 08002-4609
Return Service Requested
REPORT
A Newsletter from the Health Care Law Practice Group WINTER 2007
Recent case underscores importance of
shareholders’ agreements
BY MARKLEY S. RODERICK was goodwill in the practice, but not much. The departing doctor
was owed something for her shares, but this was more than offset
When two or more doctors form a practice by money she owed back to the corporation. Various claims made
together, they naturally focus on things like by the doctors against one another and third parties were dismissed.
signing up with insurance carriers,
Based on our experience with similar situations, the case probably
maintaining relationships with referral sources
had consequences beyond those described in the judge’s opinion.
and, of course, seeing and treating patients.
For one thing, the dispute probably destroyed the personal and
Often, the physicians pay too little attention
professional relationships that brought the partners together in the
to the development of a Shareholders’
first place. For another thing, it consumed an enormous amount of
Agreement among themselves. A recent court
their time and energy, with a high financial cost and an emotional
case illustrates what can – and often does – go wrong.
cost (stress, anxiety) that cannot be calculated. Finally, it would not
The case involved three doctors who formed an orthopedic be surprising if the partners incurred legal fees in excess of $100,000.
surgery practice. At the beginning of his 33-page opinion, the judge
The lesson of the case was stated succinctly by the judge: “This
offered the following wistful summary:
case highlights the need for a shareholder agreement to be in place
The doctors appear to be gifted and talented physicians.
However, in their zeal to focus on their developing medical (continued on page 2)
practice, they appear to have paid little, if any, attention to the
business management aspects of their practice – the corporate
structure, office policies and controls, and particularly,
developing an agreement should there by a death, divorce, or Editor’s Note…
HEALTH CARE LAW PRACTICE GROUP departure of one of their colleagues. This case stands as a stark This issue of the Health Law Report
For additional information, please contact the lawyers listed below, and clear example for all doctors to heed the biblical discusses three very diverse issues
or the lawyer in the firm with whom you are regularly in contact. admonition set forth in Luke 4:23: “Physician, heal thyself.” resulting from two court decisions and a
new statute. Mark Roderick describes
Richard J. Flaster Stephen M. Greenberg Markley S. Roderick The doctors in this case were indeed highly trained, skilled, and the disaster that can arise if health care
856-661-2260 856-661-2261 856-661-2265 successful. They left the world of academic medicine to start a private
rick.flaster@flastergreenberg.com steve.greenberg@flastergreenberg.com mark.roderick@flastergreenberg.com practitioners do not have a carefully
practice with every indication that the practice would be lucrative. drafted Shareholders Agreement. Alma
Julie K. Assis Alma L. Saravia Laura B. Wallenstein Although they met with a lawyer to form a professional corporation, Saravia’s article discusses the
856-382-2255 856-661-2290 856-661-2263 for one reason or another the lawyer did not prepare a Shareholders’
overwhelming authority of the New
julie.assis@flastergreenberg.com alma.saravia@flastergreenberg.com laura.wallenstein@flastergreenberg.com Agreement. The consequences became apparent when one of the Jersey State Board of Medical Examiners
Kenneth S. Goodkind Thomas D. Scholtes Alan H. Zuckerman doctors decided to leave the practice and move to Mississippi. to discipline physicians, even if there was no patient harm.
856-382-2227 856-661-2266
856-661-2273 Questions immediately arose: Should the departing doctor Finally, Julie Assis, the newest member of our Health Care
ken.goodkind@flastergreenberg.com thomas.scholtes@flastergreenberg.com alan.zuckerman@flastergreenberg.com
receive money as a buyout? Was there “goodwill” in the practice Practice Group, covers issues that arise in the New Jersey
Vincent J. Nolan III Elliot D. Raff and, if so, how much? Was the departing doctor bound by a Advance Directives for Mental Health Care Act.
856-661-2275 856-382-2241
Our second in a series of three presentations designed for
elliot.raff@flastergreenberg.com
restrictive covenant if she decided to return to the area? Who owned
vincent.nolan@flastergreenberg.com
the accounts receivable? Had the doctors entered into an oral physicians and other health care providers, entitled, “Does an
contract about anything? Ambulatory Surgery Center Make Sense for My Practice” will
be held in our conference center on January 17th at 5:30
PRACTICE AREAS Meeting followed meeting, lawyers got involved, and eventually
p.m. More information can be found inside. This promises to
Alternative Dispute Resolution; Bankruptcy; Business & Corporate Services; Closely-Held Businesses; Construction Law; E-Commerce & Internet; the lawsuit was filed.
be an informative and helpful evening and we look forward
Emerging Business; Employee Benefits; Environmental Law & Litigation; Estate Planning & Administration; Family Law & Adoption; Health Ce; By the time the court sorted through the testimony, it is fair to to seeing you.
Intellectual Property; Labor & Employment; Litigation; Real Estate & Land Use; Redevelopment; Securities; Taxation. say that no one walked away happy. The court found that that there
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