If it sounds too good to be true, it probably is. As a board-certified orthopedic surgeon, today’s guest, Dr. Dominique Nickson has learned to zoom in on the details when presented with a business opportunity. Tune in as we share specific compliance actions to consider in your next health care transaction.
Listen to the full episode using the player below, or by visiting one of the links below. Below is the episode’s transcript which has been edited for readability. If you have any questions or would like to learn more, email us at firstname.lastname@example.org.
Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues, simplified through real client stories and real world experiences. Creating simplicity in three, two, one.
Brad: Welcome back to another episode of Legal 123s with ByrdAdatto. I’m your host Brad Adatto with my cohost Michael Byrd.
Michael: Thanks, Brad. As a business and healthcare law firm details matter. This season’s theme is zoom in. Once we know our big picture vision or strategy, we have to roll up our sleeves to get the work done. With each episode this season we’ll have our typical stories and make sure we talk about specific actions to focus on for 2022.
Brad: Yeah. And Michael, I’m excited for today’s episode. We have a guest joining us with a really cool background, coming from a humble start to becoming an orthopedic physician. But before we bring in today’s special guest, I want to ask you a question. I saw this documentary recently and it [00:01:00] blew me away. Have you heard of this documentary called Fyre: The Greatest Party That Never Happened?
Michael: Oh yeah. It’s a massive train wreck and believe it or not. And I don’t know if you know this, but two of the streaming services came out with their own version of the Fyre Festival story right next to each other. So there are competing versions of it and they both were dumpster fires.
Brad: That’s awesome. Well, for those who don’t know, Fyre was promoted as a high end music festival on a tropical island where it was promoted by these Instagram social media influencers and they sold like 8,000 tickets because all these high end musical lineup was going to be there with luxury accommodations, gourmet dining. Some of these VIP packages sold for like $12,000.
Michael: Yeah, we should have talked about this during the season that we did dumpster fires as a theme because that’s what this was. There was no [00:02:00] luxury villas, no gourmet meals. In fact, those who attended only received boxed plain cheese sandwiches and basically FEMA tents as their accommodation. And it quickly became a major disaster where all the artists backed out of the event and they started to experience problems related to security, food, and medical service.
Brad: And so eventually for those that don’t know, you can pause this part and fast forward for 20 seconds, but the organizers eventually did plead guilty to committing wire fraud. And then one of the organizers while he was out on bail, got busted for defrauding people in another scheme. He went to jail for six years, had to fort like $26 million, and they’ve been subject to a whole bunch of different lawsuits for defrauding these people.
Michael: So what does a fraudulent [00:03:00] musical festival have to do with today’s show?
Brad: Okay. So while I was preparing for today’s show for our guests, I started thinking about the deals that he has seen in his lifetime and the importance of planning and determining is this a real deal? And sometimes it doesn’t matter who’s saying it, how good it sounds, how true it sounds, sometimes if it’s too good to be true, that just may be the case.
Michael: All right. Well, let’s bring Dominique Nickson MD on. Dominique is a board certified orthopedic surgeon and foot pain specialist providing services to patients at Next Step Orthopedics. He offers treatment for a variety of sports medicine conditions. Dominique received his doctorate in medicine with a special emphasis on orthopedic surgery from the Case Western Reserve School of Medicine in Cleveland, Ohio. He did his residency at State University of New York in Brooklyn. [00:04:00] Dominique did his fellowship training and foot and ankle training at Baylor University Medical Center in Dallas. He is married to Michelle and is a longtime friend and client of the firm. When Dominique does have free time, whatever that means, he is spending it with his son’s baseball team and traveling. Dominique, welcome.
Dominique: Thank you for having me
Brad: Well, Dominique, you know, we have worked together since 2011 and during that time we’ve had some great adventures together, but for our audience, let’s take a big step back and let’s start before you and I even met. And give the audience some of your background, where did you grow up?
Dominque: I’m originally from Indianapolis, Indiana north side.
Brad: So tell us about north side.
Dominique: I will say my neighborhood I guess you’d call it a blue collar neighborhood. Lots of good people [00:05:00] there, kind of gave me the foundation to do what I do today. I think it allows me to relate to everyday people.
Brad: That’s awesome.
Michael: How did you decide to become a doctor?
Dominique: Well I got into an advanced biology class in high school and my high school teacher named Mr. Russell, he was just as very dynamic teacher who just made biology and medicine seem like the most fascinating thing in the world. And the class was very competitive and I liked the energy of competing against the best students and it kind of led me down the path to Washington University.
Michael: So now you’re a board certified orthopedic surgeon and you have many healthcare and non-healthcare opportunities that are offered to you and we would love, just because we have stories connected to our episodes, and obviously without releasing any names, [00:06:00] I’d love to hear from you a healthcare deal that you wish you could take back and why.
Dominque: I think that there are probably several, but one that comes to mind is a deal that we did early on my arrival to Dallas with a imaging facility. The deal started off, well now I was invested into the non-federal portion of the program and eventually there were attempts by the group to reorganize it and to kind of do a slight of hand that I wasn’t comfortable with. And fortunately I brought it back to Brad and said, hey we’ll take a look at this. And essentially he advised me to get out of the deal.
Brad: That’s a fair assessment. Dominique, just taking another step into the details when, [00:07:00] and so for our audience, you know, this season’s theme is zoom in. And so for us, we really want to get into the details as to what drives certain actions. And based on, as you said, you have a for better or for worse, a plethora of health care transactions that you have seen since you have become a physician, tell us some of the terms and conditions that you’d like to examine now based on what you’ve seen.
Dominque: I think that the first and foremost I look at any deal, I try to see if it makes sense with what I do. Is it an opportunity that I can support and as in line with my business model and kind of my ethical standard? That’s kind of number one. Number two, I look at who’s involved? Are these reputable players, are they looking to make a quick buck or are they looking to do a long-term opportunity? Obviously, you know, I’m more interested in the long-term [00:08:00] gains. So those are the two kind of loose items I’ll look at. And then the next thing is how is the deal structured? I try to look at federal players, are they only looking at commercial payers in those that pretty much allows me to stratify the deals that I want to be involved with. I do not get involved with any kind of federal program patients for obvious reasons
Brad: And for our audience, I think some of those obvious reasons we can talk about in the second half. Definitely, I would say when you are looking at these deals, what are some of the returns that they talk about that you may get? Or what are some of the returns that you look at?
Dominque: Well, I’ve seen, there’s a wide array of options given. Some are more aggressive and some are very conservative. Usually the ones that seem [00:09:00] highly liquid on the front end may not be because they tend to be over promising and under delivering. I’m really looking for opportunities that are realistic and transparent. That’s probably the biggest thing, I don’t like surprises and especially when we’re talking about legal entities.
Brad: Yeah. And so when it comes to deals do you feel now more comfortable with real estate deals or deals that comes across your desk as something you’d consider, but you don’t have a preference?
Dominique: I look at any situation because they can be mirrored in any, but you know, ultimately once you start pulling back the layers, then you’ll find the truth. You know, I’m not going into any opportunity without getting it vetted legally. And in part of that legal betting is not just is it legally sound but is it kind of structurally sound? And so that’s [00:10:00] where a partnership with you guys is actually very helpful. So I haven’t done any deals that I haven’t let you guys see first, now having said that, that doesn’t mean every deal is doing perfect, but you know, you’ve seen everyone.
Michael: I’m curious too, you’ve seen a lot of deals, have you kind of picked up on any indicators that make you identify if the people on the other side are people that you shouldn’t be doing business with?
Dominque: Yeah, I think that probably the biggest thing goes back to my upbringing and my grandfather used to always say two things. Number one, there is no free lunch. And if it sounds too good to be true, it is. And so usually when I’m coming across a deal that is not going to be great. I kind of get a sense or sensation that, Hey, this is, you know, this is not quite right. So I’m not sure I can pinpoint, an exact thing, [00:11:00] but it’s a feeling. And in the deals that I have done that haven’t gone well, usually I’ve kind of pushed that feeling aside. I think it’s important to listen to your gut because your gut is usually telling you the right thing.
Michael: Fascinating. Well, I’m so grateful that you came on today and what we’ll do Dominique is we’ll let you go here in just a second and we’ll go to a commercial and then after, Brad and I will come back after commercial and kind of get into, without trying to put everyone to sleep, some of the legal analysis behind evaluating these deals. Thank you for joining us.
Dominique: Thank you for having me.
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Brad: Welcome back to the second half. We’re still here with the Legal 123s with ByrdAdatto and Michael Byrd and myself are still here. Now Michael, you know, Dominique was thrown a lot of stuff at us. Let’s kind of see what are some of your initial thoughts?
Michael: My initial thought is I’m curious, Brad, I want to hear more about this deal. The imaging deal that he talked about and I want to hear more about that story.
Brad: Yeah. And he raised a good point if you heard what he was saying, which I liked about how he was kind of breaking it down as he gets very nervous like a lot of physicians when they start hearing about [00:13:00] in this, I’ll use the word, he didn’t use it, but the co-mingling of federal payer patients with commercial payers. So in this particular deal, again, no names involved. A lot of times when someone shows up, they’ll sell you on one thing, much like Fyre. It’s just like, hey doc, this is a deal in which we’re going to have just commercial payers, we have vetted the process. So long as you do A, B and C you can invest in this imaging deal and you’re fine. And so a lot of times like a lot of deals when it first started, that was a compliant way of course I’m generalizing here, but there are a lot of ways in certain states that you, as a physician can invest in those deals and it has a lot to do with your ownership and how you’re buying in and at fair market value. So there’s a lot of pieces that go into that the moment someone injects Federal payers into it. So in this particular deal, they came back to Dominique later and said, hey, we want to shift this [00:14:00] and now we also want to use exact same facility at the exact same time to also have federal payers going through the exact same facility except it’s just a different entity. And so that had a host of issues that came with it. One of them if the same federal patients have to come from any of those physicians, not just Dominique, but any physician that can mess up the entire deal. Imaging centers themselves are a licensed facility licensed by a state and that license is not transferable back and forth over and over again. So the same entity that had one license was allowing two different entities to use it. One being a federal payer and one being commercial payer. So that opened itself to billing issues. And I would say Dominique did say something that was important, was as soon as he saw that he just didn’t think it sounded right. And so luckily he reached out to his counsel and in his case, his counsel’s awesome, that he realized [00:15:00] that.
Michael: This is not a comedy podcast.
Brad: Oh, sorry, my bad. But he realized going what he said his gut, something just didn’t seem right about it. And that allowed him to the details matter in this one that, as he said, it sounded great until the more details came out and they started trying to restructure it and so he’s like, I don’t want to be a part of something like that. So very good decision to on his perspective.
Michael: So I guess number one, he was in the deal and then they changed it?
Brad: So he was in a deal and then they came back and said hey Dominique, we want to change this deal. And that’s when he hit the pause button in his case and said well, I want to know these details and I want counsel involved. And then when he heard the details, he said, I don’t want to have anything to do with this. This doesn’t sound right.
Michael: Were there mechanisms in the deal that he had signed to allow him to get out when he wanted to get out?
Michael: Oh, because [00:16:00] of his great counsel, his amazing counsel like you said?
Brad: Well I didn’t say it was me I just said there was an amazing counsel, so you strongly implied it. I was going to say it was Jay Reyero but if you think it was me, I appreciate that.
Michael: Okay. Well are there any other details you think people should consider when they’re looking at deals like this?
Brad: A lot of healthcare arrangements, you know, we always say, depending on the deal, there’s so many different pitches. And so you hear these big picture like as we were talking about, oh hey doc, invest in this ASC or the lab of this imaging center in his case. And so on a high level, it sounds great. I mean, it sounds like it’s amazing, but this season we really want to talk about zooming in and actually understanding the details. So I’ll give you an example, Michael. He said it, which is great because this is what we always say. You know, talk to us [00:17:00] about what type of payers are involved in the arrangement. Do we have federal payers or state payers? So like Medicare and Medicaid or even Tri-Care we call these program payers.
Michael: Okay. I think we have our first vocabulary word of the day, payer. I don’t think everyone knows what that is, Brad. And so what we’re talking about, and most of it, this would be intuitive and for some of you, you already obviously know it, but a payer is a third party that pays or reimburses for the treatment of a patient. And it could be, as you said, Medicare or Medicaid or on the private side, something like United or Blue Cross Blue Shield, et cetera, et cetera.
Brad: Yeah and what matters Michael is when you do have these program payers, this will trigger federal laws versus state laws. And so what federal laws, and we’ve talked about these, I won’t go into detail heavily, but you know, we have the stark law, which is a federal anti-deferral law. We have the anti-kickback laws, we had other fraud and [00:18:00] abuse laws. And so the moment you hear that program payer or federal payers involved it makes everyone hit the pause button.
Michael: Yeah I mean, the stakes are orange jumpsuits when you’re talking federal law and here’s the kind of the contrary to that that we hear and something I heard as a baby healthcare lawyer, which is this idea that, oh, well then let’s just carve out program patients and not do that and you can do whatever you want. Is that true?
Brad: No. Sorry. You heard that probably correctly, even though it’s not correct. So a lot of people say if I don’t have federal payers and state payers involved, I just have commercial payers like the Blues, or Aetna’s, or United’s and they’re just paying for service, it’s fine. And that’s not always the case. Yes, you can still do legal transactions but you have to still meet with certain laws involving those. [00:19:00] And there are states like California or Florida, they have their own version of baby stark laws when it comes to ownership of diagnosis centers, or other things like that.
Michael: And I’ll add another element that is a common question. Well, what if it’s elective medicine and the patient’s only paying with cash and so there’s no insurance company involved? Well unfortunately, or fortunately, however you want to know it, you need to understand that many of the state laws are what they call payer and indifferent laws. In other words, cash also brings those state laws into play and so you can still have restrictions on ownership if you’re a physician,
Brad: Great point, Michael, as usual.
Michael: Yeah, I knew that you would send me that compliment. Thank you, Brad. Before we go on from this episode, our [00:20:00] theme this year is zoom in and so what other details should our audience consider?
Brad: So the last detail, I’ll have a big picture answer with details.
Michael: I’m not sure if that is a possible answer, but I do speak Brad so let’s run with it.
Brad: Follow me here. First big picture, Dominic said this, which is if the deal sounds too good to be true, it probably is because it’s not compliant. And so that’s the big picture piece. So here what are the details? So I’ll give you an example. You invest $10,000 to have ownership in this company. And after the first month of owning it you get a $30,000 distribution and so this deal seems suspect under the eyes of most states and federal governments, because who in their right minds in a typical arm’s length transaction will sell you ownership of their business that basically within the first month you make [00:21:00] three times what you just paid into the business.
Michael: And I mean for those that are not familiar with this world, they’re seeing through the fact that they’re basically saying we’re going to do this for you doctor, because we want you to refer your patients. And that’s the currency that they’re really hoping to get out of it. And that’s what the regulators are going to say. That that’s what they’re going to enforce.
Brad: One more detail on that one, Michael a good point is that if they ever say, doc, you don’t have to pay anything. You just have to refer patients and we’ll give you a 5% ownership and then after that, you could buy in more. The after-part here is irrelevant because if they’re just giving you ownership because you agree to exclusively refer patients to them, that tends to be a big issue for patient buying anti-solicitation rules anti-kickback rules. So again, hit that pause button say, wow, why would they do that? Always ask yourself the question would [00:22:00] they give that same exact deal to your barber, to your attorney, or they’re just giving it to you because of your doc. Although doctors are awesome, because we both have dads that are doctors, so we’re not saying you’re not awesome, but even then you have to remember, is this a true arm’s length transaction?
Michael: Wow. Actually makes sense, Brad. Well done.
Brad: All right, Michael, let’s hit that pause button one more time before we go today. Let’s zoom in and talk about some specific actions our audience should consider with these types of healthcare arrangements.
Michael: You said it, and we’ve said it in a number of different ways, but I would say it like this, understand where you want to hit the pause button. Number one, if you’re a physician you’re going to get opportunities and if some aspect of that is that you’re going to be referring patients into wherever you’re going to be investing, definitely hit the pause button. And hitting the pause button means go get healthcare council [00:23:00] to approve the deal because you don’t know what the stakes are but we do know in health care they can be orange jumpsuit type stakes. And that’s actually worse than being stuck on an island, eating a cheese sandwich for a weekend. It actually goes longer than that if you’re in jail.
Brad: So true. Great point, Michael. So audience, join us next Wednesday when we discuss Concierge Medicine, Music To Your Ears.
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