Urgent care centers are on the rise in the U.S. due to high costs of emergency room visits, long wait times for primary care doctors, and growing consumer preference for quick medical service. For SBA Lenders, this rising industry presents an opportunity for Lenders to assist Borrowers with the startup or acquisition of urgent care businesses to further expand access to healthcare in our communities. To achieve this goal, SBA lenders should consider the following when closing a loan to an urgent care.
Franchise Agreements:
Urgent care facilities often operate as franchised businesses through one of the many established chains of urgent care brands. As with all franchise loans, Lenders should carefully review the urgent care’s franchise agreement for conditions that may impact the Lender’s credit decision. The franchise agreement typically lists several conditions that the Borrower must meet for the Franchisor to authorize the opening of the urgent care. These may include evidence of all medical and professional company licenses, completion of franchisor required training and evidence of insurance as required by the franchisor. Lenders should ensure that all conditions listed in the franchise agreement are met prior to final funding its SBA loan so the urgent care is able to operate upon project completion and begin repayment of the loan.
Corporate Practice of Medicine:
Many states have adopted the Corporate Practice of Medicine doctrine (“CPOM”) which prohibits unlicensed individuals or entities from practicing medicine or owning a portion of a medical practice. The motive behind CPOM is to protect healthcare practitioners from external pressure from non-physicians that might hinder patient care in order to maximize profit.
To adhere to the CPOM doctrine many urgent care facilities are organized as a professional corporation (“PC”) owned by a licensed physician and Management Services Organization that may be owned in whole or in part by non-physicians (“MSO”). The PC provides medical services while the MSO manages non-clinical services such as staffing, billing, facilities, and marketing. The relationship between the PC and MSO is outlined by a medical services agreement. SBA Lenders should carefully review the medical services agreement for urgent care Borrowers to ensure that (i) the agreement adheres to applicable state laws regarding CPOM, (ii) the MSO and PC are operating companies that are eligible for SBA financing, and (iii) the business being financed and/or benefitting from the financing is independently owned and operated. Furthermore, urgent care borrowers should engage experienced healthcare counsel to ensure that that they follow all federal, state and local laws related to medical practices and eligible corporate structures for such businesses.
Lenders who fail to properly analyze the eligibility of both the franchise agreement and applicable state laws governing the practice of medicine may jeopardize their SBA guaranty should the urgent care have an ineligible structure or experience delays or business closure due to non-compliance with applicable laws. Lenders and their counsel should collaborate early in the loan closing process with the Borrower to address any potential issues prior to bringing the deal to the closing table. For information concerning urgent care financing contact us at 215.542.7070 or info@starfieldsmith.com.
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