Affiliated Service Group?

I really struggle with Affiliated Service Groups. A client asked me about the following scenario: Hospital wants to engage physician practice ("PP"). Hospital offers to hire all of PP's employees. Doctor will be the sole person that will remain behind in his entity. Hospital will then engage Doc as Independent Contractor, where he will provide all of the same services, using his former staff (now employed by the Hospital). Hospital will handle all of the back office functions for doctor (billing, insurance, etc.). The question was whether Doc, in his own entity by himself, can maintain his own retirement plan that provides very rich benefits; and not get lumped into testing that plan with the Hospital retirement plan. It seems to me that this is exactly why the ASG rules were created and that this seems like an A Org situation. But again, I am terrible at ASGs. 

Any thoughts?

I'd refer them to an ERISA attorney for an opinion. I hate ASG relationships.

An efficient way to do this is for the healthcare lawyer handling the physician’s negotiation of his service agreement with the hospital to bring in her employee-benefits partner or, if the firm lacks an employee-benefits practice, to bring in another firm to add that knowledge.

Agree that having knowledgeable attorney opine is optimal choice but without overlapping ownership - doctors don't own any portion of hospital and hospital doesn't own any portion of doctors' practices - then I don't think you have an issue. I don't think the hospital could be a management company because the "back office" management services it provides to the doctors would be a sliver of its revenue.

It is fairly common to see independent contractor doctors providing services to/through hospitals and many of these doctors have solo plans. But certainly it is worth consulting qualified legal counsel so everyone can sleep at night.

Would the doctor here be a legitimate independent contractor, as opposed to a Hospital employee?  It's a facts-and-circumstances determination, but the IRS has frequently challenged the independent contractor status of hospital-based physicians.   There are a couple of unfavorable facts here, including the fact that the Hospital handles all of the back office functions.

Without independent contractor status, his ability to have his own rich retirement plan disappears.

3 hours ago, Mainer said:

Without independent contractor status, his ability to have his own rich retirement plan disappears.

That is the $64,000 question. 

3 hours ago, Mainer said:

IRS has frequently challenged the independent contractor status of hospital-based physicians

I have not seen this, but others may have a different experience. If the physician works exclusively through one hospital then those waters get very muddy, but if (s)he sets own schedule and sees patients outside of hospital then being IC more supportable.

This may be the more important question for qualified legal counsel rather than affiliated service group.

Agree the existence of an ASG seems unlikely without some common ownership.

However, also consider whether or not the doctor might still really be the employer of his former employees. If he is still responsible for hiring, training, assigning tasks, and supervising these people, and if he still has the power to fire them, then he might still be their employer, regardless of who signs their checks.

I count at least six fields of law—agency, contracts, employment, healthcare, tax, and ERISA. (Some involve combinations of Federal laws and State laws.)

Seeking an integrated solution that considers the wideness of the issues is why a physician might want her lawyers’ advice and negotiation.

I'm retired, have not practiced ERISA for over ten years and have conveniently forgotten the details of the affiliated service group rules.  However, if this doc can legally maintain his own "rich" standalone plan under these circumstances, the law is very clearly a bad one.  This is a policy judgment, not a legal judgment.