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Physician‐Health System Integration Models
Health care reform, in one form or another, is here to stay. The pressures on physicians and health systems to work together are strong, and will remain so regardless of what SCOTUS does with the Affordable Care Act.
Three basic integration models for physicians and health systems:
- Physicians can become employed by health systems (including possibility of selling their practice)
- Physicians and health systems can enter into professional service and co‐management agreements
- Physicians and health systems can enter into joint ventures
Employment by Health Systems
- Physicians seek security – to control costs, to adopt technological advances, to attract and retain qualified employees, and to maximize commercial managed care reimbursement
- Health systems seek patients and leverage – to reduce competition with physician ventures, to prepare for Medicare payment reforms, bundled payments, and ACOs, and to better address preventable hospital readmissions
- Both seek to improve access to care (including having quality primary care physicians and specialists available), to increase quality, to reduce costs, and to remain competitive
Professional Service and Co‐Management Agreements
Professional service and co‐management agreements are an alternative to physicians being employed by health systems.
These arrangements promote the alignment of the business interests of a health system with physicians, provide new revenue opportunities for both, provide the health system with specialist physicians while reducing its employee costs, and allow the physicians to retain their practice independence.
- In a Professional Service Agreement, a health system owns and operates a clinic and contracts with an independent physician group to provide specified clinical services. The health system pays the physicians agreed upon compensation and bills and collects for their services.
- In a Co-Management Agreement, a health system and a group of physicians who are members of the medical staff form a management company which is jointly owned which manages one or more service lines offered by the health system. The management company is paid for its management services (with incentives for patient satisfaction, reducing readmissions, etc.).
Health System‐Physician Joint Ventures
Joint venture activities typically include surgery centers and diagnostic imaging centers (may also include MSOs, ACOs, and PHOs, discussed later).
Joint ventures present opportunities and benefits for the health system and the physicians:
- Physicians gain brand strength and access to capital and clinical resources
- Health systems gain physician allies and support, additional service lines, and improved brand strength
Hurdles to All Physician-Health System Business Arrangements
- Complying with the regulatory requirements – including Stark, anti‐kickback, antitrust, and income tax laws if the health system is a nonprofit
- Balancing physician expectations regarding the value of their practices and their services vs. fair market value considerations
- The parties must deal with each other at arm’s length, and the transaction must comply with fair market value considerations
- Negotiating the legal and business provisions
- Compensation (base and productivity) and benefits, if applicable
- Services to be provided and location(s)
- Staff, facilities, and resources
- Determining who reports to whom
- Hiring and firing staff/clinic employees
- Adding/contracting with additional physicians
- Termination and restrictive covenants
- Unwind and but-sell considerations
- Ownership percentages & sharing revenues and expenses
- Control and decision making
- Investors and capital requirements
- Reimbursement from payers and indigent care
Evolving Physician Practice Structures – Why?
Health care reform, economic and business uncertainty, increased regulatory burdens and scrutiny, and declining reimbursement from Medicare and other managed care payers are pushing a realignment of physician practices and providing new incentives for integration, consolidation, and other practice structures.
In a recent Medical Economics poll, 4 out of 5 physicians found it challenging to maintain their dual roles as doctor and businessperson, and 76% thought it was only going to get worse.
New and Complicated Regulations, like the following:
- New enrollment, disclosure , and compliance requirements under the Affordable Care Act
- Transition to ICD-10 Coding and version 5010 HIPAA transaction standards
- Regulatory and Advisory Organizations are expected to impact care and reimbursement –
- Patient-Centered Outcomes Research Institute (identifies research priorities and conducts research on the clinical effectiveness of medical treatments)
- Independent Payment Advisory Board (makes recommendations to reduce the per capita rate of growth in Medicare spending)
- Physician Quality Reporting Initiative
Increased Regulatory Oversight, like the following:
- Stark, Anti-kickback, HIPAA, False Claims Act, and similar Florida laws are being vigorously enforced (e.g., HEAT)
- The Affordable Care Act has made health care fraud much more dangerous –
- A physician no longer must have direct knowledge that his or her actions constituted a violation to be prosecuted.
- Activities of staff may be more easily attributed to the physician
- There is new liability for making a false statement or material error on provider applications
- Keeping an overpayment for longer than 60 days after discovery is now a violation of the False Claims Act
- Physicians providing diagnostic services like MRI, PET and CT scans must provide information to patients in writing about the other area providers
- Whistleblower and Qui Tam actions by former employees
- Increased scrutiny of valuations
Reimbursement issues, like the following:
- Decrease in government reimbursement – slower, less reliable
- Increase in number of Medicaid funded patients with lower payments (an average Medicaid payment is 56% of private payment, Medicare is 81%)
- Affordable Care Act raises the Medicaid rate for primary care physicians to 100% of Medicare in 2013 and 2014, but no guarantee long term
- Payment is shifting from traditional fee for service to “results delivered,” and segmented approaches to care are being replaced by accountability and responsibility for a patient’s health
- Thus, changes in payment methodologies — bundled payments (combined payments across multiple sectors), and new delivery models (e.g., Accountable Care Organizations and Medical Homes)
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In subsequent posts, I will outline the following and discuss how they fit into evolving physician practice structures:
- Different Physician-Health System Integration Models
- ACOs, IPAs, and PHOs
- MSOs
- Physician Practice Consolidations
- Changing Levels of Medicare Participation
- Concierge Practice.
Four Hot Topics in Healthcare Law Affecting Physician Practices
Constitutionality of Health Care Reform
Increased Regulatory Scrutiny
“Doc Fix”
New Alternative Structures in Physician Practices
Constitutionality
- More than 30 legal challenges have been filed challenging the health care reform law.
- Most cases have focused on the individual mandate to purchase health insurance.
- When the Supreme Court considers this issue in the Spring, some legal scholars believe the court’s four liberal(ish) justices – Justices Ginsberg, Breyer, Sotomayor, and Kagan – will vote to uphold the law.
- But there’s no clear consensus on how the five more conservative justices will rule, especially Justices Kennedy, Alito, and Roberts.
Increased Regulatory Scrutiny
Health care reform has made health care fraud much more dangerous:
- A physician no longer must have direct knowledge that his or her actions constituted a violation to be prosecuted.
- Activities of staff may be more easily attributed to the physician.
- There is new liability for making a false statement or material error on provider applications.
- Keeping an overpayment for longer than 60 days after discovery is now a violation of the False Claims Act.
- Physicians providing diagnostic services like MRI, PET and CT scans must provide information to patients in writing about the other area providers.
- New proposed rule (12/19/11) requires applicable manufacturers of drugs, devices, etc. covered by Medicare, Medicaid, or CHIP to report annually to HHS certain payments/gifts to physicians or teaching hospitals.
- There is a significant increase in targeted health care fraud enforcement efforts by the government’s Health Care Fraud Prevention and Enforcement Action Team (“HEAT”).
- Latest Enforcement Actions:
– 3 Patient Recruiters for Miami HHAs Sentenced to Prison in $25 Million Fraud Scheme (12/14)
– Philadelphia Doctor Charged With Running Pill Mill (12/14)
– 14 NJ health care providers arrested & charged with taking cash payments for patient referrals (12/12)
- HIPAA Issues
– Since HIPAA was passed, there have been 12,781 cases resolved with corrective action and 484 privacy breach investigations referred to DOJ for possible criminal prosecution.
– Theft or possible loss of laptops and other portable devices – 66% of the material breaches. Other common violations – improper disposal of PHI (e.g., in trash cans accessible to the public).
– One notorious example: Massachusetts General Hospital — February 2011 – PHI of 192 patients, including HIV patients, was lost when an employee left files on a subway while commuting to work. $1M fine plus corrective action.
- Florida law provides similar tools for Florida regulators – imposing possible civil and criminal penalties (and loss of license) even when no Medicaid or Medicare patients are seen
– Patient Self-Referral Act – like Stark but arguably more expansive, prohibits a physician in Florida from referring patients for the provision of any health services to an entity in which the physician (or a family member) has an investment interest or is an investor unless an exception applies.
– Patient Brokering Law – like the federal anti-kickback statute, prohibits offering, giving, or receiving any form of compensation for the referral of a health care service.
– Ownership and Control of Patient Records – like HIPAA, but more expansive.
– Fee-Splitting – enforced under the Patient Brokering Law and by Professional Boards.
“Doc Fix”
“Doc fix” is a misnomer because it isn’t the docs who are broken. Though they may be if their Medicare reimbursement is actually cut by 27% percent as slated for Jan. 1, 2012.
The cut is based on the Sustainable Growth Formula (“SGR”), a 1997 payment plan for Medicare. It links physicians’ costs, Medicare enrollment, and the GDP.
Last week, the House passed a payroll tax extension bill which included a two-year “fix” to the formula for Medicare payments to doctors. The Senate doesn’t like the House version and will not pass it. This week the Senate passed a bipartisan bill which included a “fix,” but the House has rejected it.
Alternative Practice Models
Health care reform, the “Doc Fix” uncertainty, regulatory concerns, and the economy, are all pushing a realignment of health care providers and providing new incentives for consolidation and other practice models:
- Consolidation of practices – single specialty and multi-specialty
- Hospitals are buying physician practices again (and physicians are selling).
- Physician-Hospital co-management arrangements are being seen in certain hospital departments (e.g., cardiology).
- Joint ventures with hospitals and private companies to set up ASCs
- MSOs buying or managing physician practices, with physician ownership.
- Electing a non-participating Medicare provider or opting out of Medicare
- Converting to a concierge practice
- Expanding services (e.g., dentists providing Botox)
- There are more practice breakups and departing physicians as a result of financial pressures and differing opinions on how to proceed.
Final ACO Rule
CMS “put on display” the final ACO rule on October 20, 2011.
The ACO PRM was officially published in Federal Register on November 2, 2011.
Other agencies – IRS, HHS/OIG and FTC/DOJ – have released notices of rulemaking / policy statements as well
– HHS/OIG (See above links)
– IRS
– FTC/DOJ
Statutory Basis
For over 20 years, there have been many failed models of healthcare integration – PPMs, IPAs, PHOs, Hospital employment and acquisition of physicians, etc.
The ACO name is relatively new. It was invented late in 2006 during a discussion at a public meeting of the Medicare Payment Advisory Commission.
ACOs represent the next wave of integration and care coordination.
Section 3022 of the Patient Protection and Affordable Care Act (“PPACA”) directs the Secretary to establish shared savings program no later than January 1, 2012.
Statutory purpose of the shared savings program is to “promote accountability for patient population and coordinate services under parts A and B, and encourage investment in infrastructure and redesigned care processes for high quality and efficient service delivery.”
Groups of providers for services and suppliers are provided financial incentives to work together in an ACO where they manage and coordinate care for Medicare FFS beneficiaries.
ACOs that achieve lower costs and meet certain quality performance standards are eligible for share savings payments and other incentives that CMS may establish.
Many have touted ACOs as one of the most critical reforms in the healthcare reform act, by realigning healthcare provider financial incentives to patient-centered and preventive care and away from procedure/volume based care.
Regulations
Eligibility, Structure, and Governance (42 C.F.R. § 425.5)
Assignment and Marketing (42 C.F.R. § 425.6)
Data (42 C.F.R. § 425.19)
Qualify (42 C.F.R. §§ 425.8, 425.9, 425.10, and 425.17)
Payment and Sharing (42 C.F.R. § 425.7)
Compliance Obligations, Structures, Programs (42 C.F.R. § 425.5)
Eligible Organizations
ACOs may be formed by the following organizations:
– ACO professionals in group practice arrangements.
– Networks of individual practices of ACO professionals.
– Partnerships or joint venture arrangements between hospitals and ACO professionals.
– Hospitals employing ACO professionals
– Providers or suppliers otherwise recognized under the Social Security Act.
– CAHs that meet certain criteria.
ACOs must have established a mechanism for shared governance to participate in the Shared Savings Program.
– Existing ACOs do not have to create a new structure.
ACOs are required to enter into a three-year contract with CMS.
ACOs must have a t least 5,000 beneficiaries and a commensurate number of primary care physicians.
ACO must be recognized as a legal entity in the State in which it is established, and must have a Tax Id Number.
– Program Enrollment Not Required: The ACO’s legal entity does not need to be a participating Medicare entity.
Must be capable of:
– Receiving and distributing share savings;
– Repaying shared losses;
– Establishing, reporting, and ensuring ACO participant and ACO provider/supplier compliance with health care quality criteria, including quality performance standards; and
– Performing the other ACO functions identified in the statute.
Governance
Board Composition: Governing board must be representative of the organizations comprising the ACO.
– Must include a Medicare beneficiary representative.
– Possess broad responsibility for the ACO’s administrative, fiduciary and clinical operations.
– ACO participants must have at least 75 percent control of the governing body.
Leadership and Management Structure
Operations Manager: Operations must be managed by an executive, officer, manager, or general partner.
Medical Director: Clinical management and oversight would be managed by a senior-level medical director who is a board-certified physician, licensed in the State in which the ACO operates, and physically present in that State.
Meaningful Commitment: Participants must have a meaningful commitment to the ACO’s clinical integration program to ensure its likely success.
Quality Assurance: ACOs must have a physician-directed quality assurance and process improvement committee.
Clinical Guidelines: ACOs must develop and implement evidence-based medical practice or clinical guidelines for delivering coordinated care.
Data Collection Infrastructure: ACOs must have an infrastructure (i.e. information technology) that allows the ACO to collect and evaluate data and provide feedback across the organization, and report data to CMS.
Contractual Obligations to CMS and Requirements
Three year agreement beginning January 1.
ACO would be responsible for providing a copy of the agreement to its ACO participants and ACO providers/suppliers.
The ACO contract with CMS may be changed:
– Routine CMS “business operations”
– Benefit Coverage Decisions
– Additional Quality Measures
ACO must provide in writing how it will implement changes.
ACO must enter into Data Use Agreement.
Two-Sided models also have surety bond, line of credit requirements.
Beneficiary Assignment
FFS beneficiaries who receive primary care services from primary care physicians in ACOs are assigned to the ACO in which the beneficiary received a plurality of the services
– Primary care physician must have a primary specialty designation of internal medicine, general practice, family practice, or geriatric medicine
– Primary care services based on specified HSPCS codes
– Plurality of services based on allowed charges
Assignment does not limit right of beneficiaries to choose non-ACO providers
Primary care services include – services described above as well as the ‘Welcome to Medicare’ visit, wellness visits, and visits for HCPCS codes 99201-215, 99304-50.
Primary care physician can only contract with one ACO (exclusive relationship); other ACO providers must not be required to be exclusive to a single ACO.
At start of agreement period (and at end of each performance period), ACO upon request can (consistent with HIPAA) receive name , DOB, sex and HICN of beneficiaries who CMS determines would have been assigned to ACO in any of prior 3 available years, plus aggregated date (including de-identified utilization data).
Beneficiary Notices
ACO providers must post signs in facilities and provide written notice to beneficiaries about their participation in the ACO.
– CMS indicates that notices would be standardized
ACO must also provide opt-out form to beneficiary prior to requesting claims data for the beneficiary from CMS; form must be provided as part of office visit with primary care physician.
Marketing
All ACO Marketing materials and communications such as mailings, telephone calls or community events regarding the ACO Must be approved by CMS prior to use; subsequent changes must also be approved prior to use.
We expect marketing guidelines to closely resemble those applicable to Medicare Advantage plans.
Quality Performance Metrics
Quality Measures (33 of them) divided between 4 areas:
(1) patient/caregiver experience;
(2) care coordination/patient safety;
(3) preventive health; and
(4) at-risk population
- If an ACO fails to achieve the quality performance standard on at least 70 percent of the measures in each domain (and that qps must be at least the 30th percentile), CMS will place the ACO on a corrective action plan and re-evaluate the following year. If the ACO continues to underperform in the following year, the agreement would be terminated.
Shared Savings Models
Overview
– Benchmarks
– One-Sided Model
– Two-Sided Model
Benchmarks
– ACO providers will continue to be paid under the Medicare fee-for-service payment systems throughout participation in the ACO.
– To realize shared savings, ACOs must exceed a benchmark set by CMS.
– Categorizing beneficiaries in the following cost categories: ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries.
– This benchmarking methodology will apply to all ACOs, including those consisting of FQHCs and/or RHCs (either independently or in partnership with other eligible entities).
– Weight of claims data increases as you approach 2012: claims data from 2008 is weighted 10%, claims data form 2009 is weighted 30% and claims data for 2010 is weighted 60%. The benchmark also includes annual updates to account for the increase in national Medicare fee for services expenditures.
One-Sided Model
One-Sided Model: ACO shares only program savings for all 3 years (but at a lower percentage than the two-sided model), and no program losses.
Minimum Savings Rate (MSR): Medicare computes an MSR based on the number of beneficiaries assigned to the ACO.
– This rate ranges from 3.9% (for ACOs with 5,000-5,999 beneficiaries) to 2.0% (60,000+ beneficiaries).
– Note: ACO’s with fewer beneficiaries are more susceptible to large dips and spikes in experience.
– Once MSR is reached, ACOs have “flipped the switch” and are eligible for shared savings.
Shared Savings: Under the one-sided model, an ACO that exceeds its MSR is eligible to share savings net 2 percent of the benchmark dollar for dollar.
The regulations include 4 exceptions exempting ACOs from the 2 percent net savings threshold (which allows for first-dollars savings):
(i) all ACO participants are physicians or physician groups;
(ii) 75% or more of the ACO’s assigned beneficiaries reside in counties outside an MSA;
(iii) 50% or more of the ACO’s assigned beneficiaries were assigned on the basis of services received from Method II CAHs; and (iv) at least 50% of the assigned beneficiaries had a t least one encounter with a participating rural health clinic (RHC) or federally qualified health center (FQHC).
To realize shared savings, an ACO must meet the requirements described above and demonstrate quality performance as described under §425.10.
– Shared savings are calculated on a sliding scale, by multiplying the savings rate and the quality score.
Additional Increase to Shared Savings: Under the one-sided model, an ACO’s shared savings rate may be increased by 0.5% and up to 2.5% if the ACO includes a RHC or FQHC.
The amount of shared savings an ACO receives under the one-sided model may not exceed 7.5% of its benchmark.
Under the one-sided model, ACOs are eligible for shared savings of up to 50%.
Two-Sided Model
Under the Two-Sided Model, ACOs can share up to 60% of the savings (compared to 50% under the One-Sided Model), but may also share in losses.
Minimum Savings Rate: To qualify for shared savings, ACOs average per capita Medicare expenditures for the performance year must be below its benchmark by at least 2%. To qualify for savings, ACOs must meet minimum savings requirement
Minimum Loss Rate: To share losses, an ACO’s average per capita Medicare expenditures for the performance year must be at least 2% above its benchmark costs for the year.
Qualification for Payment: As with the One-Sided Model, ACOs must meet the minimum savings rate and also the minimum quality performance standards established under § 425.10.
Increase in Shared Savings: ACOs may increase their shared savings rate by up to 5.0 percentage points if the ACO includes a RHC or FQHC.
Payment Limit: Under the Two-Sided Model, an ACO’s shared savings is capped at 10% of its benchmark.
Shared Loss Rate: With respect to the shared loss rate, plans that have losses that are high performance will share fewer losses than plans that are low quality and low performance.
Withholding: In both models, gains are subject to a 25% withholding to help ensure repayment of losses to Medicare in later years.
Repayment Guarantee: ACO’s must obtain reinsurance, place funds in escrow, obtain surety bonds, or establish a line of credit that the Medicare program can draw upon to ensure repayment of any losses in advance of participating in the Shared Savings Program under the two-sided model.
Loss Caps: The amount of share losses may not exceed the following percentages over the yearly benchmark.
– 5 percent in the first year
– 7.5 percent in the second year
– 10 percent in the third years
Compliance
Compliance obligations appear to closely track the Medicare Advantage requirements.
ACOs will be required to have an “effective” compliance plan
Specific requirements:
– In writing
– Include policies and procedures
Include the following elements:
– A designated compliance officer (or individual) who is not legal counsel to the ACO and who reports directly to the ACO’s governing body
– Mechanisms for identifying and addressing compliance problems related to the ACO’s operations and performance
– A method for employees or contractors of the ACO or ACO providers/suppliers to report suspected problems
– Compliance training for the ACO, the ACO participants, and the ACO providers/suppliers
– A requirement to report suspected violations of law
Contracts with downstream and related entities:
– All contracts or arrangements between or among the ACO, its participants and providers/suppliers, and other entities furnishing services related to ACO activities must require compliance with the obligations under ACO-MCS agreement, including document retention requirements.
– CMS will monitor the existence of, and adherence to, these requirements
– Subject to audit by HHS-OIG
Excluded providers
HIPAA: Privacy and data security
Document retention requirements: ACO records (e.g., books, contracts, and other evidence, such as data related to Medicare utilization and costs, quality performance measures, shared savings distributions) must be retained for 10 years from the end of the agreement period
Enforcement Actions: CMS may impose a wide range of enforcement actions, including termination, for failure to comply with these requirements
ACOs and Fraud and Abuse
Specified waivers of the following laws:
– Physician Self Referral law (Stark): 42 USC §1395nn — Prohibits physician with direct or indirect financial relationship with a hospital from referring for DHS for which payment may be made under a federal healthcare reimbursement program.
– Anti-kickback statute, 42 USC §1320a-7b(b)(1) and (2) — It is a crime to knowingly and willfully offer or receive remuneration intended to induce referrals for services which may be reimbursed under a federal healthcare program.
– Gainsharing is a system of management used by a business to get higher levels of performance through the involvement and participation of its people. As performance improves, employees share financially in the gain. 42 USC §1320a-7a(b)(1) and (2) prohibits this between hospitals and providers
CMS/OIG Reasoning Behind Waivers: Protect financial relationships created in the ACO model, both within the ACO and outside of the business, and only protect relationships outside ACO if relates closely to requirements of an ACO.
Interested in forming an ACO?
- Form the leadership team (which will evolve)
- Assess readiness for accountable care – SWOT analysis – Make decision
- Put together the project team – clinical and administrative, legal, nursing, community – Steering Committee
- Determine legal/accounting requirements
- Create legal and organizational framework that promotes a collaborative structure and includes financial incentives
- Ensure operational requirements are met to optimize and sustain performance — identify priorities, integrate best practices, name persons who will execute the different components of the plans
- Integrate information technology to reach meaningful use, explore HIEs
- Assess financial readiness – review payor contracts, reimbursement rates, revenue cycle functions, ancillary services, etc.
- Strengthen payor-provider relationships and collaboration
- Make the community an ally
Scheduled SGR Medicare Cuts and the AMA Medicare Participation Kit
These are tough times, and physicians are facing some serious issues in Medicare reimbursement.
The AMA recently published an article dealing with this issue. Here is the link to the AMA article. The article begins as follows:
To date, despite its clear recognition that the physician payment formula is fatally flawed and needs to be abandoned, Congress has once again missed an opportunity to permanently repeal the sustainable growth rate (SGR) formula. With the Joint Select Committee on Deficit Reduction failing to reach agreement on a deficit-reduction proposal, physicians still face a 27 percent cut in Medicare physician payments scheduled to take effect Jan. 1.
Meanwhile, Medicare carriers have distributed information to determine if physicians want to modify their status as participating or nonparticipating physicians. The AMA has developed the “Know your options: Medicare participation guide” to help physicians evaluate their options and choose the direction that is suitable for their practice.
The article and the Medicare Participation Guide are worth reading.
On the heels of these concerns, the Americvan Health Laywers Association has reported the following two stories:
Pay Cuts Spark Debate.
The Washington Post (12/4, Aizenman) reports, “The impact of mandatory Medicare pay cuts triggered by the congressional debt panel’s recent failure to reach a deal is the subject of sharp disagreement.” Physicians “and hospital officials are warning that the cuts could have serious repercussions for American healthcare, prompting many doctors to drop Medicare patients and forcing hospitals to lay off staff and consolidate facilities.” But “prominent healthcare analysts — including those serving an independent agency charged with advising Congress on Medicare — suggest the problem is not that doctors will be short-changed, but that most will continue to be paid too much.”
House Republicans Plan To Block Medicare Physician Payments Cuts.
CQ (12/5, Ethridge, Subscription Publication) reports, “House Republicans said Friday that they plan to block pending cuts to Medicare physician payments in a year-end legislative package that would extend several expiring tax and benefit provisions.” The piece notes that “it was unclear whether the patch would last for one year, like the current ‘doc fix’ (PL 111-309), or two,” while “physician groups have been pushing for an overhaul of the payment formula but would still favor a two-year patch over the yearlong fix they got last year.”
It’s clear that there are no easy answers, and certainly not even a consensus on whether there is a problem.
Nevertheless, it’s hard to believe that Congress will not act in time to stop the scheduled SGR formula cut
Stay tuned.
Two ACO Shared Savings Models
Last Thursday, October 20, the Centers for Medicare & Medicaid Services released the final rule on the formation of accountable care organizations. This final rule contains many revisions from the March 31 proposed rule. The revisions represent CMS’s response to the numerous comments that it received.
The final rule will be published in the Federal Register on November 2. The CMS press release and other information on the 696 pages composing the final rule are available from CMS.
One important revision in the final rule deals with the the two different shared savings models for ACOs. The final rule adopts the two shared savings models as set forth in the proposed rule, but with some significant changes.
First, there is the “one-sided model” which provides for shared savings among the participants during entire initial agreement period with no sharing of losses (the first “year” of the initial agreement for ACOs that actually begin in 2012 will be 18 or 21 months). The proposed rule had required that after the first two years, an ACO choosing the one-sided model would transition into the “two-sided model,” and its participants would share savings and losses during the third year.
Second, there is the “two-sided model” where participants share savings and losses for the entire first agreement period. CMS believes that accountability for losses is an important motivator for providers to change their behavior. To reduce unnecessary expenditures, the final rule adopts the requirement that all ACOs after their initial agreement period must utilize the two-sided model.
However, CMS also recognizes that many providers may not be ready to share risk, and the one-sided model is available to them for the initial agreement period. An ACO in the one-sided model which experiences a loss during the initial agreement period will be allowed to apply to remain an ACO in the two-sided model for a subsequent agreement period.
The final rule also adopts the proposed rule’s requirement of a minimum savings rate of 2% before there is any shared savings. ACOs in the one-sided model with a smaller population would have a larger minimum savings rate, and ACOs in the one-sided model with a larger population would have a smaller rate. The maximum amount to be shared, subject to meeting reporting and quality requirements, is 50% for the one-sided model, and 60% for the two-sided model.
Another very important change in the final rule is the elimination of the proposed 25% withhold on all shared savings; now ACOs will share in all savings after meeting the requirements.
Akerman is committed to providing its healthcare clients with timely information regarding the ACO final rule. My colleagues, Rob Slavkin, Betsy Hodge, and I are available to answer any questions that you may have.
HHS launches new Affordable Care Act Initiative to Strengthen Primary Care
Last week, HHS announced a new initiative under the Affordable Care Act. The initiative is intended “to help primary care practices deliver higher quality, more coordinated and patient-centered care.” If you follow this link, you will come to CMS’s new Comprehensive Primary Care initiative web site. A summary of the initiative is available in a CMS “FactSheet.”
The initiative is a limited demonstration project, and will be available in five to seven markets across the country, based on where a preponderance of health care payers apply. CMS intends to partner with commercial and public health insurers to promote community-wide investments in comprehensive primary care. Payers can be private insurers, Medicare Advantage Plans, states (e.g., Medicaid program or state employee health plans), high risk pools, etc.
CMS will provide resources to primary care practices that choose to participate in the initiative that will help primary care physicians work with patients to ensure that the physicians:
- Manage Care for Patients with High Health Care Needs
- Ensure Access to Care
- Deliver Preventive Care
- Engage Patients and Caregivers to participate in their own care
- Coordinate Care Across the Medical Neighborhood
CMS will pay primary care providers for improved and comprehensive care management, and after two years offer them the chance to share in any savings they generate. Equally important, CMS will look to collaborate with other payers in local markets who will commit to similar approaches to how they engage and compensate primary care practices.
Three Things MGMA Urges You to do to Help Avert the 29.5% Medicare Payment Cut
In its Washington Connexion email a few minutes ago, MGMA is asking for your help to stop the 29.5% payment cut scheduled to go into effect on January 1, 2012 (less than 100 days from now).
Healthcare providers, and the rest of us who care about healthcare, need to keep pressure on Congress to address this issue. MGMA suggests doing the following three things:
- Understand the impact the payment cut will have on your practice.
- Sign a petition and ask others to do the same and make your opinion known.
- Urge your elected representative to repeal the sustainable growth rate requirements that are causing these cuts.
I will add two other things that you can do:
- Express yourself to your national and state professional associations. They have lobbyists and need your support.
- Enlist the assistance of your vendors and advisors and ask them to voice their support against this scheduled cut.
Do not wait for others to act.
MSOs — Important Again for Physician Practices
Management service organizations have been around for a while providing management to physician practices, ranging from billing and collection to complete turnkey operations. In this regard, they have always been important.
However, MSOs have become increasingly critical to help physicians navigate the unique problems and opportunities facing them in this era of healthcare reform — ACOs, practice acquisitions and consolidations, and reimbursement cuts. Physicians in solo or small practices cannot practice quality medicine, deal with compliance issues, handle employees, negotiate managed care contracts, control expenses, and maximize revenues. Maybe once they could, but no longer.
The goal of contracting with a quality MSO is to allow physicians to practice medicine again without being distracted by all the back office business details.
MSOs come in many shapes and sizes, and one size clearly does not fit all. The physician must decide what it is that he needs and wants. Does he want an MSO that will provide a limited range of services for a limited price or does he want something much more extensive and expensive? The physician should discuss the alternatives with his legal and financial advisors. They will need to assist him in selecting the prospective MSOs and doing due diligence on them.
There are many issues to consider. I will discuss those in subsequent posts.
Update – Constitutionality of the Patient Protection and Affordable Care Act
My law firm colleagues, Bruce D. Platt and Sheryl Rosen in Akerman’s Tallahassee office have prepared the following update on the constitutionality of the Patient Protection and Affordable Care Act —
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Multiple court challenges have resulted from passage of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010) (“PPACA”).
On June 29, 2011, the United States Court of Appeals for the Sixth Circuit upheld the individual mandate in PPACA as constitutional. The Court in Thomas More Law Center v. Obama, 10-2388 (6th Cir.), concluded that imposition of the individual mandate is within Congress’ power under the Commerce Clause to regulate activities that substantially affect interstate commerce. The Sixth Circuit’s decision affirmed the district court’s holding in Thomas More Law Center v. Obama, 720 F. Supp. 2d 882 (E.D. Mich. Oct. 7, 2010). Although Thomas More upholds PPACA, several other appeals are still pending in various circuits, with others still at the district court level. The cases currently on appeal over substantive issues are set forth below. Cases on appeal regarding plaintiffs’ standing to challenge PPACA are excluded because they do not reach substantive holdings:
Virginia v. Sebelius, 11-1057, 11-1058 (4th Cir.) and Liberty University, Inc. v. Geithner, 10-2347 (4th Cir.) – The lower court in Virginia v. Sebelius, 728 F.Supp.2d 768 (E.D.Virginia Dec. 13, 2010), concluded the individual mandate violated the Commerce Clause and severed the mandate from PPACA. Conversely, the lower court in Liberty University, Inc. v. Geithner, 753 F.Supp. 2d 611 (W.D. Virginia Nov. 30, 2010), concluded that the Commerce Clause provides sufficient authority for PPACA’s insurance mandate. The Virginia and Liberty appeals have been consolidated. Oral argument was held on May 10, 2011. No decision has been released.
Florida v. U.S. Dept. of Health and Human Services, 11-11021 and 11-11067 (11th Cir.) – The lower court in Florida v. U.S. Dept. of Health and Human Services, __ F.Supp. 2d __, 2011 WL 285683 (N.D. Fla. Jan. 31, 2011), struck down the entire PPACA, concluding that the decision to refrain from purchasing health insurance is not economic activity, so the individual mandate unconstitutionally regulates inactivity. Oral argument took place on June 8, 2011. No decision has been released.
Seven-Sky v. Holder, 11-5047 (D.C. Cir.) – This case appeals the lower court’s decision in Mead v. Holder, 766 F.Supp. 2d 16 (D.D.C. Feb. 22, 2011), which upheld PPACA. The appeal is scheduled for oral argument on Sept. 23, 2011.
U.S. Citizens Association v. Sebelius, 11-3327 (6th Cir.) – This case appeals the lower court’s decision in U.S. Citizens Association v. Sebelius, 10-1065 (N.D. Ohio July 1, 2011). In that case, the district court became bound by the Sixth Circuit’s holding in Thomas More and entered summary judgment for defendants. The appeal is still at the briefing stage. No oral argument has been scheduled.
A Look Ahead
Various commentators believe the Supreme Court will be the ultimate arbiter of whether PPAGA is constitutional (Alexander Bolton, Lawmakers Press Supreme Court for Verdict on Health Care Law, The Hill, Feb. 2, 2011; Editorial, 3 to 2 for Health Care Reform, N.Y. Times, Feb. 25, 2011). Even Judge Vinson of the Northern District of Florida stated in his March 3, 2011 order, “Almost everyone agrees that the Constitutionality of the Act is an issue that will ultimately have to be decided by the Supreme Court of the United States. It is very important to everyone in this country that this case moves forward as soon as practically possible.” Fla. v. U.S. Dept. of Health and Human Servs., No. 3:10-cv-00188-HEH, 2011 WL 285683 (N.D. Fla. Mar. 3, 2011) (order clarifying summary judgment order dated Jan. 31, 2011).
However, it doesn’t appear likely that any of the District Court rulings will be appealed directly to the Supreme Court. The Supreme Court most frequently grants direct appeals when so requested by the federal government (in a posting of Kevin Russell to SCOTUSblog). However, thus far, the only writ of certiorari submitted for the five cases above is a writ by Virginia in Virginia v. Sebelius, and the federal government has not joined the request for cert.
If or when the Supreme Court considers the issue, some scholars believe the court’s four liberal justices – Justices Ginsberg, Breyer, Sotomayor, and Kagan – will vote to uphold the law, but there’s no clear consensus on how the five more conservative justices will rule, especially Justices Kennedy, Alito, and Roberts (Robert Barnes, Supreme Court Watchers: Roberts, Alito No Sure Bets Against Health Care Mandate, Washington Post, Feb. 13, 2011; Ben Adler, Will the Supreme Court Rule on Health Care Reform?, Newsweek, Dec. 15, 2010).
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