Discounted Fee Organizations Have Surprising Regulation

[contact-form subject='[Jeffrey L Cohen%26#039;s Blog’][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Website’ type=’url’/][contact-field label=’Comment’ type=’textarea’ required=’1’/][/contact-form] percentageThe idea of an organization which provides discounted fees to patients is not a new concept.  Organizations like independent physician associations (IPAs), even accountable care organizations (ACOs) and simpler discounted fee plans will be surprised to know that Florida may require them to be licensed by the  Office of Insurance Regulation (OIR), even though they do not handle pre payments and do not collect premiums.  That’s perhaps the most startling aspect of the regulations—there is no financial risk involved, and yet Florida law seems to require regulation.

Pursuant to Fla. Stat. 636.202(2), a “discounted medical plan organization” means an entity which, in exchange for fees, dues, charges, or other consideration, provides access for plan members to providers of medical services and the right to receive medical services from those providers at a discount.  A “discount medical plan” means a business arrangement or contract in which a person, in exchange for fees, dues, charges, or other consideration, provides access for plan members to providers of medical services and the right to receive medical services from those providers at a discount.  Fla. Stat. 636.202(1).  A discount medical plan does not include any product regulated under chapter 627, chapter 641, or part I of chapter 636 (governing Prepaid Limited Health Service Organization).  Fla. Stat. 636.202(1), which of course is no comfort to providers looking to garner or protect market share by discounting services or by creating a collection of discount services providers, which is typical of IPAs and “networks.”

Before doing business in Florida as a DMPO, an entity must be legally organized in a compliant way and must be licensed by the OIR as a discount medical plan organization or be licensed by the office pursuant to chapter 624 [Florida Insurance Code], part I of this chapter [Prepaid Limited Health Service Organization], or chapter 641 [HMO, Prepaid Health Clinic]. Fla. Stat. 636.204(1) emphasis added.  Each discount medical plan organization must at all times maintain a net worth of at least $150,000.

Providers looking to provide discounted fee arrangements in a simple and effective manner many be surprised to know how complex that endeavor in fact is.  Moreover, the discounts will likely (and ironically) have to be reduced in order to bear the state licensure and financial viability fees.  Go figure!

HIPAA Omnibus Final Rules and Penalties

On Friday January 25, 2013, the Department of Health and Human Services published the Final Rule modifying the HIPAA privacy, security, enforcement, and breach notification rules under the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and the Genetic Information Non-Discrimination Act (“GINA”) as well as other modifications to the HIPAA rules. (See 45 CFR Parts 160 and 164, Federal Register Volume 78 Number 17.)

The omnibus rule actually contains four final rules. The first final modifications to HIPAA which were mandated by “HITECH” include modifications intended to improve the Rules which were issued as a proposed rule on July 14, 2010 include six modifications.

The first omnibus final rule includes direct liability modifications for business associates of covered entities for compliance with certain HIPAA privacy and security rule requirements. Strengthening of limitations on the use and disclosure of protected health information, expanded individuals’ rights to receive electronic copies of their health information, modification and redistribution of entities privacy practices protocols, modification of individual authorization forms and other requirements to facilitate research and disclosure of child immunization proof to schools as well as to enable access to decedent information and lastly the enforcement rules have been modified to address violations such as non-compliance with HIPAA rules due to willful neglect.

The second omnibus final rule adopts changes to the HIPAA enforcement rule that increase the civil monetary penalties in a tiered manner.

The third omnibus final rule involves the breach notification for unsecured protected health information under the “HITECH” act. This rule replaces the prior rules “harm” threshold with a more objective standard.

Finally, the fourth rule prohibits most health plans from using or disclosing genetic information for underwriting purposes.

These final rules take effect this month on March 26, 2013. Covered business entities and business associates must comply with the applicable requirements by September 23, 2013. The penalties for violating the final rules are now as follows:

TABLE 2 – CATEGORIES OF VIOLATIONS AND RESPECTIVE PENTALTY AMOUNTS AVAILABLE

Violation Category – Section 1176 (a)(1)

Each Violation

All such violations of an identical provision in a calendar year
(A)  Did Not Know(B)   Reasonable Cause

(C)   (i)Willful Neglect-Corrected

(C) (ii) Willful Neglect-Not Corrected

 $100-$50,0001,000-50,000

10,000-50,000

50,000

 $1,500,0001,500,000

1,500,000

1,500,000

Providers need to be aware of the penalties for violating the rules as we most recently reported to you the office of civil rights will not hesitate in sanctioning providers for violating the Act in amounts in excess of $1.5 million.

ACO Challenges Are Formidable

Final-ACO-RulesHanging this nation’s cost cutting/quality enhancing hopes on Accountable Care Organizations (ACOs) is bound to be frustrating and disappointing.  The ACO model seriously lacks sufficient real world grounding and is no magic pill.  Things like resources, operational capability and alignment (of financial incentives and direction) seem to have been overlooked or undervalued.

The ACO model is based on one fundamental assumption:  an expanded role of primary care physicians can slow cost increases and ensure better coordination of care.  That assumption is flawed for two reasons:  first, there is a large and growing primary care shortage; and second, the financial incentives in healthcare have driven a system based on acute, episodic interactions, leading to enormously fragmented clinical training and care.

We not only have inadequate resources to drive change away from acute, fee for services based care, but rather we lack resources that drive wellness. As one physician with a large hospital system recently said:  “We physicians are not trained to provide healthcare.  We’re trained to intervene when things go bad.”  Asking healthcare professionals and facilities to drive a model based on outcomes and resource consumption is theoretically possible, but a remarkable leap of faith (and training) is required, given they have made their livings off of sick people for so long.  That’s not to say that changing financial incentives from acuity to wellness and outcomes won’t work.  It’s just going to require training and proof that the players can make money with the new mandates.

As far as operations go, those with the greatest access to management, capital, IT and such are also the most expensive—hospitals.  It makes sense that the core objective of healthcare reform is to “squeeze the toothpaste tube” backwards from hospital to specialist to primary care physicians, but it’s a great leap of faith to expect that hospitals will or even can control costs.  In a healthcare system where providers admittedly are rewarded for doing more with more expensive things, the sharp turn required by the new law will require more than just a new law.  With all the current hospital-driven physician acquisitions, the increasing role of hospitals on the ACO issue looks at times more like turf guarding than any real cost-saving, quality enhancing move.

At the end of the day, all players have to answer the question “Did they reduce cost and enhance quality?”  It seems convincing that moving away from the fee for service model will change behavior.  We just need to make sure (1) there are sufficient resources to implement the change, and (2) financial and clinical issues are well balanced.  Time will tell, but meanwhile the current irony is that the most expensive link in the chain is best situated to actually operationalize the ACO concept.

Alignment is critical.  Financial alignment will require the players to believe they can all thrive in the new ACO model, yet physicians are historically leery of any hospital driven system.  In fact, given that hospitals are driving the ACO bus at the moment, the biggest fear among physicians is that they will be left out.  Even among physician-driven ACOs, the tension between primary care physicians and specialists is intense.  How much of any savings will go to primaries vs. specialists is no less divisive than the issue of the hospital/physician split of the shared savings.

Even more critical is the apparent lack of consideration given to the need for patient participation.  Where is the financial incentive for healthy patient choices and the disincentive for unhealthy patient choices?  Moreover, in a culture where more is more, why would anyone want to receive care from an organization that gets more by giving less?  Given further the ability of patients to wander in and out of ACOs and yet charge their ACO with the costs of non-ACO providers (who arguably have no stake at all in reducing expenses), the forecast for patient alignment is gloomy, but their buy in is critical.  It is difficult to see where patients have any stake in this change and would even be inclined to choose to be served by an ACO.  Many noted theorists have drilled on the glaring lack of patient alignment.  Rama Juturu and recent Wall Street Journal editorialists/economist Clayton Christensen have been outspoken about the need to enlist patients in the drive from intervention to prevention.  Patients that flock to ACOs (or whatever) will only do so if they see what’s in it for them.  The only thing an ACO can sell is results, outcomes.  And that’s gonna take time to measure and to sell.

At the end of the day, the threat of ACOs (and any vehicle to control healthcare costs more effectively) isn’t that they won’t work.  It’s that cost concerns will outstrip clinical ones.  While it can be argued that the employment of physicians by traditionally adverse players (like hospitals) will likely reduce the tension between them, it is precisely that tension that has always held the threat of “money over quality” at bay.  What will happen as hospitals and other healthcare players employ more and more physicians?  One can only hope that it is not silence and that, as found in some well established systems in the Midwest and West, respect for the different and necessary roles of ensuring both quality and economic survival will balance out, regardless of the healthcare delivery model that emerges.

Hospital Physician Recruitment on the Rise Again

In an effort to stay competitive, hospital physician recruitment deals are on the rise.  These arrangements are permitted under applicable federal law (the Stark Law) and are a core tool in hospitals’ tool chest.  These arrangements generally involve the hospital “loaning” to the physician or to a practice employing the doctor the costs associated with that doctor joining.  Since the ramp up costs associated with hiring or a physician just relocating to a new community can be steep (especially as payer contracts can take many months to set in place), hospital financial assistance can be critical.  How do they work?  Simple—

1.The hospital guarantees, based in part on MGMA salary surveys and other cost data sources, that the physician will collect at least $X each month for a period of normally up to 12 months;

2.The doctor agrees to remain in the hospital’s service area for 2-3 years, during which time, the amount loaned by the hospital is forgiven.

Though it may sound too good to be true, there are drawbacks, including:

1.There are pretty severe limitations placed on noncompetes for hospital recruited physicians which can be daunting to practices hiring them;

2.Unless carefully worded and negotiated, recruited physicians may find themselves with high expectations and little delivered in terms of the marketing and other support required to create a successful practice.  Not being financially successful is no defense to the requirement of staying in the hospital community for several years to write off the loan;

3. Some hospitals offset their business risk by taking any excess earnings (the collections exceeding the guaranteed amount) for months after the 12 month guarantee period, a period when collections should be substantially higher than during the early phases of the recruitment.

Practices entering into a hospital recruitment arrangement need to be careful in their physician contracts to pass as much financial risk as possible to the recruited doctor.  A recruited doctor that decides he or she no longer likes the new community can leave the practice holding the bag for a huge amount of money which has not yet been forgiven.

Recruited physicians need to be careful about the risk passed off to them in their employment contracts if they are joining an existing practice, since the practices typically benefit by receiving enough money to cover all of the new physician’s salary, benefits and overhead.

Regulation Postponed: March 1, 2013 Health Insurance Exchange Notice Delivery Requirement

The Affordable Care Act (ACA) requires employers to provide all new hires and current employees with a written notice about ACA’s health insurance exchanges (Exchanges), effective March 1, 2013.
On Jan. 24, 2013, the Department of Labor (DOL) announced that employers will not be held to the March 1, 2013, deadline. They will not have to comply until final regulations are issued and a final effective date is specified.

The DOL anticipates issuing the regulations in late summer or fall of 2013. The DOL, it its announcement, cites two reasons for the delay.First, the Exchange Notice (Notice) should be coordinated with the educational efforts undertaken by the Department of Health and Human Services (HHS) and with the Internal Revenue Service (IRS) guidance on “minimum value” requirements. Delaying the Notice will achieve that goal. The DOL also cites its intent to provide employers with sufficient time to deliver the Notice at a time that will be meaningful to the employees receiving it. When ready, the DOL will produce a generic Notice which will meet the law’s requirements.

What You Need to Know About the Physician Feedback/Value-Based Payment Modifier Program

Via CMS.gov

What?
The Physician Feedback/Value-Based Payment Modifier Program provides comparative performance information to physicians and medical practice groups, as part of Medicare’s efforts to improve the quality and efficiency of medical care.  By providing meaningful and actionable information to physicians so they can improve the care they deliver, CMS is moving toward physician reimbursement that rewards value rather than volume.

The Program (which is specific to Fee-For-Service Medicare—not Medicare Advantage) contains two primary components:

  • The Physician Quality and Resource Use Reports (QRURs, or sometimes referred to as “the Reports”) Select “QRUR Templates…” option from the menu on the left side of the page
  • Development and implementation of a Value-based Payment Modifier (value modifier)

Select “Value-based Payment Modifier” from the options on the left side of the page.

Why? 
This program supports the transformation of Medicare from a passive payer to an active purchaser of higher quality, more efficient health care through the value-based purchasing (VBP) initiative.  Physician feedback reporting was initiated under Section 131 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), and was expanded by section 3003 of the Affordable Care Act of 2010. The Affordable Care Act directed CMS to provide information to physicians and medical practice groups about the resources used and quality of care provided to their Medicare Fee-For-Service patients, including quantification and comparisons of patterns of resource use/cost among physicians and medical practice groups. Most resource use and quality information in the QRURs is displayed as relative comparisons of performance among similar physicians or groups.  Section 3007 of the Affordable Care Act mandated that, by 2015, CMS begin applying a value modifier under the Medicare Physician Fee Schedule (MPFS).  Both cost and quality data are to be included in calculating payments for physicians. By 2017, the Value-based Payment Modifier is to be applied to all physicians who bill Medicare for services provided under the physician fee schedule.

READ ON

Closely Monitoring the 26.5% Medicare Physician Payment Threat

Via HCMA, SGR Advocacy Alert from the AMA – – – –  The negotiations between Speaker Boehner and President Obama on the Lame Duck tax and deficit reduction package are at an impasse. There is a very real threat of the 26.5 percent Medicare physician payment cut taking effect on January 1, 2013, at least temporarily.

If Congress does adjourn without addressing the payment cut being induced by the sustainable growth rate (SGR) formula, the Administration announced today that the Centers for Medicare and Medicaid Services will follow normal claims processing procedures.

That is, claims will not be held and Medicare carriers will process payments for physician services provided after December 31 under the normal 14-day cycle required by law.  Payment for these claims would be based on the new, lower fee schedule conversion factor of $25.0008, as opposed to the current rate of $34.0376.

At this time, it is impossible to predict whether the 112th Congress will find a way to pass a stop-gap measure before adjourning, how long such a measure would last, or how long payment cuts will be in effect before legislation can be passed after the 113th Congress convenes in January.  It is highly unusual for a new Congress to enact significant legislation in the first month of its session, but the circumstances facing our nation today are far from typical.

It is inexcusable that Congress is once again putting the 47 million Medicare patients and the practices of physicians who provide them needed health care at significant risk.  The Medicare program has become unreliable and its instability undermines efforts by physicians to implement new health care delivery models that stand to improve value for seniors and other beneficiaries through better care coordination, chronic disease management, and keeping patients healthy.

The AMA believes that the financial disruption this situation will cause for physicians and their practices is unacceptable, and we will continue to fervently convey this message in the strongest possible terms to Congress and the Administration, as we have for the past several weeks.  Our patient and physician grassroots networks have been activated, and we are seeking your voices to tell Congress just how deeply its inaction will affect you.

Despite these efforts, at this time we feel compelled to advise physicians to start making plans for steps they can take to mitigate this disruption and meet their own financial obligations in January, in case the 26.5 percent cut actually takes effect.  Given the potential impact on practice revenue in early January, physicians should be certain adequate arrangements are in place to sustain their practices.  For those physicians who are forced into the untenable position of limiting their involvement with the Medicare program because it threatens the viability of their practices, we urge that patients be notified promptly so that they, too, can explore other options to seek health care and medical treatment.

From Intervention to Prevention

“Healthcare Reform,” “PPACA” and “ACOs” all have one certain thing in common:  cost-saving change.  Though debate swirls about politics, timing and the particulars of change, it seems clear that the changing demographics of our country (aging baby boomers) in our economic climate is not sustainable as is.  And it’s no surprise that a compensation system based on how much is done and how much it costs leads to greater expense.  An economic reward system that drives costs up as more and more people are set to join the ranks of the insured (through mandated health insurance and expanded Medicaid) simply underscores the timing of the change.  What does that mean for physicians?

Physicians are asking three key questions:

  1. Is there a future for small or solo practices?
  2. Is fee for service really gonna change?
  3. What can I do right now to adapt?

The Future of the Small Practice

The only solid answer is “less.”  It really depends on complex things like the demographics of where the doctor practices and the number of competitors close by.  That said, as change happens, the hardest hit will likely be the smaller practices, since they lack the personnel and financial resources to weather the change and to invest in adaptation.  Many small practices will likely experience change in such a way that the best they can hope for is to survive, rather than thrive.  Even worse, solo practitioners already know what it’s like to handle all the duties as a physician, keep track of business operations and keep the patients flowing into the practice.  Exhausting.  Without substantial support and resources, it’s just not realistic for most solos to expect to keep up.

Even larger practices are not often run like a business.  The professionals that generate the revenue often manage as well.  Moreover, most medical practices do not market or do any serious “back office” magic (revenue cycle management).  As such, change hits small practices especially hard.  Implementing even new EHR requirements can be consuming for a small practice.  How will it be as changes are made to reduce cost and improve quality?  How will it be when practices begin to see there is opportunity in change, that they may actually make more money in a risk based compensation environment?  Rougher.  Like a herd of buffalo when attacked, circling together is a good strategy.

That said, the vision has to be clear.  Why circle together?  Most medical practices are combining and growing to guard market share, not to manage costs or measure and demonstrate quality.  This is probably the biggest reason why we see larger practices in single specialties, not multi-specialty or primary/specialty based practices.  Most physicians that are adapting by joining larger practices are doing so for the same reason why buffalos circle together—the threat of change.  Though size alone is no panacea, larger practices are definitely in a better position to adapt.

Let’s face it:  few are running after change in healthcare right now.  Few see the opportunity and are leading the charge.  Most are waiting or are just setting the stage.  And most large practices are, at best, a good platform where change can be implemented and costs can be shared and spread among a larger pool.

Will There be a Change to Fee for Service Payment?

Yep.  Simple as that.  It’s already happening.  Bundled payments are in place, even in Florida.  Capitation is old hat for many now.

When?  Over time…  Not right away.  Even ACOs aspirants are selecting just one sided risk, testing the water as they see how well they do to reduce costs, improve quality and “earn” their right to bonus money.  Physicians that think fee for service will thrive for decades are kidding themselves, at least in the insured market.  Is there a basis for it in a “second tier” or concierge sort of environment?  Probably.

What Can I Do Right Now?

First, accept that we are approaching a new paradigm of healthcare delivery.  The current model of disease/injury crisis management has prepared no one for the move from intervention to prevention.  And yet, systems that are solidly based in wellness and prevention stand to profit most from the change we all face.

Second, look to shore up you business model.  That means:

  1. Look to join a larger practice that is committed to thriving in the future risk-based compensation scenario.  If the practice is there just to thrive in a fee for service environment and has no commitment to thriving in a risk based compensation model, keep looking;
  2. Market.  Most practices do not market at all, and yet consumers are selecting medical care in the most unlikely environment—the internet;
  3. Look at anything concierge-like.  Most of the public conversation centers around the insured market, mostly the Medicare Shared Savings Program (which has spawned the ACO concept).  What about the rest of the consumers?  As the insured market gets squeezed (remember that consumers are feeling the pressure too with heightened copays, deductibles and benefit limits), you can expect growth of the “second tier,” those who want more and are willing to pay for it;
  4. Build in wellness and prevention.  Not all practices lend themselves to wellness related services that can reduce healthcare costs, but those that do must look at ways to offer cost-saving, wellness and prevention-oriented services;
  5. Enlist the patients.  The concept of “partnering” with patients is strange, but consider the amount of savings and the enhancement of outcomes if physicians could incentivize healthy patient behavior.  Though absent from the public policy conversation, health care businesses that build in patient accountability stand to win big in a payment system that rewards clinical outcomes and cost savings.

Change is frightening.  Even “good” change is frightening.  Just look at all the upset stomach meds sold at airport kiosk counters.  Physicians have a terrific burden at this time.  They not only hold our health in their hands.  They are expected to have skills and time to help create a new environment in which care will be delivered.  Denying change in the healthcare sector is a waste of time and energy.  Looking for ways to thrive in it and even drive it is wise.

Doctors: Beware Signing ACO Documents

There continues to be terrific interest in accountable care organizations (ACOs), which are of course a financially risk-based model of providing healthcare to patients who choose to enroll in the Medicare Shared Risk Program.  ACO organizations are often led by hospitals and hospital systems, though occasionally by physician organizations.  One of the key common threads among these provider led ACOs is the fear of being left out of “the game,” the fear of losing out financially.  This fear, however, can lead physicians to run headlong into danger if and when they sign ACO documents.

 

One of the key ways ACOs get formed involves a stack of contracts being created, then shoved under physicians’ noses.  Doctors afraid to lose out tend to just sign.  The organizations are really to blame here, when the documents fail to contain material terms to deal with things like:  credentialing criteria, disciplinary procedures, financial provisions, how the financial up side or down side can affect physician compensation.  The documents are simply slid under their noses and, in fear of being left out, they get signed!  Or, as my buddy Rodger says “Ready, shoot, aim.”

 

Regardless of a doctor’s view of ACOs, no document ought to be signed unless all the questions raised by them are addressed, very clearly and in writing.  Be at the table with ACO organizers and do your best to design a good system, but don’t be naïve to think that the unaddressed portions will magically get filled in somehow in a way that benefits you or that even makes sense.  At the very least, wait until the document is complete, then consider if you want to sign it.

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