Do Your Mega Group Documents Include an Operating Agreement?

                 Physicians are becoming more and more willing to pool their practices together in large group practices in order to (1) negotiate managed care contract rates, (2) develop ancillary service revenue sources, and (3) get some cost savings from economies of scale in such areas as professional liability insurance, EMR and the like.  This is great news for physicians! 

                The dominant format of such a large group, a “mega group” is what has come to be called the “Umbrella LLC” or “Super LLC” model.  Simply put, the model consists of a limited liability company (the “Big LLC”) which owns multiple limited liability companies (“Sub LLCs” or just “Subs”).  Physicians are owners of the Big LLC and are employed by it.  The Sub is comprised of the practice that joined the mega group.  Physicians looking to join a Mega Group have many things to get comfortable with such as:  governance, income sharing and overhead sharing.  Physicians need legal and financial advice to guide them in that process.  That said, what many physicians often miss is an agreement between the Super LLC and the Sub which is designed to protect their autonomy to the maximum extent allowed by applicable law.  This sort of agreement, which we can call an “Operations Agreement,” should be part of every mega group transaction.

                Mega group transaction documents often contain more legal and financial jargon than clear language about operations and what actually happens within the practice that joined the mega group.  An Operation Agreement is designed to address the particulars within the Sub (operational and financial matters) and to ensure the independence of the sub, which “houses” the group that joined the mega group.  For instance, once the mega group takes a management fee to pay for centralized expenses, what do the physicians in the Sub do with the money?  Usually, mega group documents only address the fact that the Sub gets the money. But now what the Sub does with the money (i.e. who gets what).  This is just one example of the many important issues that ought to be addressed in an Operations Agreement, including who gets to make decisions in the Sub, how to handle compensate disabled or retiring physicians, and hiring and firing matters within the Sub. 

                Mega groups present a terrific opportunity for today’s physicians.  That said, they have to make sure the documents address their legal, financial and operational needs.

Ever Wanted to Know How Long Medicare Has to Recoup Medicare Overpayments?

Healthcare providers who participate in Medicare are sometimes surprised when the government later decides that an overpayment was made.  As a healthcare provider who accepts federally funded reimbursement, you may wonder how long the government has to make a claim against you for alleged overpayments.

For Medicare overpayments, the federal government and its carriers and intermediaries have 3 calendar years from the date of issuance of payment to recoup overpayment.  This statute of limitations begins to run from the date the reimbursement payment was made, not the date the service was actually performed.  CMS has instructed carriers not to recover payments that have not been reopened (where no attempts have previously been made to collect) within 4 years from the date of payment, unless the case involves fraud or similar fault.  CMS instructs carriers not to recover overpayments discovered later than 3 full calendar years after the year of payment, unless there is evidence that the physician or beneficiary was at fault with respect to the overpayment.   Liability of the physician for refunding an overpayment is based on fault- if the overpayment was a result of a lack of disclosure or information from the Medicare beneficiary, the liability may shift to the beneficiary.  See Medicare Carrier Manual §7100.

Healthcare providers should be aware that the 3 year statute of limitations does not apply to recovering overpayments made as result of false pretenses or fraud.  In bringing a civil action against an alleged perpetrator of fraud for civil penalties, the Federal False Claims Act[i] grants the government and qui tam whistleblowers either (i) 6 years from the date of violation or (ii) 3 years from the date the facts material to the right of action are known or reasonably should have been known by the government , but not to exceed 10 years from the date of violation[ii].  When a “violation” has occurred is arguable. The statute of limitations under the Federal False Claims Act could potentially start to toll on the date the false claim is submitted, but the government has argued that the statute of limitations does not toll until the date of payment on the claim by the government or even final settlement on a cost report with the government.  Also important to note is that failure to promptly refund a reimbursement previously discovered by a healthcare provider has been construed as a violation of the Federal False Claims Act.  In other words, if you discover an overpayment and wait for CMS to make an official refund request, you may still be subject to penalties and fines.

Furthermore, aside from civil monetary penalties, there are numerous criminal statutes under which the federal government could impose criminal penalties for health care fraud, including obstruction of a federal audit, mail fraud, conspiracy to defraud the government, RICO, the criminal false claims act, False Statements Act, the Social Security Act (wherein it is a felony to render any false statement or representation of material fact), federal anti-kickback statutes, and HIPAA.

[i] The Federal False Claims Act can be found at 31 U.S.C. §§ 3729-3733.

[ii] 31 U.S.C. §3731(b).

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With over 20 years of healthcare law experience following his experience as legal counsel for the Florida Medical Association, Mr. Cohen is board certified by The Florida Bar as a specialist in healthcare law.  With a strong background and expertise in transactional healthcare and corporate matters, particularly as they relate to physicians, Mr. Cohen’s practice immerses him in regulatory, contract, corporate, compliance and employment related matters.  As Founder of The Florida Healthcare Law Firm, he has distinguished himself and his firm for providing exceptional legal services with the right pricing, responsiveness and ethics. He can be reached at (888)455-7702 and www.floridahealthcarelawfirm.com

2010 Has Already Been a Huge Year in Healthcare

             Healthcare reform alone is enough of a Rubik’s Cube, but CMS and the OIG has been especially well-staffed these days, enough so that their offices are turning out new laws and interpretations at an alarming rate.  Though it may seem overwhelming, physicians need to work harder than ever to stay on top of the changes.

Health Information Technology (HIT)

            The physician incentive payments/penalty provisions that piggybacked their way onto the federal healthcare reform law have physicians concerned and scrambling.  IT vendors and advisors are drawn to the opportunities the new law has created; and physicians need to be educated and wise. 

             The so called “HITECH” provisions of the federal healthcare reform law create a pot of about $34 Billion worth of incentive payments for eligible professionals and hospitals that attain meaningful use of certified electronic healthcare records (EHR) technology.  To obtain any money, eligible parties will have to demonstrate full compliance no later than 2015, and earlier (2011!) if they want the full benefit.  Medicare has allocated roughly $44K worth of incentives for each compliant physician; and Medicaid offers another $20K roughly, but the real incentive is not the money; it’s the fact that financial penalties apply if you don’t comply by 2015.

             Financial incentives are available for eligible professionals who use certified HIT which satisfies the “meaningful use” regulations, which were issued August 2010. They are complex and limited by time lines which industry insiders claim to be unreachable. Vendors are, nevertheless, selling and physicians are buying software and solutions in hopes they will qualify for the incentive payments.  Physicians should make sure that their contracts with such vendors protect them by requiring the solutions to be certified and meet the meaningful use guidelines. 

Healthcare Reform

            Though everyone is scared about how healthcare reform will unfold, remembering the past may help.  The fact is the concepts in the Act are not new.  For instance, IPAs, PHOs, capitation and the like are the cornerstone of the reform.  Physicians have seen these before, though not on a government mandated basis.  Moreover, where those models were once purely financial, there is a heavy clinical outcome component woven into the regulations. 

            No matter how one views it, the Act creates huge opportunities for physicians and others.  Risk based compensated Accountable Care Organizations (ACOs) are slated to be the new platform for healthcare delivery.  Good news for PCPs:  regulators and think tankers think that physicians, especially primary care physicians, are the best positioned to lead the ACO development charge.  That said, the form the ACOs will take is completely unclear and is expected to unfold over a period of ten years.  Like technology vendors, physicians have to be wary of anyone who has something to sell at this time.  One size does not fit all!  IPAs might be a great vehicle to start.  Capitated models are familiar, but a bundled payment methodology may work better in some circumstances.  One thing that is certain:  whatever business model a physician explores ought to be able to bear financial risk (e.g. capitation or bundled payments) and measure clinical outcomes, because both elements will form the basis of payments of the future.  Though specifics about the future of healthcare are unavailable, the following is a fair list of what’s likely:

  1. Movement away from fee for service payment to risk based compensation;
  2. The prevalence of IT & EMR;
  3. The need to demonstrate clinical effectiveness;
  4. An expanded role of primary care physicians;
  5. Expansion of concierge type services;
  6. Employment of physicians by hospitals;
  7. The development of larger medical practices;
  8. More patients (through insurance mandates and expansion of Medicaid     eligibility);
  9. Expanded use of “physician extenders” (as the PCP shortage worsens); and
  10. Increased enforcement in the area of healthcare fraud (civil & criminal).

OIG and CMS Pronouncements

            May was a busy month for healthcare regulators.  SMS issues the Ambulatory Surgery Center Waiting Area Separation Requirements, which has had the effect of preventing creative business opportunities between ACSs and other healthcare businesses.

            Additionally, the OIG recently issued an Advisory Opinion which makes it very difficult for imaging centers to do prior authorizations for referring physicians.

Fraud and Abuse

            If the first 2/3 of 2010 are any indication of the future in healthcare law, healthcare business professionals have a lot to keep up with. Enforcement by the Justice Department and the Office of Inspector General is in full swing. Already, for instance, nearly $2 million has been repaid as the result of employing a person who has been excluded from a federal healthcare program. Examples include:

Read On at www.FloridaHealthcareLawFirm.com

Hello world!

I founded The Florida Healthcare Law Firm in response to the deficiencies typically found in law firms—lack of transparency, uncertain pricing, poor communication, and a devaluation of the role of instinct and life experience.

Over the course of my years practicing law, I’ve found that my satisfaction and my clients’ satisfaction is directly related to the quality of the relationship. More transparency, unabashed honesty and clearer communication about what I am doing and what I am charging directly translates to better and longer term relationships. Too often I’ve seen lawyers get stuck in the legal and financial details and leave their clients without practical advice on how to accomplish their objectives.

I know that what I am doing is unique among law firms, and I’ve decided to (1) say that, and (2) make commitments to myself and my clients in terms of how business is transacted. For instance, our firm does many things on a flat fee basis, and we commit to providing you what you want when you need it. I enjoy bringing to my clients useful and straightforward advice based on my more than 23 years of experience “seeing what works and what doesn’t.”

At the end of the day, I think the way we do things makes more business sense and is more enjoyable for everyone. I hope you agree.

Jeffrey L. Cohen
Board Certified by the Florida Bar in Health Law