Physician Engagements: Who Do I Really Work For and Does it Matter?


By: Randy Goldberg, Co-Counsel

I am a successful physician who works for a thriving practice that is affiliated with a local hospital or Ambulatory Surgical Center (“ASC”).  The hospital/ASC was so impressed with my professionalism and skills that they retained me to perform certain additional duties and services for them.  Of course, they are paying me for my time and services.  This is great, I love my work, I am generating two sources of respectable income – all is good.

Not so fast!

As can sometimes be the case, all is good while there is smooth sailing and while the money is coming in.  However, once there is a bump in the road, a hiccup in a procedure, or a third party employee files a complaint with the Equal Employment Opportunity Commission (“EEOC”); the Florida Commission on Human Relations (“FCHR”); Department of Labor (“DOL”) or any federal or state agency complaining about some alleged incident in their workplace. Their filing of a lawsuit can be against you individually, against your practice or against the hospital/ASC.  Not to mention, a lawsuit can be filed by a patient or third party against the practice or the hospital/ASC.  Then what?Continue reading

CMS Issues Final Rules Updating Medicaid & Medicare Payments For 2013 & 2014

Repost Via and Kristen A. Larremore & Sarah K. Baker — On November 1, 2012, the Centers for Medicare and Medicaid (“CMS”) issued three final rules, to be effective January 1, 2013, that implement a number of Medicare and Medicaid payment changes for 2013 and 2014.

Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Electronic Reporting Pilot; Inpatient Rehabilitation Facilities Quality Reporting Program; Revision to Quality Improvement Organization Regulations

The hospital outpatient prospective payment and ambulatory surgery center (“ASC”) final rule with comment period updates the payment policies and payment rates for services furnished to Medicare beneficiaries in hospital outpatient departments and ASCs. This final rule changes certain amounts and factors used to determine the payment rates for Medicare services paid under the Medicare hospital outpatient prospective payment system (“OPPS”) and the Medicare ASC payment system.

According to CMS estimates, payments to hospitals under the OPPS for 2013 will be approximately $48.1 billion (an increase of $4.6 billion compared to 2012) and payments to ASCs for 2013 will be approximately $4.07 billion.

OPPS payment rates are being increased for 2013 by an outpatient department fee schedule increase factor of 1.8 percent. Additionally, the final rule continues to implement the statutory 2.0 percent reduction in payments for hospitals failing to meet the hospital outpatient quality reporting requirements, by applying a reporting factor of 0.980 to the OPPS payments and copayments for all applicable services. The final rule further modifies OPPS payments by basing future determinations of relative payment weights on geometric mean costs rather than median costs (which has been utilized in determining OPPS payments since the inception of the OPPS).

Payment rates for ASCs are being increased for 2013 by 0.6 percent (less than the 1.3 percent update included in the proposed rule).

Additionally, this final rule updates and implements new requirements under the Hospital Outpatient Quality Reporting (“OQR”) Program, the ASC Quality Reporting (“ASCQR”) Program, and the Inpatient Rehabilitation Facility (“IRF”) Quality Reporting Program. The final rule also (1) continues the electronic reporting pilot for the Electronic Health Record (“EHR”) Incentive Program, as finalized for 2012 through 2013, and (2) revises the various regulations governing Quality Improvement Organizations (“QIOs”), including (a) granting QIOs the authority to send and receive secure transmissions of electronic versions of medical information, (b) providing more detailed and improved procedures for completing Medicare beneficiary complaint reviews and general quality-of-care reviews (including a new alternative dispute resolution process called “immediate advocacy”), (c) increasing information beneficiaries receive in response to QIO review activities, (d) conveying to beneficiaries the right to authorize the release of confidential information by QIOs, and (e) making other technical corrections.

In addition to the foregoing modifications and payment updates reflected in the final rule, the following briefly lists certain additional changes implemented therein:

  • Continuation of a 7.1 percent adjustment to OPPS payments to certain rural hospitals, including sole community hospitals and critical access hospitals (applicable to all services paid under the OPPS, excluding separately payable drugs and biological, devices paid under the pass-through payment policy, and items paid at charges reduced to cost);
  • Continuation of the cancer hospital payment adjustment with a target payment-to-cost ratio of 0.91 for determining the 2013 cancer hospital payment adjustment to be paid at cost report settlement (intended to cause cancer hospital payments to equal the weighted average payment-to-cost ratio for other OPPS hospitals);
  • Adjustment of payments to cover the marginal cost of hospital conversion to the use of non-highly enriched uranium (“non-HEU”) sources of radio-isotopes used in medical imaging (intended to reduce US reliance on reactors outside of the US);
  • Setting the payment for the acquisition and pharmacy overhead costs of separately payable drugs and biological that do not have pass-through status at the statutory default of average sales price plus 6 percent;
  • Clarification of the application of the supervision regulations to physical therapy, speech-language pathology, and occupational therapy services that are furnished in OPPS hospitals and critical access hospitals;
  • Updates to the Part A to Part B Rebilling Demonstration that is in effect for 2012 to extend it through 2014; this extension is designed to address increased length-of-stay times for outpatients receiving observation services as well as Medicare Part A to Part B rebilling policies when a hospital inpatient claim is denied because the inpatient admission was not medically necessary;
  • Revisions to regulations governing payments for new technology intraocular lenses (§§ 416.196(a0(2) and 416.195(a)(4)) with regard to labeling, requiring the inclusion of a claim of a specific clinical benefit therein and demonstration of evidence that the intraocular lenses result in a measurable, clinically meaningful, improved outcome; and
  • Adoption of measures for the Inpatient Rehabilitation Facility Quality Reporting Program that will affect annual prospective payment amounts for 2014 as well as the adoption of new pressure ulcer measures.

Medicaid Program; Payment for Services Furnished by Certain Primary Care Physicians and Charges for Vaccine Administration under the Vaccines for Children Program

The Medicaid final rule requires State Medicaid agencies to pay at least the Medicare rates in effect under the Medicare physician fee schedule rate in 2013 and 2014 or, if higher, the rate using the calendar year 2009 conversion factor for primary care services furnished by physicians practicing within the scope of practice of medicine or osteopathy with a specialty designation of family medicine, general internal medicine or pediatric medicine, or a subspecialty within those specialties (as recognized by the American Board of Medical Specialties, American Osteopathic Association, or the American Board of Physician Specialties). Physicians are required to self attest for purposes of inclusion as a “primary care physician” that they are either Board-certified in family medicine, general internal medicine, or pediatric medicine or a subspecialty related to those specialties; or that 60 percent of all Medicaid services billed by such physician or provided in a managed care environment are for the specified evaluation and management (“E&M”) and vaccine administration codes. This payment requirement applies to primary care services paid on a fee-for-service basis as well as those paid on a capitalized or other basis by Medicaid managed care plans.

However, the final rule also requires a 100 percent federal match for any increase in payment above the amounts due for such services under the applicable Medicaid State plan rate as of July 1, 2009, such that no additional costs accrue to states for payments above the rates in effect under the 2009 Medicaid State plan methodology. Accordingly, unless a state has reduced its Medicaid rates since 2009, it will be fully reimbursed by the federal government for any increased payments. In order to claim such enhanced federal match, states must be able to document the difference between the July 1, 2009, Medicaid rate and the applicable Medicare rate for specified providers that is claimable at the 100 percent matching rate. States are given flexibility in determining whether and how often to update rates to conform to changes in the Medicare Part B Fee Schedule, if the 2013 and 2014 rates are applicable, since such scheduled rates are subject to periodic adjustments or updates through the calendar year.

Primary care physicians are targeted by these payment changes in part due to their ability to perform the vital function of coordinating patient care, including specialty care, but also due to the need for a sufficient number of primary care physicians to be participating in the Medicaid program prior to the expansion of Medicaid eligibility in 2014. Primary care services are defined under the Patient Protection and Affordable Care Act (“ACA”) (Section 1902(jj)) to include certain specified procedure codes for E&M (codes 99201 through 99499, to the extent covered by the approved Medicaid State plan or included in a managed care contract) as well as certain vaccine administration codes. Additionally, the higher payment rates are applicable to services provided under the personal supervision of eligible physicians by all advanced practice clinicians. Physicians delivering primary care services in a Federally Qualified Health Center or Rural Health Clinic are not eligible for increased payments under this final rule due to the view that these physicians are already reimbursed at the appropriate rate under the Medicaid statute.

Additionally, the final rule updates the regional maximum fees that providers may charge for administration of pediatric vaccines to federally vaccine-eligible children under the Pediatric Immunization Distribution Program (more commonly known as the Vaccines for Children program) by adding 42 C.F.R. Part 441, Subpart L. Under this program, each state is required to establish a Vaccines for Children program under which certain specified groups of children are entitled to receive qualified pediatric immunizations without charge for the cost of the vaccine. This program permits providers to impose a fee for the administration of such a vaccine, as long as the fee does not exceed the costs of such administration, without permitting the provider the ability to deny administration of the vaccine due to the inability of the child’s parents or guardian to pay the administration fee.

The explicitly stated, expected, overall benefit from the Medicaid final rule is increased provider participation by primary care physicians, resulting in better access to primary and preventive health services by Medicaid beneficiaries. However, skeptics have questioned the ability of the final rule to generate such increased participation due to the fact that the increased rates are only in place for a 2-year period, 2013 and 2014. Currently under the final rule, states are required to collect and report data to CMS on the impact of the higher rates on physician participation. That data will assist Congress in determining whether or not to extend the provisions of the final rule beyond the end of 2014.

Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule, DME Face-to-Face Encounters, Elimination of the Requirement for Termination of Non-Random Prepayment Complex Medical Review and Other Revisions to Part B for CY 2013

In conjunction with implementing the foregoing Medicaid payment increases, CMS also released a Medicare final rule with comment period that includes a statutorily required 26.5 percent across-the-board reduction to Medicare payment rates for more than 1 million physicians and non-physician practitioners under the Balanced Budget Act of 1997’s Sustainable Growth Rate (“SGR”) methodology. While Congress has overridden the required reduction every year since 2003, currently no such action has been taken.

Additionally, the Medicare final rule establishes payment rates for 2013 for the physician fee schedule, payments for Part B drugs, and other Medicare Part B payment policies to ensure that the payment system is updated to reflect changes in medical practice and in the relative value of services. It also includes a new policy to pay a patient’s physician or practitioner to coordinate the patient’s care in the 30 days following a hospital or skilled-nursing-facility stay. The changes in care coordination payment and other changes in the rule are expected to increase payment to family practitioners by 7 percent, and other primary care practitioners between 3 and 5 percent, if Congress averts the statutorily required reduction in Medicare’s physician fee schedule.

The Medicare final rule also includes the implementation of the physician value-based payment modifier under the ACA. Under the ACA, this new system is required to apply to all doctors by the start of 2017, and is one of the trickiest and most politically loaded parts of Medicare’s effort to shift away from paying for the volume of services and toward the quality of care.

The value-based payment modifier is the percentage by which amounts paid to a physician group under the Medicare physician fee schedule are adjusted based upon a comparison of the quality of care furnished to cost of care. The payment modifier provides for differential payment starting in 2015, based on performance in the 2013 calendar year. CMS originally planned to apply the modifier to medical groups of 25 or more professionals; however, in the final rule CMS changed the plan to only include medical groups of 100 or more practitioners. This change was adopted to gain experience with the methodology and approach before expanding to smaller groups—which CMS emphasizes will occur in future rulemaking.

In general, physicians with higher quality and lower costs will be paid more, and those with lower quality and higher costs will be paid less. The final rule provides an option for these groups of physicians to choose how the value modifier is calculated based on whether they participate in the Physician Quality Reporting System (“PQRS”). The PQRS is a voluntary program that allows physicians and other healthcare professionals to report information to Medicare about the quality of care they provide to people with Medicare who have certain medical conditions. All of the quality measures for which groups of physicians are eligible to report under the PQRS starting in 2013 are used to calculate the value-based payment modifier to the extent the group submits such data. Note, however, that the final rule also makes minor changes to the PQRS. Additional quality measures for those not participating in the PQRS are composites of rates of potentially preventable hospital admissions or readmissions.

Among other changes, the final rule also implements provisions of the ACA by removing certain regulations regarding termination of non-random prepayment review. Medical review is the process performed by Medicare contractors to ensure that billed items or services are covered and are reasonable and necessary. As a result of this final rule, contractors are not required to terminate non-random prepayment medical review by a prescribed time, but instead must terminate each medical review when the provider or supplier has met all Medicare billing requirements as evidenced by an acceptable error rate as determined by the contractor.

Finally, the rule implements provisions of the ACA by establishing a face-to-face encounter with a beneficiary as a condition of payment for certain durable medical equipment items such as prosthetic devices, orthotics, and prosthetics. The encounter must occur during the six months prior to the written order for each item or during such reasonable timeframe as provided by the Secretary.

Overall, this Medicare final rule continues efforts by CMS to align quality reporting across programs to reduce burden and complexity, and emphasizes paying for the quality of care as opposed to volume of services provided.

The Use of an “Inventory” With ASC Rental Arrangements in Bodily Injury Cases

By: David W. Hirshfeld

As reimbursement from third-party payors shrunk, the uninsured accident victim emerged as a financially attractive patient.  Surgeons, surgery centers, and therapists became armchair personal injury attorneys.  They learned to identify and sign-up uninsured patients who had been injured as the result of negligence, and who were likely to be successful in the lawsuits arising from their accidents.

A popular model evolved in which a surgery practice leases an ambulatory surgery center for a very competitive rate, performs the surgery, charges the patient a reasonable and customary fee for the technical and professional component of the surgery, and agrees not to seek payment from the patient if his attorney and he agree, through a “Letter of Protection,” that the surgery practice will be paid from the proceeds of the negligence lawsuit.  These days, ASCs are leasing themselves out for very competitive rates because the surgery practice guarantees payment immediately upon completing the surgery, or even in advance of the surgery, and because many ASCs currently have excess capacity.  The surgery practice often has to wait twelve to thirty-six months to be paid for its services; but when the lawsuit is resolved and they are paid, there is a healthy margin between the surgery practice’s cost for the ASC and the amount the practice is paid as technical component.  Remember, other than reasonable and customary, there is no fee schedule applicable in this context.  The model is currently so lucrative, that it has attracted lenders who help finance the surgery practices while they await payment on the Letters of Protection.  Not incidentally, this model may become less lucrative as more and more people are covered by health insurance as a result of the Patient Protection and Affordable Care Act.

The proceeds of negligence lawsuits are paid by property and casualty insurance companies, who employ professional claim adjusters, some of whom are very savvy.  Surgery practices in this model may face the argument that the insurer will only pay the surgery practice what the surgery practice paid the ASC, without mark-up.  In order to help avoid this sort of inquiry, we suggest that the surgery practice, as part of its arrangement with the ASC, receive a detailed inventory of every aspect of space, equipment, supplies and services provided by the ASC with respect to each procedure performed on each patient of the surgery practice.  Beside each item on the inventory, the ASC should list its reasonable and customary charges for that item.  This inventory can be used to support the payment secured through the Letter of Protection, and can be used by the plaintiff’s attorney when (s)he is proving damages in the negligence lawsuit.

It is very important that nobody refer to the inventory as a “bill” that was or will actually be paid to the ASC; those sorts of references may lead to an accusation of fraud since the ASC has already accepted a lesser amount as payment in full.  If and when asked, the surgery practice could justify its markup over what it actually paid the ASC as reimbursement for having to finance the surgery for many months, and as reimbursement for the risk of nonpayment.

This model can be lucrative, but it is fraught with potential problems.  The ASC inventory described above is just one noteworthy aspect of how to work the model.  Any surgery practice seeking to focus on treating negligence victims and taking Letters of Protection, should get advice from a trusted personal injury attorney and from a bona fide health care attorney.