We all witnessed the disastrous rollout of the Healthcare.gov website which crashed almost immediately after going live. The reason according to the Department of Health and Human Services was the huge demand for access to the insurance exchange. I expect that the website issues (or many of them anyway) will eventually get fixed, but then what? Is the delivery system ready or will it crash too? Consider the article published on NYTimes.com today “Medicaid Growth Could Aggravate Doctor Shortage“. And, the Medicaid expansion is only a small part of the problem. Those of us familiar with the healthcare delivery system have known for a long time that there’s an impending and massive physician shortage on the horizon, particluary in primary care. This was the case even before the passage of the Affordable Care Act and was largely due to the expected healthcare needs of the Baby Boomer generation. It’s a pretty fair bet to assume that adding 30 million more insured patients to an already stretched system will result in some kind of system failure, but what is that likely to mean?
Patients who do not have insurance or those with insurance but who can’t wait for the next available appointment with their physician have historically gone to the local emergency room. Most commercial insurance provider agreements prohibit physicians from discriminating against patients, so under Obamacare, participating physicians will likely not be able to turn categories of patients away. All patients will have the same access to the limited number of patient appointments each day. This means longer waits for appointments for everyone. Those who can’t or won’t wait for one of those appointments will likely head to the ER or one of the many urgent care centers now popping up around the country. Physicians will still not be required to participate in Medicaid (although hospitals may require their employed physicians to participate), so ready access to regular primary care for the many newly insured patients under the Medicaid expansion program is not guaranteed. Where will those folks go if they can’t find a private practice physician who accepts Medicaid? Just a guess, but I imagine many of them will end up at the local ER.
Hospital-physician acquisition of medical practices continues at a furious pace. Unfortunately, no one knows for certain whether physician employment by hospitals is the key to better or more cost-effective care. Moreover, the hospital or the physician in such a transaction may for any number of reasons decide later on that the relationship is less than desirable. Because no one can predict the future, it is generally advisable to include an unwind provision in the original practice purchase and employment agreement to allow the parties to unwind the transaction. Sometimes the unwind may be triggered or exercised upon failure to meet certain agreed-upon milestones (e.g., failure to hire another physician in the same specialty with a defined period of time), during a limited period (e.g., only during the third year of employment) or at any time during the term. The unwind clause should spell out the triggers as well as how it can be exercised and the details of how it will work to ensure a smooth transition back to private practice. Where the physician’s employment by the hospital was precipitated by the purchase of the physician’s practice assets, an unwind will usually involve the repurchase of those assets by the physician from the hospital. In this is the case, the unwind provision should address the valuation methodology to be used and the timeline for the repurchase. Finally, if the employment agreement includes a restrictive covenant, it will need to include a carve-out for the unwind. With even the best intentions on both sides of a transaction, there will be no guarantees of success. A well-thought-out unwind clause can be an important safety valve for both parties if the arrangement does not turn out as planned.
It is still evident to me that too many physician practices still do not have effective fraud and abuse compliance programs integrated into their practices. To date there has been no federal or state mandate that physicians implement a compliance program but such a mandate is coming. In fact, the Affordable Care Act of 2010 charges the Secretary of HHS in conjunction with the Office of Inspector General with implementing mandatory compliance programs for Medicare providers. However, as I have said previously on this blog, you shouldn’t wait until it’s a requirement. An effective compliance program offers practice many benefits including early identification problematic billing and contractual arrangements and potential mitigation of penalties in any fraud and abuse settlement or prosecution. Frankly, in this highly regulated environment, having an effective compliance program is simply good business. There are many excellent resources on building an effective compliance program. Most medical associations and specialty societies have developed resources on the subject. Without question, however, the starting point should be the compliance program guidance published by the OIG itself since this identifies those elements of a program that the OIG deems to be or most importance. For more information on building an effective compliance program on a budget, see Medicare Fraud and Abuse and Your Practice and Compliance Planning on a Shoestring Budget.
By Michael J. Coco
What providers and pharmacists don’t know about their employees can hurt them. That’s the hard lesson learned by a New Jersey pharmacy that had no reason to think the pharmacy it purchased came with an experienced, licensed pharmacist employee with an unsuspected criminal background. Providers should know that falsifying documents, records and applications is unethical and likely to have serious legal and civil consequences. Last month, the New Jersey Appellate Division upheld a decision by the state’s Medicaid program to deny an application submitted by Township Pharmacy on the basis that the pharmacist submitted false information when it certified that none of the predecessor employees had criminal backgrounds.
The plaintiff in Township Pharmacy was an experienced pharmacist who purchased an existing pharmacy establishment and, in doing so, retained employees who were employed by the predecessor pharmacy. One particular employee, B.L.R., was with the pharmacy for nine years, had recently undergone a background check, and was awarded a pharmacy license by the state. The plaintiff had every reason to believe that B.L.R. had a criminal history. When the State conducted an investigation, it discovered that B.L.R. did in fact have a criminal history and denied the plaintiff’s application for Medicaid participation.
On appeal, the Appellate Division upheld Medicaid’s decision, notwithstanding the fact that the plaintiff had a good-faith belief that none of his employees had criminal records. In applying something of a strict liability standard, the court opined that the pharmacist’s failure to carry out his due diligence in conducting background checks resulted him submitting a “false” application to Medicaid. Because Medicaid can deny an application based on false information submitted, the decision was upheld.
This case acts as a warning to both pharmacists and providers to conduct thorough due diligence after any entity purchase or merger. Not only can Medicaid deny an application, but the Township Pharmacy ruling appears to allow a strict liability standard for any “false” application and the penalties for such falsification include suspension and disbarment from participating in any State contracting. In other words, a good-faith error on a Medicaid application could result in a practitioner’s suspension or disbarment from Medcaid, New Jersey Family Care, or any other State program regardless of whether it is related to the Medicaid program.
The take-home point of Township Pharmacy is to conduct thorough due diligence, especially after a merger or acquisition. The case also has strong implications for anyone purchasing a physician office and employing the physician owners. Providers can guard against this concern by requiring physicians to disclose any prior criminal history when entering into an asset-purchase agreement, and allowing for termination and indemnification in the event that an undisclosed criminal history is discovered. Providers may also wish to make a background check a prerequisite to the purchase of an entity. Finally, providers should be mindful that other questions on Medicaid applications should be answered with care.
In representing healthcare providers, we are frequently called upon to assist with labor and employment legal matters. Unfortunately we are typically called in to assist after would could have been a minor issue has become a major problem — what I like to call the “clean up” phase. Not surprisingly, however, it is often much more effective, and less expensive, to engage legal counsel to help minimize labor and employment risks upfront — before they become liabilities at all.
Many small and medium-sized medical practices and other provider organizations simply don’t realize the significance of labor and employment laws. Federal and state laws impose a multitude of employment-related requirements on employers, and afford employees a variety of protections. The range of “protected classes” of employees under federal and state law is quite broad. These include protections against discrimination based on age, sex, disability or sexual orientation, to name a few.
On top of anti-discrimination protections, labor and employment laws affect how certain categories of employees may be paid (salaried or hourly), whether and how overtime wages must be calculated and paid and what an employee is entitled to upon termination of employment.
Many of these laws tend to favor the employee as, from a public policy view, lawmakers tend to believe that the employer will have greater resources and therefore a greater ability to do harm to an individual employee than vice versa. Therefore, it is incumbent upon the employer to take great care to ensure that it follows these laws closely and applies them consistently to its employees.
One way to ensure compliance with this complex set of laws is to work with an experienced employment lawyer to audit your policies and procedures to ensure that they are consistent with the law and that you are applying them appropriately in your organization. Once it is determined that the appropriate policies and procedures are in place, staff should be trained on those policies and procedures and training records should be retained to demonstrate the organization’s commitment to compliance.
As with compliance programs in other areas of the law, some advance auditing and carefully planning and implementation can go a long way in managing what could be very costly labor and employment risks.
Todd A. Rodriguez
One of the ways the Medicare program and other payer plans are recovering overpayments and identifying billing fraud is through the regular use of data mining. Simply put, by utilizing software programs that monitor and compare billing and coding data, enforcement authorities are easily able to identify problematic trends in physician billing. This is an extremely cost effective means of identifying outliers since it does not require a person to manually review claims.
Many physicians I have spoken with over the years mistakenly believe that if they undercode their services, they are reducing their risk of being audited. However, with data mining programs, this is unlikely to be the case and in fact the opporits may be true. This is because many of these programs utilize comparative peer data to determine whether a physician’s patterns are outside of peer group norms. Therefore, a physician who consistently bills one level of evaluation and management service, for example, could very well be flagged for audit if his or her peers routinely bill varying levels of service.
One good way to evaluate whether your coding patterns fall within norms is to request your peer group data from your Medicare Area Contractor and see how your own coding patterns match up.
Finally, if you still think Medicare isn’t paying attention to your coding, consider this case recently reported by the Chicago Tribune: Mobile Doctors CEO, Physician Charged With Medicare Fraud
Hiring a new physician into a practice can be an expensive and risky proposition but for most practices it is a necessary endeavor. Aside from the actual costs of recruiting and negotiating a contract with the new physician, there are associated increases in overhead, and perhaps most importantly, the risk of damaging valuable practice goodwill in the community if you happen to make the wrong choice. Here are a few important legal and business considerations to think about before hiring a new physician:
1. Are you sure you need a new physician? Physician extenders – nurse practitioners and physician assistants – often cost less than hiring a physician and can, depending on their state licensure rules, handle much of what a physician can do in the office. Moreover, extenders don’t typically expect to become owners and may be willing to work on an hourly as-needed basis. Consider first whether an extender might be enough.
2. How much can you afford to pay a new physician? Fundamentally the decision to hire is a mathematical equation: how much in salary, benefits and overhead will it cost you and do you have the patient volume to support the new physician.
3. What type of physician is the right fit for your practice? Is there a potential niche for a physician with a particular subspecialty or skills set?
4. Do you expect to offer the opportunity for the new physician to become an owner in the practice? While it’s never a good idea to guarantee co-ownership in your physician employment agreement, be prepared for candidates to ask about the opportunity and what it might entail. You don’t necessarily have to know or give all of the details, but it’s a good idea to have a sense of when co-ownership might be offered, what criteria will go into the decision to offer it and what kind of buy-in might be required.
5. Will you impose a non-competition covenant on the new physician? Restrictive covenants are very common in physician employment agreements but overly-aggressive restrictions can send the wrong message and scare good candidates away. Ideally restrictive covenants should be narrowly tailored to protect the practice.
Curious what the future of medicine will look like? According to this recent article on CNBC.com, it appears that for many physicians it will involve a boss, a timeclock and a steady paycheck. Not surprisingly, as the legal and administrative burdens of running a private practice continue to increase, more and more seasoned physicians are making the leap to hospital employment. And, according to the CNBC article, it appears that a new generation of physicians is bypassing the private practice model altogether and heading right into hospital employment.
Unfortunately, in my experience, many hospitals are not prepared to accommodate physician employees on a large scale and often lack the expertise to manage physician practices efficiently. After all, hsopitals are in the business (often not-for-profit) of running hospitals, not doctors’ offices. As a result, hospital-owned physician practices can quickly become money-losing propositions. While some hospitals may be willing to subsidize physician practices for a period of time, in my experience, they may try to play “catch-up” in the contract renewal period – imposing unrealistic performance targets on physicians or tying compensation to expenses or other factors beyond physician control.
Hospital employment can be a long-term career option but physicians should understand that most initial hospital employment terms will be less than 5 years and are commonly only 3 years. It is critical therefore that when negotiating your initial hospital employment agreement, you try to build a framework for negotiation of renewal terms. This may involve caps or floors on compensation adjustments, realistic performance criteria and mechanisms to overcome negotiation impasses such as reliance on independent third party valuation experts.
As the implementation of the federal Affordable Care Act (ACA) continues in fits and starts, healthcare providers are scrambling to best position themselves to accommodate anticipated and developing payment models. Unfortunately no one really knows what these new payment models will look like or how they will ultimately work. It is apparent, however, that most of them (such as the accountable care organization model and bundled payment models) will require some level of increased clinical or legal integration between and among providers. Given the general state of confusion around payment reform, it is not surprising that many physicians and other providers are perplexed over how best to integrate. Despite the common thinking among many physicians, integration does not necessarily mean that all physicians must be employed by hospitals. In fact, there are a number of potential integration strategies worth evaluating before making the leap to hospital employment. Some of these models include the following:
1. Practice Lease. Under this model, a hospital or health system leases the entire medical practice including the space, equipment and personnel, and engages the physicians on an independent contractor basis to staff the leased office.
2. Clinical Co-Management. Under this model, a hospital or health system would engage the practice physicians to manage the clinical aspects of a department or service line of the hospital or system. In exchange for the management services, the physician may be paid through a fixed compensation component and perhaps some quality or performance component.
3. Professional Services Agreement. Under this model, a hospital or health system would lease the services of one or more of the physicians of a practice to see and treat hospital patients at the hospital or in hospital facilities. The hospital would pay the practice fair market value compensation and would be entitled to bill and collect payment for all services rendered by the physicians during the lease periods.
4. Medical Director Services. Under this model, a hospital or health system can engage practice physicians to serve as medical directors of a service line or department as a means of enhancing the delivery of care with close physician oversight and involvement. As with all of these arrangements, care must be taken to ensure that the services are necessary, commercially reasonable and actually performed.
5. Network Affiliation. Under this model, a medical practice or its individual physicians would sign participation agreements to participate in a hospital’s/system’s provider network (e.g., an accountable care organization). The participating network providers do not become employees of the hospital or network but merely agree to participate in the payment arrangements entered into by the network.
It goes without saying, of course, that all of these integration models are subject to much federal and state regulation and therefore must be carefully evaluated and structured to comply with applicable law. Nevertheless, it is important to know that a variety integration options exist for physicians who may wish to remain in private practice.
The article Pediatricians v Retail Clinics: Is It Time to Think Beyond the Office Visit? published today at time.com, highlights an important shift occurring in the delivery of physician services. Patients are foregoing their regular physician office visits in favor of “as-needed” treatment from retail clinics, urgent care centers and walk-in clinics springing up around the Country. These outlets may certainly offer a convenient and sometimes cost-effective alternative to traditional appointment based medical office visits. However, continuity of care may be jeopardized where a retail clinic provider does not have access to a patient’s medical history. Even a written medical record may not give a provider as clear of an understanding of a patient’s history as a patient’s regular treating physician may have after years of monitoring and treating that patient.
With so much focus on the cost and efficiency of healthcare, it is no wonder that physician services are becoming commoditized. Where cost and convenience are a patient’s primary focus, popping in to the local big-box store makes sense. Of course, many retail and walk-in clinics and urgent care centers offer excellent healthcare services. However, the value of an on-going physician/patient relationship should not be overlooked.
Here are some steps physicians can take to enhance the value of the physician/patient relationship:
- Spend a few extra minutes with your patients to be sure that their questions are answered. The last thing a physician should ask the patient: “Do you have any other questions or concerns I can help you with?”.
- Create a mechanism for patients to get their questions answered when they are not in the office. Patients may have questions and concerns before or after their office visits. Giving patients access to you through email (subject to HIPAA), during scheduled telephone time, or by cell phone is a great way to maintain a close professional relationship with them.
- Be prepared to discuss alternative treatments and treatment trends. In the age of the internet, you have to expect that patients will research their sypmtoms, diagnoses and treatment options. Consider doing some general internet research on the common problems you see in your office (e.g., common cold treatments, headaches, arthritis) so you have an idea what your patients may be reading and can anticipate some of their questions.
- More and more patients are interested in holistic and alternative treatments. Whether you believe in the benefits of dietary supplements, for example, your patients may elect to use them; so, you should have a basic understanding of the risks and benefits of common supplements (e.g., Chondroitin for joint pain) and be prepared to counsel your patients on the use of them.
- Finally, have helpful literature on hand in the office on various common conditions that you can give patients during their visits. Let’s face it, not all of the medical information a patient finds onlne is going to be safe or necessarily effective. Handpicking articles enables you to select the literature that you believe sends a safe and effective message.