Physician Law : Pennsylvania Health Law Lawyer & Attorney : Fox Rothschild LLP : serving Philadelphia, Pittsburgh, Allentown, Erie, Upper Darby Twp

Adding an interesting wrinkle to an already complex environment, the Federal Trade Commission filed a suit this month to block an Idaho hospital from acquiring a physician practice.  According to an article on thomsonreuters.com, the FTC and the IDAHO Attorney General have filed an antitrust complaint  seeking to block St. Luke's Health System's acquisition of Saltzer Medical Group, a large multi-specialty practice.  The FTC's alleges that the acquisition would result in St. Luke's having a 60% share  of the local primary care market.  This most recent foray into the physician/hospital acquisition arena suggests that a truly integrated delivery model may simply not be possible in some markets.

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This week the Office of Inspector General of the Department of Health and Human Services published Advisory Opinion 12-15 in which it blessed an on-call compensation arrangement between a hospital and specialist physicians on its staff.  In finding that it would not prosecute the arrangement, the OIG pointed to several "safeguards" which it felt would adequately protect against a violation of the anti-kickback statute.  Among others, these included the following protections:

1. Based on an independent valuation, the per diem payment amounts were stipulated to be commercially reasonable, within the range of fair market value for actual and necessary services provided without regard to referrals or other business generated between the parties;

2. The hospital allocates funds for call coverage for each participating specialty and calculates the per diem annually, in advance, without regard to the individual Participating Physician’s referrals to the hospital;

3. Participating Physicians provide actual and necessary services, for which they are not otherwise compensated, including that Participating Physicians must respond within 30 minutes to a request from the hospital’s emergency department and, in some cases, must provide follow-up care.

4. The hospital offers the opportunity to participate in the arrangement to all specialists on its staff who are required by its bylaws to take unrestricted call and the method of scheduling on-call coverage is governed by a uniform equitable policy that does not take referrals into account.
 

Although an OIG Advisory Opinion may only be relied upon by the parties requesting it, this Advisory Opinion may provide useful guidance to hospitals and physicians in ensuring that their on-call arrangements are compliant.

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The 7^th Circuit Court of Appeals recently issued a decision of interest to physicians and teaching hospitals. It concerns the method of rotating teaching physicians between multiple surgeries and billing Medicare for those services.  

The case involves so-called "qui tam" claims (essentially, a whistleblower case) against a teaching hospital, by which a successful claimant gets to keep a portion of the penalties recovered.  Basically, the Medicare program pays teaching hospitals for work by residents that is supervised by teaching physicians.  Here, however, a hospital was alleged to have made its teaching physicians simultaneously supervise multiple surgeries -- and then submit fee-for-service bills to the Medicare program for certain unsupervised work.  

After addressing legal issues concerning claimants' right to sue when the facts were generally in the public domain by way of government reports (those reports were not specific to this hospital), the suit was allowed to continue for now.  

Note to physicians: The Court emphasized that a teaching hospital does nothing wrong if the teaching physicians are "immediately available" during all parts of the surgeries even if making a circuit between multiple operating theaters.  The breadth of that holding, and whether it would apply to other circumstances, is not clear.  Nevertheless, hospitals who bill Medicare for activities supervised by teaching physicians, and the physicians themselves, must pay special attention to these activities to stay within the law.

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There's an interesting piece in the Miami Herald today regarding hospitals once again acquiring physician practices. The article raises some good questions regarding the motivations underlying this growing (recurring) trend and suggests that it might be more about control than preparing for a "reformed" health care system. The article also questions whether hospitals will be any more successful this go-round in managing the acquired practices than they were in previous attempts.

I frequently represent both hospitals and physicians in practice acquisition transactions. In my experience, only a handful of hospitals and health systems have a true plan for how they will integrate the practices they are acquiring in a manner that will improve the delivery of healthcare. To be sure, how best to integrate providers to improve care is not an easy question to answer. I find, however, that the "smart" hospitals and health systems are willing to acknowledge that physicians should be involved in the development process and that they (the hospitals) do not necessarily have all the answers for how best to accomplish that goal.

If you are considering selling your practice to a hospital, or you are a hospital looking to integrate the physicians in a thoughtful way, consider whether it makes sense to begin the process with a dialogue about where each party envisions the relationship to be several years in the future. If you can reach consensus on where you want to end up, you can then structure a transaction which is specifically designed to get you there.
 

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