August 2011

For the last couple of years I have been telling my physician and provider clients that they should expect to see a dramatic rise in healthcare health fraud investigations and prosecutions. According to a recent article published by USA Today citing statistics released by the Transactional Records Access Clearing House, my prediction (albeit a fairly easy one) is proving to be true. According to the USA Today article, federal healthcare prosecutions for 2011 are on track to increase 85% over 2010, and fraud prosecutions have gone up 71% from five years ago. In addition, according to Justice Department statistics, there have already been more Medicare fraud trial convictions in the first eight months of 2011 than there were in 2010.

The spike in fraud investigations and prosecutions should come as no surprise given that the Obama administration has placed heavy emphasis on fraud, waste and abuse recoupment as a means of funding new healthcare reform legislation. On top of this, healthcare enforcement authorities are using new and more advanced means (e.g., enhanced technology and cooperative task force operations) to identify fraud and abuse. And, frankly, there is still plenty of fraud, waste and abuse in the system. It is often said that desperate times lead to desperate measures and as the economics of healthcare delivery get tighter, I expect we will see healthcare providers more willing to enter into riskier arrangements than they might in better economic times. All of these factors of course spell a potential “perfect storm” from a healthcare compliance perspective, so physicians and providers should take careful stock of there compliance efforts, including regular documentation and billing audits and a regular review of contractual arrangements to ensure compliance with applicable federal and state fraud and abuse legislation.

The results of a comprehensive study published this week in the New England Journal of Medicine (NEJM) confirms that physicians’ fears of being sued for malpractice are not irrational. According to the article, “Malpractice Risk According to Physician Specialty”, most physician will be sued for malpractice at least once in their careers. Interestingly, however, only about 22% of malpractice cases annually result in a settlement or other payout.

Low-risk specialists including psychiatrists, pediatricians, family practitioners, and dermatologists have a 75% chance on average of being sued during their careers but high risk surgery specialists — thoracic cardiovascular surgery, neurosurgery, general surgery, orthopaedic, and plastic surgery – face a 99% chance of being sued. However, the study, which also looked at the average size of payouts, suggests that the likelihood of being sued is not necessarily related to the size of payouts. For example, the average payout in pediatric cases was $520,923 but was only $344,811 in neurosurgery cases.

The threat of a malpractice lawsuit (as opposed to Medicare/payor overpayment liability which I contend is much more likely and not an insured risk!) is a perennial bogeyman for most physicians. The NEJM article is a must read for any physician who wants to see what’s really hiding under the bed — you might find that it’s really not so scary.

These are uncertain times for physicians. Under the looming threat of major Medicare reimbursement cuts, rising administrative costs and an increasingly complex regulatory environment, many of the physicians I speak to feel paralyzed in their professional lives. They are afraid to make capital investments in equipment or technology or recruit new physicians to expand their practices for fear that the government or third party payors may pull the rug out from under them. Physicians are desperate to change their situation but unable to see a clear path forward.
If you share the above sentiments, consider that one of the best ways to overcome the anxiety associated with the present uncertainties in medicine is to develop a strategic plan for your practice. Developing a strategic plan requires that you take a hard look at where your medical practice is today and that you give real thought to where you want your practice to be in the future.

At a very basic level, a strategic plan should answer the following three questions:
1. Where are you now?
2. Where do you want to be?
3. How will you get there?

The more specific you can be in answering these questions, the more successful you are likely to be in developing and implementing your strategic plan. Moreover, a strategic plan need not necessarily be set in stone. Rather, you may find it necessary to modify your plan from time to time and, in fact, you should revisit the plan on a regular basis to see how you’re doing. A medical practice strategic plan should address at least the following key issues:

1. Geographic service area;
2. Scope of clinical services;
3. Physician staffing;
4. A managed care strategy; and
5. Strategic relationships and referral sources.

There are certainly many unknowns in the practice of medicine today. One thing we know for sure however is that successful businesses evolve and you cannot get anywhere standing still. If you have never done strategic planning in your practice, consider picking a weekend in the next six months to meet with your partners for this purpose. Meet somewhere away from your practice where you can devote a significant block of uninterrupted time solely to developing a strategic plan. There are plenty of resources available online to help guide you in your efforts and, if you are still not sure how best to proceed, consider engaging a professional who regularly deals with medical practice development to help lead your strategic planning session.

According to an announcement this week, the Centers for Medicare and Medicaid Services (CMS) has extended its 5-year Physician Group Practice (PGP) Payment Demonstration program by another two years.  The extension period commenced on January 1, 2011.

Under the Demonstration program, ten (10) physician group practices had the ability to earn incentive payments based on the quality of care they provided over an established minimum benchmark for each of the quality measures.  All ten groups will participate in the extension. 

The Demonstration participants were successful in the initial 5-year period at meeting most of the quality benchmarks and, according to the announcement, CMS paid $110 million in incentives to seven of the Demonstration participants and four of the groups are to receive incentive $29.4 million of total savings to Medicare of $36.2 million.

CMS has used and intends to continue to use data from the Demonstration project to further shape policy regarding shared savings and Accountable Care Organization (ACO) payment models currently under development.

I frequently have the opportunity to speak with young physicians finishing their residencies and fellowships. One of the questions that often comes up is whether an informal “handshake” deal is sufficient or if a formal written employment agreement is necessary in order to secure a job. Typically this question is prompted by a situation where a physician already in practice tells the young physician that they will have a job and that they need not worry about the contract. What this tells me is that many physicians are still under the mistaken impression that formal legal contracts are merely an unnecessary formality and this misunderstanding is being perpetuated by many “experienced” physicians.

Of course, if the parties to a verbal arrangement keep their word, no formal written contract would be needed. Unfortunately, however, what this somewhat naive line of thinking fails to recognize is that contracts are for when people don’t keep their word. Ideally, once a contract is signed, it can be put in a drawer and hopefully will not need to be looked at again. However, contracts are for the rainy day when everyone is not getting along and perhaps the practice isn’t making as much money as everyone thought it would. As is often said in business, plan for the worst but hope for the best and the same applies to contracts — whether they be for employment arrangements, joint ventures, medical directorships or the purchase or lease of real estate or equipment. Contracts should be drafted with the “worst case” scenario in mind so that if things don’t work out, the parties have a clear path to resolution even if that means dissolving the relationship.

Continue Reading The Bad Business of Handshake Contracts