THE FUTURE OF HOSPITALS BUYING PHYSICIAN PRACTICES

Until last month, Medicare regulations reimbursed hospitals for doctor office services at a higher rate than non hospital physician offices. This so called “site-neutral payment” change may see the end of the rush for hospitals to purchase physician practices.

Hospitals have argued that since their costs are higher with a 24 hour, fully equipped campus they should receive a higher rate. Also, in some rural areas, the hospitals make it feasible for physicians to remain in local practice.

The new provision goes into effect in 2017 and only affects practices purchased after that date. There may be a short term rush to complete any pending practice purchases.

A STARK CHANGE

For many years, the Stark Law has affected the design of physician compensation agreements. Recently some interpretations and court determinations have led to commentators to believe that Stark needs to be revised to reflect the reality that Stark, as it has been presently interpreted, makes it extremely difficult to come up with creative and effective compensation arrangements that align patient, hospital, and physician interests.

CMS has now proposed certain Stark rule clarifications and relaxations. For example, CMS proposes a new Stark exception allowing payments from hospitals and clinics to physicians and physician groups to assist them in employing NPP’s. Note that this exception does not apply to CRNA’s. Also note that the financial assistance may only be the first two years of the NPP’s employment.

Other proposed Stark changes deal with some of the more technical arguments which have been made with regard to certain wording in the rules such as “takes into account,” “in writing,” and “renumeration.”

The question remains whether these changes will be adequate. While we certainly do not want physicians making their decisions base primarily or solely upon referral fees or referral payments, the reality of medical practice, both now and particularity in the future as ACO’s and other vertical medical practice concepts are investigated, is that there needs to be some alignment of hospitals and physician interests. Physicians who tend to send patients to their “own” hospitals are certainly more valuable to the system, all other things being equal, than physicians who routinely send patients outside of the hospital system. If Stark continues to prohibit the logical reward and/or compensation for system alignment, then we will be back to where we have been in the last decade or so with everyone thinking about alignment between physicians and hospital systems, but no one daring to say anything out loud because that could lead to a Stark violation.

A better approach would simply be to allow incentives to physicians who align themselves with their hospital systems but limit how much of their pay or compensation can be attributable to such alignment objectives and measures.

HEALTH SYSTEMS AS INSURERS

As we predicted previously, health systems are entering the insurance plan business. Provider-led plans are growing. Health insurance market places in 2014 had sixty-four provider-led plans and there should be seventy-two available in the in 2015 market place.

Some health plans are starting from scratch while others are partnering with existing insurers. The benefits to health plans are obvious, it drives patients to that system’s hospital and doctors. Done correctly, these plans can combine clinical and claims data to lead to more efficient and coordinated patient care.

SILLY QUI TAM

The latest silly qui tam action was filed by Dr. Troxler relating to a clinic operated by St. Francis Health System. Dr. Troxler claimed that the FCA was violated by allowing non-physician personnel to obtain and record patient’s health information. The essence of Dr. Troxler’s claim seem to be that he believed that the information could only be collected and the forms could only be filled out by physicians. The claim was dismissed. The court found that no false information was submitted to the government, and that the services were provided. The court found that nothing in the rules or regulations required any clinic to identify who collected the health information and recorded it in the EMR and billing systems.

This newsletter is edited by Paul Wallace of Jones ∙ Wallace, LLC, a member of the American Bar Association Healthcare Law Section and the American Health Lawyers Association who has been representing physicians and healthcare practices for over 25 years.  Mr. Wallace assists physicians, practices and hospitals in contract items, federal legal compliance, practice entity creation, estate and wealth planning and similar issues.  Please feel free to call if you have any questions on this newsletter or legal matters at (812) 402-1600 or pwallace@joneswallace.com.