Physician Alignment


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Describing physician alignment through Accountable Care Organizations, Co-Management and Gainsharing

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Physician Alignment

  1. 1. Confluence: Health Reform or Not, Changes in Physician-Hospital Alignment Are Here by Steven A. Eisenberg, Susan Feigin Harris, Emily E. Williams and Susan Whittaker Hughes Whether one believes that elements of the and promoted demonstration projects that This article outlines the reimbursement trends health care industry required reform becomes pay based upon performance and the term driving the need to align, discusses the role irrelevant when events and environment “performance” translates directly into quality. of clinical integration in alignment strategies, catapult the industry towards major cultural For instance, the CMS/Premier Hospital Qual- and explores three innovative models for phy- change. When there is a confluence of events ity Incentive Demonstration, which provides sician-hospital alignment. There are nuances or circumstances, change is inevitable. The financial incentives to hospitals demonstrating to each model and each implicates traditional health care industry has experienced a conflu- high quality in certain areas of acute care, re- health care legal land mines (tax, fraud and ence of events which will arguably catapult the sulted in hospitals raising their quality indices abuse, reimbursement and antitrust). industry to shift in a way that focuses seriously by over 17% over four years in certain care on creating innovative structures capable of areas, resulting in bonus payments of almost I. Reimbursement Trends Driving withstanding the new pressures caused by the $30 million.2 Alignment confluence of circumstance. Without question, healthcare expenses are These alternatives are not sought solely in the growing, and with them, federal healthcare Webster’s dictionary defines “confluence” as public sector. In our own backyard, the Cleve- program expenditures. The Kaiser Fam- “a coming or flowing together, meeting, or land Clinic and Lowe’s Companies recently ily Foundation estimates that Medicare alone, gathering at one point.”1 What are the events announced an agreement where Lowe’s full- currently 3.6% of the United States Gross that have caused this change? The Medicare time employees and their covered dependents Domestic Product (GDP), will grow to 4.2% of program is still projected to go bankrupt, enrolled in the company’s self-funded medical GDP by 2018 and to 6.4% of GDP by 2030.5 especially without any legislation that would plan may elect to schedule qualifying heart At the current growth rate, the Medicare Part attempt to slow its growth. State budgets surgery procedures at the Cleveland Clinic A Hospital Insurance Trust Fund is projected continue to be strained or crippled by various in Cleveland, Ohio at an enhanced benefits to be insolvent by 2017.6 Simply put, without a state Medicaid programs, and states cannot coverage level.3 In the press release announc- reduction in costs or other reforms, Medicare pass legislation fast enough sufficient to draw ing the agreement, Bob Ihrie, Lowe’s senior may not survive another decade. down additional matching funds. Whether or vice president of employee rewards and ser- not one advocates for a public option, there vices, said “We believe that having the correct This reality is reflected in reimbursement is almost universal agreement that fee-for- diagnosis, combined with surgery by the un- trends over the past few years, particularly for service payment makes little sense in today’s disputed leaders in this field, will produce the physicians. Medicare physician reimbursement environment, because it promotes quantity, highest-quality outcomes for our employees. has increased a mere 0%, 0.5% and 1.1% for not quality, health care. Employers are starting By enabling access to top quality care, it is our calendar years 2007, 2008 and 2009, respect- to demand that the delivery of health care be hope that employees and their dependents will fully.7 As small as these increases were, each based on quality metrics, not simply cost, be- have an improved quality of life for many years was a result of last-minute legislative interven- cause they know that keeping their employees to come.”4 The focus was clearly on quality, tion, without which the statutorily-calculated (and their dependents) healthy will lead to less with higher quality and better outcomes both adjustments would have been approximately absenteeism and, in turn, higher productivity. lowering costs and getting employees back to -5%, -11%, and -5%, respectfully.8 Even graver work sooner. is the 2010 Medicare Physician Fee Schedule The past several years have produced studies (MPFS) Final Rule, which calls for a 21% cut 12 | Cleveland Metropolitan Bar Journal MarCh 2010
  2. 2. in physician reimbursement effective Febru- (FTC) with respect to clinical integration in an effort to offer a competitive advantage ary 28, 2010.9 While the national average for began taking shape in 1999.16 In their State- over other health plans.20 Pursuant to the Medicaid physician reimbursement has faired ments of Antitrust Enforcement Policy in proposed arrangement, TriState would create slightly better, with average yearly increases of Health Care (1996 Statements), the DOJ and clinical practice guidelines to improve clinical approximately 2.5% for calendar years 2003 FTC indicated that joint contracting plans for efficiency as well as a program to monitor the through 2008, only primary care provider non-financially integrated networks will pass physicians’ adherence to those guidelines.21 reimbursement grew at the rate of inflation.10 antitrust muster if: (1) the clinical integration Physicians would be required to refer their pa- Even with a slightly higher yearly increase, is likely to produce significant efficiencies that tients to other member physicians (though the average Medicaid fees across the United States benefit consumers; and (2) any price agree- patient still had the choice of which physician remain only 69% of Medicare fees for the same ments with payors are reasonably necessary to select) and to grade their peers.22 TriState services.11 to realize those efficiencies.17 Since the 1996 also proposed the implementation of a web- Statements, guidelines, reports and speeches based health information technology system Hospitals have faired slightly better than issued by the FTC have both reaffirmed the ac- that will help identify high-risk and high-cost physicians in recent years, but that is changing ceptance of clinical integration and attempted patients and facilitate the exchange of patients’ as well. For 2010, hospitals are facing a mere to sharpen the characteristics of a clinical treatment and medical management informa- 2.1% increase in OPPS payments and a nearly integration program. tion.23 zero, if not negative, adjustment in IPPS pay- ments.12 Looking forward, if healthcare reform The FTC has also approved several specific The FTC, in part guided by the 1996 State- legislation were to pass, it will likely result clinical integration scenarios, the most recent ments, determined that it would not challenge in sustained, stagnant reimbursement for being on behalf of Tri-State Health Partners in TriState’s proposal due to three principal hospitals. Both the House’s Affordable Health 2009.18 In its decisions, the FTC has found the reasons: Care for America Act of 2009 (H.R. 3962) and following characteristics to be persuasive hall- the Senate’s Patient Protection and Affordable marks of clinical integration: (1) systems and • The program had the potential to lower Care Act (H.R. 3590) call for reductions to the programs to improve quality and efficiency, healthcare costs and improve the quality Medicare market basket updates to inpatient including (a) clinical guidelines and practice of care for patients; hospital reimbursement, as well as cuts to standards, (b) a web-based clinical-informa- • TriState’s collective negotiation of con- Disproportionate Share Hospital payments.13 tion system, and (c) referral requirements tracts with payers, including the prices Without health care reform legislation, there and/or guidelines; (2) the network is selective paid for participating physician services, will be continued cuts, as outlined by President in choosing participants, by (a) utilizing a would be “subordinate and reason- Obama’s budget. As these trends demonstrate, participating provider contract and (b) limit- ably related” to the overall proposal to physicians and hospitals alike will be facing a ing participation to fully committed providers integrate healthcare for its members, do-more-with-less scenario for the foreseeable in a variety of specialties; (3) a significant prompting application of the rule of future, and one way to save cost is through the investment of capital by participants, both (a) reason; and efficiencies inherent in alignment. monetary capital and (b) human capital; (4) • There would not be an increase in the mechanisms for evaluating performance and market power of either TriState or the II. The Role of Clinical Integration in facilitating continuous progress, including (a) physician members as a group because Alignment Strategies the use of performance metrics, (b) identify- all concerned were still free to contract Despite the recent increase in physician ing benchmarks for comparison, (c) using the individually outside the proposed pro- employment by hospitals and health systems, system infrastructure to facilitate evaluation, gram.24 healthcare remains very fragmented, making and (d) having a follow-up action plan; (5) a it difficult to achieve gains from treatment pricing agreement that furthers the integration Accordingly, the FTC determined that it would efficiency, effectively manage care, avoid dupli- of the network; (6) non-exclusivity, unless it is not recommend the commencement of any cation, and focus on quality. To achieve many so small that an exclusive arrangement would legal enforcement action against TriState or its of the goals of health reform, entities that not be anticompetitive; and (7) steps are taken providers as long as the proposed plan was fol- are otherwise competitors must collaborate. to maintain the confidentiality of participating lowed and no anti-competitive activities, like The natural extension of this collaboration is providers’ pricing information so that partici- the exercise of market power, arose. jointly negotiating with commercial payors pants cannot enter into collateral agreements, and employers to manage the delivery of thus preventing “spillover effects” from affect- Although no bright line test exists, the FTC is healthcare. Ordinarily, this joint negotiation ing the market.19 clearly comfortable with clinical integration may be considered price-fixing, which is models, which will facilitate new models of generally a per se unlawful restraint on trade TriState Health Partners, Inc., a physician- alignment involving independent physicians, under the Sherman Act,14 unless the potential hospital organization located in Hagerstown, health systems and their employed physicians. pro-competitive efficiencies of the integrated MD, sought FTC approval for an arrangement The challenge for these parties is going the ex- network outweigh the anticompetitive effects aimed to: facilitate cooperation and collabora- tra yard, to ensure that the clinical integration of the price agreement. Any clinical integra- tion among its member physicians; create a is pure and not simply a facade for collabora- tion model must pass this test, called the “rule comprehensive program of care management tion among competitors.25 of reason.” by engaging everyone associated with TriState; and offer a previously unavailable integrated III. Three Innovative Models For Physician- The position taken by the Department of set of services desirable to self-insured em- Hospital Alignment Justice (DOJ) and Federal Trade Commission ployers who want to lower healthcare costs While the DOJ and FTC have become comfort- MarCh 2010 Cleveland Metropolitan Bar Journal | 13
  3. 3. able with clinical integration, both Congress the groups to perform catherizations at the A variety of alignment models are emerging and the Centers for Medicare and Medicaid hospital.31 In approving this program, the OIG to accommodate the integration of payment, Services (CMS) have advanced from comfort cited a number of safeguards designed in the quality and efficiency. One, which has been to active promotion of physician-hospital program to prevent underutilization and over- present for some time but whose importance alignment. A number of cost savings initia- utilization and ensuring patient safety.32 Such has increased, is clinical co-management. tives in today’s healthcare reform proposals safeguards included the following: Clinical co-management is a relationship are targeted at improving efficiency through between a hospital or health system and either alignment. Following are three such models. • The parties agreed to use independent a physician group or collection of physicians, The first two models, gainsharing and co-man- third party to administrate the program, that combines the clinical principles of pay- agement, have been used in limited form the including developing the cost savings for-performance and the market drivers of past several years, and its likely the confluence metrics and measuring cost savings dur- risk and reward. The hospital or health system of events will force their expansion. The final ing the program; is able to use physician expertise to develop model, the Accountable Care Organization, is • Preferred products would be chosen better care paths and better outcomes, and much more expansive in integration then gain- first based on safety, then on cost; physicians are able to become actively engaged sharing and co-management (although incor- • Quality would be continuously moni- in managing a service line and receive com- porating elements of each). There is significant tored, with a drop in quality indicators pensation for their time and goal achievement. focus on the creation of the Accountable Care resulting in termination of gainsharing Organization models and a great deal of inter- payments; There are a variety of legal structures, capital- est , as delivery models evolve. • Physician productivity would be ization models and committee models that can compared to historical data, preventing be used, and it is really dependent upon the A. Gainsharing overutilization; service line and the issues that co-management Gainsharing involves the payment of incen- • Cost savings would be measured on an model will address. However, in developing a tive bonuses typically to physicians or other initiative-specific basis, preventing cost- clinical co-management model, it is essential practitioners by hospitals, which payment shifting; that the health system and physicians first represents a share of the savings incurred • Aggregate payments to physicians focus on the outcomes and behaviors that directly as a result of collaborative efforts would be capped; and are desired, not the compensation that will between the hospital and the physician to • The program would be disclosed to all be paid. The parties need to develop measur- improve overall quality and efficiency.26 CMS affected patients.33 able and actionable goals and objectives for a views permissible “gainsharing” as methodolo- service line, along with a committee structure gies and arrangements between hospitals and Similar safeguards were present in the other wherein both the physicians and hospital are physicians designed to govern the utilization thirteen proposed gainsharing programs, and actively managing a service line. The reim- of inpatient hospital resources and physician the OIG advised each time that the program bursement determination will follow, with the work to improve the quality and efficiency of met muster under the CMP, AKS or Stark.34 physician entity being paid a base rate for the care provided to beneficiaries and to develop physician’s involvement. There will also likely improved operational and financial hospital In 2005, Congress and CMS took this permis- be an at-risk portion of compensation based performance with sharing of gains.27 Though sive view of gainsharing one step further. Pur- on overall qualitative performance in improv- such payments potentially implicate the suant to a mandate included in Section 5007 of ing the service line. federal Civil Money Penalties Act (CMP), the Deficit Reduction Act of 2005 (DRA), CMS the Anti-Kickback Statute (AKS) and the solicited up to six gainsharing demonstration The standard caveats related to fraud and Physician Self-Referral Statute (Stark), the projects, each consisting of one hospital.35 abuse and, if applicable, tax-exemption, apply Department of Health and Human Resources, The solicitation asked hospitals to propose to co-management models. However, the ar- Office of Inspector General (OIG) has issued gainsharing programs CMS could follow and rangement can be structured to comply with at least fourteen Advisory Opinions approving evaluate to determine if gainsharing “aligns safe harbors under both the Anti-Kickback gainsharing plans since 2001.28 incentives between hospitals and physicians Statute and Stark Law. Additionally, the Office in order to improve the quality and efficiency of the Inspector General, in Advisory Opinion These approved gainsharing plans largely of care,” while improving hospital operational 08-16, approved an arrangement whereby a focused on standardization of devices, medi- and financial performance.36 To date, two hospital sought to share a portion of a quality- cations and supplies used for particular proce- projects have been accepted into the program based incentive received by a hospital from an dures.29 For example, the most recent opinion – one at Beth Israel Medical Center in New insurer with a group of physicians. outlines a program, involving a hospital, an York and one at the Charleston Area Medical interventional radiology group and a vascular Center in West Virginia. While the demonstra- C. Accountable Care Organizations surgical group, designed to share the hospital’s tion project is set to expire on December 31, As healthcare reform continues to evolve, cost savings directly attributable to certain 2009, both H.R. 3962 and H.R. 3590 propose another innovative alignment model likely changes in the groups’ cardiac catherization to extend it through September 30, 2011. will emerge: Accountable Care Organizations procedures.30 Specifically, these changes in- Such commitment by Congress suggests that (ACO). Experts define groups of providers volved standardization of the types of cardiac gainsharing may prove to be an increasingly (such as combinations of hospitals, physicians, catherization devices and supplies (stents, bal- important cost-savings tool for physicians and and other health care providers) that are jointly loons, interventional guidewires and catheters, hospitals going forward. responsible, through shared penalties or bo- vascular closure devices, diagnostic devices, nuses, for the quality of the health care delivery pacemakers and defibrillators) employed by B. Co-Management for a specific population of beneficiaries, as an 14 | Cleveland Metropolitan Bar Journal MarCh 2010
  4. 4. accountable care organization. As referenced ogy systems. While ACOs could be integrated alignment to generate substantial cost savings. more specifically below, Medicare has been delivery systems, they can also take advantage Through models such as gainsharing, co-man- one of the proponents of this model and has of clinical integration and include independent agement and accountable care organizations, funded demonstration projects, the Medicare physicians. hospitals and physicians may collaborate to Physician Group Practice Demonstration provide safe, quality care more efficiently. to test the pay for performance incentives In its June, 2009 report to Congress, the associated with this model. Results from the Medicare Payment Advisory Commission Moreover, the failure of Congress to pass demonstration indicate that the model shows dedicated a chapter to the benefits of ACOs.41 comprehensive health reform legislation will promise for containing costs while simultane- Several prominent organizations, including not slow the need or the momentum that has ously increasing patient outcomes. the Dartmouth Institute for Health Policy and begun in the health care industry to move in a Clinical Practice and the Engelberg Center direction that more closely integrates care. The An ACO could include a hospital, physicians, for Health Care Reform at Brookings Institu- health care industry recognizes that payment both primary care physicians and specialists, tion, are instituting pilot programs to test reform and greater potential belt-tightening and possibly other medical professionals.37 the ACO concept.42 Additionally, a current require innovative thinking and realignment. Services provided by these physicians would proposal suggests that Medicare may tie both • be billed fee-for-service, but the participants in bonuses and penalties to and payments as a the ACO would coordinate their care and have result of an ACO meeting or failing to meet goals related to quality benchmarks.38 Examples the benchmarks.43 Congress is receptive to Steven A. Eisenberg is a partner at of such benchmarks may include low mortal- such a program because it would give Medi- Baker Hostetler in the Cleveland ity rates or reducing hospital readmissions.39 care substantial leverage over providers to office. He can be reached at seisen- Members of an ACO would share in any cost improve quality. If enacted, H.R. 3962 would savings or Medicare incentive payments made direct Medicare to issue incentive payments to as a result of meeting its benchmarks, as well as qualifying ACOs for meeting what it calls “per- Susan Feigin Harris is a partner any Medicare penalties imposed as a result of formance targets.”44 H.R. 3590 also includes an in the Baker Hostetler Healthcare failing to meet its benchmarks.40 ACO demonstration project, but it is targeted Practice Group in Houston. She to pediatric ACOs.45 Innovative health systems can be reached at sharris@baker- The ACO structure will differ depending and physician groups likely will start planning upon its goals and market and, to truly be now for ACOs. maximized, will likely require changes to Emily E. Williams is an associate fraud and abuse laws and potentially more IV. Conclusion at Baker Hostetler in the Cleveland concrete antitrust guidelines. However, it will As reimbursement trends and increasing costs office. She can be reached at eewil- involve a single entity that will be owned by require physicians and hospitals to do more healthcare providers. The single entity will en- with less, investigating alternative alignment ter into participation agreements with payors models may offer a solution to this demand. Susan Whittaker Hughes is an (including, potentially, governmental payors), Regulators, Congress and a growing number of associate at Baker Hostetler in and have comprehensive clinical and quality physicians and hospitals are looking to the effi- the Cleveland Office. She can be guidelines and robust information technol- ciencies inherent in greater hospital-physician reached at 1 Merriam-Websters Online Dictionary, available at: www. Care, DOJ and FTC (Aug. 1999), available at www. justice. 28 See OIG Adv. Op. 01-1 (2001); OIG Adv. Op. 05-02 (2005); gov/atr/public/guidelines/0000.htm. OIG Adv. Op. 05-03 (2005); OIG Adv. Op. 05-04 (2005); OIG 2 Premier website: 17 Id. Adv. Op. 05-05 (2005); OIG Adv. Op. 05-06 (2005); OIG Adv. tools-services/p4p/hqi/index.jsp 18 See, e.g. TriState Health Partners, Inc., FTC Advi- Op. 06-22 (2006); OIG Adv. Op. 07-21 (2007); OIG Adv. Op. 3 See Lowe’s Companies press release dated February 16, 2010. sory Op. (Apr. 13, 2009), available at 07-22 (2007); OIG Adv. Op. 08-09 (2008); OIG Adv. Op. 08- 4 Id. closings/staff/090413tristateaoletter.pdf; Greater Rochester 15 (2008); OIG Adv. Op. 08-16 (2008); OIG Adv. Op. 08-21 5 Medicare Spending and Financing Fact Sheet, Kaiser Family Independent Practice Association, Inc., FTC Advisory (2008); and OIG Adv. Op. 09-06 (2009). Foundation (May 2009), available at: Op. (Sept. 17, 2007), available at 29 Id. 6 Id. gripa.pdf; MedSouth, Inc., FTC Advisory Op. (June 18, 2007), 30 OIG Adv. Op. 09-06 (2009). 7 See, 2010 Medicare Physician Fee Schedule Final Rule, available at; 31 Id. available at: www.federalregister.gove/OFRUpload/OFR- MedSouth, Inc., FTC Advisory Op. (Feb. 19, 2002), available 32 See id. Data/2009-26502_PI.pdf; and Conversion Factor, CCH Med- at; Suburban Health 33 See id. Guide ¶ 3410 (2009). Organization, Inc. (Mar. 28, 2006), available at 34 Id. 8 See id. os/2006/03/SuburbanHealthOrganizationStaffAdvisoryOpin- 35 See supra note 22. 9 See id. ion03282006.pdf. 36 Id. 10 Karen E. Stockley, Aimee F. Williams & Stephen Zuckerman, 19 See id. 37 Jane Cys, Accountable Care Organizations: A New Idea for Trends in Medicaid Physician Fees, 2003-2008, Health Tracking 20 TriState Health Partners, Inc., FTC Advisory Op. Managing Medicare, American Medical News (Aug. 31, 2009). (April 28, 2009). (Apr. 13, 2009), available at 38 Id. 11 Id. staff/090413tristateaoletter.pdf. 39 James Arvantes, MedPac Considers Accountable Care Organi- 12 See, 2010 OPPS Final Rule, available at: www.federalregister. 21 Id. zations as Possible Path to Health Care Reform, AAFP News gov/OFRUpload/OFRData/2009_26499_PI; 74 Fed. Reg. 22 Id. Now (April 20, 2009). 43,754 (Aug. 27, 2009); and CCH Med-Guide No. 1559 (2009). 23 Id. 40 See supra notes 33, 35. 13 Affordable Health Care for America Act of 2009, H.R. 3962 §§ 24 Id. 41 See supra note 33. 1103; 1112 and 1131; and Patient Protection and Affordanble 25 Id. 42 Id. Care Act, H.R. 3590. 26 DRA 5007 Medicare Hospital Gainsharing Demonstration 43 See supra note 35. 14 15 U.S.C. §§ 1, et seq. Solicitation, CMS, available at 44 H.R. 3962 § 1301. 15 See, FTC v. Indiana Federation of Dentists, 476 U.S. 447 (1986). ectsEvalRpts/downloads/DRA5007_Solicitation.pdf. 45 See H.R. 3590 § 2706. 16 See, Statements of Antitrust Enforcement Policy in Health 27 Id. MarCh 2010 Cleveland Metropolitan Bar Journal | 15