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Compliance and Legal Risks in Laborist, Surgicalist, and Hospitalist Arrangements

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Compliance and Legal Risks in Laborist, Surgicalist, and Hospitalist Arrangements

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Have you structured your hospital-based physician contracts to address all aspects of compliance?

Hospitalist agreements involve unique compliance and financial issues, particularly when global payments and advanced practice providers are involved. Risks include indirect compensation, billing and other compliance issues. This presentation will discuss compliance risks and provide guidance on how to structure compliant contracts and business arrangements.

Have you structured your hospital-based physician contracts to address all aspects of compliance?

Hospitalist agreements involve unique compliance and financial issues, particularly when global payments and advanced practice providers are involved. Risks include indirect compensation, billing and other compliance issues. This presentation will discuss compliance risks and provide guidance on how to structure compliant contracts and business arrangements.

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Compliance and Legal Risks in Laborist, Surgicalist, and Hospitalist Arrangements

  1. 1. COMPLIANCE AND LEGAL RISKS IN LABORIST, SURGICALIST, AND HOSPITALIST ARRANGEMENTS December 12, 2019
  2. 2. Penny Stroud • CEO and Co-Founder, MD Ranger. • Founder and health care consultant with Cattaneo & Stroud, Inc. since 1978 – expertise includes business planning, market analysis, contract analysis and compliance programs, physician development plans and market strategies. • Trusted advisor to health systems, boards, and physician leaders as they position for the future and identify market opportunities. • Member of Medical Advisory Board of California Transplant Donor Network and Northern California Chapter of the Cystic Fibrosis Foundation. 2
  3. 3. Joe Aguilar • Partner, HMS Valuation Partners. • Over 25 years of extensive clinical and healthcare management experience. • Specializes in providing FMV opinions and complex compensation transactions to ensure Stark, Anti- Kickback, and/or IRS compliance for various clients including healthcare systems, hospitals, law firms and private equity firms. • Technical expertise and clinical insight, three master’s degrees and hands-on experience as a Board-Certified nurse practitioner specializing in women’s health. 3
  4. 4. Heather Deixler • Corporate Associate, Latham & Watkins LLP. Certified Information Privacy Professional (CIPP/US and CIPP/E). • Counsels public and private companies operating in the healthcare and life science industries on transactional and regulatory matters. • Advises hospitals, physician organizations on privacy, physician self-referral, and fraud and abuse. • Chair of the ABA Health Law Section eHealth, Privacy and Security Interest Group, and Vice-Chair of the AHLA Health Information and Technology Practice Group’s Educational Programs. 4
  5. 5. Today’s agenda • Introductions • Overview of hospitalist contracts • Legal and compliance issues • Structuring compliant contracts • Case Studies • Q&A Session 5
  6. 6. OVERVIEW 6
  7. 7. Background • Hospitalist programs have become increasingly common over the past ten years. In 2015 only 37% of MD Ranger hospitals reported a general hospitalist program compared to 63% in 2019. • Payments for hospital-based physician services are now the largest component of hospital payments for non-salary physician contracts, reaching an average of $4.4 million annually. • Specialty-specific hospitalist programs have become increasingly common, in response to industry standards, the increasing cost of call coverage and the growing division between inpatient and outpatient medical practices. Hospital Expenditures by Type of Physician Contract (Non- Salary) Percent of Hospitals Paying by Contract Type Source: MD Ranger 2019 Benchmark Report Source: MD Ranger 2019 Benchmark Report Call Coverage 37% Direction 9%Leadership/ Other 1% Hospital Based 53% 0% 20% 40% 60% General All Non-General Laborists Pediatric Psychiatry Orthopedic Any Type Stipend Direction Coverage 7
  8. 8. High payments for on-call panels can lead to hospitalist programs that address more than ED coverage • Call pay rates have increased 34% since 2009, with many hospital-based service rates among the highest • Total payments vary widely across specialties depending on factors such as: • Onsite hours • Scope of service • Size of program • Payer mix • Most hospitals wrap ED call into the hospitalist program and do not have a separate ED call panel. Emerging hospitalists specialties include neurology/neurosurgery and orthopedics, particularly at trauma centers and comprehensive stroke centers. $0 $500,000 $1,000,000 $1,500,000 $2,000,000 25 Median 75 90 2016 2017 2018 2019 Median 75th First Call $800 $1,200 2nd Call $500 $800 Total $1,300 $2,000 Annual $474,500 $730,000 Source: MD Ranger 2019 Benchmark Report Source: MD Ranger 2019 Benchmark Report OB Hospitalist Benchmarks: Total Annual Payments Excluding Medical Direction Per Diem OB First and Second Call Emergency Coverage Benchmarks 8
  9. 9. Multiple factors contribute to initiating hospitalists programs • Regulatory requirements • Coverage challenges • Accreditation standards • Clinical outcomes and protocols • For example: “An OB/GYN hospitalist program may afford office-based physicians greater autonomy over their personal lives by responding to obstetric emergencies and urgent needs as well as providing coverage for the physician’s laboring patients if they are unavailable, cannot get to the hospital, are in the middle of busy office hours, or have scheduled operative cases.” ACOG Committee Opinion #657, February 2016 https://www.acog.org/Clinical-Guidance-and-Publications/Committee-Opinions/Committee-on-Patient-Safety-and- Quality-Improvement/The-Obstetric-and-Gynecologic-Hospitalist 9
  10. 10. LEGAL AND COMPLIANCE ISSUES 10
  11. 11. Legal factors to consider • Undue Benefit to Community Physicians • Advanced Practice Providers (NPs, PAs, CMNs) used by community MDs • Scope of services provided by MD v APP • Who employs and bills • Fair market value and commercial reasonableness of all payments associated with the contract AND the service • Stipends • Salaries • Call Coverage • Medical Director Agreements • Testing, etc. 11
  12. 12. Fraud and abuse laws Stark Law • Prohibits referrals for the provision of “designated health services” from physicians to health care providers with which they have financial relationships unless an exception applies • Physician may not refer • Provider may not bill • Strict liability – no intent required • Penalties include fines + exclusion from participation in Federal health care programs Anti-Kickback Statute (AKS) • Prohibits remuneration in exchange for referrals or other business • Intent is required, but “One Purpose” test • Violation is a felony (potential civil and criminal fines, exclusion and/or imprisonment) False Claims Act (FCA) • Prohibits submission of false or fraudulent claims to the government • Liability attaches to those who present, or cause another to present • Government uses FCA to enforce violations of the AKS and Stark Law • Many actions are brought by individuals (i.e., whistleblowers) • Treble damages + mandatory minimum penalty provisions State Fraud and Abuse Laws • May be broader in scope; apply to government programs, commercial insurance and self-pay 12
  13. 13. Billing and collecting challenges • Global payments / Fee For Service • Commercial payors / billing guidelines • Medicare / Medicaid reimbursement models / payment initiatives: • E/M visit – split/shared with Hospital- employed APP? • Who bills for the service? Has physician performed enough of the E/M visit to earn the full payment? 13
  14. 14. Enforcement highlights: 2018 settlement with UPMC/Medicor • UPMC Hamot (Hamot), a hospital based in Erie, Pennsylvania and Medicor Associates Inc. (Medicor), a regional physician cardiology practice, paid the government $20,750,000 to settle a FCA lawsuit alleging that they knowingly submitted claims to the Medicare and Medicaid programs that violated Stark and AKS • Lawsuit alleged UPMC Hamot paid Medicor up to $2 million per year for nearly a decade under shod services arrangements created to secure patient referrals. In some cases the services were either unneeded, duplicative, or never performed. • Lawsuit filed by whistleblower Dr. Tullio Emanuele, who worked for Medicor from 2001 to 2005, under the qui tam provisions of the False Claims Act. • Dr. Emanuele was compensated $6 million under the settlement. Source: https://www.justice.gov/opa/pr/pennsylvania-hospital-and-cardiology-group-agree-pay-2075-million-settle-allegations 14
  15. 15. Enforcement highlights: 2019 settlement with Sutter Health/Sacramento Cardiovascular Surgeons Medical Group • On Nov. 15, 2019, DOJ announced that Sutter Health (Sutter) and Sacramento Cardiovascular Surgeons Medical Group (Sac Cardio) will pay a combined $46 million to resolve allegations arising from claims they submitted to Medicare • As part of the settlement, Sutter Memorial Center Sacramento (SMCS) will pay $30.5 million to settle allegations that they violated the Stark Law from 2012-14 by billing Medicare for services referred by Sac Cardio physicians whom SMCS compensated in excess of FMV, allegedly stacking Physician Assistants Agreement, Medical Director Agreements and Call Coverage Agreements • Sac Cardio will pay approx. $500,000 for allegedly submitting duplicative bills to Medicare for services performed by PAs that it was leasing to SMCS • Former compliance officer of Sutter Medical Center, Laurie Hanvey, filed lawsuit and will receive nearly $6 million under the settlement. Source: https://www.justice.gov/opa/pr/california-health-system-and-surgical-group-agree-settle-claims-arising-improper-compensation15
  16. 16. STRUCTURING COMPLIANT CONTRACTS 1616
  17. 17. Key considerations for all agreements What specific service is being performed by whom? • Involving multiple providers in the delivery of pre/post care under a Global Package Service Who is the service for under the agreement? • Coverage for Unassigned Patients vs Assigned Patients of Community Physicians and/or Employed Physicians Who is required to perform the service? • Use of appropriate benchmark data in the analysis (i.e. choice of specialty, compensation, productivity) • PA/NP use by service How are the parties compensated? Who bills for what? • Billing and Collection for Services Performed and/or Cooperative Payment Methods • Per Delivery Fees paid by Community Physicians • Laborist Participation Fees based on volume of deliveries Are all payments associated with the service commercially reasonable and at fair market value for the services provided? • Medical Directorship Compensation • GME Services • Payor of Last Resort Terms 17
  18. 18. CASE STUDIES 18
  19. 19. OB Laborist agreement: Case Study What is the specific service? • Laborist Program for Hospital that delivers approximately 1,800 births • OB delivery services and/or postpartum hospital care Who is the service for under the agreement? • 15% are unassigned patients (i.e. pre-term deliveries, trauma, etc.) • Patients of community and employed (non-laborist) physicians when they are unable to attend the delivery Who is performing the service? • Community OB/GYNs • Hospital Employed OB/GYNs (non-laborists) • Certified nurse midwives • Laborists through Professional Services Agreement How are the parties compensated? Who bills for what? • Global delivery package is billed by either community or employed non-laborist physician at time of delivery (exception is Medicaid, FQHC/RHC) • Who pays CNMs/APPs? 19
  20. 20. Services and value under the global obstetrical package Delivery Services are a part of the Global Obstetrical Package: • Prenatal Care, eelivery, and postpartum care • Each component of the global package contributes to the total reimbursement and wRVUs, but service is billed and paid once as a single payment • Providers may not unbundle the global delivery code when a recipient receives OB services from more than one provider in the same group and delivery is performed by a provider in the same group. In other words, both the community OB/GYNs and the hospital-employed non-laborist OB/GYNs are billing a global service for their commercial patients, regardless of who attends the actual delivery 20 20
  21. 21. Delivery services 40% of global obstetrical package Vaginal Delivery C-Section Delivery Description of Service WRVU1 Medicare Allowable1 WRVU1 Medicare Allowable1 Delivery Services Admit History & Physical Exam (99222) 2.61 $141.17 2.61 $141.17 Management of Uncomplicated Labor 3 4.10 $247.40 5.79 $348.97 Delivery 3 6.05 $364.39 6.12 $369.28 Delivery of Placenta (59414) 1.61 $95.89 1.61 $95.89 Total Delivery Services 14.37 $848.85 16.13 $955.30 Postpartum Care Inpatient Follow-Up (99232) 1.39 $75.18 2.15 $115.67 Discharge Visit (99238) 1.28 $75.54 1.28 $75.54 Post Discharge Follow-Up (99213) 0.97 $84.62 1.91 $169.84 Total Postpartum Care 3.64 $235.34 5.34 $361.05 Delivery and Postpartum Care 18.01 $1,084.18 21.47 $1,316.34 Prenatal Care Services 14.15 $1,087.21 14.17 $1,090.57 Global Delivery Package 32.16 $2,171.40 35.64 $2,406.91 40% of total 21
  22. 22. OB Laborist Service: Compliance risk shared by all Hospital Risk • FMV compliance risk of overpaying laborist group if compensation does not take into account cooperative payment methods (for community MD patients) or uses incorrect survey specialty to value compensation (laborists are generally paid less than private practice OBs) • FMV compliance risk of overpaying employed non-laborist physicians for services they did not perform • Billing compliance risk if hospital employs a CNM or NP to help provide obstetrical services • Compliance risk associated with providing undue benefit to community/employed physicians if they do not pay enough for deliveries performed by the laborist or hospital-employed CNM Community Physician Practice Risk • Compliance risk of submitting False Claims for services not performed by the billing entity • Compliance risk of receiving undue benefit from the hospital Employed Physician Risk • FMV compliance risk of being overcompensated associated with being paid on services that they did not perform for deliveries by laborists 22
  23. 23. OB Laborists: Two perspectives Hidden value of delivery services • FMV subsidy payment under a hospital-based Professional Services Agreement (PSA) and value to the community physicians Potential overpayment: paying for services not performed • FMV compensation of employed non-laborist physicians when deliveries are provided through a laborist service 23
  24. 24. The Hidden Value of Delivery Services Units Collections per Unit Laborist Collections = Services Performed Laborist Collections = Less Deliveries Gyn Cases 24 $1,000 $24,000 $24,000 L&D Visits 1500 $70 $105,000 $105,000 OB Delivery Only 360 $885 $318,600 $0 Total Revenues: $447,600 $129,000 Expenses: Physician Costs $1,200,000 $1,200,000 Professional Liability $60,000 $60,000 Operating Expenses $126,000 $126,000 Total Expenses: $1,386,000 $1,386,000 Implied Subsidy $938,400 $1,257,000 DELIVERY VALUE EMBEDDED IN SUBSIDY = $318,600 (FMV $885 per Delivery) (A ) LESS (B ) 24
  25. 25. Potential overpayment to employed hospital physician: Paying for services not performed MD Keeps Credit for Global Services, Including Delivery MD Keeps Credit for Global Services, Less Delivery # of wRVUs Performed by Employed Physician 5,000 5,000 # of wRVUs for Deliveries Performed by Laborist 2,000 0 Total wRVUs for Compensation Calculation 7,000 5,000 FMV wRVU Conversion Rate: $40 $40 Total Employed Physician Compensation $280,000 $200,000 POTENTIAL OVERPAYMENT ASSOCIATED WITH DELIVERIES NOT PERFORMED = $80,000 25
  26. 26. Surgicalist PSA using hospital employed NP/PAs: Case Study What is the specific service? • Trauma/Surgicalist program for hospital that pays a per diem rate • Emergent Acute Care General Surgery, Trauma ICU Coverage through discharge, follow-up Who is the service for under the agreement? • Patients needing emergent non-elective surgery and/or surgical evaluation Who is performing the service? • Three (3) physicians under one entity through a Professional Services Agreement • Hospital decided recently to employ a PA to assist the service with pre-operative care, interim care management, and discharge planning How are the parties compensated? Who bills for what? • Surgeries are billed by the contractor under the PSA • Many surgeries have a global period of a specified number of days pre and post surgery 26
  27. 27. PA services as an undue benefit PA VALUE EMBEDDED IN SUBSIDY = $240,000 (A ) LESS (B ) Surgicalist Service - PA Employed by Contractor Surgicalist Service - PA Employed by Hospital Total Revenues: $1,000,000 $1,000,000 Expenses: Physician Costs $1,200,000 $1,200,000 APP Costs - Employed by Hospital $240,000 - Professional Liability $60,000 $60,000 Operating Expenses $126,000 $126,000 Total Expenses: $1,626,000 $1,386,000 Implied Subsidy $626,000 $386,000 27
  28. 28. Identifying FMV compliance risks: Both sides of the equation Hospital risk • The value of the PA must be considered when determining the per diem FMV rate • Excluded in cases where hospital employs PA • Hospital receives FMV lease payment from Surgicalist group for PA services Surgicalist group risk • Compliance risk associated with the non- monetary compensation provided to the Surgicalist group through the PA services Advanced Practice Providers (e.g. NPs, PAs, Midwives, CRNAs) have a material impact on the transactional value of a service largely derived from their ability to bill for professional services and/or procedures 28
  29. 29. Identifying billing compliance risk: Both sides of the equation Hospital risk • Hospital may be in violation of the Stark Law by exceeding the non-monetary compensation limit of approximately $400 per year. Surgicalist group risk • Claims for services must be billed by the rendering provider. Potential concern arises from hospital- employed PA providing pre-operative or post- operative care within the global period. • Split or shared visits within the global period can only be shared amongst providers employed by the same entity 29
  30. 30. 5 takeaways to ensure compliance Define the specific services to be provided  Unassigned OB patients vs assigned OB patients  Understand global package and/or global period associated with services Define who is performing the service  Community providers  Contractor providers  Hospital employed non-laborist providers Define compensation terms for PSAs based on services performed:  Community practices should avoid billing compliance risks associated with services performed by providers outside of their group  Include cooperative payment methods with professional collections in determining the FMV subsidy  Set appropriate rates for delivery of private/employed physicians’ patients Define compensation terms for employed physicians based on services performed:  Pay for services performed  Adjust collections and/or wRVUs for services performed by other providers Understand the role any APPs  Who employs them?  What services do they provide?  Who bills for their services? 30
  31. 31. Q&A SESSION 31
  32. 32. Let’s talk ⁃ pstroud@mdranger.com or 650-692-8873 ⁃ joe.aguilar@hmsvalue.com or 678.984.6435 ⁃ heather.deixler@lw.com or 415-745-5757 32

Editor's Notes

  • Hello everyone! Thanks for joining us today for our webinar on Compliance and Legal Risks in Laborist, Surgicalist and Hospitalist Agreements.  I’m Penny Stroud.
    Before I make introductions, I want to go over a few housekeeping and logistical items before we begin.
    We are keeping our call to an hour today; 45 or so minutes will cover the presentation itself and then we will leave 10-15 minutes for a live Q&A session.
    If you have a question, my colleague Erik Bartlett is on the line and will be our moderator. At any time during our webinar, simply type your question into the GoToWebinar console.  Questions will be kept anonymous when shared with the panel. Don’t be shy! Please feel free to ask more than one question if you’d like.
    Lastly, we will be sharing copies of today’s presentation by email before the end of the week, and we are recording the session today so that you can share with your colleagues.  The recording will be shared on our website sometime early next week.
    (TURN TO NEXT SLIDE)
  • My name is Penny Stroud, and I’m the CEO and Co-Founder of MD Ranger. It’s very nice to meet you all virtually, and following the webinar, I’ll be sharing my contact information should you wish to connect at any time following the presentation today.
    (TURN TO NEXT SLIDE)
  •  I’m pleased to be joined by Joe Aguilar from HMS Valuation Partners. Joe has over 25 years of extensive clinical and healthcare management experience. 
    (TURN TO NEXT SLIDE) 
  • I’m also joined by Heather Deixler, a Corporate Associate at Latham & Watkins who advises hospitals and physician organizations on physician self referral, fraud, and abuse. 
    (TURN TO NEXT SLIDE -
  • Over the past ten years hospitalists programs have grown. Among MD Ranger subscribers, in 2019 63% of subscribers reported general hospitalists programs compared to only 37% in 2015.
    These types of services now comprise more than 50% of total physician expenditures, averaging $4.4 m annually
    We’re also seeing growth in specialty-specific hospitalist programs which often replace call panels
  • As call pay demands have grown, so have hospitalist programs.
    Payments vary widely across specialties as well as across programs.
    Today we’re going to focus largely on OB hospitalist program, which in 2019 had median annual payments of $1.1 million per hospital. The 75th percentile in payments was almost 40% higher at almost $1.4m
    The good news is that many hospitalist programs supercede emergency call panels, but the cost – and scope of service provided – is significantly higher than standard call panels.
  • Hospitalist programs are initiated for a number of reasons – regulatory requirements, accreditation standards, coverage challenges and quality initiatives. The American College of Obstetricians and Gynecologists even issued a report endorsing the value of OB hospitalist programs to address physician practice challenges as well as outcomes and response times.

    We’re now going to move to the legal and compliance issues that must be addressed with these programs with Heather Deixler, an attorney with Latham Watkins.
  • .
  • 1. Based on 2018 Medicare Physician Fee Schedule
    2. Services included in "Delivery Only" CPT Code include admission to hospital, admission history and physical exam, management of uncomplicated labor, cesarean section delivery (with or without episiotomy, with or without forceps) and delivery of placenta.
    3. Estimated based on the time involved for the service and the total value of the Delivery Only CPT Code (59514) less the values for Admit H&P and the Delivery of Placenta.
    4. Prenatal Services estimated based on the difference between the Global RVUs and the combined Delivery and Postpartum Care RVUs.
  • So, before we begin a quick disclaimer about our webinar and the nature of some of the regulations I’ll mention today.

    First of all, MD Ranger doesn’t give legal advice. We’re not a law firm; I’m not an attorney

    For all matters regarding overpayments, we highly recommend involving your attorney.

  • LET’S FIRST START WITH THE HIDDEN VALUE OF DELIVERY SERVICES.


    HERE IS A SUMMARY INCOME STATEMENT FOR A LABORIST PROGRAM.


    ONE COLUMN REPRESENTS REVENUES INCLUSIVE OF A COOPERATIVE PAYMENT METHOD AND THE OTHER DOES NOT.


    AS YOU CAN SEE, THE IMPLIED SUBSIDY IS DRAMATICALLY DIFFERENT BETWEEN THE TWO COLUMNS. ONE BEING 938,000 AND THE OTHER BEING IN EXCESS OF $1,250,000


    THE DIFFERENCE BETWEEN THE TWO IS THE EMBEDDED DELIVERY VALUE IN THE SUBSIDY OF OVER $300,000 PER YEAR. NOT A SMALL FIGURE AT APPROXIMATELY 33% OF THE FMV VALUE IN THIS CASE


    IT SHOULD BE NOTED THAT THE COOPERATIVE PAYMENT, WHETHER ON A PER DELIVERY FEE OR PARTICIPATION FEE BASIS NEEDS TO BE CONSISTENT WITH THE FAIR MARKET VALUE OF THE DELIVERY SERVICES
  • Now I’d like to turn over the mike to Penny for your questions.
  • We want to thank you for joining us today. Please give us a ring if you have further questions! We hope everyone has a healthy and happy holiday season and New Year!

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