Healthcare

We described in the previous installment in this series how recent case law and DOJ settlements provide clear evidence of the position of qui tam relators, prosecutors, and government experts that losses on hospital operation of physician practices are being targeted. Because evidence suggests that hospital losses on physician practices are common in many markets, the questions on everyone’s mind are whether health system losses on physician practices put the organization and key individuals at significant fraud and abuse compliance risk, to what degree can existing physician practice losses be justified through documentation, whether the health system has a functional Fair Market Value (FMV) and Commercial Reasonableness (CR) enterprise risk management process, and—the subject of this series--is a plan at the ready to begin mitigating practice losses?

Recent DOJ settlements provide clear evidence of the position of qui tam relators, prosecutors, and government experts that hospital losses on physician practices are clearly targeted. For example, in U.S. ex rel. Parikh v. Citizens [No. 6:10-cv-00064 (S.D. Tex.)], the court denied the defendant hospital’s motion to dismiss in part because of an inference between the plaintiff’s allegations of practice losses and improper remuneration to induce referrals.

In our earlier blogs on the MACRA Final Rule with Comment Period (Final Rule), we have been discussing a series of topics from the Final Rule, especially those with changes since the Proposed Rule earlier this year.

MACRA created the new Quality Payment Program (QPP), comprised of two avenues to reward delivery of high quality care: the Merit-based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (Advanced APMs). After the May 9, 2016 release of the Proposed Rule, the feedback on the imminence of the MIPS implementation was less than fully supportive. On September 8, CMS’ Acting Administrator, Andy Slavitt blogged about the agency’s new flexibility with respect to the implementation of MIPS, and the “Pick Your Pace” moniker made it to the Final Rule, published earlier this month. 

In our blog last week on the October 14, 2016 MACRA Final Rule with Comment Period (Final Rule), we began a series on topics of interest from the Final Rule, particularly those representing departures from the Proposed Rule, to summarize the decision in the Final Rule.

MACRA repealed the much maligned Sustainable Growth Rate (SGR) formula and replaced it with the Quality Payment Program, made up of two avenues to reward delivery of high quality patient care: the Merit-based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (Advanced APMs).

With the release on October 14, 2016 of the Final Rule with Comment Period (Final Rule) for the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), titled Merit-based Incentive Payment System (MIPS) and Alternative Payment Model (APM) Incentive under the Physician Fee Schedule, and Criteria for Physician-Focused Payment Models [CMS-5517-FC], the healthcare industry received some much-awaited clarity around the May 9 Proposed Rule.

In the previous installment of this two-part series, we considered how the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) is the game-changer in the transformation of physician payment from fee-for-service to value-based payment. We further contemplated the fact that about 19 in 20 MACRA-affected providers will fall under the Merit-Based Incentive Payment System (MIPS), which consolidates the current Physician Quality Reporting Program (PQRS), Value-Based Payment Modifier (VM), and Meaningful Use (MU) programs into a single Quality Payment Program (QPP). We also pondered critical actions to take today to prepare for MACRA, one of which is identifying preferred MIPS metrics.

Government and commercial insurers are transforming payment models from fee-for-service (FFS) to arrangements that include incentives for quality, outcomes, improved patient satisfaction, and reduced cost. In the FFS environment, hospitals, physicians, and other providers have been subjected to insignificant financial risk relative to the risk borne by payers; however, with time, transformed payment arrangements have encouraged, if not required, more providers to assume downside risk. Why? One reason is to hold providers accountable for the cost and quality of care. The table below by The Commonwealth Fund summarizes this need by showing where the United States ranks relative to other industrialized nations in health outcomes and risk factors:

One of our favorite sessions at the AHLA Annual Meeting is the Year-in-Review by Jack Schroeder and Elizabeth Carder-Thompson. It is a great way to get caught up on a year’s worth of activity in health law in 120 minutes. Out of the volumes of information Jack and Elizabeth read to summarize for conference attendees, we found 10 pieces of information that were particularly interesting for our practice in these days of constant and rapid change. We felt these would be worth sharing:

If anything has disrupted the business of healthcare delivery in recent years, the transformation of reimbursement from volume to value ranks highly. Whether and to what degree we accept this reality varies among providers and facility executives, but disruptive change is either coming or has arrived. Some markets may be less sophisticated than others, with some seemingly a few years to a decade behind, but if CMS has any input—which it does—market timing in value-based reimbursement will soon shrink dramatically.

After our second day at the AHLA Physicians and Hospitals Law Institute, some clear themes are beginning to come into focus around the volume-to-value transformation in physician compensation. Quality-based compensation is fraught with challenges—quantifying value as compared to physician productivity is foreign to many. Also, missteps in the implementation can wreck the entire process.

In nearly any value proposition, the appropriate reward depends on the level of risk assumed. In the transformation to quality-based pay, the same is true. Paying physicians for quality likewise considers the value of the services contributed and the risk borne by the provider; nobody has the silver bullet as of yet, but hospitals and physicians both need to begin the journey now.

While the market gradually moves toward value-based reimbursement, hospital payments to physicians have also been in transition from purely productivity-based pay to incentives based in part on quality, patient experience, and efficiency of care. This shift has taken place in employment, professional service agreements, alternate delivery models, and clinical co-management arrangements, among others. Also included in this list are administrative service positions, such as medical directorships.

On Nov. 2, President Obama signed the Bipartisan Budget Act of 2015 (H.R. 1314).  One of the more significant provisions, aside from the suspension of the national debt ceiling and aversion of a government shutdown, is the matter of site-neutral payments, the antithesis of the site-of-service differential. This legislation is not completely unexpected, as MedPAC has recommended for quite some time that payment differentials should be eliminated.