Integrating with CINs

Clinically Integrated Networks (CINs) are gaining traction in many areas of the country, but the concept of clinical integration isn’t new. The terminology pre-dates the ACA by over a decade, as the FTC coined the term in 1996 in its Statements of Antitrust Enforcement Policy in Health Care. Today’s CINs, however, have a different look and feel than one of their more common predecessors, the Physician-Hospital Organization (PHO). The PHO similarly attempted to integrate hospitals and physicians through hospital sponsorship and physician membership, but most PHOs never reached the levels of financial and clinical integration necessary to accept risk-based payer contracts. Today’s CINs, spurred on by ACA reforms and the gradual shift from fee-for-service payment models, are making strides in collaboratively increasing the quality of care while reducing costs.

CINs may still take the form of a PHO, but participation in new payment models serves as a catalyst for promoting collaboration and accountability to improve quality care outcomes for patients at lower costs. This level of integration is further supported by a strong IT infrastructure to allow better and timely data and measurement as compared to the 90’s. Other organizational alternatives include Independent Practice Associations (IPAs), a physician-owned organization that also dates back to the previous century, as well as hospital-controlled entities that permit physician integrated participation.

CINs bring significant potential upside, particularly in the pay-for-quality transformative movement. The benefit to patients through improved access to care and information about their health; higher quality care and wellness focus; reduction of clinical variation; and cost containment all contribute to better medical care. By lowering costs for payers, insurers can pass along enhanced rates to providers. While the preferred rates aren’t the primary reason for joining the CIN, they can serve to provide a valid incentive for providers to commit to the network. Additionally, the prospects of shared savings distributions provide further motivation to achieve the agreed-upon quality metrics. The downside is regulatory compliance risk. Can the CIN operate within the legal confines of the anti-trust, fraud and abuse, tax-exempt, privacy, security, and other applicable laws and regulations? These present significant hurdles in the formation and operation of the network, and experienced healthcare legal counsel should be consulted to help navigate these waters.

Membership dues and annual participation fees are also a constant source of debate. Rates vary, but the consensus is that high fees discourage participation. Especially when the original investor(s) or founder(s) invests substantial working capital or intellectual capital, financial participation by participants is not a simple matter of whether or not to charge fees, as this carries more than a few negatives when participating physicians have no “skin in the game.” As an example, a tax-exempt hospital with 100 percent of the investment in the startup and operating capital that makes shared savings distributions to participating providers should ensure that the return on capital, allocations, and distributions received are proportional to the contributions (cash, tangible assets, and services). Also essential for compliance with fraud and abuse rules is that the payments represent fair market value consideration for the assets or services furnished. Examples abound, including membership fees ranging from zero to $2,000, with many in the sub-$500 range, and annual dues ranging from zero to $1,000, with many in the $150 to $250 range. Assessing FMV involves a market analysis of fees based on services offered, along with a return on investment analysis based on anticipated results from CIN operations.

It’s less than certain at this point just how long CINs will remain a part of the clinical integration landscape. Given the fluid nature of the market and the drive to move reimbursement models away from volume-based payment, we will likely see various iterations of Accountable Care Organizations, CINs, and other alternative integrated structures over the coming years. However, until healthcare laws catch up to the value-based payment transformation promoted by Congress and CMS, we will still keep a watchful eye on fair market value as a compliance “must do.” This is one more good reason to keep the healthcare valuation expert and health lawyer on your speed dial.

For weekly insights into healthcare, please sign up here: