key issues in physician alignment and compensation 6 7-15

Polsinelli PC. In California, Polsinelli LLP

Key Issues in Physician Alignment and Compensation

Janice A. AndersonBruce A. Johnson

150539195

real challenges. real answers. sm

Learning Objectives

� Understand payment policy and its impact on compensation and alignment strategies

� Discuss the impact of the Medicare Access and CHIP Reauthorization Act of 2015, CMS future goals and recent enforcement actions

� Understand the need to develop new incentive compensation and alignment techniques

� Describe physician compensation and alignment best practices

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Health Care Reimbursement Trends

� Physicians– Stagnant/declining Medicare Part B reimbursement– CMS/private payer focus on improving quality and reducing costs– Pay for performance, value based purchasing, shared savings,

bundled payment and other arrangements– Medicare Value Based Payment Modifier and other adjustments

provide potential for +/- % Medicare physician service adjustment

� Hospitals and Other Healthcare Providers– Value based purchasing, pay for performance, bundled payment and

shared savings arrangements– Medicare Value Based Purchasing Program results in +/- 6% in

Medicare payments for hospital services based on performance (e.g., HAC, readmissions etc.)

– Overall: Quality as the theme; cost management as the goal3


Improve Care

• Bundled payments

• No pay for errors

Improve Value

• Pay for prevention

• Pay based on diagnosis

• Pay based on performance (high quality, low cost) (i.e., Medicare Value Based systems (+/-4%/6%)

Coordinate Care

• Medical home and other• Care

management fees

• Utilization-based performance incentives

• Condition-specific partial comprehensive care payments

Adapted from: Transitioning to Accountable Care: Incremental Payment Reform to Support Higher Quality, More Affordable Health Care. Harold D. Miller. Center for

Healthcare Quality & Payment Reform www.chqpr.org. © 2012 D. Walker Keegan, Medical Practice Dimensions – Used with Permission

Direction of Payment Reform

Straight Fee for Service is becoming extinct…

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The Future

� On January 26, 2015, CMS announced the future for new payment models to reward high quality, low cost care

� Divided payment models into 4 categories with goal to have 30% of Medicare payments in new payment/delivery models by 2016 and 50% by 2018 (CMS estimates that 20% of Medicare payments are in new payment/delivery models in 2014)

� Formed the Learning and Action Network, as a collaboration of HHS, payers, employers, providers, consumers, states, etc. to accelerate transition

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So, What Does All This Mean?

� Value Based Payment means that more of the reimbursement dollar will be earned for doing things other than rendering a health care service

� Focus needs to be on those competencies needed to score well under value-based programs

� Hospital utilization declining, but new business opportunities are arising

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The Medicare Access & CHIP Reauthorization Act of 2015

� Signed into law on April 16, 2015

� Repeals permanently SGR

� Positive updates (0.5%) until 2019

� Introduces Merit-based Incentive Payment System (MIPS) and provides an option for Alternative Payment Models

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MIPS

– Ends, and improves upon, PQRS, EHR/MU and VBM and replaces with a new P4P program

– 4 categories make up a new composite score

� Quality (30%)

� Resource Use (30%)

� Meaningful Use (25%)

� Clinical Practice Improvement (15%)

– Scores below performance thresholds leads to penalties of 4% (2019) – 9% (2022)

– Scores above leads to bonuses of 4% (2019) – 9% or higher(2022)

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� Alternative Payment Models

– 5% bonus from 2019-2025 for physicians to join new risk-based models and would be exempt from MIPS; also eligible for an increased update (0.75% vs. 0.25%) after 2025

� Release of claims data commencing 2015

� New support for gainsharing

– Incorporates “medically necessary” into CMP restriction, permitting hospitals to pay physicians to reduce medically unnecessary services

– HHS required to reestablish new safe harbors for gainsharing

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Future Depends on Development and Implementation of New Competencies

� As FFS erodes, Hospitals and Physicians will be paid for new and different activities

– Ability to work across the continuum differently– Implement Evidenced Based Protocols– Care Coordination– Managing the Total Cost of Care– Quality Control– HIT and use of data– Patient-Centered Care– Population Health and Wellness– Bundled Services– Patient Engagement

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New Payment Models AffectCompensation Structures

� Changing definition of “production”– wRVUs -- predominate measure of physician clinical “work”– Movement to population health, panels and similar measures– Performance on “non-production” measures beyond clinical

service (i.e., “value,” not volume)

� Fair Market Value is critical legal issue (total comp)

� Incorporation of incentives focused on hospital, department/service line, patient satisfaction, and/or clinic quality, cost and other measures

� Adherence to evidence-based protocols and removal of variation; clinical integration and alignment across providers/settings and the continuum of care

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Physician Compensation Legal Concerns

� Common Compliance Requirements –

– Compensation must be fair market value and commercially reasonable in relation to physician work

– Pay for personally performed services only; not linked to referrals

– Promote appropriate patient treatment and care

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Fair Market Value Standard

� Enforcement focuses on Definition of Fair Market Value

� Value in arms-length transactions, consistent with the general market value. Price well informed parties and bona fide bargaining, without regard to “anticipated or actual” referrals.

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Recent Enforcement Impacts Compensation

� Toumey -- Lucrative part time employment agreements designed to funnel procedures to the hospital

� Halifax -- Employment bonus arrangement with the pool including hospital services

� Citizens – Claims involving employment agreements where the compensation was alleged to be excessive, bonus arrangements allegedly encouraged referrals, etc.

� OIG issues Fraud Alert on June 9, 2015 warning against compensating physicians for referrals

Cases and guidance illustrate the government’s focus on the structure of physician compensation arrangements

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Key Take-Aways -- Fair Market Value

The Importance of Fair Market Value

� Fair Market Value is requirement in all key Stark exceptions, includingemployment; it prohibits compensation based on anticipated referrals

� How is FMV determined? Over 90th %ile on survey data may be enoughto find that arrangement exceeded FMV.

� Need to consider “gap” between production/compensation and whetherproductivity can lead to anticipated referrals

� Best Practice – if the aggregated total amount to be paid under aphysician contract exceeds the 90th %ile (or unacceptable gap ) basedon applicable survey data, a separate analysis should occur to determineif the arrangement nonetheless is FMV 17


Key Take-Aways – Evaluating Commercial Reasonableness

Evaluating Commercial Reasonableness

� Commercial Reasonableness is NOT the same as FMV

� Commercial Reasonableness is an additional requirement

� What does “Commercial Reasonableness” mean in the context ofphysician contract?

� How to evaluate Commercial Reasonableness

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Important to Include theRight Incentives

Quality, Efficiency and Other Incentives

– Quality – PQRS and other standards vs. home grown– Stewardship – Chart/billing completion, etc. vs.

reduction of hospital operating costs per case– Expenses management – Practice vs. hospital or other

expenses outside of provider control– Access to care -- Schedule vs. location-specific

payment differentials (e.g., clinic vs. hospital locations)– Required Referrals (contract term vs. incentive)– Risk-based measures (panel size, risk performance)

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BUT BE AWARE!!

Incentive Program Concerns

– Financial incentives to reduce or decrease patient care (now canpay to reduce “unnecessary care”)

– Hospital payments for physician referrals, “stinting” on care,“cherry-picking” or steering of patients

– Overutilization and elimination of patient choice

– Stacking


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Recommendations for Incentive Goals

� Quality targets are less problematic than efficiency targets (Use Specifications Manual)

� It now may be easier to pay based on efficiency targets due to new “medically necessary” carve out

� FMV applies to goal weighting and amount; consider and incorporate partial performance


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Physician Compensation Best Practices

Best Practices– Aligned with goals, payors, and payment systems –

today and future – Pay for work and “production” – with evolving definitions– Commercially reasonable activities– Market competitive to recruit and retain – Yet, FMV is crucial (total comp)– Consistent and equitable– Simple, understandable, able to be tracked and

administered– Adaptable to changing circumstances – Compliant


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Sample Physician PerformanceDashboard

PHYSICIAN DASHBOARD


Physician Alignment andNew Delivery Models: WHY?

� Current reimbursement and payment systems

– Incentivize volume

– Misaligned incentives resulting in fragmented care and adversarial relationships among providers (e.g., hospitals and physicians), providers and payers, etc.

� New Models

– Incentivize quality, efficiency and access

– Aligned incentives directed at increased “clinical integration”, coordination and team work

– End result: Breakdown traditional “silos” of care delivery

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What’s Different About Physician andHospital Alignment Today?

� Must allow for coordination of care across continuum

� Requires broad medical staff participation (both employed and independent)

� Different payor contracting (P4P/capitation)� Must drive quality and efficiency to maximize

reimbursement under health reform� Better aligned and engaged physicians � Eliminate waste and reduce costs� Patient-centeredness� Manage patient health, not just episodic patient

care25


Common Alignment Strategies

Traditional� Medical director

� Pay for call

� IT support

� Service bureaus MSOs

� Board service

� Advisory council

� Co-marketing

Functional� Joint ventures

IPAs/PHOs

� Pay for quality

� Gain share

� Co-management

� Joint venture

� MSOs

� PSA

� Foundations

� Employment

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� Clinically integrated networks

� ACOs

� Hospital efficiency agreements

� Patient Centered Medical Home

� Shared Savings

� Bundled payments

� MA and other at-risk initiatives

Strategic

Level of Alignment


Traditional and Functional Models

� Traditional models being replaced/eliminated with models directed at longer term objectives (e.g., performance-based pay for call)

� In many communities, those physicians who are willing to be employed, are employed

� Initial “honeymoon” period completed; relationship restructuring to promote alignment– Example: Migration of Cardiology to Professional Service

Agreement (rather than employment) models to promote shared accountability and other goals


Functional Relationship Models

� Quality and efficiency incentive compensation– Employment

– Professional Service Agreements

– Variations to address value-based compensation metrics

� Service Line Co-management– Expansion to new areas

– Orthopedics, Oncology, Urology and others

– Arrangement structures vary


Employment Illustration

Base Compensation

Production/RVUBased

Productivity Bonus Comp.

Value-Based

Base Compensation• wRVU based payment for services• Periodic payment “Draw” based on past or

expected total compensation

FMV limit on total compensation

Productivity Bonus Compensation• wRVU based payment in excess of “Draw”

Value-Based Compensation• Flat dollar amounts or additional $ per wRVU• Linked to performance on value-based metrics:

• CGCAHPS• Patient Satisfaction/Citizenship• Quality• External bonuses (e.g., ACO or CIN, MA

plan etc.)• Other


PSA Illustration

Hospital Owned Service Line and Practices

Physician Employer

Entity

Management Entity

PSA Service Arrangement

$ for services^

Co-management Services*

^ * Potential value-based incentive compensation

Common Objectives:• Staffing certainty • Compensation certainty• Alignment for value• Physician entity decision-

making re staffing and other variables within resources


Strategic Models

� ACO, PHO, “Clinical Integration” and other Network organizations

– Hospital Efficiency Agreements

– Bundled payments and similar initiatives

– Innovation center initiatives (e.g., CPCI)

– Commercial/self-insured payor arrangements (shared savings, care management etc.)

– Centralized Care Management and Coordination (housed in Clinically Integrated Networks)


What are Others Doing?Strategic Models

� Medicare Shared Savings Program as resource to stimulate clinical integration– Shared savings arrangement– Patients, information and data creating opportunity– Mandated “structure” (can help avoid some local

community politics)– Fraud and abuse waivers (and opportunities)– “Deemed” clinical integration for antitrust purposes

– Additional opportunities– New MSSP Final Rule – Track 1 extension and Track 3

model– Next Generation ACO model


Medicare ACOs

ACOs:• 404 MSSP• 19 Pioneer• 99% Track 1

(shared savings upside only)

7.92M Medicare FFS Beneficiaries

287 additional commercial ACOs (estimated) (not shown)^

Sources: CMS Fast Facts, April 2015; HealthAffairs blog, “ACO Results: What we know so far


ASC

CIN (Payer Contracting)

Special Purpose Arrangements

Hospital(Inpatient Services)

MD/Groups

Ancillary Service

Providers

Participation Agreements

Co-Management Agreement

Strategic/Special Purpose Models

Co-Management Agreement

Special Committee

CIN serves as convener/coordinator for multiple otherwise separate silos

$ Shared savings from payer for pre-defined bundle/ episode


Understanding Total Spend

Example: Hip Fracture Repair (2005)

Source: Miller, D.C., et al, Large Variations in Medicare Payments for Surgery Highlight Savings Potential from Bundled Payment Programs, Health Affairs, 30(11).


What are Others Doing?Strategic Models

� Managed Care Organization and other At-risk Networks– Medicare Advantage– Commercial at-risk arrangements


At Risk Model Funds Flow Illustration

Commercial Payer (Licensed Insurer)

Managed Care Organization/CIN(Less OH/Administration Fee)

PCP CapitationPart A & B Claims Paid by Payer

$ $

Cumulative Surplus (Part A & B)

PCP MCOPerformance-Based Gainshare and Administrative Costs

Other

$

$

$ $


MCO Compensation Variables

� FFS � Capitation (PMPM)

– Base– FFS carve outs

� Performance bonus– Patient Satisfaction– Encounters and access– Communication– Clinical Quality/P4P Star Rating– Other


Compliance Considerations -- Stark

� Stark Prepaid Plan and Risk Share Exceptions– Prepaid Plan -- Services furnished by an organization

(or its contractors or subcontractors) to enrollees, of specified prepaid health plans

– Risk-sharing arrangements � Arrangements including withholds, bonuses, and

risk pools) between a MCO or an IPA and a physician (directly or indirectly) for services to “health plan” enrollees

� Does not violate AKS, Federal or State law governing billing or claims submission


Compliance Considerations -- AKS

� AKS Safe Harbor (t) -- MA/ State Medicaid Plans:– “Any payment between:”

� Eligible MCO (i.e., MA and other government plans) and “First Tier Contractor” (e.g., JSA); First Tier Contractor and Downstream Contractor (e.g., physician group); or between two Downstream Contractors

� Signed written agreement specifying items/services covered

� Specific terms, including no FFS claims for services covered by agreement, 1 year term, consideration of dual-eligibles

� No “swapping” remuneration in exchange for FFS business

� No Fair Market Value (FMV) requirement (but limited to certain plans)


Compliance Considerations -- AKS

� Antikickback Statute Personal Services Safe Harbor (d)� Signed written agreement specifying items/services

covered� 1 year term with specific terms� Aggregate compensation set in advance, consistent

with FMV, does not take into account volume or value of any referrals or other business between the parties

� Services do not involve counseling/business arrangements or activities that violate Federal or State law

� Aggregate services are commercially reasonable

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Compliance Considerations – Physician Incentive Plans

� Physician Incentive Plans (PIP) requirements• PIP -- any compensation arrangement to pay physician

or group that may have the effect of reducing or limiting services furnished to any plan enrollee

• No specific payment as inducement to limit/reduce medically necessary services to any particular enrollee

• Stop-loss required if PIP places physician/group at “substantial financial risk”

• Allows “pooling of patients” (with commercial and other plans) under defined circumstances


Payment and CompensationFramework

Source Recipient and Type of Relationship/Payment

ACO/ PHO/ MCI/ IPA Intermediary

Hospital/HS Provider Org.

Medical Group PA, PC, PLLC

Provider MD/ DO/ Other

Public/ Private/ Commercial Payor

•FFS/Pay for Performance

•Patient Centered Medical Home

•Bundled Payment

•Shared Savings Arrangement

•Capitation or Other “at Risk” Arrangement

ACO/ PHO/ IPA Intermediary

•Shared Savings Arrangement (Proceeds)

•Capitation or Other “at Risk” Arrangement

Hospital/HS/ Provider Org.

•P4Quality

•Co-Mgmt

•Gain Share

•PSA

•Employment

•Ind. Contractor

Medical Group PA, PC, PLLC

•Ownership

•Employment

•Ind. Contractor


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New Delivery Model Goals

Hospitals and Physicians are implementing to:� Demonstrate improved outcomes, quality care

and patient satisfaction� Implement quality improvement initiatives� Enhance linkage and alignment with physicians� Improve performance on hospital pay-for-

performance measures� Position themselves at an advantage in the

market on the basis of quality/cost� Share in payor gains


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Progression to Accountable Care

“Clinical Integrated Network”•Provider network•The “team” for clinical integration

“Clinical Integration”•What the CIN does•Participants collaborate on care•Game plan and rules•Operational and legal concepts

Shared Savings, Bundled Payment and Other Programs•Payment method from funding source

“Accountable Care Organization”•Market and payor engagement•Clinical integration to achieve goals•Population health management•Shared savings and/or risk


Key Takeaways

• Changes are occurring rapidly and sitting on the sidelines is no longer an option

• Over time, hospitals and other providers will be shopped based on quality and price

• Payment reform causes health care providers to face significant reimbursement losses from “value-based” variables

• New business opportunities to expand outside of traditional areas i.e., hospital, physician group or other

• Collaboration to achieve quality and efficiency of care• Alignment of compensation structures to payer environment

to position for future financial success

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About the Presenters

Janice A. Anderson, Esq .161 North Clark Street

Suite 4200Chicago, Illinois 60601

[email protected]

You may also visit us on the Web at www.polsinelli.com

Janice Anderson is a Shareholder at Polsinelli PC and has 25 years� experience focusing on health regulatory and compliance issues as well as over 30 years� experience working in the health care industry.

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Bruce A. Johnson is a Shareholder at Polsinelli PC with 25 years� experience as a health care lawyer and management consultant focusing on health care organization, physician practice, compensation, clinical integration and compliance issues.

Bruce A. Johnson, Esq .1515 Wynkoop Street

Suite 600Denver, Colorado 80203

[email protected]


About Polsinelli

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key issues in physician alignment and compensation 6 7-15

Healthcare

real challenges

real answers

medicare payments

medicare value based

bundled payment

new payment models

payment policy

incremental payment