new regulatory flexibility: how should your compliance

Copyright © 2021 by SullivanCotter

New Regulatory Flexibility: How Should

Your Compliance Program Change?

Wednesday, October 13, 2021


Presenters

1

Patty Bohney

Principal,

Physician

Compensation

SullivanCotter

pattybohney@

sullivancotter.com

Ron Vance

Managing Principal,

Physician

Compensation

SullivanCotter

ronvance@

sullivancotter.com

Ralph DeJong

Partner

McDermott Will &

Emery LLP

rdejong@

mwe.com

Jennifer Skeels

Attorney

Hall, Render,

Killian, Heath &

Lyman, P.C.

jskeels@

hallrender.com

765.231.6252 470.481.6471 312.984.6918 317.977.1497


Webinar Instructions

2

• Today’s session will include approximately 1 hour and 45

minutes of presentation and additional time for questions

• How to submit questions:

– Use the control panel on the right side of

your screen

– Type your question at any time during the webinar and

click “SEND”

– If you’re on a mobile device, click on the question mark

icon and follow the same steps

– Panelists will answer as many questions as possible

during Q&A time

All attendees can access the slide deck via the Converve platform


Agenda

3

1 Market Update

Stark Law and AKS

Regulatory Update23

New Value-Based

Exceptions / Safe

Harbors & Application45 Compliance Program

Implications

Compensation

Implications 6 Answering Your

Questions


1. Market Update

4


Government’s Role in Changing Health Care Delivery

5

New initiatives represent CMS’ push to change health care delivery with a coordinated approach with the Office of the Inspector General (OIG) and Department of Justice (DOJ)

Stark Law and Anti-

Kickback Statute

• Signaling more flexibility in value-

based arrangements between

health systems and physicians –

including expanded options that

include financial risk.

• Permit expanded use of

“outcomes” performance metrics

to take into account financial savings

and enhanced clinical quality for a

defined population of patients.

• With respect to fair market value

(FMV) and commercial

reasonableness (CR), the new

definitions are less formulaic and

more situation-specific. Value-

based arrangement payments may

not require FMV testing, but

aggregate payments may

require both FMV and CR.

“Patients Over Paperwork”

Burden Reduction

• Reduce unnecessary burden.

• Increase efficiencies.

• Improve the beneficiary experience.

Example:

Physician Fee Schedule Changes

• Impact on physician productivity

(wRVUs) and reimbursement.

• Significant changes to the wRVU

values for broadly utilized

E&M codes.

“Primary Care First”

Program

• Promotes patient access, both

inside and outside the office, and

rewards high quality to reduce

preventable hospitalizations through

population health payments.

• Model options emphasize flexibility

and accountability and drive

primary care compensation

designs that incorporate panel size.

• Models provide greater

compensation for

higher-risk patients.


Impact of COVID-19Long-Term Considerations

The pandemic is driving fundamental change and uncertainty with respect to

health care organization budgets, reimbursement, internal processes and operations

Pandemic-driven change and organizational response may have

long-term impact and requires aligned administrative and physician leadership

Financial Sustainability

• Decreases in

volume/revenue

• Increases in expense

Patient Access

• Constraints on in-person

patient consults due to

COVID-19 protocol

• Requires expanded

in-office hours

Population Health

• Flexibility to adapt to traditional and non-traditional

access to care

• Increased focus on care coordination

Continuing Priorities: Additional Pressures

Virtual Medicine

• Development/expansion of nontraditional

patient access

• Long-term uncertainty in virtual care

reimbursement

Optimizing Clinical Workforce Resources

• Physician/APP redeployment

• Expanding APP scope

Emerging as Top Priorities

6


Changing Care Delivery — Virtual Medicine

7

Source: https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/telehealth-a-quarter-trillion-dollar-post-covid-19-

reality#:~:text=13.,Survey%2C%20April%2027%2C%202020.&text=Beacon's%20claims%20data%20suggest%20that,processed%20at%20a%20later%20date.


Value-Based Performance Reimbursement

8

Metrics:

• QUEST outcomes

• Select HEDIS metrics

• Health status

• Mortality rates

Metrics:

• Patient satisfaction

• Patient Activation

Measure scores

Metrics:

• Total medical PMPM

• Total medical trend

• Total Rx PMPM

• Admissions/1000

• Readmission rate

Experience

of Care

Per Capita

Costs

The best care, for the whole population, at the lowest cost

Population

Health

With a focus on Triple Aim goals (As well as a fourth aim: employee experience)


Evolving Payer Risk Continuum

9

Tiered

Networks Full RiskACOsValue-Based

Incentives

+Pay-for-

Performance

Fee-for-

ServiceBundled

Payments

Lower

Financial RiskModerate

Financial Risk

Higher

Financial Risk

Health systems and affiliated physician organizations must prepare to provide care

and seek to optimize reimbursement across an evolving continuum of payer risk

Continued Pressures from CMS for Provider Risk and Value-Based Performance


Prevalence and Growth of Medicare Advantage Plans

10

Source: https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2021-enrollment-update-and-key-trends/

https://www.kff.org/wp-content/uploads/2021/01/9314-03-Figure-1.png


Identifying the right number and mix of physicians and advanced practice

providers (APPs) is critical to advancing an organization’s mission

and supporting strategic priorities

HEALTH SYSTEMInpatient, outpatient and

ancillary services provided

across multiple delivery sites

The Imperative of Physician and APP Alignment

1 2 3 4 5 6 7 8 9 10 11

Telemedicine

and Non-

Medical Staff

Referring

Physicians

Traditional

Hospital

Independent

Medical Staff

Physician

Recruitment

and

Retention

Support

Medical

Directorship

Services

MSO

(Practice

Mgmt)

Joint

Managed

Care (with

limited

risk)

Specialty

Institute/

Service

Line Co-

Mgmt

Joint

Venture and

Shared

Equity

Clinical

Integration

and Payer

Contracting

Exclusive

Foundation

/PSA

Full Practice

Integration/

Employment

Supported by a wide range of system and physician/APP affiliation relationships

Sample continuum

11

Advancing Key Partnership Strategies

Health Care Delivery

Payment Systems

and Structures


Physician Fee Schedule Changes

E&M wRVU Value Changes2020 vs. 2021

1 This code is eliminated in 2021. 2 This is an add-on code for every 15 minutes of extended patient office visit time.3 The Consolidated Appropriations Act of 2021 has delayed the implementation of add-on code G2211 until at least

January 1, 2024. This deferral, along with an additional $3 billion investment to the Physician Fee Schedule has

significantly impacted the budget neutrality calculations. 4 2022 Medicare conversion factor as proposed.

HCPCS Code2020

wRVU Value

2021

wRVU Value

Percentage

Change in

wRVU Value

992011 0.48 N/A N/A

99202 0.93 0.93 0%

99203 1.42 1.60 13%

99204 2.43 2.60 7%

99205 3.17 3.50 10%

99211 0.18 0.18 0%

99212 0.48 0.70 46%

99213 0.97 1.30 34%

99214 1.50 1.92 28%

99215 2.11 2.80 33%

G22122 N/A 0.61 N/A

CMS Conversion

Factor Change3

2020

$36.092021

$34.89

(3.3%)

Significant

increases in

OB and ESRD

ambulatory visit

wRVU values are

also included in

2021

CMS Conversion

Factor Change4

2021

$34.89

2022P

$33.58

12


Additional Regulatory Considerations for

Physician Compensation Planning

13

Insurance Laws

Anti-Trust

Laws

Civil

Monetary

Penalties

Stark LawAnti-Kickback

Statute

With the exception of the new value-based framework, the enforcement climate is

increasingly focused on fair market value (FMV) and commercial reasonableness

Stark Law

Anti-Kickback Statute

Civil Monetary Penalties

False Claims Act

Intermediate Sanctions

Office of the

Inspector General

(OIG)

Department of

Justice

(DOJ)

Internal Revenue

Service

(IRS)

Physician Compensation

• Structured to satisfy

exceptions and

safe harbors

• Must be at FMV

• Cannot take into

consideration value or

volume of Medicare

referrals

• Must be commercially

reasonable


2. Stark Law and Anti-Kickback Statute

(AKS) Regulatory Update

14


Summary of Fines and Penalties

15

Anti-Kickback

Civil monetary

penalties up to

$100,000 per

violation

Assessment up to

3x the kickback

Criminal fines

Imprisonment

Stark

Civil monetary

penalties of $15,000

per claim

Treble damages for

prohibited referrals

False Claims Act

3x damages of

overpayment

$11,181 to $22,363

per claim penalty

IRS

Intermediate

sanctions

Excise taxes and

disgorgement

Reputational Risk Burden on Resources High Settlements

Fines and Penalties


Overview of Changes

16

• October 9, 2019 - CMS and the OIG published

proposed changes to Stark Law, Anti-Kickback

and Civil Monetary Penalties

• CMS introduced “Regulatory Sprint to

Coordinated Care” with the goal of reducing

regulatory burden and incentivizing

value-based care

• December 2, 2020 - CMS and the OIG published

Final Rules including historic revisions to the Stark

Law, Anti-Kickback and Civil Monetary Penalties

• Effective January 19, 2021 - New definitions for

FMV/CR and new value-based exceptions

became effective and provide new potential

arrangement opportunities


Overview of Changes

17

• Modifications to existing Stark Law terms and

exception requirements

• Effective January 19, 2021 - Other new

Stark exceptions

• Effective January 1, 2022 - Stark group practice

exception changes to special rules for profit sharing

and bonus payments

• Expanded AKS Safe Harbor for personal service

arrangements and limits to what qualifies under the

safe harbor


Physician Self-Referral Law The Big Three

18

The final rule indicates that each of the “Big Three” continues to remain

relevant in assessing physician compensation arrangements

Fair Market

Value

Commercial

Reasonableness

Volume/Value

Standard


New rule attempts to clarify the definition of FMV:

• FMV is defined as: The value in an arm's-length transaction, consistent with the

general market value of the subject transaction.

• General market value is defined as: The compensation that would be paid at

the time the parties enter into the service arrangement as the result of bona fide

bargaining between well-informed parties that are not otherwise in a position to

generate business for each other.

Physician Self-Referral Law Fair Market Value

New Definition of Fair Market Value (FMV)

19


CMS summarized and responded to comment submissions:

• Published survey data continue to be relevant in assessing FMV

“Consulting salary schedules or other hypothetical data is an appropriate starting point in

the determination of fair market value, and in many cases, it may be all that is required.”

“Nothing in our commentary was intended to imply that an independent valuation is

required for all compensation arrangements.”

• CMS commentary appears to support SullivanCotter’s current approach of

assessing compensation using market survey data as well as an assessment of

relevant facts and circumstances.

“A hospital may find it necessary to pay a physician above what is in the salary schedule,

especially where there is a compelling need for the physician’s services.”


Relevant FMV Discussion Commentary

20


CMS summarized and responded to comment submissions:

• Circumstances (e.g., declining reimbursement and poor payer mix) may impact

what well-informed parties agree is FMV

“Salary schedules should not be used by a physician to demand compensation that is

above what well-informed parties…would agree is FMV.”

• P75 is not a bright-line in determining FMV

“We are uncertain why the commenters believe that it is CMS policy that compensation

set at or below the 75th percentile in a salary schedule is always appropriate, and that

compensation set above the 75th percentile is suspect, if not presumed inappropriate.

The commenters are incorrect that this is CMS policy.”


Relevant FMV Discussion Commentary

21


Final Rule FMV Impacts


• Market survey data continues to be relevant and “in many cases may be all that

is required”

• CMS does not consider P75 to be a bright line test in determining FMV

‒ Parties do not necessarily fail to satisfy FMV simply because compensation

exceeds a particular percentile

‒ Employers should not be held hostage by physician compensation demands

based solely on survey data

• Clients should be cautious about making FMV determinations on survey

data alone

‒ Online tools can provide benchmarking assessments but should not serve as

evidence of FMV

22


Physician Self-Referral LawCommercial Reasonableness

New Definition of Commercial Reasonableness (CR)

Commercially reasonable means that the particular arrangement furthers a legitimate

business purpose of the parties to the arrangement and is sensible, considering the

characteristics of the parties, including their size, type, scope and specialty. An

arrangement may be commercially reasonable even if it does not result in profit for one or

more of the parties.

• CR and FMV are not the same thing

• When assessing CR, one must put themselves in the shoes of the parties

directly involved

• Profitability is not a condition precedent to CR

The new rule includes a definition of CR :

Key considerations on the revised definition:

23


Physician Self-Referral Law Volume/Value Standard

No longer included in FMV definition, but still required:

• Requires that compensation is not determined in any manner that takes into

account the volume or value of a physician’s referrals

• No effective change from the previous prohibition

• Removed from the definition of FMV but still required to be met as a

separate standard

• Final rule examples make it clear that productivity plans do not constitute

compensation based on the volume/value of physician referrals

The new rule includes clarification of the volume/value standard:

Key considerations on the clarification:

24


Physician Self-Referral LawGroup Practice Exception

Special Rules for Profit Shares and Productivity Bonuses

25

• §411.352 - New requirements for distribution of Group Practice Profit

Shares and Productivity Bonuses

• Effective January 1, 2022 – Allowing groups time to revise compensation

plans and achieve compliance with Final Rules

Designated Health Services (DHS) Profit Sharing

• A physician in the group may be paid a share of overall profits that is not directly related to the volume or

value of the physician’s referrals

• Overall profits are defined as: Profits derived from all the designated health services of any component of

the group that consists of at least five physicians - overall profits must be divided in a reasonable and

verifiable manner

• Profits from all DHS for all physicians participating in the component of the group must be aggregated

prior to distribution

• Split-pooling of ancillary services revenue is now prohibited which may impact historical group

practice internal distribution plans and result in a need for compensation planning assistance

• A group practice physician can therefore not participate in more than one DHS distribution

methodology


Physician Self-Referral LawGroup Practice Exception

Special Rules for Profit Shares and Productivity Bonuses

26

• Contemplates and addresses the intersection of value-based activities

and compensation with group practice special rules

• Effective January 1, 2022 - Allowing groups time to revise

compensation plans and achieve compliance with Final Rules

Value-Based Enterprise Participation by Group Practice Physicians

• Profits from designated health services that are directly attributable to a group

practice physician’s participation in a value-based enterprise may be

distributed to the participating physician

• The value-based enterprise distribution is not subject to FMV


Modification to Safe Harbor

Anti-Kickback StatuteSafe Harbor PSA/Management Contract

27

Protects outcomes-based payments when certain requirements are met including:

• Collaboration between parties to:

‒ Measurably improve or maintain improvement in the quality of patient care, or

appropriately and materially reduce costs to, or growth in expenditures of, payors while

improving or maintaining quality of care for patients

• Payments are for outcomes measurement achievement or recoupment or reduced

payment for failure to achieve an outcome measure

• Outcomes-based payments must be conditioned on achieving one or more

legitimate outcome measures that are selected based on clinical evidence or

credible medical support measurably improving (or maintaining improvement in) the

quality of patient care and have benchmarks that are used to quantify:

‒ Improvements, or the maintenance of improvements in the quality of patient care

‒ A material reduction in costs to, or growth in, expenditures of payors while maintaining or

improving quality of care for patients or both




28

Other requirements in addition to those under PSA Exception of Stark Law

• Must include the outcome measures that the agent must satisfy to receive payment

• Must include clinical evidence or credible medical support relied on to select each

outcome measure and must include the schedule for monitoring and assessing the

outcome measures

• The parties must do the following for each outcome measure under the agreement:

‒ Regular monitoring and assessment of the agent’s performance, including the impact of

the outcomes-based payment arrangement on patient quality of care and periodic

assessment and revision of benchmarks and remuneration to ensure remuneration is

FMV in an arm’s length transaction.

• The principal must have policies and procedures to promptly address and correct identified material performance failures or material deficiencies in the quality of care resulting from the arrangement

• The methodology for determining the aggregate compensation must be FMV and CR and

not consider volume or value of referrals




29

The safe harbor does not protect payments:

• Related solely to internal cost savings for a principal

• Based solely on patient satisfaction convenience measures

• Made directly or indirectly by: a pharmaceutical manufacturer, distributor or wholesaler;

pharmacy benefit manager; laboratory company; compounding pharmacy; manufacturer of a

device or medical supply; other medical device distributor or wholesalers; an entity or

individual that sells or rents DMEPOS covered by federal health care programs


Scenarios, Case Study and Refinements to FMV Testing

3. Compensation Implications

30


FMV Testing Methods and Emerging Implications

31

Level 1

Level 2

Level 3

• Percentile ranking

• Compensation-per-production ratio

• Compensation-per-FTE considerations

Testing Description

• Additional analysis on any physicians falling

outside initial testing parameters

• Review individual components of compensation

• Identify remaining outlier physicians

• Expanded assessment of quantitative and

qualitative performance and circumstances

• Documentation of business judgment factors to

support upper-end compensation

The new Stark regulations support continued facts and circumstances considerations


Evidence of achievement of stretch goals for quality, service and efficiency may reduce

the reliance upon personal productivity, but the market and data is still in transition

FMV Compensation and Testing Considerations

32

The scrutiny on the market reasonableness of compensation, including aggregate compensation,

rates and correlation of work and performance to pay increases as compensation increases

Quantitative

Considerations

Qualitative

Considerations

Compensation Level

P75

P50

P90+

Wider

levels of

acceptable

correlation

Narrower

levels of

required

correlation

Highest

levels of

required

correlation

Attorney Client Privileged / Subject to Common Interest Agreement

Copyright © 2021 by SullivanCotter33

Key Takeaways

Compensation should/must

be structured to satisfy

various exceptions and

safe harbors

Compensation must not

exceed FMV

Compensation cannot take

into consideration volume or

value of Medicare referrals

Compensation above FMV

may be recharacterized

by outside entities as

payment for referrals

In addition to FMV,

compensation

arrangement(s) must be

commercially reasonable

Active enforcement

environment today

1

2

3

4

5

6


4. New Value-Based Exceptions / Safe

Harbors and Application


New Value-Based Framework Exceptions

Value-Based Arrangements

• Proposed rules intend to remove complexities that have inhibited movement to value-

based compensation arrangements

• Three similar but distinguished value-based categories were finalized:

Three Confirmed New Categories for Value-Based Exceptions

35

Stark Exceptions AKS Safe Harbors

1 Full Financial Risk Full Financial Risk

2Meaningful Downside

Financial Risk

Substantial Downside

Financial Risk

3 Value-Based Arrangement Care Coordination


Proposed New Value-Based Exceptions

36


Newly-Defined Key Terms

Proposed rules provide fairly similar definitions for

numerous terms related to the value-based

exceptions/safe harbors:

• Value-Based Activity

• Value-Based Arrangement

• Value-Based Enterprise

• Value-Based Purpose

• VBE Participant

(w/ more limitations under the AKS rules)

• Target Patient Population


Option 1

Value-Based ExceptionsOption 1


Full Financial Risk Full Financial Risk

• Requires full financial risk for all patient

care for at least 12 months

• Remuneration for achieving

value-based purposes

• Tied to health improvement of a defined

patient population

• May not reduce/limit medically

necessary services or be conditioned on

referrals of patient or business not

covered under the agreement

• Allows industry participants

(e.g., Pharma, DME, etc.)

• Other standard requirements

• Confirmed no separate

FMV requirement

• Similar requirements as Stark

• Under the value-based framework,

neither the Stark nor AKS regulations

require that remuneration be FMV, nor

do they prohibit taking into account the

volume or value of referrals of patients

within the target patient population or

business covered by the value-based

arrangement (traditional Stark and AKS

exceptions require that compensation

represent FMV and prohibit taking into

account volume or value of referrals)

37


Option 2



Meaningful Downside Financial RiskSubstantial Downside

Financial Risk

• Physicians must accept meaningful downside

financial risk for failure to achieve the VB

purpose during the entire term of the

agreement

• May not reduce/limit medically necessary

services or be conditioned on referrals of

patient or business not covered

• “Meaningful” risk is defined as the potential to

repay or forgo 10% or more of the total value

of the remuneration the physician would be

eligible to earn under this exception

• Same standard requirements

• Confirmed no separate FMV requirement

• Similar requirements as Stark

• However, the value-based enterprise

must also share in the substantial

downside risk

• Methodologies to meet risk

requirements include: (1) Shared

Savings and Losses [30%

threshold]; (2) Episodic Payment

[20% threshold]; (3) VBE Partial

Capitation

38


Option 3



Value-Based Arrangement Care Coordination

• Potential default option for initial entry

into VBE participation

• Does not require financial risk

• Requires higher documentation of

performance results based upon clinical

evidence or outcomes results

• May not reduce/limit medically

necessary services or be conditioned on

referrals of patient or business not

covered

• Quarterly monitoring requirements

• Same standard requirements

• Permits only in-kind remuneration

between a value-based enterprise and

other VB participants to encourage care

coordination

• The VBE participant receiving the in-

kind remuneration must contribute at

least 15 percent of either the cost or the

fair market value of the

in-kind remuneration

• Unlike Stark exception, AKS safe harbor

requires documentation that the

arrangement is CR

39


Proposed New Value-Based Exceptions

For Options 1-3:

• Value-based arrangement set forth in writing

• Signed by the parties

• Include key descriptions of:

‒ Value-based activities to be undertaken

‒ Links to value-based purposes

‒ Links to target population

‒ Nature or type of remuneration

‒ Methodology to determine earned remuneration

‒ Performance or quality standards

‒ Performance metrics that are objective and measurable

Shared Standard Requirements

40

Value-Based Exceptions


Potential Key Implications

• New opportunities to enhance alignment with physicians/groups participating in qualifying

value-based arrangements

• Potential substantial revision (and reduction) of prior FMV testing for qualifying exceptions

• However, likely enhanced focus upon newly clarified CR requirements

• Anticipated further physician/group pressures to expand participation in value-based

arrangements – particularly among employed physicians that have been capped or have

received relatively low value-based performance (VBP) compensation

• Increasing need for access to expertise to design, implement, monitor and report sustained

achievement of value-based purposes for new qualifying value-based arrangements

41

New Stark & AKS Regulations

– Value-Based Exceptions


Outstanding Questions

• What type of value-based purposes meet the proposed value-based

arrangements requirements?

• What types of documentation are requirement to support CR for

value-based arrangements?

• What levels of “outcomes” measurement results will meet the new risk

options requirements?

• For the full risk option, what types and levels of expense risk (e.g., medical costs,

overhead costs and/or other shared infrastructure/support costs) must be assumed?

• Are there implied caps on the level of value-based arrangements payments to physicians

under considerations of their role/participation to achieve value-based purposes or other

CR considerations?

42

New Stark & AKS Regulations

– Value-Based Exceptions


Scenarios/Case Study


43


Potential Application of Value-Based Arrangements

Across Affiliation Continuum

44

Likely Value-Based

Arrangement Compensation

Design Inclusion

1 Telemedicine and Non-Medical Staff Referring Physicians

2 Traditional Hospital Independent Medical Staff ✓

3 Physician Recruitment and Retention Support

4 Medical Directorship Services

5 MSO (Practice Mgmt)

6 Joint Managed Care (with limited risk) ✓

7 Specialty Institute / Service Line Co-Management ✓

8 Joint Venture and Shared Equity ✓

9 Clinical Integration and Payer Contracting ✓

10 Exclusive Foundation / PSA ✓

11 Full Practice Integration / Employment ✓


Discussion of Sample Compensation Scenarios

45

• Hospital pays employed physician $600,000 for all clinical services and physician is a

full-time provider of clinical services only

• Physician’s duties include general duties around quality, access, service, outcomes

and cost reduction, but there is no value-based arrangement in place and there are

no separate payments for these quality/value duties and responsibilities

• Hospital participates in shared savings programs and physician works to help

hospital achieve a shared savings payment from the relevant payor

• Hospital is willing to share its payment with physician in light of physician’s

participation in the shared savings program

‒ How formal does this have to be to qualify for a value-based exception?

‒ If physician gets a $60,000 payment, does hospital’s compensation consultant

review the FMV of the $600,000 without the shared savings payment, or the

aggregate $660,000?

‒ If the FMV review is of the $600,000 only, is the physician a 1.0 full-time

equivalent for purposes of that review?

‒ If this has to be a formal arrangement, has the allocation (to the VBA) of the

physician’s contributions in the areas of quality, access, service, outcomes, and

cost reduction actually made it more difficult to support the $600,000 as FMV

(assuming some level of facts and circumstances support was needed)?

Example: Shared Savings Payment



46

• Assume hospital pays employed physician $600,000 for all clinical

services and physician is a full-time provider of clinical services only

• Hospital wishes to formalize some of physician’s clinical duties

and goals (around quality, access, service, outcomes and cost reduction)

and convert them to a value-based arrangement

• Hospital will take $150,000 of the current compensation and use

that as the basis for the value-based arrangements payment and

will add 10% to that amount if the physician meets certain goals

‒ When the compensation consultant assesses the FMV of the

$450,000 in other clinical compensation, does the consultant still

treat the physician as a 1.0 full-time equivalent clinician or as

something less than a 1.0 FTE due to the VBA carve-out?

Example: Compensation Carve-Out for Partial Payment Risk



47

• Independent physician group practice (PGP) whose members make referrals to hospital

• PGP approaches hospital to discuss collaboration opportunities and requests that hospital

furnish a staff member (e.g., advanced practice registered nurse, nurse navigator, care

coordinator) to support the collaboration between the hospital and the PGP

• PGP and hospital agree to create a value-based enterprise whose activities will

be supported by the hospital-furnished staff member

• Neither the value-based enterprise, the hospital, nor the PGP will assume

any risk under the value-based arrangement

‒ Does furnishing a staff member constitute in-kind remuneration under the

Care Coordination Safe Harbor?

‒ May the hospital provide financial reimbursement to the PGP if the PGP

employs the staff member?

‒ Can the PGP’s provision of space, equipment, etc. used by the staff member be included in

the PGP’s 15% minimum contribution?

‒ Can the staff member provide services to patients not included within the value-based

enterprise’s target patient population?

‒ What functions may the staff member fulfill?

‒ What are the parties’ oversight obligations with respect to the staff member?

Example: Provision of Staff to Independent Physician Group Practice


Potential Key Implications

The new rules are signaling more flexibility in value-based

arrangements between health systems and physicians,

including expanded options that include financial risk. 1

2The new rules also permit expanded use of “outcomes”

performance metrics to take into account financial savings and

enhanced clinical quality for a defined population of patients.

3With respect to FMV and CR, the new definitions are less

formulaic and more situation-specific. Value-based

arrangements payments may not require FMV testing, but

aggregate payments may require both FMV and CR.

48


5. Compliance Program Implications

49


Compliance Program Implications

50

Compensation

Governance

PoliciesRequirements

for Exceptions

and Safe

Harbors

Facts and

Circumstances

Capture

Contract

Lifecycle

ManagementAnnual

Performance

Monitoring

Requirements for

Metric Selection

Education and

Training

Risk

Management

Tools and

Thresholds

Compliance

Program

Refresh



51

Expanded Stark Exceptions and related AKS Safe Harbors

offer new opportunities for achieving regulatory compliance

Requirements for Exceptions and Safe Harbors

Review and refine existing compensation governance

policies to provide a framework for achieving compliance

Evaluate existing processes to improve capture and

documentation of relevant facts and circumstances

including business purpose for the arrangement

Compensation Governance Policies

Risk Management Tools and Thresholds

Contract Request Process

Review and refine existing risk management FMV

guidelines used by your organization and

incorporate CR elements



52

No longer just good practice, annual performance

monitoring is requirement for meeting some exceptions

Education and Training

Annual Performance Monitoring

Contract Lifecycle Management

Additional requirements for contract management

A broader organizational understanding will help to

support the organization’s compliance program

Requirements for Metric Selection

Internal cost savings and metrics may not be sufficient for meeting

regulatory requirements for exceptions and safe harbors


Review and Approval GuidelinesExample

53

Examples of arrangements that must be approved by Board Level Committee are

typically documented in the Management Committee Charter

ActivityManagement

Committee

Board

Committee

Physician Compensation Philosophy and Design

Physician compensation philosophy, guidelines, timeline and approval process Recommend Approve

Significant changes to physician compensation plans/strategy/benefits plan* Recommend Approve

Physician Compensation Review

Physician clinical cash compensation offers or changes:

Below the 75th percentile Approve None

Between the 75th and 90th percentiles and supported by productivity Approve None

Between the 75th and 90th percentiles and not supported by productivity Recommend Approve

Exceeding the 90th percentile* Recommend Approve

Where total cash compensation exceeds $750,000 Recommend Approve

Highly compensated physicians (exceeding organization-defined threshold)* Recommend Approve

Independent contract arrangements exceeding 75th percentile of the market* Recommend Approve

Disqualified persons under Intermediate Sanctions and physician leadership roles Recommend Approve

Biennial FMV and commercial reasonableness review of all physicians Prepare/oversee report Approve

Physicians Compensated on an Approved Compensation Plan

To Be Developed

*A FMV opinion letter, completed by an independent third party, is recommended in these instances


Additional Value-Based Enterprise Considerations

54

Value-based enterprise (VBE) governance and monitoring considerations include:

• Regardless of whether VBE is a separate legal entity, it must be

organized pursuant to a written governing document that describes:

‒ The VBE’s value-based purposes

‒ How the VBE participants intend to achieve the VBE’s

value-based purposes

• The VBE must have identified accountable body or

accountable person

• The VBE’s monitoring activities must be tailored to

the level of risk assumed by the VBE


CR Assessment Considerations and DocumentationExample of Certain (but not exhaustive) Factors Typically Examined

55

What is the Business Purpose for this Arrangement?

1Community Need: Briefly summarize the community need met by this physician’s compensation

arrangement (physician workforce plan, other clinical need within provider’s community, number of

patients cared for by physician, demand for clinical specialty, etc.).

2Recruitment/Staffing Plans and Business Purpose: Briefly describe the recruitment/staffing

plans and/or documents describing the business purpose of this on-call proposed arrangement.

3 Licensure/Regulatory/Accreditation Obligation: Briefly describe the regulatory or licensure

obligation met by this arrangement (e.g., to maintain a certain trauma level designation).

4Call Panel: How many physicians and/or APPs will be on this call panel? Do all qualified physicians

within the specialty have an equal opportunity to participate in the panel? Confirmation call panel

physicians meet medical staff qualification criteria required to provide call services including but not

limited to privileges, credentialing etc.

5 Other Legitimate Business Purpose: Briefly describe any other legitimate business

purpose(s) this physician’s employment satisfies.


Contract Management and Documentation

56

• Additional focus on commercial reasonableness implies need to

capture facts and circumstances and to revisit at

contract renewal

• New metric selection criteria and requirements for

monitoring performance

• Requirement to maintain documentation of value-based

purpose and how the arrangement is meeting the

value-based purpose

• Requirement to maintain documentation of distribution

methodologies for value-based arrangements

Expanded Documentation and Storage Requirements


Top 10 Implications of Final Stark/AKS Rules

57

What does the final rule change?

Market surveys are still relevant for FMV assessments. here. 1

Full or “meaningful risk” value-based arrangements can be carved out for FMV purposes if they meet all requirements for Stark Exception and AKS Safe Harbors. For the third option, compensation must still be CR.

6There is no bright line rule for P75 compensation; facts and circumstances matter. 2

“Meaningful risk” definition has been softened to 10% downside risk or forgoing compensation to encourage participation.7

Benchmarking tools should not be used alone to determine FMV.3

The final rule puts more pressure on value-based arrangements to monitor performance and produce results in a short timeframe.8

CR is arguably just as important as FMV; assessment and documentation of CR.4

The final rule tightens the ability within group practices to distribute DHS profits within subgroups of physicians.9

Pay practices information and typical practices may add additional support for evaluation of compensation design CR.5

Restrictions on investments in infrastructure to enhance value-based collaboration are relaxed (cyber-security).10


6. Answering Your Questions

58

All participants have

access to a copy of the

slides via Converve.


Appendix

59


Overview of SullivanCotter Advisory Services

60


SullivanCotter Physician and APP Enterprise CapabilitiesLeading Change in Health Care

Innovative Technology,

Products and Solutions

Unparalleled Survey Data

and Resources Comprehensive

Advisory Services

• Dedicated practice of 60+ consultants

• Deep expertise and knowledge of

physician services and models of care

• Tailored physician and APP

compensation and benefits reward

program strategies that align with

systems goals

• Implementation guidance

• Data analytics with national intelligence:

– Benchmarks360™

– PPMT™

– Physician Needs Assessment

• National trends and benchmarking:

– Single source of truth

– Real-time insights

– Administration and contract

management

• Large Clinic® Group

• National APP Advisory Council

• Largest compensation and productivity

surveys with custom data analytics

• Broad research within the largest

integrated health care systems

Workforce and

Care Model

Optimization

Client

Networks

and Firm

Affiliations

Business

Valuation

and Due

Diligence

Governance

and

Regulatory

Expertise

Compensation

Strategy and

Design

Center for

Information,

Analytics and Insight

Technology

and Solutions

Center for

Information,

Analytics and

Insight

61

Copyright © 2021 by SullivanCotter62

Health systems are evolving based on their unique strategies,

which are influenced by the dynamic market environment

Physician WorkforceComprehensive Advisory Services and Technology Solutions

Physician Workforce

Advisory Services

Physician

Needs

Assessment

Business/

Practice

Valuations and

Transaction

Assistance

Physician/

Hospital

Model

Development

Professional

Services (incl.

FMV/CR)

Valuations

Value-Based

Care and

Population

Health

Readiness

Physician

Compensation

Strategy, Design

and

Implementation

Physician/

Hospital

Affiliation

Assessment

Clinical

Workforce

Optimization

Leadership

Structures and

Performance

Management

new regulatory flexibility: how should your compliance

Documents