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| | Dear Friend,
Who really threw whom out of the ASC?
Earlier this year, I read a news piece on a health system in Memphis called Methodist Le Bonheur Healthcare that had announced that it would be closing the joint venture ASC that it operates in concert with over one hundred physician partners.
The hospital system announced that it no longer made sense to perform outpatient surgery via a joint ventured ASC.
That leads to the question: it no longer made sense for whom?
Let’s try to unpack this. I have no inside track on this, but did it make sense for a hospital to run a joint venture? Well, what are its options?
One option is it doesn’t run a joint venture ASC, it runs an on-campus facility as a hospital outpatient department. If it runs a hospital outpatient department, it will receive higher fees, not only because the outpatient department is 100% hospital owned, but also because the fee for each procedure on the outpatient will be higher than that on ASC fee schedule. It will be paid for on the hospital outpatient fee schedule, at a significantly higher level.
However, the writing is already on the wall that HOPD fees will be cut down to the ASC level sooner or later. While it might provide some sort of short-term benefit to the hospital, it’s not a very efficient long-term strategy.
Was it the hospital’s decision at all? Or was it the decision of the physicians that they no longer needed a hospital partner to operate an ASC?
After all, what do hospitals add to joint ventures?
They add demands for control, that demands for control be based on their non-profit status, which isn’t true.
They generally add layers and layers of hospital administration, which is completely out of touch with running and efficient and efficacious ASC.
Other than putting some money into the deal which can easily be borrowed or raised from physician partners in the deal, there’s very little that a hospital can add, which leads to a few points.
1.) If you’re in a position like those joint venture physicians were of having a hospital partner, you have to question whether hospitals will see the writing on the wall and sooner or later pull out, either in an attempt to reap some remaining benefit from the HOPD fee schedule, or because they simply realize that they’re going to be cut by the physicians sooner or later.
2.) You must question whether you need not only a hospital partner at all, but any non-fee-based or any other equity-based developer of a surgery center. There are tremendous opportunities for physicians to completely own surgery centers whether these are solo facilities or whether these are facilities owned by many physicians. Whether they’re single- or multi-specialty, the analysis turns on the same factors each time and that is whether you have a sufficient number of cases with sufficient CPT codes that generate sufficient cash flow to make the operation a success. The place to start is asking questions and performing that initial analysis, and then you go from there.
Whether that means going from there is going forward and building or you at least know that’s not the right thing for you.
But not asking the question means you’re never going to know.
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| | Tuesday - Success in Motion Video: Fined for a Potential HIPAA Violation! Rebroadcast
Watch Tuesday's video here, or just keep reading below for a revised, more polished transcript: |
| I was reading an article this morning about another HIPAA settlement. This one is very interesting and very strange.
It’s a settlement by a hospital in Brighton, Massachusetts that paid over $200,000 to the Office of Civil Rights ("OCR") -- that’s the branch of Health and Human Services that enforces the HIPAA privacy and security rules.
What's very interesting is that the settlement wasn’t for an actual HIPAA breach, it was for a potential breach. Yep, no breach, but settled nonetheless.
Apparently, hospital employees were using a multitude – hundreds – of online applications to store or transmit patients’ protected healthcare information. OCR received a complaint that hospital employees were using an Internet-based document-sharing application “to store documents containing electronic protected health information (ePHI) of at least 498 individuals without having analyzed the risks associated with such a practice.”
I read something not so long ago, a report that indicated that in the average large hospital setting, there could be up to nine hundred different cloud-based sharing applications being used by hospital employees. I had no idea that there were that many cloud-based information sharing applications!
The point here is that no matter what you think about HIPAA compliance, it’s real and it’s here and it's being enforced . . . apparently enforced so strongly that even non-existent breaches are being investigated and are being settled.
While the obvious compliance steps, having a billing compliance plan, a HIPAA compliance plan, privacy rules, security rules, etc., in place are all required, it goes well beyond that. If those plans are just sitting on a shelf, they're close to worthless.
Compliance itself isn’t dry, it’s alive and active, and that’s what you’ve got to be thinking about. The penalties are substantial, as we see in this story of a settlement over a potential violation.
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| | Wednesday - Medical Group Minute Video: Anesthesia Company Model Arrangement Fuels $1.718 Million Dollar FCA Settlement by a Surgeon and a Separate Guilty Plea By Another Doctor Defendant
Watch the video here, or just keep reading below for a slightly polished transcript:
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| In a recent set of go-rounds with the Department of Justice, the so-called company model of anesthesia services took a major hit: One alleged co-conspirator, Jonathan Daitch, M.D., just agreed to a $1.718 million civil settlement and another, Michael Frey, M.D., plead guilty in a criminal prosecution. Frey appears to be a cooperating witness against other alleged co-conspirators.
A quick refresher: In its most direct form, the company model involves the formation, by surgeon-owners of an ASC, of an anesthesia services company to provide all of the anesthesia services for the center. But there’s nothing inherently “anesthesia” about the set-up; the same issues apply in other referrer-controlled structures, such as in the relationship between a dermatologist and controlled pathologists.
The model has long been regarded either as a blatant violation of the Federal Anti-Kickback Statute . . . or, by others (surgeons), as a perfectly proper way of doing business. That latter viewpoint appears to be crumbling under a million dollar plus settlement and the prospect of years in federal prison.
The combined facts of the settled civil case against Daitch and the guilty plea in the criminal case against Frey included allegations that the two surgeons received kickbacks via Anesthesia Partners of SWFL, LLC. (“Anesthesia Partners”), an anesthesia “company” owned by the two physicians.
The two surgeons were also co-owners of their professional practice, Advanced Pain Management Specialists, P.A. (“Advanced Pain”), which is located in Fort Myers, Florida. Anesthesia Partners was the exclusive provider of anesthesia services for Advanced Pain.
Anesthesia Partners contracted with CRNAs to provide the anesthesia services. These CRNAs were paid a contracted rate. Anesthesia Partners then billed Medicare and TriCare directly for the anesthesia services they provided. Daitch and Frey shared the profits.
The U.S. Attorney alleged in the settled allegations against Daitch that his ownership interest in Anesthesia Partners, and the remuneration he received through this ownership interest, induced him to refer his patients for anesthesia services to Anesthesia Partners. Dr. Frey plead guilty in his criminal prosecution to the same allegations.
These results are entirely consistent with the OIG’s position in Advisory Opinion 12-06. In that opinion, the OIG stated that there was no safe harbor available in respect of distributions that the surgeons would receive from their anesthesia company. Even if the safe harbor for payment to employees applied, or if the safe harbor for personal services contracts applied, those safe harbors would protect payments to the anesthesia providers. But, they would not apply to the company model profits that would be distributed to the surgeons, and such remuneration would be prohibited under the AKS if one purpose of the remuneration is to generate or reward referrals for anesthesia services.
The failure to qualify for a safe harbor does not automatically render an arrangement a violation of the AKS. As a result, Advisory Opinion 12-06 then turned to an analysis pursuant to the 2003 Special Advisory Bulletin on suspect joint ventures and found that the physician-owners of the proposed company model entity would be in almost the exact same position as the suspect joint venture described in the bulletin: that is, in a position to receive indirectly what they cannot legally receive directly—a share of the anesthesia fees in return for referrals.
The results in the Daitch and Frey cases are also entirely consistent with the OIG’s position in Advisory Opinion 13-15 (disclosure: I was counsel to the requestor of that opinion) centering on a proposed arrangement in which a psychiatry group performing ECT procedures at a hospital would capture the difference between the amount it collected for anesthesia to ECT patients and the per diem rate it would pay to the anesthesia provider.
The OIG found that the proposed arrangement would not qualify for protection under the AKS’s safe harbor for personal services and management contracts.
That safe harbor protects only payments made by a principal (here, the psychiatry group) to an agent (here, the anesthesia group); no safe harbor would protect the remuneration the anesthesia group would provide to the psychiatry group by way of the discount between the per diem rate their group would receive and the amount that the psychiatry group would actually collect.
Because, again, failure to comply with a safe harbor does not render an arrangement per se illegal, the OIG in 13-15 then analyzed whether, given the facts, the proposed arrangement would pose no more than a minimal risk under the anti-kickback statute.
The OIG flatly stated that “the proposed arrangement appears to be designed to permit the psychiatry group to do indirectly what it cannot do directly; that is, to receive compensation, in the form of a portion of the anesthesia group’s revenues, in return for the psychiatry group’s referrals of patients to the anesthesia group for anesthesia services.”
The OIG concluded that the proposed arrangement could potentially generate prohibited remuneration under the AKS and that the OIG could impose administrative sanctions in connection with the proposed arrangement. In other words, the OIG declined to approve the arrangement.
Advisory Opinions 12-09 and 13-15, and, now, the civil settlement by Dr. Daitch and the guilty plea entered by Dr. Frey in his criminal prosecution, demonstrate a fact lost to many when discussing “company model” deals: they generally do not fit into an available safe harbor — either the personal services and management contract safe harbor or the employee safe harbor.
Not only is this because payment is not set in advance and will vary with the value or volume of referrals, but even more fundamentally because those safe harbors apply only to payments from the principal to the agent, not to payments (in the form of the discount), which is remuneration, from the agent to the principal.
Physicians and CRNAs currently engaged in company model deals would be well advised to immediately obtain counsel to evaluate their relationships in light of these new developments.
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| | Thursday - Podcast: Why You Need To Adopt The Contingency Mindset |
| Listen to the podcast here, or just keep reading for the transcript
Have you considered the impact of contingency fee thinking on your business?
No, not contingency fees in the sense of a personal injury or a med mal lawyer. And no, not contingency fees in the sense of the type of contingent and blended fee deals that I do on transactions with clients from time to time. But about you working on a contingency fee basis . . . at least in terms of how you think.
How would you run your business if every patient or referral source or facility relationship paid off for you on a contingency basis only?
No fees per unit. No fees per visit. No monthly stipend support. No, well, anything, except for payment at the end, conditioned upon a successful outcome, whatever “success” means in the particular context.
If that were indeed the case, how would you organize things differently? How would you structure your practice, your facility, your group, your governance, your contracts?
This puts you in an incredibly different mindset, a very powerful mindset.
It seems simple. It seems like it is a game, but think about it, because the reality is that you are on that contingency basis. Referral sources could leave you and facilities can terminate your contract. Patients could walk for someone across the hall or across town.
So think about it: How would you reorder your business, your practice, and your relationships, if the only way that you got paid was based on a successful outcome?
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| | | | We all hear, and most of us say, that the pace of change in healthcare is quickening. That means that the pace of required decision-making is increasing, too. Unless, that is, you want to take the “default” route. That’s the one is which you let someone else make the decisions that impact you; you’re just along for the ride. Of course, playing a bit part in scripting your own future isn’t the smart route to stardom. But despite your own best intentions, perhaps it’s your medical group’s governance structure that’s holding you back
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| In fact, it’s very likely that the problem is systemic. The Medical Group Governance Matrix introduces a simple four-quadrant diagnostic tool to help you find out. It then shows you how to use that tool to build your better, more profitable future. Get your free copy here.
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| | | | | | Whenever you're ready, here are 4 ways I can help you and your business:
1. Download a copy of The Success Prescription. My book, The Success Prescription provides you with a framework for thinking about your success. Download a copy of The Success Prescription here.
2. Be a guest on “Wisdom. Applied. Podcast.” Although most of my podcasts involve me addressing an important point for your success, I’m always looking for guests who’d like to be interviewed about their personal and professional achievements and the lessons learned. Email me if you’re interested in participating.
3. Book me to speak to your group or organization. I’ve spoken at dozens of medical group, healthcare organization, university-sponsored, and private events on many topics such as The Impending Death of Hospitals, the strategic use of OIG Advisory Opinions, medical group governance, and succeeding at negotiations. For more information about a custom presentation for you, drop us a line.
4. If You’re Not Yet a Client, Engage Me to Represent You. If you’re interested in increasing your profit and managing your risk of loss, email me to connect directly. |
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