Presenting a live 90-minute webinar with interactive Q&A Co-Management Arrangements in Healthcare: Compliance in Hospital-Physician Arrangements THURSDAY, DECEMBER 7, 2017 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Alexis Finkelberg Bortniker, Senior Counsel, Foley & Lardner , Boston Donald H. Romano, Of Counsel, Foley & Lardner , Washington, D.C. Scott M. Safriet, CVA, MBA, Partner, HealthCare Appraisers , Boca Raton, Fla. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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CO-MANAGEMENT ARRANGEMENTS IN HEALTHCARE: LATEST DEVELOPMENTS AND FMV CONSIDERATIONS COMPLYING WITH LEGAL AND REGULATORY REQUIREMENTS IN STRUCTURING HOSPITAL-PHYSICIAN ARRANGEMENTS
SPEAKERS Alexis Finkelberg Bortniker, Esq. Foley & Lardner LLP Boston, MA 617-226-3177 abortniker@foley.com Donald H. Romano, Esq. Foley & Lardner LLP Washington, DC 202-945-6119 dromano@foley.com Scott M. Safriet, CVA, MBA, Partner HealthCare Appraisers, Inc. Boca Raton, FL 561-330-3488 ssafriet@hcfmv.com 5
ROAD MAP TO THE PRESENTATION Definition and Description of a Co-Management Arrangement Discussion of Key Regulatory Concerns Review of FMV Considerations Commercial Reasonableness Considerations Questions & Answers Appendix Materials 6
SERVICE LINE CO-MANAGEMENT ARRANGEMENTS Independent contractor arrangement. The purpose of the arrangement is to recognize and appropriately reward participating medical groups/physicians for their efforts in developing, managing and improving quality and efficiency of a particular hospital service line. Scope of service – The arrangement may cover inpatient, outpatient, ancillary and/or multi-site services. 7
SERVICE LINE CO-MANAGEMENT ARRANGEMENTS Example: Potential Scope of Cardiology Service Line Open Heart Vascular Cath Lab Echocardiography Surgery Surgery Inpatient Invasive PVL PCU Cardiac Radiology & Vascular Cardiac Stress Lab ECG Rehabilitation 8
SERVICE LINE CO-MANAGEMENT ARRANGEMENTS DIRECT CONTRACT MODEL Designees Operating Committee Hospital Payors Designees $ Service Specialty Group I Line Specialty Group II Hospital-licensed • Multi-party contract services • Allocates effort Other Specialty and reward between groups Group (s) 9
SERVICE LINE CO-MANAGEMENT ARRANGEMENTS JOINT VENTURE MODEL Service Line Hospital Physicians/ Payors Groups Profit Profit Distribution Distribution Service $ Line JV Management • Capital Contributions • Management Infrastructure Company 10
COMPARATIVE STRUCTURAL CONSIDERATIONS Simplicity and expense Potential securities offering for JV Model Physician holding company? JV Model better reflective of relative roles/responsibilities of hospital/MDs? JV Model may carry less Stark Law risk Direct Contract Model more remunerative? Participating MDs performing disproportionate services/Compensation based on relative efforts in Direct Contract Model vs. invested capital in JV Model? Antitrust considerations (for bundled payments): JV Model more financially integrated? 11
SERVICE LINE CO-MANAGEMENT ARRANGEMENTS There are typically two levels of payment under the service line contract: Base fee – a fixed annual base fee that is consistent with the fair market value of the time and efforts participating physicians dedicate to the service line development, management, and oversight process Bonus fee – a series of pre-determined payment amounts contingent on achievement of specified, mutually agreed, objectively measurable, program development, quality improvement and efficiency goals that are consistent with national norms Must be fixed, fair market value arrangement; independent appraisal strongly advised 12
SAMPLE CO-MANAGEMENT SERVICES Development of Service Line Medical Director services Budget process Strategic/business planning process Community relations and education Patient, physician and staff satisfaction surveys Development of clinical protocols and performance standards 13
SAMPLE CO-MANAGEMENT SERVICES (CONT’D) Ongoing assessment of clinical environment and work flow processes Physician staffing Patient scheduling Staff scheduling and supervision Human resource management Call coverage Greater value based on service intensity: do, assist, or advise/consult 14
SAMPLE SURGICAL PERFORMANCE METRICS Upper Payment Current Performance Target Incentive Priority Allocation Limit (a) Performance Measurement Year 1 Year 2 Operational Efficiencies Incentive Compensation (OEIC) Supply Cost per Case 1 13.2% $ 120,000 $5,670 % of Budget 95.0% 95.0% Turn Around Time (c) 2 8.2% $ 75,000 2.56 # Hours </=1.00 </=1.00 Improvement On On-Time Starts (1st Case of Day) 2 8.2% $ 75,000 20% >/= 95% >/= 95% Target Room Utilization 1 13.2% $ 120,000 76% # Hours >/= 85% >/= 85% Quality of Service Incentive Compensation (QSIC) Infection Rate: Antibiotics Within 30 Minutes Prior to 1 13.2% $ 120,000 89% % Compliance >/=95% >/=98% Incision Infection Rate: Insulin Drip for Patients with Blood 2 8.2% $ 75,000 0% % Compliance >/=50% >/=75% Sugar Level > 150 % Rate of Return to Return to OR for Post-Op Bleeding 2 8.2% $ 75,000 2.9% </=2.7% </=2.5% OR Mortality Rate 1 13.2% $ 120,000 (d) O/E Rate (b) </=1.00 </=0.95 Peer Group Patient Satisfaction 3 7.1% $ 65,000 >/=80 >/=85 Percentile 360° Feedback Survey Development / Peer / Employee Evaluations 3 7.1% $ 65,000 TBD Scores Administration Total Incentives $ 910,000 Quality of Service Threshold Quality Threshold would be required Gross Mortality % Conversion Mortality Rate (e) to be met in order for any of the 2.98% and/or O/E Rate 2.98% to O/E Rate above incentives to be paid out. (TBD) (e) (a) Based on maximum total incentives payout of $910,000 (Subject to Fair Market Value and Legal Approval) For Illustrative Purposes Only (b) O/E = Observed v. Expected rate (c) Turn Around Time Defined as time of incision closure to time of next incision (d) O/E mortality rate is currently not measured (e) Assumes Quality of Service Threshold will change from gross mortality % to an O/E rate once available. * Prepared by PricewaterhouseCoopers 15
PRINCIPAL REGULATORY CONSIDERATIONS Civil Monetary Penalty Statute Anti-Kickback Statute Physician Self-Referral Statute (Stark) False Claims Act Tax Exemption/Intermediate Sanctions Provider-Based Status Rules Antitrust Issues 16
CMP STATUTE, SECTION 1128A(B) OF THE SS ACT, 42 USC 1320A-7A(B) As amended by MACRA*, prohibits a hospital (or CAH) from knowingly making a payment, directly or indirectly, to a physician as an inducement to reduce or limit medically necessary services to a Medicare or Medicaid beneficiary who is under the direct care of the physician Note that paying a physician to design a plan or to oversee its implementation would not violate the CMP statute if the physician is not directly providing care to Medicare or Medicaid beneficiaries CMP of not more than $2,000 for each such individual with respect to whom the payment is made A physician who knowingly accepts payment subject to a CMP of not more than $2,000 for each individual with respect to whom the payment is made Potential for exclusion from Federal and State Healthcare programs (see 1128(b)(7) of the SS Act) * Medicare Access and CHIP Reauthorization Act of 2015, section 512 17
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