presents presents Hospital–Physician Joint Ventures: New Opportunities After Healthcare Reform pp Complying With Stark Law and Anti-Kickback Statute and Protecting Tax-Exempt Status A Live 90-Minute Teleconference/Webinar with Interactive Q&A A Live 90-Minute Teleconference/Webinar with Interactive Q&A Today's panel features: Lorin E. Patterson, Partner, Reed Smith , Falls Church, Va. Catherine T. Dunlay, Partner, Taft Stettinius & Hollister, Columbus, Ohio R Roger D. Strode, Jr., Partner, McDermott Will & Emery , Chicago D St d J P t M D tt Will & E Chi Tuesday, June 15, 2010 The conference begins at: The conference begins at: 1 pm Eastern 12 pm Central 11 am Mountain 10 am Pacific 10 am Pacific You can access the audio portion of the conference on the telephone or by using your computer's speakers. Please refer to the dial in/ log in instructions emailed to registrations.
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Hospital-Physician Joint Ventures: New Opportunities After Healthcare Reform New Opportunities After Healthcare Reform Stafford Publishing June 15, 2010 Lorin E. Patterson, Esq. Reed Smith, LLP 3110 Fairview Park Dr., Suite 1400 3110 Fairview Park Dr., Suite 1400 Falls Church, VA 22042 703-641-4363 (p); 703-641-4340 lpatterson@reedsmith.com
PPACA Impact on Physician Owned Hospitals PPACA Impact on Physician Owned Hospitals As of March 2010 approximately 265 physician owned hospitals were open for business d h it l f b i Approximately 115 hospitals were in various stages of development g p A track record of solid success, technological advances and relatively positive reimbursement (when compared with ASCs) made these (when compared with ASCs) made these increasingly popular vehicles for hospital/physician joint ventures 5
PPACA Impact on Physician Owned Hospitals PPACA Impact on Physician Owned Hospitals Effective March 23, 2010, the PPACA Changed (almost) Everything ( ) y g Section 6001 (Reconciliation Act Sec. 1106) provides that: Existing physician owned hospitals which have Medicare Existing physician owned hospitals which have Medicare provider agreements as of March 23 , 2010 and projects under development on that date which obtain Medicare provider agreements by December 31, 2010 will be p g y , grandfathered The extent of physician ownership is frozen in place. The identity of physician owners, however, can change 6
PPACA Impact on Physician Owned Hospitals Except in very limited circumstances physician Except in very limited circumstances, physician owned hospitals cannot increase their number of licensed operating rooms, procedure rooms and/or beds over those existing on the date of d/ b d th i ti th d t f enactment 7
PPACA Impact on Physician Owned Hospitals p y p Questions and Clarifications. The PPACA contains glaring inconsistencies in the text relating to physician owned hospital deals and substantial questions are created by the legislation’s other provisions Is there really an 18 month “grace period” for compliance as the y g p p wording suggests? Can physician ownership levels increase prior to December 31, 2010 for projects under development? p j p How will the prohibitions on expansion be applied? e.g. prevents increase in “licensed” procedure rooms and operating rooms” but those terms are not defined and are not operating rooms but those terms are not defined and are not licensed at the federal level. Uncertainty is greatly increased due to lack of legislative history. 8
PPACA Impact on Physician Owned Hospitals Possible Solutions to Uncertainty: Possible Solutions to Uncertainty: CMS is aware of concerns and indicates that clarifying statements might be issued soon On June 3, 2010 the PHA and Texas Spine & Joint Hospital filed suit against the Federal government in the Eastern District of Texas seeking to enjoin the enforcement of Section 6001 on the grounds that the legislation: d th t th l i l ti Is unconstitutionally vague and arbitrary Is being enforced retroactively Constitutes a “taking” without due process 9
PPACA Impact on Physician Owned Hospitals p y p Bottom Line : Hospital/physician integration on small, focused facilities is not dead in the water: Grandfathered facilities can continue to function as they presently do Although the Stark whole hospital exception is closed by the Although the Stark “whole hospital exception” is closed by the PPACA, other Stark law exceptions are still available Management/Co-Management Relationships (discussed below) below) Ownership through a public entity Shareholder equity of over $75,000,000 plus listed on an exchange h 10
PPACA Impact on Physician Owned Hospitals PPACA Impact on Physician Owned Hospitals Bottom Line cont. Integration involving economic ties which do not comprise “financial relationships” for Stark law purposes not for profit entities (foundations, etc) Isolated transactions (non-secured promissory notes) 11
New Payment Models New Payment Models e e ay ay e t e t ode s ode s Catherine T. Dunlay Taft Stettinius & Hollister cdunlay@taftlaw.com
Overview Overview • PPACA Title III Improving the Quality and p g Q y Efficiency of Health Care – § 3001 – Hospital value-based purchasing – Incentive program to begin FY 2013 funded by reduction in program to begin FY 2013, funded by reduction in base payment amount – § 3002, as amended by § 10327 – extends Physician Quality Reporting Initiative and imposes penalty for Q f failure to submit measures starting in 2014 – § 3004, as amended by § 10322 – provides for quality § , y § p q y measure reporting programs for long-term care hospitals, inpatient rehabilitation hospitals, psychiatric hospitals and hospices by FY 2014 p p y 13
Overview (Cont’d) Overview (Cont’d) – § 3006, as amended by § 10301 – directs the § , y § Secretary of Health and Human Services to submit to Congress a plan for value-based purchasing for skilled nursing facilities, home health agencies and skilled nursing facilities home health agencies and ambulatory surgery centers by FY 2012 – §§ 3011-15, as amended by §§ 10302-05 – addresses development of a national strategy to improve health care quality, including establishment of a web site by 2011 creation of an Interagency of a web site by 2011, creation of an Interagency Working Group on Health Care Quality, and funding for development of quality measures 14
Overview (Cont’d) Overview (Cont’d) • §§ 3021-27, as amended by §§ 10306-09, address development of new patient care models, including g – establishment of Center for Medicare and Medicaid Innovation within CMS by 2011 ( § 3021, as amended by § 10306); § ) – development of a shared savings program with accountable care organizations by 2012 ( § 3022, as amended by § 10307); – development of a national pilot program bundling payment for hospitals, physicians and post-acute care providers by 2013 ( § 3023, as amended by § 10308 ); and – establishment of a program penalizing hospitals for t bli h t f li i h it l f preventable readmissions ( § 3025, as amended by § 10309). 15
Center for Medicare and Medicaid Center for Medicare and Medicaid Innovation Innovation • Activities to commence January 1, 2011 Activities to commence January 1, 2011 • Established to test models that will reduce expenditure while preserving or improving p p g p g quality of care • Preference given to models that improve g p coordination, quality and efficiency 16
Value-Based Payment Value-Based Payment • HHS to establish hospital value-based payment HHS to establish hospital value based payment program to commence October 1, 2012 • HHS to select measures and establish performance standards – Levels of achievement and improvement • Incentive payment calculated as percentage of hospital’s base DRG payment per discharge 17
Value-Based Payment (Cont’d) Value-Based Payment (Cont’d) • Program funded through reduction of base DRG g g rates – One percent in FY 2013 – Increases to two percent in FY 2017 and after I t t t i FY 2017 d ft • Alignment of interests with physicians and others necessary to succeed necessary to succeed 18
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