American Academy of Nurse Practitioners

Reimbursement Seminar: Impact of ACOs

November 18, 2010

John E. Wyand, J.D., M.B.A.Attorney, Healthcare PracticeSquire, Sanders & Dempsey L.L.P.1201 Pennsylvania Ave., N.W.Washington, D.C. 20001202-626-6676jwyand@ssd.com

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John E. Wyand, Esq.,John E. Wyand, Esq., focuses his practice on health focuses his practice on health care matters. Before attending law school, Mr. Wyand care matters. Before attending law school, Mr. Wyand held senior management positions with hospital held senior management positions with hospital systems and health care companies in New Jersey, systems and health care companies in New Jersey, Indiana, Tennessee and Alabama. His unique Indiana, Tennessee and Alabama. His unique background includes extensive experience developing background includes extensive experience developing joint ventures with hospitals and physicians as well as joint ventures with hospitals and physicians as well as negotiating physician contracts. He has guided negotiating physician contracts. He has guided hospitals and health systems through joint venture hospitals and health systems through joint venture agreements that helped them grow and increase their agreements that helped them grow and increase their financial stability. In addition to developing new health financial stability. In addition to developing new health care enterprises, Mr. Wyand has served on the boards care enterprises, Mr. Wyand has served on the boards of hospitals and other health care corporations. of hospitals and other health care corporations.

He is a member of the American Bar Association, He is a member of the American Bar Association, Pennsylvania Bar Association, Camden County Bar Pennsylvania Bar Association, Camden County Bar Association, American Health Lawyers Association, Association, American Health Lawyers Association, and American Society of Law, Medicine and Ethics. and American Society of Law, Medicine and Ethics.

John E. Wyand, JD, MBA

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Agenda

• Government Position on Compliance

• Accountable Care Organizations

• Legal Challenges: Federal and State Laws

• How to Address the Legal Challenges

• Common Federal Laws, Implications, Possible Solutions

• Meaningful Use of Certified Electronic Health Records

• Getting Started

• What You Can Do

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Government’s Position

Transparency: Are you prepared to operate in a more transparent health care system?

Quality: Are you focused on quality as a compliance issue?

Accountability: Is your organization prepared for greater accountability?

Source: Keynote Address Delivered by Daniel R. Levinson, Inspector General of the Department of Health & Human Services, at the Health Care Compliance Association Annual Compliance Institute April 19, 2010 regarding Health Care Reform Legislation.

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Accountable Care Organizations (“ACOs”)Accountable Care Act § 3022

• Purpose: to promote accountability, coordinate services for Medicare beneficiaries and encourage practice transformation.

• Eligible ACOs are Medicare providers and suppliers with a shared governance mechanism who are:

– In a group practice;

– Networks of individual practices;

– Partnerships or joint venture arrangements;

– Hospital-employed ACO professionals; or

– Other groups of providers and suppliers as deemed appropriate.

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ACO Professional

• Physician,

• Physician Assistant,

• Nurse Practitioner, or

• Clinical Nurse Specialist.

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ACO Requirements/Payments

• Accountable for the quality, cost and overall care for at least 5,000 beneficiaries

• Three (3) year contract

• Formal legal structure

• Primary care capacity

• CMS information

• Clinical & administrative leadership and management

• Evidence-based medicine and patient engagement

• Demonstrate patient-centeredness

• Fee for service + shared savings payments

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Some Legal Challenges

Medical Home and ACO Legal Issues

Hospital provided resources for care coordination & practice transformation

Stark/Anti-kickback

Tax exemption (private benefit, inurement)

Joint negotiations by unaffiliated providers

Antitrust

Shared savings payments Civil monetary penalties

Hospital/physicians participating in bundled payment arrangements

State corporate practice of medicine laws, fee splitting

ACOs accepting full-risk contracts State insurance laws

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How to Address the Legal Challenges

• Apply existing solutions to new models

– Base new models and arrangements on established guidelines with the intent to reduce risk.

– Connect the dots between new models and existing solutions.

• Accountable Care Act § 3022 Waiver Authority

– Secretary has authority to waive certain legal requirements to implement this section.

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Stark and Anti-Kickback

• Stark Law

– Prohibits a physician from referring certain services (“DHS”) to an entity where payment for the DHS is made under Medicare and where the physician (or a family member) has a financial relationship with the entity. 42 U.S.C. § 1395nn.

– Strict liability with civil penalties.

– Exceptions (23), but no specific Medical Home or ACO exception.

• Anti-Kickback Statute (“AKS”)

– Prohibits any payment for referrals where payment for services is made under a Federal health care program. 42 U.S.C. § 1320a–7b.

– Intent based with criminal and civil liabilities.

– Safe harbors (25), but no specific Medical Home or ACO safe harbor.

• Medical Home and ACO Implications

– Arrangements involving hospitals and physicians will implicate Stark and AKS.

– Can give rise to False Claims Act liability.

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Stark & AKS Exceptions

• Stark: Personal Service Arrangement

– Written, signed agreement;

– Covers all of the services to be furnished by the provider;

– All contracted services are reasonable and necessary for legitimate business purposes of the arrangement;

– Term is at least one year; and

– Compensation is set in advance, consistent with FMV and does not vary with volume or value of referrals.

• AKS: Personal Services and Management Contracts

– Aggregate compensation must be set in advance;

– Compensation consistent with fair market value; and

– Arms’ length transaction.

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Civil Monetary Penalty Statute

• Civil Monetary Penalty (“CMP”)

– Prohibits a hospital from knowingly making a payment (directly or indirectly) to induce a provider to reduce or limit services (items) to Medicare/Medicaid beneficiaries under the provider’s direct care. 42 U.S.C. § 1320a-7a.

– Strict liability with civil penalties.

– No safe harbors.

• CMP Medical Home and ACO Implications

– ACOs and Medical home models involving hospitals will implicate CMPs where shared savings are paid.

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OIG’s Concerns with Shared Savings

• “Stinting” on patient care by limiting the use of quality-improving but more costly devices, tests or treatments;

• “Cherry picking” by treating only healthier patients;

• “Steering” by avoiding sicker (and more costly) patients and steering those patients to hospitals that do not offer such arrangements;

• “Quicker-sicker” discharge of patients; and

• “Unfair competition” among hospitals offering cost savings programs to foster physician loyalty and to attract more referrals.

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Common OIG Safeguards

• Transparency

• No adverse impact on patient care

• No disproportionate impact on Medicare patients or Medicare program

• Protections against inappropriate reductions in services

• Product standardization without limiting selection

• Compensation cap and per capita distribution

• Participation limited to physicians on staff

• Minimizing incentive to steer costly patients to other hospitals

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Antitrust

• The Sherman Act and the Federal Trade Commission Act

– Prohibits provider and provider-hospital organizations from agreements that unreasonably restrain trade and promote unfair methods of competition including price-fixing and dividing markets.

– “Per se” violations or “rule of reason.”

• Antitrust Medical Home and ACO implications

– Substantial financial integration.

– Substantial clinical integration.

• Federal Trade Commission

– Considering an ACO safe harbor.

– An expedited review process.

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Antitrust DOs and DON’T

• ACO Professionals contemplating the formation of an ACO with ACO Professionals that are not financially or clinically integrated should be mindful that the communication of certain information to these competitors may violate the antitrust laws.

• The following guidelines should be considered in the formation of an ACO to ensure compliance with the antitrust laws.

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DO adhere to the following practices and principles

• DO:

– Exchange only the information necessary for the establishment of the ACO.

– Consider entering into a development agreement with the prospective ACO members that outlines the types of information required to establish the ACO and provides a plan to build clinical and financial integration among the prospective members.

– Use a third party to collect and manage information regarding fees and costs of the prospective ACO members to the extent such information is required by a purchaser or government agency.

– Discuss ways to provide higher quality and more efficient services, such as investments in technology to improve the transfer of patient information and acceptance of payments.

– Consult your attorney if you are uncertain whether the exchange of a particular type of information raises an anticompetitive concern.

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DO NOT engage in any of the following practices

• DO NOT:

– Clinically or financially integrate until the prospective members of the ACO have executed an agreement outlining the terms of the ACO.

– Discuss or exchange information regarding market power, market shares, or ways to dominate the market with your non-integrated competitors. These types of issues should be discussed with your attorney, particularly if the combined share of the prospective ACO is higher than 20 percent of the relevant market.

– Discuss or exchange information regarding fees, prices, or costs of services with your non-integrated competitors.

– Compare contract negotiations with other physician groups or insurance providers with any competitor.

– Discuss ways to eliminate or reduce competition or ways to exclude other physicians or physician groups with any competitor.

– Propose refusals to deal with or boycotts of particular providers with any competitor.

– Discuss the division or allocation of markets or customers with any competitor.

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Anti-trust Safeguards

• Substantial Financial Risk

– Capitated rate;

– Percentage of premium or revenue;

– Significant financial incentives to achieve specific cost-containment goals:

• Withholding a substantial amount for distribution to the group, or

• Establishing overall cost or utilization targets with provider participants subject to subsequent substantial financial rewards or penalties based on group performance; and/or

– Global fees

• Substantial Clinical Integration

– Common information technology for exchange of all relevant patient data (EHRs);

– Development and adoption of clinical protocols;

– Care review based on the implementation of protocols; and

– Mechanisms to ensure adherence to protocols.

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Meaningful Use Incentives - Medicare

• Medicare Eligible Professionals ($44,000)

– Doctor of medicine or osteopathy,

– Doctor of dental surgery or dental medicine,

– Doctor of podiatric medicine,

– Doctor of optometry, and

– Chiropractor.

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Meaningful Use Incentives – Medicaid

• Medicaid Eligible Professionals ($63,750)

– Physicians,

– Dentists,

– Certified nurse mid-wife,

– Nurse practitioner, and

– Physician assistants employed by a rural health clinic or FQHC that is led by a physician assistant.

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Getting Started

• Identify potential partners with like-interests

• Enter into a Memorandum of Understanding to develop ACO

– What you will discuss and what you won’t discuss

– Confidentiality

– Stand still

• Clinical integration development

– Evidence-based medicine

– Patient engagement

– Patient Centeredness

• Develop accountable relationships among the participants

• Form legal structure

– Clinical and administrative systems

– Formal governance

• Contract with Medicare and others

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What You Can Do

• Be creative and remain focused on:

– Transparency

– Quality

– Accountability

• Invest time influencing new regulations and guidance documents

– CMS announced it will issue proposed ACO regulations in December.

– Consider collaborative approach to seeking OIG/FTC Advisory Opinions on common new models.

– Help your State legislators remove legal and regulatory barriers.

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Contact Information

John E. Wyand, J.D., M.B.A.Attorney, Healthcare PracticeSquire, Sanders & Dempsey L.L.P.1201 Pennsylvania Ave., N.W., Suite 500Washington, D.C. 20004202-626-6676jwyand@ssd.com