SHARED SAVINGS & INCENTIVE PAYMENT PROGRAMS

SHARED SAVINGS & INCENTIVE PAYMENT PROGRAMS Ellen V. WeissmanHodgson Russ LLP www.hodgsonruss.com

OVERVIEW • Legal Constraints In Structuring • Federal • State • Recent Developments • 15 Favorable OIG Advisory Opinions • Proposed Stark Exception • What Can You Do Now? • Federal Health Reform??? © 2009 Hodgson Russ LLP

CIVIL MONETARY PENALTY LAW • Prohibits: Hospitals Knowingly Making A Payment To A Physician To Induce A Reduction Or Limitation In Services To Medicare/Medicaid FFS Beneficiaries • Applies Even If Pay To Reduce Services That Are Not “Medically Necessary” • OIG Enforces, Issues Advisory Opinions © 2009 Hodgson Russ LLP

ANTI-KICKBACK STATUTE • Prohibits: Knowingly/Willfully Paying Or Receiving Remuneration To Induce Referrals Of Services Covered By Federal Health Programs • No Safe Harbor On Gainsharing – To Date • OIG Enforces, Issues Advisory Opinions © 2009 Hodgson Russ LLP

STARK STATUTE : PHYSICIAN SELF-REFERRAL LAW • Prohibits: Physicians Referring Medicare & Medicaid Patients To Hospital For Inpatient And Outpatient Services If Financial Relationship With Hospital, Unless Within Exception • Proposed CMS Exception • CMS Enforces, No Advisory Opinions © 2009 Hodgson Russ LLP

TAX EXEMPTION LAWS • Tax Exempt Hospitals May Not Pay Physicians If Would Constitute: • Private Inurement • Private Benefit Or • Excess Benefit Transaction • IRS Guidance: Generally OK If “Reasonable Compensation” © 2009 Hodgson Russ LLP

MANAGED CARE • CMPL Is Not Applicable To Managed Care • Medicare/Medicaid Managed Care Risk-Based Payors Are Covered By Different Statutes • Allows “Physician Incentive Plans” If They Do Not Reduce “Medically Necessary” Services © 2009 Hodgson Russ LLP

MANAGED CARE, cont. • Stark Is Applicable (If Serve Medicare/Medicaid Enrollees) • Stark Exceptions: • 42 CFR 411.355(c) – Protects Services Provided To Enrollees Of Medicare/Medicaid MCOs • 42 CFR 411.357(n) – Protects Risk-Sharing Compensation Arrangements Between MCOs And Physicians, If No AKS Violation © 2009 Hodgson Russ LLP

MANAGED CARE, cont. • If Commercial Insurer, Flexibility In Structuring Unless: • Induce Changes Re Medicare/Medicaid FFS Patients • Measure/Pay Based On All Patients • Involve Dually Eligible Patients • See OIG Advisory Opinion No. 08-16. © 2009 Hodgson Russ LLP

STATE LAWS • Some States Have Laws That Apply To All Payors • Including Medicare And Medicaid Managed Care Payors/Beneficiaries • Many State Statutes Have DifferentExceptions From Stark • If Your Hospital Operates In A State With An All-Payor Statute, Structure Carefully © 2009 Hodgson Russ LLP

WAIVER AUTHORITY • General CMS Authority: Waives Stark, But Not AKS or CMPL. • SeeRobert Wood Johnson University Hospital v. Thompson, 2004 U.S. Dist. LEXIS 8498 (D.N.J. Apr. 15, 2004) • Statutory Demonstration Projects: Waive Stark, AKS and CMPL: • MMA of 2003 § 646 • Deficit Reduction Act of 2005 § 5007 © 2009 Hodgson Russ LLP

OIG SPECIAL ADVISORY BULLETIN (1999) • All Gainsharing Programs Violate CMPL • No Authority To Issue Exception To CMPL • Declines To Issue Advisory Opinions • Has Since Issued 14 Favorable Opinions • AHA/AAMC Recently Asked OIG To Retract © 2009 Hodgson Russ LLP

OIG ADVISORY OPINIONS • 15 Favorable Advisory Opinions • 14 Shared Savings Programs • 1 Pay For Performance Program • Shared Savings Programs: • Product Standardization Or Substitution • Use As Needed • All Contain Similar Elements • OIG Finds CMPL Implicated, But Declines To Prosecute Due To Safeguards © 2009 Hodgson Russ LLP

CMPL SAFEGUARDS • Credible Medical Evidence Supports Each Performance Measure/Target • Targets Based On Hospital’s Patient Population Compared To Regional/National Norms • All Supplies/Devices Remain Available If Needed For Particular Patient • Floors Below Which Cannot Earn Incentive • Independent Review; Termination Of Physicians • Written Disclosure To Patients © 2009 Hodgson Russ LLP

AKS SAFEGUARDS • Pools Of 5 Or More Physicians • On Active Medical Staff • Per Capita Payment • Limits On Amounts To Be Earned • Re-Basing If Multi-Year • Limited Duration (1-3 Years) • Monitor Admissions For Changes © 2009 Hodgson Russ LLP

OIG ADVISORY OPINION 08-16PAY-FOR-PERFORMANCE • Private Insurer Pays Bonus To Hospital • Hospital Pays 50% of Bonus To Physicians • 2 Data Reporting Targets • 4 Quality Targets – CMS Specifications Manual For Nat’l Hospital Quality Measures • CMPL Implicated Because Measure Performance Using All Inpatients • OIG Issues Favorable Opinion Due To Safeguards © 2009 Hodgson Russ LLP

PROPOSED STARK EXCEPTION • Proposed 7/7/08 In MPFS 2009 • Shared Savings & Incentive Payment Programs • 16 Sections, Over 40 Requirements • Requirements Similar To OIG Advisory Opinion Elements • CMS Reopened Comment Period to 2/17/09 • Sought Comments On 55 Issues • One vs Two New Exceptions? © 2009 Hodgson Russ LLP

COMMENTS BY AHA/AAMC • Proposed Exception Is Too Complex, Burdensome, Narrow, Inflexible • Instead, Adopt Broad Principles: • Credible Medical Evidence Supports Targets • Monitoring Inappropriate Actions • Reward Individual Physician’s Contributions • Maintain Documentation Of Design/Payments • Legally Binding Written Agreement © 2009 Hodgson Russ LLP

COMMENTS BY NJHA • Proposed Exception Too Narrow • Instead: Restructure To Address • Programs Designed To Reduce Operational Bottlenecks • Responsible Physicians • Direct Protections for Quality of Care and Against Self-Referral vs Micromanagement © 2009 Hodgson Russ LLP

COST FINDING • CMS: Current Cost Less Acquisition Cost • Problem: CMS Proposal Doesn’t Work For Programs Targeting Operational Improvements Or Quality • Alternative: Use APR DRGs With Severity Of Illness Adjustment © 2009 Hodgson Russ LLP

PHYSICIANS/PAYMENT • CMS: Requires Pool Of At Least 5 Physicians And Per Capita Payment • Problem: Artificial Groups; Diffuses Incentive • Alternative: Pay Individual Physicians Responsible For Managing A Case To Reward Individual Performance; Address Concerns Relating To Abuse Directly Rather Than Indirectly © 2009 Hodgson Russ LLP

RE-BASING TARGETS • CMS: If Multi-Year Program, Must Re-Base Targets At End Of Year To Avoid “Duplicate” Payment/Disguised Payment For Referral • Alternative: Reward Maintaining Good Performance As Well As Improvement; Important To Incentivize Physicians To Spend Time On Non-Billable Activities Such as Discharge Planning © 2009 Hodgson Russ LLP

QUALITY PROTECTIONS • CMS: Micromanagement, such as requiring access to same supplies/devices available before program and no limits on new technology • Alternatives: • Add Severity Of Illness Adjustment • Best Practice Norms Based On Community Practice Compared To Regional Data • Committee Monitors “Outliers”; Can Withhold Incentives Or Terminate Physician © 2009 Hodgson Russ LLP

SELF-REFERRAL PROTECTIONS • CMS: Currently On Medical Staff, plus Many Indirect Protections • Alternative: Direct Protections Such As • Must Have 10+ Admissions At Par Hospital • If Dual Privileges, Cap Incentives At Prior Year Volume At Participating Hospital, Adjusted for Normal Practice Growth © 2009 Hodgson Russ LLP

CURRENT OPTIONS • If No Medicare/Medicaid FFS Beneficiaries • Flexibility In Structuring A Program • Determine Whether To Include Managed Care Beneficiaries • Determine Whether State Laws Apply © 2009 Hodgson Russ LLP

CURRENT OPTIONS • If Medicare/Medicaid FFS Beneficiaries • Use Existing Safe Harbors/Exceptions • Follow Design Features Approved In OIG Advisory Opinions • Participate In CMS Demonstration Project © 2009 Hodgson Russ LLP

THE FUTURE • CMPL: Will Congress modify to allow incentive programs allowed by Managed Care statute? • Stark: New Exceptions May Be Added & Existing Exceptions May Be Modified • AKS: Will HHS Heed The Call Of The AHA/AAMC To Issue A Regulatory Exception? • Demonstration Projects: Reports To Congress Due Soon; Will They Prompt Changes? • Federal Healthcare Reform:??? © 2009 Hodgson Russ LLP

SHARED SAVINGS & INCENTIVE PAYMENT PROGRAMS