Physician Fundamentals

1. PhysicianFundamentals Conrad Meyer JD/MHA Chaffe McCall

2. Presentation Overview • Psychology of Physician Representation (Who is this client?) • An Overview of Regulatory Issues Affecting Physicians • Anti-Kickback and Stark Law • Mechanics of Compensation and Reimbursement • Practical Issues Affecting Physicians • Employment • Physician Recruiting • Managed Care Contracting • Physician Group Practice Issues • Litigation and Other Adversarial Representations • Medical Licensure • Medical Staff Issues • Payor Credentialing and Other Disputes • Representation Takeaways and Rules of Thumb

3. Physicians’ Human Condition • Years of school • High expectations for income and status • Difficult job • Sick, worried, ungrateful patients • Long hours • Essentially piece workers • Reduced reimbursement • Increased costs

4. “Do As I Say, Not as I Do” Phenomenon Physician clients often try to self-diagnose They will often have something short of the complete clinical (factual and legal) picture They often solicit informal cocktail party diagnoses/treatment They do not always get themselves to the correct specialist 4

5. “Do As I Say, Not as I Do” Phenomenon Physicians will often use someone else’s “medication” Get information from others, but don’t rely on it as authority Physicians often do not do their homework Physicians do not practice preventive legal medicine They will commonly wait to ask for help until they are in emergency room on a weekend 5

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7. Issues Affecting Physicians and Group Practices 7

8. Regulatory Issues Anti-kickback Stark I, II, and III Antitrust Medicare reassignment rules Other Medicare rules State kickback and self-referral statutes State corporate practice of medicine State fee-splitting Reimbursement/Compensation issues 8

9. Additional Issues Relevant to Physician Representation Employment Real Estate Tax Benefits Corporate Securities 9

10. Where does Anti-kickback Law and Stark come into play? Basically, anytime money or something of value flows between healthcare providers Examples include Leases among healthcare providers Equipment rentals among healthcare providers Contractual services arrangements among healthcare providers Investment interests by healthcare providers Compensation arrangements for healthcare providers Corporate structure of healthcare providers Relationships between healthcare providers and non-healthcare providers Revenue diversification strategies for healthcare providers 10

11. Federal Anti-kickback Statute

12. Anti-kickback Statute Anyone Gives or receives Anything of value In return for referral (ordering, arranging for, recommending) Items or services covered by Medicare, Medicaid or CHAMPUS Statute: 42 U.S.C. § 1320a-7b Regulations: 42 C.F.R. § 1001.952 12

13. Patients Anyone Anyone $$$ 13

14. Examples Hospital gives surgeons free office space Hospital pays physician admitter a Medical Directorship Clinical laboratory pays John Doe a “runner’s fee” Radiology group provides professional component services to orthopaedic group, which global bills, capturing the differential 14

15. Penalties • Criminal • Fine ($2,500 +) • Jail (5 year +) • Civil • $5,000 or $10,000 per claim • Plus treble damages • $5,000 or $10,000 per claim • Plus treble damages • Exclusion from Medicare/Medicaid 15

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17. Safe Harbors Investment interests Space rentals Equipment rentals Personal services and management contracts Sale of practice Referral services Warranties Discounts Employment 17

18. Safe Harbors (cont.) Group purchasing organizations ASCs Physician recruitment OB malpractice subsidies Cooperative hospital services organizations Waiver of beneficiary coinsurance deductible amounts Ambulance restocking Increased coverage/reduced cost-sharing amounts offered by certain health plans to enrollees 18

19. Important Reminders AboutSafe Harbors If parties do not meet all the requirements of a safe harbor, the arrangement will not fail, but the enforcement authorities will look to the intent of the parties If any one purpose of the arrangement is to solicit or receive referrals, the arrangement will be illegal (U.S. v. Greber, 760 F.2d 68 (3d Cir.), cert. denied, 474 U.S. 988, 106 S.Ct. 396 (1985).) 19

20. Guidance Advisory Opinions Fraud Alerts, Bulletins & Reports Work Plan Semi-Annual Report Compliance Plan Guidance Enforcement Actions Corporate Integrity Agreements http://www.oig.hhs.gov/ 20

21. Stark Law

22. Physician Self-Referral Lawaka Stark I, II, and III A Physician may not refer patients covered by Medicare, Medicaid or CHAMPUS for “Designated Health Services” to an entity with which the physician has a financial relationship Statute: 42 U.S.C. §1395nn Regulations: 42 C.F.R. §411.351 22

23. Patients for DHS Physician Entity 23

24. Financial Relationship • Ownership Interest • Compensation Agreement 24

25. Designated Health Services Clinical laboratory services Physical therapy, occupational therapy, and speech-language pathology services Radiology and certain other imaging services Radiation therapy services and supplies Durable medical equipment and supplies Parenteral and enteral nutrients, equipment, and supplies Prosthetics, orthotics, and prosthetic devices and supplies Home health services Outpatient prescription drugs Inpatient and outpatient hospital services 25

26. Examples Physician refers patient for lab tests to a clinical lab that the physician owns Physician receives bonus based on number of DHS referred to his group practice Physician refers patients to hospital for inpatient services where physician has a services agreement with the hospital 26

27. Penalties • Civil • $15,000 per claim • Assessment 2x amount of claim • Nonpayment or recovery • Exclusion from Medicare/Medicaid 27

28. Exceptions • Physician services • In-office ancillary services • Space rental • Equipment rental • Bona fide employment • Personal services contracts • Physician recruitment • Isolated transaction • Payment from hospital to MDs for non-DHS 28

29. Exceptions (cont.) • Group practice arrangements • Payments by MDs to entity for items or services Charitable donations by physician • Non-monetary compensation up to $300 • Fair market value compensation • Medical staff incidental benefits • Risk sharing arrangements • Compliance training • Indirect compensation arrangements • Referral services 29

30. Exceptions (cont.) • Professional courtesy • Retention payments • Community-wide health information systems • DHS by rural hospitals • Investment interests 30

31. Important Reminder About Exceptions Do have to meet all the requirements of the exception or the arrangement will fail Stark’s penalties are civil vs. criminal 31

32. Guidance Regarding Stark CMS expects attorneys to be well-versed in Stark I, II, and III Best tutorial is the commentary to each set of regulations http://www.cms.hhs.gov/PhysicianSelfReferral/Downloads/66FR856.pdf http://www.cms.hhs.gov/PhysicianSelfReferral/Downloads/69FR16054.pdf http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/07-4252.pdf Sign up for http://www.cms.hhs.gov/AboutWebsite/EmailUpdates/list.asp 32

33. Mechanics of Compensation and Reimbursement 33

34. Changes in Compensation and Production for Primary Care Physicians 1992-2002 Source: Medical Group Management Association Physician Compensation and Production Survey: 2003 Report Based on 2002 Data

35. Changes in Compensation and Production for Specialty Care Physicians 1992-2002 Source: Medical Group Management Association Physician Compensation and Production Survey: 2003 Report Based on 2002 Data

36. Malpractice Costs Increase* 2001-2002 36.38% 2002-2003 53.15% *MGMA

37. Why Should You Care? • Do you want your child’s pediatrician to earn $80,000/year? • Do you want an unhappy cardiologist doing your heart cath? • Do you want an orthopedist who must do ten surgeries a day in order to make a living to perform your hip replacement?

38. Compensation • Physician source revenue • Salary – new physicians • Compensation formula • Revenue minus expenses • How to allocate expenses • How to allocate revenue • Dollars collected • RVUs

39. Compensation • Ancillary Income • Stark Prohibition • Cannot allocate on volume or value of referrals • Per capita • Same basis as non-DHS revenue • Other

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41. Reassignment Rules 42 C.F.R. §424.80; Medicare Modernization Act §952; Medicare Carriers Manual §30.2.1 • Generally: A provider is not entitled to payment for services that he/she/it did not perform • “Exceptions” • Payments to employers • Payments to healthcare delivery systems • Payments to government agencies/entities • Payments through court order • Payments to agent for billing & collection • Payments pursuant to a contract • Joint and several liability • Provider has unrestricted access to claims submitted by entity • Purchaser or Supplier Test 41

42. Medicare Generally Federal Program For Elderly and Disabled Others who buy into program regardless of age Originally “Fee-For-Service” – But Now … 42

43. Medicare Part B: Physician Services Resource-Based Relative Value Scale (RBRVS) – 1992 80% of lesser of actual charge or fee schedule Patient pays 20% as coinsurance + deductible 43

44. Top Reimbursement Issues for Physicians in 2008 Medicare Physician Fee Schedule (MPFS) Issues Physician Quality Reporting Initiative Anti-Markup Rule IDTFs Continued Shift to Practice Expense RVUs 44

45. Reimbursement Realities for the Physician No matter how good the physician, or the system, chances are, you will have to deal with the following processes: Audits Investigations Recoupment Appeals 45

46. Practical Issues Affecting Physicians Employment and Organizational Issues

47. Employment and Contracting

48. Employment Issues • Who is the employer? • Medical Groups • Hospitals • Ancillary income • Support payments • Others • Corporate Practice Prohibitions

49. Employment Issues • Termination • For cause immediately • Grounds • Time to cure • Without cause • Notice • Implications • Severance • Non-compete • When can physician terminate

50. Employment Agreements • Restrictive Covenants • State law driven • Geographical and time limitations • Exceptions • Termination without cause • Buy-out amount