The call for generating more value in the delivery of and payment for health care has encompassed a long-standing criticism of the fee for service payment model that has traditionally applied to physicians. How to compensate physicians, whether as a physician group or health system employer, is an on-going bulwark to those efforts.  In "Coping with Merging Streams: Legal Issues in Physician Compensation", Alice reviews multiple new forms of revenue from payment for physician services including – 6 forms of commercial payment along with the challenges of the new evaluation and management codes, 5 federal programs and another 4 vehicles often associated with different payment.  She considers their relative effects and the compliance issues each generates, as well as contractual pitfalls they present. Then she examines the practical impact these programs have had on the physicians they are intended to motivate, taking into account as well the widespread consolidation of physicians with health systems. Against that background, including the advent of the value-based enterprise exceptions and safe harbors, she explicates issues in physician compensation presented by the 2022 Stark rules on physician productivity and profit-sharing within a group.  She includes the need to account for external audits and voluntary repayments and offers contract guidance. The complexity of these sources of revenue combined with the restrictions of Stark present a major challenge in physician compensation relationships and agreements.

Social determinants of health have risen to the forefront of changes in payment to acknowledge that factors such as food, housing and other environmental issues can have a direct impact on the health of people for whom the government (and private payers) pay for care.  Both government and private payors traditionally have not offered any payment for services that address social determinants of health directly.  That, however, is changing in the new health care environment.  In “Finding an Oasis in the Food Desert: Legal Issues in One Social Determinant of Health”, Dan Shay explores the new payments and programs that are available to support people with diabetes, hypertension and other conditions affected by nutrition and food availability.  In addition to new payment potentials, both for providers and patients in Medicare and Medicaid, there are a range of legal issues that can arise in providing or arranging for food support, from compliance risks associated with beneficiary inducements, to Medicare enrollment, to HIPAA, to documentation issues and more. Dan considers all of these, as well as practical issues that health care providers may face, clarifying a rapidly developing area of both social and health care policy combined, which should be of interest to those who represent a wide range of providers.
“Incident to” services paid for by Medicare have been a hallmark of the program since its inception.  Back in the early 70s, the principle of paying for those services of auxiliary personnel in the physician office as “an integral although incidental part of the physician’s personal professional services” was addressed in two paragraphs in the Carrier’s Manual. Today it is the subject of 9 conditions set forth in regulations with 8 definitions underlying its meaning.  Failure to conform with “incident to” requirements has been the basis for multiple False Claims Act cases continuing to the present. Still further, understanding what it permits is essential to compliance with Stark internal compensation requirements to qualify as a group practice.  In our most recent AGG Note, “The Not So Incidental “Incident To” Rules” we elucidate the conditions that pertain for compliance, explain the significance for Stark purposes and also debunk some myths about whether the government can actually enforce based on failure to comply with the rules.
Alice has been working on physician compensation issues throughout her career. We both address these issues as they arise today in a far more complex environment than many years ago.  Stark rears its ugly head here too.  In the teleconference, “Avoiding Modern Physician Compensation Pitfalls”, Alice explores the varying sources of revenue which provide the funds from which physician compensation can be made in any practice. She elucidates the confounding Stark regulations which apply to both productivity and profit sharing payments, and considers how to address audits as well as potential voluntary repayments in the context of compensation. This brisk presentation includes a 12 page substantive handout.  She has also addressed these issues in Family Practice Management in “Pitfalls to Avoid in Physician Compensation Models”.
The No Surprises Act is actually rather full of surprises.  Its scope is far broader than many realize. In “Clarifying Questions About The No Surprises Act”, Dan explains the types of providers, practitioners and settings to which the law applies in its intention to help patients understand their financial obligations when they obtain services from out-of-network providers. He confronts the law’s approach to specific obligations related to notices, consents, disclosures, and good faith estimates. He explicates the differences between “convening providers” and “co-providers” and their different duties. This teleconference is accompanied by a 14 page substantive handout and includes practical guidance.

Continuing her theme on the need for vigilance in billing company relationships, a second circuit Court of Appeals case [Retina Grp of New England PC v Dynasty Healthcare LLC, No 21-1622-cv (2dCir, July 7, 2023] rejected a medical billing company’s claims against a Medicare Administrative Contractor,(MAC) who misclassified the billing company’s client as non-participating when they intended to enroll as participating. The MAC never notified the billing company of the classification, but paid some claims at the lower rate for non-participating physicians. The problem was discovered a year after the relationship between the biller and client ended. The client sued the biller for negligence, breach of contract and fraud. The court found it had no jurisdiction because the biller neglected to exhaust its administrative remedies before suing the MAC. But the real story in this case is that the rate at which a physician practice is paid is one of the most essential responsibilities of a billing company. The failure of the biller to confirm the proper enrollment of its client is unfathomable. The client’s reliance on the billing company with little oversight of what was being paid and at what rate is also problematic and underscores Alice’s advice regarding the need for clients to monitoring billing even when the activity is outsourced.

It is widely believed that false claims liability attaches only to claims submitted to federal payment programs. This is wrong. An 11th Circuit case, recently upheld the criminal conviction of a physician assistant for submitting faked physical therapy claims with visits charged as well, for patients who were also paid kickbacks for coming to the clinic offices to use their Blue Cross Blue Shield coverage. While the facts were egregious, the point of highlighting this case is to underscore that all compliance programs should include attention to commercial claims submission as well. Besides criminal exposure, more likely is the use of mail fraud and false claims act charges, including cases instigated by whistleblowers, where the claims submitted were to commercial payers.

Following promulgation of two sets of interim final regulations (IFRs) by the Departments of Labor, Treasury, and Health and Human Services, we now have regulations for the No Surprises Act of 2021 which addressed balance billing prohibitions for some providers and transparency issues for all providers.  In our AGG Note, “The No Surprises Act Regulations,” we explain both sets of requirements.  They are both detailed in some ways and vague in others.  What a surprise!
The split/shared rule is back with a few alterations.  The original rule was promulgated through CMS’ manual system, and dates back to the Carrier’s Manual.  CMS has now implemented the rule as a regulation (42 CFR § 415.140), liberalizing several aspects and restricting different aspects.  The new rule expands available settings to include SNFs and nursing facilities, and may now also be applied to new patients instead of just established patients.  In our AGG Note, “Split/Shared Visit Revisions,” we explain the requirements around what constitutes the “substantive portion” of the visit which determines who can bill for the service.  Two methods are available in 2022: component-based or time-based.  For 2023 and beyond, the “substantive portion” can only be time-based.  The split/shared visit rules will form the basis for overpayments and false claims if physicians and their NPPs fail to comply with the rules.

Many of our clients have struggled over the years with the effect of Local Coverage Determinations (LCDs) issued by their local Medicare Administrative Contractor (MAC) in Transmittals, FAQs and newsletters.  They can be found on each MAC's website, but they don't always cover the same topics, MAC to MAC; and they sometimes seem inconsistent with National Coverage Determinations (NCDs) which are available in the NCD manual. In 2019 the Supreme Court said in Azar v. Allina Health Services, that the government, in Medicare, must use a formal notice and comment period to issue a rule that creates a 'substantive legal standard', as for coverage. The controversy since has been what types of decisions fall into that category.  For example, when the split/shared visit rules were first published, they were not in regulation and after the Allina case, were withdrawn. (See AGG Note) The determination of what qualifies as a substantive legal standard is relevant not just to reimbursement and payment issues, but also in false claims cases.  The common wisdom had been that the government could not rely on sub-regulatory guidance for enforcement of its programs. The 9th Circuit in Agendia v. Becerra (July 2021), acknowledging Allina, has staked out a position that LCDs need not be published pursuant to notice and comment if they do not establish a substantive legal standard. The standard in the LCD at issue was that the services be 'reasonable and medically necessary'. The MAC uniformly refused to pay for Agendia's diagnostic testing because it did not meet that standard.  Interestingly, the statute itself sets forth the reasonable and medically necessary standard. But, the MACs have a lot of room for interpretation there. Taken together, this means LCDs can be imposed on providers without having been formally published subject to comments. These cases have also changed the way we do legal research. We now look for MedLearn Matters articles, newsletters, FAQs and other informal publications to inform our guidance. We suggest our clients do the same.

In the face of ever-increasing documentation and reporting requirements, reduced reimbursement, and the general hassle of managing EHRs, some physicians are reevaluating their relationships with Medicare. Towards this end, they may be exploring whether to switch from “participating” to “non-participating” status (where the physician may elect to accept assignment on claims or charge the patient a fee up to the applicable limiting charge), or to opt out of Medicare (entering into private contracts with patients wherein the physician’s services will not be reimbursed at all by Medicare, and they may charge what they please). In investigating these options, however, physicians may encounter additional information regarding how to “withdraw” from Medicare, which may lead to some confusion. Which status is the right status: non-participating, opted out, or withdrawn? And what is the difference between withdrawing from Medicare and the other statuses? Withdrawal from Medicare is appropriate when a physician is voluntarily terminating involvement in Medicare altogether, such as when the physician retires, or closes a practice location and wishes to terminate permanently the billing privileges for that location. It is not meant to be the same thing as switching to non-participating status, nor for opting out and entering into private contracts with patients.

Among the designated health services (DHS) which are the subject of the Stark law restrictions are outpatient prescription drugs.  When the Stark statute was enacted, Part D of Medicare didn't even exist; so, while it was obvious that drugs paid for under Part B, (many of which are provided in physician offices in infusions and otherwise) were covered, the answer was not so clear for drugs paid for by Part D, which may come from pharmacies, including physician owned pharmacies in some places. In fact, there is a specific regulation which sweeps Part D drugs into the ambit of Stark DHS. Physician groups which own pharmacies need to take this into account in their compensation and profit-sharing formulas.

Medicare has the right to recoup Medicare overpayments, pending a provider’s appeal through the byzantine appeals process. Here we address two cases on recoupment: one refusing relief from recoupment pending review – the traditional response to these complaints – and, one forestalling recoupment by issuing a TRO. Since the paralysis of the Administrative Law Judge review process, which has stalled appeals for two years and more despite Federal court orders to move things along, the courts have approached the recoupment issue variably. A Federal court in Ohio refused to enjoin the recoupment of almost $11 million dollars from a home health agency based on extrapolation of a review of 30 records after an initial overpayment determined the year before found about $60,000 in overpayment. Accident Injury and Rehabilitation PC et al v. Azar (C/A No4:18-Cv-02173-DCC). Even though the agency argued that it would be irreparably harmed before it could exhaust its appeal rights, the court found the agency’s success on review was unlikely and that the agency could not show it was deprived of a due process right. By contrast, a SC Federal Court found that a chiropractic practice, from which Palmetto GBA had withheld $1.8 million in response to an AdvanceMed ZPIC audit, was entitled to a temporary restraining order against the recoupment, PHHC, LLC v. Azar, No1:18CV1824 (ND Ohio) since exhaustion of administrative remedies would harm the practice in a way that could not be recompensed, despite what the traditional law requires. The court found that the ALJ process was the most important step in the appeals gauntlet, since new evidence can be introduced there. Since ALJ’s overturn lower decisions 60% of the time (!), this court found the likelihood of success on appeal was great. The TRO was issued. These decisions highlight the types of arguments that can succeed when the government’s appeal process is broken. It has been virtually impossible in the past to get any relief from recoupment pending appeal. There is some light now in this tunnel of process.

The Medicare enrollment system represents an ongoing, high-stakes administrative headache for Medicare Part-B providers. Keeping enrollment data current is a complex, detail-oriented process, but the price for failure is the potential loss of Medicare billing privileges. In his article, “The Medicare Part-B Enrollment Obstacle Course: It Hasn’t Gotten Any Easier,” Daniel Shay revisits the complexities of the Medicare enrollment system, looking at what has and hasn’t changed in the past eight years. He examines real-world examples of Part-B providers running afoul of Medicare’s enrollment requirements, and their largely unsuccessful attempts to challenge their subsequent loss of billing privileges. Finally, he offers practical strategies for maintaining accurate enrollment data to avoid problems in the first place.

Although physicians have long thought that the E/M codes might better be referred to as the S/M codes, in the 2019 Medicare Fee Schedule, new codes which will pay for non-face-to-face services, and some minor liberalizations in documentation requirements have been adopted. We address these in our new AGG Note "Time Becomes Money, And Yet", along with a review of the policies which will go into effect in 2020 for advanced diagnostic imaging and in 2021(!) for new E/M codes, although they are adopted now. Unlike most commentators who have merely reported on the content of these new codes and approaches, we think the fact that they are largely not in published regulations or even Manuals will have major significance for how the government can use them in enforcement or False Claims actions. We highly recommend a review of the Note, which is crisp and to the point.

Physicians have for years complained about the burdens payors impose on them. None of these burdens is decreasing; and physician dissatisfaction with private payors as well as Medicare has been increasing. In response, physicians are finding new ways to avoid or blunt the effect of these burdens through different pathways, including direct contracting with employers, direct contracting with patients, concierge care, and opting out of Medicare. All of these options and the contracts which support them are addressed by Alice in her article "End Running The Payers." She also considers the extent to which these programs do lower physician burden. While the numbers of physicians choosing these pathways is small, all physicians should understand what these programs are, what they offer and the risks and benefits of adopting any of them.

Cancer care represents a major segment of health care expenditures in the USA and the payment to physicians has been perversely oriented around the drugs they administer rather than the services they perform in meeting the complex needs of their patients. Recent history has demonstrated multiple attempts at reforming this payment, including most recently in CMS’ Oncology Care Model which will become Oncology First Model after 2021. In “Paying Physicians for Cancer Care”, Alice explains the inception of this out of whack system, considers reform efforts in commercial payment, looks closely at the OCM and criticisms of it and then sets forth the principles which apply in a new design suggestion which has been presented to CMS. She also sets forth contractual issues to make cancer care payment viable. The new proposal, initially presented in a White Paper which set forth five principles for program design, also figured as the focus of a Health Affairs blog post and an interview with Alice and two other members of the design team.

We have written extensively on the voluntary repayment rules and Dan has added to that with his new publication “Key Questions and Answers for Medicare Voluntary Repayments,”. Alice focuses on a specific unappreciated trap lurking in the audit process as it relates to voluntary repayments in “Heightened Peril From Physician Audits” because an external audit by one of the myriad federal contractors is prima facie credible evidence there is something to be looked at. It is more important today than ever to approach an audit properly in order to come out with a positive result. Internal audits create their own separate obligations to take action. Physician practices and anyone else paid under Parts A and B would do well to take heed.

Physician and other practitioner documentation of Medicare services has been made easier. In the 2020 Medicare Physician Fee Schedule, regulations now permit a physician to merely review and verify (by signing and dating) notes in a patient’s medical record that were made by other members of the medical team, including students, rather than re-documenting the notes. This change both shortens the time physicians spend documenting, will cut down on “note bloat,” where physicians and other health care practitioners have had to reiterate past notes to otherwise comply with documentation requirements. These new rules do not apply only to E/M services: they apply regardless of the type of services including diagnostic testing and procedures. Physicians, however, still need to be careful regarding how they document their services, and ensure that their documentation can withstand scrutiny by auditors.

Because of COVID-19, CMS issued an emergency waiver of certain telehealth requirements, and made additional changes in coverage and reimbursement for a range of telehealth services. Physicians can be paid for the performance of certain telephone visits for both new and established patients; telehealth services no longer need to be provided only in rural settings only; additional telehealth visits may be performed more frequently than previously; nursing home residents may be “visited” using telehealth instead of requiring in-person visits; and direct supervision for services may be provided virtually using real-time audio-video technology. These and other changes are shifting how care is provided to patients for the duration of the federal COVID-19 emergency declaration (still in effect, as of November, 2020). In a video interview, Dan discusses how COVID-19 and increased usage of telemedicine has changed how health care practitioners are caring for their patients now, as well as what may come in the future, in a video interview with Infection Control Today. As he has observed, with health care providers forced to meet with patients remotely, the health care industry is learning just how effective and efficient telemedicine can be. As a result, it is likely that telemedicine will become more widely covered and, hopefully, reimbursed at equal rates in comparison with in-person visits. Watch the 15 minute interview for more of Dan’s thoughts on this issue.

The use of off shore services and personnel to contribute to the delivery of health care has a long standing presence in health care. Yet, state law, federal reimbursement principles and other federal laws create barriers to the use of overseas personnel, resources, information technology and more in the delivery of health care.  Issues of whether supervision can be rendered from afar, licensure requirements, HIPAA restrictions and Medicare reimbursement prohibitions create a challenging context to make these arrangements work.  Dan Shay explores all of this and offers practical contractual language to use in any of these undertakings in his article "The Lure of Foreign Shores: Outsourcing of Overseas Health Care Functions" in the 2021 edition of the Health Law Handbook.

The role of the billing function in physician practices is critical-- so critical that many groups do not trust themselves to do it effectively. They outsource this role. Hospitals are increasingly doing the same thing. The billing function is also essential in emerging transactions such as leasing a practice to a health system, private equity management contracts, MSOs and more.  In her article "Billing Company Contracts: Accountability and Pitfalls" Alice elucidates who does this work, explores and challenges the traditional compensation model for these tasks and offers an alternative approach.  She addresses performance metrics to be considered, and then dissects the allocation of responsibilities to be set forth in these agreements. She further assesses the implications of the Medicare reassignment rules, the OIG's Model Compliance Guidance and its import, and then presents information on what happens when things go wrong.  This little addressed area of the law merits significantly more attention than it has gotten to date.

The OIG’s Work Plan for 2017 will focus on some issues we have already identified as problematic and others which will be of concern to our primary client basis.  Among these will be a focus on transitional care management and chronic care management for which there are, still today, no regulations or manual provisions. The requirements to bill for these services are set forth in FAQs, Fact Sheets and MedLearn network articles.  Alice has published 3 articles criticizing the general approach including one which examines closely the evolution of fee for service CPT codes which pay physicians for time when they are not face-to-face with the patient. Other topics the OIG will address present fair warning to those who would bill for them to make sure they are doing it right, including physician home visits, prolonged services, sleep studies, physical therapy utilization and chiropractic services.

Participation in the Medicare system is an issue that trips up many health care practitioners, and is one on which Dan has written previously 4 separate times. Medicare Enrollment: A Never-Ending High Hurdles Race, Successfully navigating the Medicare enrollment appeals process, Potential problems exist in the Medicare enrollment process, The Medicare Part-B Enrollment Obstacle Course: It Hasn't Gotten Any Easier While obtaining Medicare billing privileges is complicated in and of itself, maintaining such privileges on an ongoing basis can likewise prove complicated. A failure to adequately maintain Medicare enrollment records can lead to a loss or suspension of billing privileges, which can lead to denied claims and potential Medicare overpayments. In two new articles, Dan comes at the issue of Medicare enrollment from opposite angles. In “The Ongoing Ordeal of Maintaining Medicare Enrollment,” Dan addresses the many hurdles which physicians must clear just to maintain Medicare billing privileges. In “Medicare and Non-Covered Services,” Dan examines how physicians provide services outside of the Medicare system, and what that can mean for their continued participation with Medicare.

The health reform legislation called on the Secretary of HHS to develop a pilot program under Medicare to evaluate bundled payment. The Bundled Payment for Care Improvement (BPCI) initiative has launched. The law says the pilot will last five years, must be budget neutral, and if the Secretary finds it to be beneficial to do so can be extended in time and scope. In other words, bundled payment could become mandatory for Medicare for categories of conditions, after 2017! Commercial payors are also experimenting with bundled payment, but with relatively tepid results. In "Bundled Payment: Avoiding Surprise Packages", Alice explores what we know about bundled payment, bringing to bear her experience with the PROMETHEUS Payment® model which is the most sophisticated of these programs. She describes Medicare's previous experience with bundled payment and presents some of the methodological problems with the way the new program is unfolding. Following on her previous work on contractual and governance issues in bundled payment, she addresses those and also issues in payor-provider contracts. There are ways to avoid trouble in these transactions; and bundles for the sake of bundles alone are not worth experimenting with if the bundles are not designed properly. Caveat emptor!
All of the messages to physicians from the new health reform law and the market are that they need to improve the value of their performance in terms of efficiency and cost effectiveness, improved quality and patient-centricity and satisfaction. An obvious means to this is the deployment of less expensive clinical personnel to extend the physician's reach. In "Highest and Best Use Revisited", Dan Shay picks up a topic last considered by Alice in 1999. He describes the new pressures for physicians to focus closely on when and how to use non-physician practitioners to deliver care. He explains Medicare's rules with particular attention to nurse practitioners and physician assistants and reports on the positive impact that proper use of these ancillary personnel can have on the new mandates for improved performance.

With the questions about the health reform legislation's constitutionality resolved, the pace of change in the provider community has accelerated. In a well documented, sweeping review of physician practice developments, with special attention to how physicians can remain independent, Jeff Goldsmith in his very interesting commissioned paper for the Physicians' Foundation looks at significant trends. These include rising costs for physician practices, widespread retirement of baby boomer physicians in the near term, and the ways in which health policy gives preference to hospital employment, which likely is unsustainable in current forms. Looking at The Future of Medical Practice and The Need to Innovate he offers examples of approaches including micro-practices, well supported IPAs, and groups which take professional services risk payments, among other innovations. He offers policy recommendations for change. He makes the case that hospital employed physicians are vastly less productive than their private practice colleagues and their financial performance lags substantially as well. He posits that many of the current arrangements will be unsustainable. We have been making the same points since 2009 as well as more recently.

We would take issue with his views of innovative payment initiatives though, since he does not address the PROMETHEUS Payment® model which does not give physicians insurance risk, but rather risk to manage care effectively. Not only that, but its budgets (Evidence-informed Case Rates®) begin with good, clinical practice guidelines. Jeff's arguments regarding financing the medical home don't go as far as what we have described as to how PROMETHEUS Payment can sustain the medical home. Physicians today are paid fee for service for a non-insulin dependent diabetic about $311 for a year of care. Using the PROMETHEUS Payment model, the same physician would be paid for the same patient for the same year of care $2329 AND the system would save substantial amounts of money currently spent on potentially avoidable complications. Physicians should learn about this!!!

New payment models are only part of the innovations physicians will have to adopt.  We now offer a suite of useful tools that can be deployed by physicians in shaping their own new futures including (1) our two versions of the clinical integration self-assessment tool -- one for networks  and the other for group practices, organized medical staffs or newly coalescing ACO-type organizations; (2) our Three Tuesday Teleconferences addressing leasing the practice, co-management, and bundled payments; (3) our teleconference on compensating physicians for quality and value as well as our articles on the subject. Physicians can be far more proactive in designing their futures. The moment is now.

Bundled payment has been touted as the next, new aligned incentive payment model. Although rarely defined in the many discussions about it, bundled payment by definition combines two different providers, typically traditionally paid differently, into one budget or, in more radical versions, subject to a single prospective payment. Today's bundled payment models usually include an episode based payment. The Medicare ACO program anticipates a bundled payment model in its requirement that participating entities have the ability to allocate dollars to the disparate participants. In fact, though, in that program hospitals, physicians and others will be paid on a business as usual basis, and then, at the end of three years, if they have saved money over a benchmark there will be one payment to share. PROMETHEUS Payment offers a different model. If providers want to be paid separately, they are at risk together in a single budget, but PROMETHEUS Payment has a software program that can allocate savings appropriately to the diverse participating providers, based on good clinical practice guidelines which form the basis for the case rate. The incentives are the same, but the payment methods differ. Many commercial bundled payment and ACO programs follow the Medicare model. Herein lies the rub. Unless there are clear rules at the outset, providers may end up in the rancorous fights that characterized the few instances in the 1990s when PHOs received dollars, usually held by the hospital. CMMI asked Alice to present a technical assistance webinar for potential participants in their Medicare Bundled Payment Initiative on contractual and governance issues among providers in administering bundled payment models, and in "Avoiding Food Fights: The Value of Good Drafting to ACO Physician Participants" she elucidates the types of policy decisions that should be made today and documented governance documents and contracts among providers to avoid the problems of tomorrow. The third of our Three Tuesday Teleconferences addresses many of these issues with an opportunity for participants to ask questions.

In 2007, Alice conducted a unique survey of the extent to which physician groups compensated their employed physicians for quality.  As physicians consider deploying a range of strategies to enhance their performance, a new snapshot of the state of the art of compensating physicians seemed a worthwhile undertaking. Again, with the assistance of the American Medical Group Association (AMGA) Alice surveyed their membership. In "Compensating Physicians for Quality and Value: A Changing Landscape", she provides an initial report on the responses which came from three times as many organizations as four years earlier.  In 2008, in her longer Health Law Handbook chapter, Alice described the advent of Pay for Performance programs as the primary stimulus to these compensation models. Now, in "Bolstering Change: Physician Compensation for Quality and Value" she looks at the phenomenon of compensating physicians for quality performance and increasingly for value in cost effective approaches to care. In addition to setting the issue of physician compensation in the current enhanced value context, Alice also looks at data on how hospitals are dealing with their employed physicians on this front, and concludes that much like her observations with Jim Reinertsen of those hospital employment/integration strategies without content, she finds that many hospitals are missing a real alignment opportunity by focusing solely on wRVUs in compensating their employed physicians. And, more and more, attention will have to be paid to the cost effectiveness of physician behavior which drives the group's or hospital's revenues.
The health reform legislation provides an unprecedented emphasis on quality measurement, quality improvement, efficiency and value.  Value is improved quality at lower cost.  For providers, changing their clinical processes to meet these new demands will be essential.  Both hospitals and physicians will be facing Medicare value-based modifiers beginning in 2012.  Hospitals will further face reductions in payment for avoidable readmissions as well as for hospital-acquired conditions.  Because the two payment modifiers for hospitals and physicians, although separate, will be coordinated, this generates an extraordinary motivation for hospitals and physicians to work together.  In “The New Value on Provider ‘Value'” Alice elucidates the many aspects of health reform that reflect these new mandates.  She looks at the restrictions Congress has placed on the ability to use cost in comparative effectiveness analysis as an example of a failure of public policy.

A case decided in the Commonwealth Court of Pennsylvania has taken the quality-payment nexus further without any “never event”, or a finding of fraud, or even a bad outcome to the patients involved. In Pinnacle Health System v. Department of Public Welfare (2008 WL 140985) the hospital appealed from payment denials affirmed by the Bureau of Hearings and Appeals. The Medicaid agency denied payment for psychiatric hospitalizations where the patients were not seen by a psychiatrist on a daily basis. The hospital argued there was no regulation requiring it. The agency argued that this failure caused care to fall below the regulatory requirement that care be rendered in accordance with "accepted medical treatment standards." Both sides had experts -- the hospital's testifying to the fact that daily visits were not medically necessary, the agency's that daily visits were the standard of care. While the standard of judicial review for administrative purposes was whether the determination by the agency was supported by substantial evidence, the court held that even though the standard of ‘accepted medical treatment standards’ was general, it was not improperly vague and did put providers on notice of what was expected of them.

Considering (1) standard managed care contract language regarding treatment in accordance with accepted standards of care, (2) the burgeoning expectations that American health care should be provided at higher levels than it is, (3) increasing fraud and abuse liability for quality failures and (4) that malpractice caselaw which addresses the standard of care has imposed as the standard of care treatment regimens not widely applied, the Pinnacle case offers a tightening view of the quality imperative. Without a finding of malpractice, fraud, or a “never event” payment denial for failure to deliver services properly is a new reason to do the right thing at the right time in the right way.

Pay for performance programs show no signs of abating in popularity, yet their impact remains equivocal. Whether quality would be better if physicians within groups also paid themselves based on quality performance is unknown. If the incentives of P4P are to have impact, how are those monies distributed to the individual physicians once the group gets paid? There is virtually nothing in the literature on point. In “Physician Compensation for Quality: Behind The Group’s Green Door,” Alice looks at the data on P4P programs, the basics of traditional compensation within groups and then presents the findings from a unique survey which was sent out on her behalf by the AMGA producing responses from 14 groups around the country who are variably paying for quality as part of physician compensation. Some report significant improvement in quality performance too. Alice then looks at the payment reform models on the horizon and concludes that traditional notions of productivity, on which most current group compensation models turn, will not reward what the new systems, and most particularly the PROMETHEUS Payment® model ( is designed to generate. She examines whether the Stark rules on compensation will be a barrier to changed, creative approaches, concludes that it will not, and then looks at what employment contracts will have to accommodate to make physician compensation for quality within groups real and of value to both patients and physicians.

Pay for performance, while a positive development in terms of focusing attention on the relationship between quality results and payment systems, cannot sustain itself as a business model. How PROMETHEUS Payment® addresses the shortcomings of P4P is important to understand. In addition, group practices are ideally suited to take on PROMETHEUS Payment®, but only if they also change their systems to be more efficient with measurable quality. In "Getting Beyond P4P: PROMETHEUS Payment® and Group Practice", Alice elucidates the potential positive nexus between the new payment model and group configurations.

“Pay for Performance”(P4P) is a new phenomenon intended to incentivize physicians and hospitals to render high quality by paying them differently if they perform in accordance with criteria. From Leapfrog, to CMS, to the Bridges to Excellence program and the activities of the Integrated Health Association in California, there are many variations on this theme. That the government is in this game can also be seen in a little noted provision in HR 1 that the formerly ‘voluntary’ hospital quality reporting initiative is now not quite so voluntary since hospitals that do not report their data to CMS will experience a .4% reduction in their Medicare payment, each year they do not report. In “Contracting for Quality: Then, Now and P4P” we explore the impetus for these programs, describe and analyze their principal manifestations and consider how they relate to the contractual context within which they arise, both for hospitals and physicians. We conclude that while pay for performance is an important development, it is, at best, transitional and, as we first discussed in our White Paper “Doing Well by Doing Good: Improving the Business Case for Quality” these initiatives do not make an adequate case for offering physicians improved financial margins despite increased revenue. In addition, because these are ‘add-ons’ to the existing contractual environment and the P4P programs often unfold with no supporting contract at all, they present real and unexplored challenges for the providers who participate. We continue to believe that payment systems that carve out a new approach with many of the same goals and features of these P4P programs are better.
The health reform legislation has put a firm stake in the ground with respect to expanding the measurement of quality for many providers.  One of its principle vehicles was to solidify the former Physician Quality Reporting Initiative (PQRI) into a Congressionally mandated Physician Quality Reporting System (PQRS).  Although what is reported has nothing to do with whether either quality standards were met or quality itself improved, with the financial incentives available to those who report voluntarily, the idea is that physicians will learn to report quality effectively. By 2015, physicians who do not report will be penalized. In "PQRS and Its Penumbra", Dan Shay explores the implications of the program, how it relates to meaningful use financial incentives and the pitfalls, including false claims liability, that lurk in ineffective reporting. This program is a must know for physicians.
Among the very significant fraud and abuse changes in the health reform legislation, Congress made it clear that they expect the regulators to keep bad actors out of Medicare.  One of the techniques they will use to do this is the revamped and bolstered Medicare enrollment process.  In his new consideration of these issues, “‘Halt! Who Goes There?’: Coping with the Continuing Crackdown on Medicare Enrollment,” Daniel Shay elucidates the new rules, explains their practical implications, and then reviews 18 months worth of Administrative Law Judge opinions dealing with appeals of enrollment denials.  However, the challenge is not merely getting in the front door, but maintaining enrollment, and the administrative burdens have grown exponentially.  This is a burgeoning area that all providers need to pay attention to.
For the 2008 Medicare Physician Fee Schedule (MPFS), Medicare published rules with regard to the prohibition on marking up diagnostic testing which became effective January 1, 2008. On January 3, they were ‘suspended’ until the end of the year. With the 2009 MPFS, they were republished in final form offering two tests as to whether the prohibition is applicable: (1) whether the supervising or interpreting physician spends 75% of his time with the group; and if so, then there are no further restrictions to consider; if he does not then (2) whether the location where the service is provided is co-located with the office of the ordering physician, where that physician provides substantially the full range of his services on a regular basis. This is more restrictive than Stark; and it applies to all diagnostic testing, not just Stark DHS. Stark is about whether the service can be provided and be covered by Medicare. The anti-markup rules are about how much the billing entity can charge. The calculation of the ‘net charge’ when the prohibition does apply, if not obtained on a ‘per transaction’, ‘per click’ or ‘per study’ basis, is metaphysical at best. These rules relate to, although were not published with, the rules under Stark on “under arrangements” which also now extend far beyond the traditional hospital setting to all arrangements where a physician owned entity furnishes DHS to another entity which bills the DHS to Medicare --- most particularly, but not exclusively, hospitals.
The Medicare physician reimbursement program has been criticized, for years, as a fee-for-service program which, by definition, incentivizes physicians to overuse because the more you do the more money you make. In addition, there is no question that Medicare quality results have lagged, as quality results across health care have failed to reach optimal levels. In her polemic in the 2009 HEALTH LAW HANDBOOK, “Getting The Team Paid: How Medicare Physician Payment Policies Impede Quality”, Alice looks at four principles now known to enhance quality, and how Medicare’s own payment policies thwart the ability of physicians to deliver high quality care. Addressing specific Medicare rules that are widely applicable, she also confronts head on the now almost insufferable challenges presented by the Stark statute and its interpretations. As she points out, Pete Stark, himself, now regrets the law’s enactment. The regulators have created a monstrous regulatory program which rivals the Tax Code in its complexity without adding value. It doesn’t even work. Alice contrasts the burdens that Medicare imposes with the PROMETHEUS Payment® model ( which is a provider payment model explicitly designed to improve quality, pay providers more rationally, lower administrative burden and enhance patient engagement.
The implications of the Stark Phase II regulations when considered in light of Medicare reimbursement restrictions merit a new look.. In our AGG Note "Medicare Reimbursement Through The Stark Looking Glass", we elucidate some of the contradictions and unappreciated pitfalls lurking in issues pertaining to physician-to-physician referrals, in-office ancillary services, incident to billing, reassignment, and diagnostic testing. Unlike our previous AGG Notes, “Stark II, Phase II: The Interim Final Story”, (May 2004) and “Much Better Late Than We Thought: Stark II Final Regulations”, (February 2001) rather than reporting on the contents of the Stark regulations, this new AGG Note is more analytical. It should be read with the other two for a complete understanding of the internecine workings of Stark.
“Incident to” principles in Medicare have confused providers for years and have confounded regulators. This topic has appeared repeatedly in the OIG’s Work Plans, but efforts to revise the rules have failed to come to fruition. Now the OIG has finally issued a report criticizing the “Prevalence and Qualifications of Nonphysicians Who Performed Medicare Physician Services”. It has always been the case that for payment of any personnel under Medicare you must first comply with state law. But this report chastises the fact that many state laws permit physicians to delegate tasks to non-licensed individuals whom they supervise. As long as that relationship complied with the ‘incident to’ standards which require that a physician be on premises while the personnel render services in a course of treatment directed by the physician, such delegation is consistent with Medicare law. The OIG was not amused. “Nonphysicians performed almost two-thirds of the invasive services that Medicare allowed the physicians. An invasive procedure involves entry into the living body (as by incision or by insertion of an instrument). Nonphysicians performed almost half of the noninvasive services that Medicare allowed the physicians. Unqualified nonphysicians performed 21 percent of the services that physicians did not perform personally.” These nonphysicians did not possess the necessary licenses or certifications, had no verifiable credentials, or lacked the training to perform the service. It is unclear how the OIG came to these conclusions, but they recommend that everyone be compliant with state law (hard to argue), that incident to services be identified by a modifier (this has been done before) or that physicians be required to perform all services requiring licensure (this will bring medical practice to a halt). That said, we can expect in the current environment of pressure to save money in the program that ‘incident to’ services will become a target. Physicians are well advised to revisit their use of ancillary personnel under state law and the Medicare program rules.
CMS has been tinkering with the Medicare enrollment process for years. As part of the increasing fraud and abuse prevention arsenal, the theory has been that if they gather more information at the outset, they will be able to weed out ‘bad actors’ from obtaining access to Medicare dollars. As a result, the burdens in applying have multiplied; and now they have severely limited the ability to reach back in time to bill retroactively for claims which have accumulated pending approved enrollment. Worse yet are the burdens on already approved providers to update Medicare when there are changes in various aspects of their operations, ownership and more. Some of the rules are confusing. You don’t have to tell them that you employ physician assistants when you enroll, but you must notify Medicare if you terminate a PA! In his chapter in the 2009 HEALTH LAW HANDBOOK, “Enrollment in Medicare: Fraternity Hazing or Keeping Out Bad Actors?” Dan Shay examines the history of the process, basic requirements, penalties and appeals, and then, with specific attention to physician practices, he sets forth a range of common scenarios where there are reporting pitfalls lurking for groups which do not understand these increasingly burdensome rules.