The Latest in P4P Arrangements: How to Remain Compliant

CSHA 2015 Annual Meeting & Spring Seminar

Paul R. DeMuro

Of Counsel

Broad and Cassel

pdemuro@broadandcassel.com

Jennifer Johnson

Partner

VMG Health

jenj@vmghealth.com

Overview

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Introduction

P4P Trends, Clinical Integration, Informatics and Data Analytics

Regulatory Guidance for Structuring Arrangements

The Evolution of P4P

FMV, Arrangement Types and Tips for How to Remain Compliant

P4P Trends, Clinical Integration, Informatics

and Data Analytics

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New Payment Models

• Fee for Service & Shared Savings

• Fee for Service & Managed Risk

• Episodic Bundled Payment

• Pay for Performance

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• Measuring clinical integration

• Sharing data

• EMR

• Privacy

• Data collected

• Other considerations

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New Contract Provisions

New Contract Provisions

• Clinical integration standards • Quality metrics

• Shared savings • Threshold shared risk

• Enterprise performance versus clinical integration

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Regulatory Guidance for Structuring Arrangements

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• Clinical Integration

• Concept introduced in FTC/DOJ Statements (1996)

• Handful of FTC advice letters since

• Common features of clinical integration:

• the use of common information technology to ensure exchange of all relevant patient data

• the 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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Antitrust

• Anti-Kickback Act • Prohibits remuneration for referrals for care reimbursed by federal or

state program

• Criminal “intent” required; standard lowered by ObamaCare legislation

• Civil Monetary Penalty Law • Prohibits remuneration to beneficiary likely to influence selection of a

particular provider

• Civil statute; no criminal intent required

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Fraud and Abuse

• Fraud and Abuse Prohibitions implicate:

• wellness programs/health fairs/health promotion;

• Patient Assistance Programs;

• transportation/lodging assistance;

• promotion of adherence to treatment regimens;

• incentives to remain in network;

• readmission reduction;

• end of life–palliative care programs; and

• payment of premiums for Qualified Health Plan (“QHP”) exchange enrollees

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Fraud and Abuse

• OIG proposes to amend the definition of “remuneration” in the CMP regulations at 42 CFR 1003 by adding certain statutory exceptions for: • Certain renumeration that poses a low risk of harm and promotes

access to care.

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OIG October 3, 2014 Proposed Rules Revisions to Safe Harbors Under the Anti-Kickback Statute and Civil Monetary Penalty Rules

• Our goal is to protect beneficial arrangements that enhance the efficient and effective delivery of health care and promote the best interests of patients, while also protecting the Federal health care programs and beneficiaries from undue risk of harm associated with referral payments.

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OIG October 3, 2014 Proposed Rules (con't.)

• OIG specifically solicits comments on the following areas of concern: • Should a hospital’s decision to rely on protocols based on

objective quality metrics for certain procedures ever be deemed to constitute reducing or limiting care?

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OIG October 3, 2014 Proposed Rules (con't.)

• Should hospitals deciding to compensate physicians in connection with the use of such protocols be required to maintain quality-monitoring procedures to ensure that these protocols do not, even inadvertently, involve reductions in care?

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OIG October 3, 2014 Proposed Rules (con't.)

• Sharing patient information is critical to clinical integration

• HIPAA generally accommodates sharing among patients’ current provider “team” for therapeutic or payment purposes

• State laws protect “special information”; e.g., • HIV/AIDS

• Mental Health

• Genetic

• Drug and Alcohol Treatment

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Information-Sharing

• Is becoming key, whether or not physicians are employed

• May be fully integrated, physician to physician or hospital to hospital

• Should make extensive use of electronic health records (EHRs)

• Hopefully, interoperable in nature

• With informatics technologies

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Clinical Integration

Key Informatics Technologies • Clinical Decisions Support Systems (CDSS)

• Computerized Physician Order Entry (CPOE)

• E-Prescribing

• Mobile Health or mHealth

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Health Information Technology • Is key in the transition from fee-for-service to

payment for quality and cost-effectiveness • However, the stakeholders, including the lawyers need

to be constructive in the design of clinically integrated systems

• Everyone, including the lawyers have to get out of their silos

• It is not healthcare business as usual • The M & A lawyers have to see more than acquisitions,

and the regulatory lawyers have to see more than • fraud, and abuse, Stark self-referral, tax-exemption, and regulatory

problems

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• Health Plans, Physicians, Providers, and Ancillary Service Businesses

• To align financial incentives

• Bend the cost curve

• Compensate all fairly in the transition for doing the right things

• And, to minimize the legal risks for all

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All Stakeholders Must Work Together

• A new concept?

• Data necessary to set metrics

• Is the data clean?

• Is the data comparable?

• May be used to measure increased quality and/or decreased costs.

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Data Analytics/Big Data

• Healthcare 3.0

• Personalized medicine

• Genetic markers

• Is the data comparable?

• Focus may be on as little as one patient.

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Predictive Analysis

The Evolution of P4P

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Physicians and hospitals need to collaborate more than ever – P4P drivers

• Affordable Care Act – 6 sections on P4P

• Security – healthcare reform, changing reimbursement

• Investment requirements for information technology

• Participate in risk-based contracting, ACOs, quality initiatives

January 26, 2015 – HHS Secretary Burwell Announces P4P plan

• 85% of all traditional Medicare payments to quality or value by 2016

• 50% percent of payments to alternative payment models by the end of 2018 (ACO, bundled payments)

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P4P Physician Alignment Arrangements Growing

• Sharing savings was a slippery slope -> quality focus for years

• Hospital Quality Incentive Demonstration (HQID) for over 250 hospitals: 2003-2009

• Physician Group Practice Demonstration for ten physician groups: 2005-2010

• In 2008, the Robert Wood Johnson Foundation and California HealthCare Foundation

reported results of a national program that tested the use of financial incentives to improve

the quality of health care. Tested seven projects across the nation that adjusted

compensation based on performance scores – hospitals and physicians. Notable findings:

• Financial incentives motivate change

• Alignment with physicians is a critical activity for quality outcomes

• Public reporting is a strong catalyst for providers to improve care

• February 2012 – Committee on Ways and Means – 1 example

• UnitedHealth Group discusses results of its Premium Designation Program (PD)

• Results show over 50% decrease in some complication rates

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P4P Background - Quality

• Savings alone (capitation) no longer in the mix

• 13 Gainsharing Opinions (2001-2008) guidance

• Quality thresholds key

• ACO Business News Reports on programs– always mixed reviews – late 2014-early 2015

• ACO Pioneer Program – 24% earned shared savings in 1st 2 years, 19 of 32 remain

• Wellmark/BCBS 5 ACOs – improved quality 35% and saved $12 million over 2 years

• Sharp dropped out because it was at risk for “a significant shared loss”

• Medicare ACO New proposal – 3 models – taking comments now

• Keeping 1 sided model, but want to reduce savings rate from 50% to 40% - consensus this track is key

• Adding 3rd track, 75% savings, but downside 40% to 75%

• Payments for telehealth included

• Multiple Models and arrangements exist today beyond commercial and Medicare ACOs

• 2013 Greater New York Hospital Association - 100 hospitals desired to work with participating physicians to account

for the use of hospital resources. Physicians that met hospital quality targets while lowering costs could be

compensated a portion of the savings.

• Medicare Shared Savings Program

• Commercial payor programs growing exponentially

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Savings & Quality Combined

• U.S. Department of Health and Human Services requested study

• 129 VBP programs (91 P4P, 27 ACOs, 11 bundled payments)

• Measures: clinical quality, cost, outcomes, experience

• Recommendations:

• Set measurable goals, use national data

• Case-mix adjust outcomes measures, use broad set of measures, identify overtreatment measures, monitor

• Evolve from narrow process measures to broader set emphasizing outcomes

• Sponsor engage providers in design/implementation

• VBP sponsors should collect a common set of factors to find best working program

• Need more information:

• HHS should develop a structured research agenda to address gaps in VBP knowledge base

• CMS should study private-sector programs, program design information not available

• Study changes and investments, experiences and challenges

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2014 RAND Report: Measuring Success in Health Care – Value Based Purchasing Programs

• Standard process leading up to P4P payments • Recognized organization identifies quality metrics or average costs • Reporting measures is required, or costs are tracked • Benchmarking data is gathered • Payments for outcomes or savings is observed in market

• FMV can now be established

• Justification for payments changing

• Payments for Reporting (ie: PQRI) • Pay for Process • Pay for Outcomes • At risk for sub-par quality

• Common factors included in P4P arrangements • Lowering costs without sacrificing quality • Quality outcomes payments– individual, services line level, entire population • Use of technology

• Valuation drivers • Outcomes • New dollars coming in from 3rd parties • Service line or practice level

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Evolution of P4P Arrangements – What We Do Know

FMV and Tips for How to Remain Compliant

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• Based on the anti kickback statute, and other healthcare regulations and guidelines, any transaction

between hospitals and physicians must be at Fair Market Value.

• The amount at which property would change hands between a willing seller and a willing buyer when

the former is not under any compulsion to buy and the latter is not under any compulsion to sell and

when both have reasonable knowledge of the relevant facts, absent the consideration of referrals.

• Provides a conclusion which should not reflect consideration for value or volume of referrals.

• Offer equal P4P opportunities to all providers

• Do not tie P4P compensation to expected referrals

• P4P comparables

• Stick to regulatory guidance when it comes to paying for quality or shared savings

• Governmental programs and third party payors are good market comparables 29

Fair Market Value & P4P

• Advisory Opinion 00-02 (non-physician hospital employee cost savings reward programs) could not approve pre-payments without understanding:

• The amount of the payment

• The person the payment will made to

• The action or activity that will be proposed

*Therefore, these factors must be essential in order to determine if payments are proper

• Advisory Opinion 01-01 (Cardiac Surgery Gainsharing) favorable partially due to:

• Transparency setting out verifiable cost savings tied to specific actions

• Limited duration and specific scope

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OIG Opinions – General P4P Guidance – Valuation Lens

• Quality measures should be clearly and separately identified • Quality measures should utilize an objective methodology verifiable by

credible medical evidence • Quality measures should be reasonably related to the hospital’s practice and

consider patient population • Do not consider the value or volume of referrals • Consider an incentive program offered to all applicable providers • Incentive payments should consider the hospital’s historical baseline data

and target levels developed by national benchmarks • Thresholds should exist where no payment will accrue and should be

updated annually based on new baseline data • Hospitals should monitor the incentive program to protect against the

increase in patient fees and the reduction in patient care • Incentive payments should be set at FMV

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Regulatory Guidance - Quality

Gainsharing Guidance – Favorable OIG Opinions • Each member of the physician group should have medical staff privileges • The arrangement should be administered by a program administrator, whose

compensation was not tied in any way to the incentive compensation. • A program administrator should identify cost-savings metrics after reviewing historical practices and

understanding its medical appropriateness. • The savings targets should be “re-based” at the end of each year in multi-year arrangements. • The hospital should calculate the cost savings separately for each group and for each cost savings

recommendation.

• The arrangement should include objective measures to monitor quality (i.e., CMS Specification Manual for National Hospital Quality Measures).

• Incentive payments should be set at FMV ------------------------------------------------------------------------------------------------------- • More complex factors should be considered for allocating savings associated

with patient population and bundled payments • Responsibility for outcomes and savings • Risk adjustment for patient population • Responsibility for infrastructure costs (if applicable)

• Caps are prudent and seen in demonstration projects

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Regulatory Guidance – Shared Savings

Physician Arrangement Types with P4P Less risk for physicians - traditional deals with P4P component Simpler FMV

Clinical (% of base add-on) Medical directorships (hourly rate differential) Call coverage (portion at risk for outcomes)

Medium risk - Co-management of service line = fixed + variable fee More intricate FMV

Quality outcomes Sometimes savings

More risk for physicians Complex or model-based FMV

ACO type models - Quality initiatives provide gate or extra upside Upside based on actual savings Downside risk Bundled Payments

• The following payment allocations may be included within a clinical integration model

• Bundled payment splits – understand who is providing what service

• Quality and Shared Savings splits among ACO entity and hospital and physicians

• FMV process - balanced approach for overall model should be assessed

• Third party funded or from hospital

• Infrastructure cost recovery

• Buy-in or participation Fee

• Time spent/effort – hourly rate paid

• Split of savings – existence of minimum savings threshold

• Split of quality - benchmarks utilized

• Upside and downside risk

• Care coordinator payments – ie: Nurse care manager

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Clinical Integration Payment Models

• Start small

• Have a written agreement

• Modest set of metrics – perhaps consistent with those found in both commercial ACOs and Medicare ACOs

• Update and rebase metrics annually

• Understand who is driving cost savings and quality

• Have safeguards which prevent cherry picking and lemon dropping

• Identify flow of funds allocation early on in process

• Understand your FMV opinion and underlying assumptions

Compliant P4P payment formula = Good Data + Logic + FMV guidance

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P4P Program Starting Guidelines

Thank you!

Paul R. DeMuro Broad and Cassel

pdemuro@broadandcassel.com

954-745-5224

Jen Johnson VMG Health

jenj@vmghealth.com 214-545-5882

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• Health Care Attorney at Broad and Cassel, Fort Lauderdale, Florida

• Practices extensively in the areas of health reform, emerging markets, healthcare information technology, biomedical informatics, accountable care organizations, clinical integration, and value-based purchasing

• PhD Candidate in Biomedical Informatics at the Oregon Health & Science University School of Medicine

• Post-Doctoral Fellow, Oregon Health & Science University

• Chair, Finance Committee, American Medical Informatics Association

• Penned or co-penned over 140 publications/commentaries/columns, including Predictive Analytics – The Future of Healthcare?

• Delivered approximately 400 presentations around the world

• Member of the bars of ten jurisdictions.

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Paul R. DeMuro, CPA, MBA (Finance), MBI (Biomedical Informatics), JD, PhD Candidate, FHFMA, FACMPE, CHC

• Partner at VMG Health • Leads Professional Service Agreements Division

• Previously with KPMG’s litigation department

• Former Finance professor from the University of North Texas

• Published and presented over 50 times related to physician compensation and fair market value

• Board meetings, articles and presentations on P4P initiatives

• April 2014 HFM Magazine “Evaluating The Fair Market Value of Pay for Performance”

• Finance Committee Attendance on major P4P initiatives

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Jen Johnson, CFA