Transforming the Business of Oncology Through Science and Technology
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Transcript of Transforming the Business of Oncology Through Science and Technology
Transforming the Business of Oncology through Science and Technology
Adria WarrenFoley & Lardner
Tynan OlechnyPYA
Curtis BernsteinPinnacle Healthcare Consulting
Oncology Business Transactional Issues – At the Point of Transaction and Over the Life
of an Affiliation
Adria WarrenFoley & Lardner
Fair Market Value –Why It Matters
Page 4
Fair Market ValueIn the healthcare context, -- FMV is generally defined to mean FMV for actual and necessary items furnished or services rendered, based upon an arm’s length transaction, and without taking into account, directly or indirectly, the value of volume of any past or future referrals or the ability to influence the flow of business generated between the parties. (70 Fed. Reg., 4858, 4866 (2005))
-- Commercial Reasonableness is generally defined to mean a sensible, prudent business arrangement from the perspective of the particular parties involved, even in the absence of referrals (69 Fed. Reg. 16093 (2004))
Page 5
FMV – Why It Matters Regulatory Framework
Federal Anti-Kickback StatuteFederal Stark LawFalse Claims ActCivil Monetary Penalty LawTax Exemption Issues
Private Benefit and Private Inurement Intermediate Sanctions
State Laws
Page 6
FMV – Why It Matters Anti-Kickback Statute
Prohibits knowing and willful offer or receipt of remuneration intended to induce or arrange for referrals of business paid for by Medicare/Medicaid programs
Civil monetary and criminal penalties CMP of $50,000 per violation Criminal penalties: $25,000 per violation
and/or up to five years in jail Exclusion
Page 7
FMV – Why It Matters Anti-Kickback Statute
Any purpose test and problem of mixed motives ACA § 6402(f)(2): violation does not require actual
knowledge of AKS or specific intent to commit a violation
ACA § 6402(f)(1): claim for items or services resulting from AKS violation constitutes a false claim under the False Claims Act
Safe Harbors provide immunity Safe harbors are not required Many safe harbors require FMV and commercially
reasonable remuneration
Page 8
FMV – Why It Matters Anti-Kickback Statute
Is the purchase price a disguised kickback from the buyer (overpayment) or seller (underpayment) to induce post-deal referrals?
Valuation may help negate an adverse inference of improper intent
To the extent that a payment exceeds FMV, it can be inferred that the excess amount over FMV is intended as payment for the referral of health-program business. U.S. v. Lipkis, 770 F.2d 1447, 1449 (9th Cir. 1985)
Page 9
FMV – Why It Matters Stark Law
In general, if a physician has a direct or indirect financial relationship with a DHS entity: The physician may not make a referral to that entity for the
furnishing of designated health services (DHS) for which payment otherwise may be made under Medicare
And the entity may not bill Medicare, an individual, or another payor for the DHS performed pursuant to the prohibited referral "Designated health services" include all inpatient and outpatient hospital
services; lab; imaging; pharmacy; DME; radiation therapy; PT; occupational and speech therapy; parenteral and enteral drugs, nutrients, and supplies; prosthetics; orthotics; and home health services
… unless a specific exception applies
Page 10
FMV – Why It Matters Stark Law $15,000 civil monetary penalty assessed against physician for
each prohibited referral DHS entity must refund DHS billed pursuant to a prohibited
referral $15,000 civil monetary penalty assessed against DHS entity for
billing for service rendered pursuant to a prohibited referral, unless it can show that it did not have actual knowledge and did not act in reckless disregard or deliberate ignorance of the prohibited referral
$100,000 civil monetary penalty for circumvention schemes Requirement to report to HHS financial relationships with
physicians upon request; $10,000 penalty for failure to report Potential exclusion
Page 11
FMV – Why It Matters Stark Law Strict liability/zero tolerance law Burden of proof is on defendant
Violations are not remedied until referring physician/DHS entity repays excess compensation or arrangement is terminated
Exceptions: Isolated Transactions Personal Services Arrangements Bona Fide Employment Rental of Space, Equipment Fair Market Value Compensation Indirect Compensation Arrangements
Multiple exceptions have fair market value requirement
Page 12
FMV – Why It Matters Stark Law 2016 2016 MPFS Nov. 16, 2015 – Helped reduce technical violations Clarifications:
Existing policy Additional explanation where it appears stakeholders would benefit
from clarification New Exceptions:
Assistance to a physician to compensate a non-physician practitioner
Timeshare arrangements Revisions to existing definitions, exceptions, and other rules:
Signature requirement Unlimited holdover arrangements Renewing arrangements that qualify for the exception for FMV
compensation
Page 13
FMV – Why It Matters False Claims Act Permits private persons -- “relators” or “whistleblowers,” to
recover damages on behalf of the United States from, any person who: Knowingly presents, or causes to be presented, a false or
fraudulent claim for payment or approval; Knowingly makes, uses, or causes to be made or used, a false
record or statement material to a false or fraudulent claim; Conspires to [defraud the government]; or Knowingly makes, uses, or causes to be made or used, a false
record or statement material to an obligation to pay or transmit money or property to the government or knowingly conceals… avoids or decreases an obligation to pay or transmit money or property to the government.
Violations of the FCA are punishable by up to $21,583 per claim, plus treble damages – more than doubled in 2016.
Page 14
FMV – Why It Matters Tax ExemptionIRC § 501(c)(3) Entities tax-exempt under this section must operate exclusively for tax
exempt purposes and not engage in compensation practices that result in private inurement
Penalties for non-compliance Intermediate sanctions Loss of tax exemption
Many hospitals, health systems, academic medical centers are tax exempt
General guidelines Compensation to physicians should be FMV for services provided Total compensation paid should be reasonable for the market and
responsibilities IRC § 162 – “reasonable” compensation is the amount that would ordinarily
be paid for like services by like enterprises under like circumstances
Page 15
FMV – Why It Matters State Laws
State Law Issues State self-referral laws
May apply to a broader scope of relationships than Stark (not just physician financial relationships)
May apply to a broader scope of services than “DHS” State anti-kickback issues
May apply with respect to all services, not just those payable by Medicare or other Federal healthcare programs
May include “fee splitting” prohibitions
Page 16
FMV – Why It Matters
2005 OIG Supplemental Compliance Program Guidance for HospitalsArrangements under which hospitals (1) provide physicians with items or services for free or less than fair market value, (2) relieve physicians of financial obligations they otherwise would incur, or (3) inflate compensation paid to physicians for items or services, pose significant risk. In such circumstances, an inference arises that the remuneration may be in exchange for generating business. (70 Fed. Reg., 4858, 4866 (Jan. 31, 2005))
Page 17
FMV – Why It Matters Enforcement2015 OIG Fraud Alert: Physician Comp Arrangements May Result in Significant Liability Physicians who enter into compensation arrangements, such as medical
directorships, must ensure those arrangements reflect FMV for bona fide services the physicians actually provide
Arrangement may violate AKS if even one purpose is to compensate the physician for referrals
Government recently reached settlements with 12 individual physicians who entered into questionable medical directorship and office staff arrangements
OIG believed it took into account referrals and did not reflect FMV because the physicians did not actually provide the services contemplated
The “Yates Memo” (September 9, 2015) DOJ policy seeks individual accountability in corporate wrongdoing
Page 18
FMV – Why It Matters
Fair Market Value is central to the compliance analysis; payments must be FMV,
commercially reasonable, and cannot vary with anticipated
referrals.
Page 19
Outpatient Hospital Site Neutrality
The Bipartisan Budget Act of 2015 (BiPA Section 603) Budget compromise of November 2015 contained key provision
excluding any new off-campus hospital outpatient department (HOPD) from Medicare’s outpatient hospital prospective payment system (OPPS)
CMS Final Rule November 1, 2016
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Outpatient Hospital Site Neutrality Highlights of the Final Rule
Exempt (grandfathered sites): HOPDs in operation and billing Medicare under OPPS prior to
November 2, 2015
OPPS billing permitted for new off-campus departments that are “dedicated emergency departments”
Cancer hospitals
“Mid-build” protection
Minor protection for those few operational HOPDs that provided services but didn’t bill prior to November 2, 2015
Page 21
Outpatient Hospital Site Neutrality Highlights of the Final Rule
Non-Exempt (non-grandfathered) off-patient sites: Will continue to be able to bill on an institutional bill Payment will be at 50% of OPPS rates, for now Lose outlier payments, SCH and other benefits Relocation kills exception!
For addresses with multiple units, unit # is part of address
Limited exceptions due to extraordinary circumstances (i.e., natural disaster)
CMS states that non-exempted off-campus HOPDs would continue to be considered as part of the hospital and deemed provider-based HRSA position still important
Page 22
Repeal, Replace, or Retreat?Continuing relevance of the ACA?
Medicaid & coverage expansion
CMMI, other innovation models
ACOs
Other payment reform? MACRA?
Antitrust & Transactions
Enforcement
Tax Reform, Cash Repatriation
Curtis BernsteinPinnacle Healthcare Consulting
Issues in Transaction Valuation
Page 24
Issues in Transaction Valuation
Standard of Value Ancillary Services Personally Performed
Services Cash Flow v. Assets
Page 25
Issues in Transaction Valuation
Page 27
Collaboration Opportunities Clinical Affiliation
Agreement for organizations to collaborate on an initiative or provide a specific service together that may involve local, regional, or national partners
Regional Collaborative Flexible umbrella structure for partnering on specific initiatives and building the foundation of
potential future integration; often encompasses many independent organizations in a common geographic area
Accountable Care Organization Independent entity formed for entering into risk-based contracts; owned by constituent
organizations; creates shared accountability among participating providers Clinically Integrated Healthcare Network
Collection of hospitals that enter into joint payer contracts to improve care coordination and clinical outcomes
Mergers & Acquisitions Formal purchase of one organization’s assets by another or the combination of two
organizations’ assets into a single entity
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Multiple Models for Collaboration Employment Agreements Medical Directorship Agreements Educational Services Agreements Supervision Agreements On-call Agreements Consulting Agreements Professional Services Agreements Co-Management Agreements Quality Incentive Programs Shared Savings Arrangements Recruitment Incentive Programs Management Services
Page 29
Physician Employment Considerations Base compensation wRVU or other productivity-based compensation model Professional net revenue model In-office ancillary services Quality/performance compensation Chemotherapy administration supervision compensation Mid-level supervision compensation Practices losses
Page 30
Physician Employment (continued) Compensation level entirely disproportionate to productivity
level Example: productivity metrics (e.g., wRVUs) below median,
but total compensation exceeds 90th percentile Unusual compensation
Example: In addition to salary and incentive compensation, physician receives atypical forms of compensation (i.e., car payment paid by hospital)
Compensation exceeds collections Example: Physician is compensated at levels that far
exceed the collections associated with his/her personally performed services
Consideration of benefits
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Physician Employment (continued)
Hematology/Oncology
Radiation Oncology
Source: Medical Group Management Association
Page 32
Professional Services Agreements (PSA) Arrangements by which hospitals enter into agreements with
physicians to acquire necessary professional services Physicians retain practice entity Agreements for clinical services may include professional
staffing, call coverage, clinical and risk management leadership, infusion, and midlevel supervision
Agreements may also include administrative services such as medical directorships, service line development, and/or coordination
Other potential services may include clinical research, etc. Physicians provide professional services and hospital bills and
collect for professional and technical services Hospital hires or leases clinical staff and purchases or leases
space and equipment
Page 33
Co-Management Agreement Hospital and physicians enter into an agreement where physicians are jointly
responsible with hospital for managing a defined service line Purpose is to recognize and appropriately reward achievement of defined
goals and responsibilities typically associated with developing, managing, improving service line quality and efficiency
Compensation may not take into consideration the volume or value of referrals
Benefits include Physician engagement Focus on quality, efficiency, and outcomes Physicians have authority to implement change Physicians may remain independent and collect professional fees Physicians have greater day-to-day oversight Potential of physicians to have ownership interest in management company
Page 34
Co-Management Legal Structures Direct contract model
Agreement directly between physician/medical group and hospital
Separate company “NewCo” or management company formed to execute the
co-management agreement with the hospital and to manage the service line
May be physician-owned or a joint-venture with physicians/hospital
Physicians provide initial capitalization of NewCo (or physicians and hospital if management company is to be jointly owned)
Page 35
Co-Management Services
Leadership
• Medical Director• Advisory
Committee• Coordinating &
reporting to hospital
Budget & Finance
• Budget development
• Financial oversight & monitoring
Strategic Planning
• Development/ implementation of service line
• New program development
• Strategic planning process
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Co-Management Services (continued)
Operations
• Service line operations
• Staffing & scheduling
• Patient & staff work flow
• Equipment procurement & materials management
• Credentialing• Case
management• Policies &
procedures
Human Resources
• Review of staffing levels & recruitment & retention plans
• Input on the appointment & evaluation of clinical & non-clinical staff
Other
• Medical staff- related activities, including committee participation
• Patient & community outreach & education
• Assistance with accreditation
Page 37
Co-Management Compensation Structures Base Compensation
Hospital pays a fixed base fee for provision of pre-defined management services or limits compensation to a maximum amount based upon actual hours worked at a pre-determined rate
Fee must be consistent with time and effort associated with the scope of services provided
Incentive Fee or Bonus Hospital pays an at-risk incentive bonus if the service line meets
pre-defined, mutually agreed upon, objectively measurable performance targets (quality, satisfaction, efficiency etc.)
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Incentive Compensation Achievement of quality, operational efficiency,
patient/satisfaction goals Baseline levels determined using the facility’s historical and
clinical data and/or comparable national or regional data, with incentives paid to reflect incremental improvement
May be targeted toward identified areas of need Can be based on improvement or on achievement of specific
targets Incentives should be objective, verifiable, supported by
credible medical evidence, and individually tracked Provide for partial payment for attainment of incremental goals
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Key Considerations
Common elements include: Base compensation Productivity threshold (i.e., wRVU level) Incentive compensation for productivity Incentive compensation for quality outcomes Sign-on or retention bonus Compensation for excess call coverage Compensation for supervision or teaching services Administrative compensation
Hospitals and other organizations continue to utilize complex compensation models, often with multiple layers of compensation for multiple services sometimes referred to as “stacking”
Page 40
Assessing the Risk
• More moving parts
• Higher total compensation
• Ensuring the correct benchmarks are considered
• Assessing each part and the whole package
How risky is this agreement?
=
Page 41
Employment Considerations Proper understanding and use of survey data (compensation per wRVU,
compensation-to-collections ratio, etc.) Reliance on data from one survey versus multiple surveys What data are represented/included in each survey? wRVU data and the “match” to compensation percentile Is there a “safe” percentile for compensation – 50th percentile/75th percentile?
(settlements of the last year say: perhaps not) Historical compensation--what does it mean for FMV? Commercial reasonableness
Compensation exceeds collections Ex: Physician is compensated at levels that far exceed the collections associated with
his/her personally performed services Unusual compensation
Ex: In addition to salary and incentive compensation, physician receives atypical forms of compensation (i.e., car payment paid by hospital)
Page 42
PSA and Co-Management Considerations Ensuring that compensation matches duties (e.g., clinical versus
administrative) Increased demand on physicians The 80-hour work week Compensation for identifiable services Are we paying for the same thing twice? Survey data – do they include compensation for everything for which
we are planning to pay? Using the correct survey(s) Commercial reasonableness
Page 43
Compensation for Research/Consulting Activities Sunshine reporting requirements when compensation originates from
a manufacturer (pharma, medical device, etc.) Importance of clinical research activities in the current world – e.g.,
to meet Cancer Center Standards Defining the scope of a physician’s activities - e.g., investigator
versus physician who merely identifies subjects for a study; speaker versus advisor on product development
Source of compensation affects the stakes– pharma funding, hospital/health system funding, laboratory service provider (registry study), etc.
Keeping in mind guidance from OIG advisory opinions and compliance guidance
Reasonable payment structure – e.g., annual or monthly stipend, per subject amount, percentage of research budget, fee for service, hourly compensation, etc.
Page 44
“Top 10” Pitfalls for 2017
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Alternative Payment Models (Oncology Care Model)
10
Page 46
Task vs. Time-Based Valuations
Need to align incentives for providers Fee for service does not work in a world of bundled payment
reimbursement Quantifying actual time spent managing costs is
impossible Outside of meetings and other administrative-only time
Determining the ability to reduce cost has been studied by actuaries, regulators, hospitals, and providers Limited data on tying improved performance to reduced cost
9
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Task vs. Time-Based Valuations
9
Page 48
Task vs. Time-Based Valuations
Emergency Room Visits in Last 30 Days of Life
Metrics for improvement
Develop interventions to decrease ED usage Develop tools to analyze admissions within 21 days of
chemo Proper use of palliative care
910% 20%
Page 49
Establishing Metrics Quality measures
CMS Specialty organizations (ACoS, ASTRO, ASCO, ACP) AMA – PCPI (Physician Consortium for Performance Improvement) NCCN NCQA NQF Private payers
Satisfaction measures Patient satisfaction survey results Staff satisfaction survey results
Program development Achievement of identified milestones (not measured by volumes) Process of care measurements
8
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Midlevel Supervision Compensation
Considerations for midlevel supervision compensation Number of midlevels supervised (i.e., state requirements) Midlevel productivity Number of hours spent supervising Benchmark considerations
Prevalence of supervision Number of midlevels supervised Method of compensation
7
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Infusion Supervision Compensation Considerations for chemotherapy administration supervision
Service providers (i.e., MDs or MLPs) Scope of practice requirements Oncology and non-oncology (i.e., rheumatology, GI) services Location and number of infusion centers supervised Infusion center hours Infusion center volumes Multiple groups providing services Benchmark considerations
6
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How high is high?
5
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Value of Data
Cost to compile reports Personnel/Staffing
Technology/Software Expenses Start-Up/Infrastructure Costs
Key Drivers of Value for Data Type of Data Providing – Breaking Down the
Record Aggregated Categorical Data Observation Variable Data
Amount of Data Provided
4
Page 54
Valuing Other Intangible Assets
Work Force in Place Medical Records / Data Brand Names Licenses Non-Competes
3
Page 55
Read the fine print
Valuation: Duration Assumptions
2
Page 56
How does it all stack up?
1