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AGG Latest Issues in The Industry

We have added this guide to Latest Issues to enhance its utility. We now group developments by topic area and link to the relevant place in the Latest Issues discussions. Topics include (1) Quality and Value (70 entries); (2) Clinical Integration and Bundled Payment (22 entries); (3) HIPAA and Data Issues (11 entries); (4) Compliance, Stark and Fraud and Abuse (52 entries); (5) Reimbursement (25 entries); (6) Medical Staff Issues (22 entries); (7) Contracts, Antitrust and Other Issues (30 entries); and (8) PROMETHEUS Payment® Model (9 entries). Developments still appear in reverse chronological order with the most recent listed first. Some developments may appear under multiple topics because they have multiple implications.

1. Quality and Value

2. Clinical Integration and Bundled Payment

3. HIPAA and Data Issues

4. Compliance, Stark and Fraud and Abuse

5. Reimbursement

6. Medical Staff Issues

7. Contracts, Antitrust and Other Issues

8. PROMETHEUS Payment® Model

Chief Financial Officers of health systems are increasingly coming to understand that alignment with physicians will help their bottom line. But in a recent survey, only 20% of them said they were "very prepared" for new collaborations. Clinical integration among physicians, and between physicians and others, will be the key to success in the near and far term. Understanding the role of the CFO in clinical integration will be fundamental. In "Clinical Integration and The Chief Financial Officer" Alice sets forth five specific tactics the CFO can deploy so as to meaningfully contribute to and support efforts to clinically integrate physicians affiliated with their institutions.

Many physicians across the country are still struggling with whether to remain independent or be employed by a health system (see 1, #57). While we have decried many of the employment transactions as having no content (see 1, #54) the real issue for most physicians is in which context -- their current setting, a larger group practice, a new network,  alignment with a health system or employment by a health system -- they stand the best chance of being able to clinically integrated effectively with their colleagues (See 1, #70, #67). In "Is Physician Employment by Health Systems an Answer?"pdf image Alice elucidates the real questions for oncologists in particular, but the analysis is relevant to all physicians.

Primary care physicians, in particular, are feeling real pressure from the developing context because they have traditionally been under-reimbursed for what they do. While many are familiar with primary care capitation, fee for service remains the predominant mode of payment throughout the country.  Today, though, there is undoubtedly change afoot. For physicians to respond to the emerging environment, at a minimum they need to understand the new forms of payment which are being launched, as distinguished from new delivery models. In "Understanding the new payment models" Alice elucidates concepts associated with ACOs, bundled payment, patient centered medical home and capitation. It is fundamental reading for physicians who have not begun to address these issues.

Physician practices in communities where ACOs are being launched or payors are beginning to innovate with bundled payment initiatives will be offered contracts by which such innovations will be implemented. There are pitfalls in not understanding the real issues in bundled payment contracts. But the health plans offering these opportunities have themselves very little experience with bundled payment. In an article directed at the plans, Alice suggests "What's Fair In Bundled Payment Contracting?"

The Patient Safety and Quality Improvement Act was enacted in 2005. It was three years before any regulations were published regarding who would qualify as a Patient Safety Organization (PSO) to which providers could report safety and quality data which would be protected from discovery in almost any setting. In thinking about the type of work that real clinical integration entails, those who engage in the required intense self scrutiny that is essential to change clinical processes to deliver safer, better, more valuable health care will have to generate highly sensitive data about their own performance. To invoke the protections of the law, the data must be generated within a Patient Safety Evaluation System (PSES) which is specific to the reporting provider. Providers include any kind of health facility or practitioner licensed or authorized under state law to provide health care services. Interestingly, providers do not include IPAs, PHOs or ACOs which are rarely licensed or authorized under state law to deliver care. This does not mean they are outside the bounds of the law. This means good lawyers can be creative about how to structure relationships between providers and these new delivery vehicles so that data can be protected through a PSES for reporting to a PSO.

When sensitive data is managed within this system, it cannot be introduced, discovered or used by anyone else in any federal, state or tribal court or administrative setting, subject to very limited exceptions. The law provides both a privilege enforced by the courts as well as broad confidentiality, the breach of which is enforced by the Office of Civil Rights of DHHS. It is both flexible and potentially sweeping in its effects. The system is reminiscent of the principles for tort reform that Alice set forth in an article in 2000. In "Physicians and Patient Safety Organizations: Furthering Clinical Integration"pdf image Alice presents the context for PSOs, what the regulations require for reporting to a PSO, what caselaw teaches us and then explores some ways in which deploying this mechanism can protect the hard work physicians will have to do to make their care better. This is an opportunity all physician groups and facilities should explore. It has the potential to bring to smaller entities the experiences and learning from others, thereby multiplying the power of engagement with the PSO. We will be working with our clients to help them develop their Patient Safety Evaluation Systems and the contracts with the PSOs to which they will report.

Social media sites are ubiquitous, even if their use reflects generational divides. For physicians, social media can offer opportunities for marketing and patient education, but comes with potential liabilities, as well. In addition, the unique relationship between physicians and patients as viewed by the law, can create challenges for physicians who use social media. In "Physicians and Social Media: Untangling The Webpdf image", Dan Shay elucidates the most common social media platforms and explains their differences and functionalities. He considers the potential liabilities for physicians under HIPAA, for malpractice and for defamation which can arise through the use of social media, both personally and professionally. He also addresses how physician office staff can generate problems. Then, he offers practical guidance, illuminating the somewhat different positions taken by various professional organizations including the AMA, AAFP and ACP. We are assisting our physician practice clients in developing policies regarding the use and functions of social media, for themselves, their employees and in relationship to patients. We also assist practices who have experienced improper disclosures or other social media related events associated with the practice and its staff.

The problem of overuse is getting more attention than ever in the move toward greater value in health care. But overuse is no longer just an issue of cost.  It is increasingly a fraud and abuse concern, and in sometimes surprising arenas. Cardiologists have been charged and convicted for over-stenting but over-stenting has been a dirty secret in cardiology for years. More surprising is that an oncologist in Michigan has been charged with administering medically unnecessary chemotherapy. In a whistleblower lawsuit in Georgia, a different spin on overuse was presented where both a physician and the medical center where he practiced were charged with false claims based on his incompetence to perform procedures for which, it is alleged, the hospital should never have granted him privileges. Now, the GAO has focused on the exponential increase in both radiation therapy for prostate cancer by urologists with a financial interest in the radiation therapy center as well as anatomic pathology services billed by urologists, dermatologists and gastroenterologists who had obtained the opportunity to self-refer. While the Stark statute was primarily aimed at overuse, self-referral and financial benefit are not the only motivators of overuse. Defensive medicine also makes the cut. As the house of medicine has, at long last, begun to address the problem of overuse in the Choosing Wisely campaign providers who do not make the value of care a core value in their efforts to confront the changing environment, do so at their own peril from expanding fronts.

Hospital websites have touted their facility's quality for as long as they have existed. Much of what they post is not only puffery ("we have the best" fill-in-the-blank) but most of it is meaningless. Some hospitals, however, do provide on their websites meaningful, transparent information about what they do. In 2013, for the first time, the Leapfrog Group and URAC handed out  Hospital Website Transparency Awards to 7 hospitals, two with distinction with honors. The point was to draw attention to the problem of hospital websites potentially misleading consumers. These advertisements are barely regulated, if at all. The two sponsoring groups will make the award again in 2014; but the most interesting aspect of the whole enterprise is the criteria they will use to choose the winners. There are certainly lessons for hospitals there, but physicians should also take heed as they expand their presence on the internet.

With the publication of the HITECH and Security rules, compliance with HIPAA is back in the spotlight. Effective January 1, 2014, new rules will pertain. In our recent article in Family Practice Managementpdf image, we dispel some myths and provide practical guidance to physicians. The importance of taking HIPAA compliance seriously can be seen in the first settlement of 2013 with the Office of Civil Rights of 2013. There, Idaho State University agreed to $400,000 and enter into a 2-year corrective action plan to settle alleged violations of HIPAA. In investigating the self-reported incident, the Office for Civil Rights found risk analyses and assessments that were "incomplete and inadequately identified potential risks or vulnerabilities," as well as "failure to assess the likelihood of potential risks occurringpdf image." The principle problem was a disabled firewall over a period of four years. There was no evidence that any records were accessed or that the security actually was breached. The settlement makes it clear that risk assessment and gap analysis are essential to being able to craft a well-designed, customized plan for HIPAA compliance. This is no longer a matter of choice.

Although for most Medicare entities, the maintenance of an effective compliance program is not mandatory, the absence of an effective compliance program is foolhardy. Halfhearted attempts at compliance can also create liabilities. This was dramatically demonstrated in the case of United States and State of Wisconsin, ex. rel Keltner v. Lakeshore Medical Clinic, Limited. Here, the whistleblower former employee brought a suit against a large multispecialty medical group for false claims on a host of bases, many of which were dismissed. But her allegations on evaluation and management services survived. The predicate for her claim was that an annual internal audit of 25 claims per physician demonstrated that two physicians had each up-coded more than ten percent of their claims. The employee alleged that even though the medical group returned overpayments related to their specific claims found to have been up-coded, the non-audited claims were not reviewed. She further alleged that the medical group subsequently stopped engaging in review of E/M services codes. Neither the United States nor the State of Wisconsin chose to intervene in the action. Nonetheless, the court refused to dismiss the case, focusing on the group's ignoring audits which disclosed "a high rate of upcoding." The court went on to say, "These allegations plausibly suggest that the medical group acted with reckless disregard for the truth." While many physicians wonder what reckless disregard might mean, this is one of the few cases that has actually confronted the issue.

The case is noteworthy in that it focused around an organization that engaged in self-audits. This puts a premium on taking compliance seriously, as we have noted previously [See also links: #3; 51; 48; 45; 42; 33]. This case raises some significant issues with regard to how groups should interpret what they find on self-audits. With the new liability for false claims for failure to return overpayments within 60 days of their identification, more of these cases are likely to occur. It would also be important to focus on the OIG's Work Plan as we explain in our article, "May you never meet the OIG: The Work Planpdf image." In updating your compliance plan, it is also time to include quality-based issues as Alice describes in "Quality fraud: Two pathways to troublepdf image." While there are still no final regulations under the 60-day repayment rule, prudent practitioners will revisit their compliance programs and will seek legal counsel in evaluating the significance of what is learned on probe audits and more extensive self-audits.

Data demonstrates that physicians are now replacing their electronic health record (EHR) software at an increasing rate. Most apparently do so because they were dissatisfied with their current EHR software or vendor. Some of these dissatisfactions are so great that a class-action suit has been filed in one instance. The rate of replacement increased from 21% to 31% between 2010 and 2013. Many physicians did not have their EHR software licenses (contracts) reviewed on the first go-around. Given the problems of transition as well as changes in the industry, it is vital that physicians have their EHR license agreements reviewedpdf image by experienced counsel. As we have repeatedly written [See issues: #2: 6, 4; #6: 10], there are pitfalls awaiting in these documents.

The drumbeat for insurers to move to value-based payments cannot be ignored. However, both experience and expertise at the health plans which are touting their programs are widely variable. A recent survey reports that 82% of health plans consider the development of new payment models a major priority. They are, however, all over the ballpark in what they are doing. Many of the national plans now claim to have many ACO projects in the works, although these vary widely as well. Almost all of the new value payment propositions that are not mere pay-for-performance turn on some concepts of bundling budgets or bundling payments. Typically, providers are paid in the ordinary course, with a gainsharing bonus available based upon reconciliation at some pre-determined point in time. The contracts that create these arrangements are the most critical foundation of potential success. As Medicare moved into this arena with the Bundled Payment for Care Initiative (BPCI) they engaged consultants to provide contracting advice. Mitre and Brookings acknowledge in the Foreword to their material their extensive reliance on Alice's input and reviewpdf image of their document. The Manual is oriented around the Medicare program, but essentially highlights what is necessary to make one of these bundled payment contracts work.

We have already noted the implications of the Health Reform clarification that Stark violations can generate false claims. Little appreciated is the potential focus by whistleblowers on physician internal compensation formulas. To meet the definition of a "group practice" under Stark, compensation formulas must comply with the law. There is both more flexibility than most people understand, but also real liability lurking here since, while most of the Stark settlements have involved hospitals with non-compliant relationships with physicians, physician groups submitting claims for services which cannot comply with the definition of a "group practice" are vulnerable as well. In "The Stark realities your group needs to know,pdf image" Alice elucidates issues which should be confronted in designing competition. Given the changes in the law, it is time for group practices that provide designated health services within them to revisit their compensation formulas.

The rapid rise in the employment of physicians by health systems has been repeatedly noted. A recent survey by yet another recruitment company found that 70% of health care leaders say physicians are approaching them for employment. Yet, the data has also consistently shown that this is a money losing proposition for the hospitals in many ways, in part because once employed, the hospitals do not facilitate the physicians' clinical integration or undertake any effort to actually improve value [See also issues: #1: 61, 55, 48]. In "Four Top Complaints of Employed Doctors", newly employed physicians complain about (1) being "bossed around by less educated administrators;" (2) not being able to make decisions about staff and personnel; (3) having less authority over billing and charge coding; and (4) being forced to use new equipment and technology. In addition to the efficiencies of many of the organizations now employing physicians, the consolidation in the industry is raising other concerns with respect to provider power and negotiating with plans. It is not hard to imagine that many of the employment strategies will unravel. Whether physicians have prepared well in their negotiations with the hospital in the first place for life after a failed transaction is something that needs to be dealt with in the first place. More to the point, in many instances, health systems and hospitals can get precisely the same impact that they seek from employment without the troubles while physicians can function more effectively in their own environments. We have repeatedly stated this ("Alignment Without Servitude: Leasing the Practice to the Hospitalpdf image"), and have facilitated many practices in a wide variety of affiliation strategies with hospitals and health systems that fall short of employment and "avoid marriage." [See also issues: #1: 54, 52, 47]

The OIG's Work Plan for 2013pdf image was surprisingly light on issues that affect physicians. Although attention to specific diagnostic testing including sleep studies, high end imaging, and electrodiagnostic testing were called out for attention, there were four critical areas that include several concerns on which we have long provided guidance and one new problem particularly for physicians.

First, the OIG has identified compliance with the reassignment rules as meriting its attention. Reassignment is part of the much more highly restrictive rules and processes of enrollment and maintaining enrollment. We have written on this topic, repeatedly because we know there are real pitfalls here. (See Shay, "Potential problems exist in the Medicare enrollment process", Medical Economics (November 25, 2011), Shay, "Successfully navigating the Medicare enrollment appeals process", Medical Economics (November 10, 2011, Gosfield and Shay, “Medicare Enrollment: A Never-Ending High Hurdles Racepdf image,” DermWorld (April, 2011) pp. 14-16. Gosfield, “Medicare Enrollment: A Tougher Road to Gopdf imageASNC (March-April 2011) p. 7. Shay, "'Halt! Who Goes There?': Coping with the Continuing Crackdown on Medicare Enrollment", HEALTH LAW HANDBOOK (2011 ed.) West Group. [Click here for draftpdf image] We have a teleconference on the subject which was originally offered March 1, 2011 and is available as an MP3 with a handout.

The OIG will also be taking yet another look at physician billing for “incident to” services, one of the areas physicians must confront as they change their practice patterns to become more efficient, improve patient satisfaction and create better value for patients and payors, including Medicare. Failure to comply with the requirements of the “incident to” rules can lead to overpayments and potentially false claims. Physicians have been charged criminally on this issue and they have also faced civil false claims suits by the government. This is not a topic to trifle with.

In 2013, the OIG will look back to determine the extent to which CMS made potentially inappropriate payments for evaluation and management services. Here, the new concern is that with the advent of electronic health records, documentation using macros and other templates is driving toward increased utilization of higher level codes. There is real debate in the industry as to whether EHRs are permitting more accurate documentation and billing or whether some of the software packages drive towards upcoding. Finally, the OIG has identified place of service inconsistencies as another target for review, with primary attention to discrepancies between hospital claims and physician claims.

The value of the Work Plan is that it offers an early warning opportunity for providers, among others, to review their current practices with respect to the identified targets of review. Based on what it finds in the Work Plan, the OIG identifies suggested policy changes as well as potential topics for audit targets by the reams of investigators and auditors that the government now uses to enforce its increased fraud and abuse authorities. Forewarned is fore armed. Physicians should review their practices for all four topics.

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 Packagespdf image", 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"pdf image, 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.

As more and more physicians become employed by health systems and hospitals, concerns are raised regarding how the employers may manipulate physician behavior based on the master-servant nature of employment. In light of those concerns, the AMA has issued Principles for Physician Employmentpdf image The principles address conflicts of interest that can arise in employment relationships, contracting issues, the right to advocate, the separation of employment from the physician's status as a member of the organized medical staff, the need for peer review and approaches to performance evaluation, and transparency associate with payment by payors. The 26 individual principles provide a checklist for negotiations with potential employers, but they likely will not always be addressed in contracts. Moreover the principles offer some hope for independent physicians who seek to remain so but are worried that their referral base will erode as health systems require their employees to refer in network, so to speak. Those physicians who lose some of these referrals are often surprised to learn that the Stark regulations specifically permit the requirement of directed referrals under the personal services exception, the employment exception and the managed care exception. In other words, the policy antipathy toward self-referral in the physician world is not so honored in the health system and managed care world. We have long argued that the profound consolidation taking place right now is building powerful cartels often with no value proposition at all. We believe many of the hastily arranged transactions we have reviewed and advised on will not produce success for the employers or the employees.  We take the position that clinical integration and alignment to produce value do not require employment.

As the health care system confronts the need for significant change to produce more value, observers note the factors that drive up health care costs. One such commentator, Julie Appleby, writing in Kaiser Health News identified 7 factors driving up health care costs. Francois de Brantes, the Executive Director of the Health Care Incentives Improvement Institute, Inc. (, the board of which Alice chairs, recharacterized these as the Seven Deadly Sins of Rising Health Care Costs. They merit our attention. They include (1) Greed -- paying for volume rather than value; (2) Gluttony -- an increasingly unhealthy population; (3) Envy -- desire for new technologies and drugs; (3) Sloth -- tax breaks on insurance premiums; (5) Pride -- lack of transparent information; (6) Lust -- provider consolidation; and (7) Wrath -- legal and regulatory barriers to change. Most have had some attention paid to them in the health reform legislation. But contrary to the views of some on the far right who believe the law represents a vast government take over of healthcare, it is, in fact, quite the opposite. From the provider's perspective it is 1,000 pilots blooming in terms of real payment change. The fraud and abuse authorities do represent increasing wrath with respect to unnecessary expenditures. But providers -- and most particularly physicians -- are going to have to embrace the idea of changing themselves or they will be forced to change by others. Many of the issues we work on with our clients represent those kind of forward looking efforts, but, we think many more physicians need to be more pro-active about their futures.

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 networkspdf image and the other for group practices, organized medical staffs or newly coalescing ACO-type organizationspdf image; (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 Participantspdf image" 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.

Although most of the health reform furor was about the individual mandate, we have repeatedly made the point that health reform gave new weapons to prosecutors of fraud and abuse, and the financial pressures of the new environment make fraud and abuse enforcement a major focus of the regulators and enforcers. When GlaxoSmithKline paid more than $3 billion to settle false claims charges for a variety of misbehaviors, the government also made it clear, once again, that they would go after individual executives who ignore or worse yet encourage violative behavior.. Many in the commercial sector do not understand that the government is on a cultural jihad about this. It is remarkable that over the last twenty years, as measured by Public Citizen, fully more than 25% of Federal False Claims Act recoveries have come from big pharma. The government has new weapons and new approaches. "We used to hunt like an elephant and now we chase like a cheetah" is the line a senior advisor for investigation has used.  Alice authors a book which is updated every year titled Medicare and Medicaid Fraud and Abuse and the inexorable tightening of the enforcement snares is abundantly clear. What can regular providers do? As we have repeatedly recommended, now is the time to buff up your compliance program and if you don't have one it is imperative that you develop solid approaches to compliance. In "Compliance programs: more important now than everpdf image" Alice and Dan explain why even though the law says having one is voluntary, those who don't adopt one, or merely pay lip service to the issue, do so at real peril. And, compliance is no longer just about false claims in billing.  The OIG has announced its invigorated focus on patient safety, noting that one in four Medicare beneficiaries suffers an adverse event in the hospital, and that it will continue and increase its attention to adverse events, never events and temporary harm events. Based on these developments it is clear that a good compliance program will encompass proactive management of a range of liabilities we have identified including Stark with attention to internal compensation as well as referral relationships, anti-kickback issues, maintaining enrollment and, increasingly, quality reporting and quality performance issues as well.

We have been exhorting physicians to recognize this critical moment in health care history to change fundamental aspects of the way they deliver care in order to regain time and touch with their patients, as well as to position themselves to maximize their financial opportunities. There are a host of ways of doing this from clinical integration, to realigning with hospitals, to revitalizing the organized medical staff, to forming networks of independent physicians, and more. In a piece by a professor of radiology, pediatrics, medical education, philosophy, liberal arts, and philanthropy at Indiana University, where he also serves as vice chair of the Department of Radiology, analogizes medicine's challenges to A Cardiac Model for Resuscitating Health Care takes up the banner of physicians putting the heart back in medicine by leading these efforts. His analogies of corporate cardiopathy and practice heart failure make the point in a different way. A short article worth a read.

Between April and June, 2012, the Centers for Medicare and Medicaid Services (CMS) sent out almost 12,000 revalidation requests, some to providers who may even have completed a revalidation in recent years. However, with the passage of the Affordable Care Act of 2009, any Medicare provider who enrolled prior to March 25, 2011 is subject to a revalidation request between now and March 23, 2015. For those who have yet to undergo it, revalidation is the process by which CMS re-credentials providers who have Medicare billing privileges. The revalidation process is akin to “re-enrolling” under the newer, more stringent screening process put in place in February, 2011, requiring that providers complete a full CMS-855 application. Revalidation, like initial applications and updates, is a time-consuming, detail-oriented process which implicates providers’ billing privileges, so providers should be especially careful in responding to a revalidation request. Enrollment and revalidation are significant challenges. As we have said in teleconferences, and multiple articles [November 10 and November 25 Medical Economics articles, DermWorld article from April 2011, ASNC articles March-April 2011pdf image, and 2011 Health Law Handbook articlepdf image], this is a major challenge, especially for physicians, that demands focused attention.

On June 26, 2012, the Department of Health and Human Services' Office of Civil Rights ("OCR") released the audit protocols it is using in auditing covered entities under HIPAA, which is relevant to increased enforcement of the privacy rules. The information, located here, includes audit protocols for both the Security Rule and the Privacy Rule (including the Breach Notification provisions), broken down by Federal Regulation section. For example, when auditing covered entities with respect to their use of de-identified information, auditors are instructed to ask the covered entity’s management team whether a policy or procedure exists to de-identify protected health information, to review such policies and procedures in relation to regulatory criteria, and to verify that they are updated and presented to the covered entity’s workforce. This release provides insight into the OCR’s concerns regarding HIPAA and can assist covered entities in developing their own HIPAA compliance programs. Since even small physician practices have been subjects of enforcement, compliance with the privacy and security rules (See our teleconference - "When PHI Escapes") is yet a new imperative.

As health reform unfolds for the public payment programs, and commercial payors get on the value bandwagon too, it is increasingly clear that the role of physicians in making change happen will be paramount. Although there is much that hospitals can do on their own to improve quality, patient safety and value, none of the promise of health reform will be met without the enthusiastic involvement of physicians. Why physicians deserve special attention and most importantly what they can do to help themselves, has been an increasing focus of Alice's writing and speaking. From a six minute YouTube excerpt of a presentation to the Pennsylvania Medical Society leadership to an hour YouTube clip of a presentation to the Texas Medical Association, she makes the point that the moment for physicians to step up and organize themselves for better performance and better results is now. Her editorials in Maryland Medicinepdf imageand Medical Economics exhort physicians to recognize their unique role and unique responsibilities.

As the health care delivery system is reconfiguring, many physicians have sought employment by hospitals as a life preserver in uncertain times.  At the same time, traveling throughout the country, Alice has seen that there are a multitude of physicians who have no desire to be employed, but while remaining independent, also are coming to understand that they will have to clinically integrate with other like minded physicians, if they are to be successful in demonstrating real value in their care delivery. The Clinical Integration Self-Assessment Tool v 2.0 (CISAT) is oriented toward employed physicians – whether in their own groups or by hospitals – on one hand, or in the more hospital-centric settings of the organized medical staff or a newly forming ACO-like entity, on the other. Now in CISAT v 2.1pdf image, we have a self-assessment tool for groups of otherwise independent physicians to use in coming together to meet the clinical integration demands of the new environment. Designed to help them envision what a desired end state, or at least more evolved organization, might look like, as with v.2.0, it provides three scenarios for each of the 17 attributes of a clinically integrated entity from barely started, to making some headway, to more evolved. We hope physicians find it helpful in repositioning themselves for new challenges.

Now that the interim final Medicare ACO regulations have been published, and the first Pioneer ACOs announced, much of the furor over who will move to be an ACO should begin to subside. The regulations, while an improvement over the proposed regulations still describe a complex, infrastructure-intense, highly detailed set of requirements, with much of the potential reward still speculative. Alice has long been skeptical of the ideas embedded in the legislation. In many ways a more interesting opportunity has been presented by the Center for Medicare and Medicaid Innovation (CMMI) in its call for proposals to be a bundled payment pilot. Here, CMMI has provided four models for providers and 'conveners' to experiment with different models of bundled payment, with the proposers given the flexibility to define their own episodes of care around which payment would be bundled. The thirty day post discharge model is for physicians to prevent readmissions. There is a model for integrated systems. One for hospitals alone, and one which very much reflects the PROMETHEUS Payment approach. In "Here's how to participate in CMMI's bundled payment pilot" (Sept 2011). Alice describes some of the practical implications and legal issues associated with pursuing this opportunity. These projects will be worth watching.

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 Penumbrapdf image", 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.

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 Landscapepdf image", 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 Valuepdf image"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.

Medicare’s “PhysicianCompare” website has been live since December 30, 2010, offering the public a database of physicians and non-physician practitioners (NPPs) who participate in Medicare, searchable by specialty, location, and last name. The website also shows whether a physician or NPP accepts Medicare assignment, and whether they participated successfully in the 2009 Physician Quality Reporting Initiative. By 2013 the site will begin reporting quality performance information. However, some physicians are finding that their own entries on the website contain errors. The PhysicianCompare website populates its database with information drawn from Medicare’s Physician Enrollment, Chain, and Ownership System (PECOS) – the electronic Medicare enrollment website. This represents a golden opportunity for physicians and physician groups to check whether their enrollment information is up-to-date. If a physician notes a discrepancy in the information, or if information is missing, that physician should submit a revised enrollment application as soon as possible.  Errors such as missing practice locations, physicians who have not worked for a practice for years listed as practice members, and unlisted current members may be spotted on the Physician Compare site before they become a problem and in time to be corrected.

As we have noted before, Medicare’s focus on keeping bad actors out of the program has made the enrollment process fraught with peril. Minor errors in completing forms, misunderstanding who is a managing employee and who is a delegated official can stymie those who seek to update their information or now are required to under Medicare’s revalidation program. This means verifying all enrollment data. It is essentially filing a new application for enrollment. New regulations as a result of health reform have designated various types of providers in terms of the risk they pose to the program. DME and home health agencies are at the highest level of risk and new applicants are already subject to criminal background checks. IDTFs and physical therapists are a second level of risk.  Physician practices are at the lowest level of risk, but IDTFs owned by physicians are treated as IDTFs generally with no preferences or favorable presumptions because they are owned by physicians.  In “Medicare Enrollment: A Never Ending High Hurdles Racepdf image, we explain further the practical implications of these processes.

We have reported the increasing focus of the OIG on quality issues as a matter of fraud and abuse. (See Issues: # 7, #55, #56).  In addition, with the advent of many more quality reporting programs and more to come, risks associated with quality reporting-based false claims are also increasing. (See also Issues #63, #64) demonstrating the major emphasis the OIG is now placing on this aspect of its amped up enforcement efforts, the OIG has created a separate web page for Corporate Integrity Agreements that entail quality of care issues. For those who have naysayed our warnings, the writing is on the wall. Everyone should be including these types of issues in their compliance programs, and in the current environment, no provider should be functioning without a meaningful, operational compliance program.

As the concept has unfolded from an article in Health Affairs in December 2006, we have expressed skepticism about the implementation of Medicare Accountable Care Organizations (ACOs). The proposed regulations were met with resounding criticism throughout the industry from almost all sides; and the supporting statements, by the Federal Trade Commission on antitrust and the OIG on fraud and abuse, derided both as too restrictive and too lenient.  Many forget that this program enacted as part of health reform was never intended to be applicable to most provider groups.  At its best, CMS has estimated that 75-100 provider entities will be approved as ACOs.

We firmly believe this is a considerable over-estimate even if there is a complete revamping of the regulations. We are not alone.  In “Onerous Regs Put ACOs on the Ropes Alice and Jeff Goldsmith are the principal interviewees explaining why of the 5800 hospitals and more than 780,000 physicians in America, very few will find themselves in Medicare ACOs. That said, the pressures to be accountable for care and what that will require are an entirely different proposition. In “ACOs vs. Accountable Care: Is There A Difference?, Alice further describes the problems with the Medicare approach, but elucidates the essential activities that are necessary to be accountable for care; and they are activities that providers should be engaged in even if no one pays them differently.

Clinical integration has increasingly been discussed as the vehicle to accomplish what is necessary to be accountable for care.  But even among those commentators who have gotten beyond the antitrust notions of clinical integration, few really describe the focus of change that can create a truly clinically integrated environment, nor how those changes can make a difference. For some time now, we have touted clinical integration as a way to reorganize clinical and administrative processes of care, particularly among physicians and the other clinicians who work with them, but also in relationship to hospitals. (See issues: #70, #67, #60) Now, Alice and Jim Reinertsen MD, have created a Clinical Integration Self Assessment toolpdf image which elucidates 17 distinct attributes of clinically integrated programs, whether within a physician group, by a hospital with its newly employed physicians, within the organized medical staff, or in a newly coalescing ACO-like entity.  All ought to take into account the range of issues identified, but in slightly different ways.  We are also explicitly calling for those who may use the tool, to revise, refine and add to it.

In her article in Medical Economics “Making Clinical Integration Work Alice focuses on how clinical integration is meaningful to small physician practices.  In their brief piece for the Health Forum, “Clinical Integration: Getting From Here to Therepdf image” Alice and Jim Reinertsen focus on the hospital-physician nexus of clinical integration.  Clinical integration of various kinds is going to be the sine qua non of health care delivery which will succeed in an environment of heightened quality expectations, the need for better patient safety, diminishing reimbursement, and pressure for contained costs.

From its creation by a pro bono inter-disciplinary group of health care experts, many have looked at the PROMETHEUS Payment® model as some theoretical construct of payment. This would be wrong. Pilot implementations under a Robert Wood Johnson Foundation grant have offered practical lessons in using the program on the ground. New pilot programs in Colorado, New York and elsewhere are providing new lessons. In “Transitioning to Value: PROMETHEUS Payment Pilot Lessonspdf image”, some of the pilot sites discuss what they experienced in implementing the program in diverse settings. PROMETHEUS Payment now has toolkits to help those in the field apply what has been learned.  It can be used in any setting with a willing health plan and willing providers, but the PROMETHEUS analytics can also be used without full deployment of the payment model, to find Potentially Avoidable Complications in any claims database, which can give hospitals and physicians actionable information on which to improve care and value. This is real.

Hospital employment of physicians is occurring all over the country.  Much of it is comes from completely misguided expectations.  There are delusions and fantasies on both sides of these transactions.  Physicians hurl themselves on the bosom of the hospital in the belief this will give them financial security while they will be left alone to practice, business as usual.  Hospitals, for their part, think this will give them control over physicians, but they rarely do anything with them, particularly the specialists who have recently joined their fold.  Many of the finances of these deals cannot work going forward as hospitals confront decreased reimbursement from Medicare and fewer admissions in a quality driven environment.  We have confronted these issues before in articles addressing non-acquisition financial strategies between hospitals and physicians and on the right questions to ask and answer before leaping into these arrangements. We fully expect there to be unwinds of many of those transactions which are without content, given physician gripes about employment. That said, these arrangements can work. But the mere existence of a W-2 between the health system or hospital and the physician is not a viable, sustainable approach. Strategic goals, clear targets and benchmarks of behavior from both sides of the table are the only reasonable way for these transactions to add any real value in the changing system.

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.

The new environment makes it abundantly clear that physician engagement with hospitals will be essential to their ability to produce value.  At the same time, physicians themselves will have to find new ways to clinically integrate within their own groups.  Hospitals which have now moved significantly into the physician employment arena will have to figure out what to do with their physicians.  In their new paper, Achieving Clinical Integration with Highly Engaged Physicianspdf imageAlice Gosfield and Jim Reinertsen elucidate the new basis for common cause, contrast the current environment with past clinical integration efforts, and offer a new definition of clinical integration

“Physicians working together, systematically, with or without other organizations and professionals, to improve their collective ability to deliver high quality, safe, and valued care to their patients and communities.”

We offer four vibrant examples of very different programs where self-motivated physicians have clinically integrated.  We reflect on the ways in which the organized medical staff can actually support and bolster clinical integration; and we introduce a new framework – the Four Fs – to help structure organized thinking about re-visioning the mission of the healthcare enterprise.  This paper is a significant resource to our new program of the same title for the Institute for Healthcare Improvement, “Achieving Clinical Integration with Highly Engaged Physicians”.  In the last analysis, this is an optimal moment for physicians to step up and take a leadership stance to improve care.

The requirements of the Joint Commission Medical Staff Standard 01.01.01 has created quite a furor in some corners. The standards focus on communication and adequate representation by the Medical Executive Committee of the voting members of the medical staff.  By giving medical staff members the ability to propose amendments to the bylaws directly to the Board of Directors, the Joint Commission has taken a stand with respect to those unfortunate circumstances where Medical Executive Committees and the members of the medical staff which they represent, find themselves in conflict.  Although many lawyers have overblown reactions to these changes, many hospitals and medical staffs are taking this moment of transition to think more explicitly about the role the organized medical staff can play in the new world order of measurement, transparency, value-based payment and clinical integration.  Because the medical staff has no reason to exist other than in its support to the Board by advising it on ensuring the quality of care in the hospital, the standards, the culture, and the processes by which this will be accomplished have new momentum.  The role of physicians in defining the quality culturepdf image of a hospital cannot be overstated.  We are working with medical staffs around the country to revitalize their bylaws and their view of themselves.  Physicians can not be engaged with each other unless they meet with each other, so some organizations are changing their meeting requirements to a more traditional expectation that physicians appear at meetings. Of course, since time is the scarcest resource physicians have available, to get them to spend time working with the hospital, the work must be meaningful to them.  We have long taken the position that the best approach to engagement is to engage in the physicians’ quality agendapdf image. We think that the moment to revitalize the medical staff is even stronger than it has been.  We do not share the views of those who see the organized medical staff as obsolete.

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,pdf image 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. 

The Stark statute continues to confound physicians and those who do business with them with its complexity, draconian impacts, and complicated interrelationships with reimbursement rules such as antimarkup and the like.  Imaging is an increasing focus of the fraud enforcers.  It is not true that all those who engage in imaging services, including radiologists, are exempt from Stark.  In a piece written especially for the American Society for Nuclear Cardiology, “Legal Update: Myths about Starkpdf image Alice very briefly sets forth some of the persistent myths pertaining to this law.

In July 2010, we sent letters to our physician clientsand our hospital and medical staff clientsurging them to take specific steps to meet the challenges of health reform before the value-based modifiers are implemented in 2012.  By then, if you haven’t made serious change, it will be too late to succeed in the early going.  These steps remain viable and worthwhile.

Clinical integration has been a vaguely understood topic since the antitrust regulators introduced the concept in 1996. In follow up to our teleconference, Alice continues her focus on this issue in a new article which includes how clinical integration within groups may be an important first step before clinical integration with competitors or with hospitals. In “Clinical Integration: it’s back again she observes that the furtherance of clinical collaboration across the continuum of care will be essential to improve healthcare delivery. A broader understanding of clinical integration techniques can enhance physician performance and quality results both with hospitals and on their own.

As the healthcare industry has become more complex and more regulated, the role of health lawyers has become even more important. But, as originally expounded in her teleconference for the Reinertsen Group (Alice has taken this issue further in a direct and hard hitting article for trustees on how to assess their lawyer’s judgment. In “How To Listen To Your Lawyer, she offers practical guidance for lay trustees of hospitals, but her insight and advice is applicable to healthcare executives, managers, and physicians who don’t really understand what to make of their lawyer’s advice, especially when the lawyer says “You can’t do that.”

The PROMETHEUS Payment® model has been evaluated by RAND researchers in the New England Journal of Medicine to be the only new payment reform approach that actually has the potential to improve quality and save money. Many have wondered what the contracting model would look like for the relationship between plans and providers to make PROMETHEUS Payment® possible. Now, Alice has created a contract template which is described in a PowerPoint and recording she did for PROMETHEUS Payment® pilot sites which makes it clear that it is not necessary to re-contract the network. Simple amendments can accomplish the task. That said, there are elements of ordinary managed care contracts which would have to be suspended for the PROMETHEUS Payment® model to work.

As the concept of “Accountable Care Organizations” and moving to “The Clinic Model” have captured the fancies of a number of small and large hospital systems around the country, Alice with Jim Reinertsen, MD explores the real questions that should be asked and answered before health systems and physicians leap into these often ill-defined strategies. In their piece “Informed Consent to the Ties That Bind, Alice and Jim describe specific points of evaluation, and offer good and bad answers to the tough questions. They raise issues that few of the consultants pushing these strategies are willing to address.

While specialists are seeking employment by health systems, health systems are forming multi-specialty groups and the billiard balls are repositioning themselves throughout the country, the illusion that health system employment of physicians will solve alignment problems going forward is unfortunately far too simplistic for the current state of affairs. In her new HEALTH LAW HANDBOOK chapter, “Avoiding Marriage: Hospital and Physician Non-Acquisition Financial Strategies Alice examines these issues in greater depth than was presented in her teleconference. She explores the phenomenon of enthusiasm for full merger business strategies and offers a range of other techniques by which physicians and hospitals may bond more tightly while physicians remain independent---all with particular emphasis on improving healthcare value and quality.

In his chapter for the 2010 HEALTH LAW HANDBOOK, Dan Shay explores the rapidly intensifying issues associated with significantly increased quality reporting. We now have evidence that where the stakes for reporting go up, bad behavior will arise “Physician and Hospital Quality Reporting Fraud: Risks and Compliance Techniques looks at the diverse range of quality reports required of hospitals, health systems, and physicians. The fact of express and implied statements about quality can create false claims and other types of fraud. He suggests techniques in association with a formal compliance program by which risks might be avoided.

Alice Gosfield has been a Key Author for West Group since 1989. In addition to the HEALTH LAW HANDBOOK, which is a new book every year, she also has revised and revamped MEDICARE AND MEDICAID FRAUD AND ABUSE which is updated every year. It includes a chapter on investigations by Kevin Raphael. Now, in an interview with the publishers, she describes her entry into health law, her views of its future, and her current work on the PROMETHEUS Payment® model.

The fraud enforcement armamentarium is growing. Congress has put more weapons in the hands of enforcers and has opened new pathways for whistleblowers in the Fraud Enforcement and Recovery Act (FERA) of 2009. This law expands who is subject to false claims liability and changes the knowledge standard. Of potentially greater significance, it turns failure to repay an overpayment into a false claim. In her teleconference “Que FERA FERA: The Need for Updated Compliance Programs” Alice explains the law, elucidates its special significance for Stark law violations and offers practical guidance to buff up compliance programs to meet these very significant new challenges.

Reporting quality performance is part of the Medicare move toward improved quality and better transparency. As the stakes for reporting increase with higher financial penalties for failure to report (see issues: #56, #61, #62) as well as for bad results, the likelihood for fraud associated with those quality reports go up. This potential has now been realized where a physician altered medical records of hospital patients after they were discharged. These are hospital self-reported measures which drive scoring for hospitals to be listed on the CMS website Hospital Compare. The hospital discovered and revealed the problem itself, but this type of behavior highlights the need to include quality reporting of many kinds in the compliance program for the hospital as well as in compliance programs of physicians reporting for pay for performance and PQRI payments.

“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.

When Medicare announced its program to not pay hospitals for ‘never events’ it was not at all clear how that would affect physician payment. Now CMS has published a Transmittal announcing that for at least three of the conditions, there will be no payment to physicians for these quality failures either.

Accountable Care Organizations (ACOs) first got play as an idea in December 2006, in an article in Health Affairs by Elliot Fisher of the Dartmouth-Atlas (and colleagues) -- “Creating Accountable Care Organizations: The Extended Medical Staff”. The original idea was that hospitals should be measured for the performance of their physicians, including those who never admit and never attend there. How hospitals were to get access to what those physicians were doing, or how they were to influence their behavior was unclear, but the basic idea was that there is a continuum of care to which physicians and hospitals contribute, and it is worth measuring the results of their connections, even if the only connection is referral. This was really part of a larger discussion in multiple articles in a themed issue of Health Affairs, about the demise of the organized medical staff, criticized by multiple commentators as a moribund, obsolete institution. By January 2009, in “Fostering Accountable Health Care: Moving Forward in Medicare”, Dr. Fisher and colleagues, now including Mark McClellan, formerly chief of CMS, were focused more on how these organizations or arrangements could create shared savings for hospitals and physicians, while they were being held accountable. As more skepticism was expressed regardi ng the likelihood that these organizations would be widely implemented, six months later, in “Achieving Health Care Reform: How Doctors Can Help”, Dr. Fisher joined with Don Berwick of the Institute for Healthcare Improvement and Karen Davis of the Commonwealth Fund, to declare, among other things, that these might be virtual organizations and which would help slow spending growth.

There were still plenty of questions about what these things might be since some had cited organizations such as the Mayo Clinic as an ACO, while others referenced the regional health information organization in Grand Junction, CO as an ACO, while still others cited Geisinger which is not only a provider system but has its own health plan. Those are three very different kinds of entities. As the health reform debates intensified, the debate between proponents and critics of ACOs also peaked. Jeff Goldsmith called them “Not Ready for Prime Time” since the basic idea of setting a budget for a community of care clustered around a hospital, didn’t work in the early 1990s and won’t now. McClellan and McKethan defended the idea as essential to Medicare’s moving away from volume-driven care, citing examples of fully integrated delivery systems. The following quote is their best cut at an explanation of this fast morphing concept: “Accountable care organizations (ACOs) are provider collaborations that integrate groups of physicians, hospitals, and other providers around the ability to receive shared-savings bonuses by achieving measured quality targets and demonstrating real reductions in overall spending growth for a defined population of patients. ACOs can be organized in a number of provider configurations with different payer participants. They can also feature different payment incentives ranging from “one-sided” shared savings within a fee-for-service environment, to a range of limited or substantial capitation arrangements with quality bonuses.” Sounds to me like a super-duper-gainsharing-PHO, but bigger. Been there. Done that. Watched the squabbles over money between hospitals and physicians, not to mention primaries and specialists. But wait, yet another new study on “How To Create Accountable Care Organizations”, puts all the emphasis on primary care, with hospitals as a secondary focus, moving to community-based measured care. Clearly the concept is in flux and really isn’t about organizations at all, but approaches to delivery of care. That’s what I get at this point. If this concept survives the legislative debates, one can only hope that at most it is yet another in the plethora of pilots of the new, new thing which Congress wants to try and not mandated. Experimentation is good. Required reorganization is not.

The improvement of quality throughout the United States continues to be a major part of the health care debates, along with better control of costs and waste. In that context, clinical integration has re-emerged as a mechanism to achieve these dual results. This is interesting since many believe that the goal of clinical integration is for providers to negotiate higher fees with payors. This is because the concept emerged as part of the antitrust safety zones published by the FTC and Department of Justice in 1996. There have been many settlements [see links #6 (4 and 5)] where the FTC said, “This might have been OK if you’d been clinically integrated.” The concept has been further clarified by its principal author [see links #6, 7 and 22) but it has not been described frequently in the literature. In part this is because the utility of clinical integration to facilitate better, more efficient care has been barely explained by antitrust lawyers, who do not live in the world of quality improvement. Clinical Integration: It’s Not About Antitrust is our teleconference describing the advent of clinical integration, the context for it, what it means, and how to do it. While there is a role for antitrust lawyers where otherwise competing providers come together to negotiate for fees, the concept of clinical integration is very similar to the principles set forth at, and is applicable within physician practice groups. Moreover, it is probably essential for groups to look at the extent to which they have deployed these principles within their groups before they go looking to affiliate with others. Still, to come together around quality even if no one pays you differently is more and more critical as physician groups feel the pressure to improve their financial margins as well as their quality performance.

Many providers are skeptical that the government really enforces the Stark statute. In a first of its kind settlement, Covenant Medical Center in Iowa agreed to pay the government $4.5 million to resolve false claims act allegations originally lodged by competitors of the physicians the Medical Center had recruited and to whom they were paying extremely high salaries as employees. The really unusual aspects of the settlement were that it was with the Department of Justice which cited the Stark statute violations as the basis for the settlement because the salaries were the highest in Iowa and among the highest in the United States for physicians. The US Attorney has refused to reveal what he used to determine fair market value but he did not cite MGMA compensation data as the basis for the determination. The Stark statute requires fair market value for a bona fide employment relationship compensation to qualify under the exception.

From clinical integration, to accountable care organizations, to significantly increased attention to fraud and abuse, there is a lot of volatility afoot. Yet, there are laws on the books including Stark and the antikickback statute, which have the ability to impede true change. At the same time, there are many who over interpret these laws and do not undertake initiatives that they could.

In June 2009, at a ninety minute session at the American Health Lawyers Association Annual Meeting, at the request of Lewis Morris, Chief Legal Counsel for the OIG, and Vicky Robinson, his deputy, I joined them in a discussion of innovation in healthcare in light of program integrity demands. This was their idea, and an effort to confront what Lew calls ‘the Goldilocks paradox” --- how to find the balance between enforcing the laws on the books to protect the public programs, but without stifling innovation and improvement. I can now make this presentation available for free as an MP3 recording that you can access from my website. We do require that you register to listen to the discussion. They present their philosophy of enforcement and we discuss very specific, innovative techniques – like hospitals paying physicians for quality results, clinical integration, physician compensation for quality within groups and much more. Lew and Vicky deserve real credit for being so open and receptive in these discussions. I was honored that they asked me to be the voice of the industry with them. We had fun doing it and I think it is highly substantive. My thanks to the Health Lawyers, which for thirty-five years of my career has provided me more value for my professional dollar than any other dues I pay. For those of you who are not lawyers, you need not be one to either join the organization, make use of their resources, or buy their materials. For the entire 2009 Annual Meeting program which had other great presentations For other publications.

Lawyers offer special expertise which health care providers need in order to function in their highly regulated contexts. In addition, the special liability problems faced by those providers who do not meet the standard of care, merit careful attention to risk management. But increasingly, we see hospitals who are held captive by attorneys who needlessly scare them about compliance and liability risk. There are increasing tensions in this regard in the new world of quality transparency. We see lawyers advising physicians in so restrictive a way as to impinge on their ability to function as business entities. We see lawyers who over-estimate the nature of compliance problems and recommend potentially more risky efforts to fix them. After 35 years of working in this area, Alice can say, without limitation, that older lawyers offer more seasoned and reasoned advice than younger ones. Young lawyers get hysterical and rigid about things which do not merit such anxiety. In addition, too many lawyers of all ages over-control the situation where, mostly, the risks are purely the client’s to take.

On the other hand, it is not well understood that lawyers advising health care providers, and particularly boards of trustees, have personal liability, not only for what they do, but increasingly for what their clients do. This cannot help but influence the way they give advice. Still further, the context for the relationship between attorney and client can also color the way advice is given. What is the lawyer’s liability and how do we take that into account? Does a member of the law firm sit on the board of the hospital? How important are we as a client to the firm advising us? How does that affect what we are hearing from them? How did the in-house counsel pick the attorney she is recommending for a technical issue? What kinds of information should clients ask to assess the advice they are getting? Finally, are there certain kinds of issues on which the lawyer should be taken more seriously than others? These matters are never discussed openly – at the board, between the client and attorney, or by attorneys themselves. Alice is taking this issue on in a new webinar that addresses “When Should You Listen to Your Lawyer?” Aimed at hospital trustees, the issues she poses are relevant to all clients in the health care industry.

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. Rather than an AGG Note, for these developments Alice has used a teleconference addressing “Anti-Markup and Under Arrangements: Stark Beyond Stark” which can be purchased as an MP3 recording to listen to at your leisure, along with the handout which was distributed to conference attendees.

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.

In 2006, Congress enacted the very beginnings of a physician quality payment program. Too timid to actually pay physicians for better quality results, the Physician Quality Reporting Initiative (PQRI) is not even a pay for performance program, but a pay for reporting program. The actual quality of the care delivered does not matter. In essence it is the Physician Whatever Reporting Initiative. The number of measures to be reported has grown significantly. Many who reported in 2007 found that they did not get the proffered 1.5% bonus payment. CMS itself reports that little more than half of those who reported first received bonuses. The average payment was $600 per provider and $4,700 per physician. For 2009 the number of measures increased yet again. While this increases the chance to say something to get more money, the real problem is that it is not about quality, and only adds to the administrative burdens with which physicians are already struggling.

Under the Stark statute and regulations, there are significant restrictions on how hospitals may pay physicians or provide financial benefit to them. In today’s environment of increased demand for quality performance, paying physicians for their contribution to hospital quality performance is increasingly a sought after technique. In the proposed update to the 2009 Medicare Physician Fee Schedule (MPFS), CMS asked for comments on how they should approach gainsharing (“shared savings programs”) and quality performance payments (“incentive payment plans”). Alice responded with comments on the quality payments. We do not believe gainsharing programs are about quality. They are about saving hospitals money. They have a short shelf life, distract physicians from work they should be doing, and are not sustainable as a business model. We do not comment on them to the government, although we do advise clients who choose to implement them. Most of the programs which have been greenlighted by the OIG are so overloaded with safeguards and protections that they have relatively little utility, other than to the consultants whom the OIG apparently thinks are a protection in their structuring and review of these programs. Unfortunately, in their proposed regulations, the government failed to understand the very significant policy and operational differences between programs that pay physicians a portion of shared savings and programs which pay physicians for contributing to improved hospital quality performance as measured on nationally recognized bases.

When the time came to actually publish an exception that would address these issues, the regulators waffled. Instead they posed 55 specific questions about how to regulate these programs. There are many ways in which the Stark program is out of control and this is one of them. Admitting their lack of familiarity with quality measurement or improvement techniques, they called for answers to their questions, leaving the comment period open another ninety days into February. Alice has provided a 16 page response addressing quality performance payment programs, setting forth the minimal regulation that is necessary here to safeguard patients and protect against rewarding referrals. The government has to stop using the Stark statute as a vehicle for basic regulation of issues that are highly regulated already in other contexts.

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 organized medical staff has a unique role in assuring the quality of care in hospitals. Yet the volunteer medical staff members are under unprecedented pressures which inhibit their willingness to take on tasks they traditionally have performed for free – whether medical staff leadership, service on committees, or on-call and indigent care coverage. Now, there is some data showing that throughout the country, there is an emerging bifurcation into alternate models of medical staff-hospital relationships. (See, Casalino et al, “Hospital-Physician Relations: Two Tracks And The Decline of the Voluntary Medical Staff”, Health Affairs (Sept 2008). Where in the era of post-failed Clinton health reform, hospitals bought primary care practices and then had to unload them, more and more hospitals today are acquiring specialist practices and employing specialist physicians. Equally present are the settings in which members of the medical staff go into competition with the hospital and cease to attend there as much as they used to, while they own and develop ambulatory surgery centers, imaging facilities and even whole specialty hospitals. What is the significance of this for medical staff governance and quality surveillance? These changes in organizational arrangements really ought to have little meaning to the functioning of the organized medical staff in relationship to the hospital board and administration with regard to its principal responsibilities for quality. The medical staff members, whether employed or independent or more typically a mix, still have a unique role in the hospital.

Some commentators have taken the position that the organized medical staff is obsolete if not moribund. We believe they may be wrong; although it is becoming increasingly important to consider carefully just what the function of the medical staff ought to be in the highest quality environments. If 20% of the medical staff is responsible for 80% of the hospital admissions, then who should be considered Active Staff with governance authority to make the rules for the interrelationships among all physicians? Who should define the quality culture for physicians? If the hospital employs the physicians and mandates their participation in activities that fundamentally do not interest them, what will be the outcome for patients? If the medical executive committee is focused on internecine warfare, endovascular food-fights and not how many hearses leave the hospital and why, what will the hospital do without a medical staff on whom it can rely to create a high quality environment? We think these are essential questions which merit the attention of hospitals, their boards and medical staff members. We do not believe that employment of medical staff members ensures an engaged medical staff which will work well on quality issues. We think that the current moment in quality policy and demand for demonstrated hospital quality performance offers an unprecedented opportunity to reinvigorate the role of the medical staff around issues that really matter.

Since the inception of this website we have highlighted the inexorable movement of fraud enforcers to direct targeting of quality problems as fraud. (See, link to (3) #56, #45) When the AHLA and the OIG published joint guidance to hospital boards on their fiduciary responsibilities for quality it was clearly game on! We have highlighted the quality-compliance nexus in the past as well. The rules of the game have so intensified, however, that we now believe that it can be said that a major goal for all health care providers in the 21st century will be “Avoiding Quality Fraud ”. Alice’s article with Jim Reinertsen in Trustee magazine is directed to hospital boards, but has meaning to everyone in health care. The increasing volume of quality data reporting, implied statements about quality in claims filed, and flat out false claims liability lurk. It is significant that hospital quality data reporting has been targeted by the OIG in the 2009 Work Plan as a topic of attention. In her first participation in the teleconference series offered by The Reinertsen Group, Alice elucidated the varieties of these frauds and their pitfalls. In an updated, 60 minute presentation she offers practical tips for avoiding quality fraud in a dialogue with Jim and Jamie Orlikoff. The teleconference is available for sale and download.

The Medical Home, sometimes referred to as the “Patient-centered Medical Home”, despite sounding like a website or new kind of residential facility, is gaining traction as a route to reorganizing the delivery of care to certain populations. Finding its foundation 40 years ago in pediatrics, it is now touted as the answer for primary chronic care improvement as well as payment. A recent search for those who are very successful with these programs has led Arnold Milstein MD, to draw some interesting conclusions about what makes for a “Medical Home Run”. Unwavering commitment to keeping patients out of the hospital is key. By the same token, though, a recent issue of Health Affairs has looked at a variety of controversies and claims regarding the medical home, from differences in its definition and components, to whether those who might be most interested in offering the medical home model in fact have the infrastructure to do so. Rittenhouse, Casalino, et al, found that large medical groups were better prepared with elements of infrastructure alone (e.g., patient reminders, physician feedback, electronic records and more) to offer this approach to organizing care delivery, but even they were not routinely ready to do all that the medical home model promises.

In reviewing the claims for this model, it appears there are two movies currently playing in local theaters: Medical Home: The Clinical Movie --- which is about organizing care delivery to be sure patients can rely on a single practice to be accountable for and responsive to their needs across the continuum of care delivery; and then there is Medical Home: The Payment Movie. Here the story is yet another transitional approach to curing the dissymmetry between high quality, patient-centric clinical processes and current payment models. Medical Home: The Payment Movie seeks additional dollars to pay for the infrastructure which makes coordination of care possible. In fact, were additional payment to be made for intrastructure alone, there is no guarantee any change in quality would result. Still, it is indisputable that it costs money to implement infrastructure that makes a medical home possible --- to use non-physicians to help engage patients in their own care, maintain registries and other electronic data to foster clinically important interactions with patients and to keep tabs on the care they are getting.

The PROMETHEUS Payment® Model ( is highly consistent with the Clinical Movie script and is even better than the transitional, small-additions-to-current-payments storyboard of the Payment Movie. Also intriguing is the application of the medical home clinical approach to other types of care, like hematology-oncology. Those physicians are losing their business model based on drug payments and ought be paid for the care and coordination that are the core of what they do. Infectious disease physicians have similar issues, as do rheumatologists treating arthritics. The basic premise of the Clinical Movie is not only viable for primary care. It deserves consideration elsewhere. Elements of it are consistent with UFT-A principles as well.

The fraud and abuse liabilities which lurk in inadequate quality performance have been highlighted on this website since 2003 with an AGG Note and later Alice's article in The Journal of Health Care Compliance, “Doing What Matters.” From Jim Sheehan’s first public statements on his priorities regarding quality enforcement, to the first OIG settlement based on quality failures, to Sheehan’s 2006 PowerPoint enumerating the many ways in which quality will be the foundation for fraud enforcement, the weight of punitive attention is increasing. Now, with the OIG's published statements regarding Board responsibility for quality in hospital, and a major initiative on nursing home quality performance beginning with a joint publication with the Health Care Compliance Association the pace of the inexorable moves in this direction has quickened considerably. Those who ignore the risks do so at their own peril.

Recognizing the need for a far better appreciation of these risks in the hospital community, Jim Reinertsen and Jamie Orlikoff invited Alice to provide the core content for a webinar to elucidate the context for quality fraud and, more importantly, to provide practical guidance on coping with this new compliance imperative. This program, first presented in June 2008, has now been updated and made zippier (one hour instead of 90 minutes) and was offered in March 2009, with a recording available.

First convened in December 2004 as a disparate group of experts intending to design a new payment model, PROMETHEUS Payment® Inc., was awarded a $6.4 million grant from the Robert Wood Johnson Foundation, to develop a scorecard, refine the concepts and most importantly test the program in four pilot sites across the country. Having modeled its first Evidence-informed Case Rates™ for actual implementation beginning in 2009, the results are quite stunning. In her plain language article, “Making PROMETHEUS Payment® Rates Real: Ya’Gotta’ Start Somewhere” Alice explains the methodology of constructing the rates. First, she elucidates how the Design Team took into account its clear understanding that physicians would be suspicious of rates built on claims data. There are five specific financial cushions built into the rates. The result is that the care for a controlled non-insulin dependent diabetic, whose care comes primarily from a physician office, would be paid based just on the claims data at $311 a year; but, under the PROMETHEUS system, the same patient’s care would be eligible for $2329 to the physician!!! At the same time, what is most remarkable, is that this approach to the broad problem of delivering science based diabetes care would save the system represented in just the database we are using and this one condition, more than $340 million. This is a very powerful reason to move to the PROMETHEUS Payment® model. Similar results are emerging for the other conditions we will address initially as well. The more important hidden message in the article, though, is whether our specific program is implemented is not the issue. Throughout the American healthcare system, we are spending extraordinary amounts of money on potentially avoidable complications, while we are not paying providers enough to do what needs to be done to prevent those complications in the first place. Exploring which services the PROMETHEUS model considers to be potentially avoidable, and then analyzing how to avoid them, is a good way to think about how to organize clinical service delivery for better results with greater efficiency.

With her study of the current identified effects of P4P, traditional compensation models within physician groups, survey of groups which do compensate on quality and consideration of the legal issues in doing so, Alice opened the door to focusing on this aspect of motivating quality improvement. In her article, “Compensation for Quality: The Next Inevitable Step”, she not only makes the point that quality will never reach optimal levels if physicians do not have consistent payment incentives within their groups, but she affirmatively calls for more information about organizations which do pay their physicians for quality. It is hard to believe that only 14 groups around the country, and most of them very large multi-specialty organizations, are experimenting with these efforts. If your group pays your physicians in any measure for their quality performance or based on their quality performance, please contact us at with your story.

The regulations now referred to as “Stark III” have added to the complexities of Stark compliance, but do not require major reorganization of business or delivery relationships. There are many opportunities for hospitals to help physicians with their business case, including paying for quality performance, which is particularly intriguing in light of the widespread emphasis on measured hospital quality improvement. In her two part article “Stark III: Refinement Not Revolution”, Alice first identifies issues associated with Stark as applied within physician groups and in the second part identifies opportunities and pitfalls that the new regulations raise, with regard to hospital-physician interactions.

The challenge of engaging physicians in quality initiatives at the hospital often falls most heavily on the shoulders of the medical leadership in the C-suite, whether the chief medical officer or the VPMA or the chief of staff. In their article directed to these folks, “Finding Common Cause in Quality: Confronting The Physician Engagement Challenge”, Jim Reinertsen and Alice Gosfield dispute the metaphor offered by Jeff Goldsmith of the hospital-physician engagement continuum as a coral reef of predators and prey. From their continuing work with IHI and medical staffs and hospitals around the country, they continue to hold the firm belief that enormous strides can be made for better patient care and more activated physicians, when physicians are seen as the hospitals true partners and not mere customers.

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 is sweeping the country. Despite equivocal data as to success and impact, most payors regard it as inevitable, and most physicians are resigned to its arrival soon at a theater near them, if they are not already confronting it. Medicare’s ‘pay for quality reporting’ initiative really is “pay for whatever I did” because it is the completion of the form, not the quality of the care, which gets the payment bonus. CMS was met with a tepid enrollment of 17% of potential participants. And that program is not limited to physicians, but includes other non-physician practitioners as well. While these initiatives continue to be touted as ‘payment reform,’ on the other side of the ledger, both CMS and many health insurance programs are adopting no pay for no performance programs by denying payment for never events -- mishaps of such an egregious nature that they never should have occurred in the first place. Hospital associations have stepped forward to say their members will not bill for such events including wrong site surgeries, retention of foreign objects after surgery, death or disability associated with wrong type blood transfusions. First promulgated by the National Quality Forum in 2002, the list of the initial 27 “never events” is not without controversy, since a range of the conditions cited include matters which may have been present on admission (decubitus ulcers). Medicare has proposed to add conditions to those it already requires to be reported and on which it will not pay for the care devoted to treatment of the event or complication. There is some question as to whether this approach will be applied to physicians. In the PROMETHEUS Payment® model, a readmission for something related to myocardial infarction within thirty days of discharge is considered a potentially avoidable complication for both the physician and hospital.

In a very different spin on ‘quality’, this year marks the 20th anniversary edition of the Health Law Handbook. The book was identified as unique, even in the annals of Thomson Publishing Company, the parent of WestGroup, which now publishes the book – having been the purchaser of the big fish that ate Clark Boardman which first put it out in 1989. WestGroup noted the longevity of the book, and the challenge of having one author for all 20 editions. The book is written primarily for practicing lawyers, but it has over all of its time, offered the insights and opinions of well intentioned expert volunteers who share their intellectual capital with their colleagues – and the non-lawyers who read it, too – simply because they are asked to. Over the years it has become available on Westlaw. The book is available online.

When the privacy regulations were first adopted back in 2003, there was considerable anxiety among the provider community, and particularly physicians, with regard to the administrative burden of compliance and intrusion in the doctor-patient relationship that would come from the empowerment of patients to complain to the Office of Civil Rights regarding violation of their right to privacy. The OCR has now published data regarding enforcement of HIPAA privacy complaints and there can be no doubt that the number of complaints has indeed gone up substantially. In 2004, the first full year of the program, there were 6500 complaints filed. By 2007, that number had increased to more than 8100. But this is the grand total of all complaints received from all sources throughout the United States of America! Hardly a tsunami of privacy violations. The data on the website reports complaints filed by state and their resolutions. Although the ratios have changed slightly, more cases are determined to have no violation today, than four years ago. By far, most of the complaints are resolved on investigation and review and do not proceed further (69%). Of the cases that proceeded to investigation, last year produced almost 1500 ‘corrective actions’ (type unspecified) and a larger number (750) than before were found to have no violations.

The ability to get proper on call coverage for the hospital emergency department is a growing challenge for community hospitals as documented by the Center for Health System Change. Specialist physicians have become increasingly fearful of serving on the on-call rotation given increased liability and larger numbers of indigent and uninsured patients. Medical staffs around the country have reduced the requirements for physicians on the medical staff to perform this function, which long was seen as the physician’s professional responsibility, which in earlier times they fulfilled without much complaint. To cope with this problem, hospitals have developed a range of strategies which the center identifies in their report. Now, for the first time, the OIG has issued an advisory opinion explicitly approving an on-call and indigent coverage program to pay members of the medical staff for performing these services. Some have declaimed the safeguards this hospital established as unwieldy and impractical, but the good news is that the OIG has acknowledged this critical dilemma. They are still confused, I think, over the role of the medical staff and that most bylaws no longer require most categories of the staff to provide coverage. And, the EMTALA liabilities to make sure coverage is available are the hospital’s and not the medical staff members’ unless they are on the on call schedule. This is one of many ways in which hospitals can pay physicians to do work on their behalf to the ultimate benefit of their patients.

Clinical integration is a technique by which independent physicians and group practices can relate to one another for quality and still bargain collectively over price with managed care plans. Cited by the FTC in virtually every settlement with IPAs and combinations that bargained collusively over fees, the indicia of proper clinical integration have not been well defined. Some settlements and one Advisory Opinion, now almost six years old, have staked out some of the turf, but most of what the government has reviewed, it has always seemed, were activities that have been motivated more by price than quality improvement. The lack of clear guidance has led the American Hospital Association to call on the FTC and DOJ for greater specificity in describing what would qualify as good clinical integration. Now, in their advisory opinion to the Greater Rochester IPA, the FTC has described a program which seems far more to emanate from a quality impetus. Because GRIPA was well integrated clinically for the work it did in connection with HMO products, it had a relatively easier time orienting its activities to the PPO, fee for service, business where the antitrust risks are far greater. The opinion is a useful statement of one modern model of clinical integration.

The change in the JCAHO Medical Staff Standard to require that the medical staff bylaws be an integrated document has created a firestorm of controversy that should be less than a tempest in a teapot. Prediction of expensive disasters in redrafting bylaws, and arguing over what is process versus what is procedure, is absurd and fomented by a cadre of law firms who have made significant income from advising medical staffs and hospitals that the bylaws should be divided up into five different sections so that they may be more easily amended. The Medical Staff Bylaws are the Constitution of the Medical Staff and should be amended about as easily as the US Constitution is amended. We have written and advised on medical staff bylaws for more than 100 medical staffs all around the country over the last 30 years, and this is not all we do, as it is for some firms. We have never advised a medical staff to disaggregate their bylaws.

The other noteworthy change adopted by the Joint Commission for 2009 was that the medical staff should have the right to propose medical staff bylaws changes directly to the board. This should be non-threatening unless you have a renegade medical staff or a renegade medical executive committee where the representative function of the MEC has broken down. It would be the board’s responsibility to sort this out if the medical staff asked for changes, not recommended by the MEC, that were not in the best interests of the hospital. Everyone should calm down about these feared power struggles and focus on the real purpose of the medical staff, which is to be responsible for quality in the institution. When organizations do that effectively the medical staff can become more galvanized for a far better purpose than internal turf and power struggles.

In October 2007, the US Attorney in New Jersey entered into deferred prosecution as well as settlement agreements with six device manufacturers who had paid physicians purportedly to advise them regarding the development of new devices. Unfortunately, many of these were apparently no show jobs. But in reading the settlements and corporate integrity agreements, while the manufacturers agreed to cease what the government found to be illegitimate relationships with physicians, the government did recognize that paying no more than $500 an hour to physicians to perform real services advising these companies would be permitted. This specifically acknowledges that device manufacturers do have a legitimate need for input from practicing physicians who might use their products. There are many myths about how device manufacturers and physicians may relate to each other. In “Physician Investment in Start-Up Device Companies: Debunking The Myths”, Alice presents the boundaries of safety and a continuum of arrangements between physicians and device manufacturers.

The last five years have heard a relentless call for information technology dissemination to improve quality and lower costs in health care. Electronic health records (EHR) have been touted as the first and most important step to a real technology revolution. For physicians, though, the cost of EHR implementation has often proven prohibitive. The Stark and anti-kickback protections for donated medical records was expected to jumpstart this effort. Not so fast. In his consideration of downstreamed EHR licenses Dan Shay takes his primer on EHR license agreements a step further in explicating the special complications of tri-partite license agreements. What happens on termination is at least as important as what is entailed in implementation.

Alice Gosfield and James Reinertsen MD have been working on techniques to help physicians and hospitals work better together to improve quality. In their white paper for IHIas well as other offerings, they describe a six step plan to accomplish improved engagement around quality. Now, in “Sharing the Quality Agenda with Physicians”, they focus explicitly on the unique responsibility of lay trustees to create more effective physician engagement with hospitals. They explain how the board can ask the right questions and seek the right data to make engagement and quality strides effective and real. They emphasize the importance of meeting the varying needs of different segments of the medical staff and describe Stark compliant initiatives that should be considered.

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.

On December 5, 2006, Health Affairs published a web exclusive series of articles offering some fascinating perspectives on hospital-physician relationships which are particularly relevant to physician engagement with hospitals around quality. Berenson, Ginsburg and May observe that physicians have increasingly become competitors of the hospitals which were formerly their most valued “significant others”. Fischer, et al. argue that hospital quality results should be measured to include the “extended hospital medical staff” which would take in physicians who refer to the facility but never set foot in it. Wilensky, Wolter, and Fischer present a new spin on gainsharing as a way to meet the ever elusive goal of “aligned incentives”. Smithson and Baker contend that the medical staff organization itself is a moribund anomaly and not worth accommodating at all. Goldsmith offers a view of the medical staff as a Darwinian coral reef with predators and prey; while Cortese and Smoldt claim that legally integrated hospital-physician entities are the only hope for the future.

The provocative juxtaposition of these articles reflects the intensity of interest in the intersection of physicians’ economic behavior with the hospital’s status as an institution where most of the activities are driven by physician orders. All acknowledge that improved medical staff-hospital relationships are indispensable in today’s world.

Our work takes the position that the structure of these relationships is not the issue at all. Too much time of lawyers and accountants is spent constructing financial transactions that will bond the physicians to the hospital by generating revenue for them. There is no question that paying them for some activities is useful. Rebuilding trust where it has broken can sometimes begin with a good business deal. But, from the IHI program and white paper, to “Doing Well By Doing Good” going back through a host of other publications including the AMA White Paper from 1998, our view is that most physicians have a profound interest in quality, particularly in terms of outcomes for their patients and efficiency in the use of their time. The holy grail of “aligned incentives” and structure-driven solutions can only offer short-lived hope unless these efforts recognize that physicians themselves are increasingly reported on for their quality results, risk fraud and abuse enforcement for quality failures, and have a strong cultural concern for excellence and professionalism. All combine to define their business case for quality which must be the fulcrum to better relationships with hospitals if they are to be sustainable.

The increasing emphasis on quality as a basis for fraud and abuse enforcement is now clear. Yet many compliance officers are not integrated into the quality activities of the organizations they serve. In her viewpoint on “Doing What Really Matters: The Compliance Connection to Quality” in the Journal of Health Care Compliance, Alice presents three activities through which compliance officers can work more effectively on quality issues in addition to the fundamental challenge of raising the consciousness of the board and administration of any healthcare entity to these new quality mandates.

Among the many strategies for closer alignment between hospitals and their physicians are the proliferating joint ventures and financially driven exercises, including gainsharing, that are intended to capture with more revenues the loyalty of the medical staff members who are involved. In an editorial in a recent issue of the Journal of Oncology, “Physician-Hospital Partnerships: What Really Counts?”, Alice argues that unless the quality implications of hospital-physician ventures are their driving purpose, these transactions may generate short-term revenues, but they will not feed the core needs of their participants. Still, they may have an important role within the context of a well-thought out physician engagement strategy.

The PROMETHEUS Payment® model is designed explicitly to reward clinical collaboration among otherwise independent providers. Since 30% of any provider’s scores will turn on the performance of all the other providers treating the patient for that condition, and scores determine the totality of the payment a provider can receive, there is a real reason to pay attention to the web of referral relationships – from whom you take referrals, to whom and where you refer. Even when the optimal moment for referral occurs would be an important point for agreement among clinicians – whether primary care to specialty, vice versa or among specialists. In fact, much of what PROMETHEUS Payment® would reward, providers should be doing anyway. In her article “A New Payment Model for Quality: Why Care Now?” Alice articulates some of the steps providers should be taking anyway to improve their care and their efficiency.

The Ventura County California hospital-medical staff case generated a firestorm of controversy regarding board involvement in medical staff governance before it was eventually settled. The parties had very intense views regarding the matters at hand. (See the views expressed by the the attorneys representing the physicians). Subject to significant physician advocacy, the California legislature enacted a law establishing the medical staff’s right of self-governance in the most explicit terms ever . Specific topics statutorily reserved to the medical staff include selection of clinical criteria and standards to oversee and manage quality assurance and other medical staff activities, selection and removal of medical staff officers, and the right to retain and be represented by independent legal counsel. In case of any dispute on these issues, the medical staff and hospital governing board are obligated to meet and confer in good faith to resolve the dispute. Astonishingly, though, the statute says that when any person or entity is even about to engage in acts or practices that hinder, restrict or obstruct the ability of the medical staff to exercise its rights, the superior court “on application of the medical staff” may issue an injunction. (West’s Ann. Cal. Bus. & Prof Code §2282.5). While acknowledging the ultimate authority of the hospital board to protect the quality of medical care and competency of its medical staff, the legislature explicitly stated that their final authority may only be exercised with a reasonable and good faith belief that the medical staff has failed to fulfill a substantive duty pertaining to quality of patient care.

Many commentators have characterized this legislation as establishing that the medical staff must be considered an independent legal entity. For many reasons this would be a disaster, although there are physician advocates that have long called for this approach in the form of incorporating the medical staff. Certainly the medical staff counsel in the Ventura case makes that argument. We do not read the statute as requiring that the medical staff be seen as an independent entity and will be keenly interested in how it is interpreted by the courts. The new possibilities for liability where a medical staff is separately incorporated are significant: If it will then be able to conspire with the hospital board under antitrust principles pertaining to credentialing. It will have its own separate malpractice liability for negligent credentialing. It would not be protected under the hospital’s own director and officer’s liability insurance but rather would have to obtain its own. The full interpretation of the statutory provision is not yet known; but for medical staffs which act responsibly to surveil the quality of care in the organizations to which they direct their attention, the decision to incorporate should not be lightly taken. While ‘bad cases make bad law’, the essence of this law is not bad. It’s interpretation in already difficult circumstances could create serious consequences. In the last analysis, the extremely critical role of the organized medical staff for quality assurance and particularly among their peers, is strongly supported here. How to change the way medical staffs and hospitals interact around quality is the key challenge for hospitals of the future and a substantial theme in our work. (See “In Common Cause for Quality”, “Engaging Physicians in a Shared Quality Agenda”, “W(h)ither Medical Staffs? and more throughout Latest Issues and in Publications

The issue of how physicians can collaborate effectively when two specialties seek to perform the same services has presented increasing challenges in many contexts. A classic problem area with regard to this is the advent of coronary computerized tomographic angiography (CTAs) performed by cardiologists who generally do not read the full chest cavity. In contrast, radiologists frequently hold exclusive privileges at the hospitals at which they practice and are not as intensely focused on cardiac organs. The American College of Radiology asked us to provide them with a white paper elucidating potential reimbursement liabilities associated with splitting these interpretations. That white paper is now available addressing these issues, all of which would be obviated with the advent of PROMETHEUS Payment®.

Hospitals and physicians have tried to collaborate more effectively through bonding, purchasing, owning and managing. Virtually none of these initiatives has improved quality of care. In addition, the rise in economic credentialing, conflicts of interest policies and disclosure of ‘competing investments’ further entrenches the parties as disparate stakeholders. In her work with hospitals and physicians in common cause for quality, Alice Gosfield has focused on the negative effect of these initiatives. Frequently, overly conservative attorneys contribute to mythologies pertaining to the impact of Stark and the anti-kickback statute on these issues. In an article jointly written with Jim Reinertsen, M.D., for Hospitals & Health Networks Online, they debunk these myths and offer strategies for more collaborative, quality-enhancing relationships. The second part of the presentation describes how PROMETHEUS Payment® can further these relationships by supporting with a different payment system efforts that hospitals and physicians ought to be involved in any way.

In the 2007 Medicare Fee Schedule, the interrelationship between the Stark in-office ancillary services exception and the Medicare reassignment rule has been elucidated where the government has emphasized and focused attention on fragmented joint ventures (e.g. “pod” clinical laboratories) structured by attorneys who have not understood that the Stark rules trump the reassignment liberalizations. For any Stark designated health service, no matter what the other reimbursement rules, the Stark rules are the first hurdle for compliance. Consequently, independent contractor relationships that are generally allowed under the liberalized reassignment rules will not meet the definition of in-office ancillary services since an independent contractor is only in the group that is billing when he uses their premises (e.g. radiologists reading off-site from the group providing the technical component). We were not surprised by this position since we believe that is what the rules have said all along. However, the attention to these arrangements in the preface to the Fee Schedule means that the government is becoming increasingly aware of non-compliant creative solutions. Sometimes the answer is “you just can’t do that”.

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.

In a blog interview conducted by a surgeon who has been a client,
Alice is questioned about how she became a health lawyer, her views on
P4P, why she didn't become a physician and more. For a real change of
pace go to

The impetus for quality comes in many forms. Alice has co-authored an article with James L. Reinertsen, MD in the November/December 2005 issue of Health Affairs, "The 100,000 Lives Campaign: Crystallizing Standards of Care for Hospitals", which makes the case that IHI's 100,000 Lives Campaign has changed overnight the legal standard of care for hospitals throughout this country --- whether they enrolled in the campaign or not. We elucidate why. We speculate on the kinds of cases which failure to implement the six planks of the campaign will generate. We look at the top ten reasons hospitals get sued and place the planks in that context. Risk avoidance certainly adds to the business case for quality. And then we say why fear of malpractice liability is not the real reason to implement the six planks. Moral reasons and a call to the true mission of health care enterprises are the real motivations to prevent preventable deaths.

As health plans and health systems have consolidated and fraud and abuse enforcement has intensified throughout healthcare, the natural business tendencies in any other industry for business partners to find ways to benefit each other economically in win-win strategies has been stifled in health care. Anxiety over fraud and abuse and antitrust risks, has gotten in the way of hospitals and physicians on one hand and health plans and physicians on the other working together for their mutual economic benefit with the purpose of improving quality. In a new chapter in the Health Law Handbook, Alice makes the argument that until the three principal drivers of the care that patients receive in this country take common ownership of the quality mission and stop thinking of themselves as disparate, adversarial stakeholders, quality will never advance to the levels we would like. "In Common Cause for Quality" she articulates a perspective on how to consider a business case for quality, sets forth the quality demands on hospitals and health plans which cannot be met without full cooperation of physicians and debunks the myths that the law impedes collaboration which benefits any party economically. She then enumerates10 specific strategies by which hospitals and health plans can advance the physician's business case for quality through activities with direct beneficial financial impact on those physicians. She also presents 6 additional strategies through which physicians can and will have to help hospitals to optimize their quality efforts.

In "Enhancing Oncology's Business Case: How the Hospital Can Help" she presents a crisper version of these arguments in terms of how oncologists can safely look to their hospitals to help them with their own quality demands.

For quality to advance in this country, it is becoming increasingly clear that universal electronic medical records will be necessary. Proposed regulations to permit hospitals to provide record systems to their physicians have been published under Stark. Many physician practices are looking to obtain these programs. Whatever the source of an electronic health record system, it is certain there will have to be a license agreement by which the practice obtains access to the software, unless they build their own. In "A Primer on Electronic Health Records License Agreements", Daniel Shay reviews the context for these contracts, elucidates their common features, based on reviews of real-life documents, and points out pitfalls that physician practices should avoid in obtaining access to these vital practice accessories. In a practical, easily applied application of the deeper issues addressed in the primer, Daniel has also offered guidance on “Top Ten Questions To Ask When Looking At An EHR License Agreement.”

CMS has finally issued its first Stark advisory opinion since the publication of the Phase II final regulations. While the analysis was supportive of the position of the physicians, the issue it addressed hardly advances the state of the art in interpreting the statute. In this instance, a 700 physician multi-specialty physician group sought the approval of CMS that stock ownership by the physicians in a not for profit tax exempt organization (apparently permitted under applicable state law) did not violate the statute. The opinion is superfluous in its import but at least it has gotten the ball rolling on issuing opinions.

The Stark statute and regulations present a host of structuring and operational challenges for most physicians. Radiologists have often believed that they are immune from the implications of Stark since their ordering of diagnostics studies pursuant to a consultation is excluded from the definition of an implicated referral under Stark. However, this does not mean radiologists need not pay attention to the Stark statute. Moreover, many other types of physicians are seeking to engage radiologists in concert with them to deliver imaging services to their patients. Liabilities lurk everywhere. In “Radiologists and Their Business Significant Others: Underappreciated Traps in Stark”, we describe where some of these pitfalls lurk.

Physicians and their practice managers frequently consider contracts to be overly burdensome, too detailed, and too expensive to create. Paradoxically, though, they similarly want assurances that when they do create a contract that it will be “iron-clad”. These are naïve misunderstandings of the enormous power and value that contracts have in the modern business environment. As physicians relate to others in a wide variety of ways, whether in employment, joint ventures, vendor relationships or otherwise, contracts define their business context. By the same token, a contract is only as good as the will of the parties to abide by it, so a clear and common understanding of the goals and intentions is essential. In “Understanding Contracts: The Glue of Modern Business Relationships”, elucidates with specific reference to typical physician relationships, those fundamental aspects of contracts that are often referred to as “boilerplate” or appear in the back of the document and are assumed not to be important. This is must reading for anyone who signs a contract no matter the purpose.

In an article in Community Oncology, Alice makes the argument that because of the perverse impact of the Medicare drug payment model on oncology practices, they have neglected to focus on their own business case for some time. When much of your income is driven by profits made on the provision of pharmaceuticals to patients, a reduction in that payment can result in significant practice dislocation. For oncologists, the moment may well be optimal to really consider clinical integration. In “Better Quality, Better Margins: Seizing the Moment” Alice elucidates these connections in relationship to the application of UFT-A principles.

In its Jan/Feb 2005 issue, Health Affairs offered a range of articles confronting issues in evidence based medicine. One of them, by Timmermans and Mauck, cited a number of barriers to widespread physician adoption of clinical practice guidelines. Alice Gosfield and Jim Reinertsen noted that where guidelines are nothing but an add on to a system which imposes unmanageable administrative burdens already, there is little to motivate physicians to use them. Our letter to the editor, published in the May/June 2005 issue of Health Affairs, points out that to use CPGs as the foundation for all processes, both administrative and clinical, makes a far better business case for their use.

Since the inception of the DRG program in 1982, hospitals have been trying to find a way to motivate the physicians on their staffs to work with them to lower expenses by sharing savings generated. These 'gainsharing' notions had been virtually precluded to them going back as far as a Paracelsus hospital company program in 1983, and then in more modern iterations, by virtue of the OIG's Special Advisory Bulletin on Gainsharing Arrangements in 1999. Although the OIG approved one gainsharing program 18 months after the Bulletin (see discussion in Alice Gosfield's article on "Making Quality Happen: In Search of Legal Weightlessness"), the structure and operation of that program seemed sufficiently idiosyncratic as not to offer much by way of a model. Now the OIG has published six advisory opinions approving 'gainsharing' programs, where cardiologists and cardiac surgeons will be permitted to share in the savings hospitals generate by virtue of standardization of surgical supplies and their uses. As we note in our five principles for UFT-A, standardization for purposes of quality is important as an element of a business case for quality; but the advent of these gainsharing approvals further supports a business case for broad and deep standardization to the evidence. On the other hand, the gainsharing programs are time limited, appear to be predominately applicable in surgical contexts or analogous circumstances and hardly will serve to drive a sustainable business model for physicians.

Clinical integration has been held out by the FTC in every physician network settlement into which they have entered in the last few years. "You can't do this, but if you were clinically integrated you could." Some have questioned whether clinical integration is really available as an option to facilitate providers bargaining with payors. Brown and Toland in California was the subject of an FTC enforcement action in 2003 for their PPO bargaining activities. When they eventually settled, they agreed not to undertake any PPO bargaining unless the FTC prior approved what they were doing as sufficient clinical integration. The FTC has now reviewed Brown and Toland's ( B & T) approach and has said it represents enough clinical integration to permit negotiations, but they will still be subject to review for conformity with the integration principles. B& T says that the elements of integration they have adopted are a utilization review program, disease management and case management activities and an electronic medical record. This is meaningful because until this point there has been only one advisory opinion which addressed acceptable elements of clinical integration and now the B & T program is different. The FTC says it will review their actual implementation; but this action stands for the proposition that clinical integration is alive and well. It also means clinical integration does not require a uniform approach consistent in every respect with the hypothetical facts set forth when its permissibility was first published by the FTC in 1996. We think that UFT-A offers an option which will, by its implementation, create appropriate clinical integration to qualify for joint bargaining.

"You cannot improve what you cannot measure". "What gets measured, gets done." These truisms about quality improvement reflect the importance of performance measurement which is being used not only for P4P but also for network selection, reorganizing care delivery processes, and transforming the culture of health care organizations. For all of the policy interest in core data sets and standardization of measures, the current context offers anything but. The varieties of measures and measurers seems to be proliferating rather than consolidating. There are controversies and quandaries in performance measurement, as well as lurking legal liabilities both for those who would select and use measures as well as those who do not or do so ineffectively. In "The Performance Measures Ball: Too Many Tunes, Too Many Dancers?" Alice Gosfield offers a view of the new Medicare Modernization Act initiatives which relate to measurement; explores why the explosion of interest in measurement and measures now; clarifies concepts around measurement; provides a snapshot of the major players and their approaches including CMS, NQF, JCAHO, AHRQ and IHI; considers the significant controversies surrounding measurement initiatives; and speculates on legal pitfalls in this essential component of quality improvement and a business case for quality.

With the reemphasis on 'transparency' in health care quality policy, more and more quality information about providers will be made available. The commercial value of provider data is also increasing. Providers enter into many contractual relationships where data about them may be in play, even if that is not the focus of the relationship. For example, a managed care contract, a practice management company relationship, obtaining an electronic medical record from a software vendor, or hiring a billing company are all relationships where significant provider data will be at issue. In "Commerce in Provider Data: What, Why and Provider Contractual Controls" Daniel Shay looks at what is proprietary to a provider, considers who is reporting data and why, and offering actual contract language as well as case law, addresses contractual protections providers should think about in entering into relationships with a range of other entities.

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.

Even as Joint Commission has expanded its attention on quality improvement activities in the hospital, hospitals that do not rely on “deemed status” based on their Joint Commission survey will have to meet the CMS conditions of participation which now require the hospital to develop, implement and maintain a data driven quality assessment and performance improvement program (42 CFR § 482.21) which must rely on quality indicator data. The Board itself is held accountable for the operation of the program. (42 CFR § 482.21(e)). This reemphasis should further propel hospital boards in stewarding the data driven quality improvement of their organizations.

Regarding Stark, there remain considerable confusions about this badly drafted and misguidedly conceived piece of legislation. The fundamental concerns that motivated the legislation are legitimate: (1) Will physician investment motivate referral to poor quality, financially related entities; (2) Will Medicare overpay entities which create specious joint ventures just to investor physician referrals; (3) Will tainted referrals yield medically unnecessary care for financial return? The statute does precious little to address these core questions. Over the years we have addressed many of the misconceptions and myths about the law and regulations in addition to our two AGG Notes, two part article in Family Practice Management (Part I, Part II) and Ten Myths About the Stark Statute Debunked. Further exploration appears in the new article“Is Your Group A Group?”

The essential nature of the transaction that takes place between physician and patient, as first articulated by Jim Reinertsen in 1997, in “Health Care: Past, Present and Future” (Group Practice Journal, March/April 1997—Vol. 46, No. 2) is the critical touchstone for UFT-A principles. It has also been acknowledged in the Crossing the Quality Chasm statement that “Transferring knowledge is care.” High quality care, therefore, is care that occurs when the conditions permitting the most effective transfer of knowledge have been optimized. In her article, “The Doctor-Patient Relationship as The Business Case for Quality”, Alice Gosfield elaborates on these themes and the legal predicates for improved physician as business case for quality.

Interim Final Stark Regulations have now been published addressing the remaining statutory exceptions that were unaddressed under Phase II and creating a host of new regulatory exceptions. From recruitment subsidies from hospitals, to in office ancillary services, to professional courtesy, the Stark regulations reach into transactions large and small. The legislation is misguided, badly drafted, and unnecessarily complex. It may be the worst piece of legislation in thirty years of health care enactments, but it is law and the regulators have done the best they can to make it livable in the real world. Our AGG Note, ”Stark II, Phase II: The Interim Final Story,” explores in real life scenarios some of the most commonly applicable issues and expounds on the implications of some others. It should be read in conjunction with our 2001 AGG Note, “Better Late Than We Thought: Final Stark Regulations”. There will be a Phase III though which will surely clarify some of these matters. You can also read our comments on three issues which we have raised in response to the open call for comments.Our other publications on point include our two articles in Family Practice Management, “The Stark Truth About Stark” (Part I, Part II) and our piece in the Journal of Medical Practice Management, “Ten Myths About the Stark Statute Debunked.”

“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.

One of the major thorns in the side of physicians confronting managed care payors has been their antitrust risk if they bargain for fees collectively. We have posited that ‘clinical integration’, which the antitrust regulators have said can permit otherwise collusive bargaining among competing physicians, is part of the business case for quality. In each of the physician and hospital network settlements in the last months, the FTC has noted that the physician groups were not sufficiently integrated financially or clinically. In the settlement with Brown and Toland, the FTC imposed a new requirement that if they chose to bargain based on clinical integration they would have to submit their approach to the FTC before implementation. Given the dearth of regulatory guidance on point, and only one advisory opinion to date, it is with great pleasure that we are able to make available an important article from our 2004 HEALTH LAW HANDBOOK by Bob Leibenluft who was the head of the health care division of the FTC when the clinical integration opportunity was made available. In “Clinical Integration: Assessing the Antitrust Issues”Bob and his colleague Tracy Weir, acknowledge that the antitrust regulators have not seen much real clinical integration. We think that is probably true since much of what we are familiar with as purported to demonstrate clinical integration, in fact, does not go far enough. Still his article supports our case that doing what we suggest in our ‘unified field theory’ work would likely meet the regulators’ criteria.

Prosecutors are becoming increasingly interested in how quality implicates the fraud and abuse statutes. From understaffing in hospitals, to care which does not meet professionally recognized standards, to over-utilization, new theories of false claims and flat out fraud based on the clinical care rendered are emerging. Initially used to force some 40 or more false claims settlements around the country with nursing homes, prosecutors have now made it clear they intend to use similar theories to prosecute hospitals. In the current environment of diminishing reimbursement and heightened attention to quality, the fraud and abuse risks from less than optimal clinical behavior can no longer be ignored. Unless these issues are addressed in compliance programs, those initiatives will remain mired in the narrow focus of the administrative minutiae of billing problems, leaving the health care enterprise vulnerable and their compliance staff isolated from the principal focus of the organization – delivering high quality care.

At the same time, how to set priorities for compliance activities is beginning to stymie those compliance programs that addressed initial, low hanging fruit with corrective, voluntary actions. Some of our clients are struggling with where to go next. Many of them seem to believe that the role of compliance is to forever search out errors to report and repay. We do not share this view. We believe compliance is about doing it right in the first place and cleaning up problems found. It is not about eternal internal inspection. Our new AGG Note, “The Quality/Compliance Nexus: Moving to Programmatic Integration” examines the developing enforcement environment, sets forth liabilities already on the books, and then discusses how using clinical practice guidelinesin compliance can integrate its import into the fundamental mission of health care. The result can be to (1) enhance compliance itself by making it meaningful for those from whom compliance is sought, (2) save time for the clinicians, and (3) actually improve quality on an on-going basis.

The FTC is on the march against physician networks. In five recent enforcement actions -- against an IPA in Dallas (, the Washington University Physician Network for boycotts (, a Baton Rouge orthopedic network for a failed messenger model attempt at negotiations (, a joint bargaining mechanism between a hospital and its physicians in Maine (, and against Brown and Toland in California for their handling of their PPO contract negotiations as distinct from their HMO contracts (, the FTC has made it clear that it will not tolerate collusive bargaining among otherwise competitive physicians. Throughout, the FTC continues to hold out clinical integration as a bulwark against per se antitrust violations. To date, there has been only one advisory opinion dealing with clinical integration. Despite its insistence that it would fight the government, the Brown and Toland medical group eventually did sign a consent order in which they agreed, among other things, to notify the FTC 60 days in advance if they plan to enter into a contract which they believe will meet the standards for either financial integration or, more significantly for us, clinical integration. That the government still believes clinical integration can be meaningful is evident from its orders in these cases. We think their approach is consistent with our ‘unified field theory applied'.

We are not antitrust lawyers, but the appeal of clinical integration is enormous as a quality propelling adjunctive mechanism. While many antitrust lawyers are skeptical of the extent to which the FTC will endorse real clinical integration, we, frankly, share the view that the FTC likely hasn’t seen much real clinical integration, since most IPAs don’t provide it nor even understand it. Moreover, the FTC has made it abundantly clear that the fee agreements that will not be considered per se violative must be necessary to fulfill the clinical integration functions. The MedSouth opinion describes an unwieldy, overly complex system of managing care which is not the only approach to these issues which we think the FTC would approve. In fact, we are eagerly awaiting the battle which Brown & Toland says it will mount, to see how the developing boundaries of clinical integration square with our Unified Field Theory---Applied. (Go to for more discussion of this proposal).

The need to advance a quality agenda in the American health care system has never been more urgent. Yet current initiatives, including "pay for performance" programs, are not generating desired improvement in health care. A major reason is the failure of policy, markets and regulation to engage physicians, arguably the most significant drivers of what care is delivered. On March 28, 2003 in Chicago, Alice G. Gosfield and James L. Reinertsen, MD, FACP, convened, with the generous support of Sanofi-Synthelabo, a unique meeting of 30 senior leaders (CEOs, CMOs, Senior VPs) from a variety of leading institutions around the country  including Intermountain Health, Pacificare, Sutter, Scripps, Massachusetts General Hospital, CareGroup's Provider Service Network, HealthTexas (Baylor), Hackensack University Medical Center, Catholic Healthcare Partners, Mayo, EBM Solutions, Anthem, Institute for Clinical Systems Improvement, Oregon Health and Sciences University and others to consider, react to and develop further ideas first expounded in the AGG Note on 'Gosfield's Unified Field Theory'. This theory, which Reinertsen and Gosfield now seek to move to practice and application ("the Unified Field Theory-Applied ["UFT-A"])   posits how to use clinical practice guidelines to drive physician payment and many other aspects of the health care system. The purpose of such an approach is to (1) give physicians back more time to develop healing relationships with their patients; (2) improve quality; (3) standardize, simplify and make more clinically relevant the physician work environment; and (4) thereby make the entire health care system more consistent with overarching quality driven principles that speak to physicians the way they think. 

The discussion was met with significant enthusiasm. Gosfield and Reinertsen have now written a white paper, "Doing Well by Doing Good: Improving the Business Case for Quality" which is available in both an Executive Summaryas well as in the full version with footnotes and Appendices.Informed by the conference discussions, the paper considers

  • Current barriers to a physician business case for quality,
  • The limits of current attempts to address the business case,
  • The centrality of physicians to the American health care system,
  • Why physician time and touch with patients are essential quality problems,
  • Five principles for change which could revolutionize health care,
  • How clinical practice guidelines can provide a firm foundation for a unified system to reorder major aspects of health care delivery and accountability, not just for physicians but throughout health care; and
  • Implementation challenges that will have to be addressed to make the theory real.

The goal of the paper is to stimulate rapid-fire trials in multiple venues. The conference attendees were interested in remaining in contact regarding initiatives, experiments and experiences with these ideas. We have now established a listserve at for those who seek to communicate in an on-going way on these issues. We are hopeful this will be the beginning for broader initiatives that will expand to others.

The HIPAA Privacy Rule  became enforceable on April 14, 2003 and on April 17, 2003, the Office of Civil Rights of DHHS  published regulations addressing how it intends to enforce the Privacy Rule, so compliance is more important than ever. Many providers, still struggling with the compliance process, have found our Physician and Medical Practice HIPAA Privacy Compliance Protocol to be a useful tool. Like our Fraud and Abuse Compliance Protocol it is for sale to clients for $75 and to non-clients prepaid for $125. If you would like it provided to you electronically, let us know. Additional practical guidance can be found in The HIPAA Privacy Rule: Answers to Frequently Asked Questions by Alice G. Gosfield.

We are working with our clients to help them develop their privacy compliance plans. Like fraud and abuse compliance programs, we do not believe that these plans should be purchased off the shelf, even from us. Rather they must reflect the specific demands of each practice and these will vary considerably. We are helping our clients who are Covered Entities develop (1) their own notices of their privacy practices, authorizations, and business associate contracts as well as (2) policies and procedures to assure they comply with the rules and appropriately safeguard the rights of those whose protected health information (PHI) will be shared. We are also helping our clients who are Business Associates evaluate the contracts they are offered and develop complying policies and practices they accept as obligations.

As physicians have become more interested in receiving the full economic value of the work they produce, and they have sought increased control over their work environment, more and more often they have created and financed health care enterprises which may compete with the hospitals at which they have traditionally maintained medical staff privileges. Some hospitals have reacted with restrictive medical staff policies, intrusive inquiries into staff members’ financial relationships with other health care enterprises, controls over who may be a medical staff officer and a variety of other defensive behaviors. Some restrictions or threshold criteria for privileges reflect a real effort to safeguard quality in the hospital and are quite legitimate. Others really implicate the federal anti-kickback statute. The OIG has called for comments on how economic credentialing by hospitals may violate the anti-kickback statute. We are making available our comments to the OIG on these points. 

Economic credentialing is only one of a number of sources of tension between medical staffs and the hospitals to which they relate, which tensions are growing as the dynamics of health care change. In many ways, it is not unreasonable to ask ‘what is the value of the organized medical staff?’ in the current hospital environment. In our AGG Note, "The Organized Medical Staff: Should Anyone Care Any More?" we present information regarding the genesis and legal basis for the medical staff, how bylaws relate to the new environment, typical bylaws contents and typical bylaws mindsets. We offer 7 principles of interaction to improve and make more meaningful for physicians and hospitals their interactions in the interests of patient care quality along with 5 suggestions regarding how to revitalize and make easier certain key medical staff functions. We also review 5 of the hot potatoes in medical staff-hospital relationships including economic credentialing, EMTALA obligations, and cross-department privileging, among others.  For a more extensive consideration of these issues see Alice Gosfield's article "Whither Medical Staffs?: Rethinking the Role of the Staff in the New Quality Era.".

For related information see our discussion of our monograph for the AMA "Quality and Clinical Culture" below, and our work on the AMA's model medical staff bylaws, below.

The Federal Trade Commission has issued its first Advisory Opinion in which it approved as not a per se violation of the antitrust laws a Denver physician network of otherwise competing doctors engaged in clinical integration, even though they would negotiate collectively for fee for service payments from payers. The essential activities were proposed to be the use of clinical practice guidelines to drive their behavior, monitoring of their activities in accordance with the guidelines, changing behavior of those who could not comply and reporting of detailed data to payors. The Advisory Opinion was issued in response to the description of a program not yet in place. It represents an extremely important development in the business case for quality to motivate physicians to undertake on their own increased standardization and quality improvement for many reasons including false claims avoidance, risk management, internal cost control and efficiencies, and potential elimination of intrusive external medical management programs. This Opinion is the first enforcement validation of Gosfield’s Unified Field Theory  and should be considered closely by anyone – including IPAs, PHOs, integrated delivery systems, and MCOs – looking for a business case for quality.

Alice Gosfield's monograph for the American Medical Association, "Quality and Clinical Culture: The Critical Role of Physicians in Accountable Health Care Organizations" (Go To Article )served as the basis for the ten point guidelines developed with the AMA and promulgated by the Blue Cross Blue Shield Association, ("Guidelines for the Role of Participating Physicians in Health Plans") as recommendations for its plan members in their relationships with physicians.

Final regulations under Stark II have been issued; but extending the torture even longer, HCFA is issuing them in two phases. Phase I deals with essential issues such as physician compensation methodologies, definitions of designated health services and referrals. It qualifies the functional realities of the group practice definition. In office ancillary services and prepaid plan exceptions are also addressed. Several new exceptions have been created including one for fair market value arrangements. On the other hand, all the other exceptions including for leases, personal services and recruitment among others are addressed in Phase II. Because of the overall complexities of the statute, the regulations and preface to them are equally as complex and comprise more than 100 pages in the Federal Register.  See our AGG Note on the Final Regulations.

The good news is that some of the changes have brought Stark far more in line with general Medicare reimbursement principles. On the other hand, other changes manifest a continuing attempt to control utilization and structure relationships through these mechanisms. We are assisting clients in reevaluating their relationships in light of these rules.

Health care report cards are a burgeoning phenomenon on the health care landscape. Comparative data on health plans, hospitals and physician groups are being published by increasingly diverse sources, on the Internet and otherwise. Customer/patient satisfaction data has dominated much of the field, but more and more, clinical quality comparisons are being offered. There are legal implications for the publishers of this data - whether third parties or self-reported. NCQA's HEDIS data is a major feature in the world of managed care. Although HEDIS data reports on managed care plans its power influences how plans relate to providers. Where a plan contracts with a physician group, for example, how that group will impact on their performance scores is a competitive issue with legal overtones for the physician group. We are helping clients understand the legal and strategic pitfalls and opportunities in responding to the comparative data demands of the new environment. (See our article, "Health Care Report Cards": Quality in the Public's Cross-Hairs.)

Physicians and health care businesses to which they relate are struggling to determine their appropriate roles. Traditional organized medical staffs have not fared well in the new environment. At the request of the American Medical Association, Alice Gosfield prepared a white paper/advocacy document which articulates why, at this moment in the history of health care, the unique values physicians bring to bear are essential to the management of any organization which seeks to position itself as an accountable health care organization. The paper lays out a continuum of issues to which physicians should direct their attention, articulates principles of engagement for effective collaboration between business and clinical leaders and describes how physicians have in the past undermined their effectiveness in these undertakings. We are presenting this discussion in various settings throughout the country to integrated delivery systems, medical staffs, physician groups, managed care organizations and others. See, "Quality and Clinical Culture: The Critical Role of Physicians in Accountable Health Care Organizations". (Go To Article)

Demands placed on physicians to respond to multiple forces in the health care marketplace are daunting and often in conflict.  From risk management to avoid malpractice liability, to continuous quality improvement and managed care efficiencies, too often physicians and their managers approach these themes as disparate, unrelated activities. In the AGG Note, "Gosfield's Unified Field Theory of Health Care Management" Alice Gosfield discusses a technique grounded in clinical practice guidelines as the basis for business processes. The approach can provide a single organized pathway to respond to these multiple demands. Practical and focused, it speaks to physicians the way they think.

This work was the foundation for our more recent efforts on the business case for quality, “Doing Well By Doing Good: Improving the Business Case for Quality” and the dialogue at


Alice G. Gosfield and Associates, P.C.
2309 Delancey Pl., Philadelphia, PA 19103
(215) 735-2384
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