Contracts, Antitrust and Other Issues

With the advent of the value demand in health care, the concept of ‘managed care’ seems almost quaint Yet, provider participation agreements continue to be presented to providers to form networks and participate in plans.  But, increasingly, the contract may not be with a health plan itself, but with some intermediate entity.  In “The Modern Managed Care Contract” Alice describes what remains and what is new in the reforming system of network configurations with health plans and the contracts that forge those relationships.
As the healthcare landscape changes, the role and content of physician employment contracts has changed, too.  The new environment requires protections for employers and employees. In two publications, we address new provisions and potential pitfalls that lurk in the employment context.  In "The Modern Employment Agreement" Alice and Dan present typical provisions that meet today's new requirements, such as with respect to compliance, HIPAA, and post-payment audits, addressing what older style agreements have included as well.  In "Avoiding landmines when signing a hospital contract" Alice elucidates some of the special problems that can occur when physicians become employed by the hospital, a health system or its affiliated medical group.  None of this is your father's handshake of yore.

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 review 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.

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 Hospital"), 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]

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

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 tool 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 There” 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.

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.

Clinical integration has been a vaguely understood topic since the antitrust regulators introduced the concept in 1996. 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 Is Back”  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 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.

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.

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 (www.prometheuspayment.org) 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.

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.

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 http://insidesurgery.com/.

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 enumerates 10 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.

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.

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.

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.

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.

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.

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.”

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.

As the healthcare industry has become more complex and more regulated, the role of health lawyers has become even more important. But, 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.”

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.

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.