Squeezed by rising costs and declining reimbursements, doctors have begun to think creatively.
Individually, collectively, and in collaboration with others who feel the pinch, you're pursuing strategies aimed at boosting the bottom line. You're adding ancillary services; merging with, acquiring, or integrating with other practices; recruiting star players to your clinical team; forming all manner of joint ventures with hospitals.
These entrepreneurial strategies are, at once, financial opportunities as well as ways to improve patient care. But such strategies are not without risk—whether it's the risk of economic failure or, perhaps more frightening, the risk of tripping a legal land mine.
These land mines come in several forms: the Stark self-referral law; the equally scary antikickback statute; the Federal False Claims Act; and, last but not least, the federal antitrust or competition laws.
To help readers navigate this legal minefield, we assembled a panel of some of the nation's top health law experts. The panel met at the American Health Lawyers Association Annual Meeting in Philadelphia in June; the experts: Alice G. Gosfield, of Alice G. Gosfield and Associates, Philadelphia; Robert F. Leibenluft, a partner in the Washington, DC, office of Hogan & Hartson and the former assistant director for healthcare in the Federal Trade Commission's Bureau of Competition; Charlene L. McGinty, a partner at Powell Goldstein, in Atlanta; and Sanford V. Teplitzky, chair of the Health Law Practice Group at Ober, Kaler, Grimes & Shriver, in Baltimore.
Land mine No. 1: Practice mergers
Done the right way, says Charlene McGinty, mergers can increase efficiency, achieve certain economies of scale, permit intragroup referrals, and even strengthen a group's negotiating position in the managed care market.
But before any of this can happen, doctors must be willing to change their individual practice styles for the sake of the new group. In other words, they must really merge. Too often, they're not willing to make those changes, says Alice Gosfield, and that reluctance can not only scuttle the merger itself but also plunge the putative group into legal hot water.
Bob Leibenluft, the former FTC official, recalls a Washington state surgery clinic that got itself into just this predicament. "When the partners realized how different they really were, they resisted changing, insisting that life go on the way it was before the merger," says Leibenluft. "Then the FTC and the state attorney general went after them. Each enforcer told doctors, in effect, 'Look, despite calling yourself a merged practice, you haven't economically integrated in any fashion, and that means you're little more than independent practices engaged in per se price fixing.' Soon thereafter, the clinic was forced to break up."
But even doctors who've managed to create a truly integrated practice aren't home free. There are still significant risks, says Sandy Teplitzky: "One is the possibility that the larger group will throw its weight around, especially in its relations with the local hospital. If the group goes far enough—saying to hospital officials, for instance, that because we're responsible for 70 percent of your surgeries, we're entitled to this or that benefit—they run a real Stark and antikickback risk."
There's a second danger that merged groups run, Teplitzky says, and it falls under the federal False Claims Act: "This law makes each group member responsible for the actions of every other group member. And so, for example, if there are members in the group who bill more aggressively than others do, the group as a whole needs to deal with this issue. Otherwise, the less-aggressive members could be held jointly responsible if the actions of the other members cross the legal line."
Land mine No. 2: Partial integration
In general, the antitrust laws recognize various forms of partial integration for physicians who'd like to collaborate with their colleagues and yet retain a good measure of practice independence. For these arrangements to pass legal muster, however, their primary goal should be something other than collective bargaining with health plans.
And yet doctors often try to ignore this injunction, says Gosfield. "When clients ask me, as they often do, how little they need to integrate in order to be able to bargain with a health plan, I tell them that they're asking the wrong question. The right question is: What do I have to do in order to get better quality and streamline my delivery process? If you start with this question, fee bargaining becomes a secondary issue and you're on safer legal ground."
In other words, doctors who want to integrate their practices must be motivated by something other than money, although that may factor into their decision. Their goal in coming together must be to achieve something—operationally, clinically, or both—that they couldn't achieve by remaining independent.
Leibenluft points to an older form of integration—financial risk-sharing—which was more prevalent during capitation's heyday. "The idea here was that because Dr. Jones and Dr. Smith were financially at risk for each other, they would work collaboratively—reviewing each other's charts, figuring out how to deliver better quality care, and so forth." And because each had a stake in how efficiently—and how well—the other one practiced, the government recognized them not as competitors coming together to fix prices but as doctors working collaboratively to improve their performance.
But as capitation arrangements between physicians and health plans have become less common, physicians have had to find a nonrisk-sharing basis for integrating their practices. Enter the idea of clinical integration, which Leibenluft, one of its chief architects, describes this way: "It's a network of independent doctors working together in order to improve their performance, but without the element of financial risk sharing." Once again, collective negotiation with health plans may be a necessary part of this collaborative process, but it shouldn't be its primary goal.
The idea of clinical integration, says Leibenluft, is especially attractive to doctors who want to incorporate EHRs and other costly electronic technologies into their practices. "The trick is that, by working together and perhaps in collaboration with their local hospital, doctors can afford to get an information system in place that spans their whole network. Over time, they hope this system will improve their quality and perhaps reduce their costs."
But, just as in the case of practice mergers, even the best-planned clinical integrations can go awry. "If a network of independent practices takes steps to improve quality, it may be permitted under the antitrust laws to negotiate service rates," says Teplitzky. "But if these individual, nonfinancially-integrated practices seem to be benefiting by cross-referring to each other, they're going to run into problems under the Stark self-referral law."
Practices that integrate clinically can also run into trouble if their planning proves better than their implementation. Says Charlene McGinty: "Sometimes doctors have this great arrangement, and then it all falls apart because nobody is paying attention. The next thing you know, the network's attorney is sitting down with regulators trying to convince them that there wasn't any intent to defraud under the federal fraud and abuse laws, including the False Claims Act."
Land mine No. 3: Hospital-physician deals
In the ever-complicated world of physician-hospital relations, say panel members, each side is simultaneously competing and collaborating in order to shore up its own income. On the competitive side, physicians and hospitals have gone head to head in the contest over outpatient revenues. In fact, as physicians have joined together to open their own specialty hospitals, ambulatory surgery centers, urgent care clinics, and other outpatient facilities, hospitals have responded by doing the same.
When the competition gets sufficiently nasty, some hospitals fight back "as spurned lovers," says Gosfield, revoking privileges of physicians who invest in competing ventures.
But physicians and hospitals are also collaborating in such things as clinical joint ventures, timeshare arrangements, and real estate investments. (This last area, says McGinty, seems to be the "flavor of the month.")
As the panel made clear, these can be win-win ventures for physicians and hospitals. But, as with other entrepreneurial and collaborative enterprises, they can also pose legal risks, especially if they rest on shaky foundations. To minimize these risks, says Teplitzky, "Picture yourself sitting on a witness stand under oath and the prosecutor says to you, 'Why did you do it?' If you can't answer that question adequately now, you may be in trouble down the road when it's asked for real. "
And what's an adequate response? The government looks at a number of criteria to evaluate whether a joint venture between doctors and other healthcare entities is on the up and up. According to Teplitzky, the government asks the following questions about a joint venture:
* Will it cost government payors more money than others? "If it does, your venture isn't necessarily illegal, but it may cause somebody in the government to give it a second look."
* What impact will it have on utilization? "If you're creating an incentive for physicians to overutilize or underutilize a service, that's a bad thing from the government's perspective."
* Will it improve quality? "If so, then everyone will be happy. But if your collaboration actually causes quality to suffer, that's a problem."
* What impact will it have on access to care? "If you're bringing a new service to a community that didn't have it before, that's a good thing. If, on the other hand, you're restricting access, the Office of Inspector General [of HHS] will say that's a bad thing."
* What will the effect be on competition? "The OIG is also interested in whether you're making a service affordable that wasn't before."
* What's the effect on patients' freedom of choice? "If you're expanding patients' choices, that will be a factor in your favor."
* Will it create conflicts of interest? "You'd have a problem if the arrangement forces physicians into making economic decisions rather than clinical ones. But if physicians can improve their quality of care, that should be okay, even if the physicians were also generating extra revenue in the process."
Another tricky area in physician-hospital relationships is what the panel describes as "nonequity" or service relationships. These, too, must be done right in order to avoid legal pitfalls.
For instance, Gosfield recommends that hospitals become staffing agencies for physician practices. "This concept would be especially helpful to many small primary care groups, which would like to hire nurse practitioners and PAs but either can't find them or can't afford them. The hospitals can hire these midlevel providers as employees, and then lease them out to office-based physicians on a part-time basis. Doctors, in turn, can bill Medicare for these midlevel services at 85 percent of their office fee schedule."
This arrangement would not only boost doctors' bottom line and keep them on the right side of the law, Gosfield adds, but would also benefit the community: "Just imagine how much properly trained NPs and PAs, working collaboratively with physicians, could improve the quality of chronic care in the community." Gosfield cautions, however: In order to keep on the right side of the Stark law, doctors must pay hospitals for their midlevels at fair-market value.
Finally, doctors and hospitals have to be careful of legal land mines even in their day-to-day dealings. For example, what do hospitals pay physicians for being on call in the ED? To avoid problems, they have to pay at what the Stark statute designates as fair-market value. (For more on this, see "A Physician's Guide to Stark rules," July 23, 2004). But, contrary to what many doctors believe, "Fair-market value isn't what the two parties agree it is," says Gosfield. "Neither is it compensation for what the doctors would have earned if they'd been doing some other work."
Land mine No. 4: False claims
The False Claims Act covers billing for unnecessary services, upcoding, bundling, unbundling, and other schemes to defraud the government.
Although the vast majority of physicians are doing things the right way, says Teplitzky, there are some who aren't. "Perhaps a doctor thinks that he's not getting paid enough for a particular service," he says. "In such cases, he might be tempted to raise a level two visit to a level three. He justifies it by telling himself that there's really not that much of a difference between the two, and it's a subjective call, anyway." That can be a serious mistake.
But it isn't doctors' individual actions that get them into the most trouble. "I think the biggest threat to doctors is when they turn their billing over to consultants," says Teplitzky. "These billing consultants come in, promise to boost reimbursements by capitalizing on missed revenue opportunities, and then physicians lose control over what's going on in their own practices."
If there's a problem, blaming their troubles on an overzealous consultant won't cut it with prosecutors. Says Teplitzky: "Doctors need to understand that if a claim goes out with their name and Medicare identification number on it, they're responsible, even if they had nothing to do with its preparation. For this reason, if someone comes in and says he can boost your revenue, you need to look closely at the 'opportunities' he's talking about."
Stay out of legal hot water: tips from the experts
Our panel of health law experts offers this series of tips:
Seek an attorney's advice early. "I can't tell you how many times we're brought into the deal at the eleventh hour, when it's almost ready to be signed," says Charlene L. McGinty, a partner at Powell Goldstein, in Atlanta. "Then we have 24 hours to review something that's been going on for months—and we often end up finding all sorts of issues."
Get your advice from an expert. "Too many doctors look for their health law advice from the attorney who set up their corporation or helped them buy their house," says Alice G. Gosfield of Alice G. Gosfield and Associates, Philadelphia. "These may be bright lawyers, but they don't necessarily understand the complexities of Stark and other aspects of health law. So if you're contemplating a deal, ask your prospective attorney how many transactions like yours he's reviewed during the past year."
Listen to your attorney. "I've had clients who want me to love their deal and who try to convince me that it isn't a bad deal," says Gosfield. "But I tell them, 'Then you'll have to change it completely.' " Adds Sanford V. Teplitzky, chair of the Health Law Practice Group at Ober, Kaler, Grimes & Shriver, in Baltimore: "It's the government, ultimately, that doctors have to convince—so twisting our arms doesn't do them any good."
Be careful what you say and write. "When I was in enforcement, I used to say that it was the substance of a deal that mattered," says Robert F. Leibenluft, a partner in the Washington, DC, office of Hogan & Hartson and the former assistant director for health care in the FTC's Bureau of Competition. "But now that I'm in private practice, I say that form matters, too, because how you talk about a deal and document it can get you into much hotter water than you otherwise deserve to be."
Be careful what you put in e-mails. "An e-mail may be written in all innocence, but a prosecutor down the road may read it in a much different light," warns Teplitzky. Adds McGinty: "Doctors may write things in jest, but that doesn't mean someone, someday, might not ask them to explain what they meant."
Be careful, be careful, be careful. "It's no longer possible for doctors to say, 'Perhaps I'll fly under the radar,' " notes Teplitzky. "Because in the world of fraud and abuse, antitrust, and whistleblowers, the radar goes all the way to the ground."
By: Wayne J. Guglielmo
Medical Economics June 2004
As information technology in the health care industry evolves from an administrative tool for billing and bookkeeping to a clinical tool for improving the quality and efficiency of health care, the scope of information sharing is expanding beyond the walls of individual institutions. Achieving this level of integration will require that software models overcome a host of technical obstacles, and that they are accessible, affordable, and widely supported.
While not heralding the end of commercial software vendors, the report concludes that conditions are ripe for open source solutions to take root in health care, and that it will likely become the standard for capturing, sharing, and managing patient information to support quality care. It also notes that health care businesses have the opportunity to take the lead and drive the shift to this new model.
From USB flash drives to MP3 players, many pocket-sized electronic devices can be used to download and store large amounts of data, including protected health information.