Payers & Providers National Edition June 2011

8/6/2019 Payers & Providers National Edition June 2011

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MODERATOR:In which areas of healthcare delivery andhospital operations do you all believe a co-management arrangement works best? Why is

that so?Michael Dowell:Cardiology, because there is a large number of procedures.Oncology alsois an excellentcandiDete.There aresigni cant costissues withoncologymanagement, aspharmaceuticaldrugs and

alternativetreatment planscreate costsplateaus.Bob De Vita:I'd opt forclinical services

rst. Primarilyto leverage thephysician skills.WilliamMaruca:Agreed that cardiology is a good t, primarilybecause of the existing OIG advisory opinions

relating to gainsharing. Orthopedics,gastroenterology and neurosurgery are alsogood candiDetes. Reducing volumes of invasive procedures via non-surgicalintervention should be compliant.Michael Kyrda:I think the concept can be applied anywherethere is need for physician involvement. If ahospital has operational issues or a programthat is not meeting effective capture of marketshare, co-management can better engagephysicians.

MODERATOR:Heres a followup question: there are indeed alarge number of cardiac procedures, andsome concerns that it may be overutilized (asin McAllen, TX). Is co-management in thisinstance aimed at reducing volumes, orbettering outcomes?

Bob De Vita:I agree withthose potentialoutcomes, but

just as importantis readiness forcollaborationand sharingpower.Michael Dowell:Both reducing

volumes andbetteringoutcomes.William Maruca:You can run intomajor CMPproblems if it isdesigned toreduce volumes.Sucharrangements to

be focused on improving quality throughevidence-based decision making.MODERATOR:

What are the typical co-managementarrangements? In an LLC or similar format,does the hospital entity tend to own more of the operation, or does the physicianorganization?Michael Kryda:Every arrangement has some differencetempered by local factors and players.William Maruca:If it's a tax-exempt, there are pressures for theownership to be at least 51% hospital, but

A Roundtable On Co-ManagementHow Doctors, Hospitals Can do Business Together

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June 2011

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National Edition

Participants

Bob De Vita, faculty, University of WisconsinLubar School of Business, MilwaukeeMichael Dowell, partner, Hinshaw &Culbertson, Los AngelesWilliam Maruca, partner, Fox Rotshchild LLP,Pittsburgh

Michael Kryda, M.D., CEO, Saint JosephsHospital, Marshfield, Wis.

Date of Roundtable: June 20, 2011

Moderator: Ron Shinkman, Publisher, Payers &Providers

Technical Oversight: David Bronstein, MCOL

Continued on Page 2

[email protected] with the details of your event,or call (877) 248-2360, ext. 3.

It will be published in theCalendar section, space

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http://eservices.mnhospitals.org/imispublic_mha/Core/Events/eventdetails.aspx?iKey=744100&TemplateType=Ahttp://eservices.mnhospitals.org/imispublic_mha/Core/Events/eventdetails.aspx?iKey=744100&TemplateType=Ahttp://eservices.mnhospitals.org/imispublic_mha/Core/Events/eventdetails.aspx?iKey=744100&TemplateType=Ahttp://eservices.mnhospitals.org/imispublic_mha/Core/Events/eventdetails.aspx?iKey=744100&TemplateType=Ahttp://eservices.mnhospitals.org/imispublic_mha/Core/Events/eventdetails.aspx?iKey=744100&TemplateType=Ahttp://eservices.mnhospitals.org/imispublic_mha/Core/Events/eventdetails.aspx?iKey=744100&TemplateType=Ahttp://eservices.mnhospitals.org/imispublic_mha/Core/Events/eventdetails.aspx?iKey=744100&TemplateType=Ahttp://eservices.mnhospitals.org/imispublic_mha/Core/Events/eventdetails.aspx?iKey=744100&TemplateType=Ahttp://eservices.mnhospitals.org/imispublic_mha/Core/Events/eventdetails.aspx?iKey=744100&TemplateType=Ahttp://www.thecamdengroup.com/summit2011/http://www.thecamdengroup.com/summit2011/http://www.thecamdengroup.com/summit2011/http://www.thecamdengroup.com/summit2011/http://www.thecamdengroup.com/summit2011/http://www.thecamdengroup.com/summit2011/http://www.thecamdengroup.com/summit2011/http://www.thecamdengroup.com/summit2011/http://www.thecamdengroup.com/summit2011/http://www.healthforum.com/healthforum/html/conferences/11Summit/Summit_home.htmlhttp://www.healthforum.com/healthforum/html/conferences/11Summit/Summit_home.htmlhttp://www.healthforum.com/healthforum/html/conferences/11Summit/Summit_home.htmlhttp://www.healthforum.com/healthforum/html/conferences/11Summit/Summit_home.htmlhttp://www.healthforum.com/healthforum/html/conferences/11Summit/Summit_home.htmlhttp://www.healthforum.com/healthforum/html/conferences/11Summit/Summit_home.htmlhttp://www.healthforum.com/healthforum/html/conferences/11Summit/Summit_home.htmlhttp://www.healthforum.com/healthforum/html/conferences/11Summit/Summit_home.htmlhttp://www.healthforum.com/healthforum/html/conferences/11Summit/Summit_home.htmlhttp://www.thecamdengroup.com/summit2011/http://www.healthforum.com/healthforum/html/conferences/11Summit/Summit_home.htmlhttp://eservices.mnhospitals.org/imispublic_mha/Core/Events/eventdetails.aspx?iKey=744100&TemplateType=A


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Payers & Providers

that is not mandatory if there are suf cientsafeguards/reserve powers for the hospital. Asto the reserve powers, I'm not a tax lawyer but

as I understand it, tax exempt hospitals have toworry about unrelated business taxableincome if they give up control. Control can beachieved through means other than majorityownership. For example, in an ambulatorysurgical center joint venture, decisions thatmay impact tax exempt status must be agreedto by the hospital, such as charity care,admissions policy, etc. The hospital doesn'thave to have veto power over everything.Bob De Vita:My sense is , if you've seen one co-management deal; you've seen them all. Legalformats may lean to LLC, but the primary

driver is the readiness of both parties to sharepower and collaborate. And what I'm gettingat is, notwithstanding the structure, there is ahuge need for alignment around commonpurpose : clearly de ning the co-managemententity's aims upfront.Michael Dowell:I see 60/40 arrangements, with hospitalholding 60% in order to try to t arrangementwithin anti-kickback safe harbors, althoughpersonal services and managementagreements may be a better t.MODERATOR:How is the best way to value the servicesbeing provided by the physician organization?Is this based on the average compensationearned by the physicians involved, regionalpayments, or is there some other formula?Bob DeVita:Whatever method is chosen, it must meet thefair market value criterion for compensation if tax exempt entities. Some recent high-pro lecases suggests it can be dif cult.William Maruca:That's the most problematic question. It mustbe fair market value, which at least must beara relationship to the prorated value of thephysician's time. In addition, the paymentsneed to be triggered by objective, measurablecriteria such as quality measurments, patientsatisfaction, reduced turnaround time,reduced infection rate, etc. The proposed ACOregs give us 65 criteria that may be useful astriggers.MODERATOR:A little clari cation: When you all talk aboutfair-market value, is that based on the averagecompensation for a physician earned in theregion, or is there another criterion?Michael Dowell:

Page 2

Performance measures are a good objectivemethodology. Independent third partyvaluations are always useful.

Michael Kyrda:You have to separate the management ratefrom the funds paid for performance. Inaddition the performance metrics have to beclear and actionable. The key on thephysician management side is that theposition requires real work and leadershipability. That is what is being paid for.Bob De Vita:I Agree with Mike. For direct physiciancompensation, outside valuation companiesuse the American Medical GroupAssociation , the Medical Group ManagementAssociation and other compensation surveys

combined with the above objective goals.William Maruca:Regional data may be safer, but the IRS allowsnational benchmarks for recruitmentarrangements, so they are not out of thequestion.MODERATOR: Regarding quality metrics how should they be selected? Should there bea joint hospital/physician committee todetermine them?William Maurca:One idea is to look at what the governmenthas already approved, i.e. the gainsharingopinions and the ACO regs.Michael Dowell:There usually is a joint hospital/physiciancommittee and an attempt to achieve clinicalcriteria established by professionalorganizationsBob De Vita:Some states, Wisconsin among them, publishorganizationally reported clinical data onquality metrics. These are commonly used byorganizations paying for quality since theydon't have to be invented from scratch.MODERATOR:Stark regs require an arms-length negotiationbetween the hospital and physician entity,particularly to obtain a deal under the fair-market value exemption. How are suchnegotiations usually conducted? Is there athird party involved?William Maruca:An independent valuation is essential. Theparties should agree on the valuationprovider, who needs to have a rm grasp onpermissible and impermissible criteria.Bob De Vita:

Nurses Cost Hospitals$98K A Year Apiece

The average cost of a hospital-based nurse is $98,000 a year,according to a new survey byKPMG.

KPMG surveyed more than120 hospital chief executiveofficers for the survey. Of the directcosts, $55,739 is tied to wages,while the rest is connected to lostproductivity, employer taxes,vacation, recruitment andinsurance costs. The overall averageattrition rate for the vast majority of respondents was in the 10% to

20% range.Payment for overtime wagesfor nurses averaged four hours perweek. And 65% of the CEOs saythey use traveling nurses, primarilyfor seasonal needs and to addresslocal nursing shortages.

The survey did not providespecific data for California or otherportions of the country..

Loma Linda DevelopsNew Breast Cancer

Treatment

Researchers at Loma LindaUniversity Medical Center claimthey have developed a newtreatment for breast cancer thatdoes not include any patient sideeffects.

According to data from aclinical study that took place at thehospital, a radiotherapy treatmentdelivered via proton beam lead to adisease-free five-year survival rateof over 90%. The therapy was alsoshortened significantly, from sevenweeks down to two weeks.

"The study results show thatwe are able to offer early stagebreast cancer patients a treatmentprogram that is less risky and canbe completed in less time," saidDavid Bush , M.D., vice-chairmanof Loma Lindas radiation medicinedepartment and one of the studysprincipal investigators.

Results of the study will bepublished in the academic journalClinical Breast Cancer later thisyear.

Continued on Page 3

In Brief Roundtable (Continued from Page One)

NEWS

Continued on Next Page


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Page 3Payers & Providers NEWS

In Brief

Two New HospitalsProposed in DistantSuburb of Chicago

The Illinois Certi cate of Needcommittee staff has found serious faultwith two applications for newhospitals in McHenry County, adistant suburb northwest of Chicago.

The staff of the Illinois HealthFacilities and Services Review Boardsaid that both proposals, each for a128 bed facility, didnt meet requiredstandards. The board is expected tovote on the applications June 28, andis not required to follow the staffs

recommendations.The $233 million hospital inHuntley was proposed by CentegraHealth System , and the $200 millionhospital in Crystal Lake, by MercyHealth System .

Several nearby providers --Sherman Hospital in Elgin, AdvocateGood Shepherd Hospital inBarrington, and the St. AlexiusMedical Center in Hoffman Estates --have written letters to the committeeasking it to delay consideration of theapplications.

Minnesota HomeHealth Owner Charged

With Medicaid Fraud

Federal prosecutors in Minneapolischarged Joseph Vah Lavien , 57, orBrooklyn Park, Minn., withdefrauding Medicaid of more than$400,000.

Lavien, owner of PalmHealthcare Services Inc ., allegedlysubmitted false invoices to theMinnesota Department of HumanServices for in-home personal care.The U.S. Attorneys Office said hebilled for services not provided,billed for more services thanauthorized and more services thancould be performed on a particularday or month, billed forsupervision, and submitted falserecords.

The total loss to Medicaid wasestimated at $412,227. In addition,Lavien allegedly costMinnesotaCare , a state program topay insurance premiums for low-income residents, $83,939.

I recommend a third party, selected jointly,whose sole job is to facilitate negotiations withtime-speci c deadlines and milestones. That's in

addition to the valuation consultant.William Maruca:Bob, I like your approach, although I have notused it. I think the worst thing you can do isagree on a number then tell an appraiser tovalidate it. Not fatal, but raises someuncomfortable issues if the number ischallenged.Michael Kyrda:Our interactions are typically direct between theparties, with external validation of thearrangement.Michael Dowell:It is important that the third party valuator

understand the clinical tasks being undertakenand is able to value them separately.MODERATOR:Are the third-party valuators law rms,accounting rms, appraisal rms, or some otherentity?Michael Dowell:Theyre usually consulting or accounting rms.William Maruca:Not law rms. We aren't insured for that andyou couldn't pay me enough. We representedthe docs in the Bradford case. That involved thesale of a nuclear camera plus a non-compete.The parties worked out the number, and thehospital had it con rmed by an appraiser. Thedoctors didn't see the appraisal but relied on it.Lots of other unfortunate facts the lawyers didn'tknow about it. The judge ruled it a violation of Stark in a partial summary judgment. Its stillbeing litigated.MODERATOR:Are there any concerns about sparking a Stark-related investigation? How has the level of scrutiny changed in recent years? What do youbelieve are the triggers?Bob De Vita:A nightmare scenario goes like this. A physicianpractice is acquired. Compensation levels aretoo high, and must change to meet the org'scomp plan and/or just to be economicallysustainable. Co-management or not, this triggersthe need for outside FMV. M.D.s argue againstand org is at risk.William Maruca:Stark enforcement is almost entirely driven byqui tam relators. Very little from audits or directinvestigations. The most likely relator is adisgruntled competitor cut out of the deal, or adisgruntled former employee. If the hospital

down the road starts losing, for example,cardiology cases to a competitor that has a comanagement deal in place, you can expect

them to take a shot at it if they can.MODERATOR:Mr. Maruca: When you mention qui tam , itnormally has to be someone high up enoughin the organization or someone with access tothe books, to be considered a reliablewhistleblower. Are there people who areblowing whistles just because they don't liketheir employer, or is there serious wrongdoinggoing on?William Maruca:A qui tam relator doesn't have to have thatmuch hard nancial data to get aninvestigation started. You need a plaintiff's

lawyer who will take the case on contingency,le it under seal and dig out enough evidenceto interest the U.S. Attorney's of ce. Yes,many people do this out of animosity to theiremployers, or to cash in, but almost all of them have tried to raise the concernsinternally through the compliance programand have been brushed off.Michael Dowell:Exit interviews with terminated employees arimportant to address potential complianceconcerns.MODERATOR:Are there any speci c examples you can citeregarding outcome improvements among youclients/colleagues that have entered into a co-management arrangement?Michael Dowell:Lee Memorial Health Systems reportedastronomical savings in an agreementinvolving orthopedic surgeons. A recent articnoted 20% savings in rst three months andup to 80% savings after one year. The articlecited a combination of operational ef ciencand quality gains.MODERATOR:Do any of you have an idea of how co-management is altering the workingrelationships and environments in hospitalsbetween doctors, nurses and administrators?Or are they unchanged?Michael Kyrda:If the goals are clear and people are held

accountable the relationships improve. That iswhy having the right physician in leadership othe endeavor matters so much.William Maruca:If it works, it should be an improvement.

Administrators usually complain that thedoctors' don't care about the hospital's costs.

Roundtable (Continued from Page Two)


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Page 7Payers & Providers MARKETPLACE/EMPLOYMENT

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Payers & Providers National Edition June 2011