How to Avoid Medicare Penalties in A Physician Practice Consolidation

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1 practice management advisor Spring 2013 When two become one Understanding the ins and outs of physician practice consolidation How to avoid Medicare penalties in 2013 Safeguarding your practice from Medicare fraud 8 steps to a new physician compensation plan

2 When two become one Understanding the ins and outs of physician practice consolidation ecently projected R trends in health care provider reimbursement and regulation will likely motivate practice consolidations. Entering into a partnership with another practice may be one way to avoid selling out to a hospital. It might also help practices maintain autonomy while becoming a stronger force in the marketplace. Combining forces is a solution midway between hospital employment and total independence in a small group practice. And it s best pursued through a strategic planning process that follows a natural sequence of phases. Getting started Most practice mergers occur when two sets of physicians become collegial and friendly, and then decide that it would be to their mutual benefit to practice as one. But a more businesslike and less risky approach is for one practice to decide it needs a strategic partner and then systematically look for good candidates. Once both parties are comfortable with the merger, hire an expert to help guide the group s planning efforts. The next step is to hold informal conversations between the potential merger partners, covering the business rationale for a consolidation and discussing whether combining forces would be a good fit for both organizations. As talks go on, the conversation should switch to developing a shared vision and goals, finding commonality among providers and specialties, maximizing the benefits of combining, and establishing high levels of trust and respect between the two entities. If, after these talks, both sides commit to proceeding, the next step is to sign letters of intent and nondisclosure agreements. Develop a timetable Once both parties are comfortable with the merger, hire an expert to help guide the group s planning efforts. He or she should develop an action plan that includes a detailed timetable. Some of the tasks that must be performed include: x Gathering data and launching the due diligence process, x Preparing pro forma financial statements describing the combined entity after the consolidation has gone through, 2

3 x Retaining a CPA to assess the tax and accounting implications of the merger models, x Hiring an attorney to look at any legal implications, evaluate alternative legal structures and draft the documents, x Setting the terms of each physician s buy-in to the new entity and their compensation model, x Setting the anticipated compensation structure, and x Polling the physicians to determine whether they wish to proceed with the consolidation. Once the plan is approved, it s time to implement the merger. Implementing the merger The merging parties must select a board of directors, officers and committee members. Their task will be to determine which facilities, equipment and other assets are redundant and should be eliminated. Most operational functions billing and collections, on-call schedule, employee compensation and benefits, vendor relationships, patient relations, and referral source relations must be consolidated. The new practice will need to not only create a corporate and tax identity, but also find a malpractice carrier under which all physicians coverage can be consolidated. In addition, it must select a bank for the new entity s checking account, line of credit and lock box. Other tasks that will need to be accomplished include: x Acquiring a practice management system, which may be accompanied by an EHR system, x Consolidating fee schedules, x Notifying Medicare, Medicaid and private payors of the change in the status and identity of the new entity, and x Announcing the new physician group to existing patients, referral sources and the public. All of these tasks are essential to establishing a lock-tight, workable agreement. Work with the pros As you can imagine, consolidating two entities into one can be challenging. But it is doable. Both parties must be willing to work together to form the union. As mentioned, it s critical to bring in qualified accountants, lawyers and other health care professionals that will work together to ensure the new entity is well constructed in accordance with your state s law. x Don t want to consolidate? Alternatives are available If your practice doesn t wish to consolidate, there are other choices: Go upscale. Become a concierge-style practice that offers high-grade amenities, such as 24/7 access to a doctor, customized health advice, same-day service with no waiting, guidance with specialty care, and any out-of-office testing or procedures. You may even offer house calls for annual fees that can range from $1,000 to $5,000 per patient. Shrink down. Some physicians have moved to what s called a micropractice. It s a bare-bones model distinguished by an absence of a receptionist, nurse, billing clerk, waiting room or lab. Overhead is much less than a traditional practice, so out-of-pocket fees for patients can be low. Consolidate, but remain functionally independent. Merging with another practice may not necessarily deprive you of continued autonomy. Physician group consolidations can take whatever form the parties choose. With competent legal advice, it s possible to negotiate an arrangement that allows you to essentially remain a standalone practice but share certain elements with your partner practice to gain better leverage with payors and greater economies of scale. 3

4 How to avoid Medicare penalties in 2013 his is going to be a big year for physicians T with regard to reporting Medicare quality measures and participating in e-prescribing and EHR incentive programs. All three programs have been voluntary until now. Eventually, Medicare payments to physicians will be reduced if they don t participate in the programs. And Medicare officials will use doctors performance in 2013 as a benchmark for future penalties. E-prescribing is essential Medicare s Electronic Prescribing Incentive Program uses a combination of incentive payments and payment adjustments to encourage e-prescribing by eligible professionals. It requires doctors to attach code G8553 to Medicare claims that use an e-prescribing system. In addition to sending prescriptions electronically, the system must be able to generate an active medication list, as well as information on formulary medications; lower cost, therapeutically equivalent drugs; and patient eligibility requirements. Doctors who fail to sufficiently use e-prescribing will see a 2% reduction in their Medicare Part B payments in To avoid that penalty, your practice must indicate (through its claims) that it has employed e-prescribing in at least 10 patient encounters between Jan. 1, 2013, and June 30, Physicians who earned e-prescribing bonuses in 2012 are exempt from the penalty. Demonstrating meaningful use Physicians can earn up to $44,000 from Medicare or $63,750 from Medicaid (one or the other, not both) by demonstrating their adoption and meaningful use of an EHR system. Medicare eligible professionals must initiate a qualifying EHR system by Oct. 1, Doctors adopting EHR technology for the first time must operate under the first stage of meaningful use rules for two years before moving on to the second stage. The sooner a practice gets started, the better. Those who have already achieved meaningful use need not move on to the next stage until Beginning in 2015, eligible professionals who haven t successfully demonstrated meaningful use will be subject to a payment adjustment. The payment reduction starts at 1% and increases each year that meaningful use is not evident, up to a maximum of 5%. The Physician Quality Reporting System (PQRS) is a Medicare program that uses a combination of incentive payments and payment adjustments to promote reporting of quality information by eligible professionals. Incentive payments are made to doctors who satisfactorily report data on quality measures related to Part B services they have 4

5 provided. Beginning in 2015, the program applies a payment adjustment to eligible professionals who don t satisfactorily report data on quality measures for covered professional services. To participate in PQRS, doctors must report information from their practices on specified individual quality measures or measures groups (based on major diseases such as diabetes and osteoporosis). There are four ways these reports can be made: 1. To CMS on their Medicare Part B claims, 2. To a qualified Physician Quality Reporting registry, 3. To CMS via a qualified EHR system, or 4. To a qualified PQRS data submission vendor. Physicians who report quality measures satisfactorily receive a bonus of 0.5% of all their Medicare Part B charges. Those who fail to report successfully in 2013 will incur a penalty of 1.5% of their 2015 reimbursement rates. Moreover, the reduction in physician payments will grow to 2% in 2016 and subsequent years. Practices of 100 or more physicians that fail to make PQRS reports in 2013 will receive a 1% penalty in 2015 under Medicare s value-based payment modifier program. The program is designed to pay more to groups that provide higher-quality, lower-cost care. CMS plans to extend this program to smaller groups and solo practitioners over the next few years. Doctors who fail to sufficiently use e-prescribing will see a 2% reduction in their Medicare Part B payments in Interesting years ahead This year and for several years to come, most physician practices will be challenged as they implement these changes. That s why it s critical that physicians tap into the knowledge of their legal and financial advisors closely. x Safeguarding your practice from Medicare fraud raud in the Medicare system is, F unfortunately, an ongoing problem. No wonder Medicare regulations are always changing, often leaving physician practices in a quandary as to what the most current policies are and what they need to do in light of them. So how can you ensure your practice stays on the right side of the law? Read on. Look at high-risk areas Your fraud risk abatement effort starts with an audit of the practice s current operating policies and procedures. In particular, keep an eye out for improper coding and billing, delivered services that aren t medically necessary, and inadequate documentation and backup procedures. And, last but not least, make sure no one at your practice is accepting inducements, kickbacks or self-referrals. Once you ve determined the key risk areas in your practice, develop guidelines specifying the actions staff members are expected to take when suspected incidents of fraud arise. The OIG recommends including these guidelines in a practice compliance 5

6 manual along with relevant Medicare directives and carrier bulletins, as well as summaries of OIG Special Fraud Alerts and advisory opinions. Also appoint one or more staff members as compliance officers to monitor compliance activity and execute corrective action plans when necessary. The OIG will accept outsourcing of the compliance officer responsibilities. Understand the regs The next step is to implement a training program to familiarize the staff with regulations governing the practice s business along with the above risk areas to avoid and monitor. At a minimum, make sure you provide compliance training for all staff members, including the operation and importance of the compliance program, consequences of violating standards and procedures, and the role of each employee. Also provide coding and billing training for anyone involved in claims procedures. This training should cover coding requirements, claim development and submission processes, signing of physician forms, billing and documentation of services, ramifications of altering medical records, and legal sanctions for fraudulent billing. Report violations Because communication is key to thwarting fraud, make sure you provide staff with easy methods for reporting potential problems or violations. This will help the practice address and eliminate compliance issues before they escalate. Examples of how some practices have opened up such communication include telephone hotlines, forums, bulletin boards and drop boxes that allow anonymous reporting. Couple these methods with a culture that encourages staffers to keep their eyes and ears open to the slightest concern or complaint about possible fraud issues. procedures for dealing with individuals who violate the practice s policies and compliance standards, and then communicate the consequences to your staff. In addition, make sure all employees are aware of the OIG s Self-Disclosure Protocol (63 Federal Register 58399). It guides providers in cases of fraudulent overpayments, billing/coding violations, breach of Anti-Kickback Act or Stark law, or hiring of Medicare-excluded personnel. The components of this rule include defining the scope of the problem and conducting a preliminary examination of related documents. With the help of an attorney, practices should conduct an investigation of the circumstances surrounding the allegation. The rule also discusses how to take steps to preserve relevant documentation as soon as a federal investigation seems imminent and how to prepare a remediation plan. Finally, the rule requires practices to conduct a self-audit to demonstrate to the OIG the positive effects of the remediation. Carefully managed self-disclosure will reduce the likelihood of ongoing OIG oversight and possibly result in smaller financial settlements. Don t delay Medicare fraud will likely never go away, which makes it essential for physician practices to abide by the law and report any suspicious activity to Medicare. If your practice is lacking a system for reporting fraudulent activity, now is the time to set it up. And be sure to work with a qualified lawyer who knows the ins and outs of Medicare. x Staff members must fully understand the consequences of acting in a noncompliant manner. To get the message across, develop 6

7 Practice notes 8 steps to a new physician compensation plan f you ve completed a merger or acquisition I recently, or you re experiencing physician turnover, you should probably at least consider a new compensation plan. Here are eight steps that can help you create one: 1. Define the plan s purpose. Brainstorm a list of possible goals, sorted into three groups: nonnegotiable, very important and desirable but not indispensable. 2. Determine evidence needs. With the prioritized objectives in mind, determine what data is needed to understand their implications and ask, What information do we need to reach each objective? 3. Gather relevant evidence. Use internal and external data to help make decisions on compensation. Use the practice management system to generate data reports on payments, adjustments, charges, appointments, encounters and accounts receivable. Search libraries, the Web and industry sources for relevant reports, articles, commentary and webinars. 4. Translate the evidence. Use data gathered to identify key physician performance measures, describe common compensation system models, and establish benchmarks for what might be expected of the overall practice and its individual physicians. Have your CPA prepare examples, so each physician can see how the numbers work. 5. Define plausible alternatives. Focus on plan alternatives that are most applicable to the practice s circumstances. Create a general framework for a plan that combines the best features of other models. Within the framework, consider using new approaches for quality measurement rather than only productivity models. 6. Present the plans to the physicians. The presentation should summarize the most relevant compensation models and their respective impacts on each physician s compensation. It should also include a recommendation for the compensation plan that you believe is best tailored to the practice s needs. 7. Let the physicians choose. The physicians must decide whether the recommended plan is acceptable. The body of evidence behind the plan and its preparation should make it difficult to reject, though minor adjustments may need to be made. The plan might be approved for a trial period. 8. Perform follow-up reviews and take a final vote. Track the effect of the operational plan on physician behavior and income for at least six months and up to a year. Tweak it further, as necessary. When an appropriate comfort level is reached, ask the physicians to vote on keeping the plan indefinitely. x This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and, accordingly, assume no liability whatsoever in connection with its use RXsp13 7