Accountable Care Organizations: Latest. Compensation Strategies Structuring ACOs That Avoid Violations of Fraud, Patient Privacy and Stark Laws

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1 Presenting a live 90 minute webinar with interactive Q&A Accountable Care Organizations: Latest Developments and Alternative Provider Compensation Strategies Structuring ACOs That Avoid Violations of Fraud, Patient Privacy and Stark Laws WEDNESDAY, DECEMBER 15, pm Eastern 12pm Central 11am Mountain 10am Pacific Td Today s faculty features: David L. Klatsky, Partner, McDermott Will & Emery, Los Angeles J. Peter Rich, Partner, McDermott Will & Emery, Los Angeles Douglas M. Mancino, Partner, McDermott Will & Emery, Los Angeles William J. DeMarco, President, Pendulum Healthcare Development Corporation, Rockford, Ill. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

2 Continuing Education Credits FOR LIVE EVENT ONLY For CLE and/or CPE purposes, please let us know how many people are listening at your location by completing each of the following steps: In the chat box, type (1) your name, (2) your company name and (3) the number of attendees at your location Click the arrow to send

3 Tips for Optimal Quality Sound Quality If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory and you are listening via your computer speakers, you may listen via the phone: dial and enter your PIN when prompted. Otherwise, please send us a chat or immediately so we can address the problem. If you dialed in and have any difficulties during the call, press *0 for assistance. Viewing Quality To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again.

4 Accountable Care Organizations: Why? Sponsored by the Legal Publishing Group of Strafford Publications December 15, 2010 David Klatsky McDermott Will & Emery 2049 Century Park East, Suite 3800 Los Angeles, CA com (310) Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) 2010 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered advertising under the rules regulating the legal profession.

5 Health Care Reform... Before and after Every Picture Tells a Story 5 Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) 2010 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered advertising under the rules regulating the legal profession.

6 Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) 2010 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered advertising under the rules regulating the legal profession.

7 Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) 2010 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will 7 & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered advertising under the rules regulating the legal profession.

8 The New Realities 8 Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) 2010 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered advertising under the rules regulating the legal profession.

9 The Paradox All sides agreed on 80% of reform objectives Delivery system reform (for example Accountable Care Organizations) Wellness and prevention (for example Medical Homes) Need for cost containment (for example Bundled Payments) 9 Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) 2010 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered advertising under the rules regulating the legal profession.

10 The Current System is Not Sustainable Consider the economic backdrop: $2.4 trillion This is amount currently spent on health care in the US alone. That represents more than 17% of our national GDP, with increases averaging about 7% per year. By 2016, and before taking into account the costs of health care reform, healthcare spending was projected to surge to $4.1 trillion. 10 Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) 2010 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered advertising under the rules regulating the legal profession.

11 But in the End - It is All About Medicare 11 Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) 2010 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered advertising under the rules regulating the legal profession.

12 The Facts and Nothing But the Facts In the year 2000, Medicare provided coverage to 43.3 million seniors The first baby boomers reached the age of Medicare eligibility in 2008 By 2030, the year the last baby boomers reach Medicare eligibility, the number of people covered by Medicare will balloon to 78 million. Need to become profitable at Medicare reimbursement levels due to changing g demographics Shrinking ability to cost shift 12 Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) 2010 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered advertising under the rules regulating the legal profession.

13 Accountable Care Organizations: Latest Developments Sponsored by the Legal Publishing Group of Strafford Publications December 15, 2010 J. Peter Rich McDermott Will & Emery 2049 Century Park East, Suite 3800 Los Angeles, CA com (310) Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) 2010 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered advertising under the rules regulating the legal profession.

14 What is an Accountable Care Organization ( ACO )? (ACO)? A Medicare fee-for-service ( FFS ) ACO ( 3022 of the PPACA) is an organization of physicians and other health care providers accountable for the overall care of traditional fee-for-service Medicare beneficiaries who are assigned by CMS to an ACO Medicare FFS ACOs that meet minimum quality standards are to be financially incentivized by CMS to provide higher quality care and overall cost savings By January 1, 2012, the Secretary of HHS must establish a shared savings program that: promotes accountability for a patient population; coordinates items and services under Medicare parts A and B; and and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery 14

15 Requirements for Medicare FFS ACOs Must have defined processes to promote evidence-based medicine, report on quality and cost measures, and coordinate care Must enter at least a three-year agreement with HHS and have at least 5,000 Medicare beneficiaries (if the ACO or its providers are at financial risk, ideally 50,000+ assigned members), without engaging in risk selection Must demonstrate that it meets the defined criteria for patientcenteredness Patient and caregiver assessments Use of individualized care plans 15

16 Medicare FFS ACOs are about Quality & Cost ACOs need to have the ability to capture and report data, at the group and individual provider level, relating to measures necessary to evaluate the quality of care furnished To earn incentive payments, the ACO will be expected to meet Medicare performance standards measuring the quality of care furnished ACOs will be expected to improve the quality and cost of care furnished over time by meeting increasingly stricter quality and cost benchmarks (to be adjusted every 3 years) If already highly cost-effective historically, will ACO providers be financially penalized by being held to a higher benchmark standard? 16

17 Requirements for Medicare FFS ACOs (Cont d) ACO must have a formal legal structure permitting receipt and distribution of any shared savings and quality bonuses to participating providers (e.g., physician group practice or network, physician-hospital joint venture, hospital-employed physicians, or any other form app d by Sec ty of HHS.) ACO must have sufficient primary care physicians for assigned panel patients (to be determined by CMS) As a practical matter, each PCP should have a participating provider contract with only one ACO Specialists generally need not be restricted to one ACO (though perhaps exceptions are in order for cardiologists, oncologists, or other quasi-pcp-gate-keeper specialists) 17

18 Key Issues With Medicare FFS ACOs ACO providers are to be held accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to ACO, yet but there are no financial disincentives or other restrictions to prevent beneficiaries receiving services from non-aco providers If the ACO is to be accountable for the overall care of a defined population of Medicare beneficiaries, how can the ACO be successful if its assigned Medicare beneficiaries are not locked-in, or even financially channelled, to the ACO providers? 18

19 Medicare ACOs: Reimbursement Reform Approaches Reimbursement reform is moving towards: ACO Shared savings programs (required by 1/1/2012) Bundled payments/case rates Global payments/partial or perhaps full capitation (growing consensus favoring two-sided risk ) PPACA authorizes the Secretary of HHS to utilize specified payment models other than the shared savings program: Partial capitation where ACO is at financial risk for some, but not all, of Part A and Part B services The Secretary of HHS may substitute any payment model that the Secretary determines will improve the quality and efficiency of health care delivery 19

20 Key Elements of an Effective ACO Ideally not limited to Medicare FFS ACO contract Must be aligned with high value networks of PCPs, specialists, hospitals, and ancillary providers focused on enhanced outcomes and cost efficiency Explicit care integration and coordination mechanisms Payment arrangements with governmental and commercial payors that reward cost-effective, high-value (not high-volume) health care and improved outcomes Incorporates patient-centered medical home to better deliver primary care and coordinate care Health information infrastructure to enable community-wide care assessment and coordination, including functional integrated electronic health records ( EHR ) EHR) 20

21 Joint CMS/OIG/FTC/DOJ ACO Workshop October 5, 2010 Panel and Listening Session discussed how HHS may encourage ACOs by using Secretary of HHS s waiver authority to create broad new safe harbors and other exceptions to the AKS, Stark Law, and CMP Law, as well as greater flexibility in antitrust law enforcement Panelists and others who commented strongly recommended such waivers, safe harbors and exceptions to bring them in line with the needs of current state-of-the-art the art integrated delivery systems Particular needs expressed by public participants for flexibility in structuring incentive payments to providers in order to foster ACO goals and tracking of metrics to detect underutilization as well as overutilization 21

22 Recent CMS Announcements Friday December 3, 2010 CMS Head Donald Berwick states: Draft ACO regulations now expected to be issued mid-january 2011 CMS will inform Medicare beneficiaries when they are assigned to an ACO 22

23 MedPAC Provides Comments to CMS MedPAC Letter to CMS on November 22, 2010 Argues for the Two-Sided Risk Model Medicare Beneficiaries: Need to receive disclosure and opt-out right; suggest possible ways to get beneficiaries i i on board with their ACO Suggested quality metrics 23

24 MedPAC s View on Two-Sided Risk Model Solving the random variation problem (which otherwise can result in wasteful spending by CMS) requires the Two-Sided Risk Model Could be in addition to upside only model under PPACA Eventually would replace upside only approach. If PPACA deemed to preclude Two-Sided Risk Model then CMS should use CMMI to introduce the concept 24

25 STEPS of MedPAC s ANALYSIS: How To Solve The Problem of Random Variation Step 1 of Analysis: MedPAC Notes a Problem with Upside Only Model: Random Variation Causes Waste Groups of 5,000+ Medicare Beneficiaries 25% Of All Such Groups Have Year-To-Year Y Random Variation Of 2% Of Costs Random Variation is Wasteful in Upside Only Model ACOs May Receive Shared Savings Without Merit Step 2 of Analysis: The Fix for Random Variation Problem is Establishing a Threshold For example, little or no participation in Shared Savings of less than 2% 25

26 STEPS of MedPAC s ANALYSIS: How To Solve The Problem of Random Variation (cont d) Step 3 of Analysis: Adding a Threshold Changes Incentives/Disincentives for Marginal ACOs, Could Create Perverse Incentives for Additional Services For Example, an ACO with little to gain on the Upside of Shared Savings due to the Threshold may result in overutilization the Threshold means there is little incentive to restrain the ordering of additional services because the providers have determined the ACO is unlikely to earn Shared Savings. On the other hand, providing additional services will at least provide FFS revenue to the ACO. Step 4 of Analysis: Introduction of Downside Risk puts the brakes on ACO incentive to overutilize services to generate FFS revenue when potential for Shared Savings is deemed lost. 26

27 MedPAC s Comments on Medicare Beneficiary Involvement Disclosure is a Minimum Requirement: Necessary to Prevent Backlash and Repeat History For ACOs to be successful they need to do better than just preventing backlash. Members must be invested in their own health treatment (e.g., compliance with prescription medication regimen) CMS should explore possibilities to garner acceptance of ACOs Possible opt-out for beneficiaries who seriously object to being In ACO. Perhaps Medicare Beneficiaries in an ACO should participate in the shared savings Reduced co-payments and deductibles for beneficiaries in successful ACOs Direct payment to beneficiaries so they share in any shared savings 27

28 MedPAC s Comments on Quality Measures Population-based outcomes measures: Emergency room use Potentially preventable admission rates In-hospital mortality rates, and possibly patient safety measures Readmission rates Should Beneficiaries i i Be Surveyed and These Survey Results Factored into Quality Metrics? Improved patient experience is a stated goal of ACOs A Risk That patients will demand more expensive, discretionary services and treatments and threaten to retaliate with low quality assessments of ACO if such services and treatments not provided 28

29 AMA Issues Principles for ACOs Governance should be by physicians and not hospitals, and the revenues of an ACOi including Shared dsavings should ldbe retained dfor patient tcare services and distributed to ACO participants (These two principles appear unrealistic, as a practical matter) CMMI should provide up-front resources to physicians to facilitate formation of ACOs ACO spending benchmark should be adjusted for differences in geographic practice costs and patient risk factors. Quality performance standards d of CMS must be consistent t with AMA policy regarding quality. Patient Satisfaction Survey should be used. Tool to determine patient satisfaction and whether an ACO meets the patient-centered criteria required by the ACO law. If an ACO bears risk like a risk-bearing organization, the ACO must abide by the financial solvency standards pertaining to risk-bearing organizations. 29

30 Key Legal Issues Antitrust Laws/Clinical Integration and Market Concentration Issues Fraud and Abuse/Stark/CMP Laws Tax exemption issues for exempt hospitals and affiliates Representative State Law Issues: HMO/Insurance/TPA Licensing, Corporate Practice of Medicine, Peer Review Laws HIPAA and EHR Meaningful Use Regulations 30

31 ACOs Act Now Providers should not wait for new Medicare ACO regulations to become effective. Providers should immediately begin creating, or converting existing managed care integrated delivery systems (e.g., PHOs; contractual risk-sharing affiliations) into, ACOs. Medicare, Medicaid, HMOs, PPOs and other insurers, including self- funded employers and union funds, will want to contract with ACOs. Providers should use the next few years to build the HIT and other managed care-infrastructure necessary to thrive, and not just survive, oncoming payment reform. 31

32 Accountable Care Organizations: Structural Models David Klatsky McDermott Will & Emery 2049 Century Park East, Suite 3800 Los Angeles, CA (310)

33 Possible Comprehensive Health System ACO Legal Structure (note that an ACO, in theory, may involve just a single physician group rather than a comprehensive hospital-physician integrated health system legal structure) Accountable Care Organization IPA System Physician Organization Hospital Foundation Model Captive Group Practice Other Employed System Physicians i Clinic/FQHC Private Physicians i Medical Home 33

34 Types of ACO Models Highly Integrated Models Hospital Employment Model Tax Exempt Affiliated Practice Model Foundation Model Partially Integrated Models Joint-Ventured Physician Organization PHO Model Contractual Affiliation Models Affiliation Model Management Services Model Service Line Co-Management Model 34

35 Highly Integrated Models Hospital Employment Model SYSTEM PARENT HOSPITAL ACO Payors MEDICAL DIVISION (Dept. of hospital) 35

36 Highly Integrated Models Tax Exempt Affiliated Practice Model SYSTEM PARENT HOSPITAL 501(C)(3) ACO MEDICAL GROUP 501(C)(3) Payors 36

37 Highly Integrated Models Medical Foundation Model SYSTEM PARENT HOSPITAL 501(C)(3) ACO MEDICAL FOUNDATION 501(C)(3) Payors GROUP PRACTICE (For Profit) 37

38 Partially Integrated Models Joint-Ventured Physician Organization SYSTEM PARENT PAYORS ACO HOSPITAL 501(c)(3) PHYSICIANS GROUP PRACTICE (For Profit) 38

39 Partially Integrated Models PHO Model SYSTEM PARENT HOSPITAL 501(c)(3) MEDICAL GROUP (For-Profit) ACO CONTRACTING ENTITY (For-Profit) PAYORS 39

40 Contractual Affiliation Models Affiliation Model SYSTEM PARENT ACO HOSPITAL 501(c)(3) ALLIED PROVIDERS IPA MEDICAL GROUP (For-Profit) 40

41 Contractual Affiliation Models Management Services Model Provides comprehensive management services to a physician organization in exchange for a fair market value management fee The physician practice retains responsibility for and control over practice operations, including financial risk 41

42 Contractual Affiliation Models Service Line Co-Management Contract Model Specialists p Hospital Co-Management Fee Newco Co-Management Co. Appoint Members Service Line Leadership Council or or Operating Committee Appoint Members Quality Committee Finance Committee Operations Committee Technology & Products 42

43 Accountable Care Organizations Tax Issues Strafford Webinar December 15, 2010 Douglas M. Mancino Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) 2010 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered advertising under the rules regulating the legal profession.

44 Organizational Options Separate corporations Stock corporation taxed as C corporation Concedes taxation of net income Deemed sale of IP on liquidation Nonprofit membership corporation is tax-exempt status available? Taxable unless exempt Uncertainty concerning availability of exemption Pass-through entities Partnerships Limited liability companies Disregarded entity Related activity Addresses IP issue

45 Governance All forms allow flexibility in designing governance and physician involvement Ownership is separate from allocation of control so, for example, a single member LLC that is treated as a disregarded entity of a nonprofit hospital can still have a board of managers over-weighted with physician involvement

46 Participation Fees Initial entry fee Annual fees Recovery of costs through h contractual t distributions ib ti Relationship of fees to actual costs how does fair market value equate with actual investment in entity?

47 Taxable Income and Tax-Exempt Status Physicians who derive benefits without fairly compensating sponsor run risk of having taxable income Nonprofit hospitals that fail to charge adequate fees run risk of losing their tax-exempt status

48 Provider Payment Strategiest BILL DEMARCO, MA, CMC PENDULUM HEALTHCARE (815) December 15,

49 Provider Payment Strategies 1) Developing a pay-for-performance process. 2) Bundling and global payment methods. 3) Episodes of care, the new clinical unit of measurement. 4) Redefining care management under clinical integration. 49

50 Pay For Performance Usually establishes a floor and a ceiling defining limits for care and charges As cost creep occurs degrees of freedom (range) between top and bottom tightens Money is taken away as deciles shift in an attempt to arrive at a single predictable price With a 2% upper bonus actual innovation is limited Combining this with a form of gain-sharing motivates teams of people to innovate 50

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