1. ©2014 Reid and Riege, P.C. The “Two” Big Issues Facing Medical Practices in 2015 Mindy S. Tompkins, Esq. R EID AND R IEGE, P.C. Tel: (860) 240-1044 mtompkins@rrlawpc.com

2. ©2014 Reid and Riege, P.C. The “Two” Big Issues  Are there really just two?  Data and Dollars –Increasing requirements to record and report data –Cost in time and dollars will impact profitability of medical practices  Which Way Do We Go Now? –Options for Staying in Private Practice –Options involving Hospital Alignment or Affiliation –New Payment Models

3. ©2014 Reid and Riege, P.C. Data and Dollars: ICD-10  Mandatory change to ICD-10 by October 1, 2015  Why? –More detail about the patient’s problem –Greater opportunity for evidence-based practice –Better insight for optimizing reimbursement  ICD-9 to ICD-10 –Diagnosis Codes: 13,000 to 68,000 (30,000 basic codes) –Procedure Codes: 3,000 to 87,000 –Difference in terminology, no clear correspondence, and more documentation = challenging to implement

4. ©2014 Reid and Riege, P.C. Data and Dollars: ICD-10  Cost Estimates per AMA published survey by Nachimson Associates (updated Feb. 2014): Practice SizeEstimate / Range 3 Physician Practice$83,290 Small Practice$56,639 - $226,105 Medium Practice$213,364 - $824,735 Large Practice$2,017,151 - $8,018,364  Cash flow lag – time to bill; payors to process  Time estimates:  Training clinical and administrative staff: 16 hours  Training providers: 12 hours  Ongoing time spent on documentation: 15-20% increase for practice; 4% for physicians

5. ©2014 Reid and Riege, P.C. Data and Dollars: ICD-10  But don’t worry... Your doctor will be able to keep track of injuries caused by turtles! * Source: http://www.icd10data.com

6. ©2014 Reid and Riege, P.C. Data and Dollars: PQRS and VBP  Physician Quality Reporting System (PQRS) and Value Based Payment (VBP)  Started as an incentive; Turns into a penalty  Must electronically report 9 measures covering 3 areas (National Quality Strategy domains) for 50% of Medicare patients  Incentive of 0.5% ends in 2014  Penalties for non-participation or unsuccessful reporting –1.5%  January 1, 2015 –2%  January 1, 2016

7. ©2014 Reid and Riege, P.C. Data and Dollars: PQRS and VBP  Voluntary PQRS becomes mandatory through the VBP  VBP - Must register and report PQRS measures Group SizeReport / VBP Year Fail to Report Don’t Elect Quality Tiering Elect Quality Tiering 100+2013 / 2015 2014 / 2016 1%  2%  0% Not allowed ,  or 0% 10+2014 / 2016 2%  Not allowed  or 0% All physicians* 2015 / 2017  Not allowed ,  or 0% *Based on current CMS guidance; but subject to change.  Downward adjustment is in addition to the PQRS penalty  Increase adjustments will be budget neutral

8. ©2014 Reid and Riege, P.C. Data and Dollars: EHR  Goals of EHR meaningful use include: –reducing health disparities –engaging patients, –improving care coordination –keeping PHI in one place and secure  Meaningful Use –Stage 1 - Promotes basic EHR adoption and data gathering (2011/2012) –Stage 2 - Emphasizes care coordination and exchange of patient information (2014) –Stage 3 - Improves healthcare outcomes

9. ©2014 Reid and Riege, P.C. Data and Dollars: EHR  EHR Incentives –Up to $44,000 from Medicare (over 5 years) or $63,750 from Medicaid (over 6 years) (*Reduced by 2% sequester) –$24,000 for groups starting in 2014  Physicians who fail to demonstrate meaningful use of EHRs will be subject to payment reductions: –2015 = 1% –2016 = 2% –2017 = 3%  Estimated Costs: (Study published in Health Affairs, August 2014) –1st year average is $162,000 for a 5 physician practice –$85,000/year in maintenance fees –Average of 611 hours for implementation team –134 hours each for physicians and other clinical staff

10. ©2014 Reid and Riege, P.C. Data and Dollars: More, More, and More  E-prescribing – 2% penalty for 2014  HIPAA Compliance –Management of data security; Security risk assessment –Breach notification and reporting –Audits and penalties  Medicare, Medicaid and Payor Audits –Increase data mining of claims –Increased risk of audit and recoupment  Site of Service Modifier Reporting –Added hospital provider-based department in 2015  Sustainable Growth Rate Fix –One year extension lasts until March 31, 2015 –20.9% reduction

11. ©2014 Reid and Riege, P.C. Which Way Do We Go?  What are some of strategic options for medical practices in the era of health care reform? –Options for maintaining independent medical practices –Hospital affiliation or employment –Participation in new payment models

12. ©2014 Reid and Riege, P.C. Independent Medical Practice  Merger and Acquisitions –Groups may gain more stability and leverage with strategic consolidations/mergers into larger practices –Creates efficiencies by allowing the pooling of overhead and administrative costs –Increased capital and resources –Access to combined EHRs –Increase in negotiating leverage with payors –May protect market share by discouraging smaller groups or solo practitioners from entering the market –More opportunity for joint ventures, affiliations, and partnerships –Ability to absorb risk of some new payment models –Culture is key to success

13. ©2014 Reid and Riege, P.C. Statutory Merger Practice A Practice B merging into Statutory Merger (C.G.S. § 33-815 et seq.): –Easier to accomplish transfer of business –All assets and liabilities of non-surviving practice (B) are vested in the surviving practice (A) automatically –Contracts of non-surviving practice are vested in the surviving practice –Practice B is automatically merged out of existence –Recredentialing still needed for Practice B –Consider Certificate of Need –Consider “Black Box” review

14. ©2014 Reid and Riege, P.C. Asset Purchase Practice A Practice B purchasing substantially all the assets of Asset Purchase: –May be favored approach if large practice buys small practice or one has contingent liabilities –Ability for acquiring practice to choose which:  assets to purchase  contracts to accept or reject (subject to rights of third parties to assignment)  liabilities to assume or reject (look out for debt obligations or shareholder guarantees) –Practice B typically dissolves post-closing, after period of time to wind-up

15. ©2014 Reid and Riege, P.C. The Group Practice Without Walls  Larger group practice designed to expand easily  “Loose” merger –Keep local names and signs –Operate in separate "profit centers“; compensation can be directly related to personal/division efforts. –Can lease facilities and equipment  One legal entity with operating divisions –One billing number –Combined benefit packages –Central fee schedule and contract negotiations –Centralized accounting and business services

16. ©2014 Reid and Riege, P.C. The Group Practice Without Walls  Maintain local autonomy for staffing, equipment, supplies, operations  Obtain many of the benefits of a complete merger  Potential fit for physicians concerned about more integration or loss of local governance  Opportunity to drive participation in health care reform initiatives –Divisions can work together on care coordination –Leverage care coordination and efficiencies with managed care company –Potential to contract for participation in shared savings programs or ACOs –Can enter into arrangements with hospitals

17. ©2014 Reid and Riege, P.C. Physician Networks – IPAs and IPOs  Traditional Perspective: –Includes: Independent Practice Associations (IPA) or Independent Physician Organizations (IPO) –Traditionally has been a loose affiliation of physicians that come together for the purpose of engaging in joint managed care contracting with HMOs –Used the messenger model to negotiate with payors –Many are not sufficiently integrated to be able to achieve economies of scale and other clinical side efficiencies in cost and process improvement

18. ©2014 Reid and Riege, P.C. Functions: Contracts with payors Manages clinical integration initiative Manages incentive compensation program Clinically Integrated Physician Networks Organization: LLC, S-Corp, C Corp Non-profit or for-profit Physician Driven Board /Operating Committees Physician Practice Payors: Managed Care or Self-Insured Employers Clinically Integrated Network Entity Physician Practice Physician Practice Physician Practice Physician Practice Physician Practice Includes specialists and PCPs Expand to include other providers i.e. HHC or PT

19. ©2014 Reid and Riege, P.C. Clinically Integrated Physician Networks  Allows physicians to remain independent and participate in contracts to improve quality and efficiency of patient care  Focus is on clinical integration through: –Analyzing data to improve outcomes –Standardizing care; develop clinical protocols –Facilitating care coordination –Utilization management processes –Interoperable EMR  Rewards/Risk - Based on attainable goals  Hospitals are starting to develop CINs with medical staff

20. ©2014 Reid and Riege, P.C. Hospital Employment or Affiliation  Hospital Employment: –Historically less regulatory oversight; but becoming subject to more challenge –Physician concerns remain: loss of autonomy; loss of “joint” negotiating power; and practice management style –Long Term Stability?  Public and government attention to higher cost for outpatient visits  Is new site of service code a precursor to match E&M fee to physician fee schedule?  Would independent physician leadership provide better clinical integration and be more cost effective?

21. ©2014 Reid and Riege, P.C. Hospital Employment or Affiliation  Hospital Affiliation: –Professional Services Arrangements  Service line consulting  Clinical objective consulting – i.e. readmission reduction –Service Line Co-Management –Participate in Pay for Performance (“P4P”) or Gainsharing arrangements –Participate in hospital’s ACO or CIN

22. ©2014 Reid and Riege, P.C. New Payment Models  P4P and shared savings contracts with private payors  Bundled Care and Episode of Care Payments –Data required to develop care protocols and demonstrate value to payors based on clinical performance and patient satisfaction data –Clinical integration will be necessary  Patient Centered Medical Home  Chronic Care Management payments in 2015 Fee Schedule  ACOs –Care management is key –Uncertainty regarding actual “savings” for the Medicare ACO –Uncertainty regarding regulatory oversight outside of Medicare programs –High costs of implementation

23. ©2014 Reid and Riege, P.C. The “Red Tape” AKA Government Regulations New payment models are subject to various government regulations  Stark Law  Anti-kickback statute  Anti-trust laws –FTC requires “substantial clinical integration consists of an ongoing program to evaluate and modify the practice patterns of network participants to create a high degree of interdependence and cooperation among them….”  ACO waivers from CMS and OIG –Interim final rule published Nov. 2011 –Extended through Nov. 2, 2015

24. ©2014 Reid and Riege, P.C. Questions and Comments DISCLAIMER: This presentation is being offered for educational purposes only and is not legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer- client relationship. While it is designed to provide relevant and useful information, you are urged not to take action based solely on its contents.