May 10-11, 2018
Max Reiboldt, CPA R. Michael Barry, Esq.Coker Group Arnall Golden Gregory, LLP
Top 10 Lessons Learned From First to Second Generation Transactions Involving Physicians and Health SystemsAHLA Healthcare Transactions Conference Nashville, TN
Agenda
I. Overview of PresentersII. Industry OverviewIII. Compensation Trends IV. Best Practices for Physician Compensation
StructuresV. Illustration of Actual ModelVI. Compliance ConsiderationsVII.ConclusionVIII.Q&A
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OVERVIEW OF PRESENTERS
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Coker Team
Max Reiboldt, CPA, is president and chief executive officer of Coker Group with over 42 years of total experience, the last 23 years specifically focused on healthcare. He has experienced first-hand the incredible changes of healthcare providers, which uniquely equips him to handle strategic, tactical, financial, and management issues that health systems and physicians face in today's evolving marketplace.
From his extensive work with health systems/hospitals, medical practices, and related healthcare entities, Mr. Reiboldt understands what motivates and sustains healthcare industry professionals. He also knows what healthcare organizations need in order to maintain viability in a highly competitive market. He has keen knowledge of the effects on healthcare entity management, and is proficient in employing practical responses to the fiscal realities of market demands. Whether a transitional provider or a more cutting-edge healthcare entity, Mr. Reiboldt is uniquely qualified to work with these organizations to provide sound solutions to everyday and long-range challenges.
Mr. Reiboldt oversees Coker Group’s services and the general operations of the Firm. Mr. Reiboldt provides sound financial, strategic and tactical solutions to hospitals, medical practices, health systems, and other healthcare entities through keen analysis and problem solving. Working with organizations of all sizes, Reiboldt engages in consulting projects with organizations nationwide. His expertise encompasses physician/hospital alignment initiatives, hospital service line development, clinical integration initiatives, financial analyses (including physician compensation plans), mergers and acquisitions, hospital and practice strategic planning, ancillary services development, PHO/IPA/MSO development, appraisals, and most recently, “accountable care era” consultation. As the industry moves to adapting to many changes in response to healthcare reform, Reiboldt is providing hands-on consultation to a full array of healthcare providers.
Max Reiboldt, CPAPresident and CEO
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Coker TeamR. Michael BarryArnall Golden Gregory, LLP
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R. Michael Barry is a partner in the Corporate Practice and the Healthcare Practice.
Mr. Barry focuses his practice on health care transactional and regulatory law – specifically for hospital, health systems and other institutional providers. Mr. Barry's health care practice deals with Medicare fraud and abuse analysis and advice, including physician self-referral and anti-kickback issues. He represents hospitals and health care systems, as well as a variety of institutional physician practices, associations and medical device manufacturers. His practice also focuses on joint ventures between hospitals and physician groups, ambulatory surgery centers, medical practice sales and acquisitions, medical office leases and buy-side and sell-side health care regulatory due diligence (state and federal). He also advises clients in the negotiation and preparation of acquisition, divestiture and joint venture agreements, corporate governance, shareholder agreements, employment agreements and separation arrangements, corporate practice of medicine issues, and other general business and operational matters.
Prior to practicing law, Mr. Barry was a health care tax consultant with a large, international accounting firm.
INDUSTRY OVERVIEWMax Reiboldt, CPA
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Integrated care management focusing on
preventative care
Coordinated delivery of care
rendering appropriate services at appropriate place
and time
Performance (value); Quality/cost
control; bundled payments;
capitation; risk-based
Collaboratives: ACOs/CINs/PCMHs/
QCs
Accountable care era healthcare delivery
Traditional healthcare delivery model
Fragmented care management
treating primarily sick people
Episodes of care; utilization
management
Predominantly Production
(volume)/Fee-for-service (FFS)
payments
Disjointed provider base
Industry Paradigm Shifts Continue
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Rising Concerns
Increased demand for physician services– Fueled by Affordable Care Act– Aging patient population– Healthcare expenditures are approximately $3.3 trillion and accounts for
17.9% of Gross Domestic Product (GDP) in 2016; expected to increase by 5.5 percent per year to $5.7 trillion and 19.7 percent of GDP by 2026
Reimbursement challenges– Implementation of MACRA/MIPS/APMS– Other reimbursement placed “at risk” based on performance– Focus on value-based vs. volume-based (what does this mean for FFS?)
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Rising Concerns
Efficiency considerations– Significant investment in physician networks…what do we do with the
critical mass developed?– Search for alignment between reimbursement, vision/values, and
incentive structure
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Changing Landscape
Number of independent practice owners has declined from 62% in 2008, to 49% in 2012 to 33% in 2016*
47% of all practices are actively pursuing value-based payments in 2017, up from 44% 2015**
The federally funded healthcare Payment Learning & Action Network (“LAN”) aims to have 50% of all U.S. healthcare payments in alternative payment models by 2018***– As of 2017, 29% was tied to alternative payment
models, an increase from 23% in 2015
*The Physicians Foundation 2016 Survey of America’s Physicians**2017 Value-Based Payment Study***LAN APM Measurement Report, 2017 10
Incr
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Changing Payment Models
•Providers paid a specified amount for each service providedFee-for-Service
•Incentives for higher quality measured by evidence-based standardsPay-for-Performance
•Percentage reimbursement at risk, earned back by high quality outcomes.
Value-based Purchasing
•Single payment for episodes of treatment, shared by hospital and physicians.
Bundled Payments
•Percentage of savings from reduced cost of care shared with hospitals and physicians.Shared Savings
•All services compensated in one payment that manages the patient across the delivery systemGlobal Payments
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MACRA Overview Timeline:
– MACRA was passed in April 2015– Notice of Propose Rulemaking issued in April 2016– Final Rule issued on October 14, 2016
Replaces the sustainable growth rate (“SGR”) as a way for the Centers for Medicare and Medicaid Services (“CMS”) to adjust payments to physicians in order to drive quality up and control or reduce costs
Consolidates multiple pre-existing reporting and payment incentive programs: – PQRS – physician quality reporting system – VPM – value payment modifier – MU – meaningful use
Adds new incentive program:– CPIA – Clinical Practice Improvement Activity
Includes: – MIPS – Merit Incentive Payment System – APMs – Alternative Payment Models (basic and advanced)
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MIPS Overview Will begin distributing payments in January of 2019; however, the performance in
2017 will determine those payments Rewards performance via a two year lookback
– E.g. 2017 performance will determine payments for 2019, etc. Eligible participants:
– Now: Physicians, dentists, PAs, NPs, clinical nurse specialists, certified registered nurse anesthetists (“CRNAs”)
– In year three: Rehab professionals (physical therapists (“PTs”) / occupational therapists (“OTs”) / speech and language pathologists (“SLPs”)), audiologists, nurse midwives, clinical social workers, clinical psychologists, dieticians / nutritional professionals
In 2017, approximately 85% of providers eligible for MACRA are expected to participate in MIPS
MIPS measures and creates a composite score– Quality (uses PQRS) – 50%– Resource use* (uses VPM) – 10%– Clinical practice improvement (creates clinical practice improvement activities
(CPIAs) – 15%– Advancing care information (uses MU) – 25%
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*The final rule stated that the resource use category will not be factored in for the 2017 data. Therefore, during the first year only, the quality category will be weighted at 60%.
Impact of Changing Payment Models
• Requires changes to how we are currently practicing
• Additional costs - IT tools, staffing, contracting, etc.
Operational
• At-risk vs. guaranteed comp• Changes in amount• Changes in incentive driversFinancial
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COMPENSATION TRENDSMax Reiboldt, CPA
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Compensation Trends
Change has become an operative word
*Physician Compensation: Shifting Incentives, Healthleaders Media Council**Merritt Hawkins Review of Physician Recruiting Incentives
Changing Plans: • 41% changing
models every year or two, 38% every three to five years*
Changing Incentives:
• 39% of placements in 2017 included quality incentives, up from 32% in 2016**
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Evolution of Physician Compensation
1990s
• High guarantees • No productivity expectations• Significant benefit packages
2000s
• Strong focus on productivity (mainly wRVUs)• Guarantee treatment largely depends on locale• Limited performance incentives (outside of productivity)• Reasonable benefit package (no more pensions)
2010s
• Continued focus on productivity, although changing• Significant focus on inclusion of performance incentives (outside
of productivity)• Decreasing guarantees• Reasonable benefit package (no more pensions)• Questions of what the future looks like
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Impact of Changing Payment Models
Statistics from 2017 Sullivan Cotter Physician Compensation Survey* related to frequency of value or quality-based incentives used in total compensation, as well as mean percentage of total cash compensation if used:
Additionally, 35% of respondents noted that they anticipate modifying the balance between productivity-based and performance or quality-based pay within the next 12 months
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Percentage Using Percentage of TCC
Primary Care Physicians 58% 10%
Medical Physicians 49% 11%
Surgical Physicians 51% 11%
Hospital-Based Physicians 45% 11%
Flawed Historical Compensation Plans
Flaws in compensation plans are becoming evident and unsustainable from an employer standpoint
Some of the transactions that have occurred over the past five years have been flawed, largely due to the structure of the compensation and incentives
Moreover, due to contract incentives being based on wRVUs, physicians have not been incentivized to reduce costs or control the care process; rather, they were incented to be aggressive in coding and overall accumulation of wRVUs
Thus, as contracts are expiring, employers are reconsidering whether it is best to renew the contracts under a similar model (many of which are solely productivity based) or move toward new models (that include other, non-productivity incentives)
PSAs are becoming much more popular as well
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Compensation Trends Takeaways
The physician market has changed, with many more physicians employed/affiliated with health systems
The reimbursement paradigm is changing, with a greater focus on value– This does not mean that volume is going away, but
balanced with other incentives With the number of physicians currently
employed, there is a substantial focus on developing the “right” compensation model for the overall benefit of patient care throughout the health system, as opposed to simply aligning with all physicians in the community
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BEST PRACTICES FOR PHYSICIAN COMPENSATION STRUCTURES
Max Reiboldt, CPA
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Compensation Components
Basic Four-Component Model:
1. Base Compensation
2. Productivity Incentive
3. Quality/Non-Productivity
4. Other
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Component 1: Physician Base Compensation
Base Compensation– Completely guaranteed, partially guaranteed or at-risk?
• If guaranteed more conservatism should apply on long-term basis, perhaps closer to median levels and or a certain percentage of projected compensation (i.e. 85%)
– It is reasonable to guarantee more in first 12-24 months (during ramp-up period) and then scale down
• If a draw a higher amount could be paid, but conservatism should still exist as it is unfavorable to be in situation wherein you must recoup compensation from a physician
– Ultimately, the productivity/performance of the physician should more than cover the base compensation
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Component 2: Physician Productivity Incentive
Production Incentive– wRVU-based models are still very common– One or two-tier approaches are the norm– For primary care, some are beginning to augment
wRVUs with panel size incentives (see Coker Group white paper from February 2018, “Using Patient Panel as a Principle Element in Primary Care Physician Compensation”)
– Focus on accurate calculation of wRVUs• By rendering provider• Modifier adjusted (reimbursement is modified, so wRVUs
should follow)
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Component 2: Comp/wRVU Ratio
MGMA Survey Definitions Total Compensation
– All direct compensation and income from provider’s K-1, as applicable
The compensation data reported is total cash compensation The compensation per wRVU definition is total cash compensation
divided by wRVUs All forms of compensation, including ancillary income, profits on
employed providers, quality incentives, call pay, medicaldirectorships, and other forms of payment received by a practice, arereflected in the compensation per wRVU data
Thus, the median rate per wRVU already includes other componentsof compensation
Need to avoid “double-dipping” or stacking compensation
Source: MGMA 2017 Provider Compensation and Production Survey Guide 25
Component 2: Comp/wRVU Ratio (cont’d)
Example Using the median rate per wRVU, based on industry data, tends to
result in the alignment of compensation and productivity and is notnecessarily a representation of the level of compensation
– Rate per wRVU < Median = wRVU > Compensation– Rate per wRVU > Median = wRVU < Compensation– Rate per wRVU = Median = wRVU = Compensation
wRVUs MGMA %ile Comp/wRVU MGMA %ileTotal
CompensationMGMA %ile
5,960 25 $69.99 40 $417,159 187,969 50 $69.99 40 $557,776 43
10,402 75 $69.99 40 $728,069 715,960 25 $74.94 50 $446,642 227,969 50 $74.94 50 $597,197 51
10,402 75 $74.94 50 $779,526 765,960 25 $79.95 60 $476,506 277,969 50 $79.95 60 $637,127 57
10,402 75 $79.95 60 $831,647 80
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Market Data Summary
[client name]
[matter]
[explanation of data on tab]
DRAFT
ERROR:#REF!
National Average (MGMA, AMGA, SCA)
25th %ile50th %ile75th %ile90th %ile60th %ile40th %ile
Staff Physician $463,855$592,019$761,260$1,007,559$655,588$543,879
wRVUs5,9607,96910,40213,3698,8837,214
TCC per wRVU$61.77$74.94$88.28$105.76$79.95$69.99
&DPage &P of &N&G
Dr. Blank
[client name]
[matter]
[explanation of data on tab]
DRAFT
Compensation Analysis - Dr. BlankERROR:#REF!
Compensation ComponentsFTEAmountNational Market Data Percentiles - FTE AdjustedMarket %ile
25th %ile50th %ile75th %ile90th %ile
25th %ile$476,506$463,855$592,019$761,260$1,007,55927
Median$637,127$463,855$592,019$761,260$1,007,55957
75th %ile$831,647$463,855$592,019$761,260$1,007,55980
wRVUs5,9607,96910,40213,369--
Clinical TCC per wRVU$79.95$61.77$74.94$88.28$105.7660
Compensation ComponentsFTEAmountNational Market Data Percentiles - FTE AdjustedMarket %ile
25th %ile50th %ile75th %ile90th %ile
25th %ile$446,642$463,855$592,019$761,260$1,007,55922
Median$597,197$463,855$592,019$761,260$1,007,55951
75th %ile$779,526$463,855$592,019$761,260$1,007,55976
wRVUs5,9607,96910,40213,369--
Clinical TCC per wRVU$74.94$61.77$74.94$88.28$105.7650
wRVUsMGMA %ileComp/wRVUMGMA %ileTotal CompensationMGMA %ile
5,96025$69.9940$417,15918
Compensation ComponentsFTEAmountNational Market Data Percentiles - FTE AdjustedMarket %ile7,96950$69.9940$557,77643
25th %ile50th %ile75th %ile90th %ile10,40275$69.9940$728,06971
25th %ile$417,159$463,855$592,019$761,260$1,007,559185,96025$74.9450$446,64222
Median$557,776$463,855$592,019$761,260$1,007,559437,96950$74.9450$597,19751
75th %ile$728,069$463,855$592,019$761,260$1,007,5597110,40275$74.9450$779,52676
5,96025$79.9560$476,50627
wRVUs5,9607,96910,40213,369--7,96950$79.9560$637,12757
Clinical TCC per wRVU$69.99$61.77$74.94$88.28$105.764010,40275$79.9560$831,64780
&DPage &P of &N&G
Component 2: Comp/wRVU Ratio (cont’d)
Use caution in simply relying on the median rate per wRVU in surveydata– Survey data limitations
• Typically includes larger and/or more sophisticated groups reporting, who areable to provide detailed responses to survey questionnaires
• Includes increasing number of health system employed providers, which mayhave provided compensation greater than what is generated in private practice
• May include income derived from ancillary services or other outside services,or profits off other providers
– The median is the median; by definition the midpoint of frequency ofdistribution of observed values
• Not all providers should be at the median; some should be below, some shouldbe above
• Fallacy of the ever increasing median, if everyone is getting the median– Situation specific variables should be considered; payer reimbursement,
provider supply, etc.
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Component 3: Physician Performance Incentives
Quality/Non-Productivity Incentives– These incentives continue to gain greater prominence
in the industry• Driven largely by the shift in focus from volume to value• However, for most organizations, due to reimbursement
structure, volume is still very important
– Shift in focus from simply foundational expectations of an employed physician to value drivers
• Often tied to any quality-based reimbursement initiatives• Minimum work standards (MWS) are established to address
other foundational expectations
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Component 3: Physician Performance Incentives
Sample Focus Areas
• Quality Measures • Chart Completion• Patient Satisfaction • Administrative Adherence
• Expense Control (Practice) • Good Citizenship• Targeted Cost Savings (Hospital) • Adoption of EHR• Coding and Compliance • Referral Patterns
• Call Coverage • Medical Home Success
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Component 3: Physician Performance Incentives
Key Challenges:
– Ability to capture data; multiple systems involved, EHR is a must
– Availability of data for reporting purposes– Accuracy of underlying data– Objectivity of established measures– Applicability of measures to physicians/hospital– Funds available to incentivize– Timing of tracking/compensating– Ability to measure impact
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Component 3: Physician Performance Incentives
Key Tenets for Establishing Performance Incentives:– Determine what you want to incentivize
• Are you currently tracking, are you able to track?– Ensure an appropriate balance between value of
incentive and associated metrics– Collaborate: let system dictate some, physicians choose
some– Pay no more often than semi-annually– Establish scoring mechanism as objectively as possible– Recent surveys indicate that fewer than half earned
most (81%-100%) of available incentive dollars, with almost one third receiving 20% or less of available incentives*
*HealthLeaders Media, 4 Physician Compensation Factors to Watch, January 4, 2018.
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Component 4: Other Physician Compensation
Other Compensation Components – Pay for call
• Hourly or daily rate at FMV– Administrative services fees/medical directorships
• Hourly or daily rate at FMV• Subject to a compensation cap • Proper documentation must be provided
– Mid-level oversight • Explained on subsequent slides
– Benefits treatment• Consistent with industry norms; excess benefits should be
considered additional compensation to provider
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• Value (targeted comp/wRVU) is set on an overall basis and then allocated amongst the four components of the compensation model
• Full value is achieved through maximum performance in all areas• Model creates flexibility to adjust value among components over time as
changes in reimbursement occur
Overview of Compensation Structure
Targeted Comp/wRVU Ratio (%tile of Market Data)
wRVU Productivity
Productivity Incentive
Quality/Non-Productivity Other
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What to Expect in the Compensation Realm in 2018?
The Challenge:– Revising the incentive structure to blend fee-for-service with fee-
for-value payments– With first generation contracts, physicians have become used to
wRVUs as the main driver of their compensation– Payers (finally) are showing more interest in FMV/quality
reimbursement structures– Payer reimbursement trends will continue to influence
compensation plan models
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What to Expect in the Compensation Realm in 2018? (cont’d)
Recommendations for Creating a Responsive Model:– Provide a reasonable base level of compensation (balance security with
motivation)– Focus on wRVU productivity without overemphasizing it (less emphasis
overall)– Consider panel sizes for primary care providers– Provide a means of incentivizing non-productive criteria (quality, patient
satisfaction, citizenship, etc.; greater emphasis)– Assess the merits of a situation prior to setting stipends (i.e., mid-level
oversight)– Important to maintain synchrony between the market reimbursement
trends and the compensation models – significant compensation for quality in a mainly FFS market (or vice versa) won’t work
– Trending toward more quality-based incentives, but still largely volume-based
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ILLUSTRATION OF ACTUAL MODEL
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wRVU Productivity
• Two-tier model structure• Model variables set consistently for all specialties
• Tier One Rate- set using allocation of value• Tier Two Rate - 9% above Tier One rate• Tier Two Threshold:
• 60th percentile wRVUs• Not FTE adjusted
Outline of Key Model Components
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Individual Performance Bonus (IPB)
• Similar to current “Citizenship Scorecard”, but with key differences:• Metrics will be specialty specific• Income potential, even if QOB not achieved
• Targeted value is approximately $15,000 at median productivity (Year 3)
• Phased-in over three years to reach targeted value• Value shifted from wRVU component to IPB component
• Value of IPB (depending on specialty)(as % of 60th %ile)• Year One: 2.00% or 1.17%• Year Two: 4.00% or 2.33%• Year Three: 6.00% or 3.50%
Outline of Key Model Components
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Quality and Outcomes Bonus (QOB)
• Set at 10% of wRVU-based compensation• Similar scorecard as currently exists (updated annually)• Allocation of QOB will be completely based on productivity
Other Model Components
• P4P/HMO Bonuses: Will not be separately paid, but wrapped into overall compensation arrangement
• APP Supervision: See subsequent slide
• Administrative Time: See subsequent slide
Outline of Key Model Components
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Mid-Level Incentive
Primary Care Mid-Levels– Assessed on a per mid-level basis– $8,000 per mid-level, with opportunity of up to $12,000
• Additional payment at $3.00 per wRVU in excess of 2,667 wRVUs, up to cap• Example:
– Mid-level generates 3,000 wRVUs– Base stipend = $8,000– 333 wRVUs x $3.00 = $999– Total Mid-Level Stipend: $8,999
– Allocation of stipend:• TBD between collaborating physician and physicians utilizing mid-level
Specialty Care Mid-Levels– Generally, will not be compensated as they allow a physician to be more productive– Certain exceptions will be considered on a case-by-case basis
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Administrative Time
Specific Director Positions: • Example would be specific medical director positions• These currently exist but are documented in separate agreements• Typically compensated on an hourly basis
Joint Operating Committee• Compensated via an annual stipend
Special Committee Membership• Certain “appointed” positions for a designated period of time. Represents time
expectation above a “normal” physician.• JOC will determine what committees are compensated and how much
Normal Administrative Tasks• Signify tasks that are inherent to being a physician in a large physician group
• E.g. Office-based administrative work, medical staff meetings, practice meetings, etc.• No additional compensation will be provided for these tasks
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COMPLIANCE CONSIDERATIONSR. Michael Barry, Esq.
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Compliance Considerations
When crafting physician compensation arrangements, there are various regulatory issues that must be considered, including:– Stark Law– Anti-Kickback Statute (AKS)– Civil Monetary Penalties Laws (CMP Laws)– Tax-Exemption
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Compliance Considerations: Stark
Stark prohibits a physician from referring a patient for certain designated health services (DHS) which will be reimbursed by a Federal healthcare program to an entity with which the referring physician has a financial relationship (ownership, compensation, etc.)
There are various exceptions to the Stark Law. If an exception is satisfied, an arrangement that would otherwise be in violation of the Stark Law will be deemed to satisfy it. Two such exceptions which are particularly relevant to the discussion on physician compensation arrangements are:– (1) the bona fide employment relationship exception– (2) the personal services arrangements exception
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Compliance Considerations: Stark Exceptions
Bona Fide Employment Relationship– The employment must be be for identifiable services– The compensation must be consistent with FMV and not determined in a manner
that takes into account the volume or value of referrals by the physician (but productivity bonuses for personally performed services are allowed)
– The arrangement must be commercially reasonable even if no referrals are made to the employer
Personal Services Arrangements– The arrangement must be in writing, signed by the parties, and must specify the
services covered by the arrangement– The arrangement must cover all services to be furnished by the physician to the
entity (cross-references are permitted)– The services contracted for must not exceed those that are reasonable and
necessary for the legitimate business purposes of the arrangement – The term must be for at least 1 year– The compensation must be set in advance, cannot exceed FMV, and except in the
case of a physician incentive plan, cannot be determined in a manner that takes into account the volume or value of referrals or other business generated between the parties
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Compliance Considerations: AKS
AKS prohibits the payment or receipt of anything of value intended to reward or induce the referral of federal healthcare program business
Where the Stark Law has exceptions, AKS has “safe harbors,” and just like the Stark exceptions, if an AKS safe harbor is satisfied, an arrangement that would otherwise be in violation of AKS will be deemed to satisfy it
One key difference between Stark and AKS is that Stark is a strict liability statute. An arrangement that otherwise violates Stark mustsatisfy one of the exceptions in order for it to be a legal arrangement, whereas under AKS, an arrangement need not satisfy a safe harbor in order to be deemed compliant with AKS (but satisfying a safe harbor guarantees that the arrangement will not be considered a violation of AKS)
Like Stark, AKS has safe harbors for personal services arrangements and employees
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Compliance Considerations: AKS Safe Harbors
Employees– The AKS safe harbor for employees is similar to the analogous Stark exception, but
the safe harbor is arguably easier to satisfy. All that is required is that the arrangement be a bona fide employment relationship involving the furnishing of an item or service for which payment may be made in whole or in part under a Federal healthcare program
Personal Services and Management Contracts– This AKS safe harbor is also similar to the analogous Stark exception– The arrangement must be in writing, signed by the parties, and must specify the
services covered by the arrangement– The arrangement must cover all services to be furnished by the physician to the
entity– The services contracted for must not exceed those that are reasonable and
necessary for the legitimate business purposes of the arrangement – The term must be for at least 1 year– The compensation must be set in advance, cannot exceed FMV, and cannot be
determined in a manner that takes into account the volume or value of referrals or other business generated between the parties
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Compliance Considerations: Commercial Reasonableness In order to be commercially reasonable, an arrangement must make
sense from a business perspective even if there are no potential business referrals between the parties
Depending on the particular situation, some factors that may weigh against the commercial reasonableness of an arrangement are: (1) high guaranteed pay, (2) long contracts with limited termination rights and no ability to adjust variables, and (3) significant increases in pay for no additional work
One way to support commercial reasonableness of a long term arrangement is to build in a trigger for automatic renegotiation or adjustment to the compensation methodology if the reimbursement methodology of applicable payors materially changes from that which existed at the time the arrangement was entered into. For example, parties could require a renegotiation of a physician compensation arrangement if the Hospital’s revenue derived from the professional services of the physician(s) shifts from being predominantly fee-for-service based to fee-for-value based
48
Compliance Considerations: CMP Laws
The Federal CMP Laws enable the Office of Inspector General (OIG) to seek monetary penalties for a wide variety of activities that are prohibited by Federal law
This authority includes the ability to extract civil monetary penalties from a hospital for making a payment to a physician as an inducement to reduce or limit services to a patient under direct care of that physician (and the physician receiving the payment would be subject to civil monetary penalties as well)
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Compliance Considerations: Tax-Exemption
Tax-exempt entities are widespread in the healthcare industry. Such entities must not only navigate the complex regulations that apply to healthcare entities generally, but must also be sure to comply with applicable tax-exemption rules. For example, a tax-exempt entity must:– Operate in furtherance of its tax-exempt and charitable purposes – Consider whether a particular arrangement may result in the tax-exempt
entity generating unrelated business taxable income, and if so, whether it would be significant enough to jeopardize the entity’s tax-exempt status
– Pay no more than fair market value for items and services to avoid a perception that they are misusing their charitable assets
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Compliance Considerations: Practical Guidance
1. Get an opinion – FMV/CR2. Build in protections that would provide a trigger
for renegotiation when appropriate3. Regularly reevaluate and reset compensation
elements
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CONCLUSIONMax Reiboldt, CPA
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Top Ten Lessons Learned
There is great potential for physicians to take advantage of the changes in the industry; thus, these changes do not inevitably mean reduced compensation
The following items should be considered when negotiating second generation contracts in order to ensure the best outcomes for both physicians and employers
Flexibility and some variations in these models I sa key for 2018 and beyond, especially new transactions and second generation structures
Whether employment or PSAs, most of these tenets apply similarly
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Ten Lessons Learned
5. Gradually begin tapering off productivity goals and replace with alternative incentives. (Mirror reimbursement trends.)
4. Consider infrastructure required to support non-productivity incentives. (FFV payments must exist to require such.)
3. Ensure organization’s productivity and revenue goals are being met. (FFS still prevails.)
2. Incurring losses in physician transactions may not be offset by downstream revenue (increased site-neutral payments).
1. Physician market share does not mean success, so health systems have become more selective relative to transactions. (PSAs are much more popular now than 3 years ago.)
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Ten Lessons Learned (cont’d)
10. Payment reform is here and real (MACRA); unable to ignore the non-FFS world.
9. Continually reassess compensation structures in light of regulatory and industry trends.
8. Leverage newly prioritized metrics to reap additional reimbursement incentives (i.e. commercial or MIPS increases).
7. Begin tying incentives to reimbursement changes, such as shared savings and/or the quality/CPIA/ACI metrics being measured for MIPS.
6. Tie new incentives to organizational goals, such as cost-savings, quality, etc. and prepare to respond to MACRA/MIPS requirements.
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Q&A
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Thank you!
Coker Group Holdings, LLC2400 Lakeview Parkway
Suite 400Alpharetta, GA 30009
678.832.2000www.CokerGroup.com
Max Reiboldt, CPAPresident/CEO
R. Michael Barry, Esq.Partner, Arnall Golden Gregory, LLP
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http://www.cokergroup.com/mailto:[email protected]:[email protected]
Top 10 Lessons Learned From First to Second Generation Transactions Involving Physicians and Health SystemsAgendaOverview of PresentersCoker TeamCoker TeamIndustry OverviewIndustry Paradigm Shifts ContinueRising ConcernsRising ConcernsChanging LandscapeChanging Payment ModelsMACRA OverviewMIPS OverviewImpact of Changing Payment ModelsCompensation TrendsCompensation TrendsEvolution of Physician CompensationImpact of Changing Payment ModelsFlawed Historical Compensation PlansCompensation Trends TakeawaysBest Practices for Physician Compensation StructuresCompensation ComponentsComponent 1: Physician Base CompensationComponent 2: Physician Productivity IncentiveComponent 2: Comp/wRVU RatioComponent 2: Comp/wRVU Ratio (cont’d)Component 2: Comp/wRVU Ratio (cont’d)Component 3: Physician Performance IncentivesComponent 3: Physician Performance IncentivesComponent 3: Physician Performance IncentivesComponent 3: Physician Performance IncentivesComponent 4: Other Physician Compensation Overview of Compensation StructureWhat to Expect in the Compensation Realm in 2018?What to Expect in the Compensation Realm in 2018? (cont’d)Illustration of Actual ModelOutline of Key Model ComponentsOutline of Key Model ComponentsOutline of Key Model ComponentsMid-Level IncentiveAdministrative TimeCompliance ConsiderationsCompliance ConsiderationsCompliance Considerations: StarkCompliance Considerations: Stark ExceptionsCompliance Considerations: AKSCompliance Considerations: AKS Safe HarborsCompliance Considerations: Commercial ReasonablenessCompliance Considerations: CMP LawsCompliance Considerations: Tax-ExemptionCompliance Considerations: Practical GuidanceConclusionTop Ten Lessons LearnedTen Lessons LearnedTen Lessons Learned (cont’d)Q&AThank you!
