Finance Archives - Herrin Health Law, P.C.

ERISA: the Key to Saving Your Company’s Private Healthcare

Barry Herrin — Thu, 15 Oct 2020 11:05:00 +0000

William M. Satterwhite, JD, MD, CPE and Barry S. Herrin, JD, FACHE

Everyone in business understands the term “ERISA”. Yet few people, even those in the benefits industry, actually really understand the incredible power to improve health and save money that is contained within the provisions of the Employment Retirement Income Security Act of 1974, as amended. Though originally ERISA only addressed pension plans and individual retirement plans, the Act has been amended several times and now covers employment-based medical and hospitalization benefits plans, called “welfare benefit plans” (WBP) in ERISA parlance.

Most companies offer traditional health benefits plans that have the usual monthly premiums, copays and deductibles, and some companies even offer a choice of plans each year. These plans are almost always a very “one-size-fits-all” approach, much the same as if the company said it was going to give every employee a free pair of socks — all of the same size! Who would do such a preposterous thing, you ask? Answer: almost every company in the US with more than 50 employees!

Welfare benefit plans (WBPs) as defined by ERISA, however, let a private employer create extra health benefits that are tailored to specific people or conditions, and these can be provided in addition to the company’s traditional health insurance benefit plans. Moreover, ERISA allows an employer to determine who gets this benefit, what it is they actually get, and how it is given and paid for.

For example, in addition to a major medical plan, an employer can provide any or all of the following WBPs:

A plan for employees or beneficiaries who have been diagnosed with depression, anxiety, or other mental health disorders. This WBP can cover all visits to the psychiatrist and counselor at 100% without deductibles or copayments, along with all generic medications.
A plan for employees or beneficiaries with the diagnoses of diabetes and high blood pressure. This WBP covers all visits to the doctor at 100% without deductibles or copayments when the purpose is addressing these diagnoses. Under this plan, insulin and all generic medications can be covered at 100% without deductibles or copayments.
A plan establishing an onsite clinic for all employees, regardless of whether they are on the company’s health benefit plan or not, where all visits can be free and may be done ‘on the clock’ (that is, without the need for the employee to ‘clock out’ of work hours). Onsite visit-related generic medications can be free as well.[1]
Each WBP can have a designated ‘Nurse-Health Coach’ who is available onsite in person at certain intervals and available by phone at other times. These Nurse-Health Coaches are the ‘go-to’ people for these WBP participants and a key operational component to decreasing the cost of care, triaging those with acute needs, and coaching them regarding relevant lifestyle changes.

WHY THIS WORKS

Insurance companies generally price coverage for employers on a year-to-year basis, which means that the insurer builds in its risk of loss to both known and unknown health conditions. This is why, for example, dental insurance benefits punish insureds that have to have a crown replaced with a bridge within 5 years of the placement of the crown. The insurer would rather have paid for a bridge that creates a risk of bone loss and damages two healthy teeth instead of trying (albeit unsuccessfully) to save a damaged tooth before resorting to a bridge. This kind of pricing and payment strategy makes no sense to most employers, because the average tenure for employed professionals is five years, with 23 percent of professional workers having tenure greater than 10 years.[2] Indeed, one of the authors notes in a prior article[3] that, with this information, it might be better for an employer to pay for LASIK (at an average cost of $2500) rather than years and years of eyeglasses (at an average cost of $200 per year) because the total cost to the employer over time might well be less.

Similarly, delivering more care up front — as these models suggest — would in many cases save the employer money over time for long-term employees. It has been known for decades (at least) that the administration of a six-month course of beta blockers (available as a generic at low cost) following an acute heart attack lowers the rather substantial likelihood of a typical second heart attack occurring within the next 12 months and its attendant costs.[4] Recent studies[5] show that the use of statins combined with cardiac rehabilitation also proves cost-effective over the lifespan of the patient, and perhaps even a shorter period of time. However, insurers looking only at a yearly expense might not choose to pay for therapy that only has benefits to the patient over a multi-year period, whereas an employer who knows he will have that employee as an insured for several years, if not decades, might want to make that early expense in order to save overall dollars.

Additionally, early and persistent intervention in diabetes care and chronic obesity can prevent increases in care costs and progression of disease that could lead to short-term disability, long-term disability, and perhaps death. Such intervention can be in-person with or without the addition of drug therapy, but such interventions are a long-term commitment to decreasing long-term costs of care.[6] The attendant weight loss from such therapy also can improve cardiac health as well as reduce stress on the musculoskeletal system caused by excess weight.

Finally, for many employees with diabetes, for example, the dual barriers of high cost and inconvenient care result in poor care and poor outcomes, incurring average health care spending of $16,572 to remediate these issues.[7] With the right kind of WBP, many employers could see a drop in Year 1 costs of care for their diabetic employees. It is also not uncommon to see reductions in emergency department costs from 35% of the care spend on these employees to the single digits.

Only a payor that knows it has “bought” the risk of an insured for a longer period of time would engage in these strategies; however, most employers on the short-term financial advice of their insurers don’t do these things. The result? Less long-term improvement in employee health and higher overall health care costs to the employer.

GETTING PROVIDER BUY-IN

To be honest, the average health care provider doesn’t have any interest in lowering the health care costs its customers pay unless there is something in it for them. The alternative WBPs listed here offer the employer and a narrow network of providers the opportunity to share the rewards of a successful health care payment strategy. For example, Wake Forest Baptist Health as an integrated service provider (meaning a health care provider that owns and controls hospitals and ambulatory surgery centers and employs physicians) can offer a direct contract to self-insured employers in its service area, using only its owned and controlled resources, that could include an agreement to share any savings that these WBPs achieve each plan year with the employers. Because of the pre-emption of certain state insurance laws afforded by ERISA, such plans cannot be characterized as insurance under North Carolina law, thereby removing the necessity that an insurer (with its cost structure) be involved in the plan’s administration. In summary, a well-articulated strategic deployment of WBPs with select employers can provide a health system with steady cash flows, upside gain, and highly satisfied physicians who are not compensated by the “volume wheel.”

WHAT ARE THE POTENTIAL DOWNSIDES?

Most employers will not have the internal capacity to monitor and administer these programs and will therefore rely on their third-party administrators (TPAs) to do it for them. However, if the TPA is a subsidiary or affiliate of a major health insurer, it will be virtually impossible to get the TPA to agree to load these providers as in network and administer their claims, especially if the narrow networks compete with their other in-network providers. This is one of the dirty little secrets of health care insurers: even though ERISA permits the self-insured employer to direct the makeup of network providers, insurer-based TPAs rebel at this because it breaks the leverage that the insurer has to exclude providers who do not agree to their (usually very low) payment rates from the networks of self-insured employer plans.

One other important point needs to be mentioned and that is the other big federal law controlling employer health plans: the Consolidated Omnibus Budget Reconciliation Act of 1986, known to every human resources professional as simply COBRA. COBRA is what requires employers with 20 or more employees to allow former employees to extend their health care benefits post-employment. That means that, even though the employer has lost the potential future savings these WBPs offer, it must continue to allow former employees (and others qualified under COBRA) to continue to access these benefits.

CONCLUSION

As with many great ideas that can transform modern industry, nothing in this article is really new, as the laws have been on the books for decades and the evidence of what we’re advocating has been around for many years. However, employers find it easier simply to follow their broker’s advice and pay an insurance company or an insurer-controlled TPA to make decisions about the health and wellbeing of the employer’s most valuable resource, chalking up the ever-increasing cost of care as an expense of doing business. Employers owe it to themselves to explore every avenue to increase worker health and productivity and decrease costs. Happily, the strategies suggested here can in many cases do both. If you’d like to explore these ideas for your company, or begin a direct-to-employer offering as a healthcare provider, let us know.

Barry S. Herrin, JD, FAHIMA, FACHE, is the founder of Herrin Health Law, P.C., in Atlanta, Ga. Herrin offers more than 30 years of experience practicing law in the areas of healthcare and hospital law and policy, privacy law and health information management, among other healthcare-specific practice areas. He is a Fellow of the American College of Healthcare Executives and a Fellow of the American Health Information Management Association. He also holds a Certificate in Cyber Security from the Georgia Institute of Technology. Reach him at 404-459-2526 or barry.herrin@herrinhealthlaw.com.

ENDNOTES

Dr. Satterwhite is admitted to the Bar of North Carolina and is Chief Wellness Officer of Wake Forest Baptist Medical Center. Mr. Herrin is also admitted to the Bar of North Carolina and is outside counsel to Wake Forest Baptist Medical Center. Â© 2020 William Satterwhite and Herrin Health Law, P.C. All rights reserved.

[1] This might not be truly a welfare benefit plan in the ERISA sense but another nonmonetary benefit of employment. The distinction, although at first seemingly unimportant, affects how the employee’s health information is used and disclosed under HIPAA. Additionally, such benefits cannot, for example, be extended to dependents of employees under the employer’s health plans.

[2] U.S. Bureau of Labor Statistics. (2018, Sept. 20). Employee Tenure Summary. Retrieved from https://www.bls.gov/news.release/tenure.nr0.htm

[3] https://herrinhealthlaw.com/disrupting-the-talk-about-disruption/

[4] https://herrinhealthlaw.com/wp-content/uploads/2018/12/AHLA-2004-Feb-Herrin-Health-Law-Analysis-Pay-Performance.pdf

[5] https://heart.bmj.com/content/104/17/1403

[6] https://care.diabetesjournals.org/content/39/Supplement_1/S47

[7] https://www.diabetes.org/resources/statistics/cost-diabetes#:~:text=People%20with%20diagnosed%20diabetes%20incur,in%20the%20absence%20of%20diab

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In estate planning, save your solo medical practice with this one action

Barry Herrin — Tue, 19 Feb 2019 14:46:43 +0000

Here’s a little known fact that escapes many solo physicians who are doing their estate planning: if a physician is the sole owner of a medical practice that is enrolled in Medicare and that physician owner dies, the practice automatically dissolves for purposes of Medicare enrollment.¹ Additionally, all reassignments to the practice are automatically terminated.² Thus, neither the deceased owner-physician nor the practice is enrolled in Medicare any longer, and the Medicare billing privileges of all physicians and medical professionals working for the practice are automatically revoked.³

This can have a catastrophic effect on everyone involved with the practice, as the Medicare contractor is instructed to use the date of the physician’s death or the date of revocation to end-date the reassignments.⁴ It does not matter to the Centers for Medicare & Medicaid Services (CMS) whether the practice is a sole proprietorship, a professional corporation, or a solely owned limited liability company.⁵

Wow. Imagine if you’re the surviving spouse of such a physician and you thought you had six months to a year (depending on the state’s professional corporation rules) to find a buyer to continue the practice — you now have nothing that is worth selling except medical records and some office furniture. The loss of Medicare enrollment will cause the value of the practice to plummet because the practice no longer has the ability to bill Medicare (and perhaps Medicaid and other third party payors that rely on Medicare enrollment as a condition of participating in those programs) — not now, and not at any time in the future. Continuing the practice means starting a brand new legal entity and credentialing it and all of its providers through Medicare and Medicaid, and that means a loss of four to six months of revenue.

Have a first mate

So, even if you’re the ‘captain of the ship’ and you don’t want a ‘partner,’ the smart thing to do is have another physician who actually renders medical services in the practice own one percent (1%) of the equity. Medicare regulations do not specify required ownership percentages for the various owners of a practice,⁶ and paying a trusted physician employee (who probably already covers for you on call, vacation, etc.) a one percent bonus every year to preserve the value of the practice should make great sense. Besides, you can draft your shareholders and other governing agreements so that this one percent owner doesn’t have the ability to control the practice or any of your actions, so all you’ve done is bought practice continuation insurance against your untimely demise.

Create a crew

Creating a situation with multiple owners (all of whom are enrolled as Medicare providers) is not as difficult as it might first appear, and there just is not a good solution to the Medicare enrollment problem otherwise. And the present inconvenience of a little loss of perceived control over the practice is vastly outweighed by the ability to preserve the value of the practice on an ongoing basis even after the death of its ‘key person.’ Believe me, having seen what the lack of attention to this detail does to the survivors of a physician suicide or airplane crash has convinced me to convince you to just do it.

¹ CMS Program Integrity Manual, Chapter 15, Section 15.5.20 (C), Transmittal 445 (December 14, 2012).
² Id.
³ If the employed physician/practitioner wants to provide services at the former practice’s location, he/she must submit a Form CMS-855I change request to add the owning physician/practitioner’s practice location as a new location of the employed physician/practitioner.
⁴ CMS Program Integrity Manual, Chapter 15, Section 15.5.20 (C).
⁵ Id.
⁶ See CMS Program Integrity Manual, Chapter 15, Section 15.5.20 (C).

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The Shift to Value-based Reimbursement (VBR) | Highlights from Georgia HIMSS 2018 conference

Herrin Health Law — Sat, 03 Nov 2018 01:23:45 +0000

Barry Herrin, CHPS, FAHIMA, FHIMSS, FACHE, attorney and founder of Herrin Health Law, served as one of three panelists at the Georgia HIMSS annual conference Oct. 16, 2018, in Atlanta. The trio discussed “The Shift to Value-based Reimbursement (VBR).” Fellow panelists and moderator were:

Mary G. Gregg, MD, FACS, MHA, Enterprise Director, CareSource (panelist)
Raymond Snead, Jr., D.Sc., FHFMA, FACHE, long-time CFO/CEO who recently served as Interim CEO at Grant Memorial Hospital, Petersburg, WV (panelist)
Glenn Pearson, FACHE, MHA, principal and founder, Pearson Health Tech Insights (moderator)

Here are some highlights from our lively interchange:

There has been little true progress toward containing healthcare expenditures despite decades of trying various approaches including HMOs, PPOs, DRGs, ACOs, CON, and other efforts.
For the most part, VBR amounts to transferring risk to providers and does little to truly improve care.
Each party in the healthcare equation has a different definition of ‘value.’ Patients want the most care for the least amount of money. Payers and employers want to pay providers as little as possible. Providers want to be adequately compensated for the care they deliver.
By and large, VBR does not allow for variability in patient differences, including the extent to which they follow good health practices and adhere to suggested care guidelines. Chronic illnesses represent a huge part of health status and medical costs. Patients can do more to improve their health and, thereby, help moderate costs through better lifestyle choices and compliance with care guidelines.
Technology can help identify and address health and, therefore, tamp down coats. However, some organizations merely throw new technology or an app at a problem without adequately defining it or developing a comprehensive plan to address root-cause issues.
Hospitals must get physician involvement from the very beginning whenever proposing a change in medical practice or adopting new technology. Walking three-quarters of the way through a process and then inviting physicians into the discussion guarantees failure.
The days of considering data security as an afterthought are over. Ironclad practices must be baked in from Day One.
We need better analytics for identifying and tracking the 20% of patients who require the greatest level of care.
Patient mental health issues contribute greatly to total costs but are not being effectively addressed.
Cost coverage is being relegated to a smaller and smaller percentage of patients with insurance policies that fully cover the cost of care. As the number of plans covering costs dwindles, in order to stay in business, hospitals continue to shift more and more costs to those with more adequate plans. This effectively makes hospitals taxing agencies.
With increasing pressures from all sides, physicians are burning out faster than ever before.
Innovation is not being rewarded within the current delivery and payment system.
Amazon and others outside the traditional healthcare arena may be the source of truly disruptive innovation.

You can see the conversation went well beyond just VBR since all these issues covered interlock. The overall consensus was that the enormous complexities of the healthcare system make it impossible for a single approach like VBR to tame the cost beast.

Reprinted with permission from Pearson Health Tech Insights.

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HIM and Health IT Considerations for Advanced Payment Model Contracts

Barry Herrin — Tue, 10 Jul 2018 01:20:31 +0000

As published in the Journal of AHIMA, July to August 2018, Vol. 89, no. 07

Institutions entering the alternative payment model (APM) landscape for the first time need to have an appreciation of what this activity does and does not entail. It does not simply mean that the enterprise can package a reduced fee-for-service pricing structure into a different bag. Neither does it mean that the enterprise can expect “new money” for meeting quality benchmarks that it should already be meeting. And, in the words of one hospital executive, it does not mean that “everything can stay the same except I can write the doctors a check.”

A true APM offering creates the kind of clinical and financial integration that can help with federal and state antitrust compliance as well as with elimination of duplicative or redundant care. APMs can increase positive clinical outcomes and reduce cost, all without denying patients medically necessary services. This paradigm shift brings with it changes in operations, often occurring in parallel with ongoing efforts to stabilize revenues under the “old” way of doing things.

Getting Started with Advanced Payment Models

The biggest initial hurdle for institutions contemplating APM relationships is whether the information technology already within the enterprise is capable of gathering even basic clinical outcome data and sorting it within a variety of patient populations. Claims data, if made available by payers, and especially for a care-managed population, can show a variety of clinical activities, such as medication compliance (with prescription refill information) and clinical activity outside of the APM enterprise.

Most hospitals and multispecialty physician groups do not include vision, dental, and other types of routine care services.

Integrating this claims data with the enterprise’s electronic health record (EHR) is a critical first step, and many legacy systems (and some modern EHRs) do not have this capability. Interface engines and bridging technology are expensive as well. So, a business decision about whether the cost of new APM-assistive technology is less than the anticipated additional revenue from APM payers should be made.

Additionally, some health information management (HIM) professionals still recoil at the notion of incorporating externally generated information into the official record of care, regardless of how thoroughly this objection has been debunked, and notwithstanding how the push for interoperability has expanded the information on which clinicians rely in developing a plan of care. Such external information is critical both to care coordination in a clinically integrated environment and to developing payment models for shared savings and case rates.

The modern HIM professional must be a participant in helping the organization integrate its record of care simultaneously with its integration of payment for-and the delivery of-that care.

While considering the capability of the EHR to gather and sort clinical data in a helpful way, the enterprise should also analyze its business systems to make sure that, among other things, revenue from care not provided can be linked to patients whose overall care is being managed within the APM framework. Many APMs link the payment of bonuses to decreases in the overall “spend” experienced by individual patients or patient groups; linking these shared savings and other payments to providers who prevented unneeded (and therefore unbilled) patient care thus becomes important. A variety of regulatory schemes require that these savings be paid proportionally to the owners or participants in the APM venture as well, so business systems need to be able to track this and integrate this information into the back-end payments of bonus or savings revenues.

Deciding What to Measure

Clinicians generally do not like being measured on things that don’t matter clinically; yet, “you can’t manage what you don’t measure” is still the order of the day. The unfortunate reality of APM contracting is that once one payer requires a healthcare provider to measure some performance capability, the APM ends up measuring it for all payers on the theory that quality is payer agnostic and the enterprise doesn’t want to discriminate in the quality care it delivers based on payer type. Thus, controlling the number and quality of measurable data points at the outset of an APM relationship is critical to prevent participants from measuring everything and focusing on nothing of clinical significance.

APM participants can’t forget the various legal mandates not to create payment methodologies that incentivize providers to deprive patients of medically necessary care. However, the definition of “medically necessary” may vary depending on which regulatory scheme you apply and what a particular payer thinks about therapeutically equivalent care.

For example, physicians may not make critical distinctions between care pathways that have vastly different financial consequences unless they are both included in the conversation about developing those pathways and reminded of those pathways when atypical patients present.

Similarly, combining clinical documentation improvement (CDI) programs with new clinical and financial measurements helps make the case for both. Compliance doctrine would indicate that there needs to be valid clinical reasons present when business office or HIM staff request additions to or changes to medical record documentation after discharge (such as hospital-acquired conditions or “present on admission” indicators). Any changes to medical records after discharge typically relate only to changes in fee-for-service reimbursement, which as a motivator typically does not impress physician partners and impresses regulators even less.

However, correcting clinical documentation concurrently with an admission-or correcting entries in the record after admission that relate to the continuum of care in a clinically integrated network has more than a simple “change the document to upcode the care” impact. It affects how all of the participants in the APM structure approach ongoing care and the financial incentives for persons other than the care provider whose record has been supplemented.

Providing Feedback on Benchmarks

Frequent feedback on both clinical and financial benchmarks needs to be provided to all participants. Industry information shows that this “dashboard” information is more effective when presented as a comparison with other participants (on an anonymous basis, of course), as most providers do not want to be viewed as negative outliers. Additionally, the completeness and accuracy of clinical documentation can be dashboarded and compared with industry and competitor norms in order to show the effect on care provided or not needed-and the corresponding effect of medical spending and enterprise costs. Both are helpful in establishing the proof of clinical and financial integration desired by regulators and payers.

If a separate organization has been established to manage the APM arrangements, then one compliance-related item of documentation should be a business associate agreement between each APM provider and the management organization. Unless the manager is a licensed entity under state insurance law, most likely it will be viewed as a “legal stranger” to the flow of “protected health information” (PHI) and will need a business associate agreement with each provider. Likewise, the provision of protected health information (PHI) to members of the APM collaborative not involved in direct patient care creates another compliance risk and such information should be “de-identified” before sharing with APM management and membership.

Finally, audits of payments and explanation of benefit forms should be undertaken regularly to make sure that the payer pays in accordance with the APM agreement. For many providers, these payments will be all that they receive for services rendered, and it is not uncommon (unfortunately) for payers not to pay in accordance with their agreements.

Barry S. Herrin, JD, FAHIMA, FACHE, is the founder of Herrin Health Law, P.C., in Atlanta. Herrin offers more than 30 years of experience practicing law in the areas of healthcare and hospital law and policy, privacy law and health information management, among other healthcare-specific practice areas. He is a Fellow of the American College of Healthcare Executives and a Fellow of the American Health Information Management Association. He also holds a Certificate in Cyber Security from the Georgia Institute of Technology.

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Tips for Alternative Payment Model (APM) Contract Administration and Negotiation

Barry Herrin — Sun, 08 Apr 2018 15:18:06 +0000

Using People, Processes, and Technology

For institutions entering into the alternative payment model (APM) landscape for the first time, there needs to be an appreciation of what this activity does and does not entail. It does not simply mean that the enterprise can package a reduced fee-for-service pricing structure into a different bag. Neither does it mean that the enterprise can expect new money for meeting quality benchmarks that it should already be meeting. Finally, in the words of one hospital executive, it does not mean that everything can stay the same except I can write the doctors a check.

Rather, a true APM offering creates the kind of clinical and financial integration that can help with federal and state antitrust compliance as well as with elimination of duplicative or redundant care. APMs can increase positive clinical outcomes and reduce cost, all without denying patients medically necessary services. So, as institutions transition from fee-for-service to APM reimbursement, changes in operations and in thought processes need to occur, often in parallel with ongoing efforts to stabilize revenues under the ‘old way’ of doing things.

The biggest initial hurdle for institutions contemplating APM relationships is whether the information technology already within the enterprise is capable of gathering even basic clinical outcome data and sorting it within a variety of patient populations. Claims data, if made available by payors, and especially for a care-managed population, can show a variety of clinical activities such as medication compliance (with prescription refill information) and clinical activity outside of the APM enterprise (most hospitals and multispecialty physician groups do not include vision, dental, and other types of routine care services). Integrating this claims data with the enterprise’s electronic health record (EHR) is a critical first step, and many legacy systems (and some modern EHRs) do not have this capability. Interface engines and bridging technology are expensive as well. So, a business decision whether the cost of new APM-assistive technology is less than the anticipated additional revenue from APM payors should be made.

While considering the capability of the EHR to gather and sort clinical data in a helpful way, the enterprise should also analyze its business systems to make sure than, among other things, revenue from care NOT provided can be linked to patients whose overall care is being managed within the APM framework. Many APMs link the payment of bonuses to decreases in the overall spend experienced by individual patients or patient groups, and linking these shared savings and other payments to providers who prevented unneeded (and therefore unbilled) patient care becomes important. A variety of regulatory schemes require that these savings be paid proportionally to the owners or participants in the APM venture as well, so business systems need to be able to track this and integrate this information into the back-end payments of bonus or savings revenues.

Once the capabilities of the enterprise’s various data systems have been established, the contract negotiation team, which should include providers as well as business executives, counsel, and other subject matter experts, should convene to discuss which data will be measured within the APM and what monetary value will be assigned to each of these measurable data points. Clinicians generally do not like being measured on things that don’t matter clinically; yet, you can’t manage what you don’t measure is still the order of the day. One strategy to gain compliance is to sort the measurable data into baskets or to create successive gates through which a successful provider must pass in order to qualify for higher and higher distributions of shared savings or non-care-related revenues. The unfortunate reality of APM contracting is that once one payor requires a healthcare provider to measure some performance capability, the APM ends up measuring it for ALL payors, on the theory that quality is payor agnostic and the enterprise doesn’t want to discriminate in the quality care it delivers based on payor type. Thus, controlling the number and quality of measurable data points at the outset of an APM relationship is critical to prevent participants from measuring everything and focusing on nothing of clinical significance. And APM participants can’t forget the various legal mandates not to create payment methodologies that incentivize providers to deprive patients of medically necessary care; however, what is medically necessary may vary depending on which regulatory scheme you apply and what a particular payor feels about therapeutically equivalent care.

Care must be taken as well not to agree to an onerous measurement framework for which there is no new money. Assuming there have been no problems with the quality of care in the past, APM providers should not agree to terms that allow the payor to claw back contracted rates by adding new preconditions to payment. There is enough value in increasing quality and decreasing the overall medical spend in any patient population such that only new money needs to be put at risk. The chief value of the APM gambit is that the providers earn out their efficiencies and quality improvements.

Monitoring compliance with all of the contract’s provisions is a necessary step, which is made more difficult by the traditional separation of enterprise oversight and management into different silos of responsibility. To the extent that a separate business organization has not been formed to deal with APM contracting and payment issues, close collaboration between clinical and administrative departments needs to be created and maintained. For example, physicians may not make critical distinctions between care pathways that have vastly different financial consequences unless they are both included in the conversation about developing those pathways and reminded of those pathways when atypical patients present. Similarly, clinical reasons need to be developed and explained when business office staff request additions to or changes to medical record documentation (such as hospital-acquired conditions or present on admission indicators); reimbursement as a motivator typically does not impress physician partners. Finally, frequent feedback on both clinical and financial benchmarks needs to be provided to all participants. Industry information shows that this dashboard information is more effective when presented as a comparison with other participants (on an anonymous basis, of course), as most providers do not want to be viewed as negative outliers.

If a separate organization has been established to manage the APM arrangements, then one compliance-related item of documentation should be a business associate agreement between each APM provider and the management organization. Unless the manager is a licensed entity under state insurance law, most likely it will be viewed as a ‘legal stranger’ to the flow of protected health information (PHI) and will need a business associate agreement with each provider. Likewise, the provision of PHI to members of the APM collaborative NOT involved in direct patient care creates another compliance risk and such information should be de-identified before sharing with APM management and membership.

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