Anesthesia Business Consultants: Communique summer09

24
SUMMER 2009 VOLUME 14, ISSUE 3 ANESTHESIA BUSINESS CONSULTANTS Anesthesiologists and pain manage- ment physicians, like other Medicare providers, should be prepared for increased Medicare auditing activity. The Centers for Medicare and Medicaid Services (CMS) Recovery Audit Contractor (RAC) program has been made permanent and is expanding nationwide, and the RACs will begin auditing in the very near future. Medicare providers should be aware that RAC claim denials and overpayment demands, like other Medicare denials, can be appealed through the standard Medicare appeals process. ABC offers The Communiqué in electronic format Anesthesia Business Consultants, LLC (ABC) is happy to announce that The Communiqué will be available through a state-of-the-art electronic format as well as the regular printed version. The Communiqué continues to feature articles focusing on the latest hot topics for anesthesiologists, nurse anesthetists, pain management specialists and anesthesia practice administrators. We look forward to providing you with many more years of compliance, coding and practice management news through The Communiqué. Please log on to ABC’s web site at www.anesthesiallc.com and click the link to view the electronic version of The Communiqué online. To be put on the automated email notification list please send your email address to [email protected]. ³ INSIDE THIS ISSUE: WHAT ANESTHESIOLOGISTS AND PAIN MANAGEMENT PHYSICIANS NEED TO KNOW ABOUT THE RAC PROGRAM .................. 1 RELEVANCE OF LLCS TO ANESTHESIA PRACTICE: HOW WELL DO THEY PROTECT THE FOUNDERS’ I NCOME? .................. 2 I DENTITY THEFT PROGRAMS: WHAT EVERY ANESTHESIA PRACTICE SHOULD CONSIDER DOING NOW .......................... 10 HOW ANESTHESIA GROUPS THRIVE, NOT SIMPLY SURVIVE ......... 13 WRITING YOUR CONTRACTS FOR SMOOTH ENTRY I NTO AND EXIT FROM ANESTHESIA GROUPS . . . . . . . . . . . . . . . . . . . . . . . . . . 15 WARNING: DANGEROUS PROVISIONS IN MEDICAL STAFF BYLAWS .. 16 ANESTHESIA GROUPS NOT I MMUNE FROM STARK LAW RISK ....... 18 A MODEST PROPOSAL: I NSURANCE COMPANIES, NOT PROVIDERS, SHOULD BILL AND COLLECT DEDUCTIBLES AND COINSURANCE ..... 22 EVENT CALENDAR ................................. 24 Continued on page 4 WHAT ANESTHESIOLOGISTS AND PAIN MANAGEMENT PHYSICIANS NEED TO KNOW ABOUT THE MEDICARE RECOVERY AUDIT CONTRACTOR (RAC) PROGRAM Abby Pendleton, Esq. Jessica L. Gustafson, Esq. The Health Law Partners, P.C.

description

Communiqué features articles focusing on the latest hot topics for anesthesiologists, nurse anesthetists, pain management specialists and anesthesia practice administrators. Communique is created by Anesthesia Business Consultants (ABC), the largest physician billing and practice management company specializing exclusively in the practice of anesthesia and pain management. ABC serves several thousand anesthesiologists and CRNAs nationwide with anesthesia billing software solutions. Please send your email address to info [at] anesthesiallc [dot] com if you would like to join the Communique mailing list! Visit www.anesthesiallc.com for more information!

Transcript of Anesthesia Business Consultants: Communique summer09

Page 1: Anesthesia Business Consultants: Communique summer09

SU

MM

ER

20

09

V

OL

UM

E 1

4,

ISS

UE

3

AN

ES

TH

ES

IAB

US

INE

SS

CO

NS

ULTA

NT

S

Anesthesiologists and pain manage- ment physicians, like other Medicare providers, should be prepared for increased Medicare auditing activity. The Centers for Medicare and Medicaid Services (CMS) Recovery Audit Contractor (RAC) program has been made permanent and is expanding nationwide, and the RACs will begin auditing in the very near future. Medicare providers should be aware that RAC claim denials and overpayment

demands, like other Medicare denials, can be appealed through the standard Medicare appeals process.

ABC offers The Communiqué in electronic formatAnesthesia Business Consultants, LLC (ABC) is happy to announce that The Communiqué will be available through a state-of-the-art electronic format as well as the regular printed version. The Communiqué continues to feature articles focusing on the latest hot topics for anesthesiologists, nurse anesthetists, pain management specialists and anesthesia practice administrators. We look forward to providing you with many more years of compliance, coding and practice management news through The Communiqué. Please log on to ABC’s web site at www.anesthesiallc.com and click the link to view the electronic version of The Communiqué online. To be put on the automated email notification list please send your email address to [email protected].

INSIDE THIS ISSUE:

WHAT ANESTHESIOLOGISTS AND PAIN MANAGEMENT PHYSICIANS NEED TO KNOW ABOUT THE RAC PROGRAM . . . . . . . . . . . . . . . . . . 1RELEVANCE OF LLCS TO ANESTHESIA PRACTICE: HOW WELL DO THEY PROTECT THE FOUNDERS’ INCOME? . . . . . . . . . . . . . . . . . . 2IDENTITY THEFT PROGRAMS: WHAT EVERY ANESTHESIA PRACTICE SHOULD CONSIDER DOING NOW . . . . . . . . . . . . . . . . . . . . . . . . . . 10HOW ANESTHESIA GROUPS THRIVE, NOT SIMPLY SURVIVE . . . . . . . . . 13WRITING YOUR CONTRACTS FOR SMOOTH ENTRY INTO AND EXIT FROM ANESTHESIA GROUPS . . . . . . . . . . . . . . . . . . . . . . . . . . 15WARNING: DANGEROUS PROVISIONS IN MEDICAL STAFF BYLAWS . . 16ANESTHESIA GROUPS NOT IMMUNE FROM STARK LAW RISK . . . . . . . 18A MODEST PROPOSAL: INSURANCE COMPANIES, NOT PROVIDERS, SHOULD BILL AND COLLECT DEDUCTIBLES AND COINSURANCE . . . . . 22EVENT CALENDAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Continued on page 4

WHAT ANESTHESIOLOGISTS AND PAIN MANAGEMENT PHYSICIANS

NEED TO KNOW ABOUT THE MEDICARE RECOVERY AUDIT

CONTRACTOR (RAC) PROGRAMAbby Pendleton, Esq.

Jessica L. Gustafson, Esq.The Health Law Partners, P.C.

Page 2: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 2

RELEVANCE OF LLCS TO ANESTHESIA PRACTICE: HOW WELL DO THEY PROTECT THE FOUNDERS’ INCOME?

Aaron H. Sherbin, Esq., Jaffe, Raitt, Heuer & Weiss P.C.Andrew B. Wachler, Esq., Wachler & Associates P.C.

Anesthesiologists may want to consider organizing their practice as a professional limited liability company (PLLC). The PLLC offers distinct advantages to other forms of business entities, while offering substantially the same limited liability benefits. This article will discuss how a PLLC provides limited

liability to its owners, the nature of the tax treatment of a PLLC, the governance of a PLLC, and the admittance and withdrawal of a member of a PLLC. PLLCs are governed by state statute. Most, but not all, states recognize and permit professionals to organize as a professional limited liability company.

Certainly, any anesthesiologists interested in organizing as a PLLC should consult with their tax and legal advisor about whether or not their state permits PLLCs and how they are governed as well as how the PLLC and its members are taxed. Specific limited liability statutes will vary slightly from state to state.

UNDERSTANDING SOME OF THE LEGAL RISKS FACING ANESTHESIA PRACTICES

Like many of you, I am amazed at the still-increasing volume of legal regulation affecting the practice of medicine. Medicare has launched major new enforcement initiatives. The Federal Trade Commission has inserted itself into payment systems for professional services. Those are just two of the topics that I have asked a talented set of lawyers to address in this issue of the Communiqué. While we are all embroiled in trying to influence or at least to understand the direction of Healthcare Reform and this summer’s hot topics of payment and coverage, let us not forget that “eliminating waste” has always been an objective of the Medicare and private payer programs. The federal Department of Health and Human Services’ Office of the Inspector General (OIG) first began publishing its “guidances” on compliance programs for hospitals, for physician group practices, and, yes, for billing companies in the late 1990s. There have been very few prosecutions of private anesthesia practices (academic departments have experienced a much higher relative hit rate through the teaching hospital PATH audits) – probably because so many of us have been so careful to satisfy the rules. We must acknowledge, of course, that anesthesia services account for only about 2 percent of Medicare spending on physician services (or about $2 billion on anesthesia), and that there are providers offering far greater potential returns to the watchdogs who uncover fraud and abuse. Nevertheless, it is a good idea for all medical practices, including anesthesia groups, to follow rigorous compliance programs, and those programs should reflect recent enforcement activities. First among those is the Medicare Recovery Audit Contractor (RAC) program, the topic of the lead article in this issue. Abby Pendleton, Esq. and Jessica Gustafson, Esq. review the origins of the RAC program and its basic rules and also describe

in detail what anesthesiology and pain practices can do to prepare for potential record requests from these new bounty hunters. Their advice goes beyond protecting oneself against a RAC audit; they also review the sound documentation procedures that will be helpful in any Medicare audit. I mentioned the FTC. This federal agency is familiar to some members of the anesthesiology community in the context of antitrust enforcement. The 2003 “Red Flag” legislation that has caused – rightfully – uproar among physicians is intended to require financial institutions and creditors to implement processes to mitigate identity theft. So far so good. FTC staff, though, has been adamant that physicians who accept insurance automatically extend credit while waiting to determine and collect the patient copayment. The application of the Red Flag rules to physicians has now been postponed several times but we are now advised to plan for implementation on November 1, 2009. The article on Identity Theft Programs by Neda Mirafzali – I am very proud to announce that my daughter is entering her third year at Michigan State University Law School and spent the summer working in a health law firm – will help practices prepare to comply with the Red Flag rules. Relationships with hospitals are another area in which the law sometimes plays a significant role. Elizabeth Snelson, Esq. calls our attention to the increasing efforts of hospital administration to control the members of its medical staff. Such efforts are understandable given the uncertainty about the direction of healthcare reform and the roles of today’s healthcare institutions. Anesthesiologists need to pay attention to the bylaws and especially to the external plans, manuals and codes of conduct that are being written so as to give the C-Suite a greater say in privileging requirements. I think that some readers will find Ms. Snelson’s article quite eye-opening.

Group dynamics and organization also require attention and an occasional refresher course. Mark Weiss, Esq.discusses the importance of a strategic vision and leadership in what is probably the most readable of the articles in this issue (one can think like a lawyer without always having to write like one!). Robert Iwrey, Esq. describes provisions in group employment contracts that may determine whether an anesthesiologist will be a successful, productive colleague or not. An overview of the advantages of Limited Liability Corporations by Aaron Sherbin, Esq. and Andrew Wachler, Esq., and a summary by Adrienne Dresevic, Esq. and Carey Kalmowitz, Esq. of a recent federal appellate decision on the application of the Stark self-referral rules to a hospital exclusive contract complete the collection of lawyers’ contributions to this issue. As always, we have also been graced with an article by an officer of the MGMA’s Anesthesia Administration Assembly (AAA). Ms. Cynthia Roehr, AAA’s Legislative Liaison to ASA, deserves kudos for her imaginative cost-savings approach to collecting patient’s copayments and deductibles. I know that Ms. Roehr is eager to receive comments on her concept. We at ABC are equally eager to hear from our readers who have questions about the information we have presented in this and earlier issues of the Communiqué. With your ongoing support, we will be as relevant and informative as we possibly can.

Sincerely,

Tony MiraPresident and CEO

Page 3: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 3

However, the following general rules apply throughout the country. In a PLLC an individual member is liable for his or her own negligent or wrongful acts as well as for those same types of acts committed by individuals under his or her control or supervision. For example, in a PLLC, an individual member would likely be responsible for his or her own medical malpractice or overpayment liability only to the extent that he or she performed or supervised the services at issue. In contrast, in a partnership, each partner would be liable for the negligent acts of all other partners. A PLLC’s liability is also limited in the sense that the member’s personal assets are protected against the debts and liabilities of the PLLC. For federal tax law purposes, a PLLC is treated as a partnership. As a result, the PLLC does not pay an entity level tax; rather, the profits are generally allocated to the members of the PLLC pro rata and the members will report their share of the profits on their individual income tax returns. This tax treatment is in contrast to a C-corporation where the corporation pays a tax on the profits at the corporation level and the shareholders pay a second tax on any dividends distributed to them by the corporation. As a partnership, PLLCs offer a tremendous amount of flexibility in ownership interest in the PLLC and in how profits and losses may be allocated among members. Also, there are no restrictions as to the type of owner or number of owners of a PLLC. S-corporations, on the other hand, offer some of the same tax benefits as a PLLC, but have limitations on who may be a shareholder as well as limitations on the number of shareholders. For instance, only citizens or residents of

the United States can be a shareholder of an S-corporation. In addition, an S-corporation may have only one class of stock, and thus, allocating profits among its shareholders based upon some metric or formula that deviates from shareholdings is not permitted. The effect of having an ineligible shareholder or a second class of stock is that the corporation will lose its S-status and be taxed as a C-corporation which could potentially result in disastrous tax ramifications. Generally, owners/members of a PLLC cannot be considered employees of the PLLC. They must be treated as self-employed and, as a result, distributions received by a member of the PLLC are subject to self-employment tax. This may result in a member paying slightly higher income tax on his or her share of the profits than the member would have had he or she received the distribution in the form of wages. Since the PLLC offers incredible flexibility with regard to who can be a member and how profits and losses are allocated, the PLLC provides various options for the admittance or withdrawal of a member. However, there may be different tax consequences depending on the assets owned by the PLLC and how the buyout of a withdrawing partner is structured. A withdrawing member may have to recognize ordinary income (as opposed to capital gains) on the buyout proceeds received depending upon whether the PLLC has account receivables and inventory and whether the buyout of the member is by the PLLC itself or by the other members. PLLCs are not required to have the rigid structure associated with corporations. In other words, PLLCs do not need to have officers and directors governing their operations. A PLLC can be managed by its members (or owners) or by managers who may be a select group of the members or non-members. A PLLC is typically governed by an operating agreement, which usually includes provisions regarding how and when members meet, the power of a member to bind the PLLC, the required

vote of members, the treatment of profits and losses, how and when additional capital will be required and by whom, and what is to happen in the event of the death, disability, retirement or termination of employment of a member. Members of a PLLC can tailor their operating agreement to fit their particular practice. In summary, PLLCs protect the founders’ personal assets as well as do other corporate forms such as professional corporations, but they offer flexibility and tax advantages that may not be available with other forms. Before deciding on a corporate form, anesthesiologists should consult with experienced legal counsel and accountants.

Andrew B. Wachler is the principal of Wachler & Associates, P.C. Mr. Wachler has been practicing healthcare and busi-ness law for over 25 years. He graduated Cum Laude from the University of Michigan in 1974 and Cum Laude from Wayne State University Law School in 1978. Mr. Wachler is a member of the State Bar of Michigan, Health Care Law Section, American Bar Association, Health Care Law Section, Member of “The Health Lawyer” Editorial Board and the American Health Lawyers Association. Mr. Wachler can be reached at [email protected]

Aaron H. Sherbin is an attorney with Jaffe, Raitt, Heuer & Weiss, P.C. and is a member of the firm’s Tax and Estate Planning Groups. His practice areas include Federal Tax Law, Business Planning, Business Mergers and Acquisitions, Estate Planning, Estate Administration and Probate Litigation. Aaron earned his B.B.A. from the University of Michigan in 1985, his J. D., cum laude from Wayne State University Law School in 1988, and his LL.M in Taxation from New York University Law School in 1989. Mr. Sherbin can be contacted at [email protected]

Page 4: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 4

WHAT ANESTHESIOLOGISTS AND PAIN MANAGEMENT PHYSICIANS NEED TO KNOW ABOUT THE MEDICARE RECOVERY AUDIT CONTRACTOR (RAC) PROGRAM

1. RECOVERY AUDIT CONTRACTORS

Section 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) directed the Department of Health and Human Services (HHS) to conduct a three-year demonstration program using RACs. The demonstration began in 2005 in the three states with the highest Medicare expenditures: California, Florida and New York. In 2007, the demonstration expanded to include Massachusetts, South Carolina and Arizona. The purpose of the RAC demonstration program was to determine whether the use of RACs would be a cost-effective way to identify and correct improper payments in the Medicare program.

The RAC demonstration program proved highly “cost effective” to CMS. Over the three-year demonstration, the RACs identified more than $1.03 billion in improper payments. The vast majority of this amount, $992.7 million, constituted alleged overpayments. According to CMS, factoring in the underpayments returned to providers and suppliers ($37.8 million), the claims overturned on appeal ($46 million), the amounts improperly recouped and returned to providers upon re-review ($14 million) and the operating costs of the demonstration program ($201.3 million), the RAC program was successful in returning $693.6 million to the Medicare Trust Funds. CMS estimates that the RAC demonstration program cost approximately 20 cents for each dollar returned to the Medicare Trust Funds.1

Section 302 of the Tax Relief and Health Care Act of 2006 made the RAC program permanent, and required its

expansion nationwide by no later than 2010. CMS is actively moving forward with this expansion. According to its most-recently published “Expansion Schedule,” CMS planned to expand to 23 states by March 1, 2009, and the remaining states by August 1, 2009 or later.2

On October 6, 2008, CMS announced the names of the RAC vendors for the permanent program, and identified the initial states for which each will be responsible:

Inc., of Livermore, California is the RAC for Region A, including Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and New York;

Inc. of Fairfax, Virginia is the RAC for Region B, including Michigan, Indiana and Minnesota;

Connolly Consulting Associates,

Inc. of Wilton, Connecticut is the RAC for Region C, including South Carolina, Florida, Colorado and New Mexico; and

HealthDataInsights, Inc. of Las Vegas, Nevada is the RAC for Region D, including Montana, Wyoming, North Dakota, South Dakota, Utah and Arizona.3

More information is available from the CMS RAC website: www.cms.hhs.gov/RAC.

Before the permanent RACs begin auditing, the RACs announced they would hold “Town Hall”-type outreach meetings, at which the RACs and CMS representatives would meet with Medicare providers and suppliers. According to recent conversations this office had with Commander Marie Casey, Deputy Director of the CMS Division of Recovery Audit Operations, Medicare providers and suppliers in the first 23 states can expect automated reviews (electronic review of claims data records

Continued from page 1

RAC Expansion Schedule

Page 5: Anesthesia Business Consultants: Communique summer09

that do not involve a review of medical records) to begin at any time. Complex reviews (where medical records are requested) will begin for coding issues in September 2009, and medical necessity reviews will begin in January 2010.

CMS compensates RACs on a contingency fee basis, based upon the principal amount of collection from (or the amount repaid to) a provider. This fee arrangement provides incentive to the RAC to aggressively review and deny claims, including claims that the RAC alleges to be not “medically necessary,” an area containing much subjectivity, and a category of denial often highly disputed by the provider. 4 RACs are permitted to attempt to identify improper payments resulting from any of the following:

services that are not reasonable and necessary);

5

When performing coverage or coding reviews of medical records, nurses (RNs) or therapists are required to make determinations regarding medical necessity, and certified coders are required to make coding determinations. The RACs are not required to involve physicians in the medical record review process. However, the RACs must employ a minimum of one FTE contractor medical director (CMD) (who must be a doctor of medicine or doctor of osteopathy) and arrange for an alternate CMD in the event that the CMD is unavailable for an extended period. The CMD will provide services such as providing guidance to RAC staff regarding interpretation of Medicare policy.

Although the RACs have fairly broad discretion in determining which claims to review, CMS has prohibited the RACs from looking at certain categories of claims. For example:

The permanent RAC program will begin with a review of claims paid on or after October 1, 2007. This first permissible date for claims review is the same for the RAC reviews in all states, regardless of the actual start date for a RAC in a particular state. However, as time passes, the RACs will be prohibited from reviewing claims more than three years past the date of initial determination (defined as the initial claim paid date).

RACs are not permitted to review claims at random. However, RACs are authorized to use “data analysis techniques” to identify claims likely to be overpayments, a process called “targeted review.” In the demonstration program, the “targeted review” resulted in certain categories of providers and certain types of claims being subject to more scrutiny than others.6

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 5

Continued on page 6

Page 6: Anesthesia Business Consultants: Communique summer09

2. IMPACT OF RAC AUDITS

Over the course of the three-year demonstration, the RACs identified and collected $992.7 million in overpayments and ordered repayment of just $37.8 million in underpayments to Medicare providers and suppliers.7 Thus, approximately 96 percent of the alleged improper payments identified were overpayments, as opposed to underpayments.

3. PREPARING FOR A RAC AUDIT

Medicare providers, including anesthesiologists and pain management physicians, should begin to prepare now for the RACs and increased Medicare auditing activity. Although providers cannot prevent RAC audits from happening, they can prepare for increased claims scrutiny and RAC activity by dedicating resources to:

better identify and monitor areas that may be subject to review (i.e., reviewing compliance guidance doc-uments such as RAC Evaluation Reports, the OIG Work Plan and OIG compliance guidance, and ded-icating resources to monitoring compliance risk areas);

within the required timeframes;

-ance program in accordance with OIG guidelines, and/or strengthen-ing procedures currently in place.

Pursuant to the “Update to the Evaluation of the 3-Year Demonstration,”

published in January 2009, “Future im-proper payments can be avoided by analyzing the RACs’ service-specific find-ings.”8 Looking to the results of the RAC demonstration program is not particu-larly illustrative or educational for anes-thesia providers and pain management physicians, however. This is because:

-nials in the demonstration program involved Part A hospital claims. Eighty-five percent of the claims reviewed in the RAC demonstra-tion program were inpatient hospi-tal claims (e.g., short stays and DRG coding issues);

-tient rehabilitation facility claims; 4.25 percent of the claims were out-patient hospital claims;

claims were physician claims;

the claims were skilled nursing facil-ity claims; and

DME, ambulance, lab and other services.

Although the historical information regarding RAC denials is not particularly illustrative to anesthesiologists and pain management physicians, there is other program guidance identifying areas of increased claims scrutiny. For example, each year the OIG publishes a Work Plan setting forth various projects to be addressed during the upcoming fiscal year, to which the RACs may look to identify potential areas for their

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 6

WHAT ANESTHESIOLOGISTS AND PAIN MANAGEMENT PHYSICIANS NEED TO KNOW ABOUT THE MEDICARE RECOVERY AUDIT CONTRACTOR (RAC) PROGRAMContinued from page 5

Page 7: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 7

audit activities. In 2008, the OIG Work Plan identified interventional pain management procedures as procedures likely to undergo claims scrutiny for medical necessity. The OIG noted that interventional pain management is a growing specialty, and Medicare paid nearly $2 billion for interventional pain management procedures in 2005.

In addition to the OIG Work Plan, in September 2008, the OIG issued a report on “Medicare Payments for Facet Joint Injection Services.” The report stated that the OIG had found that 63 percent of facet joint injection services allowed by Medicare in 2006 did not meet Medicare program requirements, resulting in $96 million in improper payments.

Although the information from the RAC demonstration program does not provide specific guidance for the anesthesia and pain management industries in terms of strategic planning for the permanent program, taking into account other available guidance, anesthesia and pain groups are well advised to strengthen their compliance programs to ensure that certain anesthesia and pain management focus areas are enhanced. For example, groups should ensure that:

allowable anesthesia time and that appropriate documentation exists to support the recorded start and end times;

ompliance with the medical direction requirements is satisfied, including enhancing documentation practices to demonstrate such compliance;

improved with regard to separately payable services such as invasive monitoring lines and post-operative pain services;

improved with regard to medical necessity documentation in connection with the performance of monitored anesthesia care cases;

improved with regard to medical necessity documentation in connection with the provision of chronic pain management procedures; and

improved with regard to medical necessity documentation relative to the provision of evaluation and

management services.

4. WHAT TO EXPECT IF YOU ARE AUDITED BY A RAC

RACs engage in two types of claim reviews to identify improper payments: “automated review” and “complex review:”

An “automated review” is a review of claims data without a review of the records supporting the claim. Generally speaking, RACs may conduct automated reviews only in situations where there exists both (a) a certainty that the service is not covered or is incorrectly coded, and (b) a written Medicare policy, article, or coding guideline applicable to the claim. RACs also may use automated review, even if there is no specific Medicare policy, article or coding guideline on point, in some “clinically unbelievable” situations9 or when identifying duplicate claims and/or pricing mistakes.10 According to Commander Marie Casey, Deputy Director of the Division of Recovery Audit Operations at CMS, automated reviews of providers in the first 23 states can be expected to begin at any time.

On the other hand, a “complex review” consists of a review of medical or other records, and is used in situations

where there is a high probability (but not a certainty) that a claim includes an overpayment.11 In summary, the RAC “complex review” process is as follows:

the provider’s location to view and/or copy medical records or (b) re-quest that the provider mail, fax, or otherwise securely transmit the re-cords to obtain medical records necessary to conduct claim re-views. To “securely transmit” med-ical records means to send those records “in accordance with the CMS business systems security manual – e.g., mailed CD, MDCN line, through a clearinghouse).12

During the RAC demonstration pro-gram, some providers were overwhelmed by the volume of records requests re-ceived from the RACs. In the permanent program, CMS imposed limits on the number of records RACs may request per 45-day period.13 For physicians, such as anesthesiologists and pain management physicians, this record request limit is as follows:

o Solo Practitioner: 10 medical records per 45 days

o Partnership of 2-5 individuals: 20 medical records per 45 days

o Group of 6-15 individuals: 30 medical records per 45 days

o Large Group (16+ individuals): 50 medical records per 45 days.14

Continued on page 8

Page 8: Anesthesia Business Consultants: Communique summer09

It is essential that providers timely respond to RACs’ requests for medical records. If a RAC does not receive requested medical records within 45 days, it is authorized to render an overpayment determination with respect to the underlying claim.15 If the provider appeals this type of denial, “the appeals department may, at CMS direction, send the claim to the RAC for reopening under certain conditions…”16 However, the Carrier or Intermediary is not required to send the claim to the RAC for reopening. Thus, providers failing to timely respond to RACs’ medical records requests could lose appeal rights with respect to these claims.

Once requested medical records are received, the RAC will conduct its review of the claim. In conducting reviews, RACs are required to comply with National Coverage Decisions (“NCDs”), Coverage Provisions in Interpretive Manuals, national coverage and coding articles, Local Coverage Decisions (“LCDs”), and local coverage and coding articles in their respective jurisdictions.17 The RACs also are authorized to develop internal guidelines to assist their reviewers to conduct claims reviews consistently with NCDs and LCDs.18

Generally speaking, a RAC must complete complex reviews within 60 days from receipt of the requested medical records.19 Following its review, the RAC will issue a letter to the provider setting forth the findings for each claim and notifying the provider of its appeal rights. Alleged overpayments identified by RACs may be appealed through the

uniform Medicare appeals process.

According to Commander Casey, complex reviews regarding certain coding issues are planned to begin in September 2009. Complex reviews regarding issues of medical necessity will begin sometime after January 1, 2010.

5. HOW TO APPEAL CLAIMS DENIED BY A RAC

RAC denials are subject to the standard Medicare appeals process set forth in 42 C.F.R. Part 405, subpart I.

A. Stage 1: Redetermination

The first level in the appeals process is redetermination. Providers must submit redetermination requests in writing within 120 calendar days of receiving notice of initial determination. There is no amount in controversy requirement.

B. Stage 2: Reconsideration

Providers dissatisfied with a carrier’s redetermination decision may file a request for reconsideration to be conducted by a Qualified Independent Contractor (QIC). A QIC is a Medicare contractor tasked to complete the second level of appeal (reconsideration level of appeal). This second level of appeal must be filed within 180 calendar days of receiving notice of the redetermination decision. There is no amount in

controversy requirement.

Importantly, the QIC reconsideration is an “on-the-record” review, contrary to an in-person hearing review. In conducting its review, the QIC will consider evidence and findings upon which the initial determination and redetermination were based plus any additional evidence submitted by the parties or the QIC obtains on its own.

Of particular note, providers must submit a full and early presentation of evidence in the reconsideration stage. When filing a reconsideration request, a provider must present evidence and allegations related to the dispute and explain the reasons for the disagreement with the initial determination and redetermination. Absent good cause, failure of a provider to submit evidence prior to the issuance of the notice of reconsideration precludes subsequent consideration of the evidence. Accordingly, providers may be prohibited from introducing evidence in later stages of the appeals process if such evidence was not presented at the reconsideration stage.

C. Stage 3: Administrative Law Judge Hearing

The third level of appeal is the Administrative Law Judge (ALJ) hearing. A provider dissatisfied with a reconsideration decision or who has exercised the escalation provision at the reconsideration stage may request an ALJ hearing. The request must be filed within 60 days following receipt of the QIC’s decision and must meet the amount in controversy requirement. ALJ hearings can be conducted by video-teleconference (VTC), in-person, or by telephone. The regulations require the hearing to be conducted by VTC if the technology is available; however, if VTC is unavailable or in other extraordinary

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 8

WHAT ANESTHESIOLOGISTS AND PAIN MANAGEMENT PHYSICIANS NEED TO KNOW ABOUT THE MEDICARE RECOVERY AUDIT CONTRACTOR (RAC) PROGRAM

Continued from page 7

Page 9: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 9

circumstances the ALJ may hold an in-person hearing. Additionally, the ALJ may offer a telephone hearing.

D. Stage 4: Medicare Appeals Council Review

The fourth level of appeal is the Medicare Appeals Council (MAC) Review. The MAC is within the Departmental Appeals Board of the U.S. Department of Health and Human Services. A MAC Review request must be filed within 60 days following receipt of the ALJ’s decision. Among other requirements, a request for MAC Review must identify and explain the parts of the ALJ action with which the party disagrees. Unless the request is from an un-represented beneficiary, the MAC will limit its review to the issues raised in the written request for review.

E. Stage 5: Federal District Court

The final step in the appeals process is judicial review in federal district court. A request for review in district court must be filed within 60 days of receipt of the MAC’s decision.

6. STRATEGIES FOR APPEALING CLAIM DENIALS

Once a provider receives a claim denial made by a RAC, it is important that the provider aggressively pursue appealing the denial through the Medicare appeals process. Experienced healthcare legal counsel can assist providers with appeals to ensure all available substantive challenges and legal theories are utilized. Experienced counsel will submit an appeal brief/position statement that advocates the provider’s position.

7. CONCLUSION

Medicare providers, including anesthesiologists and pain management physicians, should be ready for increased Medicare auditing activity as the RAC program expands nationwide. Providers should make efforts now to evaluate their compliance with Medicare policy. Should a provider be subject to a RAC or other Medicare audit, effective strategies are available that can be successfully employed in the appeals process to challenge claim denials.

Abby Pendleton and Jessica L. Gustafson

are partners with the health care law firm

of The Health Law Partners, P.C. The firm

represents hospitals, physicians, and other

health care providers and suppliers with

respect to their health care legal needs.

Pendleton and Gustafson specialize in a

number of areas, including but not limited

to: Recovery Audit Contractor (RAC),

Medicare, Medicaid and other payor audit

appeals, healthcare regulatory matters,

compliance matters, reimbursement and

contracting matters, transactional and

corporate matters, and licensing, staff

privilege and payor de-participation

matters. They can be reached at

[email protected] and jgustafson@

thehlp.com.

Abby Pendleton Jessica L. Gustafson

1 The Medicare Recovery Audit Contractor (RAC) Program: An Evaluation of the 3-Year Demonstration,” at p. 15, June 2008, available at http://www.cms.hhs.gov/RAC/Downloads/RAC_Demonstration_Evaluation_Report.pdf.

2 RAC Expansion Schedule, available at http://www.cms.hhs.gov/RAC/Downloads/RAC%20Expansion%20Schedule%20Web.pdf.

3 Id. Note that the RAC Expansion Schedule indicates the four RAC regions, labeled A, B, C and D.

4 In a significant change from the demonstration program, under the permanent RAC program, if a provider files an appeal disputing the overpayment determination, and provider wins this appeal at any level, the RAC is not entitled to keep its contingency fee, and must repay CMS the amount it received for the recovery. RAC Statement of Work, available at http://www.cms.hhs.gov/RAC/10_ExpansionStrategy.asp#TopOfPage.

5 RAC Statement of Work, available at http://www.cms.hhs.gov/RAC/10_ExpansionStrategy.asp#TopOfPage.

6 Id.

7 “The Medicare Recovery Audit Contractor (RAC) Program: An Evaluation of the 3-Year Demonstration,” at p. 15, June 2008, available at http://www.cms.hhs.gov/RAC/Downloads/RAC_Demonstration_Evaluation_Report.pdf.

8 h t t p : / / w w w. c m s . h h s . g o v / R AC / D o w n l o a d s /AppealUpdatethrough83108ofRACEvalReport.pdf.

9 A “clinically unbelievable” situation is one where “certainty of noncoverage or incorrectly coding exists but no Medicare policy, Medicare articles or Medicare-sanctioned coding guidelines exist.” In these cases, the RAC may ask CMS to approve automated review. However, unless CMS specifically approves an issue for automated review, the RAC must use complex review to make such determinations. See “Statement of Work for the Recovery Audit Contractor Program” at p. 18, available at https://www.fbo.gov/index?s=opportunity&mode=form&id=1889cc7b8672a9e2c1cbe5a007b9dceb&tab=core&_cview=1.

10 Id. at pp. 17-18.

11 Id.

12 Id. at p. 11.

13 Id.

14 See “RAC Medical Record Request Limits,” available at http://www.cms.hhs.gov/RAC/Downloads/RAC%20Medical%20Record%20Request%20Limits.pdf

15 See “Statement of Work for the Recovery Audit Contractor Program” at p. 13, available at https://www.fbo.gov/index?s=opportunity&mode=form&id=1889cc7b8672a9e2c1cbe5a007b9dceb&tab=core&_cview=1.

16 Id. at p. 20 (emphasis in original).

17 Id. at p. 16.

18 Id. at p. 17.

19 Id. at p. 19.

20 Id. at p. 22.

Page 10: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 10

IDENTITY THEFT PROGRAMS: WHAT EVERY ANESTHESIA PRACTICE

SHOULD CONSIDER DOING NOWNeda Mirafzali

The Health Law Partners, P.C.

NEWSFLASH: As of July 29, 2009, the Federal Trade Commission (“FTC”) extended its August 1 deadline to enact the commonly referred Red Flags Rule (16 C.F.R. Part 681) to November 1.

Come November 1, anesthesia practices, among other entities, will be responsible for ensuring patients’ identity protection under the provisions of the Red Flag Rule. Constituting 5% of all identity theft, medical identity theft has gained greater political attention and media coverage; thus, the Red Flags Rule should come at no surprise. According to the FTC, medical identity theft occurs when an individual seeks medical services using another’s name and insurance information. It is not until victims check their credit history or are denied insurance coverage for a medical service for having reached their policy limit that they realize their identity has been stolen and their credit history crushed, taking years to revitalize. Additionally, erroneous medical entries are recorded in the victim’s name producing a fictitious medical history. The recent extension is to give the FTC additional time to “redouble its efforts to educate [entities] about compliance with the ‘Red Flags’ Rule and to ease compliance by providing additional resources and guidance to clarify whether businesses are covered by the Rule and what they must do to comply.” The FTC announced that, in the future, it would make available additional resources

and compliance guidance for low-risk entities.

What is the Red Flags Rule?

In short, the Red Flags Rule requires particular entities to develop and implement reasonable policies and procedures—appropriate to the size and complexity of the entity—to guard against identity theft. As part of the Fair and Accurate Credit Transactions Act of 2003 (“FACT”), financial institutions and creditors must have anti-identity theft programs in place. According to the FTC, “red flags” are any factors that could indicate identity theft, including identification, detection, and response to patterns, practices, or specific activities. Under the Red Flags Rule, the FTC requires financial institutions and creditors to do the following:

Identify relevant patterns, practices, and specific forms of activity that are “red flags” signaling possible identity theft and incorporate those red flags into the Identity Theft Prevention Program;

Detect red flags that have been in-corporated into the Identity Theft Prevention Program

Respond appropriately to any red flags that are detected to prevent and mitigate identity theft; and

Ensure the Identity Theft Prevention Program (“Program”) is updated periodically to reflect changes in risks from identity theft.

Who Has to Comply with the Red Flags Rule?

The FTC declared that the Red Flags Rule requires each financial institution and creditor that holds any covered account, “to develop and implement an Identity Theft Prevention Program…for combating identity theft in connection with new and existing accounts.”

For physician practices, the relevant definition is that of a creditor. A creditor, as defined in the regulation, is a “person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit.”

A covered account, as defined in the regulations, is an account “that involves or is designed to permit multiple payments or transactions…and any other account…for which there is a reasonably foreseeable risk to members or to the

Page 11: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 11

safety and soundness of the federal credit union from identity theft….”

How Does the Red Flags Rule Apply to Physician practices?

Though many physicians question the reasons why this applies to their practices, the FTC insists that the Red Flags Rule applies to physician practices. Physician practices that accept insurance or allow payment plans are considered creditors as they allow deferred payment until physicians render the services and collect the insurance and other applicable payment owed. As a result, physician practices are subject to the Red Flags Rule. Even with this definition, however, many physician practices do not agree that they are creditors under the definition of creditor. Thus, the FTC provides examples of why it believes a physician practice is a creditor. For example, a physician practice is a creditor if it “regularly bill[s] patients after the completion of services, including for the remainder of medical fees not reimbursed by insurance.” This language would cover most, if not all, anesthesia practices. Additionally, if a physician practice allows patients to set up a payment plan, the physician practice would be considered a creditor and would, therefore, be subject to the Red Flags Rule. Not all physician practices are required to adopt the Red Flags Rule. Those physician practices that require full payment prior to rendering services are not creditors and are not subject to the Red Flags Rule. Merely accepting credit card payments does not render a physician practice a creditor.

The American Medical Association (AMA) does not agree with the FTC’s position asserting that such position is not “consistent with the intent or scope of the enabling legislation….” To

date, the AMA’s protests have not been successful. This is further highlighted by the FTC’s new publication entitled, “The ‘Red Flags’ Rule: What Health Care Providers Need to Know About Complying with New Requirements for Fighting Identity Theft” (http://www.ftc.gov/bcp/edu/pubs/articles/art11.shtm).

How Can Anesthesia practices Comply with the New Regulations?

Generally, anesthesia practices (“practices”) rely on their respective hospital or facility to gather information on admitted patients. It is important that anesthesia practices check that the hospital or facility has an Identity Theft Program in place that complies with the requirements of the Red Flags Rule and any other applicable state law. practices should coordinate with the facility to adopt applicable portions of the facility program into the practice’s program to assist in meeting its Red Flags Rule obligations.

Administrative Responsibilities

The regulations require certain

administrative action and oversight. For example, prior to implementing a program, the practice must have its Board of approve the proposed program. Also, practices must designate a person to be involved in oversight of the program and education of staff. Furthermore, the regulations require that covered creditors take steps to oversee that their service providers, like billing and management companies, conduct business according to the procedures designed to mitigate the risk of identity theft. Accordingly, practices should contact their billing companies and request a copy of their policies/procedures on this topic.

As stated above, there are four parts to complying with the Red Flags rules: identifying red flags, detecting red flags, responding to red flags, and ensuring an updated program. Notably, all protocols adopted in compliance with the Red Flags Rule must be in writing.

Identify and Detect There is no complete enumeration of approved ways to identify medical identity theft. However, the FTC has

Continued on page 12

Page 12: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 12

provided examples of warning signs to look for. Practices should be aware of suspicious documents, suspicious personally identifying information, suspicious activities, and notices from victims, law enforcement, or insurers of possible identity theft. The FTC suggests physician practices ask the following questions:

Has the new patient given you identi-fication documents that look altered or forged?

Is the photograph or physical de-scription on the ID inconsistent with what the patient looks like?

Did the patient give you other docu-mentation inconsistent with what he or she has told you?

Did the patient give you information that is inconsistent with what is on file?

Is mail returned repeatedly as unde-liverable while the patient still shows up to appointments?

Does a patient complain about re-ceiving a bill for a service that he or she did not get?

Is there an inconsistency between a physical examination or medical his-tory reported by the patient and the treatment records?

If one answers “yes” to any of these questions, it would be beneficial to ask for additional information from that patient to ensure the individual’s identity matches the claimed identity. Again, since the practice will likely rely on facility personnel to obtain documentation in the admission process, the practice should

ensure that the facility requests and verifies patient identification and resolves any discrepancies as they arise prior to rendering the actual service. In such cases, the practice’s written program should refer to the facility’s written procedures for this verification process and should attach such written procedures.

Respond After a red flag has been identified and detected, the practice should follow a procedure to respond to the red flags. Responding to red flags could include a plan for gathering documents if there is an incident, a process for reporting the incident to the appropriate personnel, and guidelines to follow for appropriate action (i.e. stopping the admission and billing process, notifying the person whose identity was used, notifying the authorities, assessing the impact on the practice, etc.). In the case of an anesthesia practice, for those flags detected in the facility admission process, the practice would be relying on the facility to take action and coordinate with the practice. Again, the practice’s written program would need to record that the facility’s procedures for identifying and responding to issues have been adopted by the practice. For those issues identified after the service has been rendered, but during the billing process, the practice would need to make sure that the billing process has been halted and that appropriate action is taken. This must be included in the practice’s written program.

Ensure While this program is in place, it is important for practices to continuously

update the practice’s procedures to ensure that they are consistent with most recent updates and developments surrounding medical identity theft.

State law In addition to addressing the FTC regulations, practices should also check state law for any requirements related to this topic. For example, some states have enacted laws protecting social security numbers. State law requirements can easily be incorporated into the practice’s written Identity Theft Program. The local or State medical society is a good place to begin researching state law.

Summary Though there are no criminal ramifications for failing to comply with the Red Flags Rule, there are financial penalties for non-compliance, including a $2500 fine for each known violation. For those practices who need assistance in developing their written program, a qualified healthcare law firm can help. For additional guidance, please visit the FTC website at www.ftc.gov and the FTC’s guidance to healthcare providers, http://www.ftc .gov/bcp/edu/pubs/articles/art11.shtm.

IDENTITY THEFT PROGRAMS: WHAT EVERY ANESTHESIA PRACTICE SHOULD CONSIDER DOING NOW

Continued from page 11

Neda Mirafzali is a third year law student at Michigan University College of Law. She wrote her article while working as a law clerk at The Health Law Partners, P.C. The firm represents hospitals, physicians, and other health care providers and suppliers with respect to their health care legal needs.

Page 13: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 13

HOW ANESTHESIA GROUPS THRIVE, NOT SIMPLY SURVIVE

Mark F. Weiss, J.D.

You’re building a house . . . well, your contractor is. He tells you that he’ll start by pouring the concrete foundation and then put on the roof, after which he’ll put up the exterior walls, followed by the chimney. It’s easy to see the folly in building a home in that manner. But when an an-esthesia group builds its practice in a similar manner, it usually goes without comment, even without notice. “We need to address the issue of re-newing our exclusive contract. It expires in July,” a partner says in May. “We’re not able to retain our subcon-tractors. They’re leaving for better pay,” says another partner in August, after the exclusive contract has renewed. “The surgeons are complaining about turnover time,” states a partner in September. “We really need financial support from the hospital,” says a partner in October. Just as in our analogy to home building gone awry, anesthesia groups often consider the instances of practice building, such as exclusive contracts, sub-contracts and employment agreements, billing and collection activities, data management, and stipends, as separate projects, to be addressed on a piecemeal basis. The secret to anesthesia group suc-cess, in any economy, starts with the realization that these are not separate in-stances at all. In order for your group to thrive, they must be linked together with strategy.

THE STRATEGIC GROUP

In order to succeed at the highest plane, your group must become strategic on multiple levels. It must develop an overall business strategy. It

must then develop substrategies for each particular instance previously thought to be independent, e.g., an exclusive contracting strategy and a data management strategy, that are consistent with the group’s overall business strategy and which take into

account the interrelationship among the various substrategies. Finally, just as the strategies are aligned, the tactics employed in furtherance of each of the particular substrategies must also be coordinated.

Continued on page 14

Page 14: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 14

LEADERSHIP

Beyond the smallest of groups, two or three physicians, leadership cannot be by consensus or paralysis will set in. Successful groups must have leaders and leaders must be allowed the time required to lead and the ability to fail without fear of retribution. Just as leaders need this freedom, group members are owed faithful performance: If your homebuilding contactor told you that he was too busy to pay attention to the organization of the job because he was spending all day hammering nails, you’d think about getting a new contractor. But most groups aren’t fazed when their “leader” essentially uses the same excuse, or when they guarantee the same result by tying his hands to a full share of patient care responsibility.

GIVE ME A LEVER LONG ENOUGH . . . Successful groups understand that they must create leverage. By having options to the deal, in respect of facility contracts, in respect of contracts with employed or subcontracted physicians, and in respect with their relationships with other third parties, they create tremendous negotiating leverage. In particular, in connection with their exclusive contracting relationships, they avoid the most significant mistake a group can make: permitting the hospital to believe that the group’s mere existence turns on the hospital’s decision to grant or renew the exclusive contract.

FRAMING THE ISSUES

Despite compliance issues, facts and budgets, emotion plays a leading role in decision making. Not only is telling the better story essential, choosing the theme of the story is required. Relationships and negotiations, just like conversations, do not take place in a vacuum; they take place in a context or “frame.” Understand that there’s a battle on the meta level to frame the issues

and that winning it can determine the outcome of the more observable conflict.

TOUCH POINTS

Successful groups understand that negotiation is not something that happens only in a boardroom. Each touch point with hospital administration, with other members of the medical staff, and with patients and their families is actually an element of the process of building support for your group’s positions. Everyday interactions impact upon the group’s image. In order to advance the group’s interests, you must control or influence as many of those touch points as possible.

IT’S ABOUT TIME

Although quick results in respect of certain elements of a group’s strategy are obtainable, achieving a transformational result for an existing group requires a long term view, optimally several years. After all, the goals are long term: group and member physician success. An understanding, in fact, an expectation that it will take time and effort to achieve those results is necessary and required.

BUT IT’S NOT ABOUT A TIMELINE

Progress in positioning your group to achieve maximum power in its relationships, and, therefore, in its negotiating posture, is not a linear process. As discussed above, the process involves an ongoing series of interrelated strategies and tactics. Each of these elements, once started, continue. In duality, each is both independent and dependent: Independent in that each element is focused on a particular goal; dependent in that each strategy and tactic supports the others in achieving the group’s overall business goal. Instead of the image of a timeline, picture instead an atom: Each of the electrons revolves independently, but they all revolve around the nucleus.

BEINGNESS VS. “GETTINGSOMEWHERENESS” The problem most often preventing anesthesia groups from thriving is “beingness.” (No, this is not a metaphysical discussion.) They simply “are.” They exist to exist – to “serve” the hospital. I suggest that the better route is for your anesthesia groups to exist to serve itself, to move from beingness to “gettingsomewhereness,” with that somewhere being of your own design. Yes, plans go awry and no one can guarantee that there won’t be challenges to the strategy along the way. In fact, there will be countless small and major challenges thrust at you in countless ways. But the beauty of a strategic outlook consisting of interlocking processes is its flexibility while still guiding you to your envisioned future. The foundation may have to be shored up, the walls may have to be reinforced or allowed to sway to compensate for earthquakes, but you’ll end up with a house, not simply with a roof sitting on a slab of cement.

Mark F. Weiss is an

attorney who spe-

cializes in the busi-

ness and legal issues

affecting anesthesia

and other physician

groups. He holds

an appointment as

clinical assistant

professor of anesthesiology at University

of Southern California’s Keck School of

Medicine and practices nationally with

the Advisory Law Group, a firm with of-

fices in Los Angeles and Santa Barbara,

CA. Mr. Weiss provides complimentary

educational materials to our readers. Visit

www.advisorylawgroup.com for his free

newsletter. He can be reached by e-mail at

[email protected].

HOW ANESTHESIA GROUPS THRIVE, NOT SIMPLY SURVIVEContinued from page 13

Page 15: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 15

Long gone are the days when a physi-cian can join a group of other physicians of similar interests with a handshake and a smile—this reality is highlighted when the physician is an anesthesiologist look-ing to join an anesthesia group that enjoys one or more exclusive contracts for profes-sional services with a local hospital. With so many interrelated factors governing the relationships between the anesthesiolo-gist, the anesthesia group and the hospi-tal (e.g., a medical directorship agreement between the anesthesiologist and the hos-pital, an exclusive contract between the anesthesia group and the hospital, the an-esthesiologist’s staff privileges to provide general anesthesia at the hospital pursuant to the exclusive contract, the anesthesiolo-gist’s staff privileges to provide pain man-agement services at the hospital outside of any exclusive contract, the hospital’s desire to have the anesthesiologist provide labor epidurals requested by OB/GYNs, whether the anesthesiologist is an independent con-tractor or an employee of the group, etc.), carefully drafted written agreements be-tween the parties are essential to protect the interests of all parties involved. While the number of provisions contained within a typical engagement agreement between an anesthesiologist and a group varies, as does the wording of each provision, there are a number of key provisions that should be included in any such engagement agree-ment in order to avoid potential issues from arising that could adversely affect one or more of the parties involved. First, the engagement agreement should clearly define the anesthesiologist’s status with the group as either an employ-ee or an independent contractor. When the group has an exclusive contract with

the hospital, the typical arrangement has the anesthesiologist as an employee of the group. This is consistent with the notion that the group is exercising control over the manner in which the anesthesiologist is performing his or her duties which is often one of the key factors that motivates the hospital to enter into an exclusive arrange-ment with the group in the first instance. Second, when an anesthesiologist is looking to join a group that has an exclu-sive arrangement with a hospital, he or she should recognize that, but for his or her membership with the group, the anesthe-siologist would not have staff privileges at the hospital. Accordingly, the engagement agreement will almost certainly provide that if the anesthesiologist is terminated from the group, there will be an automatic termination of the anesthesiologist’s medi-cal staff privileges at the hospital If you are considering a contract that has an au-tomatic termination clause, you will want to make sure that it extends to the privi-leges that are governed by the exclusive ar-rangement (e.g., if the anesthesiologist has

medical staff privileges to provide general anesthesia services and chronic pain man-agement services and the group has an ex-clusive arrangement with the hospital to provide general anesthesia services but not pain management services, upon termina-tion from the group, the anesthesiologist’s medical staff privileges to provide general anesthesia services may automatically ter-minate but his or her medical staff privi-leges to perform pain management services should remain unaffected). Third, the engagement agreement should clearly define what constitutes ter-mination “for cause.” Although certain events should result in immediate termina-tion (e.g., the anesthesiologist’s loss of his or her medical license or departicipation from a significant third party payor), other adverse events capable of being effectively rectified should trigger an opportunity by the anesthesiologist to cure the problem within a reasonable amount of time. Fourth, while nearly all engagement agreements contain provisions address-ing termination of the agreement by the group “for cause” (e.g., anesthesiologist’s conviction of a felony), surprisingly, many engagement agreements fail to address “for cause” termination of the agreement by the anesthesiologist (e.g., group’s repeated fail-ure to timely compensate anesthesiologist). Many agreements likewise fail to provide for “without cause” termination by either party (e.g., allowing either party to ter-minate the agreement without cause with 60 days prior written notice to the other party). Such provisions should be includ-ed in order to avoid circumstances where a party’s expectations are not being met and departure is desired.

WRITING YOUR CONTRACTS FOR SMOOTH ENTRY INTO AND EXIT FROM

ANESTHESIA GROUPS

Robert S. Iwrey, Esq.The Health Law Partners, P.C.

Continued on page 21

Page 16: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 16

The only danger most doctors assume hospital medical staff bylaws inflict is deep sleep. Given that the bylaws govern your hospital practice, ignoring them is nothing short of perilous. But many physicians don’t pay any attention to their medical staff bylaws, trusting that the hospital is only interested in protecting the physicians it needs to provide medical care to inpatients. Right. Even if you have a contract or are directly employed by the hospital, terms in the medical staff bylaws can complicate your practice, and your life. Look for four major threats in medical staff bylaws:

#1 Threat — “Manuals” and “Plans”

Hospitals and medical staffs that have been sold a package approach of Bylaws + Organization Manual + Fair Hearing Plan + Credentialing Manual end up with documents that section out key processes from bylaws into the manuals and plans. Criteria for membership and privileges, leadership selection, and other important medical staff organizational functions controlling who can practice what at the hospital are isolated in the separate plans or manuals which, unlike bylaws, can be changed unilaterally or with limited medical staff input. Consequences go beyond the “convenience” of a brief set of bylaws:

Critical rules affecting any and all medical staff members are not voted on by medical staff members.

In many states, courts recognize bylaws (but not necessarily manuals) as enforceable contracts.

Pending Joint Commission accred-itation standards will require these processes to be back in medical staff bylaws by 2011.

#2 Threat — Hospital-controlled Medical Staff “Leadership”

Medical staff bylaws should contain the qualifications for and means of selecting medical staff leadership. Appropriate medical staff bylaws provide for representation of the different specialties on the Medical Executive Committee, which serves as the board of directors for the medical staff organization, and for election of the Medical Staff officers-typically, the President, Vice-President, Secretary

and Treasurer. Anesthesia departments should ensure that their unique interests are in fact represented by specific allies on the Medical Executive Committee, if not by a member of their own department. Self-governance, the hallmark of which is selection of leaders, is required of medical staffs under Joint Commission accreditation standards for hospitals and under some states’ laws. If the medical staff is not self-governing it cannot fulfill its primary duty — to account to the hospital board for the quality of patient care. Self-governance is required in order to enable an independent accounting. Otherwise, if the hospital controls the medical staff through its leadership, the hospital is talking to itself, receiving information only from those it selects to hear. Self-governance is threatened by medical staff bylaws provisions such as the following:

“In order to serve, elected Officers of the Medical Staff must be ratified by the Board.”

No accreditation standard calls for the hospital board to approve officers or candidates, nor should any board control medical staff elections. More subtle provisions bury the board’s control behind an offer of indemnification:

“Any Medical Staff officer, department chairperson, committee chairperson,

WARNINGDANGEROUS PROVISIONS IN

MEDICAL STAFF BYLAWS

Elizabeth A. Snelson, Esq.Legal Counsel for the Medical Staff, PLLC

Page 17: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 17

committee member, and individual staff appointee who acts for and on behalf of the hospital in discharging duties, functions or responsibilities stated in these Medical Staff Bylaws shall be indemnified, to the fullest extent permitted by law, when the appointment and/or election of the individual has been approved by the Board.”

But no hospital insurer conditions coverage on board interference with and control over the selection of medical staff leadership. Check the bylaws to assure that there are no strings attached to medical staff leadership.

#3 Threat — “Disruptive Physicians”

Outrageous actions by physicians and other medical staff members threatening hospital employees and patients are the usual example justifying language in medical staff bylaws calling for disciplining disruptive physicians. Obviously, medical staff members should be held to a professional standard of behavior. And, the Joint Commission has put into place standards that call for hospitals to implement Codes of Conduct defining “disruptive,” “appropriate,” and “inappropriate” conduct. Since codes of conduct are inevitable, attention must be paid to how they restrict how physicians may behave. Unfortunately, some hospitals use codes of conduct to control economic “conduct” by threatening physicians’ privileges and medical staff membership. For example, some hospitals include in the code of conduct an obligation to provide “quality patient care” that is defined as including, in addition to medical outcome, matters such as “timely and thorough communications with insurers or third party payors as

necessary to effect payment for care.” If physicians do not jump through the payor hoops the hospital has agreed to, they will be branded “disruptive.” Other codes define as “inappropriate conduct” any negative statement about hospital services. This prohibition seems designed to ban even valuable information and constructive criticism intended to result in system improvements. A common prohibition in medical staff bylaws applies to conduct that is “disruptive to hospital operations,” a term so broad as to be subject to the interpretation that any competition with the hospital, including financial interest in anything from a surgery center to a gift shop, is prohibited activity. Medical staff bylaws should be closely reviewed to assure that standards of professional conduct are put in place by the medical staff, for the medical staff.

#4 Threat — Outsourced “Peer” Review

Physicians are accustomed to conducting peer review, evaluating outcomes to improve care for future patients. Indeed, the purpose of the medical staff organization is to provide a structure for ongoing quality patient care improvement. However, as physicians are even more stretched providing patient care, and as hospital data systems become more sophisticated, medical staffs may find the reins of the peer review process slipping away, with

quality measures and the focus of quality studies being dictated from hospital administration or from the hospital system, to be carried out for corporate reasons. While Joint Commission accreditation is the frequent reason given for gathering and measuring data, physicians should know that the Joint Commission actually expects peer review to be conducted by peers. Thus, Joint Commission standard MS 08.01.01 states, “The organized medical staff defines the circumstances requiring monitoring and evaluation of a practitioner’s professional performance,” and, under its Element of Performance 2, “The organized medical staff develops criteria to be used for evaluating the performance of practitioners when issues affecting the provision of safe, high quality patient care are identified.” Medical staff bylaws should clearly keep the medical staff in the peer review driver’s seat. There are many other problems that medical staff bylaws can cause. To protect your practice at the hospital, it is critical that the bylaws work for, not against, medical staff members. Reduce the threat by consulting your state medical society for assistance with physician-friendly resources for the medical staff.

Elizabeth “Libby” Snelson represents

medical staffs and

writes, and writes

about, medical staff

bylaws. She is a

frequent speaker on

medical staff legal

issues at medical

staff retreats and medical society

meetings. For more information check

her Bylawg at www.snelsonlaw.com.

Page 18: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 18

Traditionally, exclusive anesthesia services contracts have not received a significant degree of scrutiny with respect to compliance with the federal Stark Law. As a result, contracts for anesthesia services have often fallen outside the typical compliance review process that applied to other hospital-based exclusive arrangements. This has changed, however, due to a recent decision from a U.S. Court of Appeals, which elevates the level of Stark Law risk to which both anesthesia groups and hospitals that contract for anesthesia services might be subject. Specifically, in U.S. ex rel. Kosenske v. Carlisle HMA, Inc., the Court of Appeals for the Third Circuit (there are twelve Circuits in the federal appellate system; appellate decisions are only binding in the Circuit in which they were issued, but they may influence courts in other Circuits) found that an exclusive contract between an anesthesia group practice and a local hospital raised a potential violation of the Stark Law. Kosenske was brought by a qui tam plaintiff under the Federal False Claims Act (the “FCA”) predicated on the theory that submitting and billing claims in violation of the Stark Law constitutes a false claim under the FCA. In Kosenske, the Court determined that the anesthesiologists “received numerous benefits as a result of [their] relationship with [the hospital], including the exclusive right to provide all anesthesia and pain management services, and the receipt of office space, medical equipment and personnel.” The Court believed that this in-kind remuneration must meet a Stark Law

exception; otherwise, all of the referrals from the anesthesiologists to the hospital were impermissible. The Court also decided that the contract (which was never amended) between the anesthesiologists and the hospital did not cover the changed circumstances of the parties, including the provision of services at a new pain clinic facility owned by the hospital. Notably, after the execution of the contract, the anesthesia group expanded its services and began providing pain management services to its own patients.The group’s pain patients were capable of being referred to the hospital. Thus, with the referrals by the group to the pain management clinic (which permitted the hospital to bill the facility fee) the anesthesia group became a referral source that had a

compensation relationship with the hospital. Specifically, several years after the execution of the agreement, the hospital built a stand-alone facility containing an outpatient ambulatory surgery center and a pain management clinic. The Court noted that the hospital did not charge the anesthesiology group rent for the space and equipment, or a fee for the support personnel it provided to the anesthesia group practice when it performed pain management services at the pain clinic. The Court held that the contract between the parties did not fall within the physician services exception to the Stark Law: because the written agreement was drafted before the pain facility existed, there was no evidence of fair market value or any specific consideration given for the free use of the pain clinic. Thus, with respect to pain management services, the hospital was furnishing things of value (e.g., space and personnel), without charge, to physicians who were then in a position to refer to the hospital for pain management services at the hospital’s clinic. As such, the arrangement was not distinguished from a situation in which the hospital was to provide incentives to a medical staff member to induce the physician to refer for outpatient hospital services. Thus, the Court’s comments were based, in large measure, on a distinction it made between anesthesia services at the hospital and pain management services at a hospital-owned outpatient pain clinic. In summary, the important feature in Kosenske, and what truly distinguished the operation of the outpatient clinic

ANESTHESIA GROUPS NOT IMMUNE FROM STARK LAW RISK

Adrienne Dresevic, Esq. and Carey Kalmowitz, Esq.

The Health Law Partners

Page 19: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 19

from the hospital inpatient service was provision of hospital space, equipment and personnel exclusively to the group. When analyzing relationships from a Stark Law perspective, hospitals and anesthesia groups can draw the following from the Kosenske case:

If a hospital offers a group the exclusive right to staff a clinic or department and no other physicians are permitted to provide these services, that exclusivity likely will be characterized as remuneration under the Stark Law. For the arrangement to comply with the Stark Law, there would need to be a written agreement in place that meets an applicable Stark Law exception. However, if the anesthesia group is not billing as if it is treating patients in their office, and the hospital is registering the patient as a hospital patient and billing a facility or technical component for any services rendered by the group, then the mere fact that a group is staffing a hospital-based clinic does not create a financial relationship under the Stark Law. No written agreement would be required under Stark in those circumstances.

Granting a physician/group an exclusive right to provide professional services has value and thus creates a financial relationship for purposes of the Stark Law. If, through an exclusive arrangement, the hospital is providing space, staff and equipment, then so long as such items are used exclusively by the physician/group to provide the exclusive service (the benefit of which inures to the hospital), these items should not implicate Stark Law concerns. However, if any of these items are not used, exclusively, to provide the service for the hospital’s benefit then the Stark Law is implicated. By contrast, if the group is seeing private patients for

which the hospital is not billing the technical component or otherwise generating revenue, the physician/group must pay fair market value for the use of these items and services.

Ultimately, when reviewing an arrangement among a physician/group and a hospital, the parties should determine whether the physician/group receives anything of value beyond the mere right to exercise medical staff privileges at the hospital. If the physician/group does not receive anything of value, then the arrangement does not create a financial relationship under the Stark Law. If the physician/group does receive something of value, there may be a financial relationship for purposes of Stark and the arrangement will need to be structured in compliance with an applicable Stark Law exception.

There are several potential Stark Law exceptions that may apply to an arrangement between and anesthesia group and a hospital. One of the major Stark Law exceptions that could be used to protect an exclusive services agreement between an anesthesia group and a hospital is the Fair Market Value Exception. This exception protects compensation between a an entity such as a hospital and a physician or group of physicians for providing services to the hospital. In order to qualify for the Fair Market Value Exception, the compensation arrangement must:

(1) be set out in writing, covering only identifiable items or services;

(2) specify the time frame for the arrangement;

(3) specify the compensation – the compensation must be set in advance, be consistent with fair market value, and not be determined in any manner that

takes into account referrals or other business generated by the physician;

(4) be commercially reasonable and further the legitimate business purposes of the parties;

(5) not violate the anti-kickback statute or other laws regulating billing or claims submission; and

(6) not include services that involve the counseling or promotion of a business arrangement that violates the law.

Anesthesia groups that have exclusive services arrangements with hospitals may also be able to protect their arrangements through the Personal Services Exception which requires the following:

(1) the arrangement is set out in writing, is signed by the parties, and specifies the services covered by the arrangement;

(2) the arrangement(s) covers all of the services to be furnished by the physician;

(3) ) the aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement(s);

(4) the term of the arrangement is for at least one year;

(5) the compensation to be paid over the term of the arrangement is set in advance, does not exceed fair market value, and, except in the case of a physician incentive plan, is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties; and

Continued on page 20

Page 20: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 20

(6) the services to be furnished under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates any law.

Finally, when the anesthesia group has an exclusive arrangement with a hospital under which the hospital is providing space, but the a group is not using the space exclusively to provide the professional services that underlie the parties’ entry into the arrangement and permit other hospital services (e.g., surgical and labor delivery services) to be the anesthesia group must pay fair market value for the use of the space. The Fair Market Value Exception set forth above will not protect the lease of space. Instead, the lease of space should be structured to comply with the Rental of Office Space Exception, which requires the following:

(1) the lease is in writing, signed by the parties and specifies the space;

(2) the term of the lease must be at least one year;

(3) the space leased must not exceed what is reasonable and necessary for the legitimate business purposes of the lease, and the lessee uses it on an exclusive basis (except for common areas);

(4) the rental charges over the term of the lease are set in advance and consistent with fair market value;

(5) the rental charges over the term of the lease are not determined in a manner that takes into account the value or value of any referrals or other business generated between the parties; and

(6) the lease would be commercially reasonable even if no referral were made between the parties. Anesthesia groups must be cognizant of the fact that effective October 1, 2009, percentage-based compensation and “per-click” payments in space leases will no longer be permitted under the Stark Law.

This article is intended as only a brief overview of the Stark Law’s applicability in the anesthesia context. The Kosenske case should serve as a means to ensure that anesthesia groups consider that the Stark Law may apply to their current arrangements with hospitals. Accordingly, anesthesia groups should have experienced health law counsel review their financial arrangements with hospitals to ensure that they are structured to comply with an applicable Stark Law exception.

ANESTHESIA GROUPS NOT IMMUNE FROM STARK LAW RISK

Continued from page 19

Adrienne Dresevic, Esq. is a founding

member of The Health Law Partners, P.C.

She graduated Magna Cum Laude from

Wayne State University Law School in

2002. Ms. Dresevic practices in all areas

of healthcare law and devotes a substantial

portion of her practice to providing clients

with counsel and analysis regarding Stark

and fraud and abuse. She is a member of

the American Bar Association, State Bar of

Michigan, Health Law Section, American

Health Lawyers Association, and serves as

an editorial board member for the ABA’s

e-Source. Ms. Dresevic can be reached at

[email protected]

Carey F. Kalmowitz, Esq. is a founding

member of The Health Law Partners,

P.C. He graduated from New York

University Law School in 1994. Mr.

Kalmowitz practices in all areas of

healthcare law, with specific concentration

on the corporate and financial aspects

of healthcare, including structuring

transactions among physician group

practices and other healthcare providers,

development of diagnostic imaging and

other ancillary services joint ventures,

physician practice, IDTF and home health

provider acquisitions, certificate of need,

compliance investigations, and corporate

fraud and abuse/Stark analyses. He is a

member of the State Bar of Michigan, the

Michigan Society of Hospital Attorneys,

the American Health Lawyer’s Association,

and the American Bar Association. Mr.

Kalmowitz can be reached at ckalmowitz@

thehlp.com

Adrienne Dresevic Carey F. Kalmowitz

Page 21: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 21

Fifth, the engagement agreement may provide that, upon termination of the agreement, the anesthesiologist must com-plete all documentation in accordance with applicable standards to allow the group to bill for the services rendered consistent with usual and customary business prac-tices. To enforce this provision, most states will allow withholding of monies owed to the anesthesiologist until completion of such documentation if an express provi-sion allowing the withhold is also added to the agreement. Sixth, the scope of services covered by the engagement agreement should be clearly defined (e.g., operative v. non-op-erative anesthesia services, medical direct-ing of CRNAs, performing labor epidurals, onsite schedule, and on-call responsibili-ties). A clear delineation of the scope of services will avoid potential conflicts be-tween the anesthesiologist, the hospital and other health care providers at the hospital who may have different understandings of the services to be covered by the anesthesi-ologist under the agreement. Seventh, covenants not to compete are quite common in physician contracts today as the majority of states will uphold them (for the most part). However, where a group has an exclusive contract with a hospital that includes a provision for the co-termination of medical staff privileges with termination from the group, a cov-enant not to compete is not really neces-sary since the anesthesiologist is not likely to have a significant number of patients following him or her to a competing facil-ity for general anesthesia services. In such instance, if the anesthesiologist is able to find another position within the relative vicinity of the hospital, he or she does not really pose a competitive threat to the hos-pital and therefore he or she should not be forced to uproot his or her family and move due to a covenant not to compete. Nonetheless, a covenant not to compete

may be appropriate where chronic pain management services are to be provided by the anesthesiologist at the hospital as such patients are more likely to follow the anes-thesiologist to a new location that is within relatively close proximity to the hospital. If a covenant not to compete is included in the engagement agreement, it should be reasonable in scope, duration and geog-raphy to adequately protect the legitimate business interests of the group but not to place an unfair burden upon the anesthe-siologist. Additionally, the engagement agreement should provide that if the an-esthesiologist is terminated by the group without cause, then the covenant not to compete will not apply. Eighth, the engagement agreement should provide that while the group is deemed to be the owner of all medical, fi-nancial and billing records related to the professional services rendered by the an-esthesiologist, the anesthesiologist should have access to all such records during, and after termination of, the engagement agreement as reasonably necessary in order to defend against third party payor actions (e.g., malpractice actions or insurance payor audits) and/or to verify compensa-tion paid and/or owed to the anesthesiolo-gist under the engagement agreement. Ninth, the engagement agreement should clearly address the responsible party for obtaining and paying for profes-sional liability insurance, including who is responsible for obtaining and paying for

“nose” and “tail” insurance and the limits of coverage. Lastly, in order to avoid significant po-tential issues in the future, the engagement agreement should, at a minimum, include an outline of the partnership opportuni-ties being offered to the anesthesiologist. Although the “buy-in” price and other important terms and conditions may not be known with certainty at the time the parties are entering into the engagement agreement, an outline of the partnership track should be included which provides each party a reasonable understanding of when the opportunity will be available and the key features of the partnership. By including the provisions described above within the engagement agreement, and making sure that each party’s under-standing of the engagement agreement is set forth clearly in writing at the onset of the relationship, the parties can protect themselves against many of the adver-sarial issues that can arise during such en-gagements—facilitating a smooth entry into, and exit from, the anesthesia group. Hiring an attorney with knowledge and experience in drafting and negotiating an-esthesia employment contracts can fur-ther facilitate a smooth entry into, and exit from, the anesthesia group. As Benjamin Franklin once said: “an ounce of preven-tion is worth a pound of cure.”

WRITING YOUR CONTRACTS FOR SMOOTH ENTRY INTO AND EXIT FROM ANESTHESIA GROUPS Continued from page 15

Robert S. Iwrey is a founding partner of The Health Law Partners, P.C., where he focuses his prac-tice on contracts, litigation, dispute res-olution, licensure, staff privileges, Medicare, Medicaid and Blue Cross/Blue Shield audits and appeals, defense of health care fraud matters, compliance and other healthcare related issues. He may be contacted at [email protected].

Page 22: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 22

Surgeries are never fun, but they are necessary. Recently my family member received excellent surgical care at our community’s surgery center. This encounter yielded ten separate provider bills. Each bill came to my home through the postal service in a separate envelope. The insurance company also mailed me “explanations of benefits” for each encounter. Thus just the postage for these mailings was nearly $10.00, and we know cost of each mailing was much more than just the postage amount. I then spent $4.40 in stamps to mail my payments to the providers. Three of these bills were for less than $10.00 each. The absurdity of this is that the money for their payment was sitting at the insurance company in my flexible spending account. Why are we wasting all of this money asking multiple care providers to communicate with and collect from the same patient? Our current process needs to change. This proposal is offered as a challenge to the current standard practices used in the healthcare industry. Currently, patient deductible and coinsurance amounts are assigned to claims as they are adjudicated by the insurance company. The collection of these amounts is then the responsibility of the care provider. I would like to propose that insurance companies hold the responsibility to bill and collect these

deductibles and coinsurance amounts. This change would result in tremendous cost savings to healthcare as a whole and improved simplicity for patients. Following are reasons to support this change:

Simplicity: Patients would receive one bill from one entity – their insurance company – and would only need to make payment to this single entity.

Plan benefits are designed and administered by insurance companies.

They hold the contracts with the employers and patients. Only the insurance company understands the intricacies of how any claim was adjudicated and thus should be responsible for explaining and administering these benefits to its contract holders.

Care providers should be allowed to concentrate on being care providers. They should not need to employ financial counselors, and patient account representatives to collect their patient accounts.

A MODEST PROPOSAL: INSURANCE COMPANIES, NOT PROVIDERS, SHOULD BILL AND COLLECT

DEDUCTIBLES AND COINSURANCE Cynthia M. Roehr, CPA

Legislative Liaison for the MGMA Anesthesia Administration Assembly

Page 23: Anesthesia Business Consultants: Communique summer09

TH E CO M M U N I Q U É SU M M E R 2009 PAG E 23

Some patients are underinsured. Under the current system, insurance companies and employers are never made aware of patients that are unable or unwilling to uphold their responsibilities under their insurance contracts. If the insurance company were aware of the non-payment, perhaps a more appropriate plan design could be adopted for the patient.

Cost Savings: Current deductible levels are high enough that multiple care encounters are assigned to each patient’s deductible amount. This results in multiple providers mailing statements to the same patients. Coinsurance is also applied to numerous claims for most patients.

The processing of every check or credit card payment has a cost associated with it. Because multiple providers are being paid, this duplicative effort results in added costs to healthcare.

Insurance companies already send patients “explanation of benefit” reports for each adjudicated claim, so this mailing is already occurring. Changing it to a “billing” instead of an informational “mailing” would not add any additional costs to healthcare.

Insurance companies have excellent data on patient addresses and contact information for the patient. This would allow them to efficiently locate and communicate amounts owed. Currently every provider has to maintain and update their systems for every address change.

Financial Ability: Insurance companies are financial institutions; medical practices are not. Smaller medical practices lack the systems and personnel to

efficiently administer and monitor patient payment plans.

Currently medical care providers are forced to employ “financial counselors” to assist patients in establishing payment arrangements. Thus multiple providers’ counselors work with the same patient and require that patient to complete each entity’s financial request forms. Under this proposal, only one counselor and form would be necessary.

Many insurance companies own or are affiliated with banks, which will allow them to help patients arrange appropriate credit when necessary to pay for unplanned medical expenses.

Insurance companies already administer most of the flexible spending, health reimbursement, and many health savings accounts. By having knowledge of and access to these funds, insurance companies can streamline the savings accounts’ release to pay amounts owed according to the plan design.

Because insurance companies manage the patients’ health care accounts, they know the patient’s ability to pay, which gives them a significant information advantage over providers.

Insurance companies can accept payments by ACH from patient’s bank accounts. Most care providers do not have access to such payment mechanisms.

Through their relationships with employers, insurance companies also have the ability to allow for payroll deductions to fulfill unpaid obligations.

Co-Payments: Copayments differ from coinsurance and deductible amounts as these

are typically fixed amounts and clearly understood by the patient as being owed at the time of service. This proposal would require that any office copayment amounts be clearly printed on the insurance card. One recommendation to this policy is that any benefit design where copayments are based on a percentage of the billed or allowed amounts should be treated like coinsurance or deductibles and be collected by the insurance company.

It is for these cost savings and simplification to the collection process that I assert insurance companies are best positioned to bill and collect deductibles and coinsurance amounts. I believe this simplification would be well accepted by patients and providers. While the insurance industry may have some objections, this proposal, if fully considered, would eliminate much unnecessary duplication and waste. Please review the above proposal as a viable means to help current medical practices eliminate inefficient and unnecessarily costs which do not promote patient care or quality. If you agree with my assessment and would like to see this change enacted, legislative action will be necessary. The insurance industry isn’t going to just capitulate and make this change. Please assist me by contacting your state and federal legislators to help me convince them of the millions of wasted administrative dollars that would be saved.

Cynthia M. RoehrChief Administrative

Officer,

Linn County

Anesthesiologists, PC,

Cedar Rapids, Iowa

cmroehr@

cr-anesthesia.com

Page 24: Anesthesia Business Consultants: Communique summer09

PRO F E S S I O N A L EV E N T S

ANESTHESIABUSINESS CONSULTANTS

255 W. MICHIGAN AVE.P.O. BOX 1123JACKSON, MI 49204

PHONE: (800) 242-1131FAX: (517) 787-0529WEB SITE: www.anesthesiallc.com

DATE EVENT LOCATION CONTACT INFO

Sep. 24-27, 2009 New England Society of Anesthesiologists Annual Meeting

The Sagamore Resort,Bolton Landing, NY

www.nesa.net

Sep. 18-20, 2009 Ohio Society of Anesthesiologists Annual Meeting

The Hilton Columbus at Easton, Columbus, OH

www.osainc.org

Oct. 16, 2009 American Society of Critical Care Anesthesiologists Annual Meeting

New Orleans, LA www.ascca.org

Oct. 16, 2009 Society for Pediatric Anesthesia Annual Meeting

New Orleans, LA www.pedsanesthesia.org

Oct. 16, 2009 Society of Neurosurgical Anesthesia & Critical Care Annual Meeting

New Orleans Marriott, New Orleans, LA

www.snacc.org

Oct. 17-21, 2009 ASA Annual Meeting Morial Convention Center,New Orleans, LA

www.asahq.org

Oct. 11-14, 2009 MGMA Annual Conference Colorado Convention Center,Denver, CO

www.mgma.com

Oct. 26-30, 2009 CSA Fall Hawaiian Seminar Grand Hyatt Kauai Resort & Spa, Poipu Beach, Kauai

[email protected]

Nov. 6-8, 2009 Association of Anesthesiology Program Directors/Society of Academic Anesthesiology Chairs Annual Meeting

Boston Park Plaza,Boston, MA

www.aapd-saac.org

Dec. 11-15, 2009 New York State Society of Anesthesiologists Postgraduate Assembly in Anesthesiology

Marriott Marquis,New York, NY

www.nyssa-pga.org

Jan. 17-22, 2010 Clinical Update in Anesthesiology, Surgery and Perioperative Medicine

Paradise Island, Bahamas [email protected]

Jan. 18-22, 2010 CSA Winter Hawaiian Seminar Hyatt Regency Maui Resort & Spa, Ka’anapali Beach, Maui

[email protected]

Jan. 29-31, 2010 ASA Conference on Practice Management Marriott Marquis,Atlanta, GA

[email protected]