Given that noncompetition clauses are ubiquitous, whether in independent practice groups or in the increasingly common hospital or health system employment of physicians, the AMA’s disapproval of them seems, at best, quixotic. The AMA’s Principles for Physician Employment, adopted last November, forthrightly states that “[p]hysicians are discouraged from entering into agreements that restrict the physician’s right to practice medicine for a specified period of time or in a specified area upon termination of employment.” § 3(f). Noncompetes, of course, do both.
The Principles as a whole were clearly driven by the increasing phenomenon of hospitals employing doctors, not merely providing them privileges, and address a number of areas where the “new normal” for physician work requires reassessment of old patterns. Thus, the Principles address conflicts of interest, medical staff relations, and the continuing of privileges when employment terminates.
Given the clear purpose of the document in trying to maintain some degree of physician independence from their hospital employers, the section addressing noncompetes is a curious provision. It adds an air of unreality to what, presumably, is a document intended to affect real world decision. And its phrasing is equally odd: Self-interest, of course, points towards not restraining a physician’s right to compete. Presumably, then, postemployment covenants not to compete are routinely signed by doctors because they are extracted as a condition of employment. What additional motivation or leverage the Principles might offer to resist employer demands is dubious.
It is true that the law frowns upon noncompetition agreements, which means that they are subjected to more scrutiny than other contracts; usually this is framed in terms of having to be no broader than necessary to protect the employer’s legitimate interest. And employers have no legitimate interest in preventing competition per se; rather, they have an interest in protecting patient relationships and confidential information. Further, restrictive covenants are unenforceable if they are contrary to the public interest, and some states show more of a disposition to strike down or narrow physician clauses on that ground. And a small number of states actually bar such postemployment restraints in the medical context.
Given the stakes involved, physician noncompetition agreements are frequently litigated, either by hospitals or practice groups trying to enforce contractual restraints or in declaratory judgment actions brought by doctors subject to such provisions seeking to have them invalidated. It’s possible, then, that the Principles might be relevant not in barring physician, noncompetes but in convincing a court that a particular clause is invalid. Possible – but unlikely, given the divergence between the Principles’ prescription and pervasive industry practice on the ground.
Another possibility might be to seek to empower physicians as employees. In the brave new world of hospital employment of physicians, doctors lose their independence but gain labor law protection. Maybe in a collective bargaining context, the Principles can be deployed by a physician’s union in an effort to eliminate or narrow such restraints.
Or maybe the section merely reflects the AMA’s long-standing resistance to such clauses, however ineffective it has been. At various times, it has viewed noncompetes as unethical (1933), “not unethical” (1960), “not in the public interest” (1980) and to be discouraged in any event but unethical if too broad (1996). S. Elizabeth Wilborn Malloy, Physician Restrictive Covenants: The Neglect of Incumbent Patient Interests, 41 Wake Forest L. Rev. 189, 217-18 (2006).
A skeptic might say that the failure of prior hostility to have much effect on either practices or the law means that the AMA is continuing to tilt at windmills. But the counter argument is that such a statement might influence other jurisdictions to join those few now barring such physician covenants.
On February 14, 2012, Marilyn Tavenner, the acting Administrator of CMS, told reporters that CMS will “re-examine the timeframe” of the planned conversion to the ICD-10 code standard. Presently, covered entities under HIPAA must fully convert from the ICD-9 coding system to ICD-10 by October 1, 2013.
ICD-10, which stands for the International Classification of Diseases, 10th Revision, is a coding system that providers use for billing purposes and medical researchers also use for statistical analysis. ICD-10 consists of 68,000 codes that will expand upon the 13,000 codes currently being used with ICD-9. The codes, each representing a separate medical service or diagnosis, are used by providers and hospitals when they submit their bills to the insurer. The providers receive payment for their services based upon the codes and the terms of their reimbursement agreement. From these codes, medical researchers are able to evaluate kind and frequency of care; with more than five times as many descriptive codes in the new system, many researchers and evidence based medicine proponents are said to look forward to the far greater depth of analysis the new coding system will offer. The United States already lags behind many countries in ICD-10 implementation and it is said that this compliance extension will widen the gap even further.
Two days after Ms. Tavenner’s announcement, HHS issued a news release stating that “HHS will initiate a process to postpone the date by which certain health care entities have to comply with ICD-10.” Kathleen G. Sebelius, the Secretary of HHS, states in the news release that “we have heard from many in the provider community who have concerns about the administrative burdens they face in the years ahead. We are committing to work with the provider community to reexamine the pace at which HHS and the nation implement these important improvements to our health care system.”
HHS’s news release leaves a lot of questions unanswered. There is no hint at which “certain health care entities” will be granted an extension for compliance and how far off the new deadline will be. HHS claims they will “initiate a process,” which leads many to believe a formal rule making process with public comments will occur. This process could possibly take years to complete, which undoubtedly has caused a giant sigh of relief for providers and institutions across the country that feel ill-prepared for the 2013 deadline. Analysts at Health Care IT News estimate that the deadline could be pushed off a year or two if there is a formal rule-making process.
As the news of Ms. Tavenner’s announcement spread, members of the industry sent out messages cautioning that a complete overhaul of the current plan is unlikely. Ms. Tavenner’s announcement, which happened at the American Medical Association (AMA) Advocacy Conference in Washington, D.C., was fittingly met with applause by AMA members. The AMA has publicly and vehemently opposed the current October 1, 2013 deadline. In a January 17, 2012 letter addressed to Speaker of the House John A. Boehner, the Executive Vice President and CEO of the AMA James L. Madara M.D. pleaded with Speaker Boehner to stop the implementation of ICD-10. In the letter, Dr. Madara argues that the conversion “will create significant burdens on the practice of medicine with no direct benefit to individual patient care, and will compete with other costly transitions associated with quality and health IT reporting programs.” Of course, Dr. Madara is referring to the task of implementing an electronic health records (EHR) system in accordance with CMS’s meaningful use criteria, which entitles a covered entity to receive incentive payments from CMS. Dr. Madara also cites to what he deems to be the competing tasks of dealing with financial penalties for non-participation in Medicare programs, including e-prescribing and the Physician Quality Reporting System.
ICD-10 opponents also cite to the industry’s recent failure to comply with the January 1, 2012 deadline to comply with the transition to Version 5010, a HIPAA electronic transactions upgrade that is necessary to support ICD-10, as evidence that the industry is not ready for the ICD-10 change. In November 2011, CMS gave in to industry pressures to extend the 5010 compliance deadline an additional ninety days. It is undeniable that providers are already subject to tremendous demands under HIPAA and the HITECH Act, on top of Medicare cuts, which are placing significant financial stress and compliance burdens on the industry. It is not surprising that ICD-10 has met a lot of resistance from providers. However, it is no secret that providers and institutions are consistently successful lobbyists for their concerns and beliefs and it remains to be seen how CMS will proceed with the scheduled ICD-10 implementation and what compromises will be made.
Proponents of the ICD-10 system argue that the new coding system will create significant positive changes in the industry because it will help collect important data that will improve the quality of patient care, decrease costs, and collect statistics for medical research. CMS and the Center for Disease Control and Prevention believe that the new codes will create more accurate and exact descriptions of diagnoses and inpatient procedures, which will improve efforts to track care, detect emerging health issues and improve quality. A report from Deloitte, a consulting firm, reported that the increased size and scope of the ICD-10 codes is expected to provide potential benefits in cost and quality measurement, public health, research, and organizational monitoring and performance measurement. Whether a provider supports the change or not, Deloitte echoes the sentiment of many that advance planning is essential. Providers and institutions that have already invested time and money into the ICD-10 implementation are frustrated and upset by CMS’s decision to “reexamine” the current compliance deadline. After all, no provider wants to see its large investment in the ICD-10 system put to waste.
The fact is that no one, perhaps even CMS and HHS, is certain about the date of the future ICD-10 implementation plan so perhaps the smartest choice for providers is to proceed with steps to continue the ICD-10 implementation. Considering the prospect of the financial disincentives attached with non-compliance, it seems like a risky choice for any provider to sit around and wait and see what may happen, especially when the ICD-10 implementation cannot happen overnight. There are providers that started the ICD-10 conversion process back in 2009 when it was first introduced and they still have not completed the task. Unfortunately for providers, the ICD-10 conversion requires time, manpower, training, testing with payers, and significant technological changes that will carry high administrative and financial costs. The Medical Group Management Association (MGMA), which opposes the ICD-10 implementation, estimates that it will cost a ten doctor practice more than $285,000 to convert to ICD-10, with software upgrades accounting for only $15,000 of that amount. According to the MGMA, the bulk amount would be for increases in claims queries, reductions in cash flow, and increased documentation time. What it comes down to is that if a provider wants to be paid for its services, noncompliance with ICD-10 is not an option. The risk for successful claims processing and receiving payments in a timely fashion is present, but adequate preparation and testing well before the compliance deadline is the best way to combat this significant risk.
One thing is certain – until HHS releases a new rule and schedule for ICD-10 implementation, opponents will continue to argue that the costs to adopt the new system are too high, the task too onerous, and the rewards too speculative to justify such an undertaking. Unless the industry comes together to find a solution for an easy transition, this could be a bumpy road until the ICD-10 transition is complete.
[Ed. Note: We are pleased to welcome Andy Braver, Esq. back to Health Reform Watch. Andy is a health care attorney who recently completed an LL.M in Health Law at Seton Hall Law. Prior to entering the LL.M. program, Andy spent five years as a healthcare provider, running a state of the art medical diagnostic imaging center. During that time, he dealt with many important health law issues faces by providers today, including Fraud and Abuse, Medicare and Medicaid licensing and reimbursement, state and private accreditation organizations, private payers, electronic health records, and HIPAA and other privacy issues, to name just a few.]
Medicare’s fee for service payment system has many problems that need fixing. While recent studies have predicted that Accountable Care Organizations (ACOs) may very well achieve better care and lower costs, any savings generated as a result of these new groups of providers will be just a drop in the bucket solution to a vast problem.
Medicare was projected to spend over $500 billion on patient care in 2010. Notwithstanding the fact that the White House Office of Management and Budget believes $36 billion of the Medicare and Medicare Advantage payments made in 2009 were improper.
The problem is, there is no distinction made for the provision of quality medical care. Conversely, there is no check in the system to make sure that the care provided is inadequate. If you provide the service, you get paid.
I realize that in many areas of medicine, it is difficult or even impossible to create a system to accurately and impartially judge the adequacy of care provided. How in fact do you measure the ‘quality’ of healthcare? Do you look at the structure of an entity, its organization and ability to provide what is generally regarded as good care? Or do you look at the actual process or provision care, measuring relative malpractice claims among other objective factors? Many believe that better outcomes suggest better care. While I do not believe that outcome or evidence based medicine is the answer to every problem, it certainly can be a solution to some of these challenges.
There are differences in the Medicare program based on geography, and local coverage determinations and reimbursement rates, whether using the PPS or RVU systems (Part A & B), vary greatly across the country. That part of the system makes sense by taking into account cost of living, cost of employment, property costs, and local tax rates.
In my mind, however, these processes fail because they do not further take into account advances in technology, or reward investment in the future. For example, Medicare pays the same amount of money for an MRI exam regardless of the type of machine that was used to take the picture, and without a thought given to the type of storage system employed by the medical provider. Imagine a facility with a two decade old system, state licensed and able to take pictures, with a machine equivalent to the first generation digital camera I owned 15 years ago, and printed pictures that are stored in a file room. Then imagine a state of the art facility with an HD camera taking high resolution digital pictures, stored in an electronic file system, in a format that is able to be sent electronically to specialists all around the country (or world), and accessed by the patient quickly and securely on the internet. Are those two pictures worth the same to Medicare? There certainly is increased value to the patient in the ‘new’ system. Better picture quality undoubtedly leads to better diagnostic capability (better medicine), and fewer picture redos over time; long-term storage and record portability is certainly going to lower future treatment costs if the issue is a chronic one. HITECH and the new EHR incentive programs recognize the importance of electronic medical records, but it remains to be seen how those requirements will affect licensing and reimbursement rates. Will there be a license ranking and a tiered payment system based on perceived quality or outcome?
I certainly hope that payments are tiered when advanced technology is used, but not according to self-assessment rankings and quality benchmarks. I would argue that medicine is the one area where any kind of ranking and result (or outcome) based assessment is virtually impossible. People are not cars, and JD Power cannot provide meaningful answers when it comes to medicine; there is no way to objectively determine a specific course of treatment for a particular patient is better at one hospital versus another. No two patients are the same, though it is entirely possible they might both drive the same car. Determining quality in healthcare is exceedingly difficult. Patient bases are different, whether because of socio-economic reasons, or geography. So do you then look to the education of the physician to determine quality? We don’t do the same for lawyers? Or do we? Do you look at healthcare structure (how an entity is organized, its equipment, etc…) to determine quality? Or process (the # of lawsuits against it, for example)? Better outcomes alone do not mean better healthcare, and none of these items taken alone should affect licensing of healthcare providers. In the end, this highlights the fact that designing a system that is fair and without major flaws may never be possible with so much money in the system and with so many parties having opposed interests. But that doesn’t mean we shouldn’t try to fix the expensive and broken (the status quo is unsustainable), it just means that attainable reform could very well mean significantly less unfairness and less major flaws. Because ultimately, in this context, the perfect may be the enemy of the good.
Filed under: Accountable Care Organizations, Hospitals, Physicians
One of the many $64,000 questions in the accountable care organization (ACO) debate has been who should lead these organizations. In a policy adopted in November 2010, the American Medical Association (AMA) made clear its view that ACOs must be physician-led. The American Hospital Association (AHA) refrained (at least in its public letter to CMS) from asserting its entitlement to the ACO helm, based, for example, on its management experience and pools of capital. Instead, it simply urged CMS to “defer details of the organization, such as leadership and management structure, to each ACO.”
CMS seems to have heeded the AHA’s advice because its recently released proposed rule does not directly take on this normative debate. (See Summary of CMS Proposed Rule on Accountable Care Organizations recently posted by Jordan T. Cohen for an overview of the proposed rule.) While “ACO participants must have at least 75 percent control of the ACO’s governing body” to be eligible for participation in the Shared Savings Program (proposed Section 425.5(d)(8)), the definition of “ACO participant” in the proposed rule includes physicians and hospitals, among others (proposed Section 425.4).
Similarly, the proposed rule simply requires that the “ACO’s operations must be managed by an executive, officer, manager, or general partner whose appointment and removal are under the control of the organization’s governing body and whose leadership team has demonstrated the ability to influence or direct clinical practice to improve efficiency processes and outcomes” (proposed Section 425.5(9)(ii)). The proposed rule does not address who or what would make the best such leader.
The proposed rule, however, clearly preserves a role for physicians to form and lead ACOs. For example, it recognizes that ACOs may be comprised of professionals in group practice arrangements and networks of individual practices, independent of hospitals (proposed Section 425.5(b)).
In addition, “[c]linical management and oversight [of the ACO] must be managed by a full-time senior-level medical director . . . who is a board-certified physician . . .,” and “[a] physician-directed quality assurance and process improvement committee must oversee an ongoing action-oriented quality assurance and improvement program” (proposed Sections 425.5(9)(iii) and (iv)).
The proposed rule also builds in a preference for ACOs comprised of all physicians or physician groups with fewer than 10,000 assigned beneficiaries by proposing to exempt them from the 2 percent net savings threshold adjustment under the one-sided model (proposed Section 425.9(c)(4)(i)). It also proposes to vary confidence intervals, which affect the minimum savings rate, by the size of the ACO in the one-sided model “to improve the opportunity for groups of solo and small practices to participate in the Shared Savings Program” (Preamble to proposed rule at Section II.F.10).
But on a practical level, the specifics of CMS’ proposal may — unintentionally, perhaps — give hospitals the greater chance to take the reins, at least initially. An apparently leaked CMS internal discussion document reflects some level of concern that physicians may have a hard time taking the lead with ACOs.
The proposed rule’s regulatory impact analysis estimates that the average start-up investment and first year operating expenditures for an ACO in the Shared Savings Program will be $1,755,251. In addition, the proposed rule uses a 6-months claims run-out (proposed Section 425.7(a)). Presumably, that means ACOs — assuming they satisfy all program requirements — will not see a dime of shared savings for more than eighteen months. CMS also proposes to withhold 25 percent of any earned shared savings accrued in a given year to ensure repayment of any losses to the Medicare program in subsequent years of the three-year ACO agreement (proposed Section 425.5(d)(6)(iii)).
Even if private physicians can amass the capital to make these upfront investments, there of course is no guarantee they will regain their outlays. A recent study published online by the New England Journal of Medicine, as reported by the American Medical Association, found that participants in CMS’ Physician Group Practice Demonstration did not recoup, at least in the initial years of the demonstration, all of the money they invested to establish ACOs. As the AMA summarized:
Early adopters, for the most part, did not recoup their set-up costs in the first three years of operation. The 10 integrated health systems that were studied spent an average of $1.7 million to take part in the demonstration project. Eight received no shared savings payments in the first year of the project. Six got a payment in the second year, and five received a bonus in the third year.
The Everett Clinic in Washington, for example, reportedly spent approximately $1 million on infrastructure for its ACO but recouped only $129,268 in shared savings during the first four years of the demonstration project.
According to a 2007 report from the National Center for Health Statistics (NCHS), in 2003-04, 80.6 percent of office-based medical practices in the United States consisted of one or two practitioners and 94.8 percent had five or fewer practitioners. The risks associated with forming an ACO are considerable for these smaller practices to absorb, especially when, at best, the ACO will see 75 percent of its portion of any shared savings upwards of eighteen months down the road and could instead be responsible for its share of losses. It is not clear how many small practices are willing and able to assume these risks without some substantial financial or management support. Not surprisingly, the AMA’s statement on the proposed ACO rule specifically identifies “the large capital requirements to fund an ACO” as a significant barrier that must be addressed if physicians in all practice sizes and settings will be able to successfully lead and participate in ACOs.
Another aspect of the proposed rule that may present a particular challenge to independent physicians is proposed Section 425.11(b)’s requirement that “[a]t least 50 percent of an ACO’s primary care physicians must be meaningful [Electronic Health Records (EHR)] users, using certified EHR technology as defined in §495.4, in the [Health Information Technology for Economic and Clinical Health (HITECH)] Act and subsequent Medicare regulations by the start of the second performance year in order to continue participating in the Shared Savings Program.”
Physician practices indisputably have increased their use of EHR systems in recent years. According to the National Ambulatory Medical Care Survey conducted by NCHS (reported here), only 17 percent of physicians in 2008 reported that they had a “basic” EHR system (which is defined as having electronic patient demographic information, patient problem lists, patient medication lists, clinical notes, orders for prescriptions, and laboratory and imaging results). Recent NCHS data (reported here) show that that number has climbed nearly 50 percent to 24.9 percent of office-based physicians.
But basic use of EHRs is not sufficient under the proposed rule, which requires “meaningful use.” Survey data from the Office of the National Coordinator for Health Information Technology, as reported here, show that only 41.1 percent of office-based physicians plan to apply for billions of federal dollars in EHR incentive payments that are available to Medicare and Medicaid providers under the HITECH Act, compared with 80.8 percent of acute care non-federal hospitals. Additionally, as reported here, a recent survey from the Medical Group Management Association (MGMA) found that only 13.6 percent of medical practices that have adopted EHRs and plan to apply for the EHR Meaningful Use incentives currently are able to satisfy the fifteen core criteria necessary to establish that they are meaningful users. Medical practices have a long row to hoe.
But the news is not all bad for physicians. The MGMA survey also found something that suggests this issue is far from resolved on a theoretical or practical level. As reported here, “almost 20 percent of responding independent medical practices that owned EHRs said that they had optimized their uses of EHRs” whereas “[o]nly 8.8 percent of responding hospitals — or [integrated delivery system (IDS)] — owned practices with EHRs said they had optimized their EHR use.”
Almost certainly, it is not just a coincidence that physicians are devoting their energy to becoming meaningful EHR users just as the first EHR Meaningful Use incentive payments are available. If CMS or private foundations develop additional incentive programs to help smaller practices cover the start-up costs associated with forming an ACO, the individual physician could still be in this game. Notably, the AMA’s brief statement on the proposed ACO rule reiterates its recommendation to CMS to increase access to loans and grants for small practices as part of this puzzle. It remains to be seen if any such programs are viable in this fiscal climate.
As promised, future posts will address the normative question of who should lead ACOs.
This past week I found myself (once again) sitting across a big desk from the surgery scheduler who works for my son’s ear nose and throat doctor. She had a stack of papers for me to sign and as she passed me each one she offered a brief explanation of what it was. As required by the March 2009 revisions to New Jersey’s Codey Law, one informed me that the surgery center where my son’s ear tubes were to be inserted was “physician-owned,” another that it was “out-of-network.” Regarding the latter, the scheduler reassured me that, while the center could “balance bill” me for the portion of the facility fee not covered by my insurance, it would not. I was told the same thing the first time around and nevertheless received a bill from the center for nearly $5,000; after I got over the shock, I called to ask that it be reduced and breathed a sigh of relief when it was, to $100.
So, balance billing was already on my mind when I received an email from Interim Vice Provost & Professor of Law Kathleen M. Boozang, calling my attention to a recent St. Louis Post-Dispatch article reporting that Steven Powell “has sued Washington University in St. Louis, accusing the university’s doctors and other Missouri health care providers of routinely and illegally over-billing for medical services.” After Mr. Powell was hospitalized in 2008 at Barnes-Jewish Hospital, the hospital’s owner and Washington University, whose doctors staff Barnes-Jewish, sued Mr. Powell to recover fees not covered by his insurance carrier that he would not or could not pay. Mr. Powell’s prospects for success are not clear, since Missouri, like most states, does not, at least not explicitly, forbid out-of-network health care providers from billing their patients for the portion of the provider’s fee not covered by insurance.
In 2009, two states, Louisiana and Texas, enacted laws that tackle the problems associated with balance billing not by banning the practice but, among other things, by requiring that the practice be made transparent. The National Conference of Insurance Legislators, the self-described “voice of state legislators in Washington in the face of mounting federal initiatives to preempt state insurance regulation,” has promulgated a draft Balance Billing Disclosure Model Act modeled on the Louisiana and Texas statutes. NCOIL will consider adoption of the Model Act at its next meeting, to be held in March of this year.
Under NCOIL’s draft Model Act, healthcare facilities would be required to provide “conspicuous written disclosure to a consumer at the time the consumer is first treated on a non-emergency basis at the facility, at pre-admission, or first receives non-emergency or post-stabilization services at the facility,” informing the consumer that the facility is either in- or out-of-network and, if the latter, that “the consumer may be billed for medical services for the amount unpaid by the consumer’s health benefit plan.” Health benefit plans would also be required to make disclosures about the potential for balance billing, “in conjunction with issuance or renewal of the plan’s insurance policy or evidence of coverage.” Finally, facility-based healthcare providers would be required to (1) take steps to include sufficient information in their bills to enable patients to understand why they are being balance billed, (2) provide patients with over-the-phone assistance understanding such bills, and (3) work with patients to implement payment plans.
NCOIL received comments on the draft Model Act from a number of stakeholders. The American Hospital Assocation wrote that “[a]n approach focused on disclosure sidesteps the key issue here: the adequacy of the insurer’s network with respect to contracts with facility-based physicians.” Families USA suggested that “[a]s part of requirements that health plans maintain adequate provider networks, health plans should contract with an adequate number of anesthesiologists, emergency room providers, and other facility-based providers to see their members at each in-network facility and should establish reasonable procedures to help both patients and families to identify and locate those participating providers.”
Predictably America’s Health Insurance Plans have a different take, arguing that the most pressing concern is “[p]rotecting consumers from runaway charges billed by some out-of-network providers[.]“ AHIP points out that “[w]hen an individual receives services from a facility and accompanying facility-based practitioners, the consumer rarely has the opportunity to select the radiologist, anesthesiologist or pathologist. Therefore, the proposed disclosure of charges and participating status of the practitioner would have a very limited practical impact because the consumer generally cannot act on this information.”
Tellingly, everyone agrees that disclosure will not be a magic bullet.