Health Insurance Exchanges: Good News, Bad News for Physicians

USA Today recently reported that people have been signing up for health insurance exchanges for in excess of expected levels.

Staff writer Kelly Kennedy reports that a survey of each of the 50 states yielded 19 states reporting estimates for how many of their uninsured residents they expect will buy through the exchanges. The reported 8.5 million would far outstrip the federal government’s estimate of 7 million new customers for all 50 states under the Affordable Care Act (ACA).

In the short term, this is great news for physicians’ practices. This statistic means there will be 8.5 million new paying customers. This is even better news for physicians in states which have refused to expand Medicaid to the level mandated by the reform law, commonly termed “Obamacare.”

Prior to the law, many states were permitted to set their own limits for Medicaid eligibility. Alabama, for example, reportedly disqualified a family from Medicaid eligibility if the family earned 25 percent of the federal poverty level (about $6,000 per year for a family of four). Under the reform law, states would have been required to expand Medicaid roles to conform to a new national standard of 133 percent of the federal poverty level (about $31,300 per year for a family of four). On June 28, 2012, the U.S. Supreme Court upheld the constitutionality of most of the ACA in the case National Federation of Independent Business v. Sebelius. However, the Court held that states cannot be forced to participate in the law’s Medicaid expansion under penalty of losing their current Medicaid funding. Therefore, patients in states which did not expand Medicaid roles to include these “newly eligible” patients are able to purchase federally subsidized private plans through health insurance exchanges, which is the subject of the USA Today article.

This is good news for physicians’ practices, because Medicaid simply doesn’t pay very well (so low in fact, about one-half of all physicians would refuse to accept a new Medicaid patient. Private plans which are subsidized by the government would almost certainly provide reimbursement rates which are above the rock-bottom rates for Medicaid patients. Open enrollment begins October 1, 2013, and coverage is set to begin January 1, 2014.

Before we all get too drunk on all this free government Kool-Aid, recall that the Kool-Aid isn’t “free.” The reform law was enacted because the Medicare trust fund could not afford to pay for all the aging baby boomers set to turn 65 in the next few years.

The idea behind the law was to save Medicare by forcing more healthy Americans into the system through individual mandates, employer mandates, expansion of Medicaid for the poorest Americans, and providing health insurance exchanges for those who are just above the level needed to qualify for Medicaid. But how is this supposed to help save the Medicare trust fund? Obviously, by cutting future Medicare reimbursement rates.  But on what part of “planet crazy” does it make sense for the government to pick up the tab of the cost for all the newly insured, (which was supposed to save the system from failing, because the government is broke)?

In her book, “Your Doctor is Not In,” Jane Orient draws the analogy between our nation’s healthcare model and the one created by Ptolemy, which contained multi-layered epicycles to explain the universe. “Wheeling and whirring, the Ptolemaic universe could be turned to predict almost any observed planetary motion – and when it failed, Ptolemy fudged the data to make it fit,” Orient writes.

Here, the Obama Administration is so desperate to make the healthcare reform law work, any solution that will keep the wheels whirring, is perfectly acceptable. By the time anyone figures out it is a bad model, the president will be working on a location for his presidential library, and paying for healthcare will be the next administration’s problem.

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The Sunshine Act and Continuing Medical Education

Beginning August 1, 2013, applicable manufacturers and group purchasing organizations (GPOs) will be required to report all payments and transfers of value to physicians and teaching hospitals to CMS. An excellent article on the rules, can be found at the Policy and Medicine website:  “Physician Payment Sunshine Act: Final Rule Top 50 Things to Know.”

Although it took many stakeholders by surprise, a proposed rule published by CMS in December 2011 incorporated indirect commercial support payments for CME into the Act’s scheme for direct physician payments.  The final rule published February 8, 2013, however, CMS makes it clear that accredited CME is already held to high regulatory standards that prevent commercial supporters from influencing the curriculum, and that further regulation under the Sunshine Act is unnecessary.  

This about face naturally led to confusion. CMS has published several rounds of questions and answers for physicians.

Here’s two such questions and answers of note:

Q: Are payments provided to physicians for speaking at a continuing medical education event reportable?

A: Speaker compensation at continuing education event such as Continuing Medical Education (CME) conference is not required to be reported by an applicable manufacturer if all of the following criteria are met:

1.) the CME program meets the accreditation or certification requirements and standards of the Accreditation Council for Continuing Medical Education, the American Academy of Family Physicians, the American Dental Association’s Continuing Education Recognition Program, the American Medical Association, or the American Osteopathic Association;

2.) the applicable manufacturer does not select or suggest the covered recipient speaker nor does it provide the third party vendor with distinct, identifiable individuals to be considered as speakers for the accredited or certified continuing education programs; AND

3.) the applicable manufacturer does not directly pay the covered recipient speaker.

Q: What items or materials are considered education materials and are not reportable transfers of value?

A: Education materials and items that directly benefit patients or are intended to be used by or with patients are not reportable transfers of value. Additionally, the value of an applicable manufacturer’s services to educate patients regarding a covered drug, device, biological, or medical supply are not reportable transfers of value. For example, overhead expense, such as printing and time development of educational materials, which directly benefit patients or are intended for patient use are not reportable transfers of value.

This Q & A page contains a bounty of easily understandable information, assuming you can find it. In keeping with the government’s penchant for confusing precision, the term “Sunshine Act” appears nowhere on the page. The official title is: “National Physician Payment Transparency Program Subtopic: Open Payments.”

This is the main page for Open Payments (synonymous with “Sunshine Act”) which contains a link to the “Frequently Asked Questions Page.”  You must then click a third link to get to the link above and then the information should flow freely.

OIG Opinion on Federal ‘Carve Out’ May Implicate ACOs

A year ago, I wrote in this column an article discussing Stark Law/Anti-Kickback Statute (AKS) and AMA Ethics Implications that may not be obvious in forming ACOs. I warned, “The question under Stark Law and the Anti-Kickback Statute isn’t the referral or treatment of patients covered within the ACO. The question is the referral of everyone else.”

Last month, I wrote the problems inherent in the limited waivers of Stark Law, the AKS, and civil monetary penalties law applicable to ACOs and the Medicare Shared Savings Program. The waivers are “limited” because the waivers only protect physicians and other participants in an ACO from fraud and abuse enforcement for activities “reasonably related” to the ACO Medicare patients.  Most practitioners who join an ACO will treat both ACO patients and non-ACO patients.  The shared savings program only works because some members of the ACO are being paid less than the expected expenditures. (In other words, someone in losing money. That’s where the savings comes from.) The shared savings program itself creates a financial incentive to make up the loss in income through cross referrals of other patients covered by federal plans.  That’s a problem.

 On June 7, 2013, the HHS Office of the Inspector General (OIG) issued Advisory Opinion No. 13-3 which may render it all but impossible for ACO participants to refer “other patients” without fear of AKS liability. I would ask you to read Opinion 13-3 to get the facts, but essentially a “parent laboratory” offered “turn-key” laboratories to physicians groups (termed “physician group laboratories” ) managed by the Parent Laboratory, which also operated other labs in the area. The plan was to “carve out” federally insured patients from being referred by the physician group to the physician group laboratories. But the physician group could refer those federal patients to the parent company’s other labs.  The referrals wouldn’t be encouraged, but wouldn’t be discouraged.

Would these “other referrals” potentially violate the AKS?

The OIG answered “yes,” there is likely a violation.  As a threshold matter, “we must address whether the ‘carve-out’ of federal business is dispositive of the question of whether the proposed arrangement implicates the Anti-Kickback statute.” We conclude it is not.” In other words, “carving out” the federal business does not eliminate the AKS problem.

The OIG explained, although the physician group laboratories would bill only for services for non-federal healthcare program patients, participation in the proposed arrangement may increase the likelihood that physicians will order services from the parent laboratory for federal healthcare program beneficiaries. This may occur for reasons of convenience, to demonstrate commitment to the parent laboratory and potentially secure more favorable pricing on private pay services. “Thus, we cannot conclude that there would be no nexus between the potential profits the physician groups may generate from the private pay clinical laboratory business, on the one hand, and orders of the parent laboratory’s services for federally insured patients, on the other.” Finally the OIG expressed concern that the financial incentives offered through the private-pay clinical laboratory business under the proposed arrangement are likely to affect a physician’s decision making with respect to all of his or her patients, including federal healthcare program beneficiaries, potentially resulting in the overutilization of laboratory services generally and increased costs to the federal health care programs.

Reading Opinion 13-3, simply replace “proposed arrangement” with “ACO Shared Savings Program.”  The same reasoning applies. The problem isn’t the physician group’s referral of ACO Shared Savings Program beneficiaries (they are “carved out” by waivers). The problem is the referral of “everyone else.”  

I certainly cannot reconcile the shared savings program with the reasoning of Opinion 13-3.  Using the language of the opinion: “the Proposed Arrangement [is] likely to affect a physician’s decision making with respect to all of his or her patients, including federal healthcare program beneficiaries, potentially resulting in the overutilization of services generally.” Add to this, the fact that many states, including my home state of Texas, have enacted state AKS laws which apply to every person, not just federally beneficiaries. Simply put, there is no “carve out,” because federal waivers do not apply to state laws.

This is not to suggest the “sky is falling” on ACOs. The problem I am describing is really no different that the “cost shifting” which has taken place since the federal Emergency Medical Treatment and Active Labor Act (EMTALA) required hospitals to lose money by treating all emergency room patients regardless ability to pay. The government has always looked the other way as hospitals made up the difference in losses by overcharging everyone else. The OIG and CMS will review the waivers after 2014 to see what can be improved. I am suggesting that there must be some attempt to reconcile Opinion 13-3 with the reality of how the Medicare Shared Savings Program actually works.

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Employer Mandate Delay: The Path to a Single-Payer Healthcare

This week, preventive and climacteric medical specialist, author, and healthcare speaker Elizabeth Lee Vliet offers Physicians Practice readers insight into the real reason behind the delay of the employer health insurance mandate in the Affordable Care Act, which she will share in a much anticipated presentation at the International Health Strategies Conference 2013, held this year, October 6-10 in Tucson, Ariz.

Martin Merritt:

I previously wrote about the delay in the employer mandate in July. You suspect there is more to the delay than simply allowing employers time to adjust?

Elizabeth Lee Vliet:

The employer mandate requires that businesses with more than 50 full-time employees must provide health insurance for all employees, and that insurance must meet the new standards set forth in the new law. Businesses that do not comply must pay a financial penalty for each employee, which for large companies can run into the millions of dollars annually.

To understand the reason for this “selective enforcement,” we must first understand this fact: President Barack Obama wants a single-payer healthcare system in the U.S. This is not a secret. In 2003, he said: “I happen to be a proponent of a single-payer healthcare system for America, but as all of you know, we may not get there immediately.” In 2007, he said: “But I don’t think we will be able to eliminate employer-based coverage immediately. There is potentially going to be some transition time.”

MM:

So the Obama Administration’s hidden agenda in delaying the rollout of the employer mandate appears to be a ploy to move us even faster to a full government-run, single-payer medical system in the U.S.?

ELV:

Most definitely. By forcing individuals to purchase compliant healthcare plans but not forcing employers to provide those plans, Obama is creating a swell of 10 million to13 million workers that must enroll in health insurance, but cannot obtain it from their employers. These workers thus have no choice but to use the government-controlled health insurance exchanges, or else pay a financial penalty. This will double the number of workers forced to get health insurance on the exchanges. That, in turn, leads to massive cost-shifting onto the backs of taxpayers subsidizing the health insurance exchanges, rather than having businesses pay for employees’ health insurance.

Higher taxes are the result. Individuals are also facing 20 percent to 100 percent increases in their private health insurance premiums for 2014 to pay for the expanded mandates of Obamacare required coverage. That means workers no longer getting health insurance from their employer will be paying far more for individual coverage. Squeezed from both directions, it is obvious that all this will collapse on itself. At that point, there will be no other option but for the government to step in and save the day, which is what the Obama administration wanted all along.

MM:

It almost sounds like an episode of “I Love Lucy,” where Lucy wants to steal the show, but needs Ricky to think it was actually his idea to cast Lucy in the starring role. She prevails, not because she is best suited for the job, but because she is the only option left?

ELV:

Obama and his party advocates sold the healthcare “reform” to the public by saying “reform” would increase competition and patient choice. But the perverse incentives, draconian regulations, and massively complex and unworkable law is a clever disguise for the real goal: to drive people out of private, employer-provided insurance, as a stepping stone to a government-run, single-payer system. Once we know the ultimate goal, the purpose behind the delay of the employer mandate seems clearer — to hurry the “transition time” away from employer-based health insurance and push more workers into the arms of government control to reach their dream of a single-payer system.

For more from Vliet on this issue, read her recent post on the Association of American Physicians and Surgeons’ website, or go to Vliet’s educational website.

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Physicians Should Take a Closer Look at Group Purchasing Organizations

If you have been approached by someone seeking your investment or participation in a group purchasing organization (GPO), be careful. Just because there is a “GPO Safe Harbor,” doesn’t mean all GPOs are safe.

Before you make any decisions, consider the HHS’ Office of Inspector General (OIG) Advisory Opinion 13-09  (July 23, 2013). There are as many ways to structure a GPO as there are restaurant napkins upon which to write business models.

Without delving too deeply into the mechanics, a group purchasing organization (GPO) is like a farmers’ cooperative. The idea is that a group of purchasers (members/hospitals) pool resources to buy in bulk from suppliers at a discount.  The GPO is funded by administrative fees that are often paid by the vendors not the buyers and usually limited to 3 percent of the purchase price, which cover’s administrative overhead. If there is any left over from this fee, it is distributed to the members. As explained in CMS guidance, when a GPO passes through a portion of its administrative fees to its members, those members are required to treat such distributions as “discounts” or “rebates.”  Two Anti-Kickback Statute (AKS) safe harbors are normally used to protect GPO activities: the GPO safe harbor, 42 C.F.R. § 1001.952(j), and the discount safe harbor, 42 C.F.R. § 1001.952(h). As a general rule, GPOs whose members are paid a flat rate, such as under a DRG system, usually have a low incidence of abuse.

As revealed in the recently released Advisory Opinion, the scheme at issue was slightly more creative: The GPO proposed to offer members an equity interest in the GPO’s parent organization in exchange for the member 1.) extending its contract with the GPO for five years to seven years; 2.) committing not to decrease purchasing volume; and 3.) relinquishing its right to a portion of the administrative fees that would otherwise have been passed through to the members. Also, the split of the “administrative fees” between members depended upon maintaining purchasing levels. Essentially, there are two potential problems here: one, the distribution of administrative fees; and two, the transfer of equity in the parent company to the members who promised to “keep up the good work” of buying from the GPO.

The OIG determined this could potentially violate the AKS, depending upon intent. The GPO safe harbor excludes from the definition of “remuneration” certain fees paid by vendors to GPOs. The proposed arrangement at issue, however, involves not only fees paid by vendors to the GPO, but also remuneration transferred between the requestor and the GPO members, which would not be included in the protection of the GPO safe harbor. When a GPO gives anything of value to its members to induce the members to order federally reimbursable products under the GPO’s contracts, the AKS statute is implicated. The equity interest is a form of remuneration that would not meet any safe harbor to the AKS. It is not a discount, because it is not a reduction in price on items or services. While administrative fees passed through to GPO members could be treated as discounts on the price of goods sold by the vendors, and the GPO and GPO members could meet the reporting and other requirements of the discount safe harbor, the same is not true of an equity interest in the parent company of the GPO.

According to the OIG, three other key elements, in combination, increase the risk of fraud and abuse posed by this particular proposed arrangement:
• First, the requestor would require members accepting an equity interest to extend their contracts by five years to seven years.
• Second, the equity interest offered would be tied to past purchases.
• Third, under this extended contract, members would not be permitted to decrease their volume of purchases under the GPO contracts.

Thus, members would be locked in to a contract for five years to seven years, regardless of whether the GPO is getting them the best prices.

In sum, not all GPOs are created equally, and not all schemes involving a GPO are protected by the GPO Safe Harbor. As with any AKS issue, each proposed arrangement must be scrutinized by an experienced health lawyer who can provide an opinion as to the legality of the arrangement.

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The Paradox of ACO Waivers of Medical Fraud and Abuse Laws

The Medicare Shared Savings program, Section 1899 of the Social Security Act, is designed to achieve three goals: Better health for populations, better care for individuals, and lower growth in expenditures.

Effective November 11, 2011, the agencies responsible for administering the law issued an Interim Final Rule containing five waivers related to accountable care organizations (ACOs), which at first blush, would appear to protect all activities related to the formation and operation of an ACO under the Shared Savings Program.

Each waiver contains a very detailed list of things which must be true for the waiver to apply:

1. An “ACO pre-participation”waiver of the Physician Self-Referral Law, the federal Anti-Kickback Statute, and the Gainsharing CMP that applies to ACO-related start-up arrangements in anticipation of participating in the Shared Savings Program;

2. An “ACO participation” waiver of the Physician Self-Referral Law, federal Anti-Kickback Statute, and the Gainsharing CMP that applies broadly toACO-related arrangements during the term of the ACO’s participation agreement under the Shared Savings Program and for a specified time thereafter;

3. A “shared savings distributions” waiver of the Physician Self-Referral Law, federal Anti-Kickback Statute, and Gainsharing CMP that applies to distributions and uses of shared savings payments earned under the Shared Savings Program;

4. A “compliance with the Physician Self-Referral Law” waiver of the Gainsharing CMP and the federal Anti-Kickback Statute for ACO arrangements that implicate the Physician Self-Referral Law and meet an existing exception; and

5. A “patient incentive” waiver of the Beneficiary Inducements CMP and the federal Anti-Kickback Statute for medically related incentives offered by ACOs under the Shared Savings Program to beneficiaries to encourage preventive care and compliance with treatment regimes.

These waivers add a second type of protection where fraud and abuse laws would otherwise be implicated: 1.) the arrangement could always fit within an existing safe harbor of the Anti-Kickback Statute or Stark Law; and 2.) failing that, a waiver could apply. The text of the rule makes clear, “The waiver authority under section 1899(f) is limited to sections 1128A  and 1128B  and title XVIII of the Act,  and does not extend to any other laws or regulations, including, without limitation, the Internal Revenue Code (IRC) or State laws and regulations.” 76 FR 67994.

Wait, wait, wait …these waivers actually have no effect on state laws, such as the Texas Illegal Remuneration statute (similar to the Anti-Kickback Statute), nor do they affect the AMA Ethics Opinions which might form the basis of a complaint before the medical board?

That means the waivers are virtually worthless as a defense to an ethics complaint that a hospital, for example, is paying a doctor not to treat his patient (that’s why there is a “Gainsharing CMP provision” in the first place,) nor to a state anti-kickback allegation that an ACO is providing free blood pressure cuffs to reduce the chance of hospitalization.  The waivers also have no effect on state laws which prohibit the corporate practice of medicine, or fee-splitting between say, an IT company who invests in the ACO and a group of physicians who control it.  Worse, in states which have anti-kickback statutes similar to the federal rule, ACO shared savings arrangements remain a crime in many states.

To be sure, the idea is “the sword of the parent is rarely stained with the blood of its child.” The CMS and Office of the Inspector General aren’t going to punish those ACOs who are making bona fide attempts to follow the law. But the feds have no control over state and federal False Claims Act Whistleblowers (the government can decline to participate, but that’s it), state attorneys general enforcing state laws, or state medical boards who are enforcing AMA ethics rules which form the basis for Stark Law and the Anti-Kickback Statute.

The closest analogy I might give would be the case of marijuana laws, where the roles are reversed: a state says it is legal, but the federal government says it isn’t. There is a certain comity between governments at the state and federal level in some cases, but the Affordable Care Act is so divisive, it is hard to know what will happen if a medical board were to enforce the AMA rules literally.

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Healthcare Reform Mandate Delay: History Repeating Itself

The Obama administration announced July 3, 2013, that it is giving large employers another year before it will try to enforce an Affordable Care Act (ACA) provision requiring large employers to offer medical coverage to their workers or pay a fine.

The large-employer mandate is intended to force larger employers to do their part to reduce the number of uninsured Americans. The individual mandate is designed to force individuals who have some ability to pay, to pay what they can, with the balance being picked up by the federally subsidized health insurance marketplace. The Society for Human Resource Management provides a nice detailed explanation of the employer mandate.

The large-employer mandate ignores the financial reality that any large employer (who also owns a calculator) can figure out that it is actually cheaper to forego coverage and pay the $2,000 fine, than to offer health insurance to all full-time workers (defined as 30 or more hours per week). It is anticipated that the employer mandate will backfire, and will additionally burden the federal government, which likely must pay the difference between the fine and the actual cost of all these newly uninsured employees who would be added to the roles of Medicaid, or driven to the subsidized health insurance exchange/marketplace.

Understand too, that the idea of employer-provided coverage came into full vogue during WWII, when there were no workers to be found (the men, and women, were all fighting and serving overseas). In order to deter “wage inflation,” (more war dollars chasing fewer workers naturally leads to “wage inflation”) the government imposed “wage freezes,” but exempted a certain percentage of wages being paid in fringe benefits, such as healthcare. Today, we have the opposite problem. There are too many workers chasing too few jobs. This leads to wage and benefit “deflation.” Employers, particularly employers of low-skilled workers, do not need offer benefits to find workers.

The official version of why the rollout of the employer mandate has been delayed was described as “employers needed more time.” Perhaps the real reason has a bit more history behind it.

Nearly 200 years ago, on August 24, 1814, British troops sailed up the Potomac and set fire to the White House. In school we were taught that this, perhaps the worst of all national embarrassments, was unavoidable (and at least we won the war.) In the 2012 book, “White House Burning, The Founding Fathers, Our National Debt, and Why it Matters to You,” authors Simon Johnson and James Kwak offer a different perspective. In 1812, Congress voted to do something very expensive, then went home; where members quickly learned that if they tried to use taxes to pay for the war effort, they certainly would not be returning to Congress the following term. Washington was left virtually undefended; because we didn’t raise enough money to provide a defense – and we got burned.

Johnson and Kwak observe our highly polarized political system is on the course set by the 1812 Congress: higher spending without higher taxes. Although the American people in 1812 got the message the British delivered, and raised taxes in 1813 and 1814, today, we have no such messenger. 

Raising taxes to cover the costs of Medicare and Medicaid is frustrated by the fact that many voters do not understand what the federal government actually does. According to a 2008 survey, 44 percent of people who receive Social Security retirement benefits say they “have not used a government program.” The figure is 40 percent for Medicare recipients, and 43 percent of those receiving unemployment benefits. People who do not realize they benefit from the government’s largess, naturally think the government is too big, theirtaxes should be lower, spending should be lower, but unsurprisingly feel their favorable programs should not be touched. Anyone not following this clearly understandable, albeit illogical voter mandate will be punished at election time.

Thus, in passing Obamacare, Congress and the president tried to “slip one past us” (and the Supreme Court called them on it). The individual mandate, (and the employer mandate by extension) is a really a “tax.” The delay in the employer mandate buys Democrats at least one more election term to think of something more clever – and they likely will.

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How ERISA Affects Medical Practices

The Employee Retirement Income Security Act of 1974 (ERISA) is one of the most unusual and fascinating of all federal laws. Originally intended to protect employee benefits and pensions, ERISA was supposed to be helpful to employees.

In a twist of judicial interpretation, ERISA provides the basis for health insurance companies to deny employee benefit claims with impunity. ERISA Section 514 preempts all state laws that relate to any employee benefit plan, with certain, enumerated exceptions. The U.S. Supreme Court has created another limitation on the insurance exception, in which even a law regulating insurance will be pre-empted if it purports to add a remedy to a participant or beneficiary in an employee benefit plan that ERISA did not explicitly provide. This means state laws providing a penalty against bad faith insurance claims practices, deceptive trade practices, fraud, misrepresentation, and even attorney’s fees are preempted.

Simply put, ERISA somehow stepped through the looking glass where everything is backward. Employee benefit protection became a license to cheat beneficiaries. Governments and charities were excluded from ERISA, which was supposed to benefit them. Instead, governments and charities are the only employers who can be sued for punitive damages and attorneys fees for bad faith claims practices.

Many commentators observe, that judicial decisions under the ERISA have been so constrictive and anti-employee, over such a long time, that it can now be said that participants in employer-sponsored pension and health insurance plans would have been better off, on balance, if the statute had never been enacted. Given that the act’s stated purpose was to protect benefit plan participants, this is a surprising conclusion to have to reach. Nonetheless the argument is strong, and is validated in part by the thousands of cases that have accumulated in which plan participants/plaintiffs have been forced to argue ERISA does not apply to their claims, as a precondition to salvaging those claims.

More recently the battle over ERISA has moved into the area of benefit review audits, as I wrote in January. [Providers fighting back] There, I cited the case of Tri3 Enterprises v. Aetna,  where Aetna, administering an employer-provided plan authorized insertion of a DME device. After the horse had left the barn, a Special Investigations Unit (SIU) reversed the authorization and denied payment (because it determined the equipment to be “experimental,” and therefore not covered by the plan.) In order to attempt to get paid, the providers who took assignment of benefits had to argue ERISA does apply (which is usually a good thing for the health plan). Health plans paradoxically argue that ERISA applies to prevent a patient from suing for extra-contractual damages (punitive damages and attorneys fees); while arguing ERISA does not apply to claims filed by a provider who is merely suing for the face amount of the claim.

If this sounds confusing, it is. In fact, if you were to envision someone plucking petals from a daisy, while chanting “ERISA loves me, it loves me not,” you would have a far better understanding of how the law works than Congress did 1974.

The way all of this works in the real world is, however, far simpler. If a patient is covered by an employer-provided plan, and the plan denies a claim, ERISA likely applies, (unless the employer is the government or a charity.)

In the absence of ERISA, the patient could hire a lawyer without paying up front, because most states allow the recovery of attorney’s fees. But ERISA forbids the recovery of anything but the amount of the benefit. This has the practical effect of taking plaintiff’s lawyers out of the equation. While a patient has little incentive to hire a lawyer out of pocket, the provider who has accepted an assignment of benefits certainly does. ERISA provides the framework for making such a claim. Unlike the patient, if the provider wins, the provider leaves with money in its pocket.

ERISA’s claims procedure and preemption of punitive damages and attorney’s fees has stood the test of time because as a matter of policy, many people do not like the idea of tort lawyers suing for huge punitive damage awards. However, most everyone is in favor of some simple mechanism for at least recovering the amount of the charges. More recently, states have been carefully crafting slow-pay laws, which thread the needle between what is considered a “coverage dispute,” from a distinct dispute over merely the timing of payment; not whether the benefits were covered.

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ABMS: Maintenance of Certification ‘Means Something’ to Patients

A few weeks ago, I interviewed Jane Orient from the Association of American Physicians and Surgeons (AAPS) regarding a lawsuit the group filed against the American Board of Medical Specialties (ABMS) over the latter’s maintenance of certification (MOC) process.

I wanted to give equal time to Lois Margaret Nora, MD, JD, MBA, president and chief executive officer of ABMS, for her perspective on the issue. Nora said she was “happy to speak at any time about the significant value ABMS member board certification brings to patients, their families, and the medical profession.”

Martin Merritt:

Is the matter of whether or not a voluntary MOC program should continue one that needs to be decided in a court of law?

Lois Margaret Nora:

ABMS member board certification is voluntary. Patients and members of the medical profession, including physicians who choose to participate in the MOC program as well as hospital and other healthcare decision makers, rely on certification and MOC as benchmarks of quality. The patients who rely on it are in the best position to judge the value of the program. The evidence demonstrates that from the patient’s perspective, “board certification genuinely means something.” Board certification and MOC speak to, and are tools which build, “patient trust.” Patient trust is crucial in the physician-patient relationship.

MM:

Critics charge that board certification has recently begun to replace the “license to practice medicine” as the standard of competence in a way which harms competition.

LMN:

Board certification and medical licensure are different and I never expect that certification will replace licensure. Board certification is an important way of providing information to a patient, but it is not the only way of establishing that a physician is worthy of patient trust. Board certification is a voluntary program that supplements other means of evaluating quality. The fact that many hospitals rely upon board certification as a standard of excellence speaks favorably of the program’s value.

MM:

Can you cite an example where the absence of a system of board certification might negatively affect patient choice?

LMN:

Yes. Board certification is a system that provides professionals, hospitals, and patients with information about physicians’ qualifications. Without board certification, there would be less information available for decision making. We believe hospitals and patients appreciate the fact that a voluntary system is in place which provides relevant information about a physician’s adherence to the highest standards of excellence.

MM:

What about the situation alleged by the AAPS regarding certain highly qualified physicians? I believe the example was a physician who runs a charity clinic caring for thousands of patients, but who lacks the time or resources to devote to maintenance of certification?

LMN:

I really can’t comment on the specific allegations in the lawsuit. However, what I can say is that ABMS and its member boards work very hard to make board certification both relevant and valuable. Physicians are very busy and need to balance all of the demands of today’s medical practice; we believe that ongoing learning and assessment are important elements of continuous professional development for all physicians, even in our very complex practice environments.

Editor’s Note: ABMS Maintenance of Certification is a registered trademark.

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Stark Law: Understanding the Rule

This morning, I awoke to find that my cat “Peppy” had become ill on top of the papers in a notebook I keep at home covering Stark Law. Although I have left work papers open many times over the years, Stark Law is apparently the only thing which makes even my cat “throw up.” Recognizing nearly every physician despises Stark Law, (and ever the “contrarian”) I decided to devote this week’s column toward an explanation of the rationale behind Stark Law. According to Stephen Covey (The “7 Habits” guy), a person can more easily live with any “thing,” provided he is given a “why.” 

Stark Law is a “conflict of interest” statute which does not prohibit a physician from earning a “fee- for- service” (FFS) which is to be directly performed by the prescribing physician (or by someone in his office or group practice. ) When a patient simply presents for treatment, (and there is no illegality in the referral) acting alone a physician (or those within his office or group) simply cannot violate Stark Law through the in-house treatment of a patient, because there is no “outside referral” to someone else.

A Stark Law violation then, must necessarily involve a medical referral of a patient between physician and at least one other “outside” entity; such as a physician and a hospital, or two physicians not in the same group practice, where a prohibited financial, or compensation arrangement exists between them. Under Stark Law, the referral must be by a physician involving one of the enumerated Designated Health Services  (DHS) which is covered by Medicare or Medicaid. Stark Law is based almost entirely upon the AMA Code of Medical Ethics Opinion on “Conflicts of Interest” which is now Opinion 8.0321.

The concept of a financial gain from “outside referral” (and only an “outside referral”) was singled out as inherently “bad” by drafters of the AMA Code of Ethics. Why then, is so much focus placed upon “outside” referrals between at least two separate entities, while internal referrals within a group are plainly not restricted at all? The answer has to do with ethical concerns over “patient trust,” and the very practical need that a physician should do nothing to give the outward appearance that he or she might be interested in anything other than providing the patient the best possible care.

The accepted ethics model originally held that a patient should come to a physician by word of mouth (advertising was forbidden.) A diagnosis was reached from listening to the patient history, and observing the symptoms, and in some cases, in-house testing. All the physician need do was “listen,” and the patient together with a few necessary tests, would “reveal” the diagnosis. Even though a physician would naturally earn a living wage for himself,  plus expenses of facilities and staff, (and this could be said to provide a “perverse incentive” in any patient encounter) these financial concerns were to be expected (and largely unavoidable.) Then too, it would be impossible to draw a line between necessary in-house ancillary testing, labs and diagnostics, from those which could, or should be outsourced through outside referral.

Here is the “tricky part.” “Outside referrals” were forbidden for much the same reason as the prohibition against a physician paying another person a fee for a referral (“fee splitting.) In either case, it is thought to be impossible to avoid the “outward” appearance that the physician might in fact, be looking at the referral as a money-making opportunity.

While internal referrals are discreet, if not “covert,” outside referrals are decidedly plainly visible and “overt.” Simply put, regulation of in-house treatment decisions would require a regulator standing between the physician and patient in the examining room, a condition which was simply anathema to the old-guard AMA. Regulation of “conflicts of interest” in “outside” referrals, conversely, did not require standing between the patient and the physician in the office examining room.

To the cynic, this might imply “hypocrisy,” but the rationale is far more entrenched. “Professionalism” required doctors to comport themselves with equanimity in the face of all manner of human concern, not simply financial. Just as doctors are often permitted to freely come and go by the “bad guys” into any police standoff to treat any gunshot victim, criminal or civilian; so too, uniformed military personnel wearing a red cross arm band were not expected to attack the enemy, even if the opportunity presented itself. “Trust” then, was not only for the patient’s benefit, it often meant the difference between a doctor walking out alive, or getting shot.

Thus, in passing Stark Law, Congress not only codified the AMA Code of Ethics, it adopted a higher ethical principle to save money. Stark Law does not forbid internal referrals within an office or group. Stark Law actually punishes the outward manifestation of a referral as a money-making opportunity.

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