NOVEMBER 2014 Visit us now online at www.NJPhysician.org
Enforcing Post-Employment Restrictive Covenants Choosing the Right Path for Your Practice; Considering the Risks, Rewards and Benefits of Your Practice Business Model New Jersey Assembly Approves Assisted Suicide Bill
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Contents
Enforcing Post-Employment Restrictive Covenants
CONTENTS
8
Choosing the Right Path for Your Practice
11
New Jersey Assembly Approves Assisted Suicide Bill
12
Hospitals, Doctors Fighting Effort to Limit Their Bills
13 Doctors’ Offices Must Be Wary of Data Breaches As Use of
Electronic Records Grows
16 Health Care Spending Reached $2.9 trillion in 2013 18 Medicare Pay Cut Looms Despite Positive Steps in CMS Rule 19 McKesson Appoints Harris as Executive Director of ACO Services
4 New Jersey Physician
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November 2014 5
Cover Story
Enforcing Post-Employment Restrictive Covenants By Paul H. Schneider, Esq., Giordano, Halleran and Ciesla
I
n New Jersey, courts will enforce a post-employment restrictive covenant in a physician employment contract “to the extent that it protects a legitimate interest of the employer, imposes no undue hardship on the employee, and is not injurious to the public.” A sharply divided New Jersey Supreme Court issued that directive in the 1978 decision of Karlin v. Weinberg, and as the years passed many lawyers and trial court judges expected the Supreme Court would reverse course when it next considered the issue again. But in a 2005 decision, Community Hospital Group, Inc. v. More, a unanimous Court reiterated that “[a]lthough post-employment restrictive covenants are not viewed with favor, if under the circumstances a factual determination is made that the covenant protects the legitimate interests of the hospital, imposes no undue hardship on the physician and is not injurious to the public, it may be enforced as written or, if appropriate, as reduced in scope.” The Court concluded that such covenants protect not only employers, but physician employees as well, because a blanket prohibition on post-employment restrictive covenants would “tend to make established physicians hesitant to employ younger associates and in turn deprive the younger physician of the opportunity to gain experience and to husband the necessary resources needed to establish a practice of his own.” Karlin v. Weinberg. Courts will enforce restrictions on office locations, and covenants limiting the hospitals at which a physician may practice. So much for the legal theory. How do these cases 6 New Jersey Physician
play out in the real world? First, judicial enforcement of restrictive covenants is not automatic. Rather, courts engage in a case-specific factual inquiry in which the employer seeking to enforce the covenant has the burden of persuading the court that enforcement of the covenant satisfies the three-prong test of reasonableness. Second, trial courts may be reluctant to enforce covenants out of concern for potential hardship to the former employee or sympathy for patients who may find it more difficult to see their physician of choice. Regardless of what side you may find yourself on, it is important to keep in mind the factors courts may consider in deciding whether and how to enforce a restrictive covenant. 1. Legitimate interests of the employer. An employer should typically be able to satisfy this criterion. The legitimate interests of the employer may include, among other things: “(1) protecting confidential business information, including patient lists; (2) protecting patient and patient referral bases; and (3) protecting investment in the training of a physician.” Community Hospital Group v. More. With regard to patient lists, the Supreme Court recognized that “by virtue of his efforts, expenditures and reputation” an employer may develop a significant practice, and that only if the restrictive covenant is enforced would he be able to protect in some measure his legitimate interest “in preserving his ongoing relationship with his patients.”
Karlin v. Weinberg. Referral sources are a particularly sensitive area. Referrals from hospital referral networks may make up a significant portion of a practice’s business, and may sometimes be the “lifeblood” of the business. Referral networks result from relationships nurtured between referring physicians and protecting relationships with referral sources, and the investments an employer makes in employees towards the creation of referral sources are legitimate interests of the employer. The fact that the physician subsequently treated patients who had been patients of the hospital or were referred to the physician from one of the hospital’s referral sources also establishes a legitimate protectable interest in enforcement of the restrictive covenant. Community Hospital Group v. More. An employer may also make a “substantial investment” in the physician by “giving him the opportunity to accumulate knowledge and hone his skills” as a physician. Paying for continuing education, certifications or malpractice insurance are also investments in which an employer has legitimate protectable interest. Community Hospital Group v. More. 2 No undue hardship on the physician employee. The second prong of the “reasonableness” test requires that the restriction impose no undue hardship on the employee. An employer may point out that a “showing of personal hardship,
While these restrictions were upheld on the basis of a case-specific factual analysis, they do provide a useful rule of thumb as to what the courts may consider reasonable.
without more, will not amount to an ‘undue hardship’ such as would prevent enforcement of the covenant.” Karlin v. Weinberg. The employee may note that “the likelihood of the employee finding other work in his or her field” is a factor courts may consider in Community Hospital Group v. More. The reason for the termination may also be relevant. A case where the employee “by his conduct” contributed to the termination, or where the employer carefully adheres to a notice of termination provision in an employment agreement, are both situations arguably weighing in favor of enforcing the covenant. On the other hand, where the employer terminates the employee in breach of the employment contract or by actions that are detrimental to the public, then enforcement of the restriction may cause undue hardship on the employee. 3. Harm to the public. The third prong of the “reasonableness” test requires that enforcement of the restriction not harm the public. On this issue, courts may focus on the patient’s interest in maintaining the relationship with her physician of choice without undue inconvenience. Yet in Karlin v. Weinberg, the Court recognized that although the restriction would require some of the physician’s patients to travel a greater distance to the new office (and some conceivably a shorter distance), no patient would, by force of law, be automatically preclud-
ed from continuing his or her ongoing relationship with the physician. Also, while the Supreme Court has acknowledged “the importance of patient choice in the initial selection and continuation of the relationship with a physician,” the Court rejected the argument that the personal nature of the physician-patient relationship means restrictive covenants are per se contrary to the public interest. Community Hospital Group v. More. Rather than focusing on preserving the individual physician-patient relationship, the Supreme Court instead took more of a “physician as commodity” approach, looking generically at the demand for the services provided by the employee physician, the likelihood those services could be provided by other physicians practicing in the area, and whether enforcement of the covenant would result in a shortage of physicians or physician specialists in the area. 4. Duration and geographic scope The duration and geographic scope of a restrictive covenant must also be reasonable. “On its face two years appears to be a reasonable period for [an employer] to replace and train a person to assume [the employed physician’s] prior role.” Community Hospital Group v. More. A companion case, Pierson v. Medical Health Centers, also upheld a two year post-employment restrictive covenant. As for geographic distance, the Supreme Court has upheld geographic limitations of 12 and 13 miles.
An analysis of the enforceability of a restrictive covenant could lead a court to limit the geographic scope or temporal duration of a covenant to make it reasonable. For example, in Community Hospital Group v. More, the Court enforced the covenant at the employer hospital but also considered the impact of a thirty-mile geographic restriction on patients seeking neurological treatment at the emergency room of another hospital within the thirty-mile radius. Because there were so few available board-certified neurologists that “neurological treatment to an emergency room patient could be compromised” by fully enforcing the covenant, the Court reduced the geographic scope of the covenant to thirteen miles and allowed the physician to practice at the other hospital in order to avoid harm to the public. 5. Enjoining of violation of the covenant. Faced with an employee who disregards a covenant, an employer wishing to enforce the restriction has little choice but to sue for an injunction. In order to obtain injunctive relief, an applicant must demonstrate (1) immediate, substantial and irreparable harm, (2) a likelihood of success on the merits, and (3) a balancing of the equities favors granting the injunction. Crowe v. DeGioia. In the case of restrictive covenants, items (2) and (3) would largely parallel the analysis as to the enforceability of the covenant discussed above. That leaves the question of irreparable harm. “Irreparable harm” is a substantial injury that cannot be adequately addressed by monetary damages alone. Harm is irreparable when a party’s monetary damages cannot be accurately quantified or otherwise ascertained, such as when there is “no certain pecuniary standard for the measurement of the damage,” Scherman v. Stern TA \l “Scherman v. Stern, 93 N.J. Eq. 626, 631 (E. & A. 1922)” \s “Scherman v. Stern, 93 N.J. Eq. 626, 631 (E. & A. November 2014 7
1922)” \c 1 . In New Jersey, courts have found that violation of an otherwise enforceable restrictive covenant will result in irreparable harm to the employer because while the injury is real and immediate, it is difficult, if not impossible, to quantify in monetary terms. While not dispositive, an employer may wish to include an acknowledgement in the employment agreement that breach of the covenant will result in immediate and substantial harm to the employer that cannot be readily quantified, and that injunctive relief is appropriate.
6. Conclusion. Courts will enforce a post-employment restrictive covenant in a physician employment contract upon finding that it protects a legitimate interest of the employer, imposes no undue hardship on the employee, and is not injurious to the public. Yet, such covenants “are not viewed with favor,” and courts may be reluctant to enforce a covenant or may scale back a covenant as a condition of enforcement. Each case will turn its own facts and the challenge faced by the employer or former employee will be to marshall its facts effectively.
Hospital Rounds
Choosing the Right Path for Your Practice; Considering the Risks, Rewards and Benefits of Your Practice’s Business Model By Ruth Harris Executive Director, ACO Services-McKesson Business Performance Services
W
ith healthcare is in the throes of change. I am continually having conversations with physicians who are faced with making a decision about the future of their practice. Unlike any time before in our healthcare system, physicians have the opportunity to engage in innovative care delivery models -models that offer fair compensation to our providers, reduction of costs to our healthcare system, and efficiency and quality of care to our patients. The success of organized groups hinges on the ability to keep the patient out of highcost settings while maintaining a high quality of care. These models create new incentives, pushing a degree of financial responsibility onto the physician with the intention to reduce costs for both the payers and system alike.
Barraged with offers and conversations, physicians are being targeted by hospitals and medical groups, who are seeking to increase participation within their organizations. Physicians 8 New Jersey Physician
are now faced with the difficult and burdensome task of choosing a model of transformation that allows their practice to continue offering quality of care, while simultaneously maintaining financial stability in an ever-changing marketplace. These new care models, which demonstrate quality and care efficiencies, represent new forms of healthcare delivery and are referred to as Integrated Care Delivery Systems. The Integrated Care Delivery model’s primary focus is on preventable care. These systems come in a variety of structures, creating difficulty in choosing the most appropriate solution. What are my choices? “So many options, so little time for me to explore the answers” seems to be a common statement from independent practice leaders. To start, consideration should be given to determine the value of remaining an autonomous practice versus the benefits and support of an organization, which can bring knowl-
edge of delivery systems and established practices to your group. It is important to remember, disruption in your system creates innovation, which in turn creates new models of care that should be explored by all physicians and providers. Accountable Care Organizations ACOs continue to garner increasing attention. The Centers for Medicare and Medicaid Services established the ACO initiative, which tasks physicians with improving the quality of care for patients, while lowering the absolute cost. Payers and providers share responsibility in providing quality, decreasing costs, and consequently sharing in the financial savings. ACOs are clinically integrated networks, which share savings with the payer through improved quality of care and reduction of cost. ACOs come in many sizes and shapes. If you have determined that an ACO is a care delivery model that you want to participate in, be sure to explore differ-
ent ACO models. Do you want to join a hospital-run ACO, which could involve the merging or acquisition of your practice with the hospital; or a physicianlead ACO, which allows you to remain independent, and shares savings through new negotiated contracts? The latter stated models are merely examples of a plethora of options, which all have debatable pros and cons. Joining any ACO model will also require the transformation of your practice. The reporting requirements and care delivery model must be considered. If you already are a PCMH and have achieved success in Meaningful Use of an EMR, the transformation should come easier for you. However, you must be aware that in any model, the change will take willingness and dedication in managing your practice in order to meet the expectations defined by ACO leadership. Donald M. Berwick, former administrator for CMS, stated, “(An) ACO will work because it is set up to reward the right combination of goals for our time: transparency, coordination, consumer power, and intolerance of waste.” Berwick also noted that failure of ACOs was most often attributed to lack of capital and the shortage of staff to support the infrastructure of the ACO. An underfunded ACO will continually struggle to solvency. ACO’s without the alignment of a supporting management team have had difficulty in meeting both quality benchmarks and generating shared savings, both essential to the sustainability of a model. In short, capital, solid infrastructure and dedication are required to make the model successful for patients, providers and payers. IPA, MSO, PHO Independent Physician Associations (IPA), Managed Service Organizations (MSO), and Physician Hospital Organizations (PHO) are alternative options that often provide support through contracts, technology, products and staff, to relieve physicians of many of the burdens associated with running a practice. These organizations can provide health delivery systems, contract negotiations, education and joint risksharing, while promoting collaboration among physicians. Organizations such as these may be less restrictive than the ACO model for physicians,
but often are fragmented and lack the momentum to offer significant benefits to each practice. But like ACOs, infrastructure and financial support are critical to the success of these alternative organizations. These organizations are often attractive to payers, and therefore can create lucrative value-based contracts, while also allowing a degree of autonomy within the individual practices. Independent physicians are able to develop a collaborative position with payers, which leads to innovative agreements, creating success for the practice, and reduced costs for the payers. Super groups Single or multi-specialty groups have also begun to emerge. These groups range from 15 plus providers, with varying geographic ranges. These practices, which in the past may have competed against each other, are now forming homogenous groups, sharing operating structures, and creating significant market presence that competes with larger organized institutions. These super groups have financial benefits due to both their size and leverage with payers, hospitals and vendors; additionally, many super groups have been successful in developing new revenue streams through the inclusion of ancillary services. Super Groups and other Physician Associations offer providers the ability to remain autonomous while receiving the benefits of a larger group. Joining one of the latter stated groups brings unique advantages as well as risks to a practice. For example, participation in these groups may require re-credentialing to a common tax identification number for billing purposes. Credentialing can be an arduous and laborious task, creating the possibility of larger issues if the group disassembles, requiring the unwinding and identification of provider numbers to regain billing and financial independence. This process can have significant impact on revenue if not done in a proper and timely manner. Lastly, organizational structure must be considered. Questions such as, will physicians be compensated less, will there be higher overhead costs created by new technology and initiatives, or
will there be transparency in reporting, are all valid points to consider during the decision-making process. Additional questions should be asked contingent upon whether the Super Group is a complete merger or a division model. (This model allows a group to keep control over some parts of a practice, such as staffing or billing.) And in all cases, professional advice should accompany any decision to participate. Triple Aim The Triple Aim is an approach designed by The Institute for Healthcare Improvement. The Triple AIM has three critical objectives: • Improve the patient experience of care • Improve the health of populations • Reduce the per capita cost of health care The Triple Aim design should be considered when evaluating the mission and strategic plan for any group. The Institute for Healthcare Improvement states, “Organizations that attain the Triple Aim will have healthier populations, in part because of new designs that better identify problems and solutions further upstream and outside of acute health care.” Strategic alignment with the Triple Aim ultimately will provide healthcare solutions that will support collaborative efforts with other providers, provide measurable results for contract negotiations and support better health for the communities involved. Evaluate Whichever path a provider may choose, it’s important that the outcome should be to improve care while reducing costs. High quality healthcare outcomes while reducing healthcare costs will inevitably produce financial November 2014 9
Hospital Rounds benefits for any group; sustainability will hinge upon proper infrastructure and excellent leadership. Evaluation of exit strategies, your ability to achieve success in the group’s reimbursement models, and financial and managerial support, is imperative before entering into any group. • With any group a physician may choose the following should be considered: • Does the group have strong leaders who will motivate the participants, or are the participants weak, leaving some providers to carry the burden of others? (Highly motivated physician leaders will create success.) • How long will it take to realize a financial benefit? • Is this model sustainable? Due diligence of all aspects is required, including the costs associated with both the transformation of your practice and integration of care. • Do you have an exit strategy with a termination clause included in your contract, ideally affording you flexibility and choice? • Did you explore existing payer contracts that the group may have? Will you be successful in these arrangements?
10 New Jersey Physician
(i.e., compare the cost per member/patient to the practice, with the monthly payment per member/patient.) In conclusion, integrated care management focusing on preventive care will be the primary goal for future contracts. Practices should be prepared to shift from volume-based reimbursements to value-based reimbursements and to embrace new tools and technology for clinical integration of care, population health management, and quality benchmarking, which in turn will support evidence-based clinical care design. Lastly, remember that data and the ability to evaluate improvements are critical to success in this new healthcare marketplace. As our healthcare system continues to evolve and develop new models of care, so will the options for physicians. Providers will always be unsure of what the future holds, but the need for change is certain. The only question left to ask is which option is best for you?
Ruth Harris is the executive director, ACO Services, at McKesson Business Performance Services. She may be reached at Ruth.Harris@McKesson.com.
Hospital Rounds
New Jersey Assembly Approves Assisted Suicide Bill Measure Would Create Process To Allow Terminal Patients To Choose End Of Life Option
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ew Jersey’s Assembly approved a bill Thursday that would allow physicians to prescribe life-ending drugs to terminally ill patients. The 41-31 vote came after the measure was pulled from consideration in June. The bill establishes a procedure for patients to request to end their lives. A second doctor would have to certify the original terminal diagnosis and confirm the patient is capable of making the decision to die without pressure from others. In addition, the attending physician would have to offer the patient a chance to rescind their request. A consulting physician would then be called upon to certify the original diagnosis and reaffirm the patient is capable of making a decision. A patient must have a prognosis of six months or less to live to request and be prescribed medication under the bill. “This discussion is about revisiting a statute last looked at in 1978 that never took into account an individual’s right to control their body and their circumstances,” said Assemblyman John Burzichelli, one of the bill’s co-sponsors. “Like society, medicine, palliative care and hospice services have changed dramatically since then. While there are many choices available right now that may be right for certain people, there is one more choice, not currently available, that deserves an honest discussion. “One thing is clear by all the polling and public testimony taken: that in New Jer-
sey, a majority of people would like to have another option along with balance of care and hospice,” Burzichelli told WCBS 880′s Sean Adams. “It doesn’t mean that they would necessarily choose it.”
Specifically, the legislation would provide that a patient may make a written request for self-administered medication in order to end his or her life in a humane and dignified manner if the patient:
As CBS2′s Hazel Sanchez reported, Janet Colbert, who is suffering from a rare and incurable form of liver cancer, was at the state capitol to show her support for the bill.
• Is an adult resident of New Jersey.
“I would like to know that I had a choice if it goes a way that I’m not comfortable with, or the pain in unmanageable,” she said. But opponents have said life expectancy estimates are often wrong, and the bill is a recipe for elder abuse. “If the patient has the prescription and does not want to take it, we have no way of knowing whether that person is being forced to take it,” said Marie Tasy, executive director of the group New Jersey Right to Life. “I felt all the legislators who voted for the bill today were very irresponsible,” Tasy added. “The bill is riddled with loopholes. There is so much room for abuse of the disabled and the elderly.” Added Dr. Ana Denisita Gomes, a general practitioner: “This bill completely eradicates what the role of a physician is. We’re a healer. We’re not killer.” The bill defines a “terminal disease” as an incurable and irreversible disease that has been medically confirmed and will, within reasonable medical judgment, result in a patient’s death within six months.
• Is capable and has been determined by the patient’s attending physician and consulting physician to be suffering from a terminal disease. • Has voluntarily expressed a wish to die. The bill additionally would require that the patient’s attending physician, at the time the patient makes an initial oral request for medication under the bill, recommend that the patient participate in a consultation concerning additional treatment opportunities, palliative care, comfort care, hospice care and pain control options, and provide the patient with a referral to a health care professional qualified to discuss these options. The vote came week after physicianassisted suicide advocate Brittany Maynard ended her life under an Oregon law allowing terminally ill people to choose when to die. Maynard, 29, defended her decision last month to CBS News’ Jan Crawford. “Cancer is ending my life,” she said. “I am choosing to end it a little sooner and in a lot less pain and suffering.” “Statistics from other states that have enacted laws to provide compassionate aid in dying for terminally ill patients November 2014 11
Hospital Rounds indicate that the great majority of patients who requested medication under the laws of those states, including more than 90 percent of patients in Oregon since 1998 and between 72 and 86 percent of patients in Washington in each year since 2009, were enrolled in hospice care at the time of death,” Burzichelli said. “This suggests that those patients had availed themselves of available treatment and comfort care options available to them at the time they requested compassionate aid in dying.” The bill now awaits further action by the Senate. Gov. Chris Christie has said he opposes the measure. Burzichelli said he is not discouraged by Christie’s opposition to date. “The bill doesn’t leave here today and go to his desk,” the assemblyman said. “And things change over time. So I would hope, as it continues to make its way through, a better understanding is hand by all.”
Hospitals, doctors fighting effort to limit their bills By Lindy Washburn
T
he state’s hospitals and physicians are pushing back against an insurance industry effort to limit what they can charge for care provided to patients whose insurance they don’t accept. They’ve formed a coalition and are demanding that insurance companies be forced to reveal how little they pay for some medical services. At issue are the bills for out-of-network care — the care provided by doctors and hospitals who don’t have a contract with a patient’s insurance plan that sets the fees they can charge. Doctors say insurers set their out-of-network reimbursement rates arbitrarily and pay less than it costs to provide the care. “The sale of out-of-network health policies is one of the biggest scams out there,” said Lawrence Downs, the chief executive officer of the Medical Society of New Jersey, representing the state’s doctors. “The amount of money they pay is severely lacking.” He cited the example of a young patient who had an operation by an out-of-network surgeon to remove part of a rib. The surgeon billed $14,000 for the procedure. The patient’s family paid their policy’s deductible and co-insurance, totaling between $1,500 and $2,000, Downs said. The insurer then paid $67 — the balance, it said, of the fee it deemed reasonable, which it set at 125 percent of the Medicare reimbursement. 12 New Jersey Physician
“This guy is paying additional money every month for the out-of-network coverage, and they pay $67,” Downs said. But insurance companies and union health plans say that some health care providers are price-gouging — and use high out-of-network charges to pad their profits. They’ve set up their own group to enlist public support, called NJ HURT. They too have stories to tell – like the one about the $8,200 bill from an emergency room to bandage a finger — no stitches included. A state Assembly panel headed by Assemblyman Craig J. Coughlin, D-Middlesex, has held a series of hearings on the subject this year, and plans to consider legislation that would protect consumers from surprise bills. When insurers settle the high out-of-network claims, the cost is passed on to consumers in the form of higher premiums. And in about half of cases, the patient may have to settle the claim himself. The Medical Society works with union health funds to mediate some disputes that arise when out-of-network charges are particularly egregious, he said. He noted that physicians sometimes have been dropped from insurer networks against their will. Last year, for example, UnitedHealthcare, the nation’s largest insurer, terminated dozens of contracts with doctors who treat Medicare Advantage customers.
Hospital Rounds The New Jersey Hospital Association, another member of the newly formed coalition, said hospitals will soon begin handing out a written notice to patients when they are admitted, letting them know the patient is responsible to find out whether a doctor who treats them at the hospital accepts their insurance coverage. Anesthesiologists, emergency physicians, radiologists and pathologists are among the specialists whose fees may not be governed by a hospital’s contract with a managed-care company; patients are sometimes surprised to receive high bills from them after they’ve been discharged from an in-network facility. “These independent doctors charge separately for their services and may not be in your insurance network,” the new notification, approved by the association, states. “Bills received from these doctors are in addition to the bill you will receive from” the hospital, it reads. The head of the insurance-industry association said that doesn’t solve any problems faced by consumers. “People on stretchers don’t ask about network status or price, nor should they have to,” said Ward Sanders, president of the New Jersey Association of Health Plans. He said it reminded him of a notice at a restaurant coat check that the restaurant is not responsible for lost or damaged coats. “Just saying you aren’t responsible for something doesn’t make it so,” he said. Concerns about how much consumers must pay out-of-pocket are growing as new plans offered through the Affordable Care Act achieve cost savings by directing patients to limited networks of hospitals. Some do not cover care received at out-of-state or non-network hospitals. Others provide a higher level of reimbursement — 90 percent — when a patient goes to a preferred hospital, and 50 percent for other in-network hospitals. “We need to make sure the patient is fully aware of his or her cost-sharing responsibility,” said Neil Eicher, the hospital association’s vice president for government affairs. Besides the hospital association and medical society, the coalition includes professional groups representing radiologists, podiatrists, pathologists, neurosurgeons, family physicians, orthopedists, plastic surgeons, osteopathic physicians, and doctors of physical medicine and rehabilitation.
Doctors’ offices must be wary of data breaches as use of electronic records grows By Beth Fitzgerald
As physician practices switch from paper charts to electronic medical records, they’re coming under more pressure to guard against data breaches that deliver sensitive patient records and valuable personal information into the hands of hackers. November 2014 13
Hospital Rounds Nelson Gomes is chief executive of PriorityOne Group, which specializes in providing information technology for medical facilities. He said he’s concerned that small physician practices, which are the norm throughout New Jersey, aren’t doing enough to safeguard patient information. Federal law requires medical facilities to protect the privacy and security of patient records and in 2013 that rule was extended to the business associates of medical facilities. Gomes said a small medical practice “needs to understand that just because they are small doesn’t mean they aren’t targets; in fact, they may just be easier targets.” He tells clients that safeguarding patient data is a continuous commitment. Physicians need to have a plan in place and be able to demonstrate that it’s working: “Your staff needs to be trained and you should be able to prove and document that your staff is trained on how to deal with a breach.” The public hears on almost a daily basis about data breaches at big national retailers like Target. Data breaches at small physician practices get less media attention, in part because each incident may involve only a few thousand patient records, or may go undetected, according to a report on physician practice data security by the IT consulting firm Spruce Technology in Clifton. According to Spruce Technology, “With a strong data security strategy in place and the right person designated as data security officer, physicians’ practices and other small health care organizations can go a long way toward protecting themselves and their patients.” Anthony Curro, chief executive of Spruce Technology, said hackers increasingly “are looking at doctor practices, which have an incredible amount of data. Vigilance (to protect that data) needs to continue to grow — and I think we are starting to see that happen.” SriniPenumella, managing partner of Spruce Technology, said data security “is a combination of people, processes and technology.” He said for a small 14 New Jersey Physician
physician office “there are (IT security) tools that they can implement, and that they can afford.” He said physicians “may not be aware of the tools that are available, or think it’s too much of a hassle to change their existing system. But if you look at the benefits, it’s really doable and accessible.” Jarrett Farrell is vice president of business development at the Flemington insurance agency Cedar Risk Management. Farrell pointed out that, when a data breach occurs, the physician practice will typically provide free credit monitoring for a year — which he said can cost between $250 to $400 per patient. “Those numbers can add up pretty quickly.” One strategy he recommends is cyberliability insurance protection to help cover the costs incurred after a data breach. Sean Keegan is director of benefit services at Cedar Risk Management, which develops health benefits plans for employers. “We deal with paperwork that has personal information, and we use encrypted emails when we are conversing with an insurance carriers, or changing someone’s coverage,” Keegan said, “Everything is going back and forth in encrypted files: there’s no more paper faxes sitting around on machines.” But not all physician offices have embraced encryption, experts said. And that can become a weak link that is compounded by the human error factor. Farrell said his company was called in recently by a dental practice that had lost a laptop. “Someone was at Starbucks doing work on a Saturday. They got up and came back and their laptop was stolen. All the patient information was there — and it did not have the encryption that should have been there.” Princeton attorney Helen Oscislawski specializes in regulatory matters, with an emphasis on compliance with the
main federal law covering the privacy of patient information: the Health Insurance Portability and Accountability Act, or HIPPA. She pointed out that, since 2008, there have been a growing number of settlement agreements stemming from HIPPA enforcement actions brought by the federal government, resulting in fines paid by health care organizations. “Some of the lessons learned are that you have no excuse other than to implement encryption,” she said. She said physicians need to spend more time on prevention of data breaches. “Physicians are not fully aware of what they need to do, because still to this day there is a huge lack of education.” She said physician practices may rely on outside IT vendors to provide them with security technology — but when something goes wrong, the physician group is responsible. “This really is a collaborative effort and, at the end of the day, neither the physicians nor the (IT) vendor should be pointing fingers. Both need to take ownership and responsibility.” Darryl Neier, who heads the forensic accounting/litigation group at Sobel& Co., said data breaches in the health care space are on the rise “because the people who are perpetrating these crimes will go where the data is” — and health care is a treasure trove of personal data. He said health care providers have to be accountable for how they safeguard that data and, in the event of a breach, they have to be prepared to answer questions like: “How are you protecting your data, how are you locking this down — and are you allowing this to happen?”
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Hospital Rounds
Health care spending reached $2.9 trillion in 2013, government says By Beth Fitzgerald
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ealth care spending maintained its “low growth,” according to a report.
Health care spending in the U.S. grew 3.6 percent in 2013, reaching a total of $2.9 trillion, or $9,255 per person, the federal Centers for Medicare & Medicaid Services announced Wednesday. CMS said U.S. health spending has maintained what it called a “pattern of low growth” — between 3.6 percent and 4.1 percent — for five consecutive years. The report by the CMS Office of the Actuary is being published Wednesday in the journal Health Affairs. The report said the rates of national health spending growth coincide with growth in the Gross Domestic Product, which averaged 3.9 percent per year since the end of the recession in 2010. The share of the economy devoted to health remained unchanged over this period at 17.4 percent. “This report is another piece of evidence that our efforts to reform the health care delivery system are working,” said CMS Administrator Marilyn Tavenner. “To keep this momentum going, we are continuing our efforts to shift toward paying for care in ways that reward providers who achieve better outcomes and lower costs.” Total national health spending slowed from 4.1 percent growth in 2012 to 3.6 percent in 2013. The report attributes the 0.5 percentage point slowdown in health care spending growth to slower growth in private health insurance, Medicare and investment in medical structures and equipment spending. However, faster growth in Medicaid spending helped to partially offset the slowdown. Other findings from the report: • Medicare spending, which represented 20 percent of national health spending in 2013, grew 3.4 percent, to $585.7 billion, a slowdown from growth of 4.0 percent in 2012. • Spending on private health insurance premiums (a 33 percent share of total health care spending) reached $961.7 billion in 2013, and increased 2.8 percent, slower than the 4.0 percent growth in 2012. The slower rate of growth reflected low enrollment growth in private health insurance plans, the continued shift of enrollees to high-deductible health plans and other benefit design changes, low underlying medical benefit trends and the impact of the Affordable Care Act.
• Medicaid spending grew 6.1 percent in 2013, to $449.4 billion, an acceleration from 4.0 percent growth in 2012. Faster Medicaid growth in 2013 was driven in part by increases in provider reimbursement rates, some states’ expanding benefits and early Medicaid expansion. • Out-of-pocket spending (which includes direct consumer payments such as copayments, deductibles, spending by the insured on services not covered by insurance and spending by those without health insurance) grew 3.2 percent in 2013, to $339.4 billion, slightly slower than annual growth of 3.6 percent in both 2011 and 2012. • Among health care goods and services, slower growth in spending for hospital care and physician and clinical services contributed to slower growth in national health care spending in 2013. However, faster spending growth for retail prescription drugs in 2013 partially offset the overall slowdown. • Hospital spending increased 4.3 percent, to $936.9 billion, in 2013, compared with 5.7 percent growth in 2012. The lower growth in 2013 was influenced by slower growth in both price and non-price factors (which include the use and intensity of services). Growth in private health insurance and Medicare hospital spending decelerated in 2013 compared to 2012. • Spending for physician and clinical services increased 3.8 percent in 2013, to $586.7 billion, from 4.5 percent growth in 2012. Slower price growth in 2013 was the main cause of the slowdown, as prices grew less than 0.1 percent. Growth in 16 New Jersey Physician
Hospital Rounds
spending from private health insurance and Medicare, the two largest payers of physician and clinical services, experienced slower spending growth in 2013, while Medicaid growth accelerated as a result of temporary increases in payments to primary care physicians. • Retail prescription drug spending accelerated in 2013, growing 2.5 percent, to $271.1 billion, compared with 0.5 percent growth in 2012. Faster growth in 2013 resulted from price increases for brand-name and specialty drugs, increased spending on new medicines and increased utilization. • In 2013, households accounted for the largest share of spending (28 percent), followed by the federal government (26 percent), private businesses (21 percent) and state and local governments (17 percent). Since 2010, the share of health spending financed by the federal government decreased — from 28 percent to 26 percent in 2013. At the same time, the share financed by state and local governments increased — from 16 percent in 2010 to 17 percent in 2013. Kerry McKean Kelly, spokeswoman for the New Jersey Hospital Association, said: “The report shows that hospital spending has grown as the demand for health care services continues, but that growth has slowed considerably. There are many factors at play in that slowdown in spending, including efforts by hospitals to reduce costs and operate more efficiently. Part of that was a planned, concerted effort by hospitals to streamline operations and provide better care at less cost. However, some of that slowdown was really forced on the hospitals by ongoing cuts, particularly in Medicare reimbursement under the Affordable Care Act and sequestration.” Christine Stearns, vice president for health and legal affairs for the New Jersey Business & Industry Association, said: “I’m happy to hear that health care spending nationally grew at a modest rate. However, small employers in New Jersey are telling me that they saw a much bigger cost increase.” She said the NJBIA’s 2014 Health Benefits Survey found that the amount of that increase corresponds to the size of the company: the smallest employers saw the biggest jump, with an average cost increase of 24 percent for those with fewer than 25 employees. “At the end of the day, employers are committed to providing health care coverage if it’s affordable,” she said. November 2014 17
Hospital Rounds
Medicare pay cut looms despite positive steps in CMS rule, doc groups say By Andis Robeznieks
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hysicians cheered and jeered parts of a lengthy final rule (PDF) the CMS issued last week that includes Medicare’s 2015 physician fee schedule and also revises the agency’s policies on telehealth and paying different rates for the same service depending on where it was delivered. Looming over all of it, however, was the potential that physician payments will be subject to a 21.2% cut driven by Medicare’s sustainable growth-rate payment formula on April 1 unless Congress intervenes. The rule was released last Friday evening, and Anders Gilberg, the Medical Group Management Association’s senior vice president for government affairs, said he was handing out Halloween candy when he received his first call about the rule.
Specifically, the rule calls for paying for “clinical staff time directed by a physician or other qualified healthcare professional, per calendar month, with the following required elements: multiple (two or more) chronic conditions expected to last at least 12 months, or until the death of the patient; chronic conditions place the patient at significant risk of death, acute exacerbation/decompensation, or functional decline; comprehensive-care plan established, implemented, revised, or monitored.” Karen Ferguson, senior director of public policy for the American Medical Group Association, said the organization plans to survey its members in 2015 to see if they are using the new chronic care-management codes or if the requirements for doing so “have proven to be too onerous.”
“We’re still looking through it,” Gilberg said this week, but he noted that the creation of a monthly care-management fee for patients with two or more chronic conditions is one of the highlights of the rule.
The CMS noted that it would be doing some monitoring of its own. “We intend to evaluate this service closely to assess whether the service is targeted to the right population and whether the payment is appropriate for the services being furnished,” the agency stated in the rule.
The CMS set the fee at $42.60, according to a fact sheet on the rule, and backed away from a previously proposed requirement that only physicians using 2014 edition-certified software would be able to collect the fee. The final rule allows doctors using 2011 edition EHRs to collect the fee as well.
The agency also clarified that the 481 practices participating in the CMS Comprehensive Primary Care Initiative would not be eligible for the care-management fee because they already receive a per-member, per-month fee for similar service as part the federal government’s mega medical home demonstration.
Physician groups are commending the CMS for rewarding care coordination, but they’re also expressing concern that administrative burdens associated with documenting nonface-to-face management services could outweigh the benefits of the new payment. Shari Erickson, vice president of governmental affairs and medical practice for the American College of Physicians, said the internal medicine specialty society believes the care-coordination fee should be higher “given the level of work involved.”
The rule also set a fee of $56.92 for remote monitoring of patients with chronic conditions and issued new payments for annual wellness visits and psychotherapy (including family sessions) delivered via telehealth.
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“It has been a long time coming, but this rulemaking signals a clear and bold step in the right direction for Medicare,” Jonathan Linkous, CEO of the American Telemedicine Association, said in a news release.
Hospital Rounds To the relief of specialists, the CMS announced maintaining current payments for gastroenterological procedures and for hip- and knee-replacement surgeries, which were the subject of sharp price reductions in the recent fee schedules. The MGMA’s Gilberg, however, questioned the CMS plan to phase out bundled 10-day and 90-day global payments for post-surgical services and to have separate billing for different services such as treating complications, managing pain, and removing sutures and staples, lines, wires, tubes, drains, casts, and splints. “It’s a strange step in the opposite direction toward bundled payments that CMS had been taking,” Gilberg said. The agency acknowledged this concern in the rule but said that there are “fundamental difficulties” in establishing appropriate values for global payments for post-surgical care and a “po-
tential to create unwarranted payment differentials among specialties.” The CMS also took action on the Medicare Payment Advisory Commission’s recommendation for site-neutral reimbursement for similar services delivered in different settings. MedPAC wants to make rates the same whether the patient is seen in a hospital or a physician’s office. The CMS plans to study the issue by creating new codes designating whether services were provided off or on a hospital campus so it can examine the trends in Medicare payment and beneficiaries’ cost-sharing as hospitals acquire physician practices and bill services they deliver as hospital-based outpatient care. Gilberg noted that the issue has gained some steam because the concept of site-neutrality payments has been floated as a method for paying for the
repeal of the sustainable growth-rate formula. While the CMS plan to study the issue has merit, Gilberg said Congress needs to seize the opportunity to repeal the SGR during the upcoming post-election “lame-duck” session that takes place before new members are seated in January. The MGMA has advocated for putting back in play a bipartisan, bicameral bill to replace the SGR that appeared headed for passage this past spring before disagreements over how to cover the $138 billion cost killed the measure last March. Gilberg said it’s unlikely a new Congress will be able to come up with new legislation before cuts take effect April 1, so he said it would be politically expedient for the Republicans to get something passed this year. If they wait, Gilberg said, Republicans “will own this issue lock, stock and barrel.”
McKesson Appoints Harris as Executive Director of ACO Services Ruth Harris has recently joined McKesson Business Performance Services, a division of McKesson Corporation, as Executive Director, ACO Services. In her role, Harris is the principal liaison between the Accountable Care Organization (ACO), physician groups and payers. Through her leadership she is responsible for providing administrative leadership and management of the ACO.
bachelor degree in criminal law and is a medical billing and coding member of the American Academy of Professional Coders. She also holds certifications with Health Care Compliance Association, and Fraud and Abuse Compliance.
Harris brings extensive experience in medical practice management with expertise in revenue cycle and operations management, regulatory compliance, human resource management, managed care contracting, electronic health record management and practice start-ups.
McKesson Corporation, currently ranked 15th on the FORTUNE 500, is a healthcare services and information technology company dedicated to making the business of healthcare run better. We partner with payers, hospitals, physician offices, pharmacies, pharmaceutical companies and others across the spectrum of care to build healthier organizations that deliver better care to patients in every setting.
Previously she held the position of President/Managing Partner of Source One Medical Management where she successfully led the overall business development and management of the company. She also developed and directed the healthcare division for Source One Services specializing in medical practice management billing and collections for physician groups. Harris is an accomplished healthcare professional with a
About McKesson Corporation
McKesson Business Performance Services helps its customers improve their business and clinical performance with revenue cycle, practice management, ACO services and healthcare information technology solutions designed to achieve better business health. For more information, visit www.mckesson.com/bps. November 2014 19
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