March 2014

T h e O f f i c i a l P u b l i c a t i o n o f t h e Lo s A n g e l e s Co u n t y M e d i c a l A s s o c i a t i o n

A PUBLICATION OF PNN www.PhysiciansNewsNetwork.com

The Changing Relationships with

PHARMA DEVICES

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MARCH 2014

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A N o r c A l G r o u p c o m pA N y

M A R CH 2014 | TA B LE OF CONT ENT S

Volume 145 Issue 3

8 16

6 COVER STORY

DEPARTMENTS

Changing 12 The Relationships

6 transitions | career management

with PHARMA & DEVICES

The introduction of the Sunshine Act and its intent to bring transparency of financial ties between medical device and drug makers and physicians demands a changing relationship between the two entities. We will highlight key considerations physicians need to be aware of and take a closer look at how hospitals are responding to the complicated changes by bringing innovation in-house that could spell potential reward for physicians.

A look at the questions and challenges associated with various stages of your medical career

8 Front Office | Practice Management Tips, hints, advice and resources

From Your Association 4

President’s Letter | marshall morgan, MD

16 CEO’s Letter | Rocky Delgadillo

Physician Magazine (ISSN 1533-9254) is published monthly by LACMA Services Inc. (a subsidiary of the Los Angeles County Medical Association) at 707 Wilshire Boulevard, Suite 3800, Los Angeles, CA 90017. Periodicals Postage Paid at Los Angeles, California, and at additional mailing offices. Volume 143, No. 04 Copyright ©2012 by LACMA Services Inc. All rights reserved. Reproduction in whole or in part without written permission is prohibited. POSTMASTER: Send address changes to Physician Magazine, 707 Wilshire Boulevard, Suite 3800, Los Angeles, CA 9001 7. Advertising rates and information sent upon request.

M A RC H 2014 | w w w. p h y s i c i a n s n e w s n e t w o r k .c o m 1

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sional association representing physicians from every medical specialty and practice setting as well as medical students, interns and residents. For more

LACMA Officers President

President-elect Treasurer Secretary

than 100 years, LACMA has

Immediate Past President

been at the forefront of current medicine, ensuring that its members are represented in the

CMA Trustee

Councilor - District 9

Councilor - District 2

med student Councilor/usc keck Councilor-at-large

young physician councilor

ment relations and community

Councilor - District 5

cma trustee

ethnic physicians commitee representative Councilor - District 1

Councilor - District 17

efforts in both Los Angeles

Councilor - District 14

County and with the statewide

Chair of LACMA Delegation

California Medical Association,

Councilor - District 6

your physician leaders and staff

Councilor-at-large

Councilor - District 7

strive toward a common goal– that you might spend more time treating your patients and less time worrying about the challenges of managing a practice.

Marshall Morgan, MD Pedram Salimpour, MD Peter Richman, MD Vito Imbasciani, MD Samuel I. Fink, MD LACMA BOARD OF DIRECTORS

areas of public policy, govern-

relations. Through its advocacy

Christina Correia 213.226.0325 | christinac@lacmanet.org Kirk Bennett 925.272.0857 | kbennett@physiciansnewsnetwork.com Dari Pebdani 858.231.1231 | dpebdani@gmail.com David H. Aizuss, MD Troy Elander, MD Thomas Horowitz, DO Robert J. Rogers, MD

Councilor-at-large Councilor - SSGPF

Councilor - District 3

Councilor - District 10 Councilor - SCPMG

Alternate med student Councilor/ucla RESIDENT/FELLOW Councilor cma trustee

Alternate Resident/Fellow Councilor Councilor-at-large

Councilor-at-large

cma trustee (resident)

David Aizuss, MD William Averill, MD Boris Bagdasarian, DO Erik Berg Stephanie Booth, MD Steven Chen, MD Jack Chou, MD Troy Elander, MD Hector Flores, MD C. Freeman, MD Sidney Gold, MD William Hale, MD David Hopp, MD Fred Ziel, MD Lawrence Kneisley Kambiz Kosari, MD Howard Krauss, MD Maria Lymberis, MD Carlos E. Martinez, MD Nassim Moradi, MD Ashish Parekh, MD Jennifer Phan Heidi Reich, MD Peter Richman, MD Sion Roy, MD Michael Sanchez, MD Nhat Tran, MD Sion Roy, MD

LACMA’s Board of Directors consists of a group of 30 dedicated physicians who are working hard to uphold your rights and the rights of your patients. They always welcome hearing your comments and concerns. You can contact them by emailing or calling Lisa Le, Director of Governance, at lisa@lacmanet.org or 213-226-0304.

Subscriptions Members of the Los Angeles County Medical Association: Physician Magazine is a benefit of your membership. Additional copies and back issues: $3 each. Nonmember subscriptions: $39 per year. Single copies: $5. To order or renew a subscription, make your check payable to Physician Magazine, 707 Wilshire Boulevard, Suite 3800, Los Angeles, CA 90017. To inform us of a delivery problem, call 213-683-9900.

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P R ES ID ENT ’S LET T ER | MA R S HA LL MOR GA N, M D

Thi s i s i m p orta nt. The Medical Injury Compensation Reform Act, MICRA, was passed by the Legislature and signed by Governor Brown during his first term in response to a statewide crisis in the availability of malpractice insurance. The cause of the crisis was an epidemic of malpractice lawsuits associated with very high jury awards for non-economic damages (aka pain and suffering).

Most physicians now practicing did not experience those bad times, but we must not allow ourselves to become complacent: If we are not vigilant and strong, those bad days may return.

Among other provisions, MICRA caps awards for non-economic damages in medical lawsuits. It is a sensible statute that has protected physicians, hospitals, local governments and community clinics for three decades. MICRA is now under serious attack in the form of a dangerous ballot measure that will be on the ballot this November.

Should that measure pass, several bad things will happen. It will become easier and more profitable for lawyers to sue doctors and hospitals. The cost of malpractice insurance premiums for state and local government health systems, clinics run by charitable organizations, and private practitioners will increase dramatically. (The California Legislative Analyst estimates that, should the measure pass, costs to state and local government could increase by hundreds of millions of dollars.) As a result, this measure would have devastating effects on access to care for patients everywhere, but those who live in underserved areas would be particularly hard hit. Community healthcare clinics like Planned Parenthood and the Central Valley Health Network say this measure will cause specialists like OB/GYNs to reduce or eliminate patient services. It could also cause doctors to leave the state, meaning thousands of Californians could lose access to their current physician.

4 PHYSICIAN MA G A Z INE | M A RC H 2014

I ask you to join me, CMA, and the Los Angeles County Medical Association in the campaign to save MICRA from this determined, deceptive and potentially disastrous assault.

The fight will not be easy or cheap. The trial lawyers are well funded, have hired extremely competent political operatives and are, predictably, using deceptive tactics to mislead voters.

The measure will be presented as a “Patient Safety” initiative. You’ll hear a lot of rhetoric from the proponents of the measure about impaired doctors, but really this is only an effort to fool voters into thinking this is about something that it’s not. The non-MICRA provisions, like drug testing for doctors, were put into the measure to disguise the real intent, which is to increase the limits on medical malpractice awards so that trial lawyers make even more money.

In their signature-gathering efforts, which I have observed personally, they are mentioning only the first item, mandatory drug testing for doctors, to members of the public. This will be by far the major emphasis of their campaign in November – not because they believe it will improve patient safety but because it is popular (polls well) among samples of the electorate: They hope their real goal – raising the MICRA cap – will ride in on its coattails.

Overcoming their well-financed and deceptive campaign will be a challenge. We must meet that challenge. Your CMA is the key member of a powerful coalition formed to fight for the preservation of MICRA. An excellent political team has been recruited and is hard at work. This is a major political battle. Such battles require both money and grassroots participation. I urge you all to donate and participate. The CMA website has numerous resources with a lot of excellent information. A great place to start is www.cmanet.org/micra.

I urge you to speak to your colleagues. Ask those who aren’t members of LACMA and CMA to join. (There is strength in numbers.) Ask them to become knowledgeable about the issues and to become involved in the fight. This is important.

Marshall Morgan, MD, is a professor and chief of emergency medicine at the Ronald Reagan UCLA Medical Center and director of emergency medicine center at the David Geffen School of Medicine at UCLA. He is the 142nd president of the Los Angeles County Medical Association.

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transi t i ons | career management

Become a Federal Certified Medical Examiner Max Lebow, MD, MPH, FACEP, Medical Director, Reliant Immediate Care Medical Group

The National Registry of Certified Medical Examiners (National Registry) is a new federal

program that establishes requirements for healthcare professionals who perform biennial certain certification physical examinations for commercial truck and bus drivers. Beginning after May 14, 2014, only Certified Medical Examiners who have received authorized training and testing on the Federal Motor Carrier Safety Administration’s (FMCSA) standard safety guidelines for commercial truck and bus drivers may perform the certifying physical exams these drivers need as part of the Commercial Driver License process.

Initially meant to apply to At the current time, there is To become a Certified Medical commercial truck and bus drivnowhere close to the number Examiner (ME) and be listed on ers involved in interstate comof Certified Medical Examiners merce, many states, includthat will be needed after May the National Registry, healthcare ing California Department of 14, 2014. It is anticipated that professionals must: Motor Vehicles, have adopted those few Certified Medical these new federal rules requirExaminers will be very busy • Take a course by an Approved ing that many classes of comperforming exams that comTraining Organization and mercial drivers who operate mercial motor vehicle drivers be awarded a Certificate of only within the state, includwill need to continue working Completion ing such classifications as bus in their field.

• Register and receive a UPN drivers, may only be given an Once listed on the Nanumber on the FMCSA website official physical examination tional Registry, the doctor may and be certified by healthcare perform certifying physical ex• Take the Certificate, UPN numprofessionals who are listed on ams on interstate and Califorber, and a picture ID to a testthe National Registry as Certinia commercial motor vehicle ing center listed on the FMCSA fied Medical Examiners. drivers. website and pass the National Once a doctor has comHow do I find an approved Registry Exam pleted training and taken the training organization? official FMCSA exam, he/she Approved training may be will be listed on the National live oor online. To date, there Registry of Certified Medical Examiners. The official are very few training organizations offering approved National Registry website, located at http://nrcme.fmc- National Registry training. sa.dot.gov. This site is where commercial driving and Reliant Immediate Care Medical Group and Reliant bus companies go, as well as individual independent DOT Training is the first approved training organization commercial truck drivers, to find a health professional in Los Angeles (FMCSA Training ID# 2487572643). Rewho can do an official biannual physical exam. liant is offering one-day courses, along with 7.5 hours There are over 8 million interstate commercial mo- of AMA PRA CME Category I credit. Our next schedtor vehicle drivers in the US. Each of these drivers must uled classes is May 17, 2014. have an official physical exam biannually. This means To learn more about our Certified Medical Examinthat at least 4 million exams must be performed every er one day live training, visit our website www.relianyear. Since California has adopted federal rules and re- timmediatecare.com and follow the DOT Training link, quires healthcare professionals to be Certified Medical or send an email to DOTtraining@reliantmedicalcenExaminers, it is estimated that almost 1 million exams ter.com, or you may send me an email at MLebow@ will need to be performed in California each year. reliantmedicalcenter.com.

6 PHYSICIAN MA G A Z INE | M A RC H 2014

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Avoid Being Put on the RAC

By Kathleen Stillwell, MPA/HSA, RN, CPHRM, Patient Safety Risk Manager II, The Doctors Company

What is a RAC Audit? Any medical practice submitting claims to a government program, such

as Medicare, may contend with a Recovery Audit Contractor (RAC). RAC audits are not one-time or intermittent reviews; they are a systematic and concurrent operating process for ensuring compliance with Medicare’s clinical payment criteria, documentation, and billing requirements.

8 PHYSICIAN MA G A Z INE | M A RC H 2014

• Providers can avoid submitting claims that do not comply with Medicare rules.

• CMS can lower its error rate.

• Taxpayers and future Medicare beneficiaries are protected.

Who Is Subject to a RAC Audit?

• Hospitals.

• Physician practice.

• Nursing homes.

• Home health agencies.

• Durable medical equipment suppliers.

• Any provider or supplier that submits claims to Medicare.

Who is the RAC Auditor?

CMS has contracted with RAC auditors for each region in the United States. It is important to know who the RAC auditor is in your region. Never ignore a letter from one of these organizations. The United States is divided into four regions. Each region has a designated recovery audit contractor. California is in Region D. • Region A RAC Auditors: Performant Recovery, Inc., and subcontractor, PRG-Schultz USA, Inc. • Region B RAC Auditors: CGI Technologies and Solutions, Inc., and subcontractor, PRG-Schultz USA, Inc. • Region C RAC Auditors: Connolly Consulting

Associates, Inc., and subcontractor, Viant Payment Systems, Inc. • Region D RAC Auditors: HealthDataInsights, Inc. Las Vegas, Nevada, and subcontractor, PRG-Schultz USA, Inc. What Does the RAC Review?

The recovery audit looks back three years from the date the clam was paid. RACs are required to employ a staff consisting of nurses, therapists, certified coders, and a physician.

The RAC reviews claims on a post-payment basis.

There are three types of review: • Automated—no medical record needed.

• Semi-automated—claims review using data and potential human review of a medical record or other documentation.

• Complex—medical record required.

What Can You Do to Prepare for a RAC Audit?

Assess your risk for billing issues by performing a risk analysis of your billing practices. Assign a knowledgeable member of your staff to review your billing processes and to develop a billing compliance plan.

Consider hiring a contractor for this task. Identify billing issues, keep track of denied claims, and look for patterns and determine what corrective actions you need to take to avoid improper payments. Common billing errors include: • Inadequately trained staff.

• Lack of time.

• Did not follow recommendations in Federal Register bulletins.

• Did not consult Health and Human Services bulletins.

• Misinterpretation of rules.

• New staff/New billing company.

The person responsible for implementing the billing compliance plan should regularly monitor RAC progress in your region. Each RAC must maintain a website with information on new audit focus areas and the status of a provider’s audits. Areas to include in your assessment and monitoring plan include: M A RC H 2014 | w w w. p h y s i c i a n s n e w s n e t w o r k .c o m 9

front offi ce | practi ce management

The RAC program was signed into law by the Medicare Prescription Drug Improvement and Modernization Act of 2003 and made permanent by the Tax Relief and Health Care Act of 2006. Its purpose is to identify improper Medicare payments—both overpayments and underpayments. The RACs use proprietary software programs to identify potential payment errors in such areas as duplicate payments, fiscal intermediaries’ mistakes, medical necessity, and coding. RACs also conduct medical record reviews. In fiscal years 2010 and 2011, RACs identified half of all claims they reviewed as having resulted in improper payments.

The program’s mission is to detect and correct past improper payments so that the Center for Medicare and Medicaid Services (CMS) can implement actions that will prevent future improper payments:

P R ACT I CE M A NAG EMENT | FR ONT OFFICE

• Review denied claims categories by RAC audit.

• Keep abreast of notifications on CMS website.

• Review annual Office of Inspector General (OIG) work plan to identify audit areas.

• Monitor RAC progress at regional RAC (their web postings).

• Perform audit of your billing practices.

Potential Issues with Electronic Medical Records The OIG is studying the link between electronic medical record (EMR) systems and coding for billing.

There is a concern that some EMR systems may upcode billing through automatically generated detailed patient histories, cloning (when you cut and paste the same examination findings), and templates filled in to reflect a more thorough or complex examination/visit. Review these issues with your EMR company and determine if your EMR program has the potential to automatically upcode billing based on EMR documentation.

up with industry changes, understand denial and appeal processes, and be able to identify resources for support.

What to Do if You Are Audited Do not ignore a letter from the RAC auditor. It is recommended you have an attorney assist you with your response to an RAC audit. Check with your insurance company to determine if you can get help with the audit. The Doctors Company, for example, provides RAC audit legal assistance for all members as part of its MediGuard® coverage. Before you send records to the auditor, be sure to review them in a “self-review.” Are there common themes? Are you coding with the correct documentation? Make copies of everything you send to the RAC auditor and be sure to keep a copy of all documentation. Send medical records via certified mail.

Staying on top of the RAC audit process is important as there are multiple policies and procedures governing RAC audits. The RAC can request a maximum of 10 medical records from a provider in a 45-day period. The time period that may be reviewed has changed from four years to three years.

Responses are timesensitive, and significant penalties may result if they are not handled properly. RACs are paid on a contingency basis for overpayments and underpayments. If you agree with the RAC demand letter, you have the choice of paying by check or recoupment from future payments, or you may request an extended payment plan.

If a recoupment demand is issued, you may pay by check within 30 days with no appeal, allow re-

Establish compliance and practice standards and conduct internal monitoring and auditing to evaluate compliance. Conduct appropriate training and education for staff, and respond to deficiencies identified during internal audits.

Establish corrective action plans and enforce disciplinary standards when necessary.

Fundamentals for Compliance Establish compliance and practice standards and conduct internal monitoring and auditing to evaluate compliance. Conduct appropriate training and education for staff, and respond to deficiencies identified during internal audits. Establish corrective action plans and enforce disciplinary standards when necessary.

Medical billing is complex. Billers and coders must be knowledgeable about many areas pertaining to billing/reimbursement. Be sure your billing staff understands local medical review policies and is knowledgeable of practice jurisdictions. Billing personnel must stay current on coding requirements and keep

1 0 PHYSICIAN MA G A Z INE | M A RC H 2014

coupment from future payments, or request or apply for an extended payment plan. There is an appeal process if you do not agree with the audit findings.

Do not confuse the RAC Discussion Period with the appeals process. If you disagree with the RAC determination, do not stop with sending the discussion letter detailing why you disagree with the findings.

File an appeal before the 120th day after the demand letter. Send correspondence to RAC via certified mail.

It is recommended you have legal representation to advise you in the response to a recoupment demand, to determine if you should appeal and to ensure you meet the required regulatory requirements of the appeal process.

Where to Get More Information on Government Audits More information on the growing risk of gov-

ernment investigations and audits can be obtained through five short videos featuring tips from Kevin R. Warren, Esq., of Michelman & Robinson LLP’s Healthcare Practice at http://ow.ly/rP02n. The videos address how to create an effective compliance program, why it’s important to train staff to avoid improper and exaggerated coding, what steps to take if your practice receives a subpoena, and how to properly protect electronically stored information.

Medicare Recovery Audit Contractors and CMS’s Actions to Address Improper Payments, Referrals of Potential Fraud, and Performance.

Office of Inspector General. U.S. Department of Health and Human Services. August 2013. https://oig.hhs.gov/oei/reports/oei04-11-00680.asp. Accessed Dec. 16, 2013.The Recovery Audit Program and Medicare: The Who, What, When, Where, How and Why? Centers for Medicare & Medicaid Services. May 13, 2013. http://www.cms.gov/Research-Statistics-Data-and-Systems/ Monitoring-Programs/Recovery-Audit-Program/Downloads/ The-Recovery-Audit-Program-and-Medicare-Slides-051313.pdf.

Accessed Dec. 16, 2013.

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The introduction of the Sunshine Act and its intent to bring transparency of financial ties between medical device and drug makers and physicians demands a changing relationship between the two entities. In this article, we will highlight key considerations physicians need to be aware of when dealing with life science and medical device companies, best practices when dealing with pharmaceutical representatives and new apps that can help doctors track Sunshine law reports. We will also take a closer look at how hospitals are responding to the complicated changes by bringing innovation in-house that could spell potential reward for physicians.

The Changing Relationships with

PHARMA DEVICES &

by Marion Webb

Shining the Light on the Sunshine Act

Beginning in July 2013, drug, device, biological product and medical supply makers started reporting to the Centers for Medicare & Medicaid Services (CMS) information on compensation, gifts and other transfers of value paid to

1 2 PHYSICIAN MA G A Z INE | M A RC H 2014

physicians.

Affected manufacturers and group purchasing organizations will be required to report certain physician ownership or investment interests, which CMS will post on its website starting on Sept. 30.

Under the new rule, if doctors have a financial relationship with, or an ownership interest or investment interest in an applicable manufacturer, or if doctors have an ownership interest or investment interest in a group purchasing organization, that information must be reported, according to news reports.

Those same rules apply to immediate family members of a physician.

Also, the rule defines “physician” as a doctor of medicine or osteopathy, a dentist, a podiatrist, an optometrist, or a chiropractor who is legally authorized to practice by the state in which he or she practices.

While registered nurses, assistant physicians, residents and pharmacists are not covered recipients, payments made to non-physician prescribers that are passed through a doctor are considered “indirect payments” and must be reported.

Also, when a physician does not receive a payment or other transfer of value, but the applicable manufacturer provides the payment or other transfer of value to another entity “in the name of” or “on behalf” of the physician, this is still considered a payment made to the physician.

To avoid reporting, doctors must make it very clear to the manufacturer that they are waiving the payment or that the payment should be made to another entity or individual, not in their name or on their behalf.

Exceptions to Reporting Requirements

A key area for concern for many physicians has been speaking engagements.

Under the final rule, if an event is considered to be continuing education (CME) or the drug or device maker does not pay the physician a speaking fee, nothing needs to be reported to the government, except any paid travel expenses or meals.

If a drug maker offers buffet meals, snacks or coffee at larger events that aren’t reserved for any one physician, then it is also not reported.

Similarly, when a pharmaceutical representative visits a doctor’s office and provides lunches that transfer of a value less than $10 per person (up to $100 a year), this also does not need to

be reported.

Many physicians may be concerned about the pharmaceutical representative interaction in their office, but an article in Physicians Practice suggests it would be detrimental to patient care to shut that door completely.

For one, pharmaceutical reps can still provide product samples, including coupons and vouchers that many low-income patients depend on, that don’t need to be reported.

The manufacturer-physician interaction is also necessary to help medical companies with their research of new drugs as physicians provide first-hand data that help companies develop effective treatments.

For another, educational materials and items that benefit patients directly will be valuable for a physician’s practice and also don’t need to be reported.

Managing Open-Door Pharma-Rep Policy

Since the arrival of managed care in the 1990s and tighter schedules, many physicians only had time to meet with pharmaceutical representatives over lunch, often with the entire staff, which was a nice perk for employees as well.

As a result of on-going changes and tighter restrictions, the ties have become weaker between pharmaceutical reps and the doctor’s office.

There’s an App for That (Sunshine Act)

To help doctors keep track of real-time payments and other value transfers to drug and device makers, the CMS released two new mobile apps called Open Payments—one for physicians and one for healthcare industry users.

Physicians can register with CMS to review the payment data that is being reported, which would help assure accuracy.

Starting in April, all physicians will have a 45day period in which to review the data and dispute any inaccuracies before it goes public.

Experts say doctors should also verify the information in the National Plan and Provider Enumeration System (NPPES) to ensure that they are identified correctly.

Once the Open Payments program is up and running in September, CMS is supposed to notify doctors as soon as they’re mentioned in any reports, but it’s a good idea to verify periodi-

M A RC H 2014 | w w w. p h y s i c i a n s n e w s n e t w o r k .c o m 1 3

pharma & d ev i ces | feature

Key Considerations: Ownership

For those who want to maximize materials, drug samples and other services pharmaceutical reps offer, the following 7 tips can help streamline practice operations in preparation of the Sunshine Act. 1. Develop your own policies and guidelines for meeting with a pharmaceutical representative, such as limiting staffpharmaceutical interactions to non-patient office hours that are scheduled ahead of time.

2. Keep electronic records of practice interactions with drug and medical device reps in case you need to dispute a manufacturer’s reports.

3. Only schedule appointments electronically, not on paper.

4. Only associate with pharmaceutical reps that are honest, authentic, provide support and education.

5. Interact with reps that hone in on your patients, study support cost and coverage for insurance .

6. Develop a clear understanding with your office staff that the rep is there to provide education and handouts that are unbiased, and set boundaries in your interaction.

7. If your practice is considering expansion or consolidation, get an outside perspective from your rep to learn what other physicians have done well.

1 4 PHYSICIAN MA G A Z INE | M A RC H 2014

cally, according to expert recommendations.

Also, if non-physician alliances are reporting under a physician’s name, the name would show up in the Open Payments site.

The apps are free through the IOS Apple Store for iPhone and iPad users and the Google Play Store for Android devices.

Hospital Innovators

The announcement by British pharmaceutical giant GlaxoSmithKline last December that it would no longer pay doctors to promote their products at medical conferences and continuing education events and no longer tie compensation of sales reps to prescriptions written is a sign that times are changing.

The drug maker will continue to employ physicians for research, consulting and market research, according to news reports.

But pharmaceutical companies aren’t the only ones taking a closer look at their business models.

As hospitals strive to improve efficiency and quality of care while saving costs, St. Joseph Health, a $6 billion system based in Orange County, launched The Innovation Institute, an independent, for-profit, limited liability company structured to cultivate new technologies.

The Institute is banking on physicians to help bring ideas to the marketplace.

Launched on Jan. 3, 2013, with an initial $40 million in investment from St. Joseph Health, the Institute is structured to be owned exclusively by seven founding nonprofit health systems and in alliance with Cleveland Clinic Innovations.

Deborah Proctor, CEO and president of St. Joseph Health, said she conceived the idea of running an incubator lab as an independent company because she wanted a way for physicians to develop products, concepts and ideas outside of the hospital environment.

Joe Randolph, president and CEO of the Innovation Institute, said some 11 physicians have already joined the program.

The Institute will accept everyone who wants to develop healthcare products—including physicians, hospital employees, and inventors not affiliated with hospitals.

Randolph said the Institute provides support and capital and assumes all the risk. Forty percent of the profits will go directly to the inventors, 40% to the founding healthcare partners, and 20% to the investors.

“One of the innovations is a computer-assisted personalized sedation station, a first-of-its-kind device that allows trained non-anesthesia professionals to administer the drug protocol, saving close to $1 billion a year,” Randolph said.

Randolph said he believes 10 ideas like this one coming out of the Institute could save $10 billion and make a real difference on the ground.

“I truly believe that like minds working together will ensure transformation in healthcare,” said Randolph.

“Our physicians have so many bright ideas. They are incredibly smart people. But you cannot just have someone walk into a CEO’s office with an idea and do something with it,” said Steven Moreau, CEO and president of St. Joseph Hospital.

“There is no way to deal with it in a hospital setting where everyone is busy treating patients and dealing with a million other things.

That’s why having a dedicated lab is so crucial, and have it outside of the hospital,” Moreau said.

He added, “I have also seen doctors try to do it on their own, only to have someone steal their idea. It takes resources to get ideas off the ground, file patents, do testing in clinical settings. Having a health system behind you and its resources is incredible.”

The Institute comprises three elements: The Innovation Lab, which is an incubator located at 620 Newport Center Drive, Newport Beach; the Enterprise Development Group (EDG), a portfolio of healthcare-related companies that provide services to the seven member owners and generate cash flow and profits for the operations of the Institute; and finally, the Growth Fund, which raises capital from private investors to fund companies in the healthcare sector.

Bon Secours Health System recently joined as a second owner.

The Institute reportedly is in talks with the other health systems to join.

Innovation will be a major driver in this changing health environment.

The Southern California Center of Technology and Innovation in Pediatrics (CTIP), a consortium established by Children’s Hospital Los Angeles and the University of Southern California (USC), received a grant of up to $1.5 million over five years from the U.S. Food and Drug Administration’s Office of Orphan Products Development for the development of pediatric medical devices.

CTIP oversees dozens of projects, including a fetal pacemaker, ultrasound-activated nanoparticles for non-invasive imaging, and a redesign of ill-fitting adult ventilation masks for use by children.

From concept to commercialization, CTIP said it provides guidance on issues related to intellectual property, prototyping, engineering, testing, grant writing and clinical trial design to aspiring device developers throughout Southern California.

According to CTIP Co-Director Dr. Yaniv Bar-Cohen, the program provides comprehensive guidance and resources to accelerate the commercialization of pediatric innovations by facilitating product development that may not otherwise be readily available.

“Being recognized as the focal point for pediatric innovation in Southern California allows us to provide a home for those in pediatric healthcare who need a place to move their ideas forward,” says Bar-Cohen who is also the director of Cardiac Rhythm Devices at Children’s Hospital Los Angeles and associate professor of Pediatrics at the Keck School of Medicine of USC.

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pharma & d ev i ces | feature

associ at i on ha ppen i ngs | lacma news

ceo’s letter

This spring, LACM A will intensify its efforts to ensure that Los Angeles County’s most vul-

nerable population—the elderly, poor and disabled—will have a choice in keeping their trusted physicians as promised by the state.

LACMA and the Los Angeles County Pediatric Medical Society recently sent a letter to the California Department of Health Care Services expressing our concerns about the deeply flawed implementation of the dual eligible demonstration program, Cal MediConnect, in LA County.

We are especially concerned that opt-out forms would not be provided

to patients after reassurances that patients would have a choice.

LACMA and the LACPMS aren’t alone in questioning how state health

officials are managing the program.

Last month, state legislators, during a joint hearing of the Senate Com-

mittee on Health and the Senate Committee on Budget and Fiscal Review, also questioned the state’s readiness for an April 1 rollout of the duals demonstration program.

Sen. Mark Leno (D-San Francisco), the hearing co-chair, asked for assur-

ances that state health officials are doing everything possible to make this transition as smooth as possible.

He was referring to the state’s previous transition of seniors and persons

with disabilities to managed care plans, which had “bumps in the road.”

Toby Douglas, director of the Department of Health Care Services,

testified during the hearing that the state is ready and able to handle the current transition of 400,000 Californians dually eligible for Medicare and Medi-Cal into managed care plans.

But we contend that is not the case.

Again, the time frame, size and quality of the Cal Medi-Connect project

for 200,000 patients in LA County is inappropriate.

A true demonstration project or pilot involves a smaller sampling whereby one can assess

results and determine the pros and cons of applying the Cal MediConnect program before moving forward with a larger population.

We have asked state legislators for another joint hearing to share these concerns.

State health officials said that patients would have a choice in electing whether they want to

continue to receive medical care from the physician they trust, and LACMA and LACPMS are not afraid to fight on their behalf.

Rocky Delgadillo Chief Executive Officer

1 6 PHYSICIAN MA G A Z INE | M A RC H 2014

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