title: adapting transactional models to an ever-evolving ... · • oversees implementation and...

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Title: Adapting Transactional Models to an Ever-Evolving World of Payment ReformSubtitle: Clinical Integration Networks: Organizational, Decisions & Regulatory Issues

Thursday August 4, 2016 2:00-3:30 PM EasternSponsored by the ABA Center for Professional Development


Edward K. White, PartnerNelson Mullins Riley & Scarborough LLP

Ed White is a partner of Nelson Mullins Riley & Scarborough LLP in Columbia where he practices in the areas of corporate, partnership, healthcare, taxation and non-profit law. Mr. White is a Certified Specialist in Taxation, a designation awarded by the South Carolina Supreme Court. Additionally, he is a Certified Public Accountant in South Carolina.


Clinical Integration Network (“CIN”) Objectives

• Triple Aim– Improve Population Health– Improve Patient Care Experience– Lower Cost

• Legally contract as a single entity• Pursue Incremental Revenues• Advance With Payment Reform to Risk-Based Contracting


Clinical Integration

• Federal Trade Commission (FTC) has stated that the joint negotiation of fees for services by competing healthcare providers could be justified either through (1) the sharing of significant financial risks among the providers or (2) the providers’ clinical integration.



• FTC’s definition of Clinical Integration is “an active and ongoing program to evaluate and modify practice patterns by the network’s physician participants and create a high degree of interdependence and cooperation among the physicians to control costs and ensure quality.”



• Key for achieving Clinical Integration are:

1. Develop and implement detailed, evidence-based clinical practice guidelines;

2. Limit participation in the program to providers who will follow the guidelines and the limitations on independent decision-making.

3. Measure and evaluate each participating provider’s compliance with the guidelines; and

4. Investment by all participating providers of time, energy, technology and financial resources in the development and enforcement of the clinical guidelines.


Clinical Integration Models (CIN)

• Contractual Alliances• Joint Venture (Equity) Models• Private Payor and/or Governmental Payor

– Commercial CIN– Medicare Accountable Care Organization– Medicaid MCO CIN


Reasons To Clinically Integrate

• Stay relevant in a shifting marketplace– Highest quality providers have best chance to survive changes

• Pursue incremental revenues from CIN• Build alliances• Prepare for government payment reforms


Example For DiscussionJoint Venture CIN (Equity Model)

Product = shared savings contracts with migration to risk-based contractsStarting with private payor products and evolving to Medicaid and Medicare

products.

501(c)(3) Hospital

Health PlanPhysician Group

CINIndependent Practices


Organizational Decisions

• Diligence and Integration Planning– Utilize Antitrust Do’s and Don’t’s while in pre-formation stage

with potential partners– Consider use of Joint Defense Agreement

• Steering Committee• Develop CIN Key Deal Points• Implementation Plan


Organizational Steps

• Letter of Intent– Define the Objectives of CIN– Governance/Reserved Powers– Clinical Committee– Compensation for Achieving Benchmarks– Choice of Entity– Allocation of Income Loss– Proposed Product & Services– Capitalization


Organizational Documents

• Operating Agreement/Articles of Organization– Governance Rights– Capital Calls/Debt Guarantee– Reserved Powers– Charitable Purpose Protection Provision– Rights of First Refusal– Allocation of Income Loss– Commitment to Clinical Integration Effort


Committee Work

• Product Design – Migration to Risk Based Products?

• Creation of Clinical Integration Policies– Create Governance Process that:

• Develops and approves the guidelines• Oversees implementation and enforcement• Develops measures to identify high-cost providers and variance from guidelines• Audits electronic medical records• Performs individual and group performance benchmarking• Arranges for education to promote compliance• Implements corrective actions including mentoring, counseling, penalties and

expulsion


Committee Work

• Compensation Policy for Achieving Metrics– Metrics and thresholds for compensation need to be clearly

defined– Designate data source for measurements– Remedial policies for providers who fail to achieve benchmarks

• Conflict of Interest Policy


Contract Templates

• Provider Agreements– Specificity and clarity in defining metrics, thresholds for

payment of incentives, data source for measurements and thresholds

– Provider agrees to provide services to patients in accordance with policies and procedures of payors and CIN including those relating to quality, record keeping and reports

– Design incentives and clarify purpose of agreement is not to limit medically necessary services


Contract Templates

• Provider will seek to facilitate in-network referrals – this will increase effectiveness of network and further goal of coordination of care

• Provider must participate in/adhere to the CIN’s clinical integration program

• Provider must participate in all payor agreements entered into by the CIN

• Provider will have no right to opt out of individual plan agreements based on fee schedule or otherwise


Contract Templates

• Provider must agree to ongoing contributions of time and effort (e.g., service on committees)

• Provider must maintain necessary computer equipment and software to connect with CIN’s electronic platform

• Provider must make data available for developing, monitoring and enforcing clinical guidelines


Regulatory Issues

• Antitrust• Stark Law

– Indirect Compensation Relationship/Physicians– Incentive Plan Exception

• Anti-kickback Statute• Tax Exemption Issues for Tax-Exempt Hospital• Securities Laws/Exemptions• Insurance• HIPAA Privacy• Trade Secrets


Regulatory Issues

• Capitalization/Governance– Proportionality (capital, voting, debt guarantees)– Charitable Purpose Protection Provision– Pre-formation in-kind contributions

• Compensation– Detailed metrics, measurement and reporting– Clarity in defining thresholds


Regulatory Issues

• Fair Market Value Determinations– Capitalization, compensation (including metrics), and

distribution– Periodic redeterminations of fair market value as metrics and

incentives evolve– Minimum Compensation Guarantees– Option Rights– Do not begin CIN Program until effective implementation of

Clinical Integration Protocols


Regulatory Issues

• Effective implementation of Clinical Integration Protocols:– At the inception of the CIN, the more protocols the better. It is

okay to start with the understanding that more will be developed in the startup year.

– All protocols should be reviewed for effectiveness at least annually

– The Clinical Committee should meet regularly each year and minutes should be kept of each meeting

– Protocols are mandatory unless in the professional judgment of the physician that the patient should be treated differently; should be somewhat rare and should be documented in the chart


Regulatory Issues

• Protocols should describe the condition or situation being evaluated, describe and list the actual clinical steps and procedures to occur to perform the evaluations, and to treat or handle the results of the evaluation, i.e., if this ___, then ___. The more specificity, the better

• Make sure providers have appropriate training to understand the clinical protocols and what is expected of the providers, and if they will be using technology they do not presently use in order to participate in the CIN, make sure they know how to use it

• CIN needs to develop a system to review and audit files to measure providers’ compliance with the protocols and patients’ adherence to the protocols


Regulatory Issues

• CIN needs to develop a system to reward providers that follow the protocols and penalize providers that do not; can be in the reimbursement structure or bonus structure, or both

• Outcomes need to be measured. This will help inform changes that may need to be made to protocols and also give the CIN the opportunity to demonstrate how the CIN made a difference in improving the health of its patients. Eventually, a “Report to the Community” could be created which would ideally show improvements in a variety of areas made over time

• Cost savings (to patients) should also be measured. Eventually, sufficient data should be collected to help show how the protocols (and patients’ adherence to them) lead to decreased spending on healthcare


Regulatory Issues

• Records should be kept of investments (both time and money) made in building the infrastructure of the CIN. While it is more challenging to track investments of time, keeping minutes of meetings, noting start and finish times, is one way to do this