Preventing Emergency Preventing Emergency Department EmergenciesDepartment Emergencies

South Florida Hospital & South Florida Hospital & Healthcare Association Annual Healthcare Association Annual

ConferenceConferenceJune 8, 2007June 8, 2007

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What are we really dealing with?What are we really dealing with?

Physician’s Physician’s Top Three PrioritiesTop Three Priorities

• LiabilityLiability Physician-Patient Relationship with Individual UnassignedPhysician-Patient Relationship with Individual Unassigned Increased Exposure to Professional LiabilityIncreased Exposure to Professional Liability

• LifestyleLifestyle Change in Expectations, Culture, Concept of Social ContractChange in Expectations, Culture, Concept of Social Contract Loss of Sleep and Other Serious Disruptions to Normal Daily RoutinesLoss of Sleep and Other Serious Disruptions to Normal Daily Routines

• CompensationCompensation On Call Obligations set forth in Medical Staff Bylaws, Rules and Regulations not Enforced On Call Obligations set forth in Medical Staff Bylaws, Rules and Regulations not Enforced

unless Pattern of Failure or Refusal to Come In Combined with Unfavorable Clinical Outcomeunless Pattern of Failure or Refusal to Come In Combined with Unfavorable Clinical Outcome Opportunity Costs – not providing care for elective patientsOpportunity Costs – not providing care for elective patients Extra costs physicians absorb to diagnose and treat uninsured and underinsuredExtra costs physicians absorb to diagnose and treat uninsured and underinsured American Academy of Orthopaedic Surgeons Position PaperAmerican Academy of Orthopaedic Surgeons Position Paper – The Responsibilities of – The Responsibilities of

HospitalsHospitals Equitable Treatment for All Physicians – Equitable Treatment for All Physicians – American Academy of Family Physicians Position American Academy of Family Physicians Position

StatementStatement

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What Does a Hospitalist Program Look Like?What Does a Hospitalist Program Look Like?

Unassigned Patient Program – Take Pressure off Primary Care Physicians otherwise Unassigned Patient Program – Take Pressure off Primary Care Physicians otherwise On CallOn Call

• Specific quality improvement criteria are condition of contract in response to history of Specific quality improvement criteria are condition of contract in response to history of physicians admitting but not seeing patients for several daysphysicians admitting but not seeing patients for several days

• Contract with Two Separate Internal Medicine Group PracticesContract with Two Separate Internal Medicine Group Practices One Group Strictly Hospital-Based, No Outside PracticeOne Group Strictly Hospital-Based, No Outside Practice

• Emergency physician determines if individual requires observation or admission by member of group Emergency physician determines if individual requires observation or admission by member of group contractedcontracted

• On duty group member must respond within one hour and admit as appropriate per criteria unassigned On duty group member must respond within one hour and admit as appropriate per criteria unassigned individual whether or not insured and coordinate consultations and work with nursing and case individual whether or not insured and coordinate consultations and work with nursing and case management to expedite further medical examination and treatmentmanagement to expedite further medical examination and treatment

• Payment is made on a per patient encounter basis with payment reduced by one half for Medicaid Payment is made on a per patient encounter basis with payment reduced by one half for Medicaid pendingpending

• Group bills and collects and collections are netted against per patient encounter payment and Group bills and collects and collections are netted against per patient encounter payment and reconciliation on quarterly basis is made (guarantee payment methodology for hospital-based group)reconciliation on quarterly basis is made (guarantee payment methodology for hospital-based group)

Other Contracted Group’s Members Also Maintain Outside PracticeOther Contracted Group’s Members Also Maintain Outside Practice• Per patient encounter payment is made only for response to uninsured individuals, and group bills, Per patient encounter payment is made only for response to uninsured individuals, and group bills,

collects and keeps payment from third party payerscollects and keeps payment from third party payers

• Hospital also maintains separate professional liability insurance policy with payment Hospital also maintains separate professional liability insurance policy with payment amount of premium based upon number of emergency department patient encounters and amount of premium based upon number of emergency department patient encounters and coverage of all physicians who serve on callcoverage of all physicians who serve on call

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With No End in Sight, Is There A Creative Solution?With No End in Sight, Is There A Creative Solution?

Collaborative EffortCollaborative Effort – Update on Palm Beach County – Update on Palm Beach County UndertakingUndertaking• Countywide shortage identified three years agoCountywide shortage identified three years ago

• Medical Society engaged and Hospitals participated in Medical Society engaged and Hospitals participated in funding detailed investigation and recommendations from funding detailed investigation and recommendations from MDContentMDContent (emergency physician and health care (emergency physician and health care economist from Ann Arbor, Michigan)economist from Ann Arbor, Michigan)

• Emergency Department Management Group formed in Emergency Department Management Group formed in April, 2005, as committee of Medical Society ServicesApril, 2005, as committee of Medical Society Services

Goal of twelve-member group – to improve emergency department Goal of twelve-member group – to improve emergency department on call access for county residentson call access for county residents

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Collaborative Effort Being PursuedCollaborative Effort Being Pursued

Primary objective – to establish system to help hospitals Primary objective – to establish system to help hospitals ensure they have place within county to refer patients in ensure they have place within county to refer patients in need of specialists hard to findneed of specialists hard to find

• Require county health care district and local hospitals to pay Require county health care district and local hospitals to pay specialists to work at certain hospitals to handle emergencies specialists to work at certain hospitals to handle emergencies while also furnishing the specialists with professional liability while also furnishing the specialists with professional liability insurance coverageinsurance coverage

At end of November, 2006, group submitted proposal to At end of November, 2006, group submitted proposal to districtdistrict

• District has nearly twenty years experience administering District has nearly twenty years experience administering county trauma systemcounty trauma system

• Organizing on-call coverage program through political Organizing on-call coverage program through political subdivision of state affords hospitals antitrust protectionsubdivision of state affords hospitals antitrust protection

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What Would Governance of Collaboration Look Like?What Would Governance of Collaboration Look Like?

District board of directors to appoint advisory District board of directors to appoint advisory committee similar to existing trauma system advisory committee similar to existing trauma system advisory committeecommittee

Advisory committee to include nine membersAdvisory committee to include nine members• Three hospital executives, one of whom must be CEOThree hospital executives, one of whom must be CEO

• Three physicians, two of whom must be available on call to Three physicians, two of whom must be available on call to emergency department for one or more hospitals in county and emergency department for one or more hospitals in county and one of whom must be emergency physician who works in one of whom must be emergency physician who works in emergency department of at least one hospital in countyemergency department of at least one hospital in county

• Two at large community leadersTwo at large community leaders

• One district board member, preferably not public office holderOne district board member, preferably not public office holder

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What Governmental Approval Needs to be Sought?What Governmental Approval Needs to be Sought?

Actual implementation plan will require approval from Actual implementation plan will require approval from district’s board of directors, Florida Agency for Health district’s board of directors, Florida Agency for Health Care Administration and U.S. Department of JusticeCare Administration and U.S. Department of Justice

Proposal submitted is framework for specialty care Proposal submitted is framework for specialty care access services networkaccess services network

Proposed framework was structured to be consistent Proposed framework was structured to be consistent with with MDContentMDContent recommendations that recommendations that

• Solution to specialty availability crisis, to succeed, must be Solution to specialty availability crisis, to succeed, must be fair, transparent, durable and easy to administerfair, transparent, durable and easy to administer

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What Objectives are Intended to be Met?What Objectives are Intended to be Met?

• Solution must satisfy physician objectives Solution must satisfy physician objectives Liability coverage for emergency department care Liability coverage for emergency department care

rendered (priority #1 - liability)rendered (priority #1 - liability) Fewer call days (priority #2 – lifestyle)Fewer call days (priority #2 – lifestyle) Guaranteed payment for services (priority #3 – Guaranteed payment for services (priority #3 –

compensation)compensation)

• Solution must also satisfy hospital objectives Solution must also satisfy hospital objectives To meet legal/regulatory requirementsTo meet legal/regulatory requirements To not be cost prohibitiveTo not be cost prohibitive To allow hospitals to continue to provide elective services To allow hospitals to continue to provide elective services

when there are not enough physicians to cover the when there are not enough physicians to cover the emergency department every day of the monthemergency department every day of the month

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What Objectives are Intended to be Met?What Objectives are Intended to be Met?

Proposed Proposed specialty care access services networkspecialty care access services network is is intended to accomplish following intended to accomplish following objectivesobjectives – –• Assure consistent access to specialty servicesAssure consistent access to specialty services

• Establish shared financial responsibilityEstablish shared financial responsibility

• Provide for quality monitoringProvide for quality monitoring

• Provide liability protection for participating physiciansProvide liability protection for participating physicians

• Allow voluntary participation by hospitals and physiciansAllow voluntary participation by hospitals and physicians

• Provide market-based compensation for participating Provide market-based compensation for participating physiciansphysicians

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What is the Status of this Project Now?What is the Status of this Project Now?

Mentioned in Mentioned in U.S. News and World ReportU.S. News and World Report article as article as multi-pronged solution that would regionalize certain multi-pronged solution that would regionalize certain critical on-call services, allowing several hospitals to critical on-call services, allowing several hospitals to pool on-call doctors to make sure these specialties are pool on-call doctors to make sure these specialties are covered at any given time and have hospitals pay for covered at any given time and have hospitals pay for liability insurance just for on-call casesliability insurance just for on-call cases

District Board of Directors Action on Specialty Care District Board of Directors Action on Specialty Care Access Services Network Proposal - UpdateAccess Services Network Proposal - Update

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How Can We Get Information to Address How Can We Get Information to Address Needs Now and Later?Needs Now and Later?

County-wide physician census for Palm Beach County-wide physician census for Palm Beach County was conducted by the Medical Society per County was conducted by the Medical Society per recommendation of recommendation of MDContentMDContent to get data to address to get data to address immediate supply needs for critical physician immediate supply needs for critical physician specialties and for long-term physician recruitment specialties and for long-term physician recruitment needs for Palm Beach County.needs for Palm Beach County.

Report was provided to help leaders address projected Report was provided to help leaders address projected shortfalls by 2011 that will affect ED on call access.shortfalls by 2011 that will affect ED on call access.

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Why is Determination of Fair Market Value Important?Why is Determination of Fair Market Value Important?

Stark law, 42 U.S.C. Stark law, 42 U.S.C. §§1395nn, Prohibition1395nn, Prohibition

• Professional services arrangement exception [42 U.S.C. Professional services arrangement exception [42 U.S.C. §1395nn(e)(3); §1395nn(e)(3); 42 CFR 42 CFR §411.357(d); Federal Register, Vol. 69, No. 59, pages 16138-§411.357(d); Federal Register, Vol. 69, No. 59, pages 16138-39, see, also, discussion on pages 16089-93 (March 26, 2004]39, see, also, discussion on pages 16089-93 (March 26, 2004]

• Fair market value definitionFair market value definition from Stark II Phase II regulations [42 from Stark II Phase II regulations [42 CFRCFR §§411.351; 411.351; Federal RegisterFederal Register, Vol. 69, No. 59, page 16128, see, , Vol. 69, No. 59, page 16128, see, also, discussion on page 16107 (March 26, 2004)]also, discussion on page 16107 (March 26, 2004)]

the value in arm’s length transactions, consistent with the general market the value in arm’s length transactions, consistent with the general market value. General market value means . . . the compensation that would be value. General market value means . . . the compensation that would be included in a service agreement as the result of bona fide bargaining included in a service agreement as the result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party . . . at the time of the position to generate business for the other party . . . at the time of the services agreementservices agreement

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What Should Valuator Know and Do?What Should Valuator Know and Do?

• Prohibition based upon definition against taking into account other agreements Prohibition based upon definition against taking into account other agreements for comparable services between physicians and hospitals in a position to for comparable services between physicians and hospitals in a position to generate businessgenerate business

• Independent third party valuationIndependent third party valuation Certain objective thresholds applied in consistent mannerCertain objective thresholds applied in consistent manner Valuator has knowledge and familiarity with Stark definition of fair market value Valuator has knowledge and familiarity with Stark definition of fair market value

and prohibition against reliance upon comparable agreements between referring and prohibition against reliance upon comparable agreements between referring physicians and hospitalsphysicians and hospitals

Valuator also cognizant of “one purpose test” from Valuator also cognizant of “one purpose test” from GreberGreber anti-kickback case. anti-kickback case. Particularly important if compensation arrangement with on call physician includes Particularly important if compensation arrangement with on call physician includes

multiple facets such asmultiple facets such as• Per diem feePer diem fee• ““Activation fee” – payment triggered upon physician responding at the request by the Activation fee” – payment triggered upon physician responding at the request by the

emergency physician to actually come into the emergency departmentemergency physician to actually come into the emergency department• Fee per service furnished to unassigned individuals examined and treated at hospital in Fee per service furnished to unassigned individuals examined and treated at hospital in

observation or admitted through emergency departmentobservation or admitted through emergency department• Professional liability insurance coverage for examination and treatment of unassigned Professional liability insurance coverage for examination and treatment of unassigned

individualsindividuals

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What can Payments be For? What Must Valuation Include?What can Payments be For? What Must Valuation Include?

• Stark requires payment be made only for services Stark requires payment be made only for services reasonable and reasonable and necessarynecessary for legitimate business purposes of arrangement and for legitimate business purposes of arrangement and compensation be set forth in advance and not exceed FMVcompensation be set forth in advance and not exceed FMV

• Third party valuationThird party valuation must verify valuation includes must verify valuation includes Analysis of important terms and provisions of proposed arrangementAnalysis of important terms and provisions of proposed arrangement Terms referenced in valuation are consistent with terms set forth within Terms referenced in valuation are consistent with terms set forth within

contractcontract Valuation references same parties as does contractValuation references same parties as does contract Valuator had opportunity to make site visit if appropriate/necessary, and Valuator had opportunity to make site visit if appropriate/necessary, and

questions answered to valuator’s satisfactionquestions answered to valuator’s satisfaction Term through which valuation is effective is statedTerm through which valuation is effective is stated Any comparables used not in position to referAny comparables used not in position to refer Definition and methodology used consistent with Stark definition of fair Definition and methodology used consistent with Stark definition of fair

market valuemarket value

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On-Call Compensation IssuesOn-Call Compensation Issues

Cost (and the slippery slope)Cost (and the slippery slope) Compliance with FMVCompliance with FMV Maintaining equity among the Maintaining equity among the

medical staffmedical staff Selecting from among various Selecting from among various

payment methodologiespayment methodologies Administrative difficultiesAdministrative difficulties

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Prevalence of Compensated Call Prevalence of Compensated Call

CoverageCoverage ArrangementsArrangements

In a survey conducted by Sullivan & In a survey conducted by Sullivan & Cotter, 46% (of 167 surveyed Cotter, 46% (of 167 surveyed healthcare organizations) reported healthcare organizations) reported that compensation is provided for on-that compensation is provided for on-call availabilitycall availability

Establishing the FMV of on-call Establishing the FMV of on-call arrangements is HealthCare arrangements is HealthCare Appraisers’ most requested type of Appraisers’ most requested type of analysis analysis

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Available On-Call Compensation Available On-Call Compensation Payment MechanismsPayment Mechanisms

Payment earmarked to defray professional Payment earmarked to defray professional liability expense or hospital indemnification liability expense or hospital indemnification for claims arising from emergent carefor claims arising from emergent care

Payment for unfunded carePayment for unfunded care Per diem (typically a 24-hour period)Per diem (typically a 24-hour period) Per diem plus payment for unfunded carePer diem plus payment for unfunded care ““Activation fee”Activation fee” Specialists’ Pool of FundsSpecialists’ Pool of Funds Deferred compensation planDeferred compensation plan

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Pros/Cons of VariousPros/Cons of VariousMethods of Compensation -Methods of Compensation -

Payment for Professional Liability InsurancePayment for Professional Liability Insurance ProsPros

• Relatively inexpensiveRelatively inexpensive• Simple to administerSimple to administer

ConsCons• Value to each physicians varies based Value to each physicians varies based

upon days of call coverageupon days of call coverage• May be a short-term solutionMay be a short-term solution

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Pros/Cons of Various Pros/Cons of Various Methods of Compensation -Methods of Compensation -Payment for Unfunded CarePayment for Unfunded Care

ProsPros• Relatively inexpensiveRelatively inexpensive• Equitable among the various on-call Equitable among the various on-call

physiciansphysicians• Directly addresses the complaint Directly addresses the complaint

regarding unfunded patientsregarding unfunded patients ConsCons

• May be a short-term solutionMay be a short-term solution• Requires claims adjudication (Requires claims adjudication (e.g.,e.g.,

global coverage periods)global coverage periods)

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Pros/Cons of Various Pros/Cons of Various Methods of Compensation -Methods of Compensation -

Per DiemsPer Diems ProsPros

• Easy to administer (unless Easy to administer (unless uncompensated care is included)uncompensated care is included)

• The most prevalent form of The most prevalent form of compensationcompensation

ConsCons• Likely to be expensive; there is no Likely to be expensive; there is no

natural ceiling for per diem rates (other natural ceiling for per diem rates (other than perhaps than perhaps locum tenenslocum tenens rates) rates)

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Pros/Cons of Various Pros/Cons of Various Methods of Compensation -Methods of Compensation -

“Activation” fee“Activation” fee ProsPros

• Easy to administerEasy to administer• Directly addresses those days in which the Directly addresses those days in which the

physician has to present to the ED physician has to present to the ED • Equitable among the various on-call physiciansEquitable among the various on-call physicians• Usually results in a cost savings to the HospitalUsually results in a cost savings to the Hospital

ConsCons• May not be viable if call frequency is activeMay not be viable if call frequency is active• Physicians may ask for an “unrealistically Physicians may ask for an “unrealistically

high” activation feehigh” activation fee

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Specialist Compensation Pool for Specialist Compensation Pool for Unfunded Care – One ExampleUnfunded Care – One Example

• In addition to hospitalist program…In addition to hospitalist program…• A “pool” is set aside quarterly for surgical and A “pool” is set aside quarterly for surgical and

medical specialist unfunded emergent/follow medical specialist unfunded emergent/follow up careup care

Pool based upon actual number of unfunded patients Pool based upon actual number of unfunded patients times pre-determined per patient case ratetimes pre-determined per patient case rate

Case rate established annually by independent Case rate established annually by independent valuation firmvaluation firm

Allocation for surgical and medical specialists in a Allocation for surgical and medical specialists in a ratio subject to revision based upon actual claims ratio subject to revision based upon actual claims experienceexperience

Claims adjusted based upon (90) day determination Claims adjusted based upon (90) day determination of unfunded statusof unfunded status

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Specialist Compensation for Specialist Compensation for Unfunded Care (continued)Unfunded Care (continued)

• All consultations based upon weighted average acuity All consultations based upon weighted average acuity level as determined by independent third party level as determined by independent third party valuation firmvaluation firm

• Separate rates determined for initial consultation and Separate rates determined for initial consultation and follow up consultationsfollow up consultations

• For surgical specialists, payment is based upon surgical For surgical specialists, payment is based upon surgical consultations not resulting in surgeryconsultations not resulting in surgery

• For medical specialists, payment is based upon actual For medical specialists, payment is based upon actual number of initial and follow up consultations (max of 5 number of initial and follow up consultations (max of 5 per patient)per patient)

• Targeted payment at a given percentage of Medicare Targeted payment at a given percentage of Medicare (e.g., 110%)(e.g., 110%)

• If physicians also participate in other hospital funded If physicians also participate in other hospital funded programs (e.g., funding of PLI) costs of such program programs (e.g., funding of PLI) costs of such program must be considered in determination that overall must be considered in determination that overall compensation is consistent with FMVcompensation is consistent with FMV

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Deferred CompensationDeferred Compensation

Relatively new conceptRelatively new concept Physicians receive deferred Physicians receive deferred

compensation subject to a vesting compensation subject to a vesting provision (typically 5-7 years)provision (typically 5-7 years)

Hospital funding of the compensation Hospital funding of the compensation can be handled through various can be handled through various means, including through the use of means, including through the use of life insurance policieslife insurance policies

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Deferred Compensation Deferred Compensation (continued)(continued)

May be administratively difficultMay be administratively difficult Once in place, it’s difficult to modifyOnce in place, it’s difficult to modify

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Valuation ConsiderationsValuation Considerations

Direct market data may be biased Direct market data may be biased and/or lack comparabilityand/or lack comparability

There is no OIG safe harbor for on-There is no OIG safe harbor for on-call compensationcall compensation

A Cost Approach (A Cost Approach (i.e.,i.e., hiring hiring physicians) is generally impracticalphysicians) is generally impractical

An Income Approach is not applicable An Income Approach is not applicable

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Factors Affecting the Value Factors Affecting the Value of On-Call Servicesof On-Call Services

Frequency and nature of call eventsFrequency and nature of call events Nature of the specialtyNature of the specialty Compensation earned by such Compensation earned by such

specialists for clinical workspecialists for clinical work Number of physicians available to Number of physicians available to

participate in call rotationparticipate in call rotation Exposure to unfunded/underfunded Exposure to unfunded/underfunded

carecare

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Sources of Compensation ValuesSources of Compensation Values

Sullivan & Cotter and other published Sullivan & Cotter and other published surveyssurveys

Hospital and medical associationsHospital and medical associations Local, regional or national market Local, regional or national market

valuesvalues Independent appraiserIndependent appraiser