A Legal Look at The Healthcare Landscape in 2016

By: Jeff Cohen


The Medicare Access and CHIP Reauthorization Act was enacted to replace the flawed sustainable growth rate (SGR).  MACRA contains performance measures for new payment models that will go in place in 2017.  MACRA also established the Merit-Based Incentive Payment System (MIPS).

Physicians have to begin to learn about MACRA to improve performance and to avoid payment penalties.

We also have the Physician Quality Reporting System (PQRS), which penalizes providers for failing to report quality measures data on Part B services.  To avoid a 2018 PQRS payment adjustment, for instance, providers have to report for a 12 month period.

There is also the Value Based Payment Modifier (VM) program that rewards groups for providing high quality, low cost care.  It’s interesting to note that CMS proposes to publically report those providers who receive an upward adjustment.  It’s being waived for Pioneer ACOs.  It’s interesting to note that the measures used for the VM program are different than those used for ACOs; and this is causing a lot of confusion.

Bottom line:  an increased use of benchmark establishment for quality and cost and financial incentive programs to achieve or surpass those benchmarks.


A new compensation arrangement exception is established for timeshare arrangements for the use of office space, equipment, personnel, items, supplies and other services.  This sort of “overhead sharing” arrangement is done, but there hasn’t been a specific Stark provision for it till this year.  It’s expected to be particularly useful in physician/hospital arrangements.

This exception amplifies the existing requirements that such arrangements must (1) be located where the physician or practice sees its patients, and (2) be used for designated health services that are incidental to what the doctor does, meaning E&M services and DHS that are provided at the time of such E&M services.

This new rule does not pertain to “advanced imaging equipment, radiation therapy equipment or pathology laboratory equipment.”  Nor does it apply to arrangements between hospitals and IDTFs or clinical labs.  It only applies to arrangements between hospitals and physicians or physician practices.

Technical note:  CMS does not think license arrangements meet the exclusive use requirement of leases.  Hence, arrangements structured as license arrangements, instead of lease arrangements probably will not qualify for this exception.

Another compensation arrangement exception will permit hospitals, federally qualified health centers and rural health clinics to pay physicians and physician practices to employ (not contract with 1099 independent contractors) a non-physician practitioner (but not CRNAs) if the practice or physician is in the geographic area services by the hospital, etc.  The non-physician may not, however, be employed to provide specialty services like cardiology or surgical services.  A previous Stark provision allowed this only for physicians.


Even though telemedicine platforms are reputed to be a key part of quality enhancing, cost reducing delivery strategies, it has a serious payment incentive problem.  Neither Medicare nor most private insurers will pay for telemedicine outside rural health areas with health professional shortages.  That said:

  1. Telemedicine coverage is expected to expand this year;
  2. Some states are implementing state based compensation for telemed services; and
  3. CMS is considering expansion of Medicare coverage for telemed services.


Employers will increasingly offer high deductible plans to employees.  That phenomenon has doubled since 2012 according to a PwC 2015 Health and Well Being Touchstone Survey.

Payer deductibles and co insurance responsibility is expected to continue to rise.  And as out of pocket expenses continue to rise, we’re expecting to see patient payment for elective producers to decline.

Patients are exercising more control over their healthcare in order to reduce expenses, which means:  not seeing a doctor, not taking meds as prescribed, skipping follow up care or procedures altogether.  One issue that has all of us guessing is the impact on primary versus specialty care.  Will PCPs expand the scope of services or penetration altogether?

Inpatient and outpatient care volume is also expected to fall, which it has since 2003.


Senate Bill 676 is aimed to level the playing field between insurer and providers a bit by removing the ability of an insurer to deny payment AFTER it has authorized care.  This will be a serious change in the payer provider dynamic, since many providers rely on prior authorization to provide care, only to face payment denial at the time of billing.  If the bill passes, providers will be required to (1) verify eligibility, and (2) get and record a prior authorization number.


The government is touting its successes in this space.  There is absolutely no relief from that pressure in sight, so physicians MUST self-audit annually.  The audit should focus on coding and healthcare law compliance.  If you don’t have a compliance plan, or if you haven’t had your business relationships gone over by healthcare regulatory counsel, just do it.  Is your corporate structure compliant?  What about how you handle designated health service revenues?  What about your marketing agreements, your personal services agreements, your medical director agreements?  Is every arrangement involving compensation set forth in a written contract that is safe harbor compliant?  The worst time to find out there is a problem is when the government (or a payer) initiates it.


Focus On Outcome Based Payment

Means physicians must:

Get their hands on costs

Have systems that track patient satisfaction and clinical outcomes

Know and track what they’re contracted to receive and what they actually get paid

Explore practice options that spread financial risk (both on the cost and income side).  Though bigger is not necessarily better, size of practice can correlate to better control and optimizing net income

Move to More Outpatient Based Care

For physicians, this means a greater need to understand and interact with ASC based care, home based care and telemedicine delivery systems

The Growth of Personalized Care

The concept of a two tiered provider system is clearer than ever.  The good news is that for those physicians who have ongoing frequent patient contact, there is an opportunity to explore concierge based care

Patient Choice Expansion

Which means medical practice have to engage in strong marketing and PR aimed at consumers.  If you don’t have a website or know what SEO does, you need to dig in and learn that!

The Biggest Thing:  The Election!

Republican candidates are unified in their promise to dismantle Obamacare, but haven’t proposed very specific alternatives.  Ironically, the biggest losers here could be physicians inside profitable ACOs.


Physicians are subject to the brunt of changing healthcare marketplace dynamics.  But they’re in the absolute best position to take leadership and benefit from doing so!

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