U.S. DISTRICT COURT RULING STRENGTHENS STATE STARK LAW

Most readers know that the federal Stark Law deals primarily with matters involving physician self referral. The state equivalent, the Florida Patient Self Referral Act of 1992, has provisions that are even tougher than the Stark law. For instance, the Stark law allows some physicians to refer to renal dialysis centers in which they have an ownership interest, but the Florida law does not. Fresenius, a provider of renal dialysis services, filed suit seeking a declaration that the federal law (and not the state law) should control on the issue. Since there are several key areas where state law is more stringent than federal law (e.g. supervision requirements and ownership of entities that don’t provide “designated health services”), many eyes were on the court. Instead of giving Fresenius a pass and saying “Florida can’t make it tougher than what the federal law says,” the court stated that the federal laws do not preempt (supplant) the state ones.

Since the Stark Law does not preempt the state law and since the state law does not violate the U.S. Constitution, business people and professionals will have to make sure that both layers of compliance (state and federal) and solidly in place.


D.C./M.D. Arrangements Share Legal Issues Nationwide

Chiropractors and medical doctors (or D.O.s) have had a long and somewhat complex relationship. Though they approach healthcare issues differently, there are many instances where they share care or even work together. Such “M.D./D.C.” relationships are legally complex, but often prove to be rewarding in many respects. Properly constructing the arrangements is critical, especially since government regulators and payers tend to view such arrangements with skepticism, alleging that the true reason for the combination is for chiropractors to avoid coverage restrictions.

The core legal issues the parties need to be aware of include: Continue reading

Anti Trust Concerns Greatly Affect Healthcare Reform – Part 3 of 3

A Good Trend

Healthcare reform is causing the Department of Justice and other regulators to do two nearly unprecedented things in the history of anti-trust law:  innovate and cooperate.  I’m exaggerating, but the truth is that healthcare reform has lit a huge fire under the…ummm…butt of government regulators to find ways to facilitate competing healthcare providers to “come together” for the sake of reducing cost and improving quality. 

 Several years ago, the Department of Justice has lightened its almost unworkable antitrust restrictions by: (1) expanding the Arule of reason@ analysis for determining whether the antitrust laws have been breached, (2) expanding the notion of shared financial risk beyond mere capitation; and (3) expanding the role of the Amessenger.@  Though the role of so called Messenger Model organizations (e.g. IPAs) provide to be a failure, the fact that the DOJ would consider other ways of creating “substantial economic risk” was shocking.  And now, what is even more shocking is that the DOJ recently:  (1) promised to view all ACO proposals essentially more leniently, and (2) agreed in a joint statement with the HHS Office of Inspector General (which has primary enforcement authority on such things as Stark and Anti Kickback violations) to cooperate with eachother to facilitate the development and roll out of ACOs.

 Rule of Reason

For those who appreciate a little more depth, possible antitrust violations are analyzed by governmental authorities using either Aper se@ or Arule of reason@ analysis.  Violations considered to be Aper se@ violations are indefensible, regardless of possible good intent or even positive market effects.  Examples include: (1) two or more physicians agreeing to charge specific fees for certain procedures in their respective, independent practices, and (2) two or more physicians agreeing not to do business with a particular HMO. 

In contrast, rule of reason analysis requires enforcement authorities to probe deeper into the investigated arrangement to see if the arrangement furthers or conflicts with the principles underlying the antitrust laws.  This type of analysis gives the investigated parties an opportunity to justify their arrangement; per se analysis does not.

The revised Statements of Antitrust Enforcement Policy in Health Care, issued several years ago by the DOJ, expanded application of the rule of reason analysis to situations previously viewed as per se violations.  For instance, a provider network has traditionally had to be financially integrated through capitation or withholds to receive rule of reason analysis, and discounted fee for service arrangements with the network sent many physicians to antitrust defense attorneys during enforcement actions based on the network=s negotiations of other payment arrangements.  And now, with healthcare reform, they want to go further.

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Anti Trust Concerns Greatly Affect Healthcare Reform – Part 2: Illustrations

Case #1:  A payer approaches you and several of your colleagues, who are competitors.  The payer gives you a contract and fee schedule, which you review with your colleagues.  Though the payer recognizes that you are not a physician group practice, it would like to deal with just one of you for contracting purposes.  You choose one of you to Arepresent@ the group of you, and seek changes in the contract, including the fee schedule.

Impression: The Sherman Act has been violated.  Since you and your colleagues are competitors and are not members of a single professional corporation through which you conduct all or substantially all of your professional practices, you may not discuss fees among yourselves, and you may not appoint someone to act as the voice of the Agroup.@  In addition to the price fixing described above, if you decided together not to contract with the payer, you would have engaged in a group boycott.

The violations can be avoided by properly structuring a formal group and adhering to certain rules in negotiating with payers.  In scrutinizing activities of a physician organization, one of the key things antitrust enforcement authorities will examine is the degree of the organization=s Aeconomic integration,@ the degree to which economic risk is shared among the shareholders.  The level of integration is key in determining whether the organization is a single economic unit or whether it is comprised of two or more economic units.

Determining whether a physician organization is sufficiently integrated is often, however, an extremely difficult task.  The law changes and is very fact-specific.  The FTC looks to such things as: 1) whether the organization is capitated; 2) the extent services are centralized in the organization; and 3) accountability of the shareholders to the organization through such things as utilization management, quality assurance and peer review.


Anti Trust Concerns Greatly Affect Healthcare Reform – Part 1: The Basics

Anti-trust laws are one of the greatest obstacles to healthcare reform.  Here’s why?  They limit the way competing physicians, hospitals and the like can do business together.  Healthcare reform requires competing providers of all kinds to come together to deliver care in the most cost effective and quality enhancing way, and yet federal and state anti-trust restrictions frustrate nearly every effort to do so.  Let’s take a quick peek behind the curtain. 

Basics 

The Sherman Act is a key federal law which is comprised of two sections: Section 1, prohibits concerted action which unreasonably restrains competition; and Section 2, generally prohibits monopolies.

For there to be a violation of Section 1, there must be an Aagreement@ and it must unreasonably restrain competition.  For there to be an agreement, there must be more than one Aeconomic unit@ involved.  That is, there can be no such agreement by one economic unit with itself.  For example, generally speaking, shareholders in the same corporation are, for antitrust purposes, legally incapable of engaging in illegal concerted action together if they share substantial economic risk.  They are generally considered to be part of a single economic unit.  Conversely, members of two or more competing economic units, separate professional corporations, for example, may not agree to a whole host of things, because such agreements would violate one or more antitrust laws.

Some agreements are considered to be so egregious that they need not even restrain competition.  The mere fact that such an agreement has occurred is enough, and there is no defense.  Some of these Aper se@ violations of the antitrust laws include: agreement among two or more independent physicians to charge a particular amount for a particular service (Aprice fixing@); agreement among two or more independent physicians not to contract with a particular HMO (Aboycotting@); agreement among two or more independent physicians regarding their hours of operation, the services they will offer, or the geographic areas they will serve (Amarket allocation@).  This is by no means a complete list or a complete description of the antitrust laws, but describes some types of activities that will violate antitrust laws.


Creating the Ideal ACO

The current fixation on Accountable Care Organizations (ACOs) is causing an enormous amount of two things:  (1) talking, and (2) inactivity.  Yes, the concept of delivering care in a manner that reduces or at least controls costs is important and interesting.  Yet, the marketplace is replete with people and businesses that have adopted a wait and see approach, which is really no approach at all.  Businesses and people who will thrive (especially in dynamic times) are those who, as always, take a lesson from sharks:  swim ahead or drown.

            So what about ACOs?  What the best “thing”?  How do you make one?  First, you have to do away with the focus on ACOs, since they are more of a concept than a thing.  Focusing on ACOs as a thing merely paralyzes the viewer because they are, by definition, not subject to such limitations.  What is clear, however, is what they’re supposed to do:  reduce costs and improve quality in a demonstrable way.  How do you do that?  Easy…squeeze the toothpaste tube backwards.

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