AHLA's Speaking of Health Law
AHLA's Speaking of Health Law
Fraud and Abuse: Proposed Changes to Physician Compensation
In this episode of AHLA's monthly series on fraud and abuse issues, Matthew Wetzel, Associate General Counsel, Compliance Officer, GRAIL, speaks with Joe Wolfe, Hall Render Killian Heath & Lyman PC, Frank Stevens, Berkeley Research Group (BRG), and Alex Krouse, Parkview Health, about the recent proposed changes to the Medicare physician fee schedule. The podcast discusses the changes made by the rule to physician compensation, and how it impacts compensation planning. From AHLA's Fraud and Abuse Practice Group. Sponsored by BRG.
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Speaker 2:Welcome to the latest edition of the American Health Law Associations Fraud and Abuse podcast. My name is Matt Wetzel, and today is November 18th, 2020. In this episode, we're discussing some recent and important proposed changes to physician compensation, specifically updates to the Medicare resource-based relative value scale or R B R D S. Uh, what are they, what are these changes? Why do they matter? And what are FR fraud abuse lawyers need to know? Joining me today is Joe Wolf, shareholder in Hall Renders Milwaukee office, as well as Frank Stevens, managing director with b r G based in la and Alex Kraus, legal counsel at Parkview Health and Indiana. Gentlemen, welcome.
Speaker 3:Thank you. Welcome. Thank
Speaker 4:You.
Speaker 2:Looking forward to the conversation today, and I think we might just jump right in. Uh, Joe, I might turn it over to you to kick us off here. Uh, the recent proposed changes to the Medicare physician fee schedule would adjust how physicians are compensated by increasing reimbursement, uh, for certain highly billed codes. Can you give us a layman's understanding of these changes and what they are and what do they mean?
Speaker 4:Yes, thanks, Matt. Um, just kind of a lay of the land here. Uh, the proposed rule around the fee schedule was issued back in August. Uh, in that rule, c m s is recommending several changes to the Medicare physician fee schedule for 2021. Uh, the, the big issue we're dealing with today was, um, an increase that they're proposing to the RVs that are allocated for, uh, several common evaluation and management services. We'll probably call them e and m services in today's call. And so for all those healthcare leaders listening in, you know that the e and m services are typically associated with primary care and other office-based visits. Um, so we have those e and m service visits are gonna have more VUS allocated to them. So that's one side of this. Uh, the second side of this, I think, is the, the, that there are also, there also needs to be budget neutrality associated with these changes. So CMS is proposing an 11% reduction to the conversion factor for the, under the Medicare physi physician fee schedule. So that means that, um, it, it will lead to essentially neutral reimbursement under, under the, the fee schedule generally. And the, the third part is what we're gonna be talking about probably specifically today, is how this impacts compensation plans. We're gonna have a dynamic, um, if these rules are finalized, where more VUS will be allocated to physician services in that E N M service space. Uh, but reimbursement will remain steady and so, or, or neutral. And so that's gonna create a, a challenging situation for some, uh, physician organizations out there. Uh, this is only a, a proposed rule right now. Um, there is still some back and forth going on, um, in DC over, you know, how these rules will ultimately be, be finalized. I know there's been some pushback, uh, by Congress, um, on the changes to these e and m service allocations. So, um, you know, we're, it's a wait and see moment, but, uh, organizations nationwide are trying to see how this will ultimately impact physician compensation plans.
Speaker 2:Thanks so much, Joe. And you know, you mentioned that, uh, there are some challenges associated with the proposal. Frank, I might turn it over to you, assuming that the changes are finalized as proposed here. Of course, you bring more than 30 years of experience advising healthcare organizations on financial and operational issues. Can you put these proposed changes into perspective for us? Why did CMS propose them and what challenges do they create? As Joe mentioned?
Speaker 3:Thanks, Matt. Um, you know, CMS is always feeling pressure to, um, respond and make sure they have enough primary care doctors in their network. And, and we have to remember that, uh, this change is, uh, specific to the Medicare fee for service program. Uh, although we have a lot of payers, both commercial and Medicare Advantage, that use r b Rrb s, um, these changes were made specific by CMS to encourage and keep and maybe bring us some more primary care vi uh, physicians in to see Medicare patients. Um, you know, there's three challenges that that come to my mind, uh, uh, that this is gonna create. Now, the first is gonna be what every physician and physician group's gonna be concerned about is, is at the end of the day, given my mix of billing, am I gonna be a winner or a loser? You know, am I gonna make more money or am I gonna lose more money overall? Um, so, you know, for, for all physician groups, that's gonna be a, a, a number one concern. The second concern I wanna talk about is physician groups that have used the RVs from rbrbs and incorporated it as a mechanism where they're employing physicians. And that mechanism works to try to create, um, a a scale by which they can ensure productivity by their physicians. And I'll, I'll give a quick example. Back when I was young, you know, I could hire a physician for, you know,$60,000 and I'd put him into play. And in, in most cases, I didn't have any productivity issues. However, there are times, times that medical groups have problems with employed physicians getting a level of productivity. In more recent years, medical groups that employed physicians have said, look, we're going to look at and your prior years RVs, what you produced, looking at the CPT code billing and the associated RVs, and we're gonna set that as a standard, and then we're gonna negotiate a, a salary. So in a hypothetical, um, you know, the salary's gonna be a hundred thousand and we got X amount of RVs that you produced last year. I'm gonna divide that into a hundred thousand, and now I've got my dollar multiplier. So it's, it's, in one sense, it is creating a fence that the doctor has to work in. He knows, this is what I can get, this is my salary, but if I don't produce the RBU's, then I'm actually gonna get paid less. Um, so that's the second challenge. And the third challenge is the, the whole issue of, you know, how if these changes go through, is it going to raise issues around regulatory compliance with Stark and anti-kickback?
Speaker 2:Frank, tell us a little bit more about, um, that last point. Obviously were the fraud abuse practice group for H L A, uh, and your, uh, insights on, on start compliance would certainly be, um, a note for our, our listeners here.
Speaker 3:Yeah. So, you know, anytime you're employing physicians and compensating them, um, you know, there, there are certain standards. There's the fair market value, a sense of reasonableness in all of these calculations have been made through the last few years. So you can ensure yourself as an organization that you're, you're right where you need to be in terms of regulatory compliance. With this change, if the change goes through the group has to do one or two things. Um, one, they could choose not to pursue this change. Um, if they could keep under the current vus, if they do have to go to the change, can they, in their contractual relationships, modify the dollar multiplier to bring the salary back to the target? And if they can't, then it's gonna raise the question of do we need to do, uh, a review to determine whether or not we're still within a sense of reasonableness and fair market value? Or have we fallen outside of that with a compensation we're paying our physicians?
Speaker 2:Joe, let me ask you on this star question, and, and Frank, really great insight here, especially in the challenges, uh, that physician group and others will face. But you know, Joe, let me, let me jump back to you quickly on the Stark law question. What stark law issues, what fraud abuse, uh, uh, legal issues, uh, did these, uh, proposed, proposed the course is finalized? Uh, what, what, what, what could they raise here? What issues could they raise?
Speaker 4:Thanks, Matt. Um, of course, you know, the issues that we're focusing in here, uh, on here are how physician compensation is calculated. And of course, uh, the physician, physician compensation is at the center of, of Stark and anti kickback, uh, compliance today. Every fraud and abuse attorney that's, that's in working in this area is analyzing physician arrangements, uh, under stark and anti kickback. And two critical standards under those rules are the fair market value and commercial reasonableness standards. And so, you know, to Frank's point, um, a healthcare organization has to be confident that, um, when 2020 ends and when 2021 begins, that, uh, they can support the compensation arrangement now and, um, under the, the, the new, uh, allocations if the fee schedule goes into place. So, uh, healthcare organizations will have to under, uh, follow one of those paths that Frank was outlining. You know, they implement or they analyze and adjust, um, or maybe they freeze the, the calculations, uh, consistent with 2020. Um, and a fraud and abuse lawyer working in this space will have to have some confidence that they're paying consistent with fair market value and that the arrangement is commercially reasonable. That's that Second part, Matt, I think is, is a, it's a bit safer in today's environment because of the, the new guidance from the government and the new proposed definition of commercial reasonableness that provides more flexibility around losses. So I think we have a bit more breathing room with that recent clarification. Um, but I do think organizations are gonna have to be ready to, to be able to substantiate why they, they still believe they're paying consistent with F M V and, and under terms that are commercially reasonable regardless of the path they choose.
Speaker 2:Thanks so much, Jill. Alex Krause, I wanna turn it over to you for a minute here. You serve both as in-house legal counsel for a health system, and you serve on the board of the American Association of Provider Compensation Professionals. Uh, what's the industry's reaction to the proposed changes, and how are you thinking about, uh, the proposed updates to the work rvu?
Speaker 5:Yeah, no, thanks, Matt. I mean, you know, I, I'd say broadly, um, you know, there's been a, a lot of organizations that have been very undecided, um, on the front of, okay, well, what are we gonna do here? Um, I think individuals that are truly in the shoes of we manage, develop a strategic aligned compensation models for providers. I think if you were to ask that person out there, um, they would probably say this whole work RVU increase, um, you know, it, it doesn't really make a whole lot of, um, you know, direct sense to them. Because I, I, I do think broadly speaking, you know, your comp models yes, are formulated based upon work RVU use, but they're also formulated based upon dozens of factors. Um, I mean, you look at the total cash compensation, you're paying not just the per unit rate, you look at supply and demand of providers. You look at, um, you know, maybe could we be utilizing apps instead of, I mean, there's so many factors when it comes to formulating comp models that I think the angst that's being created is, well, you had CMS for Medicare only. And keep in mind, Medicare isn't, you know, every single patient out there, CMS has changed work RVU values that are, that are key to these comp models. And now you have these individuals in-house that have to justify should we allow the comp models to go through and continue to pay, but in pay very increased rates for the same work. And so I think that's created angst. I think that's one thing. Um, but I do think the other issue is there's a practical, and this is whether me speaking, you know, in-house from a health system perspective, um, or just other individuals that I've spoken to in other health systems, is, you know, this is kind of a double whammy that health systems are gonna have to, um, see if they can financially pay for, and by that I mean, you know, the conversion factor on its own for any large integrated health system is likely gonna result in reduced reimbursement. Um, so if you've got a, a complex, um, you know, system of care, you, you're, you're losing, you know, money on this one mm-hmm.<affirmative>, but if you also then say, we want to implement in in our comp models, you're gonna be losing a lot more money than you typically would have. And so I think it puts health systems, um, in a position where, you know, we're already being scrutinized to make sure the cost of care is taken into account. Um, you know, and it puts, it, it puts health systems in a, in a tough position, I think.
Speaker 3:Now, Alex, this is Frank. You know, I, I think one thing that we should all keep in mind is, um, we think about this change as being focused for, um, fee for service Medicare. Um, but we also know that all the commercial payers and, and Medicare advantage and, and even state Medicaid managed care payers, uh, use rbrbs. And they're also scrutinizing whether or not they want to move forward with, uh, the 2021 version. Um, you know, I did a kind of an informal survey, and I did not find one payer who was willing to commit that they'd made the decision to move forward, in part because they haven't looked at what's gonna happen actuarily to them, what's gonna happen to their cost of care, but more so what will happen to their network. Um, there is concerned because of requirements for access to care for patients, if they make these changes, if they adopt this 2021 rrb, rrb s will they face, um, rejection by their physicians. So we know that there are many payers today that use 20 10, 20 12, 20 15, they haven't really moved to the more current versions of rbr BRBs. So this change also kind of throws a wrench in the operations of health plan as well,
Speaker 5:Frank, and that, that's, that's interesting that you mentioned that because I do think, you know, the, the, I think one, um, issue that individuals involved in provider compensation need to think about is, you know, this, this is Medicare only. It's, it's not the other. And I mean, you know, that's good to know with kind of that informal survey. It's, it's not necessarily everybody else. And when you look at most health systems, I mean, most health systems, you know, aren't just Medicare. I mean, it's a big piece, but, um, it's interesting to look at it from that standpoint too.
Speaker 2:You know, as I, as I was looking through, uh, the notes on this issue and, and studying up on the r b rrb s for this podcast, one question that came to mind, and, you know, in my own industry and life sciences, we continually move towards, um, an outcomes-based approach towards measuring our work versus the productivity based approach. And I wonder, Alex, Frank, Joe, if you have any thoughts on the question of, you know, whether we should be asking some bigger questions about how we're measuring and managing, uh, physician and provider productivity, are we doing that the right way? Should we be taking a sort of fundamentally different look at how we're, uh, assessing and compensating our physicians and providers?
Speaker 5:Um, I maybe, maybe this is Alex, maybe I'll take a stab at this one first and then I can, I can let the others respond. Um, you know, I I I, I do think that, you know, this definitely puts a pause in organizations, um, you know, rooting their comp models and work VUS when they don't really have control over what those values are. So I think on the, you know, I think on that level, um, you know, I've spoken with a colleague in a health system in Texas where, you know, they're developing a, a two to three year plan to create their own internal metrics for productivity because they, you know, I'm, I'm assuming, um, they believe this change is big enough to where they, they just really can't afford to deal with, um, you know, metrics that, that may or may not actually measure up with outcomes based, um, you know, kind of models of care. So I, I, I do think that's one, but I, I do think in the long term, I mean, I think there is a reality of you're going to have, um, different alignment strategies where volume, although is, you know, going to be important is much more mitigated. So, uh, I I, I do think, um, you know, the world of, you know, the per work rvu, um, incentivized cop model, uh, is, is going to be materially changedd.
Speaker 3:I've been, because I'm such an old person, you know, I've been around for so many years now, and I've been watching different attempts o over the last 30 plus years of trying to get to this outcomes space. And it's, it's a real challenge. Um, I see more of that happening, um, with the organizations that I work with, where they're using capitation, um, as a methodology for reimbursing physicians and then tying, um, providers together, such as a hospital, a sniff and a physician group, and putting together a model that says, here's what the total budget is. You know, if we meet it, then we all get a piece of the pie. And so there's this desire to connect people together. Um, you know, cuz one of the biggest problems we see is, um, if, if, if I'm the physician, I treat the patient and then the patient goes somewhere else, I've lost total control of that patient. So we're seeing different models being put together, uh, clinically integrated networks where they're trying to bring providers, um, into a team atmosphere where they all get rewarded when they have good outcomes.
Speaker 2:Absolutely. Absolutely. And I think, uh, you know, in other areas of regulatory development, we might see some movement from HHS on that issue as well. Uh, let me ask, let me turn it over to Joe here. Uh, you know, round us out here in this conversation, we've heard about the impact of the potential changes, the options that health systems and providers, uh, and physician groups have as far as adopting or not adopting these changes, assuming they are finalized. But boil it down for our broad and abuse lawyers. Why should we care? What should we be paying attention to, uh, in the near term on this particular issue? Joe?
Speaker 4:Yeah, thanks Matt. And I, I would start off by, I did have a thought on that, the, the, the RVs and then I, I will round us out. You know, I, I still think this probably rolls into, to the, to the recap too. I'd say the VUS at this point, I, I don't think we wanna, you know, throw out the, the baby with the bathwater or whatever that saying is. Um, RVs, uh, appear to still be relevant. Uh, the government still cares about them. They're paying reimbursement based on the rvu, the, the, the regulations still mention vus, uh, the government enforcement actions brought in the stark and anti kickback space still focus on RVU productivity when you, uh, review the pleadings. Um, so I think that it vus are still going to be relevant. Uh, the survey data continues to rely on it. Um, and it seems to be, you know, in, in what we have one of the best indicators of what the quantity and intensity of work effort is. And I think that's still going to be the case. I do think we're gonna see to, to Alex's point a shift, um, if the stark regulations and, and anti kickback regulations are finalized, which we're hoping that will be very soon, uh, to, uh, those value-based, um, arrangements, uh, with value-based enterprise framework where we are paying for care coordination quality and cost containment. So I, I do think our views are gonna be relevant, but maybe not as controlling as they have been historically. Um, and recap on the session today, I think, you know, we covered a lot of ground. Um, this is a, a complex issue. Um, it's a, a complex issue related to a rule that hasn't even been finalized. But, uh, it is so important because it, it, it will drive how physicians are paid. Um, on one end. It will drive compliance, uh, issues on another. And it's very, it's a, it's a complex issue from so many angles. And so we're seeing a lot of, uh, healthcare organizations trying to get ahead of this. Um, and I, and I do think it's going to be, um, um, something fraud and abuse lawyers should be paying attention to. Uh, because ultimately you're gonna need to understand the, the concept here in order to be able to analyze those agreements going forward, uh, in order to devise, uh, approaches and solutions. And also to understand this may not be an issue that's isolated to this year, uh, is if we're gonna move from volume to value, there could be more volatility on an annual basis around these RVs. So, uh, you may need to come up with, with multi-year solutions for if this happens again in 2022. So a big issue for all of us in the industry, and I think Frank and Alex did a great job covering it. And, and Matt, your questions were very pertinent to what we needed to talk about today.
Speaker 2:Thanks so much, Joe. And it sounds like we've got, uh, a foundation laid for perhaps a future episode of our podcast here. Uh, if the, uh, if the proposed r b rrb S changes are finalized, and then of course, as we potentially move from a volume-based to a value-based, uh, reimbursement rubric, uh, at least at the, you know, federal level, uh, uh, the impact of the r b Rrb S changes, uh, may come into play in the future as well. So appreciate that. Joe, Alex Frank, thank you again for joining us today and for your insights and the great discussion. Once again. Our guests have been Joe Wolf, co-chair of Hall Renders fraud abuse practice based in Milwaukee. Frank Stevens, managing director at B R G based in la and Alex Krause, legal counsel at Parkview Health in Indiana. Thanks for tuning in today, and please be on the lookout for future episodes of the a podcast.