1. Joan H. Krause University of North Carolina

2. Consolidation and Integration: What Role For Law?

3. Relevant Fraud Laws Medicare & Medicaid Anti-Kickback Statute Prohibits offer/payment of remuneration to induce the referral of patients, or the purchasing of items/services, payable by the federal health care programs Ethics in Patient Referrals Act (“Stark Law”) Prohibits referral of Medicare/Medicaid patients for designated health services to health care providers with which referring physician has financial relationship Civil Monetary Penalties Law Prevents hospitals from paying physicians to reduce or limit services (gainsharing) Prohibits offering of financial inducements to beneficiaries

4. The Allegations Fraud laws limit financial relationships between referral sources and referral seekers Shift from volume-driven to value-driven payment In this new model, fraud laws prevent providers from working together in more innovative, efficient, and patient-centered ways Examples: MSSP -- Required ACO fraud and abuse waivers Older: HIPAA risk-sharing safe harbors Gainsharing debate

5. The Reality Fraud laws written in a very different era Laws assume: Disaggregated health care system with many independent providers Little vertical or horizontal integration Fee-for-service payment Old models still salient $$ Patients/ Services

6. Health Care Consolidation and Integration Integration = Process of discrete health care providers coming together in (at least loosely) organized form to pursue coordinated, efficient, high-quality care Forms Financial Structural Operational

7. Financial Integration Individual success tied to others in group, such as: Managed care MSSP May exist alone or with other forms of integration No specific payment mechanism required May have little effect on potential for fraud

8. Structural Integration Assume that legal organizational structure safeguards against fraud Stark Law group practice exception ACA flexible with regard to organizational model Mitigates risks for individuals, but still potential for fraud by organization

9. Operational Integration Operation of entity is coordinated Finances Structure Delivery of care Important from patient perspective Often missing in MCOs ACA focus on outcomes and patient satisfaction

10. “In health care, like in everything else, the way we pay people affects the way they cheat.”* *Pamela S. Bucy, Health Care Reform and Fraud by Health Care Providers, 38 V ILL. L. R EV. 1003, 1049 (1993)

11. Effect of Payment Model on Fraud Fraud occurs in different ways under different payment systems, e.g.: FFS vs. capitation PPS shifted locus of fraud to outpatient settings Fraud occurs in unexpected places and in unanticipated ways that may be worse for patients Hybrid payment systems will be subject to multiple types of fraud, many of which we cannot anticipate

12. Human Nature? “Who cheats? Well, just about anyone if the stakes are right.... For every clever person who goes to the trouble of creating an incentive scheme, there is an army of people, clever and otherwise, who will inevitably spend even more time trying to beat it.” Levitt & Dubner, F REAKONOMICS : A R OGUE E CONOMIST E XPLORES THE H IDDEN S IDE OF E VERYTHING 24-25 (2005)