1. ©2013 Reid and Riege, P.C. Opportunities for Medical Practices to Design their Future Within Healthcare Reform Mindy S. Tompkins, Esq. Reid and Riege, P.C. Tel: (860) 240-1044 mtompkins@rrlawpc.com

2. ©2013 Reid and Riege, P.C. Introduction  What is driving change?  What should physician practices do?  Different Models for Independent Medical Practice –Mergers/acquisitions for small, mid and large practices –The “Group Practice without Walls” –Management Services Organizations –Clinically Integrated Physician Networks  The Past : Managed Care Contracting Networks  The Present and Future: CINs

3. ©2013 Reid and Riege, P.C. What is Driving Change?

4. ©2013 Reid and Riege, P.C. What is Driving Change? Physician Practices Decreased reimbursement Increased admin/overhead costs Physician Recruitment Difficulty Health Reform / PPACA / ACOs / Bundled Payments Anti-Kickback Statute Stark Law Physician Quality & Reporting System New IT / Technology

5. ©2013 Reid and Riege, P.C. What Can Physician Practices Do?  Door #1 - Hospital Employment –Historically less regulatory oversight –Physician concerns remain: loss of autonomy; loss of “joint” negotiating power; and practice management style –Long Term Stability?  Public and government attention to higher cost for outpatient visits  MedPac recommendation March 2012 to match E&M fee  Would independent physician leadership provide better integration?

6. ©2013 Reid and Riege, P.C. What Can Physician Practices Do?  Door # 2 - Independent Medical Practices –There are opportunities for alignment without giving up control to hospitals –Respond to pressures of the market forces; ex. need for IT infrastructure –Large groups v. Small groups – Culture is Key –Recruitment / Succession Planning

7. ©2013 Reid and Riege, P.C. What Can Physician Practices Do?  Do you need to be “On the ACO Bandwagon” now?  Or be ready to join when the time is right?  Current status: –Lots of uncertainty regarding actual “savings” in the Medicare ACO programs –High costs of implementation –Uncertainty regarding regulatory oversight, especially outside of the Medicare programs  Again, group culture is key ACOs

8. ©2013 Reid and Riege, P.C. Different Models for Independent Medical Practices within Health Care Reform

9. ©2013 Reid and Riege, P.C. Consolidation / Merger of Medical Groups  Medical practice may gain more stability and leverage with strategic consolidations/mergers  Considerations: –Creates efficiencies by allowing the pooling of overhead and administrative costs –Increased capital and resources –Access to combined EMRs –Increase in negotiating leverage with payors; increase profit –More opportunity for joint ventures, affiliations, and partnerships –May protect market share by discouraging smaller groups or solo practitioners from entering the market

10. ©2013 Reid and Riege, P.C. Asset Purchase Practice A Practice B purchasing substantially all the assets of Asset Purchase: –Favored approach –Ability for acquiring practice to choose which:  assets to purchase  contracts to accept or reject (subject to rights of third parties to assignment)  liabilities to assume or reject (look out for debt obligations or shareholder guarantees) –Practice B typically dissolves post- closing, after period of time to wind-up

11. ©2013 Reid and Riege, P.C. Statutory Merger Practice A Practice B merging into Statutory Merger (C.G.S. § 33-815 et seq.): –Somewhat easier to transfer business –All liabilities of non-surviving practice (B) are vested in the surviving practice (A) –All property owned by the non-surviving practice is vested in the surviving practice –Every contract right possessed by the non- surviving practice is vested in the surviving practice –Recredentialing still needed –Practice B is automatically merged out of existence

12. ©2013 Reid and Riege, P.C. The Group Practice Without Walls What it is?  Larger group practice designed to expand easily  “Loose” merger –Keep local names and signs –Operate in separate "profit centers“; compensation can be directly related to personal/division efforts. –Can lease facilities and equipment  One legal entity with operating divisions –One billing number –combined benefit packages –central fee schedule and contract negotiations –centralized accounting and business services

13. ©2013 Reid and Riege, P.C. The Group Practice Without Walls Why Consider this Model?  Maintain local autonomy for staffing, equipment, supplies, operations  Obtain many of the benefits of a complete merger  Potential fit for physicians concerned about more integration or loss of local governance  Opportunity to drive health care reform initiatives –Division can work together on care coordination –Leverage care coordination and efficiencies with MCOs –Can enter into arrangements with hospitals –Potential to contract for participation in shared savings programs or ACOs

14. ©2013 Reid and Riege, P.C. Management Services Organizations Model Management contracts Practice MDs Practice MDs MSO Physician, Private Equity, or Joint Venture Ownership $$$ MSOs provide practice management and administrative services to medical practices Simple Comprehensive Complex

15. ©2013 Reid and Riege, P.C. Management Services Organizations  Allows physician to concentrate on clinical aspect of their practice  Ability to maintain independent private practice  Creates economies of scale when MSO purchases services as a group instead of individual practices  Access to better employee benefits at lower cost  Easier for small groups to recruit  Opportunities for physician retirement and practice transition

16. ©2013 Reid and Riege, P.C. Management Services Organizations  Implementation of evidence-based standardized protocols, best practices, clinical guidelines, and care standards  Access to risk management, quality management, and compliance programs  Potential injection of capital and resources from non- physician private equity MSOs, particularly if MSO buys the assets; addition of ancillary services  Potential to participate in third-party payor shared savings or P4P programs  Potential for increased ability to negotiate managed care contracts

17. ©2013 Reid and Riege, P.C. Physician Networks – IPAs and IPOs  Traditional Perspective: –Includes: Independent Practice Associations (IPA) or Independent Physician Organizations (IPO) –Traditionally has been a loose affiliation of physicians that come together for the purpose of engaging in joint managed care contracting with HMOs –Many are not sufficiently integrated to be able to achieve economies of scale and other clinical side efficiencies in cost and process improvement

18. ©2013 Reid and Riege, P.C. Functions: Contracts with payors Manages clinical integration initiative Manages incentive compensation program Clinically Integrated Physician Networks Organization: LLC, S-Corp, C Corp Non-profit or for-profit Physician Driven Board /Operating Committees Physician Practice Payors: Managed Care or Self-Insured Employers Clinically Integrated Network Entity Physician Practice Physician Practice Physician Practice Physician Practice Physician Practice Includes specialists and PCPs Expand to include other providers i.e. HHC or PT

19. ©2013 Reid and Riege, P.C. Clinically Integrated Physician Networks  Allows physicians to remain independent and participate in contracts to improve quality and efficiency of patient care.  Focus is on clinical integration through: –Analyzing data to improve outcomes –Standardizing care; develop clinical protocols –Facilitating care coordination –Utilization management processes –Interoperable EMR  Rewards/Risk - Based on attainable goals

20. ©2013 Reid and Riege, P.C. Clinically Integrated Physician Networks – Opportunities  Service Line Co-Management or Professional Services Arrangements  Participate in P4P and shared savings contracts with payors  Participate in bundled care / episode of care arrangements  Increased negotiating power with payors and self- insured employers by demonstrating value based on clinical performance and patient satisfaction data  Pre-curser to physician led ACO

21. ©2013 Reid and Riege, P.C. The “Red Tape” AKA Government Regulations The Anti-kickback Statute:  MSOs: Percentage of revenue fee; affiliated ancillary service providers (i.e. clinical laboratories)  CINs: Referrals within networks; Remuneration through shared savings; Allocation by FMV; not volume or value of referrals Stark :  CINs: May apply if referrals in network to DHS providers (i.e. labs, radiology, PT)  Allocation based on FMV and set in advance

22. ©2013 Reid and Riege, P.C. More Regulatory Compliance Issues Antitrust:  CINs: Jointly negotiated fees; level of market power, i.e. reduced competition  Compliance with FTC Policy Statements on Clinical Integration Corporate Practice of Medicine:  Private equity physician practice management “[S]ubstantial clinical integration consists of an ongoing program to evaluate and modify the practice patterns of network participants to create a high degree of interdependence and cooperation among them….” - FTC, Healthcare Statements

23. ©2013 Reid and Riege, P.C. Questions and Comments DISCLAIMER: This presentation is being offered for educational purposes only and is not legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. While it is designed to provide relevant and useful information, you are urged not to take action based solely on its contents.