Preventing Emergency Department Emergencies

1. Preventing Emergency Department Emergencies South Florida Hospital & Healthcare Association Annual Conference June 8, 2007

2. What are we really dealing with? • Physician’s Top Three Priorities • Liability • Physician-Patient Relationship with Individual Unassigned • Increased Exposure to Professional Liability • Lifestyle • Change in Expectations, Culture, Concept of Social Contract • Loss of Sleep and Other Serious Disruptions to Normal Daily Routines • Compensation • On Call Obligations set forth in Medical Staff Bylaws, Rules and Regulations not Enforced unless Pattern of Failure or Refusal to Come In Combined with Unfavorable Clinical Outcome • Opportunity Costs – not providing care for elective patients • Extra costs physicians absorb to diagnose and treat uninsured and underinsured • American Academy of Orthopaedic Surgeons Position Paper – The Responsibilities of Hospitals • Equitable Treatment for All Physicians – American Academy of Family Physicians Position Statement

3. What Does a Hospitalist Program Look Like? Unassigned Patient Program – Take Pressure off Primary Care Physicians otherwise On Call • Specific quality improvement criteria are condition of contract in response to history of physicians admitting but not seeing patients for several days • Contract with Two Separate Internal Medicine Group Practices • One Group Strictly Hospital-Based, No Outside Practice • Emergency physician determines if individual requires observation or admission by member of group contracted • On duty group member must respond within one hour and admit as appropriate per criteria unassigned individual whether or not insured and coordinate consultations and work with nursing and case management to expedite further medical examination and treatment • Payment is made on a per patient encounter basis with payment reduced by one half for Medicaid pending • Group bills and collects and collections are netted against per patient encounter payment and reconciliation on quarterly basis is made (guarantee payment methodology for hospital-based group) • Other Contracted Group’s Members Also Maintain Outside Practice • Per patient encounter payment is made only for response to uninsured individuals, and group bills, collects and keeps payment from third party payers • Hospital also maintains separate professional liability insurance policy with payment amount of premium based upon number of emergency department patient encounters and coverage of all physicians who serve on call

4. With No End in Sight, Is There A Creative Solution? Collaborative Effort – Update on Palm Beach County Undertaking • Countywide shortage identified three years ago • Medical Society engaged and Hospitals participated in funding detailed investigation and recommendations from MDContent (emergency physician and health care economist from Ann Arbor, Michigan) • Emergency Department Management Group formed in April, 2005, as committee of Medical Society Services • Goal of twelve-member group – to improve emergency department on call access for county residents

5. Collaborative Effort Being Pursued • Primary objective – to establish system to help hospitals ensure they have place within county to refer patients in need of specialists hard to find • Require county health care district and local hospitals to pay specialists to work at certain hospitals to handle emergencies while also furnishing the specialists with professional liability insurance coverage • At end of November, 2006, group submitted proposal to district • District has nearly twenty years experience administering county trauma system • Organizing on-call coverage program through political subdivision of state affords hospitals antitrust protection

6. What Would Governance of Collaboration Look Like? • District board of directors to appoint advisory committee similar to existing trauma system advisory committee • Advisory committee to include nine members • Three hospital executives, one of whom must be CEO • Three physicians, two of whom must be available on call to emergency department for one or more hospitals in county and one of whom must be emergency physician who works in emergency department of at least one hospital in county • Two at large community leaders • One district board member, preferably not public office holder

7. What Governmental Approval Needs to be Sought? • Actual implementation plan will require approval from district’s board of directors, Florida Agency for Health Care Administration and U.S. Department of Justice • Proposal submitted is framework for specialty care access services network • Proposed framework was structured to be consistent with MDContent recommendations that • Solution to specialty availability crisis, to succeed, must be fair, transparent, durable and easy to administer

8. What Objectives are Intended to be Met? • Solution must satisfy physician objectives • Liability coverage for emergency department care rendered (priority #1 - liability) • Fewer call days (priority #2 – lifestyle) • Guaranteed payment for services (priority #3 – compensation) • Solution must also satisfy hospital objectives • To meet legal/regulatory requirements • To not be cost prohibitive • To allow hospitals to continue to provide elective services when there are not enough physicians to cover the emergency department every day of the month

9. What Objectives are Intended to be Met? • Proposed specialty care access services network is intended to accomplish following objectives – • Assure consistent access to specialty services • Establish shared financial responsibility • Provide for quality monitoring • Provide liability protection for participating physicians • Allow voluntary participation by hospitals and physicians • Provide market-based compensation for participating physicians

10. What is the Status of this Project Now? • Mentioned in U.S. News and World Report article as multi-pronged solution that would regionalize certain critical on-call services, allowing several hospitals to pool on-call doctors to make sure these specialties are covered at any given time and have hospitals pay for liability insurance just for on-call cases • District Board of Directors Action on Specialty Care Access Services Network Proposal - Update

11. How Can We Get Information to Address Needs Now and Later? • County-wide physician census for Palm Beach County was conducted by the Medical Society per recommendation of MDContent to get data to address immediate supply needs for critical physician specialties and for long-term physician recruitment needs for Palm Beach County. • Report was provided to help leaders address projected shortfalls by 2011 that will affect ED on call access.

12. Why is Determination of Fair Market Value Important? • Stark law, 42 U.S.C. §1395nn, Prohibition • Professional services arrangement exception [42 U.S.C. §1395nn(e)(3); 42 CFR §411.357(d); Federal Register, Vol. 69, No. 59, pages 16138-39, see, also, discussion on pages 16089-93 (March 26, 2004] • Fair market value definition from Stark II Phase II regulations [42 CFR§411.351; Federal Register, Vol. 69, No. 59, page 16128, see, also, discussion on page 16107 (March 26, 2004)] • the value in arm’s length transactions, consistent with the general market value. General market value means . . . the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party . . . at the time of the services agreement

13. What Should Valuator Know and Do? • Prohibition based upon definition against taking into account other agreements for comparable services between physicians and hospitals in a position to generate business • Independent third party valuation • Certain objective thresholds applied in consistent manner • Valuator has knowledge and familiarity with Stark definition of fair market value and prohibition against reliance upon comparable agreements between referring physicians and hospitals • Valuator also cognizant of “one purpose test” from Greber anti-kickback case. • Particularly important if compensation arrangement with on call physician includes multiple facets such as • Per diem fee • “Activation fee” – payment triggered upon physician responding at the request by the emergency physician to actually come into the emergency department • Fee per service furnished to unassigned individuals examined and treated at hospital in observation or admitted through emergency department • Professional liability insurance coverage for examination and treatment of unassigned individuals

14. What can Payments be For? What Must Valuation Include? • Stark requires payment be made only for services reasonable and necessary for legitimate business purposes of arrangement and compensation be set forth in advance and not exceed FMV • Third party valuation must verify valuation includes • Analysis of important terms and provisions of proposed arrangement • Terms referenced in valuation are consistent with terms set forth within contract • Valuation references same parties as does contract • Valuator had opportunity to make site visit if appropriate/necessary, and questions answered to valuator’s satisfaction • Term through which valuation is effective is stated • Any comparables used not in position to refer • Definition and methodology used consistent with Stark definition of fair market value

15. On-Call Compensation Issues • Cost (and the slippery slope) • Compliance with FMV • Maintaining equity among the medical staff • Selecting from among various payment methodologies • Administrative difficulties

16. Prevalence of Compensated Call CoverageArrangements • In a survey conducted by Sullivan & Cotter, 46% (of 167 surveyed healthcare organizations) reported that compensation is provided for on-call availability • Establishing the FMV of on-call arrangements is HealthCare Appraisers’ most requested type of analysis

17. Available On-Call Compensation Payment Mechanisms • Payment earmarked to defray professional liability expense or hospital indemnification for claims arising from emergent care • Payment for unfunded care • Per diem (typically a 24-hour period) • Per diem plus payment for unfunded care • “Activation fee” • Specialists’ Pool of Funds • Deferred compensation plan

18. Pros/Cons of VariousMethods of Compensation -Payment for Professional Liability Insurance • Pros • Relatively inexpensive • Simple to administer • Cons • Value to each physicians varies based upon days of call coverage • May be a short-term solution

19. Pros/Cons of Various Methods of Compensation -Payment for Unfunded Care • Pros • Relatively inexpensive • Equitable among the various on-call physicians • Directly addresses the complaint regarding unfunded patients • Cons • May be a short-term solution • Requires claims adjudication (e.g., global coverage periods)

20. Pros/Cons of Various Methods of Compensation -Per Diems • Pros • Easy to administer (unless uncompensated care is included) • The most prevalent form of compensation • Cons • Likely to be expensive; there is no natural ceiling for per diem rates (other than perhaps locum tenens rates)

21. Pros/Cons of Various Methods of Compensation -“Activation” fee • Pros • Easy to administer • Directly addresses those days in which the physician has to present to the ED • Equitable among the various on-call physicians • Usually results in a cost savings to the Hospital • Cons • May not be viable if call frequency is active • Physicians may ask for an “unrealistically high” activation fee

22. Specialist Compensation Pool for Unfunded Care – One Example • In addition to hospitalist program… • A “pool” is set aside quarterly for surgical and medical specialist unfunded emergent/follow up care • Pool based upon actual number of unfunded patients times pre-determined per patient case rate • Case rate established annually by independent valuation firm • Allocation for surgical and medical specialists in a ratio subject to revision based upon actual claims experience • Claims adjusted based upon (90) day determination of unfunded status

23. Specialist Compensation for Unfunded Care (continued) • All consultations based upon weighted average acuity level as determined by independent third party valuation firm • Separate rates determined for initial consultation and follow up consultations • For surgical specialists, payment is based upon surgical consultations not resulting in surgery • For medical specialists, payment is based upon actual number of initial and follow up consultations (max of 5 per patient) • Targeted payment at a given percentage of Medicare (e.g., 110%) • If physicians also participate in other hospital funded programs (e.g., funding of PLI) costs of such program must be considered in determination that overall compensation is consistent with FMV

24. Deferred Compensation • Relatively new concept • Physicians receive deferred compensation subject to a vesting provision (typically 5-7 years) • Hospital funding of the compensation can be handled through various means, including through the use of life insurance policies

25. Deferred Compensation (continued) • May be administratively difficult • Once in place, it’s difficult to modify

26. Valuation Considerations • Direct market data may be biased and/or lack comparability • There is no OIG safe harbor for on-call compensation • A Cost Approach (i.e., hiring physicians) is generally impractical • An Income Approach is not applicable

27. Factors Affecting the Value of On-Call Services • Frequency and nature of call events • Nature of the specialty • Compensation earned by such specialists for clinical work • Number of physicians available to participate in call rotation • Exposure to unfunded/underfunded care

28. Sources of Compensation Values • Sullivan & Cotter and other published surveys • Hospital and medical associations • Local, regional or national market values • Independent appraiser