Month: April, 2019

HHS Announces New Payment Model for EMS Services

On February 14, 2019, the United States Department of Health and Human Services (“HHS”) announced the launch of a new payment model for emergency ambulance services, Emergency Triage, Treat, and Transport (“ET3”), with the goal of allowing emergency medicine services (“EMS”) and ambulance service providers to triage and treat Medicare beneficiaries more efficiently and effectively. According to HHS Secretary Alex Azar, “this model will create a new set of incentives for emergency transport and care; ensuring patients get convenient, appropriate treatment in whatever setting makes sense for them.”

Currently, Medicare regulations only allow EMS and ambulance service providers to obtain reimbursement for services only if the patient has been transferred to a hospital (including the emergency department), a critical access hospital, a skilled nursing facility or a dialysis center. Because of this restriction, Medicare patients that have dialed 911 for a medical emergency are transported to one of the aforementioned facilities even if that patient does not require the level of care that these destinations provide. For example, if a Medicare patient has a laceration on his or her wrist, the patient would likely be transferred to the closest emergency department for sutures or in some cases, a bandage.  Under the ET3 model, EMS providers and ambulance service providers will now have greater flexibility to address the health care needs of Medicare beneficiaries requiring medical transport for a medical emergency for which they have accessed 911 services. ET3 broadens the scope under which the Centers for Medicare and Medicaid Services (“CMS”) will reimburse the transportation provider by now paying for (i) patient transfer to a hospital emergency department, (ii) patient transfer to a primary care physician office or urgent care clinic, and (iii) any treatment provided by a qualified health care practitioner in place (i.e., emergency medical technician (“EMT”)) or via telehealth. In addition, ET3 will encourage the development of telephonic triage centers for low-acuity 911 calls in regions where Medicare enrolled ambulance suppliers and providers operate in an effort to improve the quality of care and lower costs by reducing unnecessary transports to hospital emergency departments and unnecessary hospitalizations. Along with lowering the cost to the government payor, the patient who received treatment at a lower acuity facility, on scene, or through telemedicine, may also save on out-of-pocket costs that are not covered by their Medicare plan. Using the prior example, under ET3, the patient with a laceration on his or her wrist could now be treated at an urgent care facility or receive sutures from a licensed EMT or paramedic, reducing the cost and also keeping a bed open in the emergency department for higher acuity patients needing such care.

The ET3 model will be available to all Medicare-enrolled ambulance service providers and hospital-owed ambulance providers.  As part of a multi-payor alignment strategy, CMS plans to encourage ET3 model participants to partner with other payors, including state Medicaid agencies to provide the benefit of the program to those not receiving Medicare fee-for-service benefits. CMS anticipates releasing a Request for Applications (“RFA”) in Summer 2019 to solicit Medicare-enrolled ambulance suppliers and providers.  Following the RFA, in Fall 2019, a Notice of Funding Opportunity (“NOFO”) will be issued as a tool to implement the triage lines for low-acuity 911 calls. This NOFO will be available to local governments, their designees, or other entities that operate or have authority over one or more 911 dispatches in geographic locations where ambulance suppliers and providers have been selected to participate. It is anticipated that there may be up to three rounds of RFAs/NOFOs issued to stagger start dates and allow for any improvements in the ET3 model. The anticipated start date for the first participants is January, 2020.

This change in payment structure signals that CMS is recognizing alternative models of patient care, including telemedicine, as it explores ways to decrease unnecessary costs while maintaining the quality of care offered to the patient.

CONSIDERATIONS FOR THE HEALTH CARE PROVIDER IN A PRIVATE EQUITY DEAL

As private equity investors continue to survey the market for health care deals, providers who were uncertain about their strategic plans or who had no plans are finding partners out there.  Entering into a private equity transaction may be a once-in-a-career move for a health care provider.  However, it is important for providers to give some thought to what they want to negotiate in such a deal before signing on the dotted line.

Here are some considerations for the health care provider in a private equity deal:

  • Type of Partner:  some private equity firms will be very hands-on managing the health care provider while others will provide capital, but otherwise play the role of passive investors.  Some firms will bring in a very experienced operations team to supplant or support current management.  Which type of partner do you want?
  • Strategic Plan:  some private equity firms may seek to use the platform to add on other providers of a similar nature to the platform provider, while others set their sights on multi-specialty platforms.  What is your strategic plan?
  • Liquidity Event:  the initial liquidity event may be structured to have a cash component and a rollover equity component.  There is no one-size-fits-all split between the two components.  While the firm may make an initial offer on such a split, the target provider needs to consider what split best suits its needs and desires.  That may start a debate amongst the various owners of a provider if the owners are in different stages of their careers.  Early and mid-career partners may want to put more into rollover equity including some, if the deal allows, into a “parent entity” that may have different strategic plans.  Late career partners may want a higher upfront cash liquidity event.
  • Post-Closing Compensation:  compensation post-closing for providers will undoubtedly look different.  Like the liquidity event, there is no one-size-fits-all approach to compensation.  These days, some compensation is likely to be productivity-based, and that is not unique to private equity backed transactions.  Once again, the split between productivity-based compensation and fixed compensation may spark a debate.  Early and mid-career partners may want more productivity-based compensation.  Late career partners may want a higher base salary.
  • Governance:  the platform provider will have representation on the governing board of the management company, but how much representation and voting rights depends upon the particular provider.  “Add on” providers may have to work harder to negotiate for board representation if that is important to the provider.

These are just a few of the considerations for health care providers exploring a private equity deal.  Certainly, there’s much more to be done before a deal can be struck.  It is, therefore, important for a provider to contemplate what is most important to the provider as this may be one of the provider’s biggest strategic moves in his or her career.