Month: May, 2019

Is a Supergroup the Right Fit For You?

As it gets harder and harder out there for an independent physician or a small, unaligned physician practice to survive, supergroups or group practices without walls continue to gain in popularity.  A supergroup is a group of physicians or physician practices coming together under a single employer identification number in the organization of a single legal entity.  Some supergroups focus on one specialty while others are multi-specialty.

Like everything in life, there are pros and cons to supergroups and whether or not a particular attribute is a pro or a con may vary from physician to physician.  This post reviews some of the most important advantages and disadvantages.

Pros

Supergroups allow physicians to share, and reduce, expenses.  This is most often done in the context of consolidating back office functions and non-clinical staff.  Sharing non-clinical staff can allow physicians to build a more sophisticated administrative operation and pool their resources to hire more experienced staff and executives.  It also generally allows physicians to further divest themselves from involvement in administrative services and focus more on clinical care, an aim of many physicians.  Moreover, physicians can utilize the existence of a centralized administrative office to reduce the amount of space that they lease in their individual offices.  Physicians can also gain greater power to negotiate with suppliers and purchase more supplies in bulk thereby saving more money.

Supergroups are generally, by their nature, large groups (hence the term “super”).  In this day and age, more physicians can translate into better leverage with payors which can translate into higher reimbursement rates.

Physicians can use their greater resources in a supergroup to invest in technology to keep up with the ever increasing burden of regulations and reporting systems that require extensive use of technology as well as hopefully deliver higher quality care by harnessing data.

Additionally, as reimbursement continues to plateau or decrease, many physicians are looking at ancillary revenue streams.  However, to gain a share of this revenue, generally, a not insignificant capital investment is necessary.  Supergroups, with their greater resources, are better positioned to invest this capital as well as achieve savings by purchasing equipment that can be shared by multiple physicians in the group, thereby keeping costs down.

Joining a supergroup can also allow a physician to affiliate with a hospital without giving up much in the way of independence.  There are supergroups that are managed by a health system, but which otherwise generally allow the physicians to practice as they always have been.  The health system is usually paid a fair market value management fee for the management services provided to the supergroup.  Also, the affiliation of a supergroup with a hospital may give the supergroup more leverage in negotiations with payors, thereby providing an additional benefit to its member physicians.

Being a part of a supergroup may also allow a physician to establish a channel with private equity firms.  Many physicians want to enter into deals with private equity firms, but either are too small to gain notice or do not have a sophisticated enough back-office operation in order to appear attractive.  Supergroups can work on establishing more robust administrative operations, add physicians to grow larger and then approach private equity as a more attractive target with additional negotiation power.  

Cons

Despite the relative independence of physicians and profit centers in supergroups, there will still be some loss of independence.  A physician will no longer be his or her only boss as it is inevitable that some decisions will be made by a centralized board.  The extent of those decisions does vary by group.  Even if every physician is a member of the board (not advisable), each physician will have only one vote, and one vote will not be enough to carry the day.

A clash of cultures is a possibility as well.  Different physicians and practices have different ways of doing things, and given the centralization of some aspects of the group, fights over cultures do occur from time to time.

There is also a cost in forming a supergroup.  Practices will incur expenses in coming together to form the entity, develop governing documents, contribute assets, merge benefit plans and hire new management.  While these costs will hopefully be dwarfed over time by savings and higher profit margins, this is not a guarantee.

There will also be business and legal obstacles in coming together.  Some practices may be more profitable than others.  Some may carry higher overhead than others.  Some may be more productive than others.  Additionally, Stark law compliance is paramount in forming a supergroup, particularly if there are ancillary services involved that are considered “designated health services” under the Stark law.

Forming or joining a supergroup is a big decision and can be a daunting task for physicians.  It is important to consider all of the issues involved and assess the ramifications carefully before jumping completely into the pool.

New Jersey becomes Eighth State to Pass Death with Dignity Legislation

On March 25, 2019, both the New Jersey Assembly and the New Jersey Senate passed the Medical Aid in Dying for the Terminally Ill Act (the “Act”).  The final version of the bill was sponsored by Assemblyman John J. Burzichelli and Assemblyman Tim Eustace.  Governor Phil Murphy signed the bill into law on April 12, 2019 stating, “Today’s bill signing will make New Jersey the eighth state to allow terminally ill patients the dignity to make their own end-of-life decisions – including medical aid in dying.  We must give these patients the humanity, respect, and compassion they deserve.”

The Act “permits qualified terminally ill patient[s] to self-administer medication to end [their] live[s] in [a] humane and dignified manner.”  New Jersey is now only the eighth state in the country to allow competent, terminally-ill adults to exercise their “right to die.”  Under the Act, “terminally ill” is defined as a patient who “is in the terminal stage of an irreversibly fatal illness, disease, or condition with a prognosis, based upon reasonable medical certainty.” 

Furthermore, qualified patients choosing to exercise their rights under this Act will be required to submit their request in writing, stating, among other things, that they have been fully informed of any available alternatives.  Two individuals, one who must not be a relative, entitled to any portion of the patient’s estate, or the patient’s doctor, must witness and attest the voluntariness of the patient’s request. 

A “right-to-die” bill was first introduced in New Jersey in 2012.  Proponents of the Act believe it gives adults the right to control their lives, die with dignity if they so choose, and decrease their prolonged pain and suffering.  Proponents of the Act also believe that there are enough safeguards in place to protect vulnerable, elderly adults. For example, the Act requires a patient to make several requests prior to receiving a prescription.  Additionally, not all terminally-ill patients who request and receive the medication will actually end up self-administering the medication – some patients simply like having the option of requesting such medication. 

Opponents of the bill argue that once a “right-to-die” bill is passed, New Jersey will be unable to outlaw the practice.  Further, they argue that vulnerable adults may misuse the Act, while certain adults may feel pressured to end their lives, viewing themselves as burdens to their families.  A 2015 Rutgers-Eagleton poll found that sixty-three percent of New Jersey residents support the passing of a “right-to-die” bill. 

It will be interesting to monitor the effects of these statutes on physicians, psychologically and professionally.  It is debatable whether providing such medications to terminally ill patients in pain can be reconciled with a physician’s Hippocratic oath to do no harm.  It will also be interesting to see what, if any, pressure will be placed upon doctors to provide such services to patients given that many may have moral objections to administering such medications.

HHS Actually Takes Action to LOWER the Penalties For One Of Its Enforcement Laws

On April 29, 2019, the United States Department of Health and Human Services (“HHS”) announced in the Federal Register through a Notification of Enforcement Discretion that effective immediately, it would be exercising its discretion regarding the application of HHS regulations concerning the assessment of Civil Monetary Penalties (“CMPs”) under the Health Insurance Portability and Accountability Act (“HIPAA”) and the Health Information Technology for Economic and Clinical Health (“HITECH”) Act. Specifically, HHS has changed its uniform cumulative annual CMP limit across the four categories of culpability and replaced it with tiered annual CMP limits increasing as the categories of culpability increase in severity.

In 2009, HITECH established four tiers of culpability with increasing penalties based on increasing severity. Those categories included: (1) the person did not know (and, by exercising reasonable diligence, would not have known) that the person violated the provision; (2) the violation was due to reasonable cause, and not willful neglect; (3) the violation was due to willful neglect that is timely corrected; and (4) the violation was due to willful neglect that is not timely corrected.

At the time of enactment of the HITECH Act, discrepancies were identified in the descriptions of the penalty ranges and uncertainty existed surrounding whether the $1,500,000 annual cap on CMPs should be applied to all of the categories of culpability. In the final regulations implementing HITECH that were adopted by HHS in 2013, the $1,500,000 annual cap was confirmed by HHS to apply to all categories. And, ever since then, HHS has been issuing penalties under the following framework:

Culpability Min. Penalty per Violation Max. Penalty Per Violation Annual Limit
No Knowledge $100 $50,000 $1,500,000
Reasonable Cause $1,000 $50,000 $1,500,000
Willful Neglect  – Corrected $10,000 $50,000 $1,500,000
Willful Neglect – Not Corrected $50,000 $50,000 $1,500,000

However, in a sudden change of position, HHS’ guidance this past week states that upon further review of the statute, it believes a better reading of the statute is to provide a tiered annual limit. Thus, under HHS’ new interpretation, there are new maximum annual limits to HIPAA enforcement actions as follows:

Culpability Min. Penalty per Violation Max. Penalty Per Violation Annual Limit
No Knowledge $100 $50,000 $25,000
Reasonable Cause $1,000 $50,000 $100,000
Willful Neglect  – Corrected $10,000 $50,000 $250,000
Willful Neglect – Not Corrected $50,000 $50,000 $1,500,000

It is unclear how the “No Knowledge” category will work given that the maximum penalty per violation remains at $50,000 while the annual limit is only $25,000. A review of the Federal Register entry from HHS confirms these to be the numbers published by HHS, and thus, until HHS offers further guidance or begins applying these new figures to specific cases, there remains some uncertainty for this category of culpability.

Nevertheless, these changes should come as welcome news to providers and business associates trusted with protected health information (“PHI”) as a penalty for a HIPAA violation can add up quickly. Thus, these new annual limits will help to curb the financial sting of a violation, especially when the provider or business associate either is genuinely unaware of the violation or takes appropriate action in response to a violation. Only time will tell whether HHS’ clarification of its reading of the statute to require lesser annual CMP penalty caps marks a general shift toward lower penalties or fewer enforcement actions overall.

In the meantime, it would be wise for providers and business associates to continue demonstrating good faith compliance efforts to try and minimize the tier of culpability within which a particular penalty falls. Only through ongoing reviews, audits and assessments of privacy policies and procedures and general compliance programs will providers and business associates remain prepared and help to mitigate the penalty of a potential HIPAA violation.  Certainly with these new tiered annual CMP caps, those that handle PHI have an even greater incentive to remain focused on effective compliance efforts.