Confronting Disruption in Healthcare

The message is clear. Tech companies and others are determined to disrupt healthcare.  Payers think it is too expensive. Patients think it is too complex.  Meanwhile, physicians are getting paid less to do more and hospitals are providing care to more complex patients with fewer resources.  No one is happy with the inefficient healthcare system as it exists today.


Disruption brings opportunities, as well as challenges. Your healthcare organization  can meet the disruption head on if it pays attention to the following trends:

  • Importance of data analytics. Thriving healthcare organizations invest in the capability to use data analytics to manage the effectiveness and cost of health care. Mercy Health Network (MHN) developed a comprehensive data warehouse that aggregates data from over 150 sources, with plans to expand to over 500 sources.  These sources include electronic medical record clinical data, billing records, scheduling data, hospital demographic data, public exchanges, and payer claims data feeds.  MHN uses this data to anticipate patient needs and proactively engage patients in self-management.  This type of data can also be used for predictive analytics to determine needed interventions while the patient is in the hospital, such as determining which patients are at risk for falls or re-admissions and developing a care plan to address these risks.
  • Patient-Centered Marketplace. MHN is focused on putting its members at the center of its business strategy. Consumers are making more of the decisions on what  healthcare services to consume and which providers to use. Consumers are demanding more cost and quality transparency from providers.  Is your brand associated with high quality in the minds of your patients? Do you deliver an exceptional patient experience? Are you being transparent about how much the patient will pay for her care, or is she going to be surprised (and shocked) when she gets the bill? Are you aligned with your hospital-based providers so you can estimate what their charges will be?
  • Need for Cost Reduction. Purchasers of health care, including the government, employers and consumers, are increasingly cost sensitive. To be seen as the provider of choice in your market, your healthcare organization must deliver value to the community: better care and better health at a lower cost. Traditionally, cost-cutting efforts are focused on areas such as supply chain, revenue cycle, clinical documentation improvement, and labor productivity.  What is needed, however, are transformational changes to the cost paradigm in health care. Are patients receiving care in the lowest cost setting? Are nurse practitioners being used effectively? What controls are in place to ensure patients are receiving medically necessary tests and therapies? Are you using data to coordinate your patients’ care to ensure they receive needed interventions.

As General Counsel of MHN, I clearly see an important role for the legal team in these efforts. My priority as Mercy Health Network’s General Counsel is to ensure the Legal Department has the right culture and is appropriately staffed to meet the needs of our organizational clients.

To be effective, Legal staff must be responsive and understand their role in managing risk. If Legal is a “black hole”, the clients will find ways to work around them, which increases the risks to the organization and leads to litigation and non-compliance.  Legal staff also need to understand their role in providing proactive, strategic guidance. They need to be “yes” lawyers, without becoming rubber stamps, carefully gauging and advising on the risk of a particular strategy.

Employing outside counsel can be an effective way to add needed competencies.  I have used alternative fee arrangements to manage these expenses.  These arrangements include fixed-fee retainer agreements for ongoing needs and not-to-exceed fees on discrete engagements.  Active engagement and management is also key.  Outside counsel are most effective when they have an in-house lawyer advising them on who to interview and how to get needed information. This approach also eases the concerns of fellow employees who are not accustomed to being interviewed by attorneys or being questioned about what they did and why.

Thoughts on Physician Compensation Models

doctor-medical-medicine-health-42273.jpegConcerns Regarding Employment Model

In the past fifteen years, health systems moved to a physician employment model in many of their markets.  Intermedix estimates the number of hospital-owned physician practices has tripled since 2002.

Unfortunately, health systems are not effective physician practice managers.  As Jeff Goldsmith  noted in a recent Harvard Business Review article: “For many health care systems, physician “integration” — making physicians employees of the system — seems to have become an end in itself. Yet many hospitals are losing upwards of $200,000 per physician per year with no obvious return on the investment.” Mr. Goldsmith believes the poor returns on investment are due to the lack of focus on the key drivers of practice profitability: compensation models, centralized revenue-cycle functions and negotiation of health plan rates, and the reduction of needless variation in prescribing and diagnostic-testing patterns.

To make matters worse, a comparison of hospitals which switched to an employment model to hospitals which did not switch showed no demonstrated improvement in quality outcomes for the switching hospitals.

Physicians are not happy either. Burnout is a significant concern: “The spike in reported burnout is directly attributable to loss of control over work, increased performance measurement (quality, cost, patient experience), the increasing complexity of medical care, the implementation of electronic health records (EHRs), and profound inefficiencies in the practice environment, all of which have altered work flows and patient interactions.”

Losses in a physician practice also put the health system at risk under the False Claims Act.  This theory of liability is attractive because it is easy to show the subsidies exist.  The hospital subsidizing the practice then has to show the arrangement is fair market value and commercially reasonable. If this burden is not met, the subsidies can be found to violate the Stark law, which does not require any showing of intent.  Any claims submitted to Medicare in violation of the Stark law are often considered false claims.

Other Models to Consider

Given the pitfalls of the employment model and experience to date, health systems and physicians are looking for alternatives to the employment model which can meet the following goals:

  • Give physicians more control over their practice and encourage entreprenuership.  Giving physicians more control and encouraging their input to make practices more efficient should reduce physician burnout.
  • Reduce or eliminate practice subsidies, which will improve health system financial stability and reduce compliance risk.
  • Provide alignment between health system goals and physician practice goals.
  • Provide incentives to improve patient satisfaction and quality outcomes.

Virtual Private Practice

In this model, the physician practice (JV) is jointly owned by the health system and the physicians.  The health system provides management and other services to the JV.  The health system does not directly subsidize the physician practice, but may pay the JV for intangibles, such as a fee for using its brand.  This approach works best if the income of the JV is sufficient to meet the physicians’ compensation demands or the benefits of the professional management provided by the health system result in reduced operating costs.  Alternatively, the relationship can identify alternative sources of income, such as  ancillary services or value-based payments.

Professional Services Agreement

In this model the health system enters into contract with independent group and “leases” its physician employees. The physicians maintain their independence through continued ownership of the group’s professional corporation, which decides how the compensation from the health system will be distributed among the physicians. A PSA usually includes additional compensation for taking emergency room call, administrative medical director duties, and coverage of distant clinic sites. If structured appropriately, a PSA can bill for the services furnished by the physicians as provider-based services under the tax identification number of the hospital and qualify for the additional facility fee.

Co-Management Agreement

A co-management agreement is a type of professional services agreement. Under a co-management agreement, physicians are still independent contractors of the hospital, but typically, the hospital pays the physicians fixed fees for professional and certain management services. The hospital can also pay the physicians a variable fee based on quality outcomes. The hospital itself provides administrative and certain other managerial services to support the physicians. If desired, physicians may form a separate corporate entity that enters into the co-management agreement with the hospital—this allows for physicians to remain in private practice but align with the hospital’s quality and safety goals.


The Woman Who Fell From the Sky

What would you do if you were traveling abroad and needed medical care, but did not speak the language? How would you tell the treating physician what is wrong with you? What if you tried to tell her you had a sprained shoulder, but were misunderstood and they started to treat you for chest pain? What if they thought you were psychotic because they could not understand what you were saying and you were dressed differently from everyone else?

011-Woman-from-the-Sky-smIn 1983, Rita Patino Quintero was found in Johnson City, Kansas digging through trash cans and talking incoherently. She was oddly dressed and seemed to be claiming she “fell from the heavens.” She was taken to Larned State Hospital, a state psychiatric facility, where physicians diagnosed her as schizophrenic. To support their diagnosis, providers noted her unusual statements, her depression and aggression, and the fact she dressed in layers and refused to bathe. While at Larned, she was treated with psychotropic medications and eventually developed tardive dyskinesia, a condition brought on by long-term use of psychotropic medications and characterized by involuntary movements.

After twelve years of hospitalization, Quintero was finally released in 1995 at the behest of the Kansas Advocacy & Protective Services (KAPS) agency. They found a note in her file from 1983 indicating the Mexican Consulate in Salt Lake City told Larned personnel that Rita matched the description of a Tarahumara Indian, a northern Mexican tribe. KAPS convinced the hospital to release her and allow her to return to Mexico.

This case is an extreme example of what can happen when health care providers ignore a patient’s language needs and cultural context. You can read more of Rita’s story in my recent article on the Importance of Cultural Competence in Health Care – Part Two. Here is Part One in this series.

Importance of Cultural Competence in Health Care

Promoting diversity and inclusion in the health care setting is not just about reducing health care disparities. A number of health care systems, health plans, national associations, and states believe accounting for the diversity of patients and ensuring your board, clinicians, managers, and staff reflect, understand and address this diversity will improve health care outcomes, increase patient satisfaction, and increase market share.

Health care organizations must effectively interact with their patients who come from different cultural and linguistic backgrounds. To address the lack of clear guidance on how to account for diversity in providing services, the U.S. Department of Health and Human Services, Office of Minority Health developed the National Standards for Culturally and Linguistically Appropriate Services (CLAS) in Health and Health Care in 2000. The CLAS Standards were enhanced in 2013 after a public comment period, a systematic literature review and ongoing consultations with leaders and experts from the health care community. The enhanced CLAS Standards are designed to broaden the reach of cultural and linguistic competency at every point of contact in the health care continuum.

Although adherence to the CLAS standards is voluntary, health care organizations should expect accreditation agencies to evaluate their efforts to address these issues. For example, The Joint Commission has established accreditation standards that directly or indirectly measure an organization’s ability to provide culturally and linguistically appropriate services, particularly in the areas of improved communication, cultural competence, patient-centered care, and the provision of language-assistance efforts.

The New England Journal of Medicine is encouraging further research into the impacts of adopting the CLAS standards. Both scientific research and anecdotal information from adopters can help organizations weigh practice options and make business decisions.

Together Health

Trinity Health and Ascension Health announced the formation of a new business entity to coordinate health care across all of Michigan. Together Health is a separate, freestanding organization which will have its own Board, CEO and committee structure. The two systems will work with their employed and independent physician leaders to develop population health based contracts and health care delivery systems that offer seamless, coordinated care. Together Health Network will also work in concert with payers to develop health plan products for public and private health exchanges, as well as direct-to-employer offerings.

Ethan Rii and I will be discussing these types of alliances at the AHLA Annual Meeting in New York City on June 30 – July 2, 2014. “Joint Operating Agreements: Everything Old is New Again” will discuss the JOA model and other approaches health care providers are using to work together to consolidate operations, coordinate care and develop risk-based contracts. Our presentation is one of ten presentations at the AHLA Annual Meeting on how providers are meeting the challenges of health care reform through joint ventures, consolidations, clinical integration and payer contracting strategies.

Docs Don’t Like Electronic Health Records

The authors of a recent physician satisfaction survey heard this loud and clear. They didn’t include any questions about EHRs in their initial written survey, but it became a focus after open-ended interviews revealed what a dissatisfier EHRs have become for physicians. The opportunity to earn Meaningful Use dollars has incentivized health systems and large physician groups to invest in EHRs. Physicians complained EHRs are difficult to use, require them to perform clerical tasks, can’t be used to import data from other providers, and are expensive. Most troubling to me are the physicians’ concerns that the inclusion of template-based notes makes the record unreliable. The templates make it easy to add information to an EHR, but increase the inaccuracy of the note, which is an issue for patient care and can make it easier to commit fraud. If we tell providers to stop using the template-based notes, this will make the EHR less useful. We need a way to improve the accuracy of the templates without sacrificing efficiency.

Iowa Lawyer

I was admitted as an attorney in Iowa on December 20. Before that date, I could not hold myself out as an attorney authorized to practice law in Iowa. After December 20, I can claim that distinction.

Iowa requires that every attorney admitted to practice law be sworn in by a Justice of the Iowa Supreme Court, which is equivalent to the Court of Appeals in New York State. This means that 30 seconds after being admitted as an attorney in Iowa, I was shaking hands with a Justice from its highest court. Cool.

The three of us who were sworn in on December 20 had the honor and privilege of having Justice Brent R. Appel administer the oath. He took the time to explain why he thought the tradition of having Supreme Court Justices administer the oath had merit, and why it should continue. He stressed the importance of civility, public service and professionalism. Eric and Katelin bore witness to the ceremony and were duly impressed by his humility and sense of honor.

Below is the oath I swore to uphold.

I swear or affirm:

As an officer of the Court serving in the administration of justice, I will:

  • Support the Constitution of the United States and of the State of Iowa
  • Perform to the utmost of my abilities and education
  • Maintain the respect due to the Courts and my colleagues
  • Faithfully and ethically discharge the duties required of Iowa lawyers

As a zealous advocate and counselor for my clients, I will:

  • Strive to be worthy of trust and respect
  • Counsel clients to maintain only those disputes supported by law and the legal process
  • Use only those means that are consistent with justice
  • Maintain the confidences of my clients as required by law
  • Support the cause of the defenseless or oppressed, pro bono publico

As a member of the legal community, I will:

  • Strive to represent the legal profession as one of justice, honor, civility and service.

I hope I can live up to these high words.