Cost Aspects: ADS, Tax Exemption, & Legislation
Alt. Deliv. Sys.
- PPO / Pref.'ed Prov'er Org.
- Dif. From HMO
- Flexible b/c can use prov'er not on list
- Need 2 pay more $
- HMO / Healthcare
Maint. Org. / Healthcare Serv. Plan / Pre-paid med.
- Purpose 2 Contain Cost
- Deliv. / Insurer Side
- Enrollee / subscribers sign up
- Pay fixed $ / mo. as premium
- In return, get health care benefits
- Select from list of prov'ers / dr.'s
- Healthcare Prov'er Side / K'ing
w/Prov'ers
- Dif. Models
- Staff model: empl's dr.'s
- Group model
- K w/sep. legal entity of Group, a prof. corp.
- K is called prof. serv.'s agmt
- Network
- K w/own Group & other medical groups
- Integ.'ed med. groups where dr.'s share losses
/ profits through same entity
- IPA (indep. pract. ass'n)
- K w/IPA / prof'l corp. which indep'ly gov's
themselves
- Dr.'s in IPA maintain sep. pract.'s & have
prov.'er agmt in IPA 2 access K's through IPA
- Dr's Pay
- Dr.'s can't dir.'ly bill pat.'s
- Prim. care prov'er paid capitated basis of fixed
pay/member/mo.
- Internists
- Family pract.
- Ob / Gyn
- Pediatricians
- Specialists paid by discounted fee 4 serv.
- Fin.'al Disincentives
- Prim. care givers pay spec.
- Enrollee must B referred 2 spec. by prim. care
- Risk pools where HMO put some dr.'s capitation
so that spec. will B paid when referred 2
- Dr's must pay if risk pool doesn't cover all
cost of spec.
- Hosp's paid per dium rate / per day
- Dr. not want pat.'s in hosp. v. hosp's desire
2 keep pat.'s
- Ancillary risk pools
- Hosp. utilization risk pools
- Meas.'ed by # of adm. / bed days / thous. enrollees
- Want 150 bed days / 1k enrollee 4 healthy
- Want 650 bed days / 1k enrollee 4 Medicare
- Risk pools 4 running tests
- Deductible & co-payment
- Deductible is $ enrollee pays before ins. kicks
in
- Co-payment by enrollees discourage them from
going 2 healthcare
- Healthcare Serv. Plan
- HMO License
- Corp. gen'ly so file articles & bylaws w/Dep.
of Corp.
- Submit K w/prov.'ers 2 B credentialled,
compensated,
& agreed
- Must have formal grievance process 4 enrollee's
rts
- Credentialling Prov.'ers
- HMO must take rsbl steps 2 ensure prov.'ers R
competent
- Ways
- HMO do it themselves
- Req. dr.'s 2 have active staff member in hosp.
- If HMO 4 Medicare, must B fed.'ly qualified
- QA is ongoing
- Utilization rev. / plan 2 monitor & control
util. of serv.'s
- Diversification & HMO's Owning Prov'ers /
Med. Groups
- Cut cost
- Capture as much of premium paid by enrollees
as possible
- Create deliv. sys. 4 global capitated payment
where get pay 4 prov'er / hosp. 4 institutional component
- Utilization Rev.
- Control Cost & Quality By
- Med. nec.
- Utilization rev.'ers apply applicable stand.
of care
- Types of Rev.
- Retrospective
- After serv.'s prov.'ed
- On going 2 check quality
- If not confined 2 quality rev., dr. could B denied
pay after serv.
- Prospective
- Prior rev. which is pre-auth. from HMO before
prov. serv.
- All HMO has it
- If combined w/retro, dr.'s could B denied pay
- Concur.
- While care is being prov.'ed
- Ex.'s like if pat. needs 2 stay longer
- Case Managers Coord. Pat. Care
- Utilization Rev'ers
- Gen'ly not talk 2 treating dr.'s so rev.'ed in
vacuum
- RN's make frontline dec.'s
- Dr's if HMO dec. 2 deny something, but not always
same spec.
- HMO
- Prov.'er delegated if big. med. group & have
capability
- 3rd Party Adm'or (TPA) acts as 3rd party &
do adm. task 4 HMO
- Can B liab. b/c legal duty 2 dec. treatment by
stand. of care
- EMTALA v. Utilization
- EMTALA req's hosp. w/Medicare 2 give med. screening
exam 2 those coming 2 ER w/o asking 4 pay
- In CA (H & S §1317.4) HMO must pay 4
med. screening exam / any stabilizing treatment prov.'ed 2 enrollees
even if prov.'er didn't have K w/HMO
- Exception if enrollee knew / rsbly should've
known that didn't req. emergency care
- Impact on Dr's
- More imp. 2 have rel. w/HMO than w/pat.
- Less need 4 spec. & more 4 prim. care
w/HMO
- D /P Rts 4 HMO K's in CA When Deselecting
- If term'ed 4 cause / med. disciplinary rsn, then HMO has oblgn
2 give D/P
- No cause term.
- Ok if good faith & fair dealing & not contrary 2 pub.
policy
- If entity deselecting prov'ers controls imp. econ. int., then
can arg. that dr. deserves fair proced.
- If dr. believes term. by bad faith / contrary 2 pub. policy,
entitled 2 some fair proced.
- The higher the econ. int., more likely 2 find D/P rts
- Vested econ. int. stand. where prov.'er has rt. 2 some D/P
whenever deprive prov'er of econ. rt.
- If IPA HMO
- HMO & IPA give D/P rts whenever take med. discip. axn
against dr.'s
- Econ. Credentialing
- Criteria by Utilization: How Much Dr. is Costing
- Actual K 4 Dr. & HMO
- HMO can restrict referrals, but Dr. has oblgn 4 best dec.
4 pat.
- Encounter data
- Approp. 4 capitated data
- Prov'er submits encounter data 2 get paid
- Clean Claims
- Approved billing form 4 payment
- Unenforceable cl's
- K'al indemnity cl's unenforceable btwn HMO & Dr.
- Noncompetition agmts which restrict dr's from going 2 another
HMO if term.
- Enforceable
- Can have equit. indemnity
- Non-solicitation agmts which prohibit dr.'s from soliciting
pat.'s away from HMO
- CA dr.'s have rt. 2 notify pat. when change pract. / location
which is dif. from soliciting
- HMO Membership List Confid.
- But if dr. can keep sep. list
- If dr. part of med. group, they med. group is keeper of files
- Capitation
- Co-payment could B deducted from capitation rate
- Entitled 2 adj. in rate if change in actuary / assumption
- Stop loss protection
- Ins. policy 2 pay 4 care that goes above limit
Tax Exemption
- Charact's
- Exempt activities that contrib. 2 pub. goods
- Adv's
- Not pay tax
- Exempted from sec. laws
- Fed.: Nonprofit Org. Under IRC 501)c)3
- Most Desirable B/c Allow 4 Tax Exempt Donations
- Reqt's 2 Qualify 4 Tax Exempt Status
- Org'ed excl'ly / subst'ly 4 exempt / charitable purposes
- Gen'ly corp. so file articles of incorp. & limit 2
charitable
purpose
- Ez prong 2 meet & not where prob's gen'ly arise
- Operated excl'ly / subst'ly 4 exempt / charitable purpose
- Whether true community benefit was conferred in operation
- Factors incl.
- Stated purpose prov's sig. benefit 2 others w/o expected reward
- Hosp. is supported by donation & gifts
- Recipients of charitable serv's need not pay
- Whether income prod. / exceeds operating expenses / not
- Whether benefic. restricted / not
- Operation is low burden on govt
- Reqts 2 Retain IRS 501)c)3 Exempt Status
- Private benefit test
- Applies 2 everybody
- Prohibits activities resulting in priv. benefit unless
- Incidental 2 pub. purpose +
- Qualitative factor
- Rsbl rel. btwn hosp's charitable goal & priv. benefit
conferred
- Activity is nec. 2 achieve exempt purpose & benefit is
nec. byprod.
- Not subst'l 2 priv. person
- Quantitative factor
- Benefit conferred on indiv. shouldn't B excessive in amt.
- Only confer priv. benefit nec. 2 accomplish pub. purpose
- Factors
- Whether arms length negotiation
- Caps on exempt org.'s potential risk on investment
- Exempt org. retained control
- Whether payment & investment returns is rsbl amt
- Exempt org. has rt. 2 retain control of activity
- Exempt org. has rt. 2 obtain any asset / has option / 1st
rt. 2 refusal
- Private inurement test
- Only apply 2 insiders
- Dr's in med. staff is assumed 2 B insider
- No part of net earning inures any benefit of SH / indiv. who
has pers'al / priv. int. in org.
- Not prohibit all arr. but closer scrutiny 2 see if insiders
unduly benefit from rel.
- Factors
- Arms length negotiation
- Terms were comm'ly rsbl
- Payment 2 insiders serve true busi. purpose
- Payments can't B dep. on income / rev. of exempt org.
- Rsbl ceiling / max. cap on payment 2 insiders
- Compensation rsbl 2 rel. of benefit received by exempt org.
- IRC 501)a
- Pub. charity / lots of pub. support which has better tax
exemption
- Priv. foundation has sig. donors who control where 2 use $
- Unrel'ed Busi. Income Tax
- Taxed on Unrel'ed Busi. Income
- Not suff. 2 satisfy integral part but activity itself must
B exempt 2 not pay tax
- If 2 much unrel'ed activity, then jeopardize tax exempt status
- Def. & Analysis
- Any gross income derived from exempt org. from any unrel'ed
trade / busi. reg'ly carried on
- Activity has 2 B trade / busi.
- Reg'ly carried on so consid. freq. & cont.'ty
- Unrel'ed if not subst'ly rel'ed 2 exercise / perf. by that
org. 4 exempt purpose
- Comm'l availability: if exempt org's activity also prov'ed
by comm'l institution in same area, gen'ly not subst'ly rel'ed
- Hands on med. care test: more subst'ly rel'ed if activity
involves hands on med. care
- Pat. / non-pat. test: more subst'ly rel'ed if activity only
2 pat.'s
- Portion of income
- If lwr than 10%, ok 2 exempt
- Dang. if 10-15%
- Exceptions 2 UBTI
- Royalty payment 4 use of intangible
- Rent
- Income from vol'eers
- Mergers Btwn Profit & Nonprofit
- IRS Scrutiny
- Rel'edness criterion 2 see if jt. venture furthers exempt
purposes
- Conflict of int. criterion
- Control factor / allow exempt org. 2 operate excl'ly in
furtherance
of exempt purpose
- Whether exempt partn. is limited partn. which give no control
2 mgmt
- Whether profit org's duty 2 max profit conflicts
- Fin.'al benefit criterion
- Whether there's priv. inurement / benefit
- Govt's participation 4 community benefit
Legislation
- Fraud & Abuse & Anti-kickback Stt
- Lwr Cost by Decr'ing Inapprop. Utilization
- Payment Prog's
- Cost Based Reimbursement Sys. Before
- Hosp. bill 2 Medicare 4 cost of care
- Prospective Payment Sys.: PPS
- Payment set before serv.'s rendered by diagnosis rel'ed groups
(DRG)
- DRG consid.'s adm'ing diagnosis of pat.'s & $ hosp. receives
based on that
- DRG varies by external factors affecting hosp. cost
- Anti-Kickback Stt: 42 USCA §1320a-7b
- Section b)1
- Whoever knowingly & willfully solicit / receive any
remuneration
dir'ly / indir'ly, overtly / covertly, in cash / in kind 4 referral
of serv.
- Remuneration incl's kickbacks, brib, / rebate
- Section b)2
- Same except it's offers / pays instead of solicit / receive
- Evol. of Stand.'s 4 Viol.
- Viol. if any purpose / 1 of payment 2 induce referral
- 1st circ., viol. if prim. purpose is unlawful
- 9th circ., viol. if prove beyond rsbl doubt that 1 of material
purpose is $ / referral
- Scienter Reqts
- 9th circ. req's knowing the law & intend 2 viol. / willfully
viol.
- Not many follow 9th reqt
- Penalties
- Monetary $25k
- Jail of 5 yrs.
- Excl'ed from Medicare / caid: mandatory / permissive
- Small Entity Investment Safe Harbor
- Investors in position 2 make / influence referrals can't hold
more than 40% of investment int.
- Terms on investment int. R offered same
- Terms on which an investment is offered Rn't affected by prev.
/ expected vol. of referrals
- Investors not req'ed 2 refer busi. as condition of B'ing
investor
- Entity not mkt / funish serv.'s dif'ly 2 investor v. non
- Investors' referrals can't generate more than 40% of gross
revenue
- Entity not loan $ 4 investors
- Payments 2 investors have 2 B proportional 2 ownership int.
so not pay based on vol. / value of referrals that investors make
2 entity
- Stark Leg.
- Before
- Dr. can't refer 2 lab if had investment / ownership in clinical
lab
- Broader Now
- Dr. can't refer 2 entity he / imm. family has ownership int.
/ compensation arr. 4 7designated health serv.'s
- Radiology
- Phys. therapy
- Occupational therapy
- Radiation therapy
- Durable med. equip.
- Home health
- No scienter reqt
- Compensation Arr. & Fin.'al Rel.
- Compensation arr. is any arr. where dr. receives remuneration
from entity in empl. / indep. K'or rel.
- Fin.'al rel. 4 those having ownership / investment int.
- Indep. K'or Safe Harbor (Almost ID 2 F & S Safe Harbor)
- K in writing
- Cov. all serv's dr. expected 2 perf.
- Serv's can't exceed what's rsbl & nec. 4 legit. operation
- Term of arr. has 2 B @ least 1 yr.
- Compensation in writing in advance
- Compensation can't exceed fair mkt value of serv.
- Compensation can't take into acct value / vol. of referrals
- If Viol.
- Entity 2 whom referral made can't bill Medicare
- Dr's subj. 2 fine & possible excl. from Medicare / caid
prog.'s
- OIG
- Issue advance ruling on proposed trxn
- Specif. real trxn in writing
- Takes 6 wks 4 response
- Spec. fraud alert of what fraud will B targeted w/DOJ &
HHS
This material is copyrighted by the author. Use of the material
for profit is strictly prohibited without the written
permission
from the author.
May 6, 1997
Ms. Haeji Hong
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