Part 1

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) has designated $100 billion to reimburse eligible providers for health care–related expenses or lost revenue attributable to COVID-19. This includes lost revenues/profits attributed to lost or cancelled elective procedures as well as extraordinary expenses related to COVID19 responses. The law contemplates funding not only losses as of this date but future expenses as well. Presently, this fund is administered by the Assistant Secretary for Preparedness and Response (ASPR) under the U.S. Department of Health and Human Services (HHS). 

Currently, there is little or no guidance on whether the funds are to be allocated among regions, practice areas or types of institutions. At a minimum, an application for payment must include a statement of the provider’s need and its taxpayer identification number.  The Secretary has yet to promulgate regulations, application forms, the standards for calculating losses and other required documentation.  These will no doubt provide many details which are unspecified in the CARES Act as of the date of this posting.  In the meantime, health care providers would be advised to gather data on the expenses and losses they have incurred due to the Coronavirus and the expenses they anticipate incurring so they can be submitted as soon as guidance is received from the Secretary.

Mr. David has over 15 year of experience in calculating commercial damages and lost profits.  Chris and his team of analysts have developed a financial model to calculate the losses for hospital departments, medical clinics and other outpatient facilities related to COVID-19.

Please give us a call to discuss how we can help you.

#losthospitalprofits  #losthealthcarerevenues  #COVID19lostprofits  #hospitalcommercialdamages #hosptiallostprofits

The information provided herein is of a general nature and cannot be substituted for an actual fair market valuation opinion, in which specialized knowledge is applied to a particular circumstance.  Therefore, nothing in this paper should be construed to offer or render a valuation or legal advice and neither Chris David or HealthValue Group can take any responsibility for an attempt to use or adopt the information or disinformation presented herein.

On March 30, 2020, CMS issued blanket waivers of several Stark Law requirements related to COVID-19 physician arrangements. The Stark waivers can be relied upon retroactively to March 1, 2020, until the expiration or termination of the declared public health emergency.

The Stark waivers can be relied upon for financial arrangements that relate ONLY to a “COVID-19 Purpose.” CMS identified the following COVID-19 Purposes:

Scope of the Stark Waivers Related to Fair Market Value Compliance

The Stark waivers exempt providers from sanctions for noncompliance with the Stark Law related to the following types of arrangements, absent the government’s determination of fraud or abuse:

Physician Services – Payment from an entity to a physician that is above or below FMV for services personally performed by the physician to the entity;

Space/Equipment Rentals – Rental charges for equipment or office space that is below FMV;

Payments to Physicians – Payments from an entity to a physician that are below FMV for items or services purchased by the entity from the physician;

Payments from Physicians – Payments from a physician to an entity that are below FMV for the use of the entity’s premises or for items or services purchased by the physician;

Medical Staff – Remuneration that exceeds the current medical staff incidental benefits amount ($36 per occurrence) or annual nonmonetary compensation ($423) limit;

Loans – Loan payments: (1) with an interest rate below FMV; or (2) on terms that are unavailable from a lender that is not in a position to generate business for the physician;

Physician-Owned Hospitals – Referrals by a physician owner of a hospital that temporarily expands its facility capacity above its amount allotted under the physician-owned hospital exception. In addition, referrals by a physician owner of a hospital that converted from a physician-owned ambulatory surgical center to a hospital on or after March 1, 2020, provided that the hospital meets certain requirements;

Group Practices – Referrals by a physician in a group practice for medically necessary designated health services furnished by the group practice: (1) in a location that does not qualify as a “same building” or “centralized building”; or (2) to a patient in his or her private home, an assisted living facility or independent living facility where the referring physician’s principal medical practice does not consist of treating patients in their private home;

Home Health – Referrals to a non-rural home health agency when the physician has an ownership in the home health agency;

Rural Areas – Referrals by a physician to an entity with which the physician’s immediate family member has a financial relationship if the patient who is referred resides in a rural area; and

Other – Referrals by a physician to an entity with whom the physician has a compensation arrangement that satisfies the substance of an applicable exception but is not in writing or signed as required by the exception (unless the arrangement is already covered by another waiver).

The information provided herein is of a general nature and cannot be substituted for an actual fair market valuation opinion, in which specialized knowledge is applied to a particular circumstance.  Therefore, nothing in this paper should be construed to offer or render a valuation or legal advice and neither Chris David or HealthValue Group can take any responsibility for an attempt to use or adopt the information or disinformation presented herein.

#healthcarefairmarketvalue#healthcarefmv#physicianfmvcomp#telemedicinefmv#telehealthfairmarketvalue

The Eliminating Kickbacks in Recovery Act of 2018 (EKRA)^[1] was signed into law on October 25, 2018 which included some provisions for laboratories and how they procure patients.  In general, EKRA prohibits knowingly and willfully:

1. Soliciting or receiving any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient or patronage to a recovery home, clinical treatment facility or laboratory; or
2. Paying or offering any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind
   • to induce a referral of an individual to a recovery home, clinical treatment facility or laboratory; or
   • in exchange for an individual using the services of that recovery home, clinical treatment facility or laboratory.

Although the language used in EKRA is similar to the language in the AKS (mentioned above), there are some important differences to be aware of. First, EKRA applies to all health care benefit program business, including private payors, while the Federal AKS applies only to the federal health care programs (Medicare/Medicaid). Second, even though the SUPPORT Act focuses on substance abuse treatment, EKRA applies to all laboratory testing, regardless of whether the laboratory tests are related to substance abuse.

EKRA includes several statutory exceptions that describe situations where EKRA will not apply, some of which are similar to the federal Anti-Kickback Statute (AKS) safe harbors. The more significant exception related to laboratories is EKRA’s exception for remuneration paid to employees which is narrower than that the Federal AKS employment exception. 

The Federal AKS employment safe harbor (42 C.F.R. § 1001.952(i)), protects payments, including volume-based commissions, paid to bona fide employees.  In contrast, ERKA will only protect payments made by an employer to an employee or independent contractor if the payment is NOT determined by or DOES NOT vary by:

• the number of individuals referred to a particular recovery home, clinical treatment facility or laboratory;
• the number of tests or procedures performed; or
• the amount billed to or received from, in part or in whole, the health care benefit programs of the individuals referred to a particular recovery home, clinical treatment facility or laboratory.

In other words, even though volume-based commissions may be paid to employees under the Federal AKS, under EKRA, a laboratory that pays volume-based commissions to its employees risks enforcement action.

As a result, many operators of genetic testing labs and their attorneys are re-structuring their independent contractor agreements and devising effective and compliant arrangements to provide management/marketing/advertising services in a legal and compliant manner.  This almost always calls for an FMV opinion on the fees charged/paid.

The most common payment arrangements/models we’re seeing at HVG are separate entities characterized as either marketing/advertising firms, MSO or telemarketing/call center firms. These sales & marketing business are typically either direct-to-consumer (DTC) or physician services channel (PSC) firms. The DTC services are believed to be more problematic from a compliance perspective. These independent “marketing firms” contract with genetic testing labs and other types of labs to perform a number various tasks and strategies to promote the laboratory’s services.  Since the fee charged by the marketing firm cannot be a commission or based on reimbursements or number patients, estimating the FMV fee is more of a challenge.  HVG is seeing many of the services agreements identified as “Marketing/Advertising Services Agreements” or “Management Services Agreements.” From the appraiser’s perspective, it’s important to know the specific scope of services with as much detail as possible.  The most common and appropriate way to arrive at the FMV of such services is a method called “cost plus.”  It’s customary for professional services to be charged to a client based on the actual direct costs (labor and out-of-pocket expenses) plus a certain percentage mark-up. It’s the appraiser’s job to determine the fair and reasonable (i.e. fair market value) mark-up percentage. As such, these “marketing/adverting” arrangements should require the service provider to submit records of actual employee timesheets, payroll roster, employer payroll costs and out-of-pocket expenses each month.

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[1] Included in Section 8122 (18 U.S.C.§ 220) of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (“SUPPORT”)

Upon completion of cataract or refractive (i.e. LASIK) eye surgery, a series of post-operative exams, evaluations and tests are required. This post-operative care can be performed by the ophthalmologist who performed the surgery or it can be sub-contracted to the patient’s optometrist or another provider.  This type of arrangement is most commonly referred to as clinical “co-management”.

Co-management is the planned transfer of care during the global period from the operating surgeon to another qualified provider when clinically appropriate. Normally, the operating ophthalmologist makes arrangements before surgery to refer the patient to another ophthalmologist or optometrist for post-operative care with prior approval of the patient.  According to data in Key Metrics: Assessing Optometric Practice Performance (2015 Edition), 12% of optometrist eye care visits are related to post-operative cataract and refractive surgery co-management. The physician or optometrist receiving the patient must be licensed to manage all aspects of the post-operative care, including the ability to diagnose potential complications that may require another operation.

OIG is Looking

Co-management of patient care has been targeted by the Department of Health and Human Services, Office of Inspector General (OIG), as a potential illegal kickback. Specifically, the OIG Fiscal 2003 Work Plan states that the OIG “will determine if relationships between ophthalmologists and optometrists violate anti-kickback laws.” The OIG will examine arrangements where optometrists refer surgical cases contingent upon the surgeon’s referral of the patient back to the optometrist for post-surgical care so that the optometrist shares in the global surgical fee. In addition, the AMA and the American College of Surgeons have expressed disapproval of co-management arrangements that are driven by economic considerations.

It’s common for an optometrist to refer their patients to an ophthalmologist for eye surgery.  Then, the ophthalmologist will contract with the referring optometrist to perform the post-op care for that patient.  This cross-referral relationship causes the need to ensure payments to and from referring physicians to be strictly at fair market value (FMV) and that the post-op procedures are commercially reasonable.

If the patient is covered by Medicare and is getting standard cataract surgery with a traditional lens, then the co-managing provider who is performing the post-op care can bill and collect from Medicare for their portion of the global reimbursement for the covered cataract procedure.

However, if a patient elects to have a laser-assisted cataract procedure and a premium lens, which is not covered by Medicare, then the patient will normally pay out-of-pocket for this upgrade.  In such case, the operating ophthalmologist may require certain additional post-op care, over and above that which is covered by Medicare under a normal cataract surgery case.

The physician performing the surgery will bill and collect from the patient for the elective (non-covered) upgrades and also pay the co-managing provider a fair market value fee for the additional post-op care. 

As such, it is vitally important that the post-op co-management fee paid by the surgeon and collected by the referring optometrist is FMV.  It is advisable to have a third-party appraiser estimate the fair market value of the post-op procedures and protocols that the operating ophthalmologist requires[1]. A qualified appraiser will estimate a fair market value of the professional time, overhead and administrative time incurred in each post-op visit. Each post-op visit typically includes a visual acuity test for near and distance vision, a tonometry test and slit lamp examination (explained later in the report).  However, the post-op care varies based on different patient outcomes and could require additional post-op visits and additional tests and examinations.

In addition, if the surgeon is requiring additional procedures and protocols and or additional post-op visits, then this also must pass a commercially reasonable (i.e. clinically necessary) examination. A third-party appraiser/consultant should be hired to perform this analysis.

The American Academy of Ophthalmology (AAO) and the American Society of Refractive & Cataract Surgery (ASCRS) have published guidelines for health care providers considering co-management relationships.  Both AAO and ASCRS believe co-management is ethical and appropriate in the right circumstances and certain requirements must be met.

The Society for Excellence in Eyecare (SEE), an organization consisting of both ophthalmologists and optometrists, believes that patients should control the co-management decision, subject to the surgeon determining that the decision is in the patient’s best medical interest and they also recommend that post-operative care by a referring optometrist should only occur when the patient is fully informed about co-management.

Chris David

cdavid@healthvaluegroup.com

303-918-3607

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[1] The operating ophthalmologist has the ultimate responsibility for the preoperative assessment and postoperative care of the patient, beginning with the determination of the need for surgery and ending with completion of the post-operative care.  The post-operative period is the time in which most complications occur and within which stable visual function is achieved.  The operating ophthalmologist has an ethical obligation to the patient that continues until post-operative rehabilitation is complete.