Physicians News November 2013 : Page 1
PHYSICIANS NEWS Digest PhysiciansNews.com WINTER 2013 AND THE FIRST AMENDMENT 1 Most physicians believe that they are free to talk—or not talk— with patients about whatever they so choose, consistent with their pro-fessional ethics and medical judg-ment. They may, in fact, believe that the First Amendment protects this right. However, because physi-cians are considered to be engaged in a commercial activity and subject to state licensing, physician com-munications with their patients are subject to governmental regulation. State legislatures have increas-ingly passed laws that specifically prescribe what physicians may or may not say. Legislatures have both required that physicians provide certain information to patients us-ing state-mandated scripts and pro-hibited physicians from discussing certain topics with their patients. When challenged on the basis that these laws violate physicians’ First Amendment rights to speak freely to their patients, courts have ap-plied standards of review developed lower standard of legal protection in the context of commercial speech, than the protection that is afforded that is, they have essentially to political speech, which is highly By Martha Swartz PHYSICIAN-PATIENT COMMUNICATION INSIDE THI S ISSUE THE PRACTICE 5 Things You Can Do Now to Prepare for MU Stage 2 4 RESEARCH equated physicians’ communica-protected because it is considered tions with their patients with com-essential to the preservation of our mercial advertising, applying a See First Amendment on page 10 REVISITING CAPITATION: IS ‘PMPM’ FAIR TO PROVIDER? Introduction The Affordable Care Act (the “Act”) requires that all individuals, subject to certain limited and enu-merated exceptions, obtain "mini-mum essential" medical insurance coverage. 1 Beginning in 2014, indi-viduals and small businesses will be able to purchase private health in-surance—qualified health plans— through competitive marketplaces, which are called “Affordable Insur-ance Exchanges,” “Exchanges,” or “Marketplaces.” 2 These qualified health plans must meet certain minimum certification standards, such as essential community providers and essential health ben-efits. 3 The Act also establishes the general requirements for payments to participating accredited care or-ganizations. 4 A partial capitation model is authorized under the Act to “[i]improve the quality and effi-ciency of items and services fur-nished to Medicare beneficiaries without additional program expen-ditures.” 5 The Affordable Care Act, Accredited Care Organizations, and the inflationary effects of fee-for-service payments have led to a resurgence in the use of capitated payment methodologies. 6 Providers should have a good understanding of what capitation is, and what risks are inherent. Overview of Capitation Capitation is a risk-based pay-ment system. Under a capitated plan, the provider (physician, phys-ical therapist, chiropractor) agrees to accept a predetermined dollar amount each month for each plan By Franklin J. Rooks Jr. , PT, MBA, Esq. PRST STD US Postage Paid Permit No. 397 Bellmawr, NJ enrollee (the “Member”) that is as-signed to the provider for medical care. 7 The predetermined dollar amount is termed a “PMPM,” mean-ing “Per Member, Per Month.” The provider’s risk lies in the Member’s utilization of the health plan. Tra-ditionally, providers such as physi-cians and physical therapists entered into capitated agreements for strategic reasons. Physical ther-apists participated with capitated agreements to better position them-selves with their referral base. Physical therapists generally do not like to inform referring physicians that they will not participate with capitated plans, especially when the physician participates. Rather than being perceived as “cherry picking” the best-paying patients, physical therapists historically utilized cap-itated plans as a “loss leader,” with the hope that the physician would refer better reimbursing patients, in addition to the capitated ones. Physicians, on the other hand, en-tered into capitated agreements be-cause of the PMPM income stream. The rationale was that a high vol-ume of capitated plan Members would compensate the physician for excessive risk. Healthy patient pop-See Capitation on page 5 8 Is Better Sleep Quality the Key to Managing Fibromyalgia? SURGERY Is Better Sleep Quality the Key to Managing Fibromyalgia? 12 DEPARTMENTS Business . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 14 Classifieds. . . . . . . . . . . . . . . . . . . . . . . . . . 15 The Practice . . . . . . . . . . . . . . . . . . . . . . . . . 4 Surgury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Physician-Patient Communication And The First Amendment
Most physicians believe that they are free to talk—or not talk— with patients about whatever they so choose, consistent with their professional ethics and medical judgment. They may, in fact, believe that the First Amendment protects this right. However, because physicians are considered to be engaged in a commercial activity and subject to state licensing, physician communications with their patients are subject to governmental regulation.<br /> <br /> State legislatures have increasingly passed laws that specifically prescribe what physicians may or may not say. Legislatures have both required that physicians provide certain information to patients using state-mandated scripts and prohibited physicians from discussing certain topics with their patients. When challenged on the basis that these laws violate physicians’ First Amendment rights to speak freely to their patients, courts have applied standards of review developed in the context of commercial speech, that is, they have essentially equated physicians’ communications with their patients with commercial advertising, applying a lower standard of legal protection than the protection that is afforded to political speech, which is highly protected because it is considered essential to the preservation of our democratic form of government.<br /> <br /> A case emanating from Pennsylvania, Planned Parenthood v. Casey, is often cited as having established this standard for physician communications with their patients. In that case, Planned Parenthood challenged a Pennsylvania statute that required physicians to provide specific information to women seeking abortions about the “probable gestational age of the unborn child”, arguing that the law violated physicians’ First Amendment rights.2 The U.S. Supreme Court upheld that portion of the law, concluding that physicians’ speech justifiably could be restricted “as part of the practice of medicine, subject to reasonable licensing and regulation by the State.”3. <br /> <br /> In deciding whether a state regulation unduly interferes with an individual’s free speech rights, courts engage in a balancing act, weighing the state interest promoted by the regulation against the individual’s constitutional right. Where a regulation interferes with political speech, courts require that the regulation serves a very important or “compelling” government interest if the regulation is to be upheld (“Compelling Interest Test”), but if a regulation only interferes with commercial speech, the regulation will be upheld as long it reflects a “substantial” governmental interest and the regulation is “rationally related” to that interest (“Rational Basis Test”). Since courts generally apply the less protective “Rational Basis Test” to laws that regulate physicians’ communications with their patients, they usually uphold state regulations that restrict physician-patient communication.<br /> <br /> Compelled Speech vs. Prohibited Speech.<br /> <br /> Courts disagree about the extent to which states are permitted to mandate the content of physicians’ communications with their patients versus their ability to prohibit physicians from speaking about certain topics to their patients. However, it appears that courts tend to frown more upon laws that prohibit speech than laws than require physicians to follow a state-mandated script in communications with their patients.<br /> <br /> Laws that Ban Physician Speech.<br /> <br /> A federal judge in Florida decided that a Florida law that prohibited physicians from asking their patients about gun ownership as part of a preventive care discussion violated physicians’ First Amendment rights. (Wollschlaeger vs. Farmer).4 The Ninth Circuit Court of Appeals rejected as unconstitutional a federal law that prohibited physicians from talking with their patients about medical marijuana (Conant vs. Walters).5 On the other hand, the U.S. Supreme Court upheld a federal regulation that prohibited physicians who worked in a federally funded family planning clinic from counseling women about abortion (Rust v. Sullivan).” 6 Most recently, the Ninth Circuit Court of Appeals rejected arguments that a California state law banning a type of psychotherapy that is aimed at changing an individual’s sexual orientation, violated the psychotherapist’s First Amendment rights (Pickup v. Brown).7 <br /> <br /> The reasoning in these cases varied: the Wollschlaeger court, in a decision that runs counter to most other cases in this area, applied the more protective Compelling Interest Test because the state was trying to regulate the content of physicians’ speech. The Conant court didn’t make clear what standard of review it was using—it just emphasized the need for physicians to be able to talk freely with their patients. The Rust Court didn’t address the First Amendment at all, but based its decision on the government’s prerogative to direct its funding. Finally, the Pickup court concluded that the speech that is used in` therapy is conduct, rather than speech, and therefore not protected by the First Amendment.<br /> <br /> In 2012, the Pennsylvania legislature enacted a law that prohibits physicians from revealing information about fracking chemicals that he obtained in the course of treating a patient.8 A lawsuit challenging this prohibition has been filed by a Pennsylvania nephrologist.<br /> <br /> Laws that Mandate Physician Speech.<br /> <br /> All fifty states have laws that require physicians to disclose certain information to patients prior to treating them; these laws are known as “informed consent” laws. None of them have been successfully challenged as an unconstitutional infringement of physicians’ free speech rights. In fact, physicians are subject to professional disciplinary action, as well as lawsuits by patients, if they fail to provide the required information to patients. The difference between “informed consent” laws and the laws that mandate the content of specific information to be conveyed to patients is that “informed consent” laws merely impose a general obligation to provide certain types of information, leaving to the physician’s judgment the content of the information to be disclosed.<br /> <br /> Abortion is one area in which state laws have tried to force physicians to follow state-mandated scripts in communicating with their patients. The Eighth and Fifth Circuit Courts of Appeal have each approved laws in South Dakota and Texas, respectively, that require physicians to provide a pregnant woman seeking an abortion with specific information about the fetus; in South Dakota, the law requires the physician to provide the patient with a written statement that the “abortion will terminate the life of a whole, separate, unique, living human being”, “that the pregnant woman has an existing relationship with that unborn human being and that the relationship enjoys protection under the United States Constitution and under the laws of South Dakota:” and “that by having an abortion, her existing relationship and her existing constitutional rights with regards to that relationship will be terminated.”10 The Texas law requires physicians to order sonograms for pregnant women seeking abortions and to provide information about the “presence of cardiac activity” and “the presence of external members and internal organs in the fetus or embryo”.11 In both cases, the courts reached their conclusions by applying the less protective “Rational Basis Test”, rather than the more protective “Compelling Interest Test”.<br /> <br /> The Pennsylvania state legislature recently passed a law mandating that women with dense breasts receive a state-mandated script in their mammography reports that suggests that they might need additional tests.12 Several expert groups, including the American College of Radiologists, have expressed concern about the legislation since they believe that the assessment of breast-density is subjective and there is no consensus about whether that factor alone warrants additional screening. The New York state legislature passed a law requiring physicians to provide terminally ill patients with information about palliative care and end-of-life options.13 Thus far, neither statute has been challenged.<br /> <br /> Physician’s Communications with Their Patients Should Be Afforded More Legal Protection than Commercial Speech <br /> <br /> Unlike commercial speech which is aimed at making profits for the speaker, a physician’s communication with his patients, the parameters of which are established by the physician’s ethical obligations and fiduciary duty to her patient, is intended to benefit the patient. In fact, in restricting a physician’s ability to communicate with his patient, the First Amendment rights of her patient are also being infringed since the patient is being denied information that the physician wants to convey or is receiving slanted information that the physician would not otherwise provide.<br /> <br /> The state has a role in regulating physicians’ communications with their patients to some extent. In imposing a general obligation to provide medically relevant information through informed consent laws, the state fulfills its obligations to protect the safety of its citizens without unduly interfering with the substance of information that physicians convey to their patients. However, recently enacted laws exceed this valid purpose and interfere with physicians’ exercise of their First Amendment Rights.<br /> <br /> The Law Office of Martha Swartz concentrates on the regulatory and business aspects on health care. (www.swartzhealthlaw.com).
Revisiting Capitation: Is 'PMPM' Fair To Provider?
Franklin J. Rooks Jr., PT, MBA, Esq.
Introduction <br /> <br /> The Affordable Care Act (the “Act”) requires that all individuals, subject to certain limited and enumerated exceptions, obtain "minimum essential" medical insurance coverage.1 Beginning in 2014, individuals and small businesses will be able to purchase private health insurance— qualified health plans— through competitive marketplaces, which are called “Affordable Insurance Exchanges,” “Exchanges,” or “Marketplaces.”2 These qualified health plans must meet certain minimum certification standards, such as essential community providers and essential health benefits. The Act also establishes the general requirements for payments to participating accredited care organizations. A partial capitation model is authorized under the Act to “[i]improve the quality and efficiency of items and services furnished to Medicare beneficiaries without additional program expenditures.” The Affordable Care Act, Accredited Care Organizations, and the inflationary effects of fee-for-service payments have led to a resurgence in the use of capitated payment methodologies. Providers should have a good understanding of what capitation is, and what risks are inherent.<br /> <br /> Overview of Capitation <br /> <br /> Capitation is a risk-based payment system. Under a capitated plan, the provider (physician, physical therapist, chiropractor) agrees to accept a predetermined dollar amount each month for each plan enrollee (the “Member”) that is assigned to the provider for medical care. The predetermined dollar amount is termed a “PMPM,” meaning “Per Member, Per Month.” The provider’s risk lies in the Member’s utilization of the health plan. Traditionally, providers such as physicians and physical therapists entered into capitated agreements for strategic reasons. Physical therapists participated with capitated agreements to better position themselves with their referral base. Physical therapists generally do not like to inform referring physicians that they will not participate with capitated plans, especially when the physician participates. Rather than being perceived as “cherry picking” the best-paying patients, physical therapists historically utilized capitated plans as a “loss leader,” with the hope that the physician would refer better reimbursing patients, in addition to the capitated ones. Physicians, on the other hand, entered into capitated agreements because of the PMPM income stream. The rationale was that a high volume of capitated plan Members would compensate the physician for excessive risk. Healthy patient populations were expected to result in low utilization, with the capitation payment going straight to the physician’s bottom line. Capitated agreements potentially expose the provider to substantial financial risk. If the pool of plan Members assigned to the provider is either older or sicker than typical plan Members, utilization of the plan’s benefits may result in delivery of medical services at a net loss. The expense attributed to patient care could well exceed the PMPM capitation amount plus applicable co-payments. Prior to signing any capitation agreement, providers should understand the risk involved, and obtain as much information as possible from the carrier to evaluate the decision to participate.<br /> <br /> Understanding Capitation <br /> <br /> A capitated agreement is essentially a risk management agreement. To provide some backdrop, consider the popular Atlantic City game of roulette. If a gambler bets on red, black, odd, or even, he or she knows that there is a 47.37% chance of winning. The payout for these bets is 1:1, meaning that the winning gambler will receive $1 for every dollar wagered. By knowing the odds of winning, and the return for every dollar bet, the gambler can make an informed decision on whether the wager is within his or her risk tolerance. Just as a gambler would contemplate the risks inherent with each wager, the physician, too, should engage in a similar decision making process when determining whether to participate with a capitated plan.<br /> <br /> Does the PMPM provide adequate compensation? The PMPM should be based on an actuarial determination of the likelihood of a patient’s utilization of health care services. For Medicare Advantage Plans and State Medical Assistance Plans, the federal government defines an “actuarially sound capitation rate” as a rate which has been developed in accordance with generally accepted actuarial principles and practices; is appropriate for the populations to be covered; is appropriate for the services to be furnished; and have been certified by actuaries who meet the qualification standards established by the American Academy of Actuaries and follow the practice standards established by the Actuarial Standards Board.”8 One publication of the American Medical Association indicates that “actuarially sound” means that “[t]he PMPM payments provide for all reasonable, appropriate, and attainable costs that can be expected for your patient population.”<br /> <br /> Is the PMPM fair? Providers should understand how the insurance carrier arrives at the PMPM reimbursement. What economic value does the insurance carrier place on patient care? Central to this inquiry is, “what does the insurance carrier believe is a fair reimbursement per visit for each patient encounter?” Assume that optimal utilization is where the anticipated utilization projected from the actuarial analysis equals the actual utilization. Under optimal utilization, what would be the reimbursement per patient encounter? For example, if optimal utilization circumstances yields a per-patient encounter reimbursement of $35, what does that say about the value the insurance carrier places on the provider’s services?<br /> <br /> Capitation payments are not based on the provider’s costs of delivering care.10 Under the capitated agreement, the insurance carrier issues a monthly capitation check to the provider based on the number of plan Members that are assigned to the provider, multiplied by the PMPM amount. The dollar amount of the capitation check and the PMPM on which it is based is independent of the Members’ utilization of the providers’ services. The PMPM is the same if every Member utilizes the provider’s services or if no Member utilizes them. Making an informed decision on accepting a capitated contract requires historical utilization data and an anticipated number of capitated Members. Providers need to understand how a capitated contract will affect their practice. To do so, providers should be intimately familiar with the certain key statistics which measure their practice’s financial performance. <br /> <br /> Understanding Operational Metrics<br /> <br /> A potential influx of capitated patients can have a substantial impact on the practice. Patient volumes will affect practice’s operational metrics. Knowledge of operational metrics is central to assessing the true financial impact of a capitated contract. Traditional capitated plans are not risk-adjusted. The provider bears the full burden if actual utilization exceeds the projected or anticipated utilization. If the provider’s cost in rendering care exceeds the capitation payments, the loss belongs to the provider. The provider needs to consider the following operational metrics:<br /> <br /> • What is the provider’s current average reimbursement per patient encounter?<br /> <br /> • What is provider’s current average cost per patient encounter?<br /> <br /> • What is the provider’s current average profit per patient encounter?<br /> <br /> • What is the provider’s weekly capacity for patient care?<br /> <br /> • What is the provider’s productivity under current levels of patient care?<br /> <br /> Operational data is extremely important in understanding the potential impact of a capitated contract. The provider should have a firm grasp on the actual or projected expense incurred per patient encounter, regardless of payer source. The provider must also understand that costs per patient encounter are a function of productivity. Labor is essentially a fixed cost. If the provider staffs the office for 40 hours a week, that labor expense exists whether 5 patients are seen in a week or whether 50 patients are seen that week. However, the cost per patient encounter varies widely in these two extremes. While the example is exaggerated for illustration purposes, the cost per patient encounter is much higher when there are 5 patients treated versus 50 patients. Capacity and productivity are interrelated. The provider must understand how many patients encounters can be performed per week and how many actually are performed. Productivity is the ratio of actual encounters over capacity. All of the points above can be affected by changing patient volumes. It is important to assess how they can be affected.<br /> <br /> • What is the expected utilization of the provider’s services under the capitated contract?<br /> <br /> If the provider has excess capacity, additional patient volume should not result in any incremental professional labor costs. Nevertheless, the provider should be concerned with the potential impact of Member utilization. While non-professional staffing is not typically measured under a productivity calculation, the provider should be attentive to the fact that additional Member utilization may increase overall labor costs. There may be a need for additional support personnel and administrative staff to handle authorizations, verifications, and scheduling. If the provider already has high productivity levels, increased utilization through the capitated plan Members, may require additional professional labor (physician, physician assistant, nurse practitioner). To the extent that the capitated contract requires the provider to furnish supplies, incremental costs may also result with additional patient volume. Patient volume drives costs. The provider should request an estimate of the number of Members that are expected to be assigned to the practice.<br /> <br /> The Provider’s Risk <br /> <br /> The provider should understand the magnitude of risk to which he or she is exposed. The provider, just like the gambler, should have the information to determine if the reward is commensurate with the risk. The gambler has a 1 in 37 chance of winning when betting on a single number in roulette. The payout is $35 for every $1 wagered. <br /> <br /> The gambler knows these odds. The “house” knows these odds. It is a much different bet if the house knows the odds and payoff, and the gambler does not. Knowledge of the risk should not be one-sided. The provider should insist on receiving utilization data from the insurance carrier. The capitated plan’s historical utilization information will assist the provider in identifying the magnitude of risk assumed. To manage risk, the risk must be identifiable and measurable.<br /> <br /> The provider can essentially only manage what he or she can control. With this risk based payment system, the provider cannot control the number of Members assigned. The provider cannot control the demographics of the Members. That is, the average age of the assigned Member population, the Member’s sex, and the overall health/sickness of the Member population are all factors beyond the provider’s control. If the population of Members assigned is older and sicker, this should be reflected in the PMPM. These are all external risks. The PMPM is the compensation to the provider for the assumption of that risk. The provider needs to determine if the PMPM provides adequate compensation for the risk assumed and services expected to be rendered.<br /> <br /> Capitation plans place the provider’s reimbursement at risk, unlike preferred provider organization (“PPO”) plans. Preferred plans reimburse the provider on a fee-for-service basis. There is no inherent reimbursement risk. If service is performed, subject to obtaining any necessary authorizations and/or eligibility determinations, the provider is paid for the procedures performed. In contrast, per visit reimbursement for the capitated product is the sum of capitation payments and copayments, divided by the number of Member visits. A higher denominator (Member visits) results in lower reimbursement per visit. To draw a comparison, in the world of investing, returns are lower for financial products where the principal is safe. An example of this is a United States Treasury Bill. A “junk bond,” on the other hand, offers the potential for extremely high returns, but with significant risk. There is a risk-reward trade-off. With the Treasury Bill, an investor will receive a low yield with negligible principal risk. With the junk bond, there could be a fantastic return, or there could be nothing, including a loss of principal. Because of the potential loss of principal, there is a “risk premium.” The investor is compensated for the risk assumed. But, is this true of capitated plans? In exchange for the risk assumed, does the capitated plan offer the provider the potential for greater reimbursement than a “safer” PPO if Member utilization is effectively managed? The provider’s risk is clear – utilization that generates excess costs beyond the capitated reimbursement and receipt of the patients’ copayments, coinsurances and/or deductibles. The potential for reward is less clear. Providers may be asking themselves, “what is the insurance carrier’s risk?”<br /> <br /> The Insurance Carrier’s Risk <br /> <br /> The carrier’s risk is generally limited to the capitation payment. It is a known and quantifiable risk, which is established in advance through the determination of the PMPM payment schedule. Under a capitated plan, the insurance carrier shifts the risk to provider and to the patient. The patient’s risk exposure is reflected by the per-visit copayment. The provider’s risk is in rendering services where the cost may exceed the reimbursement received under the capitation arrangement. The provider’s risk is also reflected by the challenge in collecting copayments.<br /> <br /> The provider can shift some of that risk back to the insurance carrier by carving out certain services from the capitated agreement. There may be certain patient populations where the provider cannot confidently assume the risk under the capitated agreement. Certain medical conditions and diseases may have costs that cannot be accurately predicted, and there may be considerable expenses associated with these diagnoses. Because of this instability, certain services may be better managed on a fee-for-service basis or other compensation arrangement. These diagnoses should be identified and written into the agreement as exclusions from capitation.<br /> <br /> Summary <br /> <br /> To determine if the capitated payment adequately compensates the provider for the risk assumed, the provider needs to have the information necessary to make an informed decision. The insurance carrier should be asked to provide utilization data. The provider should have a fundamental understanding of what constitutes a fair per-patient encounter reimbursement; the capitated plan’s anticipated utilization based on historical data; the anticipated number of Members that will be assigned to the provider; and the anticipated PMPM and copayment amounts for the Members in the plan. The provider needs to have a clear understanding of the practice’s operational metrics and should be able to anticipate how an influx of capitated patient volume could affect the practice’s bottom line.<br /> <br /> About the author: Franklin J. Rooks Jr., PT, MBA, Esq. Is a physical therapist and practicing attorney in Philadelphia, Pennsylvania. Prior to his practice of law, Frank was a founding partner of PRO Physical Therapy (now ATI Physical Therapy), a Wilmington, Delaware based operator of physical therapy clinics. In 2006, Frank sold his interest to a private equity firm. Frank can be contacted at firstname.lastname@example.org.
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