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How Should Compliance Process Integrate the Yates Memorandum?

Thursday, September 29th, 2016

Compliance Process and the Yates Memorandum?

Yates Memorandum Compliance Investigation ProcessThe controversial Yates memorandum is one of the most significant policy changes to ever come out of the Department of Justice.  Companies in virtually every industry should be examining their practices in view of the significant shift in emphasis of Federal prosecutors.

Here are a few points that suggest actions that should be taken by compliance officers and other corporate officers in reaction with the new Federal policy.

1.     The Yates memorandum is a “board-worthy” issue.  Board members and upper management must all be advised of the new DOJ position and the impact on their responsibilities and the compliance process.  The stakes involved in corporate wrongdoing have clearly been raised by Federal prosecutors.  This is serious business.

2.     Significant committees should be advised and integrate these principles into their activities.

3.     Internal investigation process must be amended in a number of ways, some specific to new steps that are required to be taken and to stress the importance of investigating individual wrongdoing.

4.     The process and flow of addressing internal investigations must be reviewed and in many cases revised to meet the new requirements.  A new triage step must be added to the analysis of the investigation process to determine whether there is any potential individual wrongdoing that should be investigated and disclosed.

5.     The dynamics between lower level wrongdoers and the company may be changed because of the increased probability of individual prosecution and the need for the company to disclose all information relating to individual liability.   This will require companies to investigate employees much more frequently.

6.     The need to assure that UpJohn warnings are provided to employees who may have individual liability is increased.  This should be reflected with specific provisions in the investigation process.   It is critical that evidence obtained through internal investigation not be “contaminated” by not giving proper notifications to subjects.  Contamination of evidence could have a negative impact on eligibility for cooperation credit from Federal prosecutors.

7.     Investigation process and procedures need to be reviewed and made air tight.  Detailed investigation steps should be laid out in the investigation policy and supporting documents.  The UpJohn process should be memorialized in investigation policies and procedures to reflect the need for companies to take more intense actions to investigate employees.  No specific changes are required in the UpJohn process, but the process must be well defined and systematized.  Many companies do not specifically address the need to give UpJohn warnings in their investigation policies.

8.     Investigation reports must cover each and every potential subject of the investigation and all relevant information should be disclosed in the report.   The investigation of each potential subject must be taken to a conclusion regarding potential individual wrongdoing.

9.    Yates requires a complicated privilege analysis which should also be considered for inclusion in policies and procedures.  Clarification provided by Federal prosecutors following issuance of the initial Yates Memorandum provides a degree of guidance about what information can be privileged and what cannot.

10.     Broad knowledge of the new Federal focus on individual accountability should be provided within the organization.  Employees and contractors should be advised of the new investigation policies and processes that will apply if an investigation is necessary.  All should understand what will occur if they become the subject of a Federal or internal investigation.

11.    Corporate liability will be influenced by the compliance process, tone from the top, effectiveness of the compliance process and other indications of an effective compliance program.  Individual liability will be largely based on the elements of the potential infraction.  Investigation process must include an analysis of the elements of the potential infraction with respect to each potential subject of an investigation.  Investigation reports and forms should be adjusted to assure that these standards are consistently maintained.  Evidence should be organized and attributed to each applicable subject in support of investigative conclusions.

12.    Compliance officers must educate individuals within the organization regarding the seriousness of these developments.  The best outcome is that individuals will take their role in preventing wrongdoing more seriously and will proactively operate in a manner that makes it unlikely that wrongdoing will ever occur.

For more information regarding the Yates Memorandum and other compliance and health law issues, stay tuned to our blog.

Clinically Integrated Networks – Fee Sharing Procedures

Wednesday, March 25th, 2015

Jointly Providing Health Care Fee Information to Payers 

As health care provider networks move down the path toward clinical integration, we are often asked to provide guidance on how information can be jointly provided to payors.  The antitrust laws recognize that collective sharing of some pricing information, even by otherwise competing providers, can be beneficial and does not necessarily violate antitrust laws.  However, there are significant limitations on what can be jointly provided and how the information can be shared.

At the outset, it should be clarified that collective negotiations by competing providers who are not financially or clinically integrated should never take place and constitutes a per se violation of federal antitrust laws.  Prohibited activities include any action in contemplation of or in furtherance of an agreement on fees or other aspects of reimbursement.  It is unlawful for a non-integrated group of competing providers to agree on or suggest a central fee schedule.  Any activity relating to prospective fees should be avoided.

Competing providers can jointly provide information on fees currently being charged or that have been charged in the past as long as certain safeguards are implemented and strictly followed.  The FTC and DOJ have stated that the joint provision of historic fee information to payors raise little anticompetitive concerns as long as the following conditions are met:

1.         Collection of fee information is managed by a third part;

2.         Any information that is made available to competing providers must be at least three (3) months old;

3.         Data provided to participating providers must meet further requirements, including:

a.         It must be aggregated so recipients cannot identify the prices charged by individual providers;

b.         There must be at least five (5) providers reporting data that goes into an integrated statistic; and

c.         No provider can represent more than twenty-five percent (25%) on a weighted basis for any statistical item.

I normally recommend that provider groups create antitrust policies that address the provision of fee information to payors and other sensitive antitrust issues.  Even an organization that is significantly clinically integrated should be concerned with the method used to convey fee information to payers.

Adopting and applying specific antitrust policies is a step toward assuring antitrust compliance.  Antitrust policies should include detailed processes for conveying fee information that incorporate the parameters applicable to the organization.

Primary Care Integration Strategies – The Division Model Group Practice

Wednesday, May 21st, 2014

 Divisional Merger IntegrationIt is no secret that the role of primary care is central to the creation of systems to respond to health care reform and changing reimbursement models.  To the extent primary care providers have not already relinquished their strategic positions by becoming employed, entering provider service agreements or service line management agreements with hospital controlled systems, primary care providers maintain a strong position in the market.

Primary care groups are still faced with the need to create or participate in organizations that provide for the best means to manage patient care.  Primary care groups are seeking strength in numbers by creating larger groups.  The goal is to best maintain their competitive position, to diversify risk, to create efficiencies through shared savings opportunities, and to maintain appropriate levels of influence over care cycles, protocols and division of emerging, episodic-based payment.

In order to achieve these goals, some independent primary care groups are considering merger with other groups.  Oftentimes, merging providers will seek ways to maintain some degree of intra-office independence while still taking advantage of the benefit of a larger group.

Provider mergers and acquisitions, particularly between competing independent practices in the same specialty area, can create sensitive antitrust issues.  Generally, competing providers are prohibited from agreeing to the price of services.  However, otherwise competing providers who legitimately merge into a single group are legally incapable of conspiring because they are a single entity.

The tension between the desire to maintain a degree of independence and the need to effectively merge practices leads to consideration of what has become known as a “divisional merger.”  A divisional merger is similar in many ways to the concept of a group practice without walls that was prevalent during the 1990s.  Under this model, individual offices or groups of offices form divisions that maintain some degree of operational and financial independence.  Structuring divisional model groups can be extremely tricky.  Balance needs to be created in the amount of financial, governance, and operational authority that is ceded to the central board of directors and maintained in the divisions.  If too much authority is maintained at the divisional level, there is a risk that a “failed merger” will have taken place.  If a failed merger is found, the individual providers or divisions will be considered to be independent and capable of conspiring in violation of antitrust laws.

Divisional mergers raise a host of additional legal and business issues.  A divisional model group must be structured to comply with Stark Law and Anti-Kickback prohibitions.  Generally, the group and its financial structure must comply with applicable Stark Law exceptions and must be structured as a qualifying “group practice.”  An issue that arises in virtually all divisional model structures involves the treatment of ancillary revenues; in particular, “designated health service” revenues under the Stark Law.  Although primary care practices tend not to generate as much DHS revenue as specialty practices, clinical laboratory and diagnostic revenues are common.

A divisional merger will be subject to all of the same transactional and due diligence issues that apply to any other type of merger or acquisition.  Each participant will need to assess the risk associated with merging under one entity with other participants.  This involves a lengthy process of due diligence and addressing issues that are raised through the process.  Oftentimes, numerous sets of legal counsel are involved in the structural and transactional issues.

In the end, assuming that the divisional merger is properly structured, the combined entity can create significant benefits to primary care participants.

Antitrust Policies Avoiding Spillover – Clinically Integrated Networks

Monday, May 19th, 2014

Antitrust “Spillover” In Integrated Networks

Even clinically or financially integrated networks need to take affirmative steps to limit what has been labeled by enforcement agencies as “antitrust spillover.”  This term generally refers to the affect that an agreement on price within a network might have on pricing that occurs outside of the network.  It is not wise for an organization to openly debate fees among competing provider members, even if the organization is clinically integrated.  Affirmative steps should still be taken to limit distribution of sensitive fee information.

Clinically integrated networks should implement detailed antitrust policies that reduce any adverse effects on an agreement on pricing.  Ideally, specific pricing terms should be lock boxed.  Perhaps most importantly, the clinically integrated network should assure that all providers receive training on the content of the antitrust policies and general antitrust law considerations.  Training should be verified and documented in the same manner as other compliance training.

Standards for Achieving Clinical Integration – How Much Is Enough

Monday, May 19th, 2014

Clinical Integration AttorneyI am often asked to provide my opinion on the standards that must be met in order to be considered to have achieved clinical integration.  Clinical integration provides some significant benefits under the antitrust laws.  Failure to meet clinical integration standards can have some significant downsides for providers who are attempting to adapt to health care reform by establishing new organizational models to manage care.

There is no single test to determine whether an organization is clinically integrated for antitrust purposes.  The DOJ/FTC Joint Statement on Antitrust Enforcement Policy in Health Care provides some very general guidance on factors that are indicative of clinical integration.  More detailed analysis of clinical integration requirements can be found in several advisory opinions that have been issued by the FTC.  Analysis of all available resources makes it clear that there is no single formula for achieving clinical integration and each organization will be unique in the mechanisms and processes that are used to achieve required levels of collaboration and interdependence between providers.  I can sense a degree of frustration when I am unable to provide a certain answer of the precise conditions that must be in existence to meet clinical integration tests.  I believe some of the uncertainty is due to the fact that clinical integration is a system and a process rather than a static model of operation.

We are certainly able to flush out the primary elements of a clinically integrated network.  An organization that wishes to create a CIN should clearly set its objectives, define the mechanisms that it intends to create, and should develop a plan to move toward achievement of defined goals and operation of the CIN mechanisms.  Too much focus on precisely when clinical integration is achieved tends to place the emphasis on the wrong factors and assumes that clinical integration is an end in and of itself rather than a system and a process that much be created and continuously operated.  Clinical integration changes the very fabric of how health care is delivered.  It does this by reshaping the culture in which health care providers operate.  It is not something that can be achieved overnight.  Rather, it is a continual process of growth and development.

If the focus is on creation of the system and processes, the antitrust benefits will naturally flow.  Therefore, we should be cognizant of the way that clinical integration is defined under the antitrust laws as we structure clinically integrated organizations.  But we should avoid getting bogged down in questions about how much integration is enough.

 

Antitrust Law Application In Rural Areas- Hospital Mergers

Wednesday, May 7th, 2014

Antitrust Law is a “Big City” Legal Issue, Right?  Wrong.

Antitrust Law Small TownsOne might tend to believe that the rather obscure area of antitrust law would have little application in small town America.  After all, most of the legal expertise on the antitrust is located in big cities (Ruder Ware being a major exception).

When you really examine the cases that are being brought by the Federal Trade Commission, you will begin to see that it is the market where there are few competitors that tend to be on the receiving end of antitrust enforcement activities.  Market areas where there are only three or four hospitals are much more likely to see antitrust enforcement activity than are markets with more competing hospitals.

The same concepts hold true with physician affiliation and mergers.  For example, the merger of two urology groups in a big city market would quite possibly not involve a sufficient number of providers to adversely impact competition in the market.  In a smaller market, those same two urology groups could involve all of the urologists in town.  A merger in that situation could create a monopoly.

Similar issues arise in the development of clinically integrated provider networks.  Even if independent physicians achieve clinical integration control of too much of the market could adversely impact competition and could raise antitrust concerns.  These risks are often much greater in small town markets.  This “big city” legal issue cannot be overlooked when putting together “small town” business deals.

Primary Care Integration Strategies – Divisional Group Practice Mergers

Tuesday, January 7th, 2014

Division Model Group Practice – Primary Care Integration Strategies 

Primary Care Integration Divisional Model It is no secret that the role of primary care is central to the creation of systems to respond to health care reform and changing reimbursement models.  To the extent primary care providers have not already relinquished their strategic positions by becoming employed, entering provider service agreements or service line management agreements with hospital controlled systems, primary care providers maintain a strong position in the market.

Primary care groups are still faced with the need to create or participate in organizations that provide for the best means to manage patient care.  Primary care groups are seeking strength in numbers by creating larger groups.  The goal is to best maintain their competitive position, to diversify risk, to create efficiencies through shared savings opportunities, and to maintain appropriate levels of influence over care cycles, protocols and division of emerging, episodic-based payment.

In order to achieve these goals, some independent primary care groups are considering merger with other groups.  Oftentimes, merging providers will seek ways to maintain some degree of intra-office independence while still taking advantage of the benefit of a larger group.

Provider mergers and acquisitions, particularly between competing independent practices in the same specialty area, can create sensitive antitrust issues.  Generally, competing providers are prohibited from agreeing to the price of services.  However, otherwise competing providers who legitimately merge into a single group are legally incapable of conspiring because they are a single entity.

The tension between the desire to maintain a degree of independence and the need to effectively merge practices leads to consideration of what has become known as a “divisional merger.”  A divisional merger is similar in many ways to the concept of a group practice without walls that was prevalent during the 1990s.  Under this model, individual offices or groups of offices form divisions that maintain some degree of operational and financial independence.  Structuring divisional model groups can be extremely tricky.  Balance needs to be created in the amount of financial, governance, and operational authority that is ceded to the central board of directors and maintained in the divisions.  If too much authority is maintained at the divisional level, there is a risk that a “failed merger” will have taken place.  If a failed merger is found, the individual providers or divisions will be considered to be independent and capable of conspiring in violation of antitrust laws.

Divisional mergers raise a host of additional legal and business issues.  A divisional model group must be structured to comply with Stark Law and Anti-Kickback prohibitions.  Generally, the group and its financial structure must comply with applicable Stark Law exceptions and must be structured as a qualifying “group practice.”  An issue that arises in virtually all divisional model structures involves the treatment of ancillary revenues; in particular, “designated health service” revenues under the Stark Law.  Although primary care practices tend not to generate as much DHS revenue as specialty practices, clinical laboratory and diagnostic revenues are common.

A divisional merger will be subject to all of the same transactional and due diligence issues that apply to any other type of merger or acquisition.  Each participant will need to assess the risk associated with merging under one entity with other participants.  This involves a lengthy process of due diligence and addressing issues that are raised through the process.  Oftentimes, numerous sets of legal counsel are involved in the structural and transactional issues.

 

In the end, assuming that the divisional merger is properly structured, the combined entity can create significant benefits to primary care participants.

Clinical Integration Elements – FTC Actions

Monday, December 16th, 2013

clinical integration structuresElements of Clinical Integration

Identified in FTC Reviews; No Action Letters

 

With the release by the FTC of the Norman PHO letter, I thought it would be appropriate to summarize some of the key factors relevant to clinical integration decisions.  This list is not necessarily exhaustive.  Additionally, it is worth pointing out that clinical integration factors are slightly different as applied to Accountable Care Organizations.  The Norman PHO letter was released about 9 months ago.  It involved a physician-hospital organization that had historically operated as a messenger model contracting mechanism for its providers.  The PHO wanted to implement higher levels of clinical integration and sought an opinion from the FTC as to whether its structure raised risk under the antitrust laws.  The resulting opinion from the FTC is perhaps the most complete iteration to date of the various factors that the FTC considers when examining levels of clinical integration.

 Clinical Integration factors include:

1.         The organization is accountable for the quality and cost of services.

2.         Accountability for overall care of patients.

3.         Strong primary care component (sufficient to support specialty network).

4.         Central governance, leadership and management of system.

5.         Central clinical and administrative systems.

6.         Ability to report on outcomes, quality, utilization, and clinical process.

7.         Actively promotes evidence-based medicine through continual process.

8.         Coordinates care across system.

9.         Information technology and central data analysis.

10.       Financial investment or financial risk by members.

11.       Degree of exclusivity.  Exclusivity begins to indicate clinical integration.

12.       Joint contracting is required to meet system goals and create efficiencies.

13.       Systems are in place to enforce member obligations to comply.

Factors taken from Norman PHO, Tri-State, GRIPA, MedSouth and treatises on clinical integration.  Also uses factors required of ACOs as guidance although ACO requirements differ.

Antitrust Market Analysis In Provider Integration

Friday, October 4th, 2013

 Initial Antitrust Market Analysis In Provider Affiliations

antitrust integrated networksAntitrust analysis of potential integrated provider groups necessarily requires identification of the applicable market.  Market share issues cannot be addressed without first knowing the market parameters.  Market analysis has both a geographic and a product component.  In the health care area, the product component involves the specialty area of the physician or other provider involved.  The market may include a specific specialty or may be subject to expansion when there is a degree of functional overlap between specialties.

The geographic nature of the market can involve an extremely complex analysis.  From a planning perspective, it is generally most prudent to begin with the most restrictive definition of the geographic model.  If the network meets market standards based on a conservative market definition, further analysis is not required.  Geographic market definition can be expanded from the most conservative parameters as an exercise in risk assessment.  Based on the degree of market expansion, determinations can be made regarding elements of risk which will in turn help assess whether more complete market definition and analysis is required as a risk assessment tool.  The more conservative market definition is generally where regulators will begin their analysis and is a useful starting point for initial antitrust risk assessment.

Once the market is defined, there needs to be some analysis of the market share that will be represented by the combined group.  The number of physicians in the applicable market can be examined but does not necessarily lead to an accurate indication of market share in any given specialty.  The reality is that not all providers in a given specialty market are “equal” from an antitrust market share perspective.  The degree of market share between similarly qualified providers can be extensive.

Parties who are in the planning stages need to gather enough information to get some feel for market share without spending the money to engage an economist to do a full analysis.  Some cases will be clear on one side or the other.  If the initial conservative analysis does not indicate significant market share problems, the planning can move forward knowing that antitrust exposure is extremely low.  If the conservative market analysis indicates that the merger would result in significant market share, further analysis is required in order to identify and mitigate antitrust risk.

Physician Integration – Some Things Never Change

Tuesday, December 11th, 2012

Physician integration has been around since the early 1990s; at least I have been working on integration transactions since then.  There was a ground swell of integration transactions in the mid 1990s during the “great Clinton health care reform scare.”  I have a post coming soon that will bring back some memories for some of you from those early days of integration.   I was recently reflecting on how physician integration has transformed over the years.  There are some new laws out there and we have more to go on for legal guidance when structuring provider organizations.  On the other hand, a lot of what lies at the core of physician integration, the part where the “rubber meets the road,” has stayed fundementally the same.  Those physicians and groups who have not already thrown the towel in with a major health care system are looking for ways to stay independent.  In many cases, their best bet is to integrate with other independent providers.

Here are a few insights from a health care attorney that has been involved with physician integration for longer than he cares to mention:

  1. Federal and state antitrust laws are still the primary laws governing the structure of these organizations.  Without antitrust laws, physicians would stay in separate groups and just band together informally to contract with managed care plans.
  2. You still need to be clinically or financiallly integrated in order to pass the antitrust “sniff test.”
  3. There is more definition regarding what it takes to become clinically integrated than there was “back in the day.”  That is the good news.  The bad news is that it is probably more difficult to clinically integrate than we thought it would be back in the 1990s.
  4.  Group practices without walls are now called “divisional models” groups and come in all shapes, sizes and forms.  They are still the same thing; but someone thought it would be “cooler” to call them “divisional mergers.”
  5. My guess is that a lot of the “divisional mergers” are actually “failed mergers” waiting to be called out because they have only a very minimal amount of actual integration.  A lot of people are trying to slice the pie to thin and we might just see some of these models be put to the test in the near future.  Some of the new divisional model groups are integrated on a shoestring and the FTC is beginning to look at their structure to determine whether they are truly a “single actor” for antitrust purposes.
  6. The Stark Law has expanded to govern treatment of designated health services in integration transactions.  Back in the day, when we first started doing these transactions, the Stark Law was new and only applied to one line of service, clinical laboratory service; that is unless you were lucky enough to be in a state like Florida that had its own anti-referral law.
  7. Compliance issues have come to the forefront as a significant part of these integration transactions.
  8. Just like back in the olden days, there are plenty of people out there who will tell you exactly what you want to hear.  They usually have something to gain from you moving forward into a combined group; even if the combination is on a shoestring.  I am tempted now to go into a “you might just have an antitrust issue” tirade at this point.  But I will hold off on that for a later post.

 

John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
500 First Street, Suite 8000
P.O. Box 8050
Wausau, WI 54402-8050

Tel 715.845.4336
Fax 715.845.2718

Ruder Ware is a member of Meritas Law Firms Worldwide

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