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Collaboration can save medical practices time, money and effort

Physicians can share front office staff and an electronic health record system. However, they need to prove integration efforts are legal to avoid antitrust violations.

By Karen Caffarini covered practice management issues during 2008-09 and writes for us occasionally on the topic. Posted Aug. 12, 2013.

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For many small and solo practices, collaboration is the key to survival in today's health care world. Whether joining an independent practice association or accountable care organization or entering into an informal, handshake agreement with other practices, physicians have been able to lower their costs and improve their quality of life by banding together.

Health care attorneys say collaborations can be good for doctors and their patients, who could benefit from any cost savings, provided they are done correctly. If not, doctors could find themselves in trouble with the government for possibly violating Stark, anti-referral or antitrust laws. They also could face problems with the Internal Revenue Service over tax issues.

“The Federal Trade Commission spends a lot of time worrying about health care, including physician joint ventures. If the physicians did nothing but agree on prices, the FTC could go after them,” said Steve Cernak, counsel with Schiff Hardin's Ann Arbor, Mich., office.

Many practices have chosen to band together formally through an IPA. In these organizations, doctors own their practices but are legally organized to contract as a group to provide services. They have an executive director who works for the doctors, and they usually have legal assistance.

Jennifer Brull, MD, took an informal approach. Her solo family practice in rural Rooks County, Kan., is part of a collaboration that includes three solo practices; one small practice; one hospital-owned, midlevel practice; and one urgent care practice. Five physicians and five midlevel practitioners work together under the arrangement.

She said they share front office staff and an electronic health record system. They cross-train everyone and split expenses. And they use a formula that allows for month-to-month changes, including allowances for staff time off and people working more hours.

“Most of this has been done in a pretty Midwestern way — with a handshake and a lot of trust built over the years,” Dr. Brull said.

When the hospital-owned, midlevel practice joined, a lawyer got involved to avoid any concerns over Stark laws. She said the group isn't big enough to negotiate with health care plans.

Dr. Brull said that although they operate as a group, physicians and midlevel practitioners retain their independence through their own practice. If someone takes time off, it doesn't affect the bottom line. The only disadvantage, she said, is that they all have to work harder to collaborate on policies and procedures.

Whether a health professional is part of a large IPA with several hundred doctors or a small, informal group, he or she needs to collaborate carefully, Cernak said.

“Antitrust laws will see all individual practices as competitors. You should continue to compete on everything, including prices,” he added.

He said doctors need to show real integration efforts, either by sharing a back office or moving into the same office together, or agree to a capitation rate to avoid antitrust violations. This, he said, would show the FTC that an office is improving its bottom line in ways other than patient fees.

“If you set up collaboration just to agree on a fee for service, that's straight up price-fixing and is illegal under antitrust laws,” Cernak said.

Legal hot water

“Cost sharing is not the same as price-fixing,” said Robert Wild, managing partner and founder of the Great Neck, N.Y.-based health care law firm Garfunkel Wild. He said practices can share costs, but several IPAs have gotten in hot water with the FTC for reported price-fixing.

In a Florida case, the FTC charged a group of physicians with forming an IPA to get higher fees for services. The FTC said the physicians' agent approached health plans with the threat of a boycott by member doctors if it didn't agree to a higher price for services.

Similar accusations were leveled against a group of 600 physicians in California. They were prohibited from collectively negotiating for fee-for-service payments under the FTC ruling.

Colin McCulloch, an associate in the health care and life sciences practices with the Washington, D.C., office of the Epstein Becker Green law firm, said there are several other potential problems that need to be considered when practices collaborate.

McCulloch gave the example of two physicians located two doors from each other in the same building who decide to share costs and offices. He said sharing costs could violate Stark rules, particularly if one physician is picking up a large share of the costs and is getting referrals from the other physician.

The Stark law, which limits physician referrals to health entities with which they have a financial relationship, especially comes into effect when a hospital-owned practice enters the mix. Physicians in the group could be accused of having incentives to make more referrals to that hospital, McCulloch said.

McCulloch said patients may start to see the two doctors as operating under one practice, which could open the practices up to the same legal liabilities.

“Depending on your personalities, this could also lead to labor issues. If you're laid back and I'm high-strung, your long-time receptionist may really hate me, and that's a problem for both of us,” he said.

McCulloch said IPAs also are at risk for cherry-picking doctors, especially if hospitals are included. “The key is to go in with your eyes wide open. You may not want to go into a full-merged partnership,” he said.

ACOs enter the mix

McCulloch predicted that more physicians will move to a more formal structure, such as an ACO, which doesn't run the same risks as an IPA. In ACOs, doctors come together voluntarily to give coordinated high-quality care to Medicare patients while avoiding unnecessary duplication of services and preventing medical errors. Wild said physicians can't negotiate prices with Medicare, eliminating any price-fixing worries.

Matt Kinley, a partner of Tredway, Lumsdaine & Doyle, LLP, a Southern California-based law firm, said some concerns were raised that ACOs would violate antitrust laws, leading to certain exceptions being made.

“With ACOs, physicians agree to a certain payment, but that payment is based on improved quality of care,” Kinley said. “The government is very interested in a system that improves quality of care and uses technology, which ACOs do.”

Kinley said it's too early to tell if ACOs will replace IPAs.

Robert Wergin, MD, a family practice physician in rural Nebraska, recently joined 47 other physicians in nine counties, all with small, privately owned practices, in moving from an IPA-type structure to a physician-only ACO.

“We wondered, 'Where will our small practices fit in with all these changes in health care? Would we be swept away?' We were worried. How would we survive?” asked Dr. Wergin, who is in a town of 2,000 and covers a county of 17,500 people.

He said the ACO received a $200,000 advance from the federal Center for Medicare and Medicaid Innovation. He said the ACO needs to show that it's saving money to keep that advance. Its physicians can get bonuses if they meet certain quality measures.

Dr. Wergin said the doctors now will have strength in numbers as they did under their IPA-type structure but will be able to work with insurers such as BlueCross BlueShield without fear of violating antitrust laws.

Dr. Wergin is confident that doctors will be able to save money and improve quality under the ACO.

“We wanted to survive, and we will,” he said.

Karen Caffarini covered practice management issues during 2008-09 and writes for us occasionally on the topic.

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