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Navigating Healthcare’s Changing Financial Landscape

Top Lawyers look at Impact on Providers, Payers and Investors

Since passage of the federal Affordable Care Act (ACA) in 2010, South Florida healthcare attorneys have been helping their clients navigate the industry’s changing landscape. Now, the pace is accelerating, as state and federal regulators move to implement the ACA following the U.S. Supreme Court’s 5-4 decision in May upholding the act’s constitutionality.

Sandra Greenblatt

“I’m a big supporter of the healthcare reform act,” said Sandra Greenblatt, of Sandra Greenblatt, P. A. in Miami, one of four Top Lawyers in healthcare law interviewed by South Florida Legal Guide. “It’s a wonderful step for the people of our country who need universal coverage. Despite the rhetoric, it’s not a government-run program, and it retains the private insurance market. With increased coverage, more people will be able to access primary care and preventive services appropriately, rather than going to the emergency room when they get sick.”

To date, much of the public attention has focused on the expansion of the nation’s healthcare delivery system, including the possibility of a Republican President and Congress repealing the law after the November election. Meanwhile, South Florida’s healthcare lawyers are also looking at the financial implications for providers – including physicians, therapists, hospitals and health systems – and health plans, such as HMOs (health maintenance organizations) and PPOs (preferred provider organizations) that pay the providers.

Ira Coleman, partner, McDermott Will & Emery LLP, in Miami, notes that the reimbursement paradigm is changing: “In the past, if doctors or hospitals had high-acuity patients who required numerous services, they could bill for those services,” he said. “Now, if they manage those patients in a way that keeps them healthier, they should do better financially.”

One of the biggest dollars-and-cents issues is how the flow of federal reimbursement money will be impacted by healthcare reform. The Centers for Medicare & Medicaid Services (CMS) administers Medicare, for instance, through contracts with insurance companies, carriers or other fiscal intermediaries. “Although the federal government sets regulations, it’s not in the healthcare business,” said Lee F. Lasris, of Florida Health Law Center in Davie. “It’s in the payment business to be sure funds are there to pay for Medicare and Medicaid, which is a joint venture between the federal and state governments.”

 Lee Lasris

The ACA also provides incentives for the creation of accountable health organizations (ACOs), where groups of physicians, hospitals and other providers team up to provide more collaborative, consistent and higher quality patient care. Rather than the traditional fee-for-service billing model, ACOs collect the funds, like a joint business venture, and then divide them among the participating providers.

“There are various ways to split the pie in a way that respects the government’s incentives,” said Lasris, whose firm represents providers and some managed care clients, and deals with regulatory and contract matters. “Ideally, that leads to a lower total cost for the government and high-quality outcomes for the patient.”

Addressing Financial Disputes

Joseph Zumpano, founding partner, Zumpano Patricios & Winker (ZPW) in Coral Gables, expects to see increased financial conflicts between providers and health plans following the Supreme Court decision upholding the ACA. The justices ruled that the states could not be compelled to expand Medicaid programs for the poor, and Governor Rick Scott responded to the ruling by saying there would be no expansion in Florida.

 Joseph Zumpano

“Those two dynamics are likely to fuel additional disputes between hospital systems and managed care payers like HMOs,” said Zumpano, who represents providers in complex managed care disputes, and with his team has recovered more than $100 million for hospitals and other clients. “First, the ACA puts increased financial pressure on payers, such as the requirement for health plans to accept patients with preexisting conditions. However, the health plans may not get the volume of Medicaid patients they are expecting. That means payers may further increase their financial pressure on hospital systems and other providers.”

Zumpano, whose cases have established important precedents and novel arguments in the area, says the rising level of tension between providers and payers can result in payer strategies that may include:

• Steerage of patients to certain lower-cost providers, in disregard of contractual provisions.

• Increased “gaming the system” in violation of contract provisions. For example, a payor might attempt to merge several separate services into one billing code, reducing the total reimbursement to the provider.

• Modifying the payer’s policies and procedures in an attempt to obtain financial advantage, in disregard of contract principles.

• Payment of plans under lower contract rate schedules rather than the appropriate higher rate schedules, in violation of the contract.

“Certainly, healthcare reform has created a pressure cooker for managed care plans,” adds Zumpano, who is an opponent of “payer unilateralism,” a term he uses to characterize one-sided behavior by managed care payers in violation of agreements with providers or applicable law. In Adventist v. Blue Cross, Zumpano and his team advocated against HMOs unilaterally setting payment rates for emergency services and care rendered by a non-contracted health care provider, establishing the principle that a healthcare provider would have a private cause of action against an HMO under the applicable Florida Statute.

Investing in Healthcare

 Ira Coleman

The new healthcare environment is also spurring a wave of mergers, acquisitions and new investment activity, according to Coleman, who focuses his practice on healthcare mergers and acquisitions and healthcare private equity.

“I believe we’ll see an acceleration of the consolidation trend in this sector,” said Coleman. “ Health systems are buying physician practices, especially in primary care, to meet the demands of becoming an ACO. The larger health systems will continue to grow, and I think you’ll see many of the physician-owned groups getting bigger as well, adding to their negotiating and purchasing power.”

Greenblatt, who represents physicians, pharmacies and ancillary providers, says she has seen more physicians wanting to form new groups or join existing large groups. “Many physicians are afraid to remain solo because of concerns that they won’t be able to access decent managed care contracts,” she said. “With ACOs already forming, I think the larger group model will have a better chance of success than it has in the past.”

However, Coleman thinks there will still be room for the solo practitioner and the small group practice in the new healthcare system. For example, affluent patients may well be willing to pay a premium for “concierge-type” medical services. However, smaller providers could wind up leaving reimbursement money on the table if they’re not careful. “If a solo physician can’t hire a skilled insurance person to handle claims, most likely the difficult ones will go to the bottom of the pile and the provider may never collect,” Coleman said.
Since the Supreme Court ruling, Coleman has seen increased interest from private investors in physician practices. Other investment targets include the technology companies that are developing electronic medical records (EMR) and electronic health record (EHR) systems that are increasingly important for passing patient data from one provider to another.

“Investors are following the macro trends, and looking for practices that have shown they can bend the cost curve while still keeping quality high,” he said. “Today, the most attractive practices understand the changing landscape, and are able to get high scores in terms of results and patient satisfaction.”

Coleman notes that Medicare is no longer paying the same amount for every patient with the same condition. “If you treat a patient with a higher level of acuity or co-morbidities, you should be paid more,” he said. “It should be obvious for a doctor to do this, but they need to understand the questions to ask the patient and obtain the history, and that can be a whole new learning curve.”

Other Financial Trends

Under the new “holistic” model to providing healthcare services, Greenblatt expects to see increased demand – and potentially higher reimbursement – for primary care physicians. “Hospitals could do better financially if they can use their emergency rooms for appropriate cases,” she added. “If there are still a lot of uninsured people who go to the ER for primary care, you haven’t really helped the hospital.”

Lasris says that changing compensation models will encourage more physicians to go into primary care and pediatrics, and help address a shortage of doctors in those fields. In the meantime, there will be greater use of physician extenders, such as nurse practitioners and physician assistants (PAs) to handle the simpler cases.

“We need to make smarter use of our physician resources,” Lasris said. “For example, an oncology patient with no problems could be seen by a primary care doctor or PA, rather than the cancer specialist, on a follow-up visit.

Like the other attorneys, Lasris expects continuing changes in the healthcare sector in the coming months. “When Medicare was created in the 1960s, it was not fully formed,” he said. “Over the years, it grew from one volume of regulations to an almost countless number. Right now, we have the skeleton of a newly invented healthcare program and it will take time to mature.”

Greenblatt agrees that the APA is a “first step” to changing the nation’s healthcare system and also expects new rules and regulations coming down the road from Washington.

Summing up the current climate, Coleman said, “This is an exciting time to be a healthcare attorney. It’s fun to be part of the solution that helps get clients through these challenging times.”

South Florida Legal Guide 2012 Financial Edition

Back to 2012 Financial Edition

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