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Five keys to mitigating risks associated with hospital-physician contracting [PODCAST]

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In this episode, Rob Senska, Director of Compliance Services and Associate General Counsel at BESLER, discusses five keys to mitigating the risks associated with hospital and physician contracting.
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Michael Passanante: Welcome back to the Hospital Finance Podcast. This is Mike Passanente, glad you could be with us.

Today, I am joined by Rob Senska. Rob is our Director of Compliance Services and Associate General Counsel here at BESLER Consulting. And on today’s podcast, Rob is going to walk us through five keys to mitigating risks with hospital and physician contracting.

Welcome back, Rob.

Rob Senska: Thanks, Mike. I appreciate it. Great to be here!

Michael: So let’s walk through these five keys. The first one, pre-acquisition strategies, talk to us about that.

Rob: Absolutely! So first and foremost, from what I’ve seen in my experience, one key or pivotal way to mitigate physician alignment or contracting risk is to simply do your vetting, your due diligence, upfront.

What I’ve seen in my experience is hospitals sometimes are a little shortsighted in the vetting of physician practices or even individual physicians.

So one piece of advice that I like to give our clients is to simply do a pre-acquisition audit of billing practices and the billing processes of the target physicians.

By doing this, even if you decide to take on the risk, at least you know what you have. You don’t want to buy something essentially without knowing what you have upfront. Maybe you’ll be able to address these things through the transaction and the transaction documents. But even if not, at least you know what you need to do from a management perspective in terms of auditing and education with those acquired physicians or practices.

Michael: The second key is evaluating the fair market value.

Rob: Exactly, Mike. In terms of any physician deal, in order to meet the tenets of the fraud and abuse laws, namely, Stark, anti-kickback and to avoid any potential false claims act suit by the federal government, hospitals still need to be wary of making sure that the amount that they pay under these deals is really what the marketplace demands, and not more than that.

So, making sure that the actual compensation or payment structure of the acquisition is, in fact, fair market value. And also, as a separate analysis, making sure that the transactions meet the commercial reasonableness test are pivotal and key essential elements to make sure that the deals don’t, a) attract regulatory scrutiny, and also b) don’t run afoul of the fraud and abuse laws.

Michael: Rob, your third key is establishing consistency across providers. Can you tell us about that?

Rob: Yes, absolutely. This is more what I call an MBA or management concept. It’s really having a strategic approach to how you are acquiring practices rather than being haphazard or re-inventing the wheel every time.

Having some level of consistency in terms of how you structure transactions, in my opinion, even though it’s more of a soft, intangible viewpoint, I think it’s important to do that because what it shows people looking from the outside is that you are, in fact, treating physicians with some equality. And by doing that, in my opinion, you run less risk of drawing scrutiny on your transactions.

For instance, if you’re treating one provider much differently from a transactional standpoint and from a fair market value standpoint, because that’s a high referrer, then clearly, you’re going to draw regulatory scrutiny.

So making sure you have consistency in how you approach these things can mitigate your risks.

Michael: Rob, your fourth key is establishing standard operating procedures.

Rob: Right! Mike, I put this point in the context of policy and procedure development. But basically, establishing certain [P’s and P’s] or SOP’s, either one really is the same to me in terms of how they’re used in the industry. But developing consistency in those as well is a key point here. And also, looking at them very carefully to ensure that you have pathways and policies and procedures that a) meet the regulatory requirements, but b) that makes sense from a practical standpoint.

You never want to write a policy that goes way above and beyond what the law requires, in my opinion. Once you do that, that becomes the law or the standard for your company.

So really taking a careful inventory of what you have in place, what the laws require, and then what makes sense from a business standpoint, those are all key items that need to be thought about by management.

Michael: And Rob, your fifth and final key is looking at your overall risk profile.

Rob: Absolutely! It’s important. And all of these to me—just to step back—all five of these need to work in tandem, but understanding what your risk profile is, you’ll hear the term thrown out there from consultants and attorneys and administrators –  enterprise risk management.

The enterprise risk management that I’m speaking of here is really specific to your physician alignment strategies, but it needs to be part of your overall company’s enterprise risk management strategy globally.

Boards need to be involved with this in terms of understanding what your risk profile is. If you don’t know what your gaps are in terms of risk, how can you manage them?

So it’s simply doing the assessments and the due diligence of your own company as to how you operate and how you manage these physician relationships is a key starting point.

Now, the next question I would have was, “How do you do that effectively?” And I think the simple answer is going back to all of the excellent regulatory guidance we have now.

Some things that come to mind off hand specifically are the 1998 and then the 2005 supplement of the hospital compliance program guidances. Those keys, those haven’t changed. They’re still out there. They’re on the OIG website. Looking at relevant advisory opinions that the OIG puts out, I think the 1994 OIG fraud alert is still relevant in parts.

These things are places for any compliance officer or person running physician practices. These are key pieces and key guidance that the government has put out.

To me, they’re really a roadmap for ensuring compliance and lowering your risk.

Michael: Rob, these are such important points for hospital physician contracting or arrangements. This is a key topic for hospitals across the country today. Thanks for stopping by and shedding some light on that with us.

Rob: Thank you so much for having me.

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