An Open Letter to Law Firm Managing Partners and Chairs of Healthcare Practice Groups

What Should You as Practitioners Be Considering?

First of all, healthcare isn’t going away. It’s the largest single component of our economy, and even in recessions, it grows. There is money to be made, given the huge sums that are available for care and how truly badly they are spent. Given the absolute need for healthcare reform, there will be considerable disruption, and as we attorneys know, within disruption are practice opportunities. The flow of money must change. Operating structures of healthcare providers must undergo a complete change. There will be governance issues, and how the money is split up will be challenging at best.

So what are the issues to be considered? Here are some. I’ll add to this list in later blogs.

• Technology: Physicians and hospitals sooner or later will be required to use Electronic Medical Records (EMRs) and be part of a Health Information Exchange (HIE). These will dramatically reduce medical error and waste, and should over time significantly improve the quality of care. Consider how much easier it would be to measure the quality of diabetic care by a primary care doctor with digital records rather than paper. How can we reward good care if we cannot measure it? There will be significant legal opportunities within physician practices regarding meaningful use of technology and reimbursement by insurers, the federal government and Accountable Care Organizations.

• Measures of quality of care and outcome: Today under what is called the “fee for service” system of payment, insurers and the federal government pay providers to do “things.” Office visits, surgeries, medications, etc. The more “things” that are done, the more money the provider is paid. The very best cardiac surgeon is often paid the same as the very worst. We pay for quantity, not quality. So what do we get? Quantity. How does a primary care doctor increase his or her income? More office visits. Does that result in better quality of care and outcomes? No. So to change that, quality of care and outcomes and cost of care will have to be the primary determinants of what a provider is paid. These are more difficult to measure than the number of “things”done, and thus there will be much opportunity revolving around this very important item from a legal perspective. Said another way, there will be disputes to be resolved.

• Accountable Care Organizations (ACOs): We sometimes speak of ACOs (capitalized meaning as defined by the ACA) and of acos, lower case. I will give you my definition of an aco: A business organization of multi-specialty integrated care givers who are jointly held accountable for the quality of care, the costs of care, the outcomes, and the overall health of an assigned patient population. The aco may be paid in a number of different ways (e.g., a “bundled” type of payment for a cycle of care or condition or “capitation”). The aco undertakes the risk that the capitated or bundled payment is insufficient to treat the defined population of patients. The idea is not necessarily to reduce care, but to find ways to provide services as more efficiently and achieve superior outcomes and thereby reduce costs because of a healthier patient population (reducing “use” of services for the right reasons). Studies demonstrate no relationship between the amount of care and the quality of outcomes, believe it or not. Providing more care is often inconsistent with better outcomes and better overall health. It’s all about providing smarter, more integrated, coordinated, and better care. Providers could be paid more for doing less if that works, and they will know best how that could be done. Providers will be highly incented to find ways to reduce costs to maximize profits under the bundled or capitated payment methodology, still always consistent with quality of care and outcomes. Cutting care for it’s sake only is a no-no. And of course, all providers within an aco would have to have interoperational EMRs.

You can immediately see how an aco fits into healthcare reform. You change the delivery system by changing how the aco is paid based upon measured quality of care, outcomes, and costs. The result will be an intelligent, appropriate reduction of the use of services. Acos can be hospital centric or primary care centric. Any of a number of models can do well, and improvisation will be key. If lawyers understand these issues, they can better advise their clients. One can immediately see the opportunities for legal advice. First, in the formation of the aco, much thought and draftsmanship will be required. This is largely uncharted territory, and it will be complex. It absolutely requires a lawyer who understands the nuances and balances in healthcare delivery. Also post contract execution issues will surely arise within the aco concept: who measures the amount of payment; how is the bundled payment divided amongst the providers; what are the operative and legal structures of acos; what are the governance models; etc. This is fertile ground for honest disagreement.


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