Private Equity Investment in Ambulatory Surgery Centers

September 21, 2023

Written by Josh Miner, Savanna Ganyard, CFA, and Taryn Nasr, ASA

The Ambulatory Surgery Center (ASC) market is a fast-growing sector of healthcare that is attracting considerable interest from private equity (PE) funds across the country. The following outlines the current state of the market as well as key factors driving ASC market growth and attracting PE investment.

Private Equity Industry Outlook

2021 saw the most PE-related healthcare transactions in history, with an estimated 1,018 transactions occurring throughout the year. During the first quarter of 2023, transaction activity slowed from the pace set in 2021, primarily due to macroeconomic factors including inflationary pressures, rising interest rates, and higher labor costs. Additionally, rising interest rates and tight credit have increased the cost of debt leading to a reduction in leverage of one to one-and-a-half turns. Uncertainty surrounding the bank debt market has led PE investors to turn to private credit and other deal strategies. These strategies include searching for smaller deals where securing financing may be easier or targeting add-ons that are small enough to purchase without debt.

Despite the recent slowdown in activity, it is likely that the deal volume will rebound as macroeconomic uncertainty eases, but, in the short term, PE firms will likely continue to target smaller platform deals and add-ons. These transactions will likely involve independent targets, as other institutional investors may not attempt an exit in the current economic conditions.

Ambulatory Surgery Center Industry Overview

The ASC market was recently sized at $84 billion in 2020 and is projected to grow at a compounded annual growth rate (CAGR) of 3.9% to $131 billion by 2031. The industry is highly fragmented with 70% of ASCs independently owned and the remaining owned by larger conglomerates. Over the past several years, PE ownership in the ASC space has steadily increased. Two of the largest players in the industry, AmSurg and Surgery Partners, have PE ownership. Other major ASCs with PE ownership include Covenant Physician Partners, EyeCare Partners, Gastro Health, GI Alliance, HOPCo, PE GI Solutions, and Value Health. Notably, Bain Capital’s $3 billion leveraged buy-out (LBO) of Surgery Partners in 2017 remains the largest deal completed in this space.

The expected growth in the ASC industry is driven by numerous factors including a shift towards lower cost procedures. On average, patients save $684 per procedure at an ASC as compared to a hospital based on a 2021 report from UnitedHealth Group. Specifically, orthopedics is a growth area driven by cost savings. On average, ASCs reduced the cost of orthopedic procedures by 17% to 43%. These cost savings at an ASC lessen the burden on the patient and help boost margins in an ASC setting. As a result, orthopedics continues to be a popular specialty for investors pursuing an ASC strategy.

Orthopedics remains the most popular specialty, but gastroenterology, pain management, and ophthalmology make up large portions of the market. Notably, cardiology has become the fastest-growing specialty as ASCs invest in technology and higher acuity procedures continue to move to the ASC setting. The demand for cardiology is driven by an aging population and the level of cardiovascular disease in U.S. adults (e.g., half of all U.S. adults have cardiovascular disease). While cardiology is currently primarily a hospital-based specialty, with 70% of cardiologists employed by hospitals, as this specialty moves into ASCs there is a unique opportunity for PE firms to secure a foothold in a fast-growing segment.

On January 31, 2023, Lee Equity Partners (LEP) completed a buyout of the Cardiovascular Institute of the South (CIS) for an undisclosed amount (of note, LEP deals typically range from $50 to $150 million in equity). CIS has 21 locations across two states and employs over 60 physicians. This deal represents one of the larger buyouts of an ASC in recent memory and illustrates the growth of cardiology as a specialty in ASCs.

As more cases and specialties shift to an ASC setting, there is an increasing patient demand for multi-specialty ASCs. Patients are seeking convenience in the ability to receive treatment for a multitude of treatments in one place. The number of multispecialty ASCs is forecasted to expand at a 4.3% CAGR, outpacing general ASC market growth.

Ambulatory Surgery Centers and Private Equity

These industry characteristics coupled with the PE industry outlook should continue to drive transactions within this space, specifically among the 70% of independently owned ASCs. Due to recent macroeconomic factors, we expect PE firms to continue to pursue smaller add-on deals aimed at consolidating several ASCs in an area. These types of transactions allow PE firms to capitalize on industry trends, optimize cost-cutting opportunities, and generate attractive returns. On the other hand, these transactions are also attractive to independent and physician-owned ASCs due to the benefits of a larger growth infrastructure which can leave more time for physician owners to focus on patient care.

Conclusion

ASCs can offer cost savings and convenience to consumers without sacrificing quality of care. Due to increasing demand, the number of specialties, and the ability to perform high-acuity procedures, the ASC market is projected to grow steadily over the next decade. Market growth, combined with the availability of investment opportunities due to the fragmentation of the market, will continue to attract PE investment. As macroeconomic conditions become less uncertain, it is likely that PE investment will continue to rebound to historical levels in the healthcare industry. Furthermore, the many attractive qualities of the ASC industry should draw investment in the space.

Sources

  1. BH Sales Group. (2023). Industry Overview June 2023. ASC Data.
  2. Avanza Healthcare Strategies. (2022). 2022 Key ASC Benchmarks and Industry Figures.
  3. PitchBook. (2023, May 9). Healthcare Services Report: Q1 2023.
  4. Newitt, P. (2022, November 29). The specialties driving ASC growth. Becker’s ASC Review.
  5. Newitt, P. (2023, May 4). 3 numbers pointing to ASC growth. Becker’s ASC Review.
  6. Condon, A. (2021, October 7). 3 key trends driving ASC market growth. Becker’s ASC Review.
  7. VMG Health. (2023). 2023 Annual Healthcare M&A Report.
Categories: Uncategorized

Structuring Value-Based Compensation Plans to Maximize Revenue Under Alternative Payment Models

September 14, 2023

Written by Anthony Domanico, CVA and Ben Minnis, CVA

The following article was published by the American Association of Provider Compensation Professionals.

In the rapidly evolving landscape of healthcare, traditional fee-for-service (FFS) reimbursement models are being replaced by alternative payment models that focus on value-based care in addition to, or even sometimes fully in replacement of, fee-for-service reimbursement. This shift from volume to value necessitates a strategic rethinking of compensation plans for healthcare providers to align incentives, optimize patient outcomes, and maximize revenue. The implementation of value-based compensation plans requires a deep understanding of the intricacies of different alternative payment models and the development of innovative strategies to ensure financial success while prioritizing quality care.

The Paradigm Shift: Value-Based Care and Alternative Payment Models

A key tenet of value-based care is the focus on delivering high-quality healthcare outcomes to patients while managing costs effectively. Alternative payment models, such as bundled payments, accountable care organizations (ACOs), and capitation, incentivize providers to prioritize preventive care, care coordination, and patient engagement while reducing unnecessary or inappropriate services.

These models differ from traditional fee-for-service, which rewards the quantity of services delivered rather than their outcomes. Under a fee-for-service reimbursement model, the more you do, the more you get. This is the case even if certain types of care or services are not warranted, are considered excessive based on the problem set presented by a particular patient, or do not lead to good patient outcomes.

However, under value-based contracts providers are rewarded not for the volume of services rendered, but for providing high-quality care to a large population of patients while also reducing unnecessary and/or inappropriate services.

The Compensation Shift: Designing Physician Compensation Programs to Maximize Revenue

While all value-based care models pay for value in some respect, the way various payment programs are structured will determine what compensation mechanism(s) will lead to better outcomes for both the physician and the organization.

Consider the following scenarios that are all focused on a hypothetical organization with $100 million of revenue and 200 FTE doctors ($500,000 in revenue per FTE).

Fee For Service + Value

Under a non-capitated value-based model where the organization continues to earn reimbursement under an FFS construct, with additional revenue opportunities through quality incentives, that organization might see $90 million of FFS revenue for the same book of business. In addition, that organization can earn up to an additional $20 million in value-based payments for a total possible range of $90-110 million of revenue.

Under this reimbursement structure, the organization will still be incentivized to have its physicians rewarded for productivity. After all, a sizable portion of the organization’s revenue, and most of the organization’s ability to increase the revenue pool (the $90 million), is through FFS reimbursement. As such, a compensation model under this construct might be a productivity model (with or without a base salary component). Also, it would include an additional incentive opportunity for value-based arrangements based on the metrics included in the organization’s value-based contracts.

Fee For Service + Value + Shared Savings

Another emerging component of value-based contracts is shared savings opportunities. If an insurer typically incurs costs of $10 million for managing a population of patients, and the subject organization can take high-quality care of the same population of patients for $9 million, insurers are increasingly sharing a portion of the cost savings back to the providers/health systems that are helping to achieve these savings.

Designing compensation arrangements to maximize shared savings opportunities is much trickier than under FFS and value models. After all, it is much more challenging to define metrics around achieving cost savings on a targeted population of patients than it is to measure things like hemoglobin A1c scores. As a result, we often see organizations either use shared savings dollars earned from insurers to fund larger quality incentives or pass through a portion of those earned dollars received from insurers to network physicians.

The latter option is complex in that it requires organizations to understand how those cost savings are achieved and to be able to allocate those savings earned down to the individual physician level or develop a proxy formula to estimate these factors for payment. As an example, we may see an organization decide to withhold 50% of funds earned to cover the additional costs incurred by the employer (such as hiring care coordinators to ensure patients with diabetes are getting back to the clinic for follow-up tests, etc.), and distribute the remainder by using a formula based on quality, wRVUs, or some other distribution formula.

Ensuring compensation remains consistent with fair market value under these types of arrangements is challenging. With that in mind, you will want to ensure you are working with counsel and a compensation design/valuation expert to ensure any compensation models remain consistent with fair market value.

Capitation

At the other end of the volume-to-value spectrum are capitation models which include an organization that receives a fixed payment on a per member per month basis for all members under its care. Under these models, if those 200 FTE physicians manage a panel of 50,000 patients, and the organization is reimbursed $166.67 per patient per month, that organization receives a total annual payment of $100 million.

Under these models, the organization receives a fixed payment regardless of its costs, assuming it has the same number of patients. An organization can only increase top-line revenue through growth in the patient population served, so compensation models tend to be a combination of fixed and variable. Specialists might be paid on a salary-type model (with or without incentives), while primary care providers might be paid on an acuity-adjusted panel size model whereby physicians are incentivized to take on more patients and grow the total capitated revenue of the organization.

These models may also include incentive payments tied to care coordination, quality outcomes, cost controls/reductions of unnecessary or inappropriate services, and the like.

Conclusion

The table below summarizes the options discussed. Note that the compensation models in the right-hand column are the most predominant compensation model structures for a particular reimbursement model. However, other models may be more appropriate depending on the facts and circumstances impacting the subject organization.

Transition Strategy

In addition to designing compensation models that allow for maximum revenue potential, organizations must enact robust change management processes to ensure their providers are not lost in the transition to a new compensation model. Providers need to understand the rationale behind the new models and how their efforts contribute to both patient care and financial success for the organization and the providers. Regular feedback loops and performance evaluations can help providers track their progress and make necessary adjustments.

Conclusions and Key Takeaways

As healthcare continues to shift toward value-based care, designing an effective compensation plan is becoming increasingly crucial for provider organizations to thrive under these alternative payment models. The suitable model for your organization might vary significantly from the compensation structure observed at the neighboring health system. This is especially true considering both organizations could be positioned at distinct points along the risk continuum.

The key success driver is for organizations to design models that will help them be successful wherever they are on the continuum. By aligning incentives with patient outcomes, leveraging innovative strategies to provide more cost-effective care, and adapting to changing market dynamics, organizations can optimize revenue and physician-earning opportunities while delivering high-quality care to their patients.

Categories: Uncategorized

FMV Compliance with Equipment Lease Transactions

September 6, 2023

Written by Nick Shannon, ASA, and Joel Gomez, ASA

Earlier this year, the United States Attorney’s Office Eastern District of Michigan issued a press release regarding a False Claims Act settlement involving a regional hospital system and physicians. Specifically, Covenant Healthcare System paid $69.0 million to settle allegations in 2021 under the False Claims Act related to improper financial relationships with eight physicians and a physician-owned investment group. In addition to the False Claims Act, there were specific allegations pertaining to the Anti-Kickback Statute (AKS) and The Physician Self-Referral Law (Stark Law).

One component of the allegations included a medical equipment lease arrangement between Covenant and the physician-owned investment group. It was alleged that Covenant permitted the group to structure the equipment lease under non-arms-length negotiations with the purpose of inducing patient referrals.

Many health systems and physicians/physician groups pursue lease arrangements to provide flexibility in assessing long-term relationships and to reduce capital expenditure at the outset of an employment agreement. These agreements may include traditional personal property fixed asset leases, such as furniture, fixtures, and equipment, or material capital asset leases such as major movable medical equipment. With the increased popularity and projected growth of medical equipment lease agreements, there is the possibility of increased scrutiny and consideration of whether these agreements comply with federal laws.

Tips When Planning, Initiating, or Reviewing Medical Equipment Lease Agreements

Evaluating the Equipment Lease Structure

The structure of the equipment lease transaction has a significant impact on fair market value requirements, as well as other tax, accounting, and financial reporting requirements. When planning an equipment lease arrangement all parties involved should consider the following:

  1. Is the leasing arrangement intended to be an operating lease or capital lease? Has future ownership of the subject equipment been discussed and established? For example, does the contract outline buy-out options or end-of-lease purchase options for the lessee at the current fair market value?
    • For operating leases, the determination of the lease term impacts anticipated residual value, interest rates, and fair market value lease payments. Does the lease term reasonably reflect a lease period that a third-party financial institution would consider?
    • What is a reasonable process to estimate the residual value and what support can be provided to reasonably estimate the future fair market value residual at lease termination? For example, does residual value simply reflect a percentage of equipment cost at lease inception, or does it reflect anticipated market depreciation of the subject equipment?
    • What processes or requirements would a financial institution include in developing the appropriate interest rate applicable to the transaction given the credit risk of the potential lessee (could be either a health system or a physician/physician group)? Are there expectations or objectives regarding required return on/of the investment?
  2. Alternatively, is the leasing arrangement intended to be a capital lease? Do all parties understand that the title will transfer at lease termination?

Evaluating Internal Revenue Service and Tax Guidance

For federal income tax purposes, the Internal Revenue Service (IRS) has established guidelines for “true leases” or “fair market value lease.” This guidance specifies that a true lease, or operating lease, involves a lease transaction where the lessor is deemed the owner of the asset and receives all depreciation and tax benefits. Guidelines to consider for true lease classification include:

  1. Does the minimum investment reflect an amount equal to at least 20 percent of the cost of the subject equipment?
  2. Does the minimum investment remain equal to at least 20 percent of the cost of the subject equipment?
  3. Does the residual value at the end of the lease term reflect an amount equal to at least 20 percent of the original cost of the subject equipment?

If the above guidelines are not satisfied, a lease transaction would be considered a non-tax lease, or capital lease, where depreciation and tax benefits fall with the lessee.

Evaluating Financial Accounting Standards

Another consideration, for both a potential lessor and lessee, is to evaluate the accounting treatment and impact for a particular classification of the lease. For example, a potential lessee interested in reporting a capital lease for financial reporting purposes would need to confirm at least one of the following criteria:

  1. Does the lease transfer ownership of the subject equipment to the lessee by the end of the lease term?
  2. Does the lease grant the lessee a purchase option and is there reasonable certainty this option will be exercised?
  3. Does the lease term cover a major part of the subject equipment’s economic life?
  4. Does the present value of the total lease payments equal or exceed FMV?

Alternatively, if the potential lessee cannot confirm any of the above criteria, they would classify the lease as an operating lease.

Evaluating the Stark and AKS Conditions and Standards

Once the appropriate equipment lease structure is determined the underlying details of the arrangement should be evaluated considering Stark and AKS, assuming the potential for financial and referral relationships between the parties.

Under Stark Law Section 42 CFR § 411.357(b) exceptions to the referral prohibition related to compensation arrangements subset (b) Rental of Equipment states that equipment lease arrangements do not constitute a financial relationship if the payments made by a lessee to a lessor meet the following requirements:

  1. The lease arrangement is set out in writing, is signed by the parties, and specifies the equipment it covers.
  2. The equipment leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement and is used exclusively by the lessee when being used by the lessee (and is not shared with or used by the lessor or any person or entity related to the lessor).
    • For purposes of this paragraph (b), exclusive use means that the lessee (and any other lessees of the same equipment) uses the equipment to the exclusion of the lessor (or any person or entity related to the lessor). The lessor (or any person or entity related to the lessor) may not be an invitee of the lessee to use the equipment.
  3. The duration of the lease arrangement is at least one year. If the lease arrangement is terminated with or without cause, the parties may not enter a new lease arrangement for the same equipment during the first year of the original lease arrangement to meet this requirement.
  4. The rental charges over the term of the lease arrangement are set in advance, are consistent with fair market value, and are not determined:
    • In any manner that considers the volume or value of referrals or other business generated between the parties; or
    • Using a formula based on:
      • A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed on, or business generated, using the equipment; or
      • Per-unit of service rental charges to the extent that such charges reflect services provided to patients referred by the lessor to the lessee.
  5. The lease arrangement would be commercially reasonable even if no referrals were made between the parties.
  6. If the lease arrangement expires after a term of at least one year, a holdover lease arrangement immediately following the expiration of the lease arrangement satisfies the requirements of this paragraph (b) if the following conditions are met:
    • The lease arrangement met the conditions of paragraphs (b)(1) through (5) of this section when the arrangement expired;
    • The holdover lease arrangement is on the same terms and conditions as the immediately preceding lease arrangement; and
    • The holdover lease arrangement continues to satisfy the conditions of paragraphs (b)(1) through (5) of this section.

Similarly, AKS Section 42 CFR § 1001.952(c) outlines safe harbor related to equipment rental by meeting the following six standards:

  1. The lease agreement is set out in writing and signed by the parties.
  2. The lease covers all equipment leased between the parties for the term of the lease and specifies the equipment covered by the lease.
  3. If the lease is intended to provide the lessee with use of the equipment for periodic intervals of time, rather than on a full-time basis for the term of the lease, the lease specifies exactly the schedule of such intervals, their precise length, and the exact rent for such interval.
  4. The term of the lease is for more than one year.
  5. The aggregate rental charge is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that considers the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare, Medicaid, or all other federal healthcare programs.
  6. The aggregate equipment rental does not exceed what is reasonably necessary to accomplish the commercially reasonable business purpose of the rental.
    • Note: For purposes of paragraph (c) of this section, the term fair market value means the value of the equipment when obtained from a manufacturer or professional distributor, but shall not be adjusted to reflect the additional value on party (either the prospective lessee or lessor) would attribute to the equipment as a result of its proximity or convenience to sources of referrals or business otherwise generated for which payment may be made in whole or in part under Medicare, Medicaid, or other federal healthcare programs.

In summary, the absence of arms-length negotiations could imply equipment lease payments constructed above or below fair market value, and therefore, not meeting Stark exception requirements under Rental of Equipment that states, “The rental charges over the term of the agreement are consistent with fair market value.”

Stark Law defines fair market value, with respect to the rental of equipment, as “the value in an arms-length transaction of rental property for general commercial purposes, consistent with general market value.”

In addition, AKS prohibits soliciting or receiving remuneration “in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a federal healthcare program.”

Categories: Uncategorized

Strategic Partnerships in the Inpatient Rehabilitation Industry: Highlights, Opportunities, and Risks

September 5, 2023

By Sydney Richards, CVA, Patrick Speights, and Christopher Tracanna

Approximately 45.0% of acute care discharges are subsequently admitted to a post-acute setting nationwide, including approximately 4.0% who are admitted to an inpatient rehabilitation facility (IRF). An IRF is a freestanding inpatient facility or specialized unit within an acute care hospital that offers intensive rehabilitation to patients after illness, injury, or surgery. Now more than ever, investment demand for IRFs is strong due to the unique value propositions relative to other healthcare verticals, including strong clinical outcomes at an efficient price to payors, a period of stable regulations, rising patient demand, and a high margin for efficient operators.

In response to this demand and the potential for high returns, acute care operators may consider affiliating their existing inpatient rehabilitation units (IRUs) with platform post-acute operators to drive financial returns while improving patient outcomes. IRUs are operated as distinct departments of acute care hospitals, while IRFs are freestanding facilities. Going forward we will use the generic term IRF when discussing the inpatient rehabilitation industry.

Below, VMG Health experts highlight key industry facts driving up investment. Additionally, our experts detail the potential benefits and risks of common IRF affiliation models, such as joint ventures, joint operating agreements, divestitures, and management agreements.

5-Year High Medicare Margins

As presented in the table in the below, aggregated IRF Medicare margins were at a five-year high in 2021 at 17.0%. One driver of this increase is the Centers for Medicare and Medicaid Services (CMS) COVID-19 waivers that allowed flexibility in admission criteria and therapy requirements to maintain IRF status. Now that the emergency declaration has ended, margins may become more pressured as IRFs return to standard operating criteria. It is also notable that freestanding Medicare margins were 25.8% in 2021 compared to hospital-based margins of 5.8%. Many factors contribute to this difference, including:

  • Scale Hospital-based IRFs typically have a lower bed count than freestanding IRFs.
  • Strategic Differences – Hospital-based IRFs typically support the operations of a broader acute care hospital or health system.

Proliferation of Strategic Post-Acute Buyers; Growth in Freestanding IRFs

In 2021, five IRFs closed while 22 new IRFs began operations, resulting in a net gain of 17 IRFs. According to MedPAC, the majority of new IRFs were freestanding and for-profit, and most closures were hospital-based nonprofits. As reflected in the chart on the right the top six freestanding IRF operators control approximately 91.5% of freestanding IRFs in the market.

Large Industry with Growing Patient Demand

In 2021, Medicare spent $8.5 billion on 379,000 fee-for-service (FFS) discharges across 1,180 IRFs nationwide. These FFS Medicare stays accounted for approximately 52.0% of IRF discharges on average.

Fragmented

Despite the proliferation of specialized post-acute IRF operators, the IRF industry remains fragmented with over 70.0% of all IRF locations being hospital-based IRUs. The remainder are freestanding facilities. However, based on their relatively larger size and bed counts, freestanding IRFs accounted for approximately 55.0% of Medicare discharges. Additionally, while for-profit IRFs make up about 37.0% of all IRFs, they account for approximately 60.0% of the total Medicare discharges.

Many of the aforementioned factors turned the IRF industry into an attractive sector for a strategic post-acute investor. For acute care systems, collaborating with a post-acute operator can offer significant benefits, including reducing the length of stay and readmission rates, and providing access to clinical and operational best practices. Collectively, these enhancements improve both patient outcomes and financial returns. We have identified several affiliation models for post-acute and IRF unit operators, as well as advantages and disadvantages to consider for each model.

Divestiture

Joint Venture

Joint Operating Agreement

Management Agreement

A post-acute care strategy is vital for acute care providers seeking to elevate patient outcomes while maximizing value to their organization. Forming strategic alliances with post-acute operators in inpatient rehabilitation may be one successful approach. Operators have many avenues to consider whether it is through the sale of an existing inpatient rehabilitation unit, joint venturing with a partner to create a de novo freestanding IRF, or employing a post-acute manager to drive performance in an existing IRF. No matter your path forward, VMG Health experts can provide actionable insights into the value of your existing IRF business and assist with a potential IRF partnership in a model that fits your post-acute strategy.

Sources

  1. ATI Advisory. (2023, February 10). National Medicare FFS Hospital Discharges to SNF and HHA Trending Toward Pre-Pandemic Patterns.
  2. Medpac. (2023). Inpatient rehabilitation facility services. Report to the Congress: Medicare Payment Policy.
  3. Encompass Health Corporation. (2023). Find a location.
  4. Ernest Health. (2023). Our hospitals.
  5. Pam Health. (2023). Inpatient Rehabilitation Hospitals.
  6. Lifepoint Health. (2023). Locations.
  7. Select Medical. (2023). Locations.
Categories: Uncategorized

The Evolution of Telehealth and What’s Next

August 28, 2023

Written by James Tekippe, CFA and Zach Strauss

For those in the healthcare industry, telemedicine has been viewed as a way to increase access to healthcare, while mitigating the challenges of limited resources of physicians and healthcare providers. Although the use of telehealth has steadily grown over the past two decades, the challenges presented by the COVID-19 pandemic supercharged this growth. As the United States and the world move beyond the worst months and years of the pandemic, telemedicine usage will continue to change within the industry. This article will explore the state of telehealth immediately prior to and during the early years of the pandemic to provide context for the question, “What will be the next stage of telemedicine in the U.S. healthcare system?”

Telemedicine Prior to the Pandemic

Prior to the COVID-19 pandemic, many people in the industry believed telemedicine had the potential to make healthcare more accessible, especially for underserved communities. However, in 2016 only 15% of physicians worked in healthcare practices that used telemedicine in any fashion.1 Part of why utilization was low pertained to reimbursement rates. Physicians who utilized telemedicine were not reimbursed at the same level by Medicare as in-person services, and only a limited amount of visit types provided through telemedicine were reimbursable.2,3 In addition, Medicare outlined certain stipulations that allowed providers to use telemedicine for care, including requiring that the provider had a pre-existing relationship with a patient, limiting a provider to only providing services at the practice where they typically provided in-person services, and necessitating the provider was licensed and physically in the same state as the patient being treated.2,4  Finally, the technology used to provide telemedicine had to meet the requirements of the Health Insurance Portability and Accountability Act (HIPAA), which required providers to invest in compliant technology to be able to offer care using telemedicine.5

Changes Spurred on by the Pandemic

During 2020, the COVID-19 pandemic became a catalyst that rapidly changed the direction of telemedicine in the U.S. From February 2020 to February 2021 telehealth claims volumes increasing 38x year over year.6 As the world, began implementing lockdown orders in February and March 2020 to limit the spread of COVID-19, legislators in the U.S. looked for a solution to assist the public in accessing the healthcare system while mitigating the public’s fear of contracting this virus. Various solutions were enacted as part of the CARES Act, which was passed in March 2020. These solutions were aimed at increasing the use of telemedicine by healthcare providers. Through CARES, many of the barriers that previously made it harder for providers to adopt the usage of telemedicine were relaxed. This created an unprecedented opportunity for providers to explore the capacity of this medium of care.

First, Medicare changed reimbursement for telemedicine visits to be the same as in-office visits.3 Additionally, physicians were given the ability to reduce, or even fully waive, the Medicare patient cost-sharing for telehealth services which made telemedicine more attractive to patients.3  The CARES Act also removed location barriers and made it possible for providers to see patients who were in different states from the provider during a visit.2 The CARES Act also allowed healthcare providers to offer more types of visits through telemedicine means, like emergency department visits, remote patient monitoring visits, and check-in visits.2 Additionally, providers who historically were not able to provide care through telemedicine, like occupational therapists and licensed clinical social workers, were able to use telemedicine as an option to treat patients.4 Finally, technology HIPAA requirements were relaxed such to allow more two-way audio-visual options, such as Facetime, Skype, Zoom, and audio-only telephonic services for telemedicine visits. This realty increased the ability for providers to offer this service to their patients.2, 5

Current Legislations Impacting the Future of Telemedicine

As the country moves beyond the public health emergency COVID-19 created, the future of telemedicine will depend on whether = regulations revert back to the pre-COVID state. States across the country, from Washington to New Hampshire to Virginia, are introducing legislation to expand telemedicine beyond the CARES Act.7 Despite different geographical locations and political leanings, states seem to agree about telemedicine’s ability to increase access to healthcare. For example, Oregon has introduced legislation to permanently allow out-of-state physicians and physician assistants to provide specified care to patients in Oregon.7 Texas has proposed legislation that would remove the requirement of being “licensed in this state” from an array of licensing and practice requirements for providers to practice telemedicine in the state.7 Virginia has also proposed legislation that offers a solution for telemedicine service provider groups that employ health care providers licensed by the Commonwealth. The legislations would establish that these groups do not need a service address in the Commonwealth to maintain their eligibility as a Medicaid vendor or provider group.7

At the national level, two active bills, HR 4040 and HR 1110, both contain pro-telemedicine legislation. HR 4040, passed by the House in July of 2022, extended certain Medicare telehealth flexibilities beyond the end of the COVID-19 public health emergency (PHE). The bill would allow for Medicare beneficiaries to continue receiving telehealth services in any location they wish until December 31, 2024, or the end of the PHE, whichever comes later..8 In addition, this legislation would continue to grant other healthcare providers, such as occupational therapists and physical therapists, the freedom to continue practicing telemedicine via the CARES Act.8 Finally, behavioral health services, alongside evaluation/management services, would still be allowed via audio-only technology.8 Within the industry, this bill has seen support, specifically from the American Telemedicine Association and the American Counseling Association.7, 9  

HR 1110 is a report commissioned by Congress with the explicit purpose of expanding access to telehealth services to Medicare and Medicaid beneficiaries.10 Under this legislation, Congress would require that two reports be provided, one by the U.S. Department of Health and Human Services, and the second by the Medicaid and CHIP Payment and Access Commission (MACPAC) and the Medicare Payment Advisory Commission (MedPAC).10 In the report led by HHS, Congress would require HHS to provide a comprehensive list of telehealth services available during the PHE. This report would include details about the types of providers that could supply these services, a comprehensive list of actions the secretary of the HHS took to expand access to telehealth services, and the reasons for these actions.10 Additionally, this report would require a quantitative and qualitative analysis of the previously mentioned telehealth services, specifically calling out data regarding use by rural, minority, elderly, and low-income populations.10

Regarding the MedPAC and MACPAC report, Congress would require an assessment of the improvements or barriers in accessing telehealth services during the PHE. And in addition, the information MedPAC and MACPAC know regarding the increased risk of fraudulent activity that could result due to expanding telehealth services.10 To conclude the report, Congress has asked both MedPAC and MACPAC to provide recommendations for improvements to current telehealth services and expansions of these services, as well as potential approaches for addressing fraudulent activity previously outlined in the report.10 Ultimately, these reports would be vital in shaping future policies around telemedicine to increase access to and improve the effectiveness of telehealth.

The last few years there have been major changes in many aspects of life, including the ways healthcare is delivered. The U.S. was able to tap into the large potential telemedicine has to offer during the worst stages of the pandemic. However, as we move into the future, it will be important for local and federal governments to continue improving the regulations that impact telemedicine to help expand access.

Sources

  1. Kane, C., and Gillis, K. (2018). The Use Of Telemedicine By Physicians: Still The Exception Rather Than The Rule. Health affairs (Project Hope) 37(12) (2018): 1923-1930.
  2. Shaver, J. (2022). The State of Telehealth Before and After the COVID-19 Pandemic. Primary care, 49(4), 517-530.
  3. Centers for Medicare & Medicaid Services. (2020, March 17). Medicare Telemedicine Health Care Provider Fact Sheet.
  4. American Medical Association. (2020, April 27). Cares Act: AMA COVID-19 pandemic telehealth fact sheet.
  5. Weigel, G., Ramaswamy, A., Sobel, L., Salganicoff, A., Cubanski, J., and Freed, M. (2020, May 11). Opportunities and Barriers for Telemedicine in the U.S.. During the COVID-19 Emergency and Beyond. KFF.
  6. Bestsennyy, O., Gilbert, G., Harris, A., and Rost, J. (2021, July 9). Telehealth: A quarter-trillion-dollar post-COVID-19 reality? McKinsey & Company.
  7. ATA Action. (2023, January 18). ATA Action 2023 State Legislative Priorities.
  8. H.R.4040 – 117th Congress (2021-2022): Advancing Telehealth Beyond COVID-19 Act of 2021.
  9. American Counseling Association. (2022). ACA Government Affairs and Public Policy: 2022 Year End Report.
  10. H.R.1110 – 118th Congress (2023-2024): KEEP Telehealth Options Act of 2023. (2023, March 3).
Categories: Uncategorized

How to Measure Acuity-Adjusted Panel Size for Contemporary Provider Compensation Plans

August 7, 2023

By Anthony Domanico, CVA, and Ben Minnis

VMG Health was published in the American Association of Provider Compensation Professionals (AAPCP) 2023 Journal of Provider Compensation. The section, “How to Measure Acuity-Adjusted Panel Size for Contemporary Provider Compensation Plans” was written by VMG Health experts Anthony Domanico and Ben Minnis.

In their section, Domanico and Minnis offer a detailed examination of diverse panel size approaches and important factors to consider when incorporating these metrics into a compensation plan. As organizations take on greater financial responsibilities in payer agreements, it is vital to ensure that incentives harmonize with compensation plans.

About the Publication

The second edition of this journal provides an in-depth analysis of issues such as financial pressures medical groups are facing, optimal timing for adopting a new Medicare Physician Fee Schedule, whether wRVU-based compensation plans remain the guiding principle for employment arrangements, and concerns about the emerging physician shortage. The five articles published in this edition all passed through a rigorous framework to ensure quality analysis.

For additional guidance related to provider compensation design or any other valuation, strategy, or compliance services, our expert Anthony Domanico would be happy to assist. Please email him at anthony.domanico@vmghealth.com to learn more.

Categories: Uncategorized

Physician Burnout and Career Fatigue Part 1: The Growth of Physician Workload and Workplace Violence in Healthcare

August 7, 2023

By James Tekippe, CFA – VMG Health, and Courtney Stokes, JD, MHSA – Kathleen L. DeBruhl & Associates, LLC

The following article was published in the American Bar Association Health Law Section’s eSource.

Prior to the onset of the COVID-19 pandemic, the issue of career fatigue was already a growing concern for physicians and healthcare systems. In 2018, a survey conducted by The Physicians Foundation reported that 31% of physicians indicated they often have feelings of burnout. Fast forward a few years into the pandemic, and in the 2022 edition of this survey, this number has jumped to 62% of respondents indicating that they often have feelings of burnout. This growth in burnout is a major concern as physician burnout negatively impacts physicians’ well-being, decreases the quality of care physicians provide, and contributes to older physicians retiring earlier than anticipated and younger physicians leaving the field altogether. While many of the reasons for these results were present before COVID-19, the pandemic has brought this discussion into new context and importance.

This is the first in a three-part series on physician career fatigue and mental health issues. This article will examine four of the major causes of career fatigue for physicians: administrative burdens, including those created by the advent of electronic health records (EHRs), the increase in violence in the healthcare setting, the continued industry-wide staffing shortages, and the persisting stigma associated with seeking treatment for a mental health condition or substance use disorder. While there are no simple answers or quick fixes for these issues, this article will include a discussion of potential solutions that various stakeholders around the country are adopting in an attempt to positively address physician career fatigue and burnout.

Categories: Uncategorized

Aligning OB/GYNs: Improving Care & Maximizing Reimbursement

August 3, 2023

Written by Haley Condon and Jen Johnson, CFA

The Centers for Medicare and Medicaid Services (CMS) will finalize the rule to establish a “Birthing-Friendly” hospital designation in fall 2023. While the motivation for the designation comes from the White House Blueprint for Addressing the Maternal Health Crisis, it gives hospitals the opportunity to experience a more favorable payor mix in their OB/GYN and laborist programs by improving the quality of care. As a result, we will see hospitals build strategies around incentivizing physicians to help them hit quality targets.

Improving Care

The new designation will be awarded to hospitals that answer “Yes” to both parts of the Maternal Morbidity Structural Measure question. The question focuses on two key points:

  1. The use of quality metrics to measure program performance.
  2. The implementation of safety protocols is based on the performance results compared to the quality metrics [1].

With a maternal morbidity rate that increased to 32.9 deaths per 100,000 live births in 2021, it is no surprise that women are conscious about safety and quality when considering where they will give birth [2].

According to a 2018 report, a large majority of mothers used quality care information to help compare facilities and providers when creating their care plans {3]. Additionally, several websites advise the top things to look for when selecting a birthing facility. These sites list many important factors to consider such as the hospital’s quality of care, C-section rates, clinical excellence in labor and delivery, pain relief choices, NICU and emergency capabilities, high-risk services, and the length of stay after birth [4,5,6,7]. These repeated recommendations to evaluate hospitals based on these topics and their overall quality of care demonstrates that mothers want the best care possible for themselves and their children when giving birth. This data shows that when given the choice women are most likely to select a facility recognized for its maternal and fetal safety.

Maximizing Reimbursement

Obtaining a “Birthing Friendly” designation will draw in both mothers and better-contracted rates. According to a Kaiser Family Foundation study, “private insurers pay nearly double Medicare rates for all hospital services, ranging from 141% to 259% of Medicare rates” [8]. Attracting more patients with private insurers is a step toward increasing collections, which is a welcome strategy as many hospitals experienced significant losses in 2022 [9].

In the eyes of patients with commercial payors, hospitals that obtain a designation for high-quality birthing services can cause them to become ideal birthing destinations. In addition, the “Birthing-Friendly” hospital designation provides hospitals the opportunity to increase the value of their services for their patients while taking a financially viable action. The “Birthing-Friendly” hospital designation allows for an intersection between the quality of care and financial motivations. While seeking the designation might allow hospitals to assist their bottom line, it will also provide access to medical care that prioritizes the safety of the mother and child. The designation will inevitably motivate hospitals to integrate value-based metrics into their physician compensation structures.

While value-based care arrangements do not make up most arrangements in the healthcare industry, they are continuing to rise in prevalence. According to a Deloitte survey, 41% of provider organizations’ overall revenue was tied to value-based models, up from 38% in 2020 [10].

Additionally, a 2022 MGMA survey showed that 81.45% of the single specialty physician practices surveyed participated in commercial value-based programs and 85.80% participated in government value-based programs [11]. The increasing push for value-based payment structures is supported by CMS’ goal to have 100% of Original Medicare beneficiaries, and the majority of Medicaid beneficiaries, in accountable care programs by 2030. The Birthing Safe Hospital designation program provides an opportunity for hospitals to develop strong value-based arrangements in their laborist programs by using the designation’s requirements as a guideline.

Selecting Quality Metrics

When considering a value-based compensation arrangement with their physicians, it is important that hospitals ensure their arrangements are consistent with fair market value. This means they will need to select strong, outcome-driven quality metrics if they want to tie financial incentives to these metrics. Selecting metrics that are recognized in the industry and are measurable is the best way to ensure a compliant, successful physician incentive program.

In order to encourage buy-in, physicians should be a part of the selection process when choosing metrics. They will also need to be educated on what makes a strong metric from a valuation perspective. Once the quality metrics have been selected, an analysis should be conducted to ensure any compensation tied to the metrics is consistent with fair market value. The stronger the metrics, the more support can be provided for higher compensation levels.

Factors that make physician-based quality metrics strong include metrics that are outcomes-based, nationally measured, and physician driven. The major value considerations when assessing these arrangements from a fair market value perspective include market data for similar arrangements, historical performance for the service line, and industry-wide benchmarks. A good starting point when developing a program includes metrics that are the current focus of National Perinatal Quality Improvement Programs and other obstetrics quality improvement initiatives. These programs’ metrics include reducing C-section rates for low-risk pregnancies, reducing induced deliveries before 39 weeks, reducing the use of episiotomy, and increasing the percentage of deliveries that have a postpartum visit between seven and 84 days after delivery [13, 14].

Bottom Line

CMS plans to award the “Birthing Friendly” designation to facilities that demonstrate a “commitment to the delivery of high-quality, safe, and equitable maternity care” [1]. This new designation will impact reimbursement and will inevitably create new strategies for hospitals attempting to align with their OB/GYNs. As with most physician alignment strategies, financial incentives will likely come into play. VMG Health expects to see quality incentives as part of compensation design initiatives, and a proliferation of service line co-management arrangements in the OB/GYN space. Key components in developing a hospital’s strategy around obtaining this designation will include collaborating with physicians, understanding industry-recognized benchmarks, and assessing market data around these types of incentives.

Sources

  1. U.S. Centers for Medicare and Medicaid Services. (2022, August 1). FY 2023 Hospital Inpatient Prospective Payment System (IPPS) and Long Term Care Hospitals (LTCH PPS) Final Rule – CMS-1771-F Maternal Health.
  2. Hoyert, D. L. (2023). Maternal Mortality Rates in the United States, 2021. CDC National Center for Health Statistics.
  3. Sakala, C., Declercq, E.R., Turon, J.M., & Corry, M.P. (2018). Listening to Mothers in California: A Population-Based Survey of Women’s Childbearing Experiences, Full Survey Report. National Partnership for Women & Families.
  4. Dawson, C. (2021, August 3). 6 Things to Consider When Choosing Your Maternity Hospital. Healthgrades.
  5. CentraState Medical Center. 7 Tips for Choosing Your Maternity Hospital.
  6. Esposito, L. & Rowe, A. (2022, December 1). How to Choose a Maternity Hospital. U.S. News & World Report.
  7. Miles, K. (2023, February 16). Choosing a hospital for labor and delivery. Babycenter.
  8. Lopez, E., Neuman, T., Jacobson, G., & Levitt, L. (2020, April 15). How Much More Than Medicare Do Private Insurers Pay? A Review of the Literature. Kaiser Family Foundation.
  9. American Hospital Association. (2022, September 15). Report: Hospitals face worst year financially since start of COVID-19 pandemic, jeopardizing access to patient care.
  10. Bethke, M. J., Drenth, H., Guest, D., Beever, S., & Wagh, M. (2022, September 8). Moving in sync to value-based care. Deloitte Insights.
  11. Medical Group Management Association. (2022). 2022 Practice Operations Survey: Based on 2021 Data.
  12. Fowler, L., Rawal, P., Fogler, S., Waldersen, B., O’Connell, M., & Quinton, J. (2022, November 7). The CMS Innovation Center’s Strategy to Support Person-centered, Value-based Specialty Care. Centers for Medicare & Medicaid Services.
  13. Centers for Disease Control and Prevention. (2023). Perinatal Quality Collaboratives.
  14. HealthKeepers, Inc. HEDIS measure for prenatal and postpartum care.
Categories: Uncategorized

Orthopedic Medical Group Spotlight: Market Drivers and Alignment Opportunities

July 25, 2023

Written by Sydney Richards, CVA, Clinton Flume, CVA, and Patrick Speights

Orthopedics-focused ambulatory surgery centers (ASCs) are one of the fastest-growing segments of ASCs [1]. Orthopedics simplistically is the diagnosis, treatment, prevention, and rehabilitation of musculoskeletal system injuries and diseases. This specialty is evolving quickly to leverage demographic, payor, and technological marketplace shifts. Though the industry is still highly fragmented across the United States, VMG Health continues to see a demand for affiliations with strong orthopedic groups emerging from diverse contexts such as health systems, nationwide ASC operators, and private equity groups. Many orthopedics groups are considering whether now is the right time to pursue an affiliation or acquisition and how much their business could be worth to a potential buyer. Below, VMG Health experts highlight a few of the key trends impacting orthopedics providers in the U.S. We also identify what makes an orthopedics group attractive (Hint: It’s not just about the bottom line).

Compared to other specialties, orthopedics was hit disproportionately hard by the deferment of elective procedures during the COVID-19 pandemic and subsequent labor shortages. Through the second quarter of 2023, many markets have stabilized and recovered to pre-pandemic volumes. Over the next decade, orthopedics providers will continue to face unprecedented demand growth fueled by the aging population. Geriatric patients are naturally more susceptible to injury and disproportionally experience degenerative joint conditions compared to younger populations. As the population age shifts and there are continual technological innovations, people will live and work longer, which will create increased demand.

The population-driven demand for orthopedics services is further exacerbated by innovations and regulatory changes in the industry, such as the migration of inpatient-only procedures to ASC settings. It is estimated that moving total joint replacement cases from hospitals to ASCs lowers the cost of care by approximately 40% while maintaining the same outcomes [2]. As a result of this significant savings opportunity, around the beginning of 2019 [3] many commercial payors began requiring cases to be performed in ASCs rather than hospital surgery departments unless the latter were medically necessary due to complications or comorbidities. Medicare is also increasingly willing to pay for ASC procedures. For example, total knee replacements were approved for ASCs in 2020 and total hips were approved in 2021. Although the reimbursement is lower in an ASC than it would be in a hospital setting, according to VMG Health’s ASC benchmarking analysis, orthopedics cases are the highest-reimbursing cases performed in ASC settings nationally [4]. Many physicians also prefer operating in a specialized ASC setting where they can control the patient experience and operating room setup and earn returns for driving efficiency in expenses and operational metrics. As shown in the data below, in response to these opportunities orthopedics-focused ASCs are among the fastest-growing types of ASCs, along with cardiology and pain management. Nationwide, providers are investing heavily in the equipment and unique buildouts required to specialize in orthopedics, such as 23-hour-stay recovery suites.

Source: MedPAC, 2023

To service the forecasted demand volumes and ensure that capital spent developing orthopedics-focused ASCs is optimized, there is a growing demand for orthopedic medical groups among private equity representatives, ASC operators, and health systems alike. Physicians are also increasingly interested in partnerships. Macroeconomic factors, such as inflation and rising costs of capital, compound the already burdensome administrative challenges facing healthcare providers. Factors such as declining reimbursement, shifts in payment models (fee for service, bundle pricing, value-based care), labor shortages, rising medical supply costs, and retiring providers have boosted physicians’ desires for partnerships. In choosing the most appropriate alignment model for partnership, physicians will be interested in monetizing their business’ equity and structuring their compensation package and strategic partner’s future vision.

Stakeholder alignment with orthopedic groups focuses on several key factors, a few of which are outlined below. While this is not an exhaustive list, the topics below highlight many salient considerations and value drivers for a medical group affiliation:

  • Does the orthopedic medical group have a favorable reputation in the community? Has the practice invested in modern infrastructure to enhance patient care and optimize practice management?
  • What is the medical group’s competitive position in the market? How does the medical group’s reputation and growth trajectory compare to those of their peers? Individually, what are each of the orthopedic physicians’ future outlooks?
  • How do the medical group’s provider base and productivity compare to national benchmarks? Does the medical group leverage mid-level providers? What are the current and projected compensation structures? Are key producers nearing retirement? Post-transaction, what would be the opportunities for key provider income repair if a portion of the earnings were sold forward in a transaction?
  • What complementary ancillary services are provided by the medical group? For example, is there a comprehensive range of orthopedics services, such as a surgery center, imaging, or on-site physical therapy?

Below we have outlined private equity, hospital, health system, and corporate entity stakeholders and the value they may attribute to alignment with orthopedics groups.

Private Equity

Orthopedics is one of the most active segments of the healthcare services industry for private equity investment. Compared to other clinical subspecialties, orthopedics remains highly fragmented across the nation. Moreover, the strong demand discussed above and a growing shortfall [5] of physician supply create highly favorable investment opportunities for private equity platforms seeking to form strategic partnerships with independent orthopedic groups. Below we have included a summary of the trending count of orthopedics-centered private equity deals in recent years.

Health Systems

For many health systems, partnering with orthopedic physician groups provides an opportunity to partially recapture profitable inpatient cases, as they have transitioned to physician-owned ASCs. We have seen numerous care models evolve and expand recently, such as joint ventures with local orthopedics groups to construct de novo, highly specialized orthopedic surgery centers. The benefits of such an arrangement could include the following:

  • Specialized ASCs allow for highly skilled staff and have facilities structured for top-tier patient quality and outcomes
  • Opportunities to create de novo ASCs and realize returns through joint affiliation
  • Physicians capitalizing on health system brands, debt rates, and supply chain efficiencies
  • Partnership with a health system may allow more favorable contracting compared to an independent context

ASC Operators

For ASC operators, orthopedic group partnerships represent an opportunity to gain market share and leverage their existing ASC expertise. The benefits of partnering with ASC operators could include the following:

  • Access to and guidance in operational best practices for ASCs, potentially improving care quality, patient outcomes, and returns
  • Relief of management/administrative burden on providers through access to a strategic partner, for example, recruitment assistance
  • Access to ASC operator debt rates and supply chain efficiencies

The right partnership can provide orthopedics groups with access to resources and expertise to improve their competitive advantage and patient care through the relief of administrative burdens and improved financial stability. Physicians should consider their long-term goals when evaluating potential partnerships and offers. For future stakeholders, including corporate entities, health systems, and/or ASC operators, the potential value of an orthopedics group extends beyond the bottom line of the organization. By joining forces, orthopedics providers and their partners can bridge the gap between expertise and resources. Alignment with the right partner can improve patient outcomes and elevate the standard of care for orthopedic patients at a more efficient cost.

Sources

  1. MedPAC. (March 2023). Ambulatory surgical center services: Status report.
  2. EurekAlert!. (2019, March 14). No increased risk of complications for joint replacement in ambulatory surgery setting. American Association for the Advancement of Science.
  3. Condon, A. (2022, February 7),. Commercial payers driving cases to ASCs; orthopedics most primed for growth. Becker’s ASC Review.
  4. VMG Health. (2023). Intellimarker Multi-Speciality ASC Benchmarking Study.
  5. Merrit Hawkins. (2019). Orthopedic Surgery: Supply, Demand and Recruiting Trends.
  6. PitchBook. (2023, May 9). Q4 2022: Healthcare Services Report.
Categories: Uncategorized

Orthopedic Surgery Documentation Compliance Tips

July 24, 2023

Written by Debra Rossi, CCS, CCS-P, CPC, CPMA

Joint Replacement Surgery

Prior to approving reimbursement for joint replacement surgery, CMS (and most commercial payers) typically require patients to undergo a period of conservative therapy or non-surgical treatments. The purpose of this requirement is to ensure that surgery is considered only when other treatment options have been exhausted or deemed ineffective.

The specific requirements for conservative therapy may include:

  1. Duration of Conservative Therapy: CMS may specify a minimum duration for conservative therapy, typically ranging from three to six months. During this period, patients are expected to undergo and document their participation in various non-surgical treatments aimed at managing joint pain and functional limitations. The duration requirement may vary depending on the specific joint being treated.
  2. Documentation of Non-Surgical Treatments: Providers are required to document the patient’s participation in conservative therapies, such as physical therapy, occupational therapy, use of assistive devices (e.g., canes, braces), weight loss programs, pharmacological interventions (e.g., nonsteroidal anti-inflammatory drugs), and other appropriate interventions. The medical records should reflect the type, frequency, and duration of these treatments.
  3. Lack of Improvement: Documentation should include that the conservative therapies have failed to provide significant or sustained improvement in the patient’s joint pain, activities of daily living, and overall quality of life. This may involve objective measurements, such as range of motion, functional assessments, pain scales, or patient-reported outcomes.
  4. Physician Assessment and Documentation: The surgeon is responsible for evaluating the patient’s response to conservative therapy and documenting the lack of improvement or inadequate response despite adherence to the recommended treatments. The physician should provide a clear clinical rationale for proceeding to joint replacement surgery.

Please note that the requirements outlined in the CMS NCD are specific to Medicare coverage for joint replacement surgeries. Private insurance plans may have their own coverage policies and criteria. Additionally, these requirements may be subject to updates and revisions, so it’s essential to consult the most current CMS guidelines or to seek guidance from the relevant healthcare authorities for the most up-to-date information.

Assistant At Surgery

When a primary surgeon utilizes an assistant at surgery documentation plays a vital role in ensuring proper communication, accountability, and compliance with regulatory requirements.

Documentation elements that a primary surgeon should provide when utilizing an assistant at surgery include:

  1. Surgical procedure documentation should include a detailed description of the surgical procedure provided including the preoperative diagnosis, specific steps taken, techniques employed, instruments used, and any modifications made during the surgery along with the surgical team, anesthesia details, significant findings, and post-operative diagnosis.
  2. Document the identity and credentials of the assistant at surgery. This includes their name, professional title (e.g., physician assistant, nurse practitioner), and any relevant certifications or qualifications. This documentation helps establish the qualifications and authority of the assistant.
  3. The primary surgeon should clearly outline the roles and responsibilities assigned to the assistant during the surgical procedure. This may include specific tasks, such as tissue handling, suturing, retracting, or other support functions. Documenting these roles helps clearly establish the medical necessity for the assistant and allows for supporting documentation needed for payer clarification when reimbursement is questioned.

It’s important to note the specific documentation requirements may differ based on local regulations, facility policies, and the requirements of insurance providers or regulatory bodies. Surgeons should consult the relevant guidelines and protocols specific to their jurisdiction and healthcare facility to ensure compliance with documentation requirements when utilizing an assistant at surgery.

Categories: Uncategorized

Contact the Experts