Partner Alignment

Adam Rubenfire: Hello and welcome. I'm Adam Rubenfire, Modern Healthcare's Custom Content Strategist. And it is my pleasure to welcome you back to Reimagining Care: COVID-19 Action Steps, a video series sponsored by Hall Render. In today's video Part 4 Partner Alignment, we'll discuss how leaders can align physicians with COVID-19 priorities and address the significant surge virtual care demand. We'd like to thank our sponsor, Hall Render, the nation's largest healthcare focused law firm. Now I'm thrilled to introduce our guests for today, Bill Thompson and Chris Eades. Bill is the chairman of the firm. He concentrates his practice on complex transactional matters, assisting clients with a wide range of deal structures. Chris is a shareholder and focuses his national practice in the areas of virtual care and medical staff governance. Bill and Chris, thank you for joining us today.

Bill Thompson: Thanks Adam.

Chris Eades: Thanks Adam for having us.

Bill Thompson: Great to be with you.

Adam Rubenfire: Excellent, well, Bill, we're going to start with you. Bill, let's discuss how COVID-19 will affect physician employment and its impact on physician compensation. Can you talk to that?

Bill Thompson: I can. That's a really important issue for our health systems and particularly for the employed physician basis. As you know, now over 50% of the physician workforce is employed by a hospital or a health system. And what we've seen is it may have taken a pandemic for some of the benefits of employment to actually be realized. We've seen a number of our hospitals and health systems move to protect the incomes and the compensation of their employed physician basis. And that's even in light of significant decreases in volume, significant decreases in productivity, but the systems are holding steady on the physician income. So I think it's been a real benefit to those physician groups on the employment side of things.

Bill Thompson: As you know, almost all physician compensation systems have some sort of productivity base to them, whether it be work RVUs and mostly work RVUs. And it's going to be really difficult for a lot of these physicians to be able to hit the productivity targets that are part of their compensation model. And as volume slowly creep back, I still think that the productivity is not going to nearly rise to the level of what's required under some of the employment agreements. So many of our hospitals and health systems have kind of moved to so-called normalize if you will, the productivity and smooth that out in a really, in an effort to try to protect and keep whole the physician's compensation. And so that's been a really a big benefit for them. Some of the systems have agreed not to go below kind of a base salary, even though the productivity bonus might not be awarded, but the base salary will be honored and not cut. So that's a good thing.

Bill Thompson: And then on top of that, some of our health systems have paid hazard pay, particularly for some of the critical care specialists. Some of the other intensivists that are really working hard and working long shifts in really tough conditions. And so on top of keeping compensation based compensation whole, there's also some shift pay that has been paid. In normal days, if we did that, we'd probably run into some compliance problems under the Stark Law, but thankfully the Stark waivers have really helped us in this area. We're able to protect some of the employed physicians income through so-called COVID-19 purposes that illuminated under the proposed or the start waivers themselves. Maybe just keeping enough physicians in town to serve the community is one of those purposes, justifies the payment of compensation when it may not have otherwise been earned and in other times that could run into compliance issues. So we continue to secure the coverage that we need and make the physicians whole. So, yes, I think in some, the hospitals are really trying hard to keep their employed physicians at the compensation that was set regardless of the pandemic.

Bill Thompson: Now, I will say on the other hand, there are certain hospitals and health systems. These are particularly maybe rural hospitals, maybe some smaller hospitals that have been forced to take cuts to their physician employment compensation. Some of these cuts are to the base salary. Some of them are not paying any productivity or some of these are just actually furloughs even of some of the physicians. These have been a little tricky because usually there's an employment agreement in place. And that creates a binding obligation to make payment to the physicians regardless. And we've seen some of these forced measure clauses in these arrangements come into play as to whether or not the hospital or health system really has the right to unilaterally reduce maybe guaranteed base compensation.

Bill Thompson: But for the most part, I think it's gone pretty easily with these physicians. There hasn't been that much litigation, if you will, or pushback. We've seen often where the physicians are voluntarily taking pay cuts, particularly when hospital physician leadership are also taking pay cuts. The physicians are seeing some of the staff being furloughed, and they understand the difficult position that our health systems are in financially and are willing voluntarily to take some of those cuts. But I think now that some of the volumes are starting to return, we're really returning to coming back at least to close to normal compensation.

Bill Thompson: I'll end with one kind of area here that will be interesting, a bit of a side issue is how will these kind of cuts in payment and drops in productivity, how will they affect some of the survey data that is out there? The MGMA survey data, SullivanCotter, the other survey physician compensation survey data that's used to set fair market value compensation. We'll just have to wait and see. It may be a blip, but it may really actually take an asterisk for the 2020 data. It will be interesting to see.

Adam Rubenfire: Excellent, thanks Bill. So we know that it's been a significant challenge for health systems, large systems to overcome COVID-19 challenges. So what about much smaller, independent physician practices? What has this been like for them and what are you hearing?

Bill Thompson: Yeah, it's been a real struggle for sure. We've heard the dire statistics. I think it's the MGMA study in April that said 97% of physician practices have received a drop of 55% or more in their revenues. That was on top of an AHA study that talked about the drop in outpatient volumes at hospitals of 35% or more. Those statistics are staggering and they really have adversely impacted the independent physician practices. Many of the hardest hit practices are some of the proceduralists, the surgeons like orthopedic surgeons, GI docs and the primary care docs certainly have not escaped the really difficult position that they've been put in.

Bill Thompson: The dilemma here as always with physician practices is that they operate on very low cash reserves. And so they're just not able to whether financially a downturn like created by the pandemic. Some of them were able to access some of the government relief funds. Those might've been the SBA loan. It might've been the paycheck protection program. Others probably maximize their lines of credit, but that still hasn't been enough for a number of the independent practices. They've had to furlough staff, furlough some of their physicians, take some pay cuts. All in an effort to try to stay open. Interesting, they just weren't easily able to pivot to virtual care as a way to bring in additional income. Many of the practices just haven't invested resources yet in a virtual platform. And in even if they have, some of their patients really aren't used to virtual care and are reluctant to access their primary care doctor through virtual care.

Bill Thompson: So while the volumes are continuing to return slowly, these practices just, they can't undo the financial harm. And fast enough really. I just don't know that many of them are going to really thrive or survive. As you look ahead, there's going to be an increase in uninsured patients as a result of the pandemic, their revenue cycle is going to be elongated because of slower pay. There'll be a depletion of cash reserves and additional debt that the physicians have taken on. So the independent practices are in a tough spot, particularly the smaller ones.

Adam Rubenfire: Excellent. So Bill, can you talk about then physician practice acquisitions and other physician hospital health system alignment strategies that are emerging as a result of those challenges and the pandemic in general? What are you seeing in the market?

Bill Thompson: Yes. We're seeing a lot of movement in the market and just for the reasons that we just talked about in terms of these practices, independent practices struggling, not only have they been harmed financially, but really it's the delivery system is changing on them. And virtual care has a cost, as we said, to try to establish those platforms. And it's very difficult. It's not easily done on a quick basis. So those types of issues are even weighing them down further. So some of our practices are rethinking their business model, really rethinking whether independence is possible. Not that they don't want to remain independent. The question is is can they remain independent? And they're seeking more certainty, probably mostly more financial certainty because financial certainty provides for longevity. And I think some of the independent practices are really thinking about the longevity of their practice on a status quo basis.

Bill Thompson: At the same time, what we're seeing is there's a fair amount of investment capital on the street. And that's so called dry powder, if you will. Most of that is held by a lot of the larger national systems, but some of the stronger regional systems have a fair amount of investment capital that they're ready to deploy. So there's a bit of a buyer's market out there right now. And we're counseling our hospital health system clients to really think hard about what their alignment strategy is right now. Of course, that might be an acquisition strategy. That might be a value based strategy. That might be a contractual strategy, joint ventures with their physicians or all of the above and probably more. The point is is that there are opportunities right now. And I think, well, no one size fits all in any market. I think the hospitals and health systems need to be close to their independent practices and see what they need and see if there's a fit, if there's a way to come together and assure the longevity of that practice.

Bill Thompson: I also think in these discussions, our health systems have to have some flexibility. These independent practices are somewhat reluctant sellers, reluctant partners, if you will. They've been fiercely independent. And the last thing they want to do is give up that independence. And so, as you think through some of the models that you may be offering too, the alignment models offering too, some of the independence in the market, think about ways that they may be able to get out if they don't like it. They may not necessarily be subject to a covenant not to compete if they're only employed for a year or less. But ideas that will make these physicians, these fiercely independent physicians feel more comfortable about their decision to potentially join or partner with a health system that they have otherwise not thought about before.

Adam Rubenfire: Excellent. So Bill, will this pandemic accelerate people's desire to take on risk, leaders to have more payment certainty?

Bill Thompson: I think it will. It's been 10 years or more since the Affordable Care Act's promise of value based payment models in the demise of fee for service. But we know that really hasn't come to fruition. I think there's still only probably 20% of total provider revenues at risk in any one time. So we're still dependent on fee for service, or a lot of the systems are dependent on fee for service. But what we've seen is those that are less dependent on fee for service have weathered the storm, the pandemic storm better. These are particularly some of the larger vertically integrated systems that might have a health plan as part of their system that are able to take risk that are getting particularly capitated payments, that they may have been getting capitated payments through the pandemic really without having to spend much because nobody was really seeking care at that point in time.

Bill Thompson: An interesting side like though, is that there's a lot of pent up demand right now, and there's been a lot of patients holding back on their care. At some point that's probably going to let loose and those patients are going to enter the system. And if you're capitated, you're going to have to take care of those patients who may be sicker at that point in time. But overall, I think we can say that those that were on less of a fee for service model probably are doing better and did better through the pandemic. I think there's no doubt that this experience is going to accelerate the movement to volume based payment models. We've seen that the fee for services is probably not the best model and the market is starting to demand particularly much more consumerism is taking place, demanding more settings of care outside of the hospital, lower cost settings like ambulatory surgery centers, urgent care centers, hospital at home is a big one now. A number of alternative settings, different from the hospital that really have a higher value for the dollar that's being paid.

Bill Thompson: I think there's going to be no doubt, some regulatory hurdles to all of that. We all know that the healthcare system is one of the most highly regulated systems in the country. A lot of these regulations are getting in the way of movement to value based payment models, but to CMS's credit, they realize that, and they are starting to try to move away and eliminate if you will some of the regulatory hurdles. Just one example is the Stark regulations that propose changes to the Stark regulations that will really help enable a lot of these value based arrangements where we're able to pay physicians in a different way for value based models than we are today, because today's payment may trip the Stark statute. And so those regulations are at OMB right now. They're really making their way through the system. Hopefully, they'll be on the street sometime very soon. So yes, at the end, I think this experience is going to accelerate the movement to value based models.

Adam Rubenfire: Excellent. Thank you so much, Bill. Chris, I want to move on to you and ask you some questions about virtual care. There's just been an incredible surge with COVID-19. In many cases, health systems and practices have had to make this dramatic shift in a matter of days that it's just a new normal. What did that look like among the executives that you've talked to?

Chris Eades: Yeah. Hi Adam. I think the word incredible is the right word. We've seen a massive growth in the virtual care space in really a very short period of time. Two reasons for that, right? I mean, the first is more obvious in terms of necessity. By its very nature, virtual care allows for distance between providers and patients. And that's really been critical in terms of reducing the risk of COVID-19 transmission. But secondly, and very importantly, we have seen incredible relaxation of many of the traditional barriers to virtual care. Pre-COVID-19 reimbursement for virtual care services was highly limited. In terms of professional practice barriers, many obstacles to navigate in this realm. Really, for many years at this point, virtual care stakeholders have been working to address those barriers, but really the period of emergency has forced that issue. And that's because of the necessity, right?

Chris Eades: So at this point through and very early on in the pandemic through various federal and state emergency orders, waivers, exceptions, enforcement discretion, we've seen a significant relaxation of those barriers. That relaxation of those barriers has really fostered the surge that we all recognize has happened. We've also seen some recent studies that have actually quantified the surge, probably most notably HHS issued a study or a report at the end of this past July.

Chris Eades: And that study found that among fee for service primary care providers, there had been almost a 50% increase in the use of telehealth at the height of the pandemic, so a significant increase. Notably that study also found that there had been a more significant increase in the urban setting, as opposed to the rural setting. That's not unexpected, but it also illustrates the impact of some of these barriers, most notably Medicare. So a traditional Medicare barrier are the originating site restrictions in terms of where a patient can be located to receive services. And typically pre COVID-19 that did not include, except for a few exceptions, did not include an urban setting, did not include the patient's home. So with the lifting of those restrictions, we've seen increased usage in those areas as well.

Chris Eades: And then lastly, that study also found by virtue of interviews and surveys done with various practitioners that those practitioners anticipate seeing nearly a 20% increase in their use of telehealth technology post pandemic. So these studies have not only confirmed the surge in virtual care, but also established that practitioners anticipate continuing to use virtual care, even post pandemic.

Adam Rubenfire: Excellent. Thanks. So Chris, is this trend sustainable? And if so, what are systems doing to prepare for this to be the new normal?

Chris Eades: Sure. Adam, there's no doubt in my mind that we're going to continue to see growth in virtual care. The potential advantages are just too significant. And really at this point, more obvious. Many providers and patients have now experienced virtual care. And there may be some hesitation among providers and patients, but by and large, I think there's a lot of recognition of these potential benefits. Folks have actually realized some of these benefits. And it's why we hear key leaders in DC very publicly stating that the genie's really out of the bottle on this issue. So we're going to continue to see growth in this area. The real question is how much growth? And I think that's going to turn in large part on the extent to which these COVID-19 specific virtual care waivers and exceptions are made permanent. And so when that happens and to what extent certainly remains to be seen. That will bear on short term and long term growth of virtual care post pandemic.

Chris Eades: In terms of the second question, what are systems doing to really enhance virtual care? I would say early in the pandemic providers were all over the map and that was because many providers, if not most, and in some cases, very large, sophisticated healthcare systems really hadn't engaged in a whole lot of virtual care. And so it was a matter of ramping up nearly overnight and arriving at a short term solution that would allow for virtual care. The conversation that we're having with providers and the providers are having with themselves has shifted. The conversation is now more about what's our plan post pandemic. And again, there are lots of questions that remain unanswered in terms of what kind of permanent change, if any, we will see, but there's also a host of a host of considerations that providers are now engaging in to advance tele-health irrespective. And that really starts with a discussion around where does it make the most sense to plug virtual care into the existing care delivery model, right?

Chris Eades: Virtual care is a really multifunctional tool, can be used in a lot of different ways. Where does it make sense to plug it in? On that note, we're seeing an uptick in the creation of telehealth leadership positions or roles, really identifying a person or persons that can spearhead this effort and help drive it forward in a more organized and deliberate way. Technology, right? Early in the pandemic, we have exceptions allowing for the use of non HIPPA compliant technology, but now the conversation is more about, okay, what's our longterm solution here? We need to find a technology that's HIPAA compliant, it's regulatory compliant, it's practical. It will do what we needed to do. It'll work well with our EMR. Practitioners will be able to easily use it. Patients will be able to easily navigate it. So a lot of conversation about that piece now.

Chris Eades: And then I think finally, the professional practice considerations. So again, early in the pandemic, it was, let's take advantage of the exceptions. Let's do what we need to do overnight to render patient care. Now there's more of an emphasis on let's understand what the rules of the game, so to speak, are from a professional practice standpoint pre-pandemic, and then perhaps likely post pandemic. And then let's construct virtual care policies and procedures and workflows that really incorporate those requirements. And not just for regulatory compliance reasons, but importantly, to incorporate best practices in terms of how these providers are going to do virtual care. So those are the kinds of discussions that we're hearing at this point in terms of advancing the ball post-pandemic.

Adam Rubenfire: Excellent. So Chris, can you get into those challenges a little bit more? So credentialing, licensing, other tasks needed to scale up clinician capabilities, virtual care, because this is obviously a challenge, period, but I can't imagine what it's like for systems that are increasingly between states and regions with different regulations.

Chris Eades: Yeah. And as I mentioned, there have traditionally been and technically remain very significant barriers to implementing virtual care. The first thing that it's important to recognize is that the regulatory backdrop here is very complex. And it's very complex mainly because of the inconsistency and variability. Variability, for example, among states or within states, even. So at this point in time, still no two states tackle virtual care in the same way. Minimally, there are subtle differences, but quite often there are really dramatic differences in terms of how states approach virtual care. That's significant if you're going to see patients across state lines, which is often the case. But then even within States, we see a lot of inconsistency and variability. Professional practice boards at this point are approaching virtual care in different ways. The rules of the game for a physician are often different than the rules of the game for maybe a psychologist.

Chris Eades: In addition to that, we see variability between what the professional practice boards have to say in terms of their rules, their guidance, and maybe what the telemedicine statute says. Sometimes that's because one or both are stale at this point in time. In addition to that, we see inconsistency among what the payer rules are, perhaps the state Medicaid rules for virtual care in relation to the professional practice standards. So all of this variability and all of this confusion right out of the gate creates a hurdle for virtual care providers to navigate.

Chris Eades: In terms of the barriers themselves, as I've mentioned, reimbursement has been quite limited from the standpoint of Medicare, Medicaid, commercial payers. So that's a significant limitation that has effectively been a barrier. From a professional practice standpoint, it starts with licensure. Except for a few limited exceptions, to the extent you're going to be treating patients in different states via virtual care, you have to be licensed in those States. So if you're planning to practice in all 50 states, potentially you may need to be licensed in all 50 states. You have to navigate the professional liability requirements. What are those coverage requirements? Do you have coverage and do you have enough coverage state to state to render those services?

Chris Eades: Scope of practice is a big one. When we're talking about virtual care quite often, and I would say even more often than not at this point, we're not talking about physicians rendering care so much as maybe APRNs or PAs or physical therapists, maybe as genetic counselors, et cetera. The scope of practice rules are quite different state to state. Many of them still don't even contemplate the practice, a virtual care. And then technology. Technology is a big challenge, and Bill alluded to this. It's a matter of what is our solution? Will it work? Who will maintain it? Is it licensed appropriately? And who's going to pay for it? There's a cost of entry here, and it's not just as simple as choosing who's going to pay for it because we've got to consider this against the applicable regulatory backdrop as well. So lots of barriers out there and is why we're so anxious to see what type of permanent change we see out of Washington, DC and at the state level over the course of the pandemic.

Adam Rubenfire: So then Chris, how does that all factor in the value based care equation? What changes?

Chris Eades: Well, I think it's important to recognize, particularly as the states, particularly as we have these discussions in DC, in terms of what type of permanent change we should see, we should recognize that virtual care fits nicely with value based care. The potential advantages just line up quite well. And I think it starts with patient access. One of the key benefits of virtual care is the ability to connect a patient to the type of practitioner that patient needs at that time, right? Absent virtual care. It's quite often the case that there's an inability to do that. Even before COVID-19, and even with some of the Medicare originating site exceptions, we've seen that.

Chris Eades: Telestroke would be one example, a patient shows up to an ED, perhaps a rural ED, stroke like symptoms, a there's the ability to connect that patient, that ED physician with the specialist to exchange a lot of real time information and get that patient the treatment that patient needs and direct that patient appropriately. And you can think of all sorts of examples across the board where that type of access really will foster what we're trying to accomplish with value based care, in terms of more efficient coordination, improved quality, improved outcomes.

Chris Eades: In terms of practitioner coordination, virtual care allows practitioners, whether they're sharing care for a patient, or whether it's one practitioner consulting another, again, the opportunity to more easily connect and share real time data regarding a patient. In terms of chronic care management, lots of opportunity there, whether it's through remote patient monitoring or other types of modality. Here too, even before COVID-19, we've seen this with end stage renal disease. More recently, we've seen changes relevant to home health, but all sorts of opportunity to provide a more convenient way to manage these patients when they're at home. We see the same thing with postsurgical followup, physical therapy, speech therapy, et cetera. So I think the two line up well, the real question becomes what type of permanent change will we see and will it really allow providers to maximize use of virtual care to foster value based care?

Adam Rubenfire: Excellent. So, Chris, as we wrap up what hospitals and healthcare providers be considering if they intend to develop or expand virtual care services?

Chris Eades: Well, I think at this point, providers need to be very deliberate, right? Early in the pandemic, again, it was a matter of just doing what was needed to ramp up very quickly. And there wasn't a whole lot of time to map this out. But as the conversation has shifted, we do have that opportunity now. And I think it's very important to provide a roadmap, and whether it's a new virtual care service where we're expanding a service. In our discussions with providers, we start with, why are you wanting to engage in virtual care or expand virtual care? What potential advantage are you seeking here? Is it reimbursement? Is it expansion of service? Or maybe it's not that. And it's some other operational efficiency or maybe it's a convenience for patients, convenience for practitioners, maybe it's because it's the hospital down the streets also doing this, and we want to do it as well, but it's really important to nail down why you're getting into virtual care because of all of these barriers. If you jump in to quickly and haven't done that analysis, you may end up finding that you can't realize that advantage.

Chris Eades: Secondly, what services are you going to provide? In an area where there are very few universal truths, one is that you need to be able to meet the same standard of care that would be applicable to in-person treatment. If you can't do that, then you shouldn't be rendering that service through virtual care to begin with. And then next, what providers are going to actually render the virtual care? Are we talking physicians? Are we talking PAs, APRNs, et cetera? As I mentioned previously, we need to consider those scope of practice rules, collaboration requirements, supervision requirements. We also need to nail down what's our connection with those providers? Do we employ them? Are they on our medical staff? Do we have a contract with them? What will our connection be? Both to facilitate the service, but also to do so in a way that is compliant with the relevant regulations. Where will these providers be located? In our state, somewhere else? Again, that's significant from a licensure standpoint, from a professional liability standpoint, also potentially from a payer enrollment standpoint.

Chris Eades: And then importantly, where will the patients be located? Are we doing this in our home state? Are we going to do this in three states? Are we doing it in 50 states? That will dictate what log meaning we need to pay attention to before we jump in. Technology, I've touched on, who's going to provide it? Who's going to maintain it? Will it work well with our EMR or record keeping practices?

Chris Eades: And then last but not least reimbursement. If reimbursement is important to us, and it usually is, will Medicare pay for this? Will Medicaid pay for this? Will the commercial payers pay for this? And those answers can be wildly different depending upon the payer, depending upon the type of provider and depending upon the type of service. And also state to state along the lines of commercial payers, we have high variability in terms of parody rules. These statutes that may require commercial payers to pay for these types of services and the extent to which they do so. So there's a lot to consider, but I think the point here is you need to be very deliberate in terms of considering this and mapping these issues out at this point before you jump in.

Adam Rubenfire: Thank you, Chris. Well, that brings us to the end of our conversation today. Thank you again, Bill and Chris for joining us with a great conversation. And thank you to our sponsor Hall Render. To learn more about Hall Render, please visit hallrender.com. To our audience, thank you so much for joining us for the final episode in our four part series. It has been amazing to hear from so many knowledgeable guests. If you haven't seen our other three videos on COVID-19 preparedness, financial strategies, operations, please check them out on Modern Healthcare's Facebook page or at modernhealthcare.com.

Adam Rubenfire: Thank you for joining us.