Question:

Our hospital has a nonprofit subsidiary that employs physicians.  Will Medicare payments to this subsidiary be covered by the new “3-day window rule”?

Answer:

No, as long as the hospital does not completely control the operations of the subsidiary. Under the 3-day window rule, a hospital (or an entity that is “wholly owned” or “wholly operated” by the hospital) must include on the claim for a Medicare beneficiary’s inpatient stay, the diagnoses, procedures, and charges for all outpatient diagnostic services and admission-related outpatient non-diagnostic services that are furnished to the beneficiary during the 3-day payment window. 42 C.F.R. §412.2(c)(5).  Diagnostic services have long been subject to this rule. The current effective date for this rule as it pertains to non-diagnostic services is July 1, 2012.  The key question is whether a subsidiary employing physicians is “wholly owned” or “wholly operated” by the hospital so as to trigger the applicability of the rule.

Medicare regulations, at 42 C.F.R. §412.2(c)(5)(i), provide:

An entity is wholly owned by the hospital if the hospital is the sole owner of the entity.  An entity is wholly operated by a hospital if the hospital has exclusive responsibility for conducting and overseeing the entity’s routine operations, regardless of whether the hospital also has policymaking authority over the entity.

Commentary from CMS issued with the 2012 physician fee schedule program payment policies in the November 28, 2011 Federal Register provided some guidance on how CMS interprets the “wholly owned and wholly operated” provisions of the 3-day window rule.  CMS stated that at the present time, physician practices self-designate whether they are owned or operated by a hospital on the 855B enrollment form filed with Medicare.  76 Fed. Reg. 73285.  These regulations went on to restate guidance from 1998 regulations when the 3-day window rule was first adopted and applied to diagnostic services.  However, this commentary was not particularly helpful in that it simply gave examples of physician practice entities wholly owned by a hospital, which CMS said would be subject to the 3-day window rule, contrasted with a physician practice entity and a hospital both owned by a third corporation, which CMS said would not be subject to the rule.  The commentary never addressed the meaning of “wholly owned” or “wholly operated” beyond parroting the regulations.

The Medicare Claims Processing Manual, CMS Pub. 100-04, §90.7, as amended by Transmittal 2373 (Dec. 21, 2011), also restated the regulations when it purported to give guidance on the meaning of “wholly owned” or “wholly operated,” by saying:  “Wholly owned or wholly operated entities are defined in 42 CFR §412.2; ‘An entity is wholly owned by the hospital if the hospital is the sole owner of the entity.’  And, ‘an entity is wholly operated by a hospital if the hospital has exclusive responsibility for conducting and overseeing the entity’s routine operations, regardless of whether the hospital also has policymaking authority over the entity.'”

Since CMS has never issued any guidance as to the meaning of “wholly owned” or “wholly operated” other than the provisions cited above, these terms are to be interpreted based on their plain meaning. As a nonprofit corporation, the subsidiary in your case is not “owned” by anyone since nonprofit corporations have no owners or shareholders.

Furthermore, the subsidiary would not be “wholly operated” as long as the hospital does not have exclusive responsibility for conducting and overseeing the routine operations of the subsidiary.  As long as the subsidiary has separate staff who are responsible for its day-to-day operations, it would not be considered to be wholly operated by the hospital for the purposes of the 3-day window rule.

Question: Our hospital and MEC members just won summary judgment upholding denial of reappointment to a physician whose behavior was disruptive for years.   This has consumed everyone’s attention for too long.  Our new Vice Chief of Staff suggests developing a Physician-Hospital Compact based on his experience at another hospital. Could this help put this all behind us?

Answer: Many hospitals and physicians have found that the process of working together on developing a Compact has helped the board, management team, physician leaders, and both independent and employed physicians develop better lines of communication and prepare them for the dramatic changes facing organizations today.  Litigation such as you have experienced may not feel much like a victory after years in court.  A Compact can build on the hospital’s mission, vision and values statement to provide a framework for the future, in terms of principles of appropriate behavior that all applicants for appointment and reappointment would sign.  That may help avoid this kind of litigation but, more importantly, foster trust and commitment to common goals.

We think that a carefully crafted Compact is a worthwhile idea, and can help focus efforts to improve care for patients and also improve the process of providing care. A successful Compact must include not just Guiding Principles, but also Action Steps to make them happen.

Join senior partners Linda Haddad and Barbara Blackmond as they discuss the benefits of a Compact, and how to develop one that yields measurable results, at our audio conference on May 22, 2012.

Question: Did The Joint Commission issue a new FAQ regarding the use of non-licensed, non-employee individuals in a hospital, including health care industry representatives?

Yes.  The Joint Commission (“TJC”) issued the new FAQ yesterday.  The FAQ states that TJC has expectations regarding anyone entering a health care organization, and that to maintain patient safety, organizations need to be aware of who is entering, and their purpose.

The FAQ then states that there are additional expectations for non-licensed, non-employees that have a “direct impact on patient care” and uses as examples, health care industry representatives in operating rooms giving guidance to a surgeon, or training staff on equipment use, and surgical assistants brought in by surgeons, then lists these requirements and the Standards and Elements of Performance:

• Taking steps to ensure that patient rights are respected, including communication, dignity, personal privacy (RI.01.01.01, EPs 4, 5, and 7), and privacy of health information (IM.02.01.01, EPs 1 and 2);
• Obtaining informed consent in accordance with organization policy (RI.01.03.01, EPs 1, 2, and 13);
• Implementation of infection control precautions (IC.01.01.01, EP 1);
• Implementation of the patient safety program (LD.04.04.05, EP 1); and
• For non-employees brought into the organization by licensed independent practitioners, there are two additional requirements regarding qualifications and competence of these individuals (HR.01.02.05, EP 7 and HR.01.07.01, EP 5).  (This requirement does not apply to health care industry representatives as they are not under the direction of a licensed independent practitioner.)

The FAQ then notes that these are the minimum Standards, and that an organization may choose to apply other Standards, and/or more stringent requirements.  It concludes by stating that while TJC has received many questions regarding credentialing health care industry representatives, it does not require credentialing of these individuals, but that some professional organizations do recommend specific credentialing requirements for these individuals, and to check www.advamed.org for more information.

(From a Chief Medical Officer who recently attended The Peer Review Clinic)

Question: We are implementing the professional practice evaluation (peer review) process that we learned at The Peer Review Clinic.  I know that you recommend that a Leadership Council perform a “triage” function.  We are concerned that adding this step may slow down the process.  Why not just have the multi-specialty Professional Practice Evaluation Committee (PPEC) serve that function?

Answer:  Here are the reasons why we recommend (and most hospitals we work with include in their professional practice evaluation process) a Leadership Council

1. It keeps all of the top Medical Staff Leaders who serve on the Leadership Council – President of the Medical Staff, Chair of the PPEC, CMO/VPMA and perhaps Credentials Chair – in the loop with regard to the cases that are being reviewed in the process.  Certainly, reports from all Department Chairs regarding cases they have reviewed are sent to the PPEC for its review, but that happens on the “back end.”  Having the Leadership Council triage on the front end helps to prevent cases from going into a “black hole” in the Departments and makes sure that cases are reviewed according to the appropriate procedures (See #2 below).  Could the PPEC serve this function?  Yes, but it is harder to schedule a committee to review and make those initial triage determinations so using the PPEC for that function is likely to hamper rather than expedite the process.
2. Not all cases that are identified for review should go through the peer review process, e.g., cases involving unprofessional conduct or that might involve a practitioner health issue.  Many hospitals are using the Leadership Council to address cases of unprofessional behavior that are identified or referred into the process.  Incidents of unprofessional conduct (or to use the Joint Commission’s latest phrase, “behaviors that undermine a culture of safety”) are usually much better and more consistently addressed through a Medical Staff Code of Conduct Policy with a small group of leaders (such as those on the typical Leadership Council) than by Department Chairs alone or by the PPEC.  Likewise, issues involving a practitioner health issue should be addressed through the Practitioner Health Policy, not through the peer review process.

Some hospitals have all cases go to the Leadership Council for triage and referral to the appropriate review process.  Others have “straightforward” cases involving clinical issues go directly to Department Chairs for review and “administratively complex” cases go to Leadership Council.  The “administratively complex” cases are those involving professional conduct or a possible health issue, those involving the Department Chair, or those where a troubling clinical pattern has developed with a practitioner that has not been resolved through previous interventions.

Certainly, a Leadership Council is not absolutely required.  But most hospitals that have implemented it have found it to significantly enhance the effectiveness and efficiency of the process.

Upcoming dates for The Peer Review Clinic:

• October 4-6, 2012 • Fairmont Scottsdale Princess
• February 7-9, 2013 • Disney Boardwalk
• May 2-4, 2013 • Ritz-Carlton, New Orleans

Question:

Emergency Departments have been volatile places for a time now, so our hospital has had a policy on managing difficult ED patients for a while.  But now our staff is clamoring about disruptive inpatients and visitors, Security wants to post large “no weapons allowed” signs at all access points of the hospital, and searching patients and visitors has been raised.  What kind of policies are hospitals putting into place to try to manage all of this?  And just what the heck is going on?

Answer:

Patient violence and disruption are becoming increasingly common, and scary.  Violence (or the threat of it) has led hospitals to adopt no weapons policies, which include appropriate signage and the searching of patients and visitors, as needed, in the ED.  Disruptive patient policies are becoming more common.  (Disruptive patients are different from violent patients.  Disruptive patients are noncompliant as to hospital rules, respecting staff and personnel, and rules of civility.)   Disruptive family members of patients are not uncommon.  Hospitals have adopted policies concerning the taking of audio recordings, photographs or moving images by cell phone or other handheld devices to prevent visitors from taping the care of patients (for potential use against those providing the care).   In-service programs on defusing violence and/or escalating situations are often held in multiple hospital units, not simply the ED.  Outpatient clinics and practices are dealing with more disruptive patients and visitors.  Physicians are trying to deal with patients who are getting multiple medication prescriptions from multiple providers. (These patients often use multiple pharmacies to prevent discovery of their ruse.)   Physician “firings” of patients because of this behavior are on the rise.  So are firings due to patient noncompliant behavior.

The reasons for all this?  There are many:  enhanced levels of stress (high unemployment and depressed wages); mental instability issues (psychiatric and drug and alcohol-based); societal breakdowns in civil behavior; hospitals as prime spots for emotional distress, outbursts and confrontations; hospitals open 24 hours a day; the list goes on and on.  There is no easy answer to this, nor any one answer.  That’s why we are seeing hospitals adopting more behavioral policies of these kinds (and behavioral patient treatment contracts) to try to manage difficult situations in all parts of the hospital, and with all populations of the hospital.

Question:

Thanks for the clarification a couple of weeks ago on the recent CMS Memorandum (S&C-12-17) regarding providers writing orders for outpatient hospital services.  As a follow-up question, are we required to check excluded provider status or query the National Practitioner Data Bank (“Data Bank”) for these ordering practitioners who do not hold clinical privileges at our hospital?

Answer:

The CMS Memorandum does not specifically require a hospital to check excluded provider status or query the Data Bank for these practitioners.  However, a hospital is required to develop a policy that describes how it will handle these practitioners.

Even though not required by the CMS Memorandum, a hospital may want to check excluded provider status.  Many of the outpatient services these practitioners may order may be an item or service that is paid for in whole or in part by a federal health care program.  If the practitioner is excluded, the hospital would be subject to denial of payment and possible civil monetary penalties.

Since the ordering practitioners are not being granted clinical privileges, there is no requirement to query the Data Bank.  If a hospital decides that it does want a Data Bank report, it could require the practitioner to self-query.

QUESTION:

Can our hospital’s Institutional Review Board (“IRB”) be structured like and function as a medical staff committee?

ANSWER:

No.  The federal Food and Drug Administration regulations pertaining to IRBs, 21 C.F.R. §56.101 et seq., define an IRB as “any board, committee, or other group formally designated by an institution to review, to approve the initiation of and to conduct periodic review of biomedical research involving human subjects.”  The Department of Health and Human Services’ regulations echo the “institutional” aspect of the formal designation of IRBs (45 C.F.R. Part 46).  Federal regulations require the IRB to be a committee formally designated by a hospital’s Governing Board to review biomedical research involving human subjects at the hospital.

Therefore, we recommend that the IRB be created by a Board resolution and thereafter function as a committee of the hospital, rather than the medical staff, with its independent authority derived from the Board.  For this reason, a medical staff committee should not act as the IRB.  There may be substantial overlap of the IRB membership with those of a medical staff committee.  However, the IRB should be constituted as a separate committee of the Board in accordance with the membership requirements set forth in the federal regulations.

Question: Why does Horty Springer always schedule its audio conferences during clinic hours?  It is very difficult for a busy physician to carve out these blocks of time.  How about 11:30 or noon?

Answer: We get this question a lot, so we thought we’d take a minute to address it, as we have always struggled to find a time that works best for all.  The problem is that we serve physicians and hospitals in five different time zones!  This makes it difficult – if not impossible – for us to find a time that is convenient for all, or even most.

But don’t be discouraged!  We appreciate your interest in our programs and this is why we make all of our audio conferences available on CD and MP3.  This provides even the busiest professional the opportunity to listen at his or her convenience.

 

Check out our library of past titles on our new website (yes, we really do want to show it off!) or keep an eye out for upcoming audio conferences coming to an iPod near you!

Question:

Like most hospitals, we’re employing more and more physicians.  We’ve been struggling with how to conduct peer review of these employed physicians.  Should we use the Medical Staff peer review process, or should we address concerns via the employment contract using the Human Resources process?

Answer:

Many hospitals are struggling with this question.  Ideally, the Medical Staff and HR processes can be integrated to take advantage of the unique advantages of each.  It would be impossible to address this question fully in this limited space, but here are some general thoughts.

We recommend that once a concern about an employed physician is logged in to the hospital’s central repository (you do have a central repository, right?), the person or entity responsible for employment decisions be notified.  This may be a hospital-affiliated physician group, or it may be the HR department within the hospital.  (We’ll refer to this person or entity as the “employer.”)

The content of this notification has to take into account the state’s peer review law.  Some states permit the free flow of information among peer review entities, while other state laws do not address this topic.  Where it is not clear that state law permits the sharing of peer review information, one option is for the employer to be notified that a concern has been raised without providing copies of documentation.

Once the employer has been notified that a concern exists, it can choose to review the matter itself or it can ask that the matter be reviewed via the Medical Staff process.  Presumably, employers will be more likely to deal with behavioral concerns on their own, while they may be more likely to defer to the Medical Staff process to review clinical issues.

If the employer does review the matter on its own, it must notify the Medical Staff process of its resolution of an issue.  Importantly, if those responsible for the Medical Staff process are unhappy with the employer’s resolution of a concern, they have the authority to review the matter independently via the Medical Staff process.

If the employer asks the Medical Staff to review an issue, the employer can be kept in the loop by having the person responsible for employment decisions (or a designee) take part in the Medical Staff’s review of the issue (this may be the VPMA or the physician in charge of the hospital-affiliated group).  This is perhaps the safest approach to protect the peer review privilege, depending on state law.  If at any point during this process the employer concludes that the physician’s employment should be terminated, the employer may do so (subject to the procedures set forth in the employment contract).

There are numerous other factors that must be considered, such as whether the physician’s contract has an “incident and coterminous” provision, whether it has a “no cause” termination provision, whether litigation is likely if a physician is terminated, and so on.  But the key point is that it is possible to integrate and coordinate the Medical Staff and HR processes.

For more information on these issues, please join us in Chicago on April 12-14 for The Peer Review Clinic.  Mornings will be devoted to discussions of how hospitals can design a more effective peer review process, while afternoons are free to let you explore all the museums, parks and other attractions of Chicago. 

Question: We were confused by a recent CMS Transmittal that seems to indicate that all providers writing orders for hospital outpatient services (i.e, rehabilitation and respiratory care) must be privileged by the hospital. This requirement would create huge headaches for us and our patients. Can you clarify CMS’s position on this issue?

Answer:

This issue has been on the minds of many, ever since CMS published Transmittal 72 back in November.  It stated that certain hospital outpatient services could only be ordered by practitioners who had been granted clinical privileges to do so.

This set off a firestorm in the provider community.  Hospitals pointed out that Transmittal 72 created a huge problem for community physicians (i.e., those without hospital privileges) and for physicians whose patients travel out of town or, worse yet, out of state.

Fortunately, CMS issued a new memorandum on February 17, 2012 clarifying its position and updating its original guidance.  In the new memorandum, CMS makes it clear that outpatient services in hospitals may be ordered by a practitioner who is:

• responsible for the care of the patient;
• appropriately licensed;
• acting within his/her scope of practice under state law; and
• authorized by the medical staff to order the applicable outpatient services in accordance with hospital policy.

However, the practitioner is not required to hold medical staff privileges at the hospital under this new superseding guidance.

Did you notice the number of cases in this week’s HLE that involved employed physicians?  We did!  Join Linda Haddad, Henry Casale and Charlie Chulack to learn more – “Integrating Employed Physicians into the Health System of the Future,” April 12?14 at the Fairmont, Chicago.