This transcript has been auto generated
00;00;00;00 - 00;00;24;10
Jonathan Porter
Welcome to another episode of Husch Blackwell's False Claims Act Insights podcast. I'm your host, Jonathan Porter. In most industries, the way that people are compensated is pretty straight forward. You think about the value that they bring to the business, and that largely governs how compensation works for those who are involved in healthcare. They know that is not the way it works in healthcare.
00;00;24;10 - 00;00;50;08
Jonathan Porter
Healthcare has all of these guardrails up to make sure that only the right productivity measures are being included in deals and physician compensation and other things. And there's a bunch of reasons for all of that. But getting the language right, getting the talking points right when you're doing deals, when you're talking about physician compensation, those are common stumbling blocks that a lot of smart people at our firm think a lot about.
00;00;50;11 - 00;01;12;07
Jonathan Porter
And so what we're going to talk about on the podcast today is that very topic, how we can talk about the financial side of healthcare without crossing any sort of compliance lines. Joining me to talk about that important issue is my law partner, Hal Katz. Hal is a partner in Husch Blackwell's Austin, Texas office. Former ADA Health law section chairman.
00;01;12;13 - 00;01;38;00
Jonathan Porter
Hal and I actually, this is a bit of a special episode because Hal and I tomorrow are going to talk about this very topic at the American Alliance of Orthopedic Executives Conference in Louisville, Kentucky. And so we're picking up on that conference going into a little bit more depth, talking about these really important things, how these topics, how we're talking about healthcare in deals and the financial side of healthcare and deals can result in some compliance problems.
00;01;38;00 - 00;01;45;09
Jonathan Porter
And so how thanks for joining me in Louisville. Thanks for joining me on the podcast for this little bonus episode of the podcast. I appreciate your help.
00;01;45;11 - 00;01;52;23
Hal Katz
Oh, Jonathan. Thank you. You know, it's always my pleasure to join you. You are my favorite podcaster. Just for the record.
00;01;52;26 - 00;02;02;13
Jonathan Porter
I appreciate that, Hal. So, Hal, why don't you set this up for us? Because I think people hear the open and they maybe are a little puzzled. Why does it matter what people put in writing and healthcare deals?
00;02;02;15 - 00;02;25;29
Hal Katz
Great question. Great way to kick us off, Jonathan. Let us frame this as a reminder. There are two standards in business. There's one standard for pretty much every business out there, and that is what makes good financial sense. How do we grow the business? What do we need to do and put that in place? And you're pretty much in good shape.
00;02;26;01 - 00;03;15;01
Hal Katz
There's a separate standard for the healthcare industry, and that's because there's a belief that individuals should not be rewarded financially for the business that they generate. That's the whole kickback for referrals. So we have that whole regulatory scheme both at a federal level and a state level, that we have to be mindful of in healthcare here specifically, we need to make sure that when we set compensation, when we negotiate a purchase price, when we try and grow business for the medical group, the surgery center, the ancillary services that we are doing it in a proper way and we are using words to describe the comp model, the growing, the business strategy and the
00;03;15;01 - 00;03;20;14
Hal Katz
purchase price that comply with those federal and state requirements.
00;03;20;17 - 00;03;41;27
Jonathan Porter
Thanks, Hal. And so, just so our listeners know, when we're talking about the Anti Kickback Statute and the Stark law, which is another prohibition against dollars sort of influencing what physicians do. It's not at all clear. So a lot of laws, you understand what is illegal and what is fine. And the extension Stark law where there's a ton of confusion around them.
00;03;41;27 - 00;04;01;11
Jonathan Porter
And so that's why people like Hal spend their days thinking about how to structure these things in compliant ways. And really, what we talked about here is not necessarily how to structure it in compliant way. It's making sure everyone understands that we're doing this in a compliant way, because sometimes when people don't understand that and they think that perhaps something's going wrong, there are some enforcement problems.
00;04;01;11 - 00;04;24;12
Jonathan Porter
And so let's talk about those. To me, when I think about this issue, there's a spectrum of egregious ness. So on one end you have people who know what they're doing is illegal and they do it anyway. So, for example, there was a criminal case in your neck of the woods, Texas, just a few years ago where physicians owned a hospital with the plan to, quote, buy surgeries, but to cover up those bought surgeries with fake consulting contracts.
00;04;24;13 - 00;04;51;00
Jonathan Porter
That's one end of the spectrum. But on the other end, there's the recent DOJ stark intervention against a Tennessee health system where it appears that there were legitimate efforts to fairly value physician compensation. But the financial team, I guess, didn't fully comprehend the stark implications of how and why things were being structured and the financial team made some statements about the downstream financial benefits of a deal that ended up in a DOJ complaint.
00;04;51;00 - 00;05;05;15
Jonathan Porter
So how what are some best practices for those involved in the physician compensation discussions? How can health systems and physician groups get alignment on deals, and hopefully avoid getting the finance team quoted in a future DOJ False Claims Act compliant?
00;05;05;18 - 00;05;37;07
Hal Katz
So as far as best practices go, the first thing I would recommend is everybody slow down. There should not be a rush to make a change to the comp plan. There should not be a rush just to try and increase productivity at a surgery center. The management team needs to be thoughtful in how they address these issues. If it's around a comp plan change, make sure you have the right experts specialists to identify what changes should be made to the comp plan and how to communicate them.
00;05;37;07 - 00;06;08;16
Hal Katz
Communicate them formally in meetings. Document the discussion in the meeting, what the concern is with the comp plan, what the options are for changing the comp plan, the basis for changing that comp plan and at each stage, making sure that those align with the requirements for compensation methodologies for increasing productivity at the surgery center. But there's no issue with trying to grow the business.
00;06;08;19 - 00;06;21;07
Hal Katz
It's really around how you message growing the business and being more productive. That's really what especially physicians or management teams within physician organizations need to remember.
00;06;21;11 - 00;06;43;13
Jonathan Porter
Yeah, great point, Hal. You mentioned the basis for comp and methodologies for comp. So let's go there next. A decade ago, right on the heels of the big Tuomey trial. And I think a lot of people in healthcare remember the big Tuomey trial. It's the trial that literally ended the health system over Start violations. So right after that, there was another hospital, this one in Florida, that was heading towards a trial against DOJ.
00;06;43;13 - 00;07;02;14
Jonathan Porter
And they saw to me and they said, we don't want that. We'd like to settle this. And so they settled that case. The issue there was the math. The math itself for calculating comp. It included drugs that were sold at the hospital, tests that were run at the hospital, things that you can't base comp on under start, what we call designated health services.
00;07;02;15 - 00;07;27;11
Jonathan Porter
You can't do that understaffed. But in a lot of orthopedic groups, how there's no formula for comp. It can be more of a black box. And when that black box comp gets questioned, there are a bunch of people scrutinizing whether the appropriate metrics were the basis for comp or whether some inappropriate metrics snuck into the comp calculation. So how give our listeners some best practices for thinking about comp when it comes to that?
00;07;27;14 - 00;07;56;09
Hal Katz
Jonathan, first of all, the doctors in the management team have to be very familiar with what can be included when setting a compensation formula. That's number one, because number two, you've got to be able to clearly explain what the payment was for, why that amount for what you were paying, who approved it, and whether it was applied consistently across all physicians.
00;07;56;09 - 00;08;06;06
Hal Katz
I mean, those are some fundamental principles that have to be met when it comes to setting compensation going forward.
00;08;06;08 - 00;08;26;19
Jonathan Porter
Thanks. I'll. Yeah, that's something that I worry about is when you have a black box compensation model and you really can't understand how the numbers work. What's stopping DOJ from coming back with perfect hindsight is 2020 vision saying you can't tell us how the numbers work, but it sure looks to us like people who refer a lot to the ASC.
00;08;26;19 - 00;08;42;04
Jonathan Porter
They're getting a lot more money and the people who don't. And so it looks to us like you're rewarding people for something that is profitable to yourself. That's where I get worried. And so I think it's always good to have a methodology. And so I'm glad that you are just through that a little bit, you know, something that we're not going to cover.
00;08;42;06 - 00;09;08;19
Jonathan Porter
And our ROE talk is the role of private equity investment in healthcare. And I think this dovetails nicely with our topic because when you've got P backing in healthcare, the PE owners or investors, they're thinking a lot about the finances of healthcare. One thing that impacts the finances of healthcare is where downstream referrals go. And so sometimes you hear words in healthcare like leakage or phrases like keeping procedures.
00;09;08;21 - 00;09;20;10
Jonathan Porter
How could you explain why that tension exists in healthcare, and how strong organizations can find ways to talk about financial realities without crossing a compliance line?
00;09;20;13 - 00;09;57;26
Hal Katz
Jonathan, that tension point is real. Where services occur affects the economics. Everybody understands that in private equity is focused on earnings utilization predictability. Even medical groups are thinking about growth access, facility utilization. The issue is not acknowledging that that's not the problem. The issue is how it gets translated into incentives, into compensation, and into language that you use to manage the physicians and the others who are providing the services, generating the revenue.
00;09;58;03 - 00;10;47;06
Hal Katz
That's really the struggle. What we see is for strong groups focusing on capacity, focusing on access, operational efficiency, framing the business issues around those concepts. Those three concepts is where we think successful groups do it right, or how successful groups do it right where it gets. What I would say risky is when the conversation starts to shift into where cases should go, either for ancillary services or facility services, and how those kind of referral patterns result in better returns, or how it improves volumes, how volumes stay within the practice or within the own facility.
00;10;47;12 - 00;11;09;20
Hal Katz
That's where we see the problems arise. Where the language starts to create exposure is really where management has to step in. When physicians are doing their best to talk about these things, but don't appreciate how it has to be talked about and has to be thought about. You know, it's not just talk, it's thought because we're talking about an intent.
00;11;09;23 - 00;11;12;06
Hal Katz
That's a very important role for management.
00;11;12;08 - 00;11;35;13
Jonathan Porter
Thanks, Hal. And that's where I think folks like the orthopedic executives that we're talking to tomorrow. I think that's where they come in, because it's their job to make sure that there are guardrails up, to make sure that the words that people are using are aligned with the intent of the organization. And so that's why I'm glad that we're doing this house, because the words that people use and specifically management of a physician group, that's their job to make sure that the right guardrails are up.
00;11;35;13 - 00;11;58;15
Jonathan Porter
So how let's end with some proactive tips for our listeners. Let's say we've got a listener worried about saying the wrong things, and they want to take some concrete steps today to get on better compliance footing. What can they do, Hal? What are some compliance guardrails that healthcare organizations need to be thinking about and implementing? And why are those compliance guardrails good investments for healthcare organizations?
00;11;58;17 - 00;12;25;29
Hal Katz
Jonathan, I'd say the first most important step is to slow down. Management, leadership, they are overwhelmed with everything on their plate, all of their responsibilities. And often this is just one of many other responsibilities that they're just trying to push through and implement. But this is one area where I would strongly recommend they slow down, and they really think about the things that we've been discussing.
00;12;26;01 - 00;12;55;10
Hal Katz
So when they're formulating that email, when they're having a meeting, discussing a proposed change in compensation methodology, or trying to increase productivity at the surgery center, they don't cut the discussion short by saying, we need more referrals to the surgery center. They need to be thoughtful and frame it the way we've been discussing in order to avoid that risk that they're going to be scrutinized in.
00;12;55;12 - 00;13;25;12
Hal Katz
They're going to be seen as rewarding the owners or the physicians for those referrals. So think about their words, think about their documentation. What are they putting in presentations? What are they putting in their minutes? How's everybody talking about that? I'd say those are my strong recommendations. And pulling in of course, legal counsel when they're making any changes to compensation plans, ownership requirements, I would say those are very important steps.
00;13;25;14 - 00;14;00;27
Hal Katz
Now why is this so important? Well, it is very hard to explain to someone down the road, let's say a regulator or law enforcement, a whistleblower attorney, what was written down in a document. They're going to get a one-dimensional view of what you did based on what they read on paper or what they see in reports. And it's going to be very challenging to tell a different story than what they see produced in those documents.
00;14;00;27 - 00;14;22;00
Hal Katz
And a little bit of front-end thoughtfulness and formality. While that might take more time and maybe a little bit more expense because you're getting some guidance in what you put down, it's going to save a lot of time, stress and expense on the back end. When someone comes in and wants to understand why you did what you did.
00;14;22;02 - 00;14;43;29
Jonathan Porter
Excellent wisdom. Hal thank you for that. I'm sure our listeners are grateful for that ending advice. You know, the thing that people don't realize when enforcers come and look at what your organization has done, they're looking at that with the end in mind. They've got some reason why they are scrutinizing you for your organization. It usually involves some sort of an outlier in something it's trying to figure out.
00;14;43;29 - 00;15;16;06
Jonathan Porter
Did finances cause this? So they look at your documents, they look at your deal documents, your emails, your text messages with an eye towards why did this happen? And that's what people don't understand is there's a reason that we advise clients to get aligned on why we're doing the things that we're doing, so that you can avoid a misperception down the road, because if 99% of the organization's all on the same page and 1% don't get it, and that 1% puts in a text message that you know, hey, this is why we're doing this, DOJ is not going to put the 99% in their complaint.
00;15;16;06 - 00;15;35;09
Jonathan Porter
They're gonna put the 1%, the 1% that helps their case. That's just the way it works. You got to be aligned on this stuff. You gotta be thoughtful about it. You got to know what you're doing and why you're doing it. But your whole organization understand as well. And that's why, Hal, I'm really glad that we're teaming up here to talk about this issue, because I think this really is a big deal in healthcare, totally unlike any other industry.
00;15;35;09 - 00;15;42;15
Jonathan Porter
And so how I appreciate you joining the podcast and joining me in Louisville. This is a good week for healthcare compliance. So how thanks for joining me.
00;15;42;21 - 00;15;45;26
Hal Katz
Thanks for having me, Jonathan, and looking forward to doing this together tomorrow.
00;15;46;02 - 00;16;05;16
Jonathan Porter
To close, the tentacles of the False Claims Act are way, way, way bigger than what a lot of people think. There are some really big Supreme Court cert petitions that are coming up that could change the entire landscape of the False Claims Act. We're going to talk about those on this podcast. False Claims Act enforcement has the potential to like end companies.
00;16;05;19 - 00;16;27;21
Jonathan Porter
It has the potential to change the way that entire industries do business. And so that's why I'm so happy to practice here on Husch Blackwell with people who think about these big, important topics. We're going to continue to bring you the important topics on this podcast and so many others. But to our listeners, we appreciate you listening to us and we'll see you next time.