Becker's Hospital Review

Save the Date: Becker's Hospital Review CEO Strategy Roundtable - Nov. 5, 2014 - Chicago 8 As the Patient Protection and Affordable Care Act unfolds, two things seem to be happening: (1) people are becoming less clear about the benefits of the Act, and (2) the costs and taxes associated with the Act are becoming clearer. And, as providers get less reimbursement, many people are paying more in taxes under the law. Given this, one might wonder if the public mood toward the entire program will be connected (i.e., will people look at the tax increases on investment income and in several other places and equate it to a question of cost benefit analysis of the PPACA?). Further, the biggest potential benefit from the PPACA (for both individuals and the nation's fiscal health) would likely be lower healthcare costs. Yet, lower healthcare costs mean decreased revenues for healthcare providers throughout the country, which could result in layoffs. Will people couple this decrease in spending with increased taxes and be able to understand the accounting? In essence, how do taxes go up and employment and benefits go down? We think this will be interesting to watch play out financially and politically. 2. Hospital mergers Will the FTC's interest in hospital mergers change if one is struggling and a local partner is the obvious choice? More hospitals within the same or neighboring markets are exploring mergers than in the past, when acquisitions and mergers involving a larger system part- nering with a smaller organization in order to gain a foothold in the market were more common. Traditionally, the Federal Trade Commission has been somewhat cautious in challenging such mergers on anticompetitive grounds. In the past few years, however, it has become much more aggressive, having been successful in several high-profile challenges. Most recently, the FTC sued Albany, Ga.-based Phoebe Putney Health System over its $195 million acquisi- tion of Palmyra Park Hospital from the Hospital Authority of Albany Dough- erty County. Last February, the Supreme Court sided with the FTC, and in August, the hospitals announced a settlement with the FTC that would avoid a divestiture. Hospital systems entering into intra-market mergers will have to look at the extent of their market power, the extent to which patients have access to alternative hospitals and providers, and whether payers still have sig- nificant options in providers to assess the likelihood of FTC intervention. What will be interesting to watch play out in the next few years will be whether or not the FTC keeps up its aggressive stance toward these mergers, especially in situations where one hospital is clearly struggling. As the second- or third-tier (or market share) hospitals in many of these towns continue to struggle, the obvious alignment choice for many will be another local hospital. 3. Hospital alignments short of merger Can these partnerships be designed to be mutually beneficial, or will one hospital benefit over the other? Many systems are still looking at alignment models short of a complete merger or acquisition. Here, the parties are looking at independent practice association-type models, accountable care-type models and other arrange- ments amongst providers, whether on the vertical level with practices or side- by-side with other hospitals. These types of arrangements raise interesting antitrust questions as to whether such arrangements have enough clinical and financial integration to withstand claims of price fixing. There are also questions of whether the parties can truly work well together in an aligned strategy short of an acquisition. For example, does one hospital always look to the other hospital and expect that the second hospital will be less impor- tant to it in terms of managed care contracting and every other effort? In essence, is there always a winner or loser, or is there actually a situation in which aligned hospitals can be mutually beneficial to each other? For exam- ple, can the partners be helpful to each other in contract alignment and not perceive one hospital as taking dollars or patients from the other? 4. Rise in qui tam cases Will the growth in qui tam cases affect providers' ability to fully defend themselves? The number of qui tam, or whistle-blower, cases being filed against healthcare providers pursuant to the False Claims Act is growing. In 2008 there were 378 qui tam cases filed, and in 2013 that number soared to 752 cases. The PPACA expanded False Claims Act liability, making it possible for a fraud and abuse, anti- kickback or Stark violation to serve as the basis for a false claims case. It used to be unclear that an anti-kickback claim, for example, could give rise to a false claims case, but now, under PPACA, such actions are actually direct paths to such claims. Additionally, there is an increased frequency in which the government is join- ing qui tam relators in their cases. When the government joins, the chances of collection and the amount of collections by the relator go up significantly. Perhaps as a result of this, there has been a significant increase of attorneys who work solely in this area to drive qui tam cases, in essence creating an industry around qui tam cases. Further, the potential exposure in qui tam cases ($11,000 per claim plus feasible damages) makes it difficult to not settle such cases. 5. Dr. Ezekiel Emanuel questions choice in healthcare Do we really need 5,000 hospitals? In his new book "Reinventing American Healthcare," Ezekiel Emanuel, MD, PhD, former health policy adviser to the Obama administration, makes the statement that there is not a need for 5,000 hospitals in the United States. While he is harsh with his point, he may be right. Unfortunately, any future state with fewer hospi- tals will not come without a lot of pain for many communities across the coun- try. As many small communities look at their hospitals really struggling due to not being able to recruit enough physicians, invest in technology or create the infrastructure necessary to maintain a true inpatient facility, he may in fact be right. However, like Army bases used to be, many of these hospitals are the largest employers in their towns and a hub of the community. Thus, the transition and restructuring of healthcare away from these smaller independent hospitals will mean a lot of pain for communities. 8 of the Most Interesting Developments in Healthcare (continued from cover) Hospital Physician Partners (HPP) is one of the nation's foremost Emergency and Hospitalist Medicine Management companies. Our approach incorporates over 20 years of clinical and operational expertise in Emergency Department and Hospitalist program management and our flexibility and creativity enable customized, integrated and efficient solutions for both hospital leadership and clinicians. If unable to attend, contact Ingrid Bennett Vice President of Business Development 919.395.3956 ibennett@hppartners.com www.hppartners.com To find out more, please stop by and see us at Booth #52. PARTNERING FOR RESULTS

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