Office of Inspector General ruling puts common fee arrangement in question
PPMCs: Not dead yet, but facing major changes
An April 15 Office of the Inspector General (OIG) ruling will change the way physician practice management companies (PPMCs) do business because of the restrictions the arrangement places on financial incentives between physician practices and practice management companies they contract with.
Although the ruling is by no means a death knell to the PPMC industry, smart practices will pay attention to details of the OIG's ruling, says Christopher Rolle, JD, an attorney with the Orlando, FL, law firm of Broad and Cassel.
Rolle explains that the case involved a proposed arrangement in which a primary care practice would hire physicians and deliver medical care, and the PPMC would provide the facilities and management and marketing services - including billing and collection, negotiation, and oversight of payer contracts, and establishment of provider networks to which the practice might be required to refer its patients.
In return for its services, the PPMC would get payments for capital expenditures it made to set up the clinic, fair market value payments for the operating services provided, and 20% of the practice's monthly net revenues.
But the OIG felt that anti-kickback laws against paying or receiving payment, directly or indirectly, in exchange for referring patients were violated by the agreement. The main problem, says Rolle, was that there was no compensation fixed in advance - it was a percentage of revenue.
But there were other problems with the arrangement, including:
· Financial incentives to increase patient referrals.
The PPMC would get a percentage of practice income, including revenue from managed care contracts arranged by the PPMC. This suggests a kickback.
· No safeguards against overutilization.
The OIG found the proposed establishment of provider networks and the required referral arrangements created a risk of overutilization. There was no incentive - or none presented to the OIG - to provide only the care needed.
· No safeguards against abusive billing practices.
The PPMC would provide billing services and would receive a percentage or revenues. This incentive to increase revenues, the OIG found, could increase the risk of up-coding and other abusive billing practices, something the OIG said was a "long-standing concern."
Not a death knell
Although the news was bad, Rolle says there is some hope. The OIG appears to provide some flexibility in percentage-based contracts, provided they have adequate protection against fraud and abuse. A carefully crafted arrangement with appropriate safeguards, might be acceptable to the inspector general, he says.
The OIG opinion is related only to the practice which requested it, says Rolle, but no smart practice can ignore the ruling. "The PPMCs are aware of this too, and they are looking for ways to work around the problems," he says. "But this is a fairly standard kind of arrangement, so this is very important to practices that are thinking of entering into a PPMC agreement."
In the future, Rolle says fixed fees may take over as the most common kind of payment to PPMCs. But he and his firm are already working with companies and practices to see if there is an appropriate way to structure a percentage deal.
· Chris Rolle, Attorney, Broad and Cassel, Orlando, FL. Telephone: (407) 839-4200.
You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
- Award-winning Medical Content
- Latest Advances & Development in Medicine
- Unbiased Content