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Physicians Post-PPACA: Not Going Bust At The Healthcare Buffet (Part 1 of 2)

Submitted by on March 15, 2012 – 1:45 pm

David. W. Hilgers

Sidney Welch

By David W Hilgers, Esq. and Sidney S. Welch, Esq.

The passage of the Patient Protection and Accountable Care Act (“PPACA”)[1] has already had a substantial impact on American medicine. Whatever repeals, reformations, defundings, or modifications lie in the future for healthcare reform, the concepts and trends represented by this legislation and its progeny clearly will have an enormous impact on healthcare delivery and the entire healthcare industry. However, no sector of the healthcare industry will be as heavily impacted as the American physician. To risk being accused of hyperbole, PPACA is potentially the final event in a long series of occurrences which will fundamentally transform the structure of the American healthcare industry and the role of the physician in the same. The likelihood of this change has long been expected, but physicians have been amazingly resistant to the predictions. The pressures created by PPACA and the changes it represents may be impossible to overcome.

To understand the potential and probable impact of PPACA for physicians, it is important to understand the backdrop against which it arrives.

Pre-PPACA Physician Environment

Declining Physician Reimbursement

Due to a number of factors, physician reimbursement declined by 25 percent from 1995 to 2008.[2] In the past year alone, physicians have anguished while waiting for Congress to force a delay to the sustainable growth rate (“SGR”), which repeatedly threatened to further reduce Medicare payments to physicians by at least 25 percent. Relief finally came in late 2010 for a one-year period and again in December 2011 for another two months,[3] but these temporary fixes leave a specter of uncertainty hanging over physician practices.

This decline in reimbursement naturally has resulted in a corresponding decline in physicians’ compensation. According to the most recent data available, from 1995 to 2003 a physician’s net income adjusted for inflation declined seven percent for many specialties.[4] This decline has been both consistent and exponentially increasing.

Perhaps the greatest factor contributing to declining physician reimbursement is the struggle to reduce the insupportable rate of healthcare inflation, by both private insurers and the government. The physician compensation component of these costs is perhaps the easiest cost factor to reduce because physicians are generally organized into small, independent practices that cannot jointly negotiate for higher fees due to American antitrust laws. In this battle, physicians have very little ability to negotiate higher rates from insurers because physicians have been slow to consolidate, whereas hospitals and insurers have consolidated quickly, enabling them to better negotiate to protect their interests. In many states, only one insurer dominates the market.[5] In many towns, only one hospital operates. Consolidation in these markets gives both the hospitals and the insurance companies an enormous advantage over physicians, who have to negotiate as individual small practices, whereas the much larger insurance companies are able to exert irresistible leverage in negotiations to reduce the rates paid to doctors for their medical services. Meanwhile, the consolidated hospital systems have a negotiating advantage in their compensation discussions with insurers as well as with physicians for call pay and other physician compensation.

Another factor creating the decline in physicians’ income is their reduced ability to benefit from ancillary services. As physicians’ fees have decreased, they have looked to the revenues from ancillary services to supplement their compensation. However, the federal government has limited physicians’ ability to utilize ancillary services to supplement their income through further narrowing the opportunities available to physicians under the federal Anti-Kickback (“AKS”)[6] and Stark laws.[7] These diversification efforts are often viewed by the government as efforts to over-utilize ancillary services to increase physician revenue. In fact, the frequently used in-office exception to the Stark law, which allows a physician to refer a patient to the physician’s office if it is for in-office MRI, CT, PET or other radiology services, has been modified by PPACA to require physicians to notify the patient of similar services offered by other providers in the area.[8] Additionally, both Medicare and private payors have reduced the fees paid for ancillary services provided by doctors on an outpatient basis.[9]

In addition to diminishing compensation, physicians have been subject to continuing operating cost increases. Not only have rent, labor, and malpractice insurance costs continued to rise,[10] but increased administrative costs demanded by insistent regulatory requirements have overwhelmed medical groups.[11] The physicians are caught in the squeeze between decreasing reimbursement and increasing costs with no clear solution in sight.

Regulatory Pressure

The regulatory pressures on physicians are overwhelming. Pressures to comply with false claims provisions, compliance plans, AKS and Stark regulations, The Health Insurance Portability and Accountability Act (“HIPAA”), the Occupational Safety and Health Act, the Controlled Sub­stances Act and licensing requirements, coupled with potential recovery audit contractor (“RAC”) audits and Medicaid fraud unit investigations and increased scrutiny from the Centers for Medicare & Medicaid Services (“CMS”) as well as potential for prose­cution by the U.S. attorneys offices all combine to exhaust the resources of even the largest healthcare providers. To smaller medical groups, the resources that must be dedicated to these regulatory demands are impossi­ble to financially support.

Another factor discouraging physi­cians is the reality that even technical violations can support both civil and criminal prosecution that is both costly and frightening. For example, the failure to sign a written contract can, and has, resulted in a claim for refund of all Medicare dollars paid to the hospital as the result of referrals from the doctor that didn’t sign the contract. Further, this is not an uncommon claim in the present compliance environment.

The Gross Clinic, 1875

Culture Change

Another fundamental change in the physician’s environment has been a change in the culture of American medicine. Very little room exists in modern American medicine for TV doctor Marcus Welby, whose idyllic practice never bothered with numbers issues like costs. Today’s regulatory requirements and economic pressures demand a highly efficient business model for a physician practice. In the past, the physicians could give free care because they were generating revenue sufficient to subsidize that care. In today’s world, that margin does not exist. Consequently, physicians are required to work long hours, see many patients, and spend substantial amounts of time on non-patient activities, such as medical teaching, administration and research.

Meanwhile, younger physicians graduating from medical school have a different view of their career than their seniors. Generally, these younger physicians are interested in shorter work hours, reduced administrative responsibilities, and fewer leadership requirements. They typically are more interested in working as physician-employees than in creating an independent practice with all its corresponding responsibilities.[12] These factors, plus a daunting number of actual and anticipated physician baby boomer retirements, create increasing pressure on physicians to find a new business model.[13]

Lack of Capital

A number of physicians have and are making efforts to respond to the changing healthcare landscape in innovative and creative ways, imple­menting cost-cutting measures for their patients and implementing electronic health record (“EHR”) systems. However, in addition to the regulatory constraints, physicians are impeded significantly in these efforts by a lack of access to capital. Physician practices do not provide a structure to develop capital resources, since most of the profit is paid in compensation to their doctors.[14] As a result, physicians are either abandoning these innovative efforts in frustration or having to partner with others to survive.[15]

Federal Policy Pressure

The final element in the pre-healthcare reform physician environment is the clear federal regulatory policy designed to encourage physician groups to move into integrated systems or larger physician groups. The examples of this policy are numerous: (i) the loopholes or exceptions that have been developed which allow hospital-owned groups to circumvent certain AKS and Stark requirements;[16] (ii) the quality bonus programs developed by Medicare, which are from a practical standpoint only available to large physician organizations because only these large practices have the infrastructure to measure for these quality metrics and deliver them across a large patient population; (iii) the requirement to move to EHRs, which is an expense outside the realm of possibility for most small physician groups; (iv) the ACE Demonstration pilot program, which bundles physician-hospital payments;[17] and (v) the push to Accountable Care Organizations (“ACOs”).[18]

As a consequence of many of these changes in the culture and economics of physician practice, medical practices have already begun to change dramatically. Large integrated systems have begun to develop, and their preferred methodology for integration has been employment of physicians. The push toward physician hospital employment is a new trend. In the recent past, managed care organizations experienced increasing enrollment rates in the late 1980s and early 1990s and more physicians left private practice in favor of employment opportunities as hospitals tried to build larger integrated systems.[19] However, as Health Maintenance Organization (“HMO”) enrollment slowed, the impetus for integrated care diminished. Addition­ally, the hospitals discovered that these physician groups were expensive and difficult to operate. Consequently, by the turn of the century, many of these hospital groups had been disbanded and the doctors returned to private practice.[20] By 2000, only slightly more than 7.5 percent of all physicians were employed by hospitals.[21]

This state of affairs has dramatically changed. In 2008, 13 percent of all physicians were employed by hospitals.[22] A survey of residents in 2008 indicated that 22 percent expected to be employed by hospitals, as opposed to 2003, when only five percent had the same expectation. This expectation was corroborated by survey results from the Medical Group Management Association (“MGMA”), which reported that in 2009 more than half (65 percent) of established physicians were placed in hospital-owned practices and almost half (49 percent) of physicians hired out of residency or fellowship were placed within hospital-owned practices.[23] Some preliminary statistics from the last 12 months show that this trend has continued through 2011, with 74 percent of hospital leaders planning to hire even more doctors in the near future.[24] While many attribute PPACA and the threatened cuts to Medicare as speeding up this trend, the race to physician employment actually began in 2009 with Medicare cuts in imaging. However, it is difficult to ignore the activities occurring right now between physicians and hospitals as they seek ever-more imaginative ways to integrate their structures.

As can be seen, the long-standing American physician business model was under great pressure from environmental factors before the passage of healthcare reform. With diminishing compensation, increasing regulatory pressures, changing physician culture, lack of access to capital, and federal policy pressures, the small independent practice that has dominated the healthcare delivery system was already on the ropes. However, PPACA has created significant cause to ask whether this business model can survive given the future course of healthcare.

PPACA Provisions Directly Impacting Physicians

Anti-Kickback Reforms

As mentioned earlier, the pre-PPACA environment for physicians reflected an ever-increasing regulatory scrutiny by the federal government and state governments for healthcare fraud. However, the statutes and regulations made some defenses available to doctors to contest fraud claims brought by the federal or state governments. PPACA effectively eliminated some of the government’s barriers to prosecuting physicians by clarifying previous rulings in circuit courts and precluding defenses typically used by defense attorneys to contest fraud claims.[25]

One example is the change to the AKS’ requirement that the government prove a knowing and willful violation of the statute.[26] Prior to PPACA, circuit courts disagreed on the issue of whether a person had to have actual knowledge that he was violating the AKS.[27] PPACA added the following language regarding scienter: “With respect to violation of this section, a person need not have actual knowledge of this section or specific intent to commit a violation of this section.”[28] This change clarifies that concern and reduces the burden of proof for the prosecution, since the prosecution does not have to prove a predominant intent to violate the AKS, but only that one motive of defendant was to generate referrals.

Changes to the Stark Laws

Disclosure of Imaging Ownership

Federal regulators and policymakers have long believed that allowing physicians to receive revenue from imaging owned by the physicians invites over-utilization of those services. Through various mechanisms, including the federal anti-markup provisions,[29] the elimination of shared ownership of imaging facilities,[30] and the elimination of the per-click payment structure,[31] CMS has greatly reduced the ability of the physicians to own imaging facilities.

For example, as noted above, PPACA requires physicians referring patients for imaging services within their group practice to give their patients written notice that the patient may obtain this service outside the physician’s group practice.[32] This provision applies to MRI, CT, and PT scans, as well as “any other radiology and imaging equipment that the Secretary determines appropriate.”[33] In addition to this notification, the physician is required to provide a written list of alternative suppliers in the area where the patient resides.[34] The number of patients that will change their mind and seek imaging elsewhere is likely to be de minimis, but the burden on physician practices and the opportunity for a prosecutable mistake or violation on the physician’s part are significant, although the final rule by CMS does ease some of the administrative burdens on physicians.[35] While this new rule can adversely impact physicians’ ability to own and operate an imaging facility, many also believe that the trade-off in offering the patient the choice is important and outweighs the potential impact on physicians.

Self-Disclosure Protocol

Under Section 6409 of PPACA, the Department of Health and Human Services (“HHS”) was authorized and required to create a self-disclosure protocol that allows physicians to self-report Stark violations to the government.[36] This provision seemingly will allow CMS to compromise or waive Stark sanctions, which it had heretofore not had the ability to do. It was hoped that the regulations promulgated under this provision would give some greater definition as to what types of Stark violations would be subject to waiver or reduction in penalty. However, the recently promulgated regulations do little more than quote the language of the statute and are very unhelpful in determining how these self-disclosures may impact physicians.[37] In fact, to date only two cases have been settled by CMS under the new rules, with no guidance as to how the settlements were obtained and what, if any, further action was taken against the self-referring entities.[38]

Physician Ownership of Hospital Prohibition

Probably the most important change to the Stark law contained within PPACA is the prohibition against physician ownership of hospitals.[39] From its inception, the Stark law had contained a provision that allowed physician ownership of hospitals under certain circumstances. In many states, this exception to the Stark law has resulted in a rapid growth of hospitals owned at least partially by physicians. Opponents of physician-owned hospitals argued that this growth of physician-owned hospitals resulted in higher utilization or “cherry-picking” of patients. Consequently, proposals were made to eliminate cherry-picking or over-utilization.[40]

However, PPACA opted for complete prohibition, subject to a grandfathering provision. The final result is that a physician-owned hospital holding a Medicare provider number prior to March 23, 2010 (the date of PPACA’s enactment) cannot expand the number of beds, procedure rooms, and operating rooms for which it was licensed on that date.[41] PPACA grants a small exception for hospitals that were in construction and that did not have their Medicare provider number on March 23, 2010.[42] Those hospitals were allowed to continue construction and operate as long as they completed their construction before December 31, 2010 and obtained their Medicare provider number before that date.[43] In addition, no physician-owned hospital may expand the percentage of ownership in the hospital after the date of enactment.[44]

The consequence of this change will be the eventual elimination of any hospitals developed by physician owners. Those hospitals that presently have physician ownership will be able to continue for some unknown period of time. Their inability to expand will likely require many of them to divest their physician ownership or ultimately fail economically.[45]

The irony of this change is that it eliminates one method for integrating physicians and hospitals. Another irony is the reality that much of the competition for existing hospital systems has been created by expansion of physician-owned hospitals.[46] The elimination of this competition combined with the continued concentration of the hospital industry will ensure that hospitals will not have as many competitive pressures to reduce their rates or perform services more efficiently.[47] The only pressure on hospitals to reduce rates and perform services efficiently will come from the payment methodology. These same payment methodologies if applied to physician-owned hospitals would generate the same incentives to provide more quality services at higher efficiency, without the anti-competitive impact.[48]

False Claims Act

The False Claims Act (“FCA”)[49] has become the statute of choice for federal prosecutors in the enforcement of the AKS and Stark law. While the penalties and remedies in the FCA already give the prosecutor a substantial advantage, PPACA further strengthened the FCA in several ways:

1. PPACA affirmatively requires providers to report and return overpayments and to report in writing the reason the overpayment occurred.[50] No longer can physician practices arguably engage in a cost-benefit analysis of repayment and hope to “fly under the radar.” While the federal government has long held that overpayments must be refunded, PPACA dramatically increases the requirements for and consequences of overpayments.[51] The new law creates an affirmative and express obligation to make repayment, and the failure to do so is now another violation of the FCA.[52] A report of an overpayment must be made within 60 days after discovery of the overpayment.[53] Failure to do so is deemed to be a false claim.

2. PPACA amends the AKS to clarify that claims for services resulting from the kickback constitute a false claim.[54]

3. PPACA expands the reach of the FCA to payments made in connection with any insurance plan issued under the new health benefit exchanges.[55] Therefore, the FCA will not apply just to Medicare or Medicaid, but to any private insurance plans issued under the exchanges. This is a substantial expansion of the types of payments subject to the FCA.

4. The qui tam provisions of the FCA were also expanded so that it is now easier for whistleblowers to collect from these claims. First, the law changed the limitations of public disclosure. In the past, if facts used to demonstrate a violation of the FCA were already made in state proceedings or private litigation, they were not available for a relator to utilize in a whistleblower claim and the whistleblower would not be entitled to recovery. Under PPACA, revelations in a state proceeding or private litigation are no longer public disclosures that would disqualify a relator from recovering under a whistleblower claim.[56]

The original source exception was broadened, as well. Prior to PPACA, the whistleblower had to have knowledge of the facts underlying the allegation that was “direct and independent….”[57] The language is now changed to say that knowledge that is “independent of and materially adds to the publicly disclosed allegations” is and will entitle the whistleblower to recover.[58]

Other Provisions Strengthening Compliance Authority

In addition to the changes to the FCA, PPACA strengthened the government’s compliance resources in other ways:

1. PPACA expanded administrative penalties available to CMS. Now, Medicare and Medicaid payments to a provider can be suspended “pending an investigation of a credible allegation of fraud.”[59] Further, CMS can exclude any entity that knowingly makes or causes to be made a false statement or omission in an application agreement, bid, or contract to participate as a provider under a federal healthcare program.[60]

2. PPACA authorized the Secretary of HHS to mandate providers to have a compliance program.[61] These mandatory compliance programs will apparently be rolled out to different categories of providers over the next several years. However, it is very likely that physicians will be included in these mandated compliance programs.

3. PPACA expanded the resources available to prosecute fraud and abuse.[62] Three hundred million dollars was added to the funds available to prosecute fraud and abuse over the next 10 years. PPACA authorized increased provider scanning and enhanced oversight of providers. It expanded the use of RAC audits for Medicaid and Medicare Parts C and D. It also broadened HHS’ subpoena power to apply to cases involving allegations that a party is defrauding federal healthcare programs. Nor did healthcare reform ignore the criminal penalties for healthcare fraud. PPACA required that federal sentencing guidelines be amended to increase sentences for defendants convicted of federal healthcare offenses and added violations of the AKS to the category of offense.

These enhancements to the prosecution are considered by the government to be important tools needed to reduce fraud and abuse and, thus, reduce healthcare costs. That may very well be true, but the increased compliance costs they create adds exponentially to the costs of practicing medicine. These changes further increase the pressure on the small practice to seek protection from a larger organization that can afford the resources necessary to comply with the labyrinth of federal and state regulations.

PPACA Reforms Beneficial to Physicians

Although there are a number of healthcare PPACA provisions that could be viewed as detrimental to physicians, PPACA did provide certain benefits to physicians, particularly in the area of reimbursement for primary care.

1. Primary care physicians will receive a 10 percent incentive payment for all Medicare charges.[63] This payment is inclusive for primary care practitioners, defined by Section 5501 as a physician with a specialty in family medicine, internal medicine, geriatrics, and pediatrics.

2. General surgeons performing major procedures in health professional shortage areas from 2011 to 2015 will receive a 10 percent incentive payment.[64]

3. Psychotherapy services were subject to a five percent incentive payment through December 31, 2010.[65]

4. PPACA authorizes the Secretary of HHS to establish geographic payment adjustments for physicians in 56 localities, which include 42 states, Puerto Rico, and the Virgin Islands.[66] These provisions allow the geographic practice cost index (“GPCI”) to be adjusted as follows: For 2010, the law reinstated a floor of 1.00 on the work GPCI that expired December 31, 2009. For 2010 and 2011, Medicare increased the practice expense GPCI in all payment locales that had a practice expense GPCI below the floor of 1.00 (Montana, North Dakota, South Dakota, Utah, and Wyoming). These changes had the effect of payment increases in a number of states.

5. The Medicare quality reporting incentive payments of one percent was paid in 2011 and 0.5 percent will be paid from 2012 to 2014 for voluntary participation in patient quality reporting.[67] Additionally, a 0.5 percent payment will be made to physicians who participate in a qualified maintenance of certification program.[68] However, the physician payment will be reduced 1.5 percent in 2015 for physicians who do not successfully participate in the patient quality reporting program. In 2016, a two percent penalty may be assessed for failure to participate.

6. Medicaid payments for primary care physicians were raised to Medicare rates for 2013 and 2014.[69]

Of course, one major potential benefit created by PPACA to physicians is the substantial expansion of insurance coverage to the large numbers of patients who presently do not have healthcare insurance. Some already estimate that between an aging population and overall population growth, U.S. physicians’ workload will increase by 29 percent from 2005 to 2025.[70] Theoretically, the further expansion of potential payments and payor sources by an increased number of insured patients should be a benefit to doctors.

However, in reality many physicians around the country are already fully occupied in providing patient care. They are not missing the patient volume, but they are being squeezed by reduced reimbursement for those patients and increased cost of care as described earlier. The increased demand for access to doctors may only bring more criticism on the doctors as they develop long delays for appointments or limit their practices. This is what occurred in Massachusetts when universal insurance was implemented.[71]

(The conclusion of this article will appear in the next issue of Physicians News Digest.)


David W. Hilgers is a Partner at Brown McCarroll, L.L.P. and is a member of the firm’s Healthcare Law Section. He has practiced law for more than thirty-five years. His primary focus is on healthcare, corporate, and administrative law. Mr. Hilgers represents healthcare providers, including physicians, dentists, health systems, managed care organizations, long-term care facilities, multi-specialty groups, hospitals, hospital districts, and community mental health and mental retardation centers. He can be reached at dhilgers@brownmccarroll.com.

Sidney S. Welch is a Partner with Arnall Golden Gregory LLP’s healthcare practice. Ms. Welch is recognized nationally for representing physicians and physician practices in all legal aspects of their practices. This expertise includes healthcare regulatory, corporate, contractual, administrative and litigation matters.

Ms. Welch currently serves as Chair of the American Bar Association Health Law Section’s Physician Issues Interest Group and Vice Chair of the American Health Lawyers Physicians and Physicians Organization Group. Ms. Welch is a frequent speaker and author on health­care matters, and has been recognized as one of the nation’s top ten physician attorneys by Nightingale News. She can be reached at Sidney.Welch@AGG.com.


[1] Pub. L. No. 111-148 (2010).

[2] Douglas O. Staiger, David I. Auerbach, & Peter I. Buerhaus, Trends in the Work Hours of Physicians in the United States, 303 J. Am. Med. Ass’n 747 (2010).

[3] See Pub. L. No. 111-309 (2010); see Medicare pay cut averted; Congress OKs two-month patch, AMA Alert Dec. 23, 2011, www.ama-assn.org/ama/no-index/news/2011-12-23-ama-alert.page.

[4] HaT. Tu & Paul B. Ginsburg, Losing Ground: Physician Income 1995-2003, 15 Center for Studying Health System Change Tracking Report 1 (2006), http://hschange.org/CONTENT/851/851.pdf; Staiger et al., supra note 2.

[5] David W. Emmons, Jose R. Guadado & Carol K. Kane, Competition in Health Insurance: A Comprehensive Study of U.S. Markets, 2010 Update, American Medical Association Division of Economic and Health Policy Research (2010).

[6] 42 U.S.C. §1320(a)-7b. The Anti-Kickback Statute (“AKS”) provides for criminal penalties for certain acts impacting Medicare and Medicaid reimbursable services. Of primary con­cern is the section of the AKS which prohibits the offer or receipt of certain remuneration in return for referrals for or recommending pur­chase of supplies and services reimbursable under government healthcare programs.

[7] 42 U.S.C. §1395nn, §411.350, §411.389. The Stark law, technically known as the Ethics in Patient Referral Act, restricts self-referral, or the practice of a physician referring a patient to a medical facility in which he/she has a financial interest, for Medicare and Medicaid patients

[8] Patient Protection and Affordable Care Act (“PPACA”), Pub. L. No. 111-148, sec. 6001, 124 Stat. 119 (2010). See also further dis­cussion of this modification later in this article.

[9] Paula Nelson, Managed Care Contracting– Ancillary Contracting, Managed Care Resources, Inc. (1998).

[10] Press Release, Med. Grp. Mgmt. Ass’n. Medical Group Practice Cost Increases Outpace Revenues (October 20, 2008), http://www.mgma.com/press/default.aspx?id=22678.

[11] Steffie Woolhandler, Terry Campbell & David U. Himmelstein, Costs of Health Care Administration in the United States and Canada, N Engl J Med 2003;349;768-75 (2003). See also Congressional Budget Office Report, Key Issues in Analyzing Major Health Insurance Proposals, December 2008.

[12] Bill Wooten, Generational Differences, Presentation to the Texas Medical Association (October 2008). http://www.slideshare.net/bmwooten/generational-differences-texas-medical-association-10-3-2008.

[13] Darryl Fears, Retirements by baby-boomer doc­tors, nurses could strain overhaul, Washington Post (June 14, 2010). http://www.washington­post.com/wp-dyn/content/article/2010/06/13/AR2010061304096.html.

[14] Keith D. Moore, et al. Providing Capital for Physician Group Practices: New Opportunities For Hospitals – Statistical Data Included, Life & Health Library (Dec 1999).

[15] Id. Many physician practices had trouble at the turn of the century because of poor nationwide financial conditions and dried up existing capi­tal sources, forcing many practices to partner up or sell to large medical companies.

[16] Hospitals can subsidize medical groups they own, but they cannot subsidize independent medical groups.

[17] The Medicare Acute Care Episode Demonstration (“ACE”) is a hospital-based demonstration set up by CMS that is designed to test the use of bundled payment for both hospital and physician services for a select set of inpatient services to improve the quality of care through Medicaid fee-for-service. See CMS Press Release January 6, 2009, https://www.cms.gov/DemoProjectsEvalRpts/downloads/ACEPressRelease.pdf.

[18] Bernadette Broccolo, Toward Accountable Care: How Healthcare Reform Will Shape Provider Integration. Strafford Webinar – “Physician-Hospital Clinic Integration: Navigating the Complexities” page 4 (July 21, 2011). http://media.straffordpub.com/products/physician-hospital-clinical-integration-navigating-the-complexities-2011-07-20/reference-material.pdf.

[19] Sharon Bell Buchbinder, et al. Estimates of Cost of Primary Care Physician Turnover, Am. Journal of Managed Care, 1431-1432, November 1999.

[20] Carol K. Kane, Physician Market Report No. 2004-2 3 (Am. Med. Ass’n ed., 2001), http://www.ama-assn.org/resources/doc/health-policy/pmr-022004.pdf. See also O’Malley, Ann S., et al., Greenville & Spartanburg: Surging Hospital Employment of Physicians Poses Opportunities and Challenges, Community Report No. 6, Center for Studying Health System Change, Washington, D.C. (February 2011).

[21] Id.

[22] American Hospital Association’s Statistics, 2008.

[23] Med. Grp. Mgmt. Ass’n, Physician Placement Starting Salary Survey: 2010 Report Based on 2009 Data, (MGMA ed., 2010).

[24] Lena H. Sun, Hospitals Courting Primary-Care Doctors, (Wash. Post June 19, 2011).

[25] Until the passage of PPACA, circuit courts around the country had ruled on similar cases differently. In Hanlester Network v. Shalala, 51 F.3d 1390 (9th Cir. 1995), the court held that defendants charged with violation of the AKS must have actual knowledge of the statute being violated and intent to violate it, in con­trast to previous circuit court opinions to the contrary. See U.S. v. Greber, 760 F.2d 68 (3d Cir.), cert. denied, 474 U.S. 988 (1985). PPACA clarified this section to preclude any defense that the defendant did not have knowledge of the AKS.

[26] The AKS prohibits individuals or entities from knowingly and willfully offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid or any other federally funded program (except the Federal Employees Health Benefits Program). 42 U.S.C. § 1320a-7b(b) (2006).

[27] E.g., Hanlester Network v. Shalala, 51 F.3d 1390 (9th Cir. 1995); Cf., United States v. Starks, 157 F.3d 833 (11th Cir. 1998). Prior to PPACA, a few circuit courts required a spe­cific intent to violate the AKS.

[28] Section 6402(f)(2) of PPACA (Pub. Law 111-148).

[29] 42 C.F.R. § 414.50 (2008).

[30] 73 Fed. Reg. 48434 (Aug. 19, 2008).

[31] Id.

[32] PPACA, Pub. L. No. 111-148, sec. 6001, 124 Stat. 119 (2010).

[33] Id.

[34] On November 2, 2010, CMS posted its final rule implementing this section of PPACA. In it, some of the administrative burdens on phy­sicians were softened, but much of the section remained intact. CMS requires that the dis­closure be made for all MRI, CT and PET services, but declined to expand the require­ment to other imaging services. Physicians must give notice to the patient of at least five “suppliers”, which is reduced from the initial requirement of 10. “Suppliers” includes all competing physicians in the area, but does not include providers of imaging services such as hospitals. Further, to help ease the burden somewhat, CMS is requiring that physicians include only suppliers within 25 miles of the physician’s office, since the physician cannot possibly create an individualized notice for each patient regardless of where they live. CMS also clarified, however, that notice must be given to the patient each time the service is needed, and not only on the initial visit, although the requirement that the physician get the patient’s signature and keep the signed notice for documentation has been removed. Finally, CMS will not make an exception to this requirement for emergency or one-time bases, nor will CMS provide standard disclo­sure language. See Centers for Medicaid & Medicare Services, Final Rule, 75 Fed. Reg. 73443 (November 29, 2010).

[35] Id.

[36] PPACA, Pub. L. No. 111-148, sec. 6409, 124 Stat. 119 (2010). See also Ethics in Patient Referral Act (commonly referred to as the “Stark Act”) 42 U.S.C. § 1395nn.

[37] For more information on the regulations, see CMS Self-Disclosure Protocols: https://www.cms.gov/PhysicianSelfReferral/98_Self_Referral_Disclosure_Protocol.asp#TopOfPage.

[38] Id.

[39] See supra note 32 at sec. 6001.

[40] Following two separate moratoria, one in 2003 enacted by Congress and again by CMS in 2005, the Medicare Payment Advisory Commission (“MedPAC”) and CMS launched investigations into specialty physi­cian-owned hospitals which were excluded from Stark liability based on the “whole hos­pital” exception. The subsequent reports and testimony to Congress paved the way for the changes outlined in Section 6001 of PPACA. See MedPAC, “Report to the Congress: Physician-Owned Specialty Hospitals” and Michael Leavitt, “Study of Physician-owned Specialty Hospitals Required in Section 507(c)(2) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003,” Health and Human Services (2005).

[41] See supra note 32 at sec. 6001.

[42] Id.

[43] Id.

[44] Id.

[45] Tim Eaton, Health Law Reform Targets Physician-Owned Hospitals (Austin Am. Statesman, May 29, 2010).

[46] Spencer Harris & Brad Zarin. Physician Owned Hospitals. (Tex. Pub. Policy Found. August 2011).

[47] Id. at 5. While hospitals and physicians will be measured and scrutinized based on their performance with the passage of PPACA, community hospitals may not have a com­petitive market to drive prices when physician-owned hospitals are gone.

[48] Id.

[49] 31 U.S.C. §§ 3729–3733.

[50] See supra note 32 at sec. 6402(d).

[51] Mark Gallant, Salvatore Rotella, Jr., and Melanie Martin, Providers Beware: HealthCare Reforms Make Failing To Promptly Refunds Overpayments – Including Those Attributable To Identified Stark Violations – Potential False Claims Act Violations, Cozen O’Conner Health Law Alert (April 26, 2010). http://www.cozen.com/admin/files/publications/health042610.pdf

[52] See supra note 32 at sec. 6402.

[53] Id.

[54] Id. at sec. 6402.

[55] Id. at sec. 1313

[56] 56 Id. at sec. 10104.

[57] 31 U.S.C. § 3730(4)(A) & (B).

[58] See supra note 32 at sec. 10104. Some believe that this change will have a significant impact on qui tam complaints because it may open the door for whistleblowers to rely on secondhand or indirect information when making an alle­gation, as long as allegations add new information to what is already available in the public domain. See McDermott Will & Emery, HealthCare Reform: Legislation Expands False Claims Act, Whistleblower Cases Expected to Increase, (March 31, 2010) http://www.mwe.com/index.cfm/fuseaction/publications.nldetail/object_id/a3520977-8f8a-4b5b-a83d-26ada4315a1d.cfm.

[59] See supra note 32 at sec. 6402.

[60] Id. at sec. 6408.

[61] Id. at sec. 6401.

[62] Id. at sec. 6402.

[63] Id. at sec. 5501.

[64] See supra note 32 at sec. 5501

[65] Id. at sec. 3107.

[66] Id. at sec. 3102,

[67] Id. at sec. 3002.

[68] Effective January 2011, any physician who meets specified requirements may have their “Physician Quality Reporting System” quality percent for that year increased by 0.5%. Requirements include submitting quality mea­sures data for a 12 month reporting period and completing a certification program for a year. See Centers for Medicaid & Medicare Services, Physician Quality Reporting System Maintenance of Certification Program Incentive Guidance, https://www.cms.gov/pqrs/downloads/MOC_Guidance_Final1_2_3.pdf.

[69] See supra note 32 at sec. 1202.

[70] Robert B. Doherty, The Certitudes and Uncertainties of HealthCare Reform, Annals of Internal Medicine (April 8, 2010).

[71] “Physician Shortage in Massachusetts Continues to Squeeze Primary Care,” Henry, Tanya Albert, AMEDNEWS.com, October 12, 2011; “Physician Workforce Study,” Massachusetts Medical Society, September, 2011; “Mass. Health Care Reform Reveals Doctor Shortage, National Public Radio, http://www.npr.org/templates/story/story.php?storyId=97620520, 21/1/08.

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