Beyond the Bottom Line

The Centers for Medicare and Medicaid Services (CMS) recently released additional guidance on the Two-Midnight rule that carries important implications for hospitals seeking to apply the rule correctly and consistently. In this episode of 1st Talk Compliance, host Kevin Chmura is joined by Stacy Pereira, Executive Director of Coding and Clinical Services in Panacea’s KA Consulting Division, to continue the discussion surrounding the Two-Midnight rule and the challenges it poses.

If you enjoyed Panacea’s recent webinar on the topic, or you’re simply looking for more information on how the rule might impact you, tune in for a deep dive into the potential challenges involved for hospitals seeking to apply the rule correctly, possible financial impacts of the rule’s enforcement, and pitfalls of over- or underusing observation status.

In case you missed our webinar on the Two-Midnight rule, you can watch it on-demand here.

Previously on 1st Talk Compliance, we spoke with Kevin Chmura, CEO of Panacea Healthcare Solutions, about how the advent of price transparency has caused the business of healthcare to evolve and opened up fresh possibilities for healthcare providers to gain a competitive advantage.

In this episode, we continue that conversation by inviting on two additional experts from Panacea—Govind Goyal, President of Financial Services, and Henry Gutierrez, Senior Vice President, Financial Consulting Services—to dive deeper into the recent changes to price transparency requirements and expand upon the many ways healthcare providers can adapt to succeed in this new consumer-driven arena. From navigating compliance regulations to leveraging data for a competitive advantage, tune into Part 2 of “The Sky’s the Limit – How Price Transparency Can Empower Healthcare Providers” to gain insight into the evolving landscape of price transparency and what lies ahead.

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Private equity has become increasingly entrenched in the healthcare sector, offering various financing options for providers to consider. However, like all types of financing, private equity introduces its own unique set of benefits and drawbacks and carries important legal implications. It’s essential to understand all the factors at play in order to maximize financial impact and preserve operational efficiencies while avoiding sacrificing compliance and quality of care.

Tune in to hear Grace Walsh in conversation with Rachel Rose, JD, MBA, to explore this timely topic. In addition to providing a detailed overview of private equity in healthcare and its various pros and cons, Rachel shares valuable updates on enforcement actions by the U.S. Department of Justice and Congressional inquiries.

Episode transcript available below.

Grace: Hi, Rachel. It’s great to have you back on the show. Thank you so much for joining me today to talk about this timely topic.

Rachel: Hi, Grace, thank you for having me. As always, it’s my pleasure to be a guest for First Healthcare Compliance and to talk about fun healthcare topics.

Grace: Wonderful. So today, we’re talking about private equity. And so, just to get us started, can you give us some background on private equity? Are there different categories of private equity? And if so, what are the differences between them?

Rachel: That’s a great question, Grace. And first, as we delve into our conversation today, I want the listeners to think about healthcare being different than other industries. And the reason is we cannot treat patients the way we can, for example, potato chips or a car. And those are factors that come into play when an entity that is looking to startup, or that is looking to be acquired, starts to ask some very critical due diligence questions of a private equity firm, or a private equity fund.

So, getting to the heart of your question. Although there are different definitions of private equity, basically, it’s an entire asset class of investments that are not quoted on our public stock markets. Now, a private equity fund may be quoted on a publicly traded market, and some examples of firms and funds that are publicly traded are Blackstone, KKR, Carlyle, and Apollo Group. But again, this depends on the phases of capital.

So, I want our listeners to think of private equity as a continuum, and venture capital, which includes angel investing, focuses really on one end of the spectrum, and that is early stage investments, including those that show a promising business model, a promising idea, even or competent leadership through an executive team with experience. Usually, they have a board or an advisory board set up with them, and in exchange for the money for the investment, oftentimes, investors at this stage want a seat at the table in one way or another.

The next phase is what’s known as growth capital. Although it’s similar to venture capital, these companies are already profitable and are really seeking additional capital to continue to fuel growth. Now, continuing to fuel growth is very different than saying at the outset in your business plan that I only need this amount of money to be invested to achieve my objectives. That’s where a lot of startups get into trouble because they didn’t ask for enough money upfront.

You’re always better off asking for more money rather than constantly going to the well. And also making sure that you’ve budgeted and explained to the investors that I’m asking for this amount because these are some unknowns: I don’t know what inflation is. I don’t know if there could be an adverse impact as a result of an election, of a pandemic, of a natural disaster, of a cyber-attack. All of those items are prudent to list as reasons why you need this much capital as well as hard costs that can be established.

So, from this growth capital phase, we really get into the stereotypical private equity phase, and that is making a controlling investment, right? So, having a majority investment in a company, which may or may not be distressed. Now, whenever we hear the term distressed or underperforming, that creates an opportunity for any person, including private equity, to maximize their returns or their Delta from what they paid to what they want to achieve as a return.

Now, private equity firms can do this in various ways. Sometimes they just buy the company outright. Other times, a private equity company or firm takes out a significant amount of debt, often using underlying capital as collateral, and, in turn, the debt is paid via future cash flow from the target company.

There are also different debt equity options, including bonds, and that’s basically in investment, in a security. Typically, people pay per bond, what’s known as a par value for ease. A lot of par values are set at $100 or $1,000 dollars, and in exchange for loaning that money, the investor receives what are known as bond coupon payments over the life of the bond, when, at the end, the bond issuer returns the investor’s initial investment. So, it’s basically incremental interest payments, if you will, known as coupon payments, and then at the end, the bond issuer returns the investor’s money.

For those who are not financially savvy, so to speak—and truthfully, before I obtained my MBA, I was history in pre-med undergrad, I worked in the government, and I worked in pharmaceutical and medical device sales, so I knew when the war of 1812 was, I knew my ilium from my ileum—but once you start learning about finance, my reference was for bonds, always, municipal bonds or government bonds. And there are a lot of privately issued bonds as well. It’s not just a government, including a municipal government that can, in fact, issue those. Additionally, there is something known as a convertible bond, and that is a fixed income debt, security that pays interests, but upon a certain triggering event, can also be converted into either a common stock or a particular type of equity shares.

And given the investment interests in healthcare by private equity funds, I believe in 2021 private equity invested more than 206 billion dollars in US healthcare. This is an area of investment that is not going away, but also should be tempered, both on the PE (private equity) side and by the entities that are being acquired.

Grace, did that answer your question?

Grace: Yes, thank you for that explanation. That’s really fascinating.

You mentioned looking at private equity as a continuum, which kind of leads into my next question, which is: What would you say are some of the pros and cons of utilizing private equity at the various phases of a company’s life cycle?

Rachel: That’s a great question. And the answer—I’ll give you my lawyer answer here—is it depends. And I say that because a company may be well-funded initially by the owners, for example. And they might not need startup costs at that phase. So, if you and your partner, for example—and I’ll just step back for a second. If you are starting a company, make sure that it’s not a handshake deal. Make sure that even if it is your best friend, that you have all of the legal documents, the operating agreement, what happens in the event of a divorce? It’s always safer to have not only a pre-nup upfront, but also, it is something that if you do seek investors down the line, they will appreciate that all of these potential issues have already been addressed in what should be a very unemotional manner, because it’s just business and you’re just memorializing the terms in a contract with both of you represented by separate legal counsel. And that, in turn, leads to a more well-presented package to potential investors.

So, before you even consider whether or not you need money along the different continuum that I just went into, you really want to make sure that you have all of your documents secure, and your exit strategy, including your pre-nup. No handshake deals on that front. It really makes things smoother, again, down the entire lifespan of the corporation. So, if you accept money early on, you’re going to be giving up typically a significant amount of ownership interests.

For those of you who have watched Shark Tank, that is an example of that and Shark Tank sometimes is the angel investor, the idea stage, sometimes it said venture capital stage, which is early stage, where the company’s getting started, but it really needs more guidance and cash in flux, but then it also invests in that growth capital stage. Which is really the middle stage.

So again, you don’t want to over-ask for an obscene amount of money, but you want to make sure that you’re not going back to your investors and asking for additional funds when that could have been accounted for in a breakdown of contingencies: the unknowns, the rate of inflation, disruptions in production because of a cybersecurity incident. Whatever it is, you need to ask what their plans are with the company, especially at the growth phase and that last phase, the stereotypical private equity phase where the firm or a fund comes in to buy out the company, whether through a leveraged buyout, which we just went into, or by paying cash out front, because that’s where you’re really going to give up pretty much all of your control. You may retain some ownership that’s very common, including in healthcare and in practices, but just know what the downstream implications are and make sure that whatever part in the process you’re in, if you are a target for a private equity fund or investors want to invest in your company, make sure a) you’re not giving up more than you have to and b) that you have contingencies in your contracts with the PE entities or funds as to what happens to your share percentage if they sell again, what does that mean? Is there any impact on physicians, for example, in their personal agreements with non-compete?

All of those are items you want to be thinking about at any stage of a private equity continuum.

Grace: I see. Thank you. I’d love to switch for a moment to more of an oversight perspective. As private equity is becoming increasingly prominent in healthcare, have the US Department of Health and Human Services (HHS), Congress, and the Federal Trade Commission placed greater scrutiny on the use of private equity in healthcare and the healthcare sector, and, if so, why are we seeing this trend?

Rachel: Great. That is not only a great question; it’s very important for your audience as a whole. So, let’s step back and focus on the HHS Office of Inspector General (OIG) first.

In November of 2023, they published their annual or quasi-annual compliance guidance. And really, this is a great guiderail, because any person who is in the healthcare industry, or looking to invest in the healthcare industry, can look at this document and say, what areas of enforcement are the government looking at, and how does that impact my due diligence? How does it impact my potential rate of return? Are there additional investments that need to be made? All of these items that should be closely evaluated. And the 2023 guidance was no exception. Basically, it highlighted not only the growing prominence of private equity and other forms of investment, but it also honed in on raising concerns about the impact of ownership incentives, such as the return on investment on the delivery of high quality, efficient healthcare.

And the HHS OIG specifically stated that healthcare entities, including their investors and governing bodies, should carefully scrutinize their operations and incentive structures to ensure compliance with the federal fraud and abuse laws and that they are delivering high-quality, safe care for patients.

And that’s something that really cannot be emphasized enough. Both the Fraud, Waste and Abuse laws, but most importantly, the continuing concern for patients’ care. Because if there’s anything the government homes in on, it will be adverse patient outcomes and deaths, for that matter. So, related to the Federal Trade Commission, I’m going to now pull together recent statements that the Federal Trade Commission, the Department of Justice, and the Department of Health and Human Services launch a cross government inquiry on the impact of corporate greed in healthcare. And really that was a press release that came out in the beginning of March of 2024. So, there’s nothing really new or anything that is really being hidden by the government. They’re telling you. And they’re telling you that it could come from any or all of these potential entities, government entities.

And so, the key areas that they’re focused on are the increasing involvement, the maximization of profit at the expense of quality care, and anti-competitive effect. So, increasing consolidation in order to generate the often touted 20% to 30% return in private equity funds to their own investors at the expense of patients’ health and outcomes, as well as worker safety, quality of care, and affordable healthcare for patients and taxpayers is absolutely not going away.

To that point, we have some recent case law, including the Federal Trade Commission v. U.S. Anesthesia Partners, Inc., and this case was filed in the Southern District of Texas in September of 2023. It’s case number 4:23-cv-03560. And in essence, what the FTC did was to focus on anti-competitive behavior involving a scheme to consolidate anesthesia practices in Texas, drive up the price of anesthesia services provided to Texas patients, and increase their own profits. In turn, providers, whether it was an ambulatory surgery center or hospitals, really didn’t have any other option of going to another anesthesia group because Anesthesia Partners had bought them all up. So that’s where a lot of these issues stem from, so that’s an area to highlight.

Another area to highlight is the Department of Justice and the utilization of the False Claims Act. Not only in relation to the traditional Fraud, Waste and Abuse laws such as the Stark Law and the Federal Anti-Kickback Statute, but also the area of causing to be submitted a false and fraudulent claim. And that’s where, in the example of the United States ex rel. Medrano and Lopez v. Diabetic Care case. This is a case which was filed in the Southern District of Florida. What’s important here is that the settlement involved not only the compounding pharmacy and the Chief Executive Officer; it also involved a private equity firm that colluded to generate referrals of prescriptions for an excessively expensive pain cream, scar cream, and vitamins regardless of the patient need, which were in turn reimbursed by TRICARE, which is the federal health care program for military members and their families, for a total of 21.36 million dollars was the amount of the settlement.

Finally, another example of how the DOJ has named, and I should say, the whistleblower attorneys have named private equity firms. It comes down to ownership and control. If the Government or a relator’s council cannot show ownership and control (you need both), then the private equity company’s likelihood of being dismissed from the case is potentially greater.

I will add the caveat that there is a provision in the False Claims Act for a co-conspirator, and that’s found at 31 U.S.C. § 3729(a)(1)(C). So, their co-conspiracy doesn’t necessarily dovetail with the private equity, ownership and control. So, they still may be named and survive staying in the case as a defendant. But what’s unique about a case that was filed in the Central District of California, United States v. Insys Therapeutics, was that the district court denied the private equity company’s motion to dismiss, and expressly stated that the company could be found liable through its portfolio company, a specialty pharmacy, because the mere use of separate business entities, and the notion that the private equity company itself did not submit the claims, was not persuasive. So, all of those factors are areas to hone in on.

Finally, Congress, and specifically, Senator Warren from Massachusetts and some others, have issued requests to various private equity companies in relation to a specific healthcare system and its private equity firms, because there are a lot of hospitals that are closing, there have been a lot of adverse patient outcomes, and a lot of patient deaths as well. In turn, the private equity company maximized its profits and sold out the real estate and other assets from underneath the hospitals.

So, again, you need to be very conscious of the practices, and if you’re looking to be acquired, or have a majority ownership interest, in particular by a private equity firm, just absolutely make sure that you’re doing your due diligence in asking the questions regarding the adverse impact on patient care. What’s going to be happening with the monies, what is the anticipated rate of return, and is that reasonable in light of legal patient care obligations?

Is that helpful, Grace?

Grace: Yes, very much so. That’s really interesting, particularly the example you brought up that shows that private equity firms may indeed be held liable under the False Claims Act. And the scrutiny on the impact of quality and accessibility of patient care, it seems like an especially important component of private equity in healthcare and the trends that we’re seeing.

Rachel: Absolutely.

Grace: So, I’d love to kind of finish up with the question: What compliance and due diligence suggestions do you have for healthcare providers and facilities considering private equity?

Rachel: That’s an excellent question, Grace. And if I can distill it down into three compliance considerations, first, I would say look at the HHS OIG compliance guidance and use that as a roadmap, because those parameters will give you a good guide as to how your organization needs to comply. From there, and how that translates into due diligence, normally, when I’ve been involved in mergers and acquisitions or I’ve helped startup companies, we have a checklist. And so, helping to create a checklist and questions and answers for due diligence is very important. And some of what we discussed here today, Grace should be included.

And I would specifically, if I could pick three questions under due diligence, I would specifically look at, first and foremost, what cost cutting measures are you proposing? Secondly, how is the anticipated rate of return going to impact, potentially adversely, patient care? And lastly, why do you want to take these steps in order to make our operations more efficient? And those three questions will give an entity a good roadmap there.

Lastly, in terms of compliance, I would suggest looking at what compliance guidance looks like from the Department of Justice. And the reason I say that is, if you are on the defense side of a False Claims Act case, you have the framework as to what the DOJ will consider constitutes an adequate compliance program.

And then, as really, the bow on what I just outlined, I would absolutely keep a pulse on what government agencies are issuing in terms of press releases, in terms of guidance, I would look at what Congress is doing. Take a look, and do a search on congressional hearings and private equity in healthcare. And that will keep you abreast of the areas of potential changes in regulation.

It can also help you, as the acquiring company, sidestep legal land mines, as well as the entity that is being acquired, ask more prudent questions.

Grace: Thank you, Rachel. This has been incredibly insightful, and I appreciate you taking the time to speak on this important topic.

Rachel: Thank you Grace. And if you don’t have any more questions for me, again, it was my pleasure being here with you today and I appreciate your questions and raising awareness on this issue.

Grace: Likewise. And to our listeners, thank you for tuning into 1st Talk Compliance. I hope you learned something new to take with you. If you have any questions about anything you heard today, we’d love to hear from you. You can get in touch by emailing us at [email protected] or by visiting the First Healthcare Compliance website. Until next time, take care and stay informed.

Grace Walsh speaks with Kevin Chmura, CEO at Panacea Healthcare Solutions, to explore an extremely timely topic: price transparency and its far-reaching impact on how healthcare providers interact with consumers, with each other, and with the market at large. Tune in as Kevin shares some important insights about how price transparency has opened the door to a whole new world of data analysis and strategic business strategies for healthcare providers, and covers what we might expect to see for the future of price transparency. We also include some key resources for listeners hoping to boost their knowledge of CMS price transparency regulations and learn how they can leverage price transparency data to empower their own strategic initiatives.

Episode transcript available below.

Grace: Hi, Kevin. Welcome. It’s great to have you back.

Kevin: Thanks, Grace. It’s great to be back.

Grace: So, price transparency. We’re several years into the CMS regulations. Could you give us a recap of where we are now with price transparency?

Kevin: So, price transparency has been around for a few years now, as you pointed out. I think it would take the entirety of this recording to really catch everybody up. So, what I’ll do is, I’ll fast forward right to where we are right now, but I’ll encourage you all, if you don’t have a good frame of reference, feel free to go to our website, panaceainc.com There we have a lot of content and webinars and other things we’ve done that were really catch you up on high levels of detail.

I’ll avoid the detail today, but what I will say is that in the 2024 rules for machine-readable files published by the Centers for Medicare & Medicaid Services (CMS), there were some newly introduced complexities to a number of fields and other compliance rules, coupled with an increase in scrutiny into the quality of the files and a compressed amount of time that any provider has to get compliant if they receive an out-of-compliance letter from CMS, all of which has caused an uptick in both paying attention to this and also it’s really caused a lot of kind of heartburn for healthcare providers right now.

Most have taken price transparency seriously but have treated it as a bit of a side project. People are starting to realize that it’s not going away, that it’s difficult to be in compliance and that there are real penalties for not being in compliance. The 2024 new rules really underscored that CMS is scrutinizing the files that are being put out there and they’re advancing towards the goal of providing information that consumers and other entities can use with the goal of driving down cost.

So as they analyze what’s out on the files in their original requests, they’re continuing to revise that to make it better. Each one of those annual revisions, though, causes lots of complexities, and then it’s also causing a fair amount of inconsistency in the files that are being produced, because you think you have it set and then you realize as you publish your next file, you get the next set of rules and you’ve got to almost start all over again from time to time.

So do the catch-up from Panacea—we share a lot of information there—but pay particular attention, if you’re new to this, to some of the complexities in the 2024 rules.

Grace: Thanks, Kevin. So, Kevin, from your perspective, what does the near-term future in price transparency look like?

Kevin: Yeah. And that’s a great question because we’re very focused now on where we’re heading with all of this. So, as I’ve mentioned before, there are annualized shifts in the rules that make compliance complicated. I think it’s fair to say, given the past trend of other major initiatives from CMS, that eventually that year-to-year shifting of rules will settle down, that there will be little tweaks here and there, but that you won’t really need to shift your mindset year over year. It’s not really in the nature of CMS to do things that way anyway.

If you think of price transparency not as a compliance requirement, but if you thought of it as a product going out to market, that’s when you’d move into what we would typically call the “acceptance phase,” meaning the early adopters have done their thing, the mavericks have been out there, they led the way, and now everybody understands and accepts what they need to do, and they’ve gained some level of proficiency in getting compliant with the rules.

What we’re looking forward to in the acceptance phase, as I call it, is that that’s when the quality and reliability of data that’s being published by both providers and payers will improve greatly. And right now, because of the shifting complexity the difficulties in compliance year over year, the files lack a level of consistency. So, we can look at a given provider’s file year over year and really see shifts in the quality of the data that’s coming. We’re also in the business of producing machine-readable files, and while we’re proud to say that our files have reached 100% compliance with CMS rules, I will attest that it’s difficult and the data quality and validation is often the last thing that’s done after you just create the file itself.

So once we move into that acceptance phase, once we start to really be able to rely on data, that’s when to a certain degree producing the file will be somewhat commoditized. Today it’s highly important that you’re focused on that, because there’s a high level of scrutiny. Once scrutiny starts to die down because people are generally compliant, that’s when you need to start to build out a strategy that says, the data is good, how else can I use it, right? What can I do with this? If the ultimate goal of price transparency rules was to drive down cost, there’s lots of ways that can happen, not just the consumer shopping, but also the providers finding ways to either increase revenue, gain market share, or drive down their own costs and pass those savings back on to the consumers.

And there’s a number of business opportunities that we think are presented through the use of the data that are already emerging now and that will only get better as time goes on.

Grace: That’s interesting. As you mentioned, providers now have some experience navigating price transparency compliance requirements and meeting those initial regulatory requirements. Now that we have some experience under our belt, how should providers think about the long-term future of price transparency?

Kevin: Yeah. As I said before, price transparency is here to stay. It’s survived several administrations at this point. We’re into an election year, I think regardless of the next administration, we don’t anticipate that it would go away. There may be changes to how the rules work, but we’re looking at this as this will become as embedded in the system as HIPAA was when it first rolled out.

So, when you think through the long term, as I said before, moving past compliance, moving past the commoditization of the data, that’s when you really start to need to think about how can we put this data to good use. And really what you’re saying to yourself there is not our data; I’m a hospital. I produce my file, I publish it, I put that out there. Everybody can see it. All of my peers, all of my friends, all of my competitors, they’ve done the same, right?

In the near long term, if you will, the medium term, I think the first thing to be thinking about is, how do you access and interpret the data, right? These are massive files that are being produced, often hundreds of thousands, even millions of lines. Tons of columns, lots of data, and just breaking them open can be complicated and a little bit mind-numbing.  When you look at it and so, you know, medium term, what we’re telling people is: either develop tools internally or find tools that you can use to access and analyze the data and start to familiarize your entire organization with your data and the data from your competitors.

It’s not the job of, say, a Chief Financial Officer, Chief Compliance Officer, even the CEO of a health system to think through all of the uses of this data. If you introduce it into your organization and say, look at this interesting thing we found from the hospital down the street, what they’re reimbursement rate is for this particular service from this particular payer—let the ideas bubble up through the organization to say, you know, what we could do with that is X or Y or Z. And those ideas are out there. There are probably people in your organization today that are just starved for data. They have some good ideas. They don’t have the data to support bringing something say to market or to bring something up through the organization to make suggestions. What we’re doing with price transparency is, we’re opening up a rich data source—a valuable data source—to everybody.

In earlier parts of my career, I spent a fair amount of time working with the managed care departments at hospitals and health systems, and we did contract modeling and contract negotiation support, those types of things. And we would sign myriad NDAs promising that we wouldn’t disclose negotiated rates from any given pair. Everybody felt like they had the best rates and they didn’t want the guys down the block to know what those were. Well, that’s all out there right now, right? That all gone, right? It’s out there. It’s available. Anybody can go download it right now, and with the payer files, if you can break those open, which is a challenge, but once you’re able to do that, you have that data updated on a monthly basis. So, it’s very timely and detailed as well.

And so the first step in the long term is find some tools, get your hands on some data and really start to familiarize your whole organization with what’s out there, both for your data and then how it compares to your competitors. And so that comparative set of analyses and tools [is] likely the first stop in the long-term use. And then, think creatively; start to think through how you can use this data to benefit yourself. And we have some progressive customers now that are already starting to move past the phase of, “Okay, we just need to have compliant files” and [onto], “What can we do with this data?”

Grace: That’s great. I’d actually love to dive into the specifics of how Panacea’s customers are using, and planning to use, price transparency data. Could you expand on that?

Kevin: Yeah, sure. So, you know, we have been leaders in the price transparency services really since it was invented. Our background was in chargemaster optimization and strategic pricing, and when you think about what price transparency represents, in some ways it’s the offspring of those two things, right? And so we were natural contenders to move into this business. Our customers turned to us when the first sets of rules came out and asked us to help them, and we built a pretty robust business around it.

From the very beginning, though, we could see that, okay, this is very important, producing a machine-readable file, a consumer display, a good faith estimate—I’m focusing a little bit on the CMS rules, but really all of the price transparency rules, we’re immersed in all of that—but we can see from the beginning that the publishing of machine-readable files and accessing them was going to open up some opportunities for our customers and their competitors to learn a lot about each other. And so, from the beginning we started developing products that would help in the most logical ways. And then we’ve watched our customers use data beyond our tool set. So, I’ll touch on a few of them.

First and maybe the most obvious, if you will, is using price transparency in contract negotiations with your payers. Back in the old days, we would play poker with the payers. We didn’t really know what anybody else around the table had in terms of their cards. Now you do. Right? Now you can look at a payer’s file or your local competitor’s file and drill right down to a payer, a product, a service, and say, this is the reimbursement that they’re getting for it.

The one thing we caution people is, you know, what they’re getting for any given service—you don’t know why. So negotiations take on many forms and their customer may have given a little bit here to get something there. So we give a level of caution, but in the simplest terms, having additional information to go to battle with your payer negotiations is always helpful. We have a product in the market right now called RateAnalyzer™ that does exactly that, and it organizes and speeds the process, but these are things if you’ve got access to some good data tools, you would be able to do yourself.

So, contract negotiations, that was the obvious one. What we’re seeing customers do that’s really interesting to us is starting to integrate this data into other business and into other business initiatives. One of them is marketing. And so, we’re starting to see customers look and say, we’re the best value in the market. We’re looking at this service, our underlying charge, our negotiated rate for this, we’re comparing that to our local competitor who is in the area that this patient may drive to get this service. And now we’re going out to the physicians. We’re putting together marketing campaigns to say not only is our quality better than everybody else’s, but our value is better than everybody else’s, and you’re likely to walk away with a smaller out-of-pocket with us because of the negotiated rate that we have.

Every hospital relies on patients walking in the door every single day, and many of them over the last couple of decades have really become experts in marketing their services.

Really coupled with that as business development, so taking it one step further, not marketing a direct service necessarily to a set of patients, but rather we’re thinking about opening up a clinic in this area, a clinic of this discipline in a particular geography, or a series of [clinics], and we don’t really have these covered in our managed care contracts or we’ve never really focused on this, and so it’s not something that we feel like we’re being reimbursed appropriately for, if we were focused on it. Let’s look at our competitors who already gained some market share in this space and see what they what they have right. See what they’re getting from any given payer, understanding, you might not be able to get there all in one shot. But does the market really open itself up to a profitable business for you, or at least a break-even business for you? Is this a good business move? Will you ever be able to get the rates you need to sustain the service?

Putting mission aside for just one second, you know, without margin, there is no mission at most hospitals. So you use this as a business development tool to say, can I do some market analysis that says this is a good move, I can sustain this; and running it across multiple payers, because all of that data is available to you. So, the business development teams at a number of our customers have asked us for help pulling some specific data for exactly that purpose and that’s a really exciting development.

I’ll just touch on one more, just in the interest of time, that we’re seeing as well, and this is a major trend that’s always happening in our space, and that’s mergers and acquisitions.

What we’re seeing in services is folks now using price transparency data as a way to identify targets. These guys have a great contract with payer X, Y, and Z. We know that they would be amenable to an opportunity. Let’s go and approach them proactively, not wait for them to put together a request for proposal for partnerships, but let’s be first to the market and try to preempt them doing that to see if we can’t move something forward.

Price transparency data coupled with just a little bit of usage data—which, by the way, you can get from CMS for most providers—really gives you a chance to take a look and say, okay, we can do something with that potential target. So that one’s really exciting. That one’s probably the one that’s most recently emerged and one that I think, because of the nature of it and some of the players that are in it, will very rapidly move to the forefront the use of price transparency data.

Grace: It sounds like price transparency data is really revolutionizing how providers approach contract negotiations and proactively enhance their business initiatives, and that requires a good deal of adaptability as the marketplace changes. In your experience, what are some potential barriers that healthcare providers might face when it comes to getting their hands around price transparency data and putting it to good use?

Kevin: Well, first, just the size of the files creates technical challenges; if you want to use payer data, they’re big. It’s hard to even download the files given today’s systems. Provider files are a little bit more manageable, but because of the various formats that you can publish in and still be compliant, there is no single tool or set of, say, loaders that you could write that you point it at every file and it will load clean. You really have to approach every single file individually, which often exceeds the technical limitations of a lot of our customers, which is why we build tool sets around that.

And then understanding the data, right? So, now you’ve loaded it, you can see it, but really understanding, well, what does this tell me? Remember that anybody that’s spent any time with these files, that there are different reimbursement methodologies that greatly vary. So, any given amount that you would read on a file, so a case rate versus a DRG rate versus a percent of charges, you can have a very, very different output number there. And so, understanding that—which, thankfully, CMS required as a field in 2024 to really give you that context—but you really need to pay attention to what you’re looking at, certainly before you use it to make any decisions. Though, people with familiarity of the reimbursement system and healthcare finance can generally get up to speed very quickly once they can get their hands on the data.

Grace: Great. Thank you. What should providers be doing today to stay current on regulations and prepare for future changes?

Kevin: Yeah, that’s a great question. We’re covering the future here, but I’ll take everybody back to the present. You know, our first advice to everybody is get compliant if you are not comfortable with your current file. If you have a vendor you’re working with, really scrutinize the output that your team or your vendor is putting out there. Make sure that it’s going to be compliant.

What we’re seeing today from CMS is much more detailed letters; when a prospect comes to us and says that they received this letter from CMS, we can tell that CMS is looking at the files. It’s not just simply, do you have one or do you not have one? They can see deficiencies in the files and they’re only going to get better at that, so get compliant, avoid penalties, avoid headaches. That’s always number one.

Then, once you’re there and you start to think about the future, start to really understand who your peers and competitors are. If you’re going to look at somebody else’s data, who do you want to see? Why do you want to see them? Make sure your peers and your comparative groups are relevant. You know, are they of an equal size, payer mix, geographic type, right? The hospital down the block really could be very different than you, and looking at their information can be interesting but not necessarily relevant. And because you’ve got now access to data from across the country, you can build a peer group of really anybody now. So, understand who your peers and competitors are as you start to use and appreciate the data.

And then the last thing is, assess some tools, build them yourself or buy a few, and then the advice we’re giving everybody now is think creatively. Find a partner that can help you if you need it, find some creative folks in your organization that can use the data, but as you open up the data and what it can do to your whole organization, really start to get those creative juices flowing to say, wow, this is something we’ve never had before. It’s information that we can use to analyze ourselves. It’s information we can use to benchmark ourselves against ourselves, payer to payer, that type of thing, but also all of our peers, competitors, friends in the market, those that have been successful—now you can try to start to understand why. And think of uses beyond those that I said, business development, marketing, M&A—they’re out there.

I’m excited to see where price transparency is going to take some of the leaders in this industry. I think we’re going to be amazed when we look back a few years from now that, you know, in 2024, we’re worried about just getting compliant. Can you imagine a few years from now we’re going to look back and say, well, I can’t believe that that was what we were worried about given everything we’re doing with the data now. So, it’s exciting times ahead and I’m really looking forward to seeing what everybody can do. I’m excited about what we’re doing at Panacea, but we’re just one player in a growing market of both hospitals and vendors that are out really trying to empower people with this data.

Grace: Yeah. Lots of potential. Well, I think we’re about at time. Thank you so much for that well-rounded account of where we are at with price transparency. It was great to talk to you.

Kevin: Yeah, Grace. Thanks so much. We’re passionate about this subject matter. We love it, we’re immersed in it. It’s exciting times, and so look forward to our next conversation.

Grace: Likewise. And to our listeners, thank you for tuning in to 1st Talk Compliance. I hope you learned something new today. If you’re interested in learning more about this topic, head on over to Panacea Insights to explore our complimentary content library of articles, podcasts, and webinars.

Until next time, take care and stay informed.

In our current healthcare climate, it’s more crucial than ever to maintain defensible and rational healthcare pricing while remaining competitive and optimizing net revenue. As Panacea’s experts can tell you, it’s a tricky balance to strike—but the benefits of a strategic approach to hospital pricing are well worth the effort.

Tune into this episode of 1st Talk Compliance to hear from Govi Goyal, Panacea’s President of Financial Services, and Brian Prokop, SVP of Financial Consulting Services at Panacea, as they share their tried-and-true approaches to developing defensible pricing strategies, and learn how these measures can position hospitals for success in the era of price transparency.

Episode transcript available below.

Grace: Hi, Brian, hi, Govi. Thank you so much for joining me today.

Let’s kick this off with a question about the value of strategic pricing. How does Panacea’s strategic pricing engagement help hospitals develop pricing strategies that are not only defensible but also based on a careful analysis of cost and/or market data?

Govi: Yeah, absolutely. I can jump in here. So, I think it’s important to just talk about, you know, now more than ever, how important defensible pricing really is.

Patients are getting more and more knowledgeable. They’re shopping around, they’re questioning things that look off to them. I would say consumerism is really at an all-time high. And, if you think about it, price transparency is not going away. You know, it’s a requirement that is only expanding both the hospitals and payers have to conform to. There’s the No Surprises Act, where you have, every self-pay patient is required to get a good faith estimate—so there’s a ton of exposure out there to a hospital’s or provider’s prices where it’s even more important now to be able to be defensible.

And it’s not even just for the self-pay population. If you think about it, even if you have insurance, likely you have a deductible and there’s a lot of folks out there with high-deductible health plans.

So, price matters. The higher the price, the higher likelihood that as a patient you’re going to have to pay more.

And again, even if you have insurance, there’s still a lot of payers out there paying on a percent of charge.

So, the chances are that patient is going to be impacted. They’re going to pay more, whether they’re self-pay or insured, because of that higher price, that higher negotiated rate. And Medicaid hasn’t expanded yet to all 50 states. So, there’s still that donut hole and there’s still a significant population.

The other piece is defining defensible prices. A hospital needs to explain how they arrived at their pricing. Is it based on cost? If so, how much? Is it 3 times, 4 times cost? Is pricing based on Medicare payment or reimbursement? Are you 2 times, 3 times APC? Is it based on market data? If it is based on market data, then how much higher or lower than the market should it be and what’s considered the market?

All of these are applicable when we’re trying to get to defensible pricing. Again, you have to be able to explain.

So, here at Panacea, we collaborate with our clients and we gain an understanding of what their current pricing philosophy is, and we work with them to create a road map for their future price clauses that they so they can get to defensible pricing.

But I think Brian could definitely share more and draw upon his experience. Sometimes it is a little difficult to get to good cost data, or even good market data. But I’ll defer to Brian to talk more about that.

Brian: All right. Thanks, Govi. A little bit more about our how Panacea treats hospital pricing: it’s really around looking at market data, looking at cost data, taking a look at those Medicare rates, existing payer contract terms, and really looking at what components of those contracts are going to impact price changes, and where do you stand in the market? How can we align you closer to the market and not have a huge impact on your net revenue there—not negatively impact that net revenue?

That is what we look at when we’re looking at developing a defensible pricing strategy.

Govi: Yeah. So, we have an audit trail basically that will tell you, for every single line item, essentially what that methodology may be, and that can become really helpful if, at any time, the hospital is put in an awkward position where they need to defend their prices.

Grace: I know the term “transparency” came up in that response, and this is a concept that’s likely going to surface a few times through our conversation today, including this next question.

So, in the context of hospital pricing, how does Panacea’s approach establish clear and documented rationale behind pricing decisions? And why is this transparency crucial for both internal understanding and external communication?

Govi: The keyword there—I picked up on two keywords you mentioned. One is “decisions” and the other is “communication.”

You know, Brian and I can tell you, there’s a lot of decisions that need to be made in strategic pricing, especially before any of the fun financial modeling can occur.

I think most importantly, we need good alignment in what the scope and approach will be. So, for example, we talk about the scope. Some of the key decisions to be made are: what service lines do you want to focus on? In addition to your ancillary areas, surgical cardiology, radiology, are you also including pharmacy and supplies? Those can take on a project of their own. Do you also want to do professional in addition to hospital pricing?

So, we have to be careful about not trying to bite off more than we can chew.

And you also have to consider your payer caps, so even if you want to focus on all these different areas, you may not have enough revenue to play around with because you’re restricted. Certain payers may have a percentage cap. Maybe Cigna says 2% and Blue Cross is 3%. You can’t increase your gross revenue higher than those caps. You have some restrictions to consider.

But a lot of these decisions need to be made at a high level at leadership level for clients, especially when we talk about what we want to include in the scope, so there’s tremendous communication that needs to happen across different levels.

Panacea, we can make some recommendations. We can look at the market analysis, we can look at contribution factors, which we’ll talk about a little more. We talk about the modeling, but that allows us to basically see where you get the most bang for your buck, and we can also see where you have the most risk—where your price is little too high or too low compared to the market.

You know, another decision that particularly we work with our clients is when we do that market analysis, we have to determine and work with our clients to figure out what peers do we want to pick to be able to do our comparisons with, and what do you consider a peer.

I think Brian can share some thoughts there on when he’s working with the clients to help them pick that solid peer group.

Brian: All right. So, for clients, in selecting their peer groups, the stuff I typically would go over with them is understanding the size of the provider; who do they deem to be their most ideal competitors, or who are they most in competition with in their area? When we’re looking at this, we may start out and look at it from a mile radius perspective, but there may be some providers that we don’t want to include in that selection. An example is, if you’re large short-term care hospital probably don’t want to be compared to a critical access hospital if they’re within the mile radius you’re searching there.

When we’re looking at peer data, one of the questions that does come up from providers is, you know, what should I utilize? Should it be a weighted average or should it be a percentile? Here at Panacea, one of the things we lean towards is trying to push that provider to utilize the weighted average versus a percentile.

One of the key pieces to why we do that is, if you’re using a percentile, you’re not taking into account the volume of a service that that provider is performing, whereas if you’re using a weighted average of that, you’re taking into account which are the big players for this service. If you’re using a percentile, there may be a provider in that percentile base that maybe only has one unit of that service. They’ve only done one.

So, it’s not going to necessarily make sense to use a percentile, and it may, you know, put you in a worse position in the market than you really are in comparison to the main competitors out there.

Govi: Yeah, that’s well said, Brian.

And you know, some of the other decisions that are, I would say, maybe a little bit easier for our clients to think about it as, are there certain items in your in your chargemaster that you want to freeze; for whatever reason you want, they need to remain untouched, and we have to make sure we don’t unintentionally restructure those prices. Or there could be other items where there’s a relationship.

For example, generally speaking, services that can be done all throughout the hospital—they can be done in different cost centers, emergency nursing stations, respiratory—they have the same HCPCS code, so we generally align them with the same price. But hey, if it’s done in the Emergency Department (ED), our costs are higher. So, we want the prices to be higher in there even though it’s the same service.

So, clients may have relationship where they say, all the price needs to be 1.5 times higher in the ED. Or maybe there’s a dependency between professional and hospital pricing where the combined price has to align with other services, or the professional prices should be a percentage of hospital prices, or there are multiple facilities the organization and there has to be a relationship there.

So, there’s a lot of dependencies and decisions that we typically walk through to make sure that we incorporate them into the model.

Going back to the communication piece to it, you know, every everyone involved, even including the chargemaster (CDM) team—so, the CDM team may not be responsible for the strategic pricing, but they are responsible for adding new services to the CDM, so they need to know too what kind of strategy is put into place, what’s the methodology, so that when they’re adding new services to the CDM, for example, that they set the prices accordingly and it’s aligned with the overall strategy.

Grace: Okay, got it. That’s actually a great lead-in to our next question, which is going to focus on the chargemaster.

Could you elaborate on how Panacea ensures that chargemaster, or “CDM,” prices are not only defensible but also optimized to yield the optimum net revenue for hospitals?

Govi: Yeah, absolutely. So, there are the basically two main goals that were seeking to accomplish with strategic pricing.

One is being defensible, which we’ve been talking about in great detail here, and that’s all to do with just being able to explain how you arrived at your prices, being market sensitive, and so forth.

But the other piece, which we haven’t touched upon yet, is the net revenue aspect and working with hospitals and health systems and providers to make sure that we meet their financial goals and not only get them more in line with the market, but also optimize their net revenue so it’s greater than what they would have gotten if they just did an across-the-board.

But it’s important to know that these aren’t competing goals. You can decrease your overall peer position—and let’s hypothetically say you’re 5–10% above the market and you want to bring that down a couple percentages—you can decrease that, but still be able to get a net revenue increase that’s possibly greater than just doing an across-the-board.

This is very difficult to do if you don’t have a really sophisticated modeling tool. You have to have a modeling tool that’s able to handle many, many objectives, different parameters and constraints. This is not something that you can simply do in Excel or Access.

And so, at Panacea, we continually evolve our modeling capabilities, which is able to support a more accurate gross and net revenue calculation from any price changes and be able to support these multiple objectives: both defensible [pricing] and net revenue goals, at the same time being mindful of any constraints like payer caps.

But just to kind of deep dive here a little bit on some of the modeling capabilities here that I think are important: getting to accurate modeling is critical because oftentimes payers will scrutinize and do an audit and you have to be able to show the payers your analysis to support your price increases in the event that an audit does happen.

So, one of the unique things we do is we will take the usage data and we’ll take it at the payer plan level, but also the patient class level. For example, if a typical hospital working with does 1,000 EKGs in a year, we need to see the breakdown. What percent of those are Blue Cross Blue Shield, HMO, outpatient? What percent are Cigna, PPO, ED or inpatient? And so forth, because each of those different categories—depending on the patient class, the payer, the plan—could have a different reimbursement rate, different payer percent charge paying.

So, to get to that granular level and incorporate that can really optimize your net revenue calculations.

I’m just kind of hitting the surface there. I’ll put Brian on the spot here a little bit. Brian, do you want to talk a little bit more about the modeling process, whether you want to talk about maybe some of the other reports? And also, we haven’t talked about stop-loss/lesser-of; that might be good to weave in too.

Brian: Yeah, I can elaborate on that, Govi.

So just some of the other stuff in relation to modeling that we have the capability of doing is not only, you know, using market data, using Medicare rate, using commercial contract rates in developing that rational defensible pricing strategy; it allows us to develop a model utilizing all those factors as base factors there, but then we can also make adjustments to these based on specific service categories like labs, CT, MRI…we can break that down even further if we want to, to the revenue code level and to take it even further steps down to that individual CPT code, if we need individual changes made to those, as well as the service code within your CDM. We can do individual code adjustments as needed to align with the market and, you know, potentially optimize or improve net revenue for the hospital.

So, from that data we can generate reports. Govi mentioned the audit trail report, but there’s numerous other reports that you can see, what is my gross and net impact as well as market position by service category by revenue code, by department, by individual payers. You can see that information when we do these analyses.

Another thing that we’re able to provide with the extract is when we do provide it out to hospitals, it also has what’s known as a user price override section where a user can go into the exported data, make a change, and they can actually see what the impact is going to be on gross and net revenue by making that change within the export itself there.

Other things I think about here as well, when we’re talking about modeling and everything we take into consideration, you know, I put it into four different buckets:

You have your percent of charge contracts or components of a contract that are percent of charge; you have your items that are line item fee schedules that are at risk from a line item lesser-of; you have your case level components, which can be at risk for case level lesser-of such as DRG’s case rates and whatnot; and then there’s also stop-loss and outlier provision.

How is this pricing strategy impacting those four areas when we’re making changes?

So one of the things that we do to make sure that we’re not negatively impacting lesser-of or stop-loss is, we take your claims data, run the new prices through, and identify how are we impacting case level lesser-of; how are we impacting line item lesser-of; how are we impacting stop-loss and outlier provisions; and how are we impacting those percent of charge components of the contract to see what your overall net impact is. Is it better than what you would have received doing an across-the-board increase and are we aligning to market?

Grace: I see. Thank you. A lot of considerations there.

So, we touched on this earlier a bit, but how does the growing demand for price transparency place increased pressure on hospitals to be transparent about their pricing structures, and what challenges do they face in justifying the costs associated with medical services?

Govi: Yeah, hospitals are being asked to a lot, aren’t they? Not just this year, previous years too, but especially this year, as many are aware, starting in July of this year—and believe or not, it’s going to be here before you know it, at least CMS allowed for that grace period—there are substantial new requirements that are that are hitting the machine-readable files. If you think your machine-readable file is big right now, it’s probably going to double in size.

That puts a tremendous amount of pressure on hospitals to comply with these new requirements, because some of these requirements are really going to change the way hospitals have approached putting together their price transparency files. Gone are the days where you can just rely on claims and payments data. You really need to be leveraging your actual payer contracts, because CMS is requiring you now to put in the charge methodology, which is really the rate methodology—are you getting paid by case rate, per unit, fee schedule, and so forth, right?

And then further down the road, in January of 2025, there’s going to be additional requirements in pharmacy, which can get complicated because you have to interpret data from the formulary and put your unit and type of measurement in there.

There’s also the estimated allowed amount, which I’ve seen a lot of questions from hospitals in the community about, which requires the combination of claims data, payments data, payer contracts, for instances where clients might be getting paid a percent of charge on a DRG, or maybe they’re stop loss lesser of provisions, where there’s not a standard negotiated rate, right?

These are not easy asks. You can take that and combine it with the good faith estimates, right, which give more exposure to your pricing and are also very difficult to produce that itemized estimate.

So, enforcement is increasing. We know that. CMS is reducing the window, they’re going straight to corrective action plans, so they’re bypassing the warning letters, and if they identify errors in your file, you no longer have 200 plus days to fix it. You only have 90 days to correct it, and if you don’t correct it, you can get hit with penalties, and so you have to be able to be ready to update your files and be able to provide contracts or additional data that CMS may request.

The Patient Rights Advocate group is out there. Again, as I mentioned earlier, you don’t want to be in the newspaper, you don’t want that public shaming. Now, they’re probably more about making sure that hospitals are displaying their prices versus pointing out where prices might be too high.

But, you know, I’ll tell you, there’s still a lot of variation out there in prices and rates. And Brian can tell you too, you can look at two hospitals that are right down the street from each other, they’re both about the same bed size, teaching status, not for profit, and you look at their machinable-files and there could be a ton of variation in how much they’re charging and how much they’re being reimbursed for the same services or the same payers.

I mean, the jury still out on whether or not overall healthcare expenses are going to go down and who’s really benefiting the most: is it the patient, hospital, or payer?

But I do think with this increased pressure in transparency and, you know, hospitals being able to have to justify the prices, what we’re going to see is probably some of that variation not entirely go away but be more consistent. If hospitals are benchmarking their prices, they’re going to start to get more in line in the market. If payers see that other payers are reimbursing more or less, they’re going to try to justify to pay less to providers.

So it’s this game that’s going to be played over again, and I think we’ll over time we’ll start to see that variation start to go down.

Grace: Yeah. Like you said, there’s a lot of pressure on hospitals right now.

We’re about at that time. Thank you both so much for joining me and sharing your expertise. And to our listeners, thank you for joining us for our conversation today. I hope you learned something new to take with you.

If you have any questions about anything you heard today or if you want to continue the conversation, please visit Panacea’s website at www.panaceainc.com or reach out to us on social media.

Stay tuned for more thought provoking episodes on 1st Talk Compliance. Until next time, take care and stay informed.

In this episode of 1st Talk Compliance, Grace Walsh is joined by Becky Jacobsen, Vice President of CDM, Coding & Audit Services at Panacea Healthcare Solutions, to explore the key updates to Evaluation and Management (E/M) guidelines for 2024.

On the surface, this year’s changes may appear fairly straightforward, but dig a little deeper and you’ll find that the updates have important implications for correct coding procedures. From payers, providers, and coders to those who work in auditing or IT template development, it is essential to keep up a comprehensive grasp on E/M coding guidelines. Tune in as Becky breaks down a few of the most significant guideline updates, clarifies some common areas of confusion, and shares her insider tips as an expert in the field of coding compliance auditing and education.

Episode transcript available below.

Grace: Hi Becky, welcome. Thank you for joining me today.

Becky: Thank you, Grace.

Grace: Many of our listeners are likely familiar with the term evaluation and management, or E/M. But for anyone new to this subject, could you give us a little background on what E/M is?

Becky: Sure can. Evaluation and management services are utilized for problem focused visits performed in all healthcare settings. These are cognitive services in which a physician or other qualified healthcare professional, which I’ll refer to as QHP throughout our podcast today, that is where they diagnose and treat illnesses or injuries.

Code selection in most of our categories of E/Ms are based on either time or medical decision making. It is truly important for providers, coders, auditors, educators and template developers to understand the E/M guidelines to maintain compliance with coding and documentation.

Grace: We’ll dive deeper into these in a moment, but could you give us an overview of the key changes to E/M guidelines in 2024?

Becky: Sure. I picked up just a few of them that are out there. There’s much more, some new codes that are out there as well that will be interesting as we move forward.

But broadly, the following areas we have are: Shared or split care visits, those have been changed; multiple E/M services on the same date of service; they gave us some instructions on the proper use of hospital, inpatient or observation services, which do include our same day admit discharge codes 99234 through 99236; and there’s a new G-code for CMS out there for evaluation and management visits that are part of an ongoing longitudinal care relationship. Those are gaining quite a bit of interest and attention.

One of the things to mention is, as we typically encounter, CMS (the Centers for Medicare and Medicaid Services) as well as the American Medical Association (AMA) do not have the same guidelines for some of these changes. So, we always need to be looking at our carriers and how we need to code for those services rendered.

Grace: I see. That must add an additional layer of complexity to these.

Becky: It sure does.

Grace: Let’s focus in on split/shared visits first. First of all, for anyone unfamiliar with this term, could you tell us how split/shared visits are defined?

Becky: Yes, a split/shared visit is when services are provided jointly between a physician and a non-physician provider who both work in the same group and same specialty. So non-physician providers are typically our PAs or our NPs.

You do have to note that AMA guidelines indicate that when [an] advanced practice nurse and physician assistants are working with physicians, they are considered as working in the exact same specialty and subspecialty as the physician. However, CMS has indicated they will continue to not recognize subspecialties for defining initial versus subsequent services. And what that means is they do not allow providers in the same specialty but different subspecialties to report separate initial visits.

Also, with shared/split care services, the two providers may act as a team in providing care to the patient in the hospital and other institutional settings, working together during a single E/M service. The shared/split care guidelines are applied to determine which professional reports the service.

If you picked up, I stressed institutional settings are where shared/split care services are rendered; [whereas] in the clinic setting, which is typically place of service 11, incident two is followed versus shared/split care guidelines. So now we have to dive into place of service as well.

Grace: Okay, thanks for that background. So, what are the key changes affecting split/shared visits in 2024?

Becky: Okay, so let’s talk about the guidelines. Both AMA and CMS instruct to utilize either time or medical decision making to determine the substantive portion of the visit. The provider who performs that substantive portion of the encounter is the one who would report the service. Now, I feel that time is the easier way to determine the billing provider. However, in discussion with clinicians, the overall consensus is that medical decision making is actually the more relevant area.

So, let’s talk about time. That’s the easier way if both providers for shared/split care services must document their time and the level of service is based on the total time spent by both of those providers on that date of the encounter.

The billing provider is the professional who spent the majority of the non-face-to-face or face-to-face time performing the service. You have to always remember that, when calculating time with two providers involved, only distinct time can be utilized. So, if those providers are meeting with the patient together, only one of them can report the time.

I think documentation best practice is to document the start and stop times for each of the providers so that no overlapping time is summed to determine that level of service.

Jumping into the medical decision making area. Little bit of difference here again in the guidelines.

AMA requires that the physician or other QHP made or approved the management plan for the number and complexity of problems addressed at the encounter and that they take responsibility for that plan with its inherent risk of complications and or mortality or morbidity of patient management.

Now, let’s go over to CMS. They are a little stricter than AMA, so CMS indicates that there needs to be a little bit more.

CPT allows that physician to merely review the NPP’s note and add his or her signature to show he or she agrees with the NPP. CMS expects that the medical record would contain sufficient documentation to show which provider performed the medical decision making portion of the visit.

What that means as a whole is that a physician’s signature on its own is likely not enough to support billing under the physician for that split/shared care visit. So, the recommendation here would be to put a policy in place for your facility. If you’re doing a lot of these shared/split care services, you want to ensure that providers understand there’s a difference between AMA and CMS as well.

Also, CPT Symposium—always attend it every year, highly recommend it—the CPT panel determined that they were going to give a little more guidance with the hopes that CMS would adopt this guidance in 2025. What they say is, a physician or other qualified healthcare professional has performed two of the three elements used in the selection of the code level based on medical decision making.

So, remember, we have three areas for medical decision making.

If the amount and/or complexity of data to be reviewed and analyzed is used by the physician or other QHP to determine the reported level of service, assessing an independent historian’s narrative and the ordering or review of tests or documents do not have to be personally performed by that physician or other QHP. They say that this is because the relevant items would be considered in formulating the management plan, so don’t need to personally perform those in order to be the billing provider. However, independent interpretation of tests and discussion of the management plan or a test interpretation must be personally performed by the physician or other QHP if that is used to determine the level of service.

So, what they’re saying here is, if there is an independent interpretation of a test and discussion of the management plan, or a test interpretation, that has to be personally performed by the billing provider.

The provider who bills the split/shared care visit has to sign and date the medical record. However, I want to put a best practice in here. We always say, when you document you sign, so I would recommend that both providers sign and date the note.

One last comment: CMS does require modifier FS on all shared/split care visits.

Keep in mind, when we have a new modifier, it’s probably going to be watched and monitored and there probably will end up being some type of OIG RAC audit review on those. So, always keep that in the back of your mind.

Grace: Perfect. And you mentioned multiple E/M services on the same date as a category affected by the E/M guidelines updates. Let’s dive into this next. What do these changes look like?

Becky: This is interesting. Again, we have a difference between AMA and CMS.

AMA does allow reporting two services by the same practitioner on the same date of another E/M service, whereas CMS does not.

So, we’re going to talk about CPT guidelines. A patient may receive E/M services in the same or more than one setting on a calendar date. There are circumstances in which the patient has received multiple visits or services from the same physician or other QHP or another physician or other QHP of the exact same specialty and subspecialty—remember, this is CPT—who belongs to the same group practice. The hospital, inpatient and observation care services and nursing facility services are per day services. So, when multiple visits occur over the course of that single calendar date in that same setting, you only still report one service code.

When using medical decision making for that code level selection, we would aggregate that medical decision making over the course of that entire calendar date, and for time, we would sum the time over the course of the day using the guidelines for reporting time.

If we have multiple encounters in different settings or facilities—that is, the patient can be seen and treated in different facilities so they can go hospital to hospital transfer, for an example—when more than one primary E/M service is reported and time is used to select that level, only the time spent providing that individual service can be allocated to the code selection. You cannot count time twice when reporting more than one E/M service, so no overlapping here.

For prolonged services, those are also based on the same allocation and their relationship to the primary service. The designation of the facility may be defined by licensure or regulation. So, this is a very important factor to know prior to coding for those two E/Ms on the same date of service.

If you transfer a patient from a hospital bed to a nursing facility bed in a hospital with those types of nursing facility beds, that is considered two services in two facilities because you are discharging the patient from hospital over to nursing facility

An intra-facility transfer, for a different level of care—so, if you’re moving a patient from a regular unit to a critical care unit—that does not constitute a new stay. That patient is just moving within that same facility.

In the emergency department or services in other settings that can be in the same or different facilities, the time spent in the emergency department by a physician or other QHP who provides a subsequent E/M service can be used in calculating total time on that date of service when they are not reporting the ED service and the other E/M service is reported. Always keep in mind: there are no time components that are included in the descriptor of the emergency department codes.

For discharge services and services, and other facilities, each service may be reported separately as long as the time spent on discharge is not counted towards the other level of service for the subsequent service. So, you can’t double dip on your time here. This also includes any hospital, inpatient, or observation care services including those same day admit and discharge codes, because those services are also selected based on medical decision making or time. When those services are reported with another E/M on the same calendar date, time related to the hospital inpatient or observation care service cannot be used for code selection of the subsequent service.

For discharge services and services in the same facility, if the patient is discharged and readmitted on the same calendar date to the same facility, you would report a subsequent care code instead of a discharge or an initial service. For the purposes of E/M reporting, that is considered a single stay.

If you have discharge services and services in a different facility—so, if the patient is discharged from one facility and then admitted to another—that is considered a different stay. Therefore, the discharge and the initial service can be reported as long as time spent on the discharge service is not counted towards the total time of the initial when reported based on time.

Transitions between office or other outpatient, home or residence or emergency department and hospital, inpatient or observation or nursing facility—so, quite a large gamut of categories there—if that patient is seen in two settings and only one service is reported, the total time on the date of the encounter or the aggregated medical decision making is used to determine the level of service, and you would only report one E/M code.

So, a lot of information there. Remember, those are all AMA CPT directives.

Grace: So, between the split shared guidelines and the multiple visits on the same day, it seems like there’s a common theme of clarifying guidelines to avoid, as you said, accidentally double dipping when determining and reporting level of service. Is that fair to say?

Becky: Yes, that is very true.

Grace: Got it. All right, we can move on to the next topic. Proper use of hospital, inpatient or observation services, including admission and discharge. So, this encompasses CPT codes 99234 to 99236. What are the important changes to note here?

Becky: So, the goal of these updates is to provide direction on the appropriate use or label of certain types of services for coding and create consistency with CMS, particularly addressing those short stays that are less than 8 hours. There is a very nice table that was provided regarding these and how they want us to look at these.

So, if the patient’s length of stay—let’s say they’re placed either inpatient or observation, that’s exactly what we’re talking about here—if the length of stay is less than 8 hours, you are to be reporting the initial codes only.

So, less than 8 hours, you would not report an admit and discharge or a same day admit discharge, which is 99234 through 99236. Now, if the stay is 8 hours or more on the same calendar date, that is where you would use your same day admit discharge codes.

Keep in mind, those 99234 through 99236 codes are used only by the physician or other QHP who performed both the initial and the discharge services. Any other providers would be reporting initial codes

And then, you know, the same follows through, this has not changed. If it’s less than 8 hours and there’s a different calendar date, you day one would report your initial codes, and then your subsequents in between there, and then your discharge codes in there.

There were also some minor language changes. The guidelines for those same day admit discharge codes replace the word “encounter” with “visit” to clarify that these codes apply only when two separate visits—one initial admission and one discharge service—occur on the same day.

Grace: I see. Let’s move on to the new G-code. What can you tell us about this change?

Becky: All right. So, the G-code G2211 is an add-on code that is applicable only to office or other outpatient visit codes. It reflects the time, intensity and practice expense resources involved with physicians who provide these services that build longitudinal relationships with the patient and address the majority of the patient’s health care needs with consistency and continuity over longer periods of time.

When you think about that descriptor of the code, it is typically part of primary care services or internal medicine, but they are not limiting it to the type of provider who can report it. You just need to ensure that your treatment of that patient is actually addressing the majority of the patient’s health care needs and it’s over a longer period of time. So, it’s really that relationship status that we’re looking for.

One would use this code when the provider is the continuing focal point for all healthcare services the patient needs. CMS does indicate the relationship between the patient and the physician is the determining factor of when to add this code.

One little note here: You cannot use G2211 when the E/M service has modifier 25 appended to it or with 99211, which technically we define as a nurse visit.

So, for a little bit of background on this code. The studies were showing that primary care office visits were more complex than those that were conducted by other specialties. Primary care physicians can pack highly complex care into very short visits by managing all of the patient’s acute and chronic conditions, providing ongoing preventive services and counseling, and addressing behavioral health challenges and unmet social needs. So, they developed this code to cover that additional practice expense and time and the expertise for that G2211.

Medicare officials agreed that the updated office visit E/M payments don’t fully account for the more complex whole person care that is being provided by primary care physicians. Existing coding processes are better at denoting procedures than at describing cognitive services such as continuous comprehensive primary care.

Our current coding for E/M services fails to account for many of the unique services and resources that primary care physicians provide or reflect their extraordinary role in coordinating care for their patients. When you think about this, the typical primary care physician caring for Medicare patients must coordinate care, and this is on average, with 229 other physicians working in 117 practices. That’s a lot of work. And so that is where this G-code is meant to capture that and give additional payment for that work.

Grace: That’s so interesting. That seems like a really great illustrator of the constantly evolving nature of these guidelines to meet the real-world needs of that setting.

Becky: Exactly.

Grace: So, are there any other guideline updates that our listeners should be aware of?

Becky: Well, I could talk about updates to codes and guidelines for days on end. I’m going to try to choose those that are related to the E/M, seeing as that’s our topic today.

So, CPT did make two clarifications regarding data in medical decision making. I have to say, in my own personal opinion, data has gotten to be so confusing. [We are] finding ourselves digging back in the medical records to appropriately determine, can we give credit for this, can we not give credit for this? So, it is getting to be quite tedious and mundane for review purposes

For CPT, one of the items that they clarified was tests ordered and independently interpreted. First, the definition of an independent interpretation: That independent interpretation of a test for which there is a CPT code that can be billed, and an interpretation or report, is a customary part of that test. You cannot give credits when the physician or other QHP who reports the E/M is reporting the CPT code for that diagnostic test or has previously reported the test.

So, if you’re billing for the interpretation and report, of course you can’t take credit for that in the E/M. If they’ve previously reported the test, it’s a one and done for data. Once you look at it, you’re done. You can’t take credit for it again, that being the same provider or QHP in the same specialty or subspecialty.  So, some type of interpretation has to be documented, but it doesn’t need to conform to the standards of that complete report. A test that is ordered and independently interpreted may count as both a test ordered and interpreted.

Our second clarification was for an appropriate source. For the purpose of the discussion of management data, an appropriate source includes professionals who are not healthcare professionals, but they may be involved in the management of the patient. So, this could be a case manager, a teacher, a lawyer, a parole officer. It does not include discussion with the family or caregivers. And they also said, for documents that are reviewed, documents from an appropriate source may be counted towards data.

There are quite a few other clarifications provided by AMA. I’m going to briefly touch on those.

So, regarding the number and complexity of problems addressed at the encounter, which is one element utilized in selecting the level of service, AMA indicated multiple new or established conditions may be addressed at the same time and may affect medical decision making.

Symptoms may cluster around a specific diagnosis and each symptom is not necessarily a unique condition. Comorbidities and underlying medical conditions in and of themselves are not considered in selecting a level of service of E/M unless they are addressed and their presence increases the amount and or complexity of data to be reviewed and analyzed or the risk of complications and or morbidity or mortality of patient management.

Here’s an important clarification. The final diagnosis for a condition does not in and of itself determine the complexity or risk as an extensive evaluation may be required to reach the conclusion that the signs or symptoms do not represent a highly morbid condition. So, presenting symptoms that are likely to represent a highly morbid condition may drive medical decision making even when the final diagnosis is not highly morbid.

I know from my time consulting, which is a really long time, you can’t look at the final diagnosis. You have to look at how that patient presents and all the work that is done in order to come up with that final diagnosis and treatment plan. So, it’s not based on your final diagnosis and we always need to remember that.

Another clarification was regarding risk. AMA clarified that management risk is different than condition risk. While condition risk and management risk may often correlate, the risk from the condition is distinct from the risk of the management.

Talking about management risk, AMA also clarified parental controlled substances indicating that the level of risk is based on the usual behavior and thought process of a physician or other QHP in the same specialty and subspecialty and not simply based on the presence of an order for that controlled substance. So, keep that in mind.

One last item. Talking about hospital inpatient or observation care services, AMA did talk about when those services continuously span two calendar dates, meaning that they cross that midnight threshold. AMA clarified that in this circumstance, you report a single service and report that service on one calendar date. If that service is continuous before and through midnight, all the time can be applied if you’re utilizing time for your level of service.

CPT doesn’t provide instructions on what data services reported. However, CMS did indicate that you would report the date the patient encounter begins. So, again, no directive versus some directive from CMS. So, you need to determine what you’re going to do with that internally.

Grace: Got it. So, we’ve covered a lot of ground in this episode. Just to zoom out for a moment, could you speak to what are some of the common errors that you see in E/M coding? And do you believe that these guideline updates will help resolve these problems?

Becky: So, common errors. The documentation is really important. And you know, often times, I have providers that say to me if I do this and this, that’s a four, right? Well, no, I really need to see the documentation, and one of the things that typically we see lacking is the medical decision making process.

This really is the thought process of the provider and the work that they did, and we need to try to get that on the paper, which is very hard for providers to do because nine times out of ten it is a manual data entry process.

So, those providers should be educated on how to appropriately document the medical decision making process within their assessment and plan, preferably.

The guidelines themselves do clarify some frequently asked questions; however, from a documentation perspective it’s not really going to solve any problems. We still need more work and education in order to get our documentation up to where it needs to be for our levels of service.

One other thing that I have to mention that was discussed at Symposium—and this was during a Q&A session, so of course it’s not written, it was verbally said, and unless somebody transcribed that conversation, we’re probably not going to have it there. But what they said was, we are not to utilize the old table of risk. When you look at the way the new guidelines are laid out, they only give us a few examples of moderate and high risk.

I really, truly recommend that providers document the level of risk—they are the ones who know their patients best—and then add a statement indicating why the patient falls into that category of risk.

Grace: Would you say that your background as a nurse informs how you understand and educate others about E/M guidelines?

Becky: It certainly does. While I’m auditing documentation and looking to ensure that everything is supported appropriately, I have to take off my nurse hat so that I don’t make assumptions.

The nice thing about having a nursing background and still actively participating in nursing, I’m able to discuss disease processes, possible management options and treatments to help the providers document their thought process to aid in supporting medical decision making. It helps them sometimes if I can throw out a couple of ideas—”did you think about this? Did you think about that?” They’re like, well, yeah, of course I did, and I’m like, but it’s not documented.

So, kind of triggering some of their thought processes to get that down on paper is very helpful.

My nursing background also aids in assisting with template development to help insert some reminders into those templates for the sole purpose of documentation. So, just giving them those little keywords or asking them a little question within their templates actually helps drive them to document more of their thought process in the end.

Grace: What can our listeners do to make sure that they’re working with the most up to date guidelines? Do you have any resources you’d recommend to a coding professional looking to learn more about this topic?

Becky: I would recommend that you ensure providers, coders, auditors and templates are updated. I have to say, it is nearly impossible to grasp all of the changes throughout the entire CPT book simultaneously.

You also want to ensure that any vendors and any software that you utilize is up to date to make sure that you’re ensuring compliance on your end.

Panacea does always recommend a proactive approach when it comes to coding proficiency. This includes actively pursuing educational programming and conducting regular internal audits to identify those recurring errors. Audits and education are just two of Panacea’s offerings and two of my favorites.

Grace: So, there you have it. Those are some of the primary updates to E/M that we’ve seen in 2024. Today we talked about split/shared visits, multiple E/M services on the same date, and the proper use of hospital inpatient or observation services, including admission and discharge services, for codes 99234 to 99236, as well as the new G-code, G-2211, and a handful of clarifications affecting medical decision making and risk.

Thank you so much, Becky, for joining me and sharing your expertise.

Becky: Thank you, Grace. My pleasure.

Grace: And to our listeners, thank you for joining us today for our conversation. I hope you learned something new to take with you. If you have any questions or want to continue the conversation, please visit our website or reach out to us on social media. If you’d like more info about anything you’ve heard today, you can contact us at [email protected].

Stay tuned for more thought-provoking episodes on 1st Talk Compliance. Until next time, take care and stay informed.