Anesthesia Business Consultants: Communique summer09

SUMMER2009VOLUME14,ISSUE3
ANESTHESIA
BUSINESSCONSULTANTS
Anesthesiologists and pain manage-
ment physicians, like other Medicare
providers, should be prepared for
increased Medicare auditing activity.
The Centers for Medicare and Medicaid
Services (CMS) Recovery Audit
Contractor (RAC) program has been
made permanent and is expanding
nationwide, and the RACs will begin
auditing in the very near future.
Medicare providers should be aware that
RAC claim denials and overpayment
demands, like other Medicare denials,
can be appealed through the standard
Medicare appeals process.
ABC offers The Communiqué in electronic format
Anesthesia Business Consultants, LLC (ABC) is happy to announce that The Communiqué
will be available through a state-of-the-art electronic format as well as the regular printed
version. The Communiqué continues to feature articles focusing on the latest hot topics
for anesthesiologists, nurse anesthetists, pain management specialists and anesthesia
practice administrators. We look forward to providing you with many more years of
compliance, coding and practice management news through The Communiqué. Please log
on to ABC’s web site at www.anesthesiallc.com and click the link to view the electronic
version of The Communiqué online. To be put on the automated email notiﬁcation list
please send your email address to info@anesthesiallc.com.
INSIDE THIS ISSUE:
WHAT ANESTHESIOLOGISTS AND PAIN MANAGEMENT PHYSICIANS
NEED TO KNOW ABOUT THE RAC PROGRAM . . . . . . . . . . . . . . . . . . 1
RELEVANCE OF LLCS TO ANESTHESIA PRACTICE: HOW WELL
DO THEY PROTECT THE FOUNDERS’ INCOME? . . . . . . . . . . . . . . . . . . 2
IDENTITY THEFT PROGRAMS: WHAT EVERY ANESTHESIA PRACTICE
SHOULD CONSIDER DOING NOW . . . . . . . . . . . . . . . . . . . . . . . . . . 10
HOW ANESTHESIA GROUPS THRIVE, NOT SIMPLY SURVIVE . . . . . . . . . 13
WRITING YOUR CONTRACTS FOR SMOOTH ENTRY INTO AND
EXIT FROM ANESTHESIA GROUPS . . . . . . . . . . . . . . . . . . . . . . . . . . 15
WARNING: DANGEROUS PROVISIONS IN MEDICAL STAFF BYLAWS . . 16
ANESTHESIA GROUPS NOT IMMUNE FROM STARK LAW RISK . . . . . . . 18
A MODEST PROPOSAL: INSURANCE COMPANIES, NOT PROVIDERS,
SHOULD BILL AND COLLECT DEDUCTIBLES AND COINSURANCE . . . . . 22
EVENT CALENDAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Continued on page 4
WHAT ANESTHESIOLOGISTS AND
PAIN MANAGEMENT PHYSICIANS
NEED TO KNOW ABOUT THE
MEDICARE RECOVERY AUDIT
CONTRACTOR (RAC) PROGRAM
Abby Pendleton, Esq.
Jessica L. Gustafson, Esq.
The Health Law Partners, P.C.

THE COMMUNIQUÉ SUMMER 2009 PAGE 2
RELEVANCE OF LLCS TO ANESTHESIA PRACTICE: HOW
WELL DO THEY PROTECT THE FOUNDERS’ INCOME?
Aaron H. Sherbin, Esq., Jaffe, Raitt, Heuer & Weiss P.C.
Andrew B.Wachler, Esq., Wachler & Associates P.C.
Anesthesiologists may want to
consider organizing their practice as a
professional limited liability company
(PLLC). The PLLC offers distinct
advantages to other forms of business
entities, while offering substantially the
same limited liability benefits. This article
will discuss how a PLLC provides limited
liability to its owners, the nature of the tax
treatment of a PLLC, the governance of a
PLLC, and the admittance and withdrawal
of a member of a PLLC.
PLLCs are governed by state statute.
Most, but not all, states recognize and
permit professionals to organize as a
professional limited liability company.
Certainly, any anesthesiologists interested
in organizing as a PLLC should consult
with their tax and legal advisor about
whether or not their state permits PLLCs
and how they are governed as well as how
the PLLC and its members are taxed.
Specific limited liability statutes
will vary slightly from state to state.
UNDERSTANDING SOME OF THE LEGAL RISKS FACING ANESTHESIA PRACTICES
Like many of you, I am amazed at the still-
increasing volume of legal regulation affecting
the practice of medicine. Medicare has launched
major new enforcement initiatives. The Federal
Trade Commission has inserted itself into payment
systems for professional services. Those are just
two of the topics that I have asked a talented set of
lawyers to address in this issue of the Communiqué.
While we are all embroiled in trying to
influence or at least to understand the direction of
Healthcare Reform and this summer’s hot topics
of payment and coverage, let us not forget that
“eliminating waste” has always been an objective
of the Medicare and private payer programs. The
federal Department of Health and Human Services’
Office of the Inspector General (OIG) first began
publishing its “guidances” on compliance programs
for hospitals, for physician group practices,
and, yes, for billing companies in the late 1990s.
There have been very few prosecutions of private
anesthesia practices (academic departments have
experienced a much higher relative hit rate through
the teaching hospital PATH audits) – probably
because so many of us have been so careful to
satisfy the rules. We must acknowledge, of course,
that anesthesia services account for only about 2
percent of Medicare spending on physician services
(or about $2 billion on anesthesia), and that
there are providers offering far greater potential
returns to the watchdogs who uncover fraud
and abuse. Nevertheless, it is a good idea for all
medical practices, including anesthesia groups,
to follow rigorous compliance programs, and
those programs should reflect recent enforcement
activities.
First among those is the Medicare Recovery
Audit Contractor (RAC) program, the topic of the
lead article in this issue. Abby Pendleton, Esq. and
Jessica Gustafson, Esq. review the origins of the
RAC program and its basic rules and also describe
in detail what anesthesiology and pain practices
can do to prepare for potential record requests
from these new bounty hunters. Their advice goes
beyond protecting oneself against a RAC audit; they
also review the sound documentation procedures
that will be helpful in any Medicare audit.
I mentioned the FTC. This federal agency is
familiar to some members of the anesthesiology
community in the context of antitrust enforcement.
The 2003 “Red Flag” legislation that has caused –
rightfully – uproar among physicians is intended
to require financial institutions and creditors to
implement processes to mitigate identity theft. So
far so good. FTC staff, though, has been adamant
that physicians who accept insurance automatically
extend credit while waiting to determine and
collect the patient copayment. The application
of the Red Flag rules to physicians has now been
postponed several times but we are now advised
to plan for implementation on November 1, 2009.
The article on Identity Theft Programs by Neda
Mirafzali – I am very proud to announce that my
daughter is entering her third year at Michigan
State University Law School and spent the summer
working in a health law firm – will help practices
prepare to comply with the Red Flag rules.
Relationships with hospitals are another area
in which the law sometimes plays a significant
role. Elizabeth Snelson, Esq. calls our attention to
the increasing efforts of hospital administration
to control the members of its medical staff. Such
efforts are understandable given the uncertainty
about the direction of healthcare reform and
the roles of today’s healthcare institutions.
Anesthesiologists need to pay attention to the
bylaws and especially to the external plans, manuals
and codes of conduct that are being written so
as to give the C-Suite a greater say in privileging
requirements. I think that some readers will find
Ms. Snelson’s article quite eye-opening.
Group dynamics
and organization also
require attention and
an occasional refresher
course. Mark Weiss, Esq.
discusses the importance
of a strategic vision and leadership in what is
probably the most readable of the articles in
this issue (one can think like a lawyer without
always having to write like one!). Robert Iwrey,
Esq. describes provisions in group employment
contracts that may determine whether an
anesthesiologist will be a successful, productive
colleague or not. An overview of the advantages of
Limited Liability Corporations by Aaron Sherbin,
Esq. and Andrew Wachler, Esq., and a summary
by Adrienne Dresevic, Esq. and Carey Kalmowitz,
Esq. of a recent federal appellate decision on the
application of the Stark self-referral rules to a
hospital exclusive contract complete the collection
of lawyers’ contributions to this issue.
As always, we have also been graced with an
article by an officer of the MGMA’s Anesthesia
Administration Assembly (AAA). Ms. Cynthia
Roehr, AAA’s Legislative Liaison to ASA, deserves
kudos for her imaginative cost-savings approach to
collecting patient’s copayments and deductibles. I
know that Ms. Roehr is eager to receive comments
on her concept. We at ABC are equally eager
to hear from our readers who have questions
about the information we have presented in this
and earlier issues of the Communiqué. With
your ongoing support, we will be as relevant and
informative as we possibly can.
Sincerely,
Tony Mira
President and CEO

However, the following general rules apply
throughout the country. In a PLLC an
individual member is liable for his or her
own negligent or wrongful acts as well as
for those same types of acts committed
by individuals under his or her control
or supervision. For example, in a PLLC,
an individual member would likely be
responsible for his or her own medical
malpractice or overpayment liability only
to the extent that he or she performed
or supervised the services at issue. In
contrast, in a partnership, each partner
would be liable for the negligent acts of
all other partners. A PLLC’s liability is
also limited in the sense that the member’s
personal assets are protected against the
debts and liabilities of the PLLC.
For federal tax law purposes, a PLLC
is treated as a partnership. As a result,
the PLLC does not pay an entity level tax;
rather, the profits are generally allocated
to the members of the PLLC pro rata and
the members will report their share of
the profits on their individual income tax
returns. This tax treatment is in contrast
to a C-corporation where the corporation
pays a tax on the profits at the corporation
level and the shareholders pay a second tax
on any dividends distributed to them by
the corporation.
As a partnership, PLLCs offer a
tremendous amount of flexibility in
ownership interest in the PLLC and in how
profits and losses may be allocated among
members. Also, there are no restrictions
as to the type of owner or number of
owners of a PLLC. S-corporations, on the
other hand, offer some of the same tax
benefits as a PLLC, but have limitations
on who may be a shareholder as well as
limitations on the number of shareholders.
For instance, only citizens or residents of
the United States can be a shareholder
of an S-corporation. In addition, an
S-corporation may have only one class of
stock, and thus, allocating profits among its
shareholders based upon some metric or
formula that deviates from shareholdings
is not permitted. The effect of having an
ineligible shareholder or a second class of
stock is that the corporation will lose its
S-status and be taxed as a C-corporation
which could potentially result in disastrous
tax ramifications.
Generally, owners/members of a
PLLC cannot be considered employees of
the PLLC. They must be treated as self-
employed and, as a result, distributions
received by a member of the PLLC are
subject to self-employment tax. This may
result in a member paying slightly higher
income tax on his or her share of the
profits than the member would have had
he or she received the distribution in the
form of wages.
Since the PLLC offers incredible
flexibility with regard to who can be a
member and how profits and losses are
allocated, the PLLC provides various
options for the admittance or withdrawal
of a member. However, there may be
different tax consequences depending on
the assets owned by the PLLC and how
the buyout of a withdrawing partner is
structured. A withdrawing member may
have to recognize ordinary income (as
opposed to capital gains) on the buyout
proceeds received depending upon
whether the PLLC has account receivables
and inventory and whether the buyout of
the member is by the PLLC itself or by the
other members.
PLLCs are not required to have
the rigid structure associated with
corporations. In other words, PLLCs do
not need to have officers and directors
governing their operations. A PLLC
can be managed by its members (or
owners) or by managers who may be
a select group of the members or non-
members. A PLLC is typically governed
by an operating agreement, which usually
includes provisions regarding how and
when members meet, the power of a
member to bind the PLLC, the required
vote of members, the treatment of profits
and losses, how and when additional
capital will be required and by whom, and
what is to happen in the event of the death,
disability, retirement or termination of
employment of a member. Members of a
PLLC can tailor their operating agreement
to fit their particular practice.
In summary, PLLCs protect the
founders’ personal assets as well as do
other corporate forms such as professional
corporations, but they offer flexibility and
tax advantages that may not be available
with other forms. Before deciding on a
corporate form, anesthesiologists should
consult with experienced legal counsel and
accountants.
Andrew B. Wachler
is the principal of
Wachler & Associates,
P.C. Mr. Wachler
has been practicing
healthcare and busi-
ness law for over 25
years. He graduated
Cum Laude from the
University of Michigan in 1974 and Cum
Laude from Wayne State University Law
School in 1978. Mr. Wachler is a member
of the State Bar of Michigan, Health Care
Law Section, American Bar Association,
Health Care Law Section, Member of
“The Health Lawyer” Editorial Board and
the American Health Lawyers Association.
Mr. Wachler can be reached at awachler@
wachler.com
Aaron H. Sherbin
is an attorney with
Jaffe, Raitt, Heuer
& Weiss, P.C. and
is a member of the
firm’s Tax and Estate
Planning Groups.
His practice areas
include Federal Tax
Law, Business Planning, Business Mergers
and Acquisitions, Estate Planning, Estate
Administration and Probate Litigation.
Aaron earned his B.B.A. from the University
of Michigan in 1985, his J. D., cum laude
from Wayne State University Law School in
1988, and his LL.M in Taxation from New
York University Law School in 1989. Mr.
Sherbin can be contacted at asherbin@
jaffelaw.com

WHAT ANESTHESIOLOGISTS AND PAIN MANAGEMENT PHYSICIANS NEED TO KNOW
ABOUT THE MEDICARE RECOVERY AUDIT CONTRACTOR (RAC) PROGRAM
1. RECOVERY AUDIT
CONTRACTORS
Section 306 of the Medicare
Prescription Drug, Improvement and
Modernization Act of 2003 (MMA)
directed the Department of Health and
Human Services (HHS) to conduct
a three-year demonstration program
using RACs. The demonstration
began in 2005 in the three states with
the highest Medicare expenditures:
California, Florida and New York. In
2007, the demonstration expanded to
include Massachusetts, South Carolina
and Arizona. The purpose of the
RAC demonstration program was to
determine whether the use of RACs
would be a cost-effective way to identify
and correct improper payments in the
Medicare program.
The RAC demonstration program
proved highly “cost effective” to CMS.
Over the three-year demonstration,
the RACs identified more than $1.03
billion in improper payments. The vast
majority of this amount, $992.7 million,
constituted alleged overpayments.
According to CMS, factoring in the
underpayments returned to providers
and suppliers ($37.8 million), the claims
overturned on appeal ($46 million),
the amounts improperly recouped
and returned to providers upon re-
review ($14 million) and the operating
costs of the demonstration program
($201.3 million), the RAC program was
successful in returning $693.6 million
to the Medicare Trust Funds. CMS
estimates that the RAC demonstration
program cost approximately 20 cents
for each dollar returned to the Medicare
Trust Funds.1
Section 302 of the Tax Relief and
Health Care Act of 2006 made the RAC
program permanent, and required its
expansion nationwide by no later than
2010. CMS is actively moving forward
with this expansion. According to its
most-recently published “Expansion
Schedule,” CMS planned to expand
to 23 states by March 1, 2009, and the
remaining states by August 1, 2009 or
later.2
On October 6, 2008, CMS
announced the names of the RAC
vendors for the permanent program, and
identified the initial states for which each
will be responsible:
Inc., of Livermore, California is
the RAC for Region A, including
Maine, New Hampshire, Vermont,
Massachusetts, Rhode Island and
New York;
Inc. of Fairfax, Virginia is the RAC
for Region B, including Michigan,
Indiana and Minnesota;
Connolly Consulting Associates,
Inc. of Wilton, Connecticut is the
RAC for Region C, including South
Carolina, Florida, Colorado and
New Mexico; and
HealthDataInsights, Inc. of Las
Vegas, Nevada is the RAC for Region
D, including Montana, Wyoming,
North Dakota, South Dakota, Utah
and Arizona.3
More information is available from
the CMS RAC website: www.cms.hhs.
gov/RAC.
Before the permanent RACs
begin auditing, the RACs announced
they would hold “Town Hall”-type
outreach meetings, at which the RACs
and CMS representatives would meet
with Medicare providers and suppliers.
According to recent conversations this
office had with Commander Marie Casey,
Deputy Director of the CMS Division of
Recovery Audit Operations, Medicare
providers and suppliers in the first 23
states can expect automated reviews
(electronic review of claims data records
Continued from page 1
RAC Expansion Schedule

that do not involve a review of medical
records) to begin at any time. Complex
reviews (where medical records are
requested) will begin for coding issues in
September 2009, and medical necessity
reviews will begin in January 2010.
CMS compensates RACs on a
contingency fee basis, based upon the
principal amount of collection from (or
the amount repaid to) a provider. This
fee arrangement provides incentive to
the RAC to aggressively review and deny
claims, including claims that the RAC
alleges to be not “medically necessary,” an
area containing much subjectivity, and a
category of denial often highly disputed
by the provider.4
RACs are permitted to
attempt to identify improper payments
resulting from any of the following:
services that are not reasonable and
necessary);
5
When performing coverage or
coding reviews of medical records, nurses
(RNs) or therapists are required to
make determinations regarding medical
necessity, and certified coders are
required to make coding determinations.
The RACs are not required to involve
physicians in the medical record
review process. However, the RACs
must employ a minimum of one FTE
contractor medical director (CMD)
(who must be a doctor of medicine or
doctor of osteopathy) and arrange for
an alternate CMD in the event that the
CMD is unavailable for an extended
period. The CMD will provide services
such as providing guidance to RAC staff
regarding interpretation of Medicare
policy.
Although the RACs have fairly broad
discretion in determining which claims
to review, CMS has prohibited the RACs
from looking at certain categories of
claims. For example:
The permanent RAC program will
begin with a review of claims paid
on or after October 1, 2007. This
first permissible date for claims
review is the same for the RAC
reviews in all states, regardless of
the actual start date for a RAC in a
particular state. However, as time
passes, the RACs will be prohibited
from reviewing claims more than
three years past the date of initial
determination (defined as the initial
claim paid date).
RACs are not permitted to review
claims at random. However,
RACs are authorized to use “data
analysis techniques” to identify
claims likely to be overpayments, a
process called “targeted review.” In
the demonstration program, the
“targeted review” resulted in certain
categories of providers and certain
types of claims being subject to
more scrutiny than others.6
Continued on page 6

2. IMPACT OF RAC AUDITS
Over the course of the three-year
demonstration, the RACs identified
and collected $992.7 million in
overpayments and ordered repayment
of just $37.8 million in underpayments
to Medicare providers and suppliers.7
Thus, approximately 96 percent of the
alleged improper payments identified
were overpayments, as opposed to
underpayments.
3. PREPARING FOR A RAC AUDIT
Medicare providers, including
anesthesiologists and pain management
physicians, should begin to prepare
now for the RACs and increased
Medicare auditing activity. Although
providers cannot prevent RAC audits
from happening, they can prepare for
increased claims scrutiny and RAC
activity by dedicating resources to:
better identify and monitor areas
that may be subject to review (i.e.,
reviewing compliance guidance doc-
uments such as RAC Evaluation
Reports, the OIG Work Plan and
OIG compliance guidance, and ded-
icating resources to monitoring
compliance risk areas);
within the required timeframes;
-
ance program in accordance with
OIG guidelines, and/or strengthen-
ing procedures currently in place.
Pursuant to the “Update to the
Evaluation of the 3-Year Demonstration,”
published in January 2009, “Future im-
proper payments can be avoided by
analyzing the RACs’ service-specific find-
ings.”8
Looking to the results of the RAC
demonstration program is not particu-
larly illustrative or educational for anes-
thesia providers and pain management
physicians, however. This is because:
-
nials in the demonstration program
involved Part A hospital claims.
Eighty-five percent of the claims
reviewed in the RAC demonstra-
tion program were inpatient hospi-
tal claims (e.g., short stays and DRG
coding issues);
-
tient rehabilitation facility claims;
4.25 percent of the claims were out-
patient hospital claims;
claims were physician claims;
the claims were skilled nursing facil-
ity claims; and
DME, ambulance, lab and other
services.
Although the historical information
regarding RAC denials is not particularly
illustrative to anesthesiologists and
pain management physicians, there is
other program guidance identifying
areas of increased claims scrutiny. For
example, each year the OIG publishes a
Work Plan setting forth various projects
to be addressed during the upcoming
fiscal year, to which the RACs may look
to identify potential areas for their
WHAT ANESTHESIOLOGISTS AND PAIN MANAGEMENT PHYSICIANS NEED TO
KNOW ABOUT THE MEDICARE RECOVERY AUDIT CONTRACTOR (RAC) PROGRAM

audit activities. In 2008, the OIG Work
Plan identified interventional pain
management procedures as procedures
likely to undergo claims scrutiny for
medical necessity. The OIG noted that
interventional pain management is a
growing specialty, and Medicare paid
nearly $2 billion for interventional pain
management procedures in 2005.
In addition to the OIG Work Plan, in
September 2008, the OIG issued a report
on “Medicare Payments for Facet Joint
Injection Services.” The report stated that
the OIG had found that 63 percent of
facet joint injection services allowed by
Medicare in 2006 did not meet Medicare
program requirements, resulting in $96
million in improper payments.
Although the information from
the RAC demonstration program
does not provide specific guidance for
the anesthesia and pain management
industries in terms of strategic planning
for the permanent program, taking
into account other available guidance,
anesthesia and pain groups are well
advised to strengthen their compliance
programs to ensure that certain
anesthesia and pain management focus
areas are enhanced. For example, groups
should ensure that:
allowable anesthesia time and that
appropriate documentation exists to
support the recorded start and end
times;
ompliance with the medical direction
requirements is satisfied, including
enhancing documentation practices to
demonstrate such compliance;
improved with regard to separately
payable services such as invasive
monitoring lines and post-operative
pain services;
improved with regard to medical
necessity documentation in
connection with the performance of
monitored anesthesia care cases;
necessity documentation in
connection with the provision
of chronic pain management
procedures; and
necessity documentation relative
to the provision of evaluation and
management services.
4. WHAT TO EXPECT IF YOU
ARE AUDITED BY A RAC
RACs engage in two types of claim
reviews to identify improper payments:
“automated review” and “complex
review:”
An “automated review” is a review
of claims data without a review of the
records supporting the claim. Generally
speaking, RACs may conduct automated
reviews only in situations where there
exists both (a) a certainty that the service
is not covered or is incorrectly coded, and
(b) a written Medicare policy, article, or
coding guideline applicable to the claim.
RACs also may use automated review,
even if there is no specific Medicare
policy, article or coding guideline on
point, in some “clinically unbelievable”
situations9
or when identifying duplicate
claims and/or pricing mistakes.10
According to Commander Marie Casey,
Deputy Director of the Division of
Recovery Audit Operations at CMS,
automated reviews of providers in the
first 23 states can be expected to begin at
any time.
On the other hand, a “complex
review” consists of a review of medical
or other records, and is used in situations
where there is a high probability (but
not a certainty) that a claim includes an
overpayment.11
In summary, the RAC
“complex review” process is as follows:
the provider’s location to view and/
or copy medical records or (b) re-
quest that the provider mail, fax, or
otherwise securely transmit the re-
cords to obtain medical records
necessary to conduct claim re-
views. To “securely transmit” med-
ical records means to send those
records “in accordance with the
CMS business systems security
manual – e.g., mailed CD, MDCN
line, through a clearinghouse).12
During the RAC demonstration pro-
gram, some providers were overwhelmed
by the volume of records requests re-
ceived from the RACs. In the permanent
program, CMS imposed limits on the
number of records RACs may request per
45-day period.13
For physicians, such as
physicians, this record request limit is as
follows:
o Solo Practitioner: 10 medical
records per 45 days
o Partnership of 2-5 individuals: 20
medical records per 45 days
o Group of 6-15 individuals: 30
medical records per 45 days
o Large Group (16+ individuals):
50 medical records per 45 days.14
Continued on page 8

It is essential that providers timely
respond to RACs’ requests for medical
records. If a RAC does not receive
requested medical records within 45
days, it is authorized to render an
overpayment determination with respect
to the underlying claim.15
If the provider
appeals this type of denial, “the appeals
department may, at CMS direction,
send the claim to the RAC for reopening
under certain conditions…”16
However,
the Carrier or Intermediary is not
required to send the claim to the RAC
for reopening. Thus, providers failing to
timely respond to RACs’ medical records
requests could lose appeal rights with
respect to these claims.
Once requested medical records are
received, the RAC will conduct its
review of the claim. In conducting
reviews, RACs are required to
comply with National Coverage
Decisions (“NCDs”), Coverage
Provisions in Interpretive Manuals,
national coverage and coding
articles, Local Coverage Decisions
(“LCDs”), and local coverage and
coding articles in their respective
jurisdictions.17
The RACs also are
authorized to develop internal
guidelines to assist their reviewers to
conduct claims reviews consistently
with NCDs and LCDs.18
Generally speaking, a RAC must
complete complex reviews within 60
days from receipt of the requested
medical records.19
Following its
review, the RAC will issue a letter
to the provider setting forth the
findings for each claim and notifying
the provider of its appeal rights.
Alleged overpayments identified by
RACs may be appealed through the
uniform Medicare appeals process.
According to Commander Casey,
complex reviews regarding certain coding
issues are planned to begin in September
2009. Complex reviews regarding issues
of medical necessity will begin sometime
after January 1, 2010.
5. HOW TO APPEAL CLAIMS
DENIED BY A RAC
RAC denials are subject to the
standard Medicare appeals process set
forth in 42 C.F.R. Part 405, subpart I.
A. Stage 1: Redetermination
The first level in the appeals process
is redetermination. Providers must
submit redetermination requests in
writing within 120 calendar days of
receiving notice of initial determination.
There is no amount in controversy
requirement.
B. Stage 2: Reconsideration
Providers dissatisfied with a carrier’s
redetermination decision may file
a request for reconsideration to be
conducted by a Qualified Independent
Contractor (QIC). A QIC is a Medicare
contractor tasked to complete the second
level of appeal (reconsideration level
of appeal). This second level of appeal
must be filed within 180 calendar days of
receiving notice of the redetermination
decision. There is no amount in
controversy requirement.
Importantly, the QIC reconsideration
is an “on-the-record” review, contrary
to an in-person hearing review. In
conducting its review, the QIC will
consider evidence and findings upon
which the initial determination and
redetermination were based plus any
additional evidence submitted by the
parties or the QIC obtains on its own.
Of particular note, providers must
submit a full and early presentation of
evidence in the reconsideration stage.
When filing a reconsideration request,
a provider must present evidence and
allegations related to the dispute and
explain the reasons for the disagreement
with the initial determination and
redetermination. Absent good cause,
failure of a provider to submit evidence
prior to the issuance of the notice of
reconsideration precludes subsequent
consideration of the evidence.
Accordingly, providers may be prohibited
from introducing evidence in later stages
of the appeals process if such evidence was
not presented at the reconsideration stage.
C. Stage 3: Administrative Law Judge
Hearing
The third level of appeal is the
Administrative Law Judge (ALJ)
hearing. A provider dissatisfied with
a reconsideration decision or who has
exercised the escalation provision at
the reconsideration stage may request
an ALJ hearing. The request must be
filed within 60 days following receipt of
the QIC’s decision and must meet the
amount in controversy requirement.
ALJ hearings can be conducted by video-
teleconference (VTC), in-person, or by
telephone. The regulations require the
hearing to be conducted by VTC if the
technology is available; however, if VTC
is unavailable or in other extraordinary
WHAT ANESTHESIOLOGISTS AND PAIN MANAGEMENT PHYSICIANS NEED TO
KNOW ABOUT THE MEDICARE RECOVERY AUDIT CONTRACTOR (RAC) PROGRAM

circumstances the ALJ may hold an in-
person hearing. Additionally, the ALJ
may offer a telephone hearing.
D. Stage 4: Medicare Appeals Council
Review
The fourth level of appeal is the
Medicare Appeals Council (MAC)
Review. The MAC is within the
Departmental Appeals Board of the
U.S. Department of Health and Human
Services. A MAC Review request must
be filed within 60 days following receipt
of the ALJ’s decision. Among other
requirements, a request for MAC Review
must identify and explain the parts of
the ALJ action with which the party
disagrees. Unless the request is from an
un-represented beneficiary, the MAC will
limit its review to the issues raised in the
written request for review.
E. Stage 5: Federal District Court
The final step in the appeals process
is judicial review in federal district court.
A request for review in district court
must be filed within 60 days of receipt of
the MAC’s decision.
6. STRATEGIES FOR APPEALING
CLAIM DENIALS
Once a provider receives a claim
denial made by a RAC, it is important
that the provider aggressively pursue
appealing the denial through the
Medicare appeals process. Experienced
healthcare legal counsel can assist
providers with appeals to ensure all
available substantive challenges and
legal theories are utilized. Experienced
counsel will submit an appeal brief/
position statement that advocates the
provider’s position.
7. CONCLUSION
Medicare providers, including
physicians, should be ready for increased
Medicare auditing activity as the RAC
program expands nationwide. Providers
should make efforts now to evaluate
their compliance with Medicare policy.
Should a provider be subject to a RAC or
other Medicare audit, effective strategies
are available that can be successfully
employed in the appeals process to
challenge claim denials.
Abby Pendleton and Jessica L. Gustafson
are partners with the health care law firm
of The Health Law Partners, P.C. The firm
represents hospitals, physicians, and other
health care providers and suppliers with
respect to their health care legal needs.
Pendleton and Gustafson specialize in a
number of areas, including but not limited
to: Recovery Audit Contractor (RAC),
Medicare, Medicaid and other payor audit
appeals, healthcare regulatory matters,
compliance matters, reimbursement and
contracting matters, transactional and
corporate matters, and licensing, staff
privilege and payor de-participation
matters. They can be reached at
apendleton@thehlp.com and jgustafson@
thehlp.com.
Abby Pendleton Jessica L. Gustafson
1 The Medicare Recovery Audit Contractor (RAC)
Program: An Evaluation of the 3-Year Demonstration,”
at p. 15, June 2008, available at http://www.cms.
hhs.gov/RAC/Downloads/RAC_Demonstration_
Evaluation_Report.pdf.
2 RAC Expansion Schedule, available at http://www.cms.
hhs.gov/RAC/Downloads/RAC%20Expansion%20
Schedule%20Web.pdf.
3 Id. Note that the RAC Expansion Schedule indicates
the four RAC regions, labeled A, B, C and D.
4 In a significant change from the demonstration
program, under the permanent RAC program, if a
provider files an appeal disputing the overpayment
determination, and provider wins this appeal at any
level, the RAC is not entitled to keep its contingency
fee, and must repay CMS the amount it received for
the recovery. RAC Statement of Work, available at
http://www.cms.hhs.gov/RAC/10_ExpansionStrategy.
asp#TopOfPage.
5 RAC Statement of Work, available at http://www.cms.
hhs.gov/RAC/10_ExpansionStrategy.asp#TopOfPage.
6 Id.
7 “The Medicare Recovery Audit Contractor (RAC)
Program: An Evaluation of the 3-Year Demonstration,”
at p. 15, June 2008, available at http://www.cms.
hhs.gov/RAC/Downloads/RAC_Demonstration_
Evaluation_Report.pdf.
8 http://www.cms.hhs.gov/RAC/Dow nloads/
AppealUpdatethrough83108ofRACEvalReport.pdf.
9 A “clinically unbelievable” situation is one where
“certainty of noncoverage or incorrectly coding exists
but no Medicare policy, Medicare articles or Medicare-
sanctioned coding guidelines exist.” In these cases,
the RAC may ask CMS to approve automated review.
However, unless CMS specifically approves an issue for
automated review, the RAC must use complex review
to make such determinations. See “Statement of Work
for the Recovery Audit Contractor Program” at p. 18,
available at https://www.fbo.gov/index?s=opportunity
&mode=form&id=1889cc7b8672a9e2c1cbe5a007b9dc
eb&tab=core&_cview=1.
10 Id. at pp. 17-18.
11 Id.
12 Id. at p. 11.
13 Id.
14 See “RAC Medical Record Request Limits,” available at
http://www.cms.hhs.gov/RAC/Downloads/RAC%20
Medical%20Record%20Request%20Limits.pdf
15 See “Statement of Work for the Recovery Audit
Contractor Program” at p. 13, available at https://www.
fbo.gov/index?s=opportunity&mode=form&id=1889c
c7b8672a9e2c1cbe5a007b9dceb&tab=core&_cview=1.
16 Id. at p. 20 (emphasis in original).
17 Id. at p. 16.
18 Id. at p. 17.
19 Id. at p. 19.
20 Id. at p. 22.

IDENTITY THEFT PROGRAMS: WHAT
EVERY ANESTHESIA PRACTICE
SHOULD CONSIDER DOING NOW
Neda Mirafzali
NEWSFLASH: As of July 29, 2009,
the Federal Trade Commission (“FTC”)
extended its August 1 deadline to enact
the commonly referred Red Flags Rule
(16 C.F.R. Part 681) to November 1.
Come November 1, anesthesia
practices, among other entities, will
be responsible for ensuring patients’
identity protection under the provisions
of the Red Flag Rule. Constituting 5% of
all identity theft, medical identity theft
has gained greater political attention
and media coverage; thus, the Red
Flags Rule should come at no surprise.
According to the FTC, medical identity
theft occurs when an individual seeks
medical services using another’s name
and insurance information. It is not
until victims check their credit history
or are denied insurance coverage for
a medical service for having reached
their policy limit that they realize their
identity has been stolen and their credit
history crushed, taking years to revitalize.
Additionally, erroneous medical entries
are recorded in the victim’s name
producing a fictitious medical history.
The recent extension is to give the FTC
additional time to “redouble its efforts
to educate [entities] about compliance
with the ‘Red Flags’ Rule and to ease
compliance by providing additional
resources and guidance to clarify whether
businesses are covered by the Rule and
what they must do to comply.” The FTC
announced that, in the future, it would
make available additional resources
and compliance guidance for low-risk
entities.
What is the Red Flags Rule?
In short, the Red Flags Rule
requires particular entities to develop
and implement reasonable policies and
procedures—appropriate to the size
and complexity of the entity—to guard
against identity theft. As part of the Fair
and Accurate Credit Transactions Act of
2003 (“FACT”), financial institutions
and creditors must have anti-identity
theft programs in place. According to
the FTC, “red flags” are any factors that
could indicate identity theft, including
identification, detection, and response
to patterns, practices, or specific
activities. Under the Red Flags Rule, the
FTC requires financial institutions and
creditors to do the following:
Identify relevant patterns, practices,
and specific forms of activity that
are “red flags” signaling possible
identity theft and incorporate those
red flags into the Identity Theft
Prevention Program;
Detect red flags that have been in-
corporated into the Identity Theft
Prevention Program
Respond appropriately to any red
flags that are detected to prevent
and mitigate identity theft; and
Ensure the Identity Theft
Prevention Program (“Program”)
is updated periodically to reflect
changes in risks from identity theft.
Who Has to Comply with the Red
Flags Rule?
The FTC declared that the Red Flags
Rule requires each financial institution
and creditor that holds any covered
account, “to develop and implement an
Identity Theft Prevention Program…for
combating identity theft in connection
with new and existing accounts.”
For physician practices, the relevant
definition is that of a creditor. A
creditor, as defined in the regulation, is
a “person who regularly extends, renews,
or continues credit; any person who
regularly arranges for the extension,
renewal, or continuation of credit; or
any assignee of an original creditor who
participates in the decision to extend,
renew, or continue credit.”
A covered account, as defined in
the regulations, is an account “that
involves or is designed to permit multiple
payments or transactions…and any other
account…for which there is a reasonably
foreseeable risk to members or to the

safety and soundness of the federal credit
union from identity theft….”
How Does the Red Flags Rule Apply
to Physician practices?
Though many physicians question
the reasons why this applies to their
practices, the FTC insists that the Red
Flags Rule applies to physician practices.
Physician practices that accept insurance
or allow payment plans are considered
creditors as they allow deferred payment
until physicians render the services
and collect the insurance and other
applicable payment owed. As a result,
physician practices are subject to the Red
Flags Rule.
Even with this definition, however,
many physician practices do not
agree that they are creditors under the
definition of creditor. Thus, the FTC
provides examples of why it believes
a physician practice is a creditor. For
example, a physician practice is a creditor
if it “regularly bill[s] patients after
the completion of services, including
for the remainder of medical fees
not reimbursed by insurance.” This
language would cover most, if not all,
anesthesia practices. Additionally, if a
physician practice allows patients to set
up a payment plan, the physician practice
would be considered a creditor and
would, therefore, be subject to the Red
Flags Rule.
Not all physician practices are
required to adopt the Red Flags Rule.
Those physician practices that require
full payment prior to rendering services
are not creditors and are not subject to
the Red Flags Rule. Merely accepting
credit card payments does not render a
physician practice a creditor.
The American Medical Association
(AMA) does not agree with the FTC’s
position asserting that such position
is not “consistent with the intent or
scope of the enabling legislation….” To
date, the AMA’s protests have not been
successful. This is further highlighted
by the FTC’s new publication entitled,
“The ‘Red Flags’ Rule: What Health
Care Providers Need to Know About
Complying with New Requirements for
Fighting Identity Theft” (http://www.ftc.
gov/bcp/edu/pubs/articles/art11.shtm).
How Can Anesthesia practices
Comply with the New Regulations?
Generally, anesthesia practices
(“practices”) rely on their respective
hospital or facility to gather information
on admitted patients. It is important
that anesthesia practices check that the
hospital or facility has an Identity Theft
Program in place that complies with the
requirements of the Red Flags Rule and
any other applicable state law. practices
should coordinate with the facility to
adopt applicable portions of the facility
program into the practice’s program
to assist in meeting its Red Flags Rule
obligations.
Administrative Responsibilities
The regulations require certain
administrative action and oversight.
For example, prior to implementing
a program, the practice must have its
Board of approve the proposed program.
Also, practices must designate a person to
be involved in oversight of the program
and education of staff. Furthermore, the
regulations require that covered creditors
take steps to oversee that their service
providers, like billing and management
companies, conduct business according
to the procedures designed to mitigate
the risk of identity theft. Accordingly,
practices should contact their billing
companies and request a copy of their
policies/procedures on this topic.
As stated above, there are four parts
to complying with the Red Flags rules:
identifying red flags, detecting red flags,
responding to red flags, and ensuring an
updated program. Notably, all protocols
adopted in compliance with the Red
Flags Rule must be in writing.
Identify and Detect
There is no complete enumeration
of approved ways to identify medical
identity theft. However, the FTC has
Continued on page 12

provided examples of warning signs
to look for. Practices should be aware
of suspicious documents, suspicious
personally identifying information,
suspicious activities, and notices from
victims, law enforcement, or insurers of
possible identity theft. The FTC suggests
physician practices ask the following
questions:
Has the new patient given you identi-
fication documents that look altered
or forged?
Is the photograph or physical de-
scription on the ID inconsistent with
what the patient looks like?
Did the patient give you other docu-
mentation inconsistent with what he
or she has told you?
Did the patient give you information
that is inconsistent with what is on
file?
Is mail returned repeatedly as unde-
liverable while the patient still shows
up to appointments?
Does a patient complain about re-
ceiving a bill for a service that he or
she did not get?
Is there an inconsistency between a
physical examination or medical his-
tory reported by the patient and the
treatment records?
If one answers “yes” to any of these
questions, it would be beneficial to ask
for additional information from that
patient to ensure the individual’s identity
matches the claimed identity. Again,
since the practice will likely rely on facility
personnel to obtain documentation in the
admission process, the practice should
ensure that the facility requests and
verifies patient identification and resolves
any discrepancies as they arise prior to
rendering the actual service. In such cases,
the practice’s written program should refer
to the facility’s written procedures for this
verification process and should attach such
written procedures.
Respond
After a red flag has been identified
and detected, the practice should follow
a procedure to respond to the red flags.
Responding to red flags could include a
plan for gathering documents if there is
an incident, a process for reporting the
incident to the appropriate personnel,
and guidelines to follow for appropriate
action (i.e. stopping the admission and
billing process, notifying the person
whose identity was used, notifying
the authorities, assessing the impact
on the practice, etc.). In the case of
an anesthesia practice, for those flags
detected in the facility admission process,
the practice would be relying on the
facility to take action and coordinate
with the practice. Again, the practice’s
written program would need to record
that the facility’s procedures for
identifying and responding to issues have
been adopted by the practice. For those
issues identified after the service has been
rendered, but during the billing process,
the practice would need to make sure
that the billing process has been halted
and that appropriate action is taken.
This must be included in the practice’s
written program.
Ensure
While this program is in place, it is
important for practices to continuously
update the practice’s procedures to
ensure that they are consistent with
most recent updates and developments
surrounding medical identity theft.
State law
In addition to addressing the FTC
regulations, practices should also check
state law for any requirements related to
this topic. For example, some states have
enacted laws protecting social security
numbers. State law requirements can
easily be incorporated into the practice’s
written Identity Theft Program. The
local or State medical society is a good
place to begin researching state law.
Summary
Though there are no criminal
ramifications for failing to comply with
the Red Flags Rule, there are financial
penalties for non-compliance, including
a $2500 fine for each known violation.
For those practices who need assistance
in developing their written program, a
qualified healthcare law firm can help.
For additional guidance, please visit
the FTC website at www.ftc.gov and the
FTC’s guidance to healthcare providers,
http://www.ftc.gov/bcp/edu/pubs/
articles/art11.shtm.
IDENTITY THEFT PROGRAMS: WHAT EVERY ANESTHESIA PRACTICE
SHOULD CONSIDER DOING NOW
Neda Mirafzali is a
third year law student
at Michigan University
College of Law. She
wrote her article while
working as a law clerk
at The Health Law
Partners, P.C. The firm
represents hospitals,
physicians, and other health care providers
and suppliers with respect to their health
care legal needs.

HOW ANESTHESIA GROUPS THRIVE,
NOT SIMPLY SURVIVE
Mark F.Weiss, J.D.
You’re building a house . . . well, your
contractor is. He tells you that he’ll start
by pouring the concrete foundation and
then put on the roof, after which he’ll
put up the exterior walls, followed by the
chimney.
It’s easy to see the folly in building a
home in that manner. But when an an-
esthesia group builds its practice in a
similar manner, it usually goes without
comment, even without notice.
“We need to address the issue of re-
newing our exclusive contract. It expires
in July,” a partner says in May.
“We’re not able to retain our subcon-
tractors. They’re leaving for better pay,”
says another partner in August, after the
exclusive contract has renewed.
“The surgeons are complaining
about turnover time,” states a partner in
September.
“We really need ﬁnancial support
from the hospital,” says a partner in
October.
Just as in our analogy to home
building gone awry, anesthesia groups
often consider the instances of practice
building, such as exclusive contracts, sub-
contracts and employment agreements,
billing and collection activities, data
management, and stipends, as separate
projects, to be addressed on a piecemeal
basis.
The secret to anesthesia group suc-
cess, in any economy, starts with the
realization that these are not separate in-
stances at all. In order for your group to
thrive, they must be linked together with
strategy.
THE STRATEGIC GROUP
In order to succeed at the highest
plane, your group must become
strategic on multiple levels. It must
develop an overall business strategy. It
must then develop substrategies for
each particular instance previously
thought to be independent, e.g., an
exclusive contracting strategy and a
data management strategy, that are
consistent with the group’s overall
business strategy and which take into
account the interrelationship among
the various substrategies. Finally, just
as the strategies are aligned, the tactics
employed in furtherance of each of the
particular substrategies must also be
coordinated.

LEADERSHIP
Beyond the smallest of groups, two
or three physicians, leadership cannot
be by consensus or paralysis will set in.
Successful groups must have leaders and
leaders must be allowed the time required
to lead and the ability to fail without fear
of retribution.
Just as leaders need this freedom,
group members are owed faithful
performance: If your homebuilding
contactor told you that he was too busy
to pay attention to the organization of
the job because he was spending all day
hammering nails, you’d think about getting
a new contractor. But most groups aren’t
fazed when their “leader” essentially uses
the same excuse, or when they guarantee
the same result by tying his hands to a full
share of patient care responsibility.
GIVE ME A LEVER LONG ENOUGH ...
Successful groups understand that
they must create leverage. By having
options to the deal, in respect of facility
contracts, in respect of contracts with
employed or subcontracted physicians,
and in respect with their relationships
with other third parties, they create
tremendous negotiating leverage.
In particular, in connection with
their exclusive contracting relationships,
they avoid the most significant mistake a
group can make: permitting the hospital
to believe that the group’s mere existence
turns on the hospital’s decision to grant
or renew the exclusive contract.
FRAMING THE ISSUES
Despite compliance issues, facts and
budgets, emotion plays a leading role in
decision making. Not only is telling the
better story essential, choosing the theme
of the story is required.
Relationships and negotiations, just
like conversations, do not take place in a
vacuum; they take place in a context or
“frame.” Understand that there’s a battle
on the meta level to frame the issues
and that winning it can determine the
outcome of the more observable conflict.
TOUCH POINTS
Successful groups understand
that negotiation is not something that
happens only in a boardroom. Each
touch point with hospital administration,
with other members of the medical staff,
and with patients and their families
is actually an element of the process
of building support for your group’s
positions. Everyday interactions impact
upon the group’s image. In order to
advance the group’s interests, you must
control or influence as many of those
touch points as possible.
IT’S ABOUT TIME
Although quick results in respect of
certain elements of a group’s strategy are
obtainable, achieving a transformational
result for an existing group requires a
long term view, optimally several years.
After all, the goals are long term: group
and member physician success. An
understanding, in fact, an expectation
that it will take time and effort to achieve
those results is necessary and required.
BUT IT’S NOT ABOUT A TIMELINE
Progress in positioning your
group to achieve maximum power
in its relationships, and, therefore, in
its negotiating posture, is not a linear
process. As discussed above, the process
involves an ongoing series of interrelated
strategies and tactics. Each of these
elements, once started, continue. In
duality, each is both independent and
dependent: Independent in that each
element is focused on a particular goal;
dependent in that each strategy and tactic
supports the others in achieving the
group’s overall business goal. Instead of
the image of a timeline, picture instead
an atom: Each of the electrons revolves
independently, but they all revolve
around the nucleus.
BEINGNESS VS.
“GETTINGSOMEWHERENESS”
The problem most often preventing
anesthesia groups from thriving
is “beingness.” (No, this is not a
metaphysical discussion.) They simply
“are.” They exist to exist – to “serve” the
hospital.
I suggest that the better route is
for your anesthesia groups to exist to
serve itself, to move from beingness
to “gettingsomewhereness,” with that
somewhere being of your own design.
Yes, plans go awry and no one can
guarantee that there won’t be challenges
to the strategy along the way. In fact,
there will be countless small and major
challenges thrust at you in countless
ways. But the beauty of a strategic
outlook consisting of interlocking
processes is its flexibility while still
guiding you to your envisioned future.
The foundation may have to be shored
up, the walls may have to be reinforced
or allowed to sway to compensate for
earthquakes, but you’ll end up with a
house, not simply with a roof sitting on a
slab of cement.
Mark F. Weiss is an
attorney who spe-
cializes in the busi-
ness and legal issues
affecting anesthesia
and other physician
groups. He holds
an appointment as
clinical assistant
professor of anesthesiology at University
of Southern California’s Keck School of
Medicine and practices nationally with
the Advisory Law Group, a firm with of-
fices in Los Angeles and Santa Barbara,
CA. Mr. Weiss provides complimentary
educational materials to our readers. Visit
www.advisorylawgroup.com for his free
newsletter. He can be reached by e-mail at
markweiss@advisorylawgroup.com.
HOW ANESTHESIA GROUPS THRIVE, NOT SIMPLY SURVIVE

Long gone are the days when a physi-
cian can join a group of other physicians
of similar interests with a handshake and
a smile—this reality is highlighted when
the physician is an anesthesiologist look-
ing to join an anesthesia group that enjoys
one or more exclusive contracts for profes-
sional services with a local hospital. With
so many interrelated factors governing the
relationships between the anesthesiolo-
gist, the anesthesia group and the hospi-
tal (e.g., a medical directorship agreement
between the anesthesiologist and the hos-
pital, an exclusive contract between the
anesthesia group and the hospital, the an-
esthesiologist’s staff privileges to provide
general anesthesia at the hospital pursuant
to the exclusive contract, the anesthesiolo-
gist’s staff privileges to provide pain man-
agement services at the hospital outside of
any exclusive contract, the hospital’s desire
to have the anesthesiologist provide labor
epidurals requested by OB/GYNs, whether
the anesthesiologist is an independent con-
tractor or an employee of the group, etc.),
carefully drafted written agreements be-
tween the parties are essential to protect
the interests of all parties involved. While
the number of provisions contained within
a typical engagement agreement between
an anesthesiologist and a group varies, as
does the wording of each provision, there
are a number of key provisions that should
be included in any such engagement agree-
ment in order to avoid potential issues
from arising that could adversely affect one
or more of the parties involved.
First, the engagement agreement
should clearly define the anesthesiologist’s
status with the group as either an employ-
ee or an independent contractor. When
the group has an exclusive contract with
the hospital, the typical arrangement has
the anesthesiologist as an employee of the
group. This is consistent with the notion
that the group is exercising control over
the manner in which the anesthesiologist is
performing his or her duties which is often
one of the key factors that motivates the
hospital to enter into an exclusive arrange-
ment with the group in the first instance.
Second, when an anesthesiologist is
looking to join a group that has an exclu-
sive arrangement with a hospital, he or she
should recognize that, but for his or her
membership with the group, the anesthe-
siologist would not have staff privileges at
the hospital. Accordingly, the engagement
agreement will almost certainly provide
that if the anesthesiologist is terminated
from the group, there will be an automatic
termination of the anesthesiologist’s medi-
cal staff privileges at the hospital If you
are considering a contract that has an au-
tomatic termination clause, you will want
to make sure that it extends to the privi-
leges that are governed by the exclusive ar-
rangement (e.g., if the anesthesiologist has
medical staff privileges to provide general
anesthesia services and chronic pain man-
agement services and the group has an ex-
clusive arrangement with the hospital to
provide general anesthesia services but not
pain management services, upon termina-
tion from the group, the anesthesiologist’s
medical staff privileges to provide general
anesthesia services may automatically ter-
minate but his or her medical staff privi-
leges to perform pain management services
should remain unaffected).
Third, the engagement agreement
should clearly define what constitutes ter-
mination “for cause.” Although certain
events should result in immediate termina-
tion (e.g., the anesthesiologist’s loss of his
or her medical license or departicipation
from a significant third party payor), other
adverse events capable of being effectively
rectified should trigger an opportunity by
the anesthesiologist to cure the problem
within a reasonable amount of time.
Fourth, while nearly all engagement
agreements contain provisions address-
ing termination of the agreement by the
group “for cause” (e.g., anesthesiologist’s
conviction of a felony), surprisingly, many
engagement agreements fail to address “for
cause” termination of the agreement by the
anesthesiologist (e.g., group’s repeated fail-
ure to timely compensate anesthesiologist).
Many agreements likewise fail to provide
for “without cause” termination by either
party (e.g., allowing either party to ter-
minate the agreement without cause with
60 days prior written notice to the other
party). Such provisions should be includ-
ed in order to avoid circumstances where a
party’s expectations are not being met and
departure is desired.
WRITING YOUR CONTRACTS FOR
SMOOTH ENTRY INTO AND EXIT FROM
ANESTHESIA GROUPS
Robert S. Iwrey, Esq.

The only danger most doctors
assume hospital medical staff bylaws
inflict is deep sleep. Given that the bylaws
govern your hospital practice, ignoring
them is nothing short of perilous.
But many physicians don’t pay
any attention to their medical staff
bylaws, trusting that the hospital is only
interested in protecting the physicians
it needs to provide medical care to
inpatients.
Right.
Even if you have a contract or
are directly employed by the hospital,
terms in the medical staff bylaws can
complicate your practice, and your life.
Look for four major threats in medical
staff bylaws:
#1 Threat — “Manuals” and
“Plans”
Hospitals and medical staffs that
have been sold a package approach of
Bylaws + Organization Manual + Fair
Hearing Plan + Credentialing Manual
end up with documents that section
out key processes from bylaws into
the manuals and plans. Criteria for
membership and privileges, leadership
selection, and other important medical
staff organizational functions controlling
who can practice what at the hospital are
isolated in the separate plans or manuals
which, unlike bylaws, can be changed
unilaterally or with limited medical staff
input. Consequences go beyond the
“convenience” of a brief set of bylaws:
Critical rules affecting any and all
medical staff members are not voted
on by medical staff members.
In many states, courts recognize
bylaws (but not necessarily manuals)
as enforceable contracts.
Pending Joint Commission accred-
itation standards will require these
processes to be back in medical staff
bylaws by 2011.
#2Threat — Hospital-controlled
Medical Staff “Leadership”
Medical staff bylaws should
contain the qualifications for and
means of selecting medical staff
leadership. Appropriate medical staff
bylaws provide for representation of
the different specialties on the Medical
Executive Committee, which serves as
the board of directors for the medical
staff organization, and for election of
the Medical Staff officers-typically, the
President, Vice-President, Secretary
and Treasurer. Anesthesia departments
should ensure that their unique interests
are in fact represented by specific allies
on the Medical Executive Committee,
if not by a member of their own
department.
Self-governance, the hallmark of
which is selection of leaders, is required
of medical staffs under Joint Commission
accreditation standards for hospitals and
under some states’ laws. If the medical
staff is not self-governing it cannot fulfill
its primary duty — to account to the
hospital board for the quality of patient
care. Self-governance is required in order
to enable an independent accounting.
Otherwise, if the hospital controls the
medical staff through its leadership,
the hospital is talking to itself, receiving
information only from those it selects to
hear.
Self-governance is threatened by
medical staff bylaws provisions such as
the following:
“In order to serve, elected Officers of
the Medical Staff must be ratified by
the Board.”
No accreditation standard calls for
the hospital board to approve officers or
candidates, nor should any board control
medical staff elections.
More subtle provisions bury the
board’s control behind an offer of
indemnification:
“Any Medical Staff officer, department
chairperson, committee chairperson,
WARNING
DANGEROUS PROVISIONS IN
MEDICAL STAFF BYLAWS
Elizabeth A. Snelson, Esq.
Legal Counsel for the Medical Staff, PLLC

committee member, and individual
staff appointee who acts for and on
behalf of the hospital in discharging
duties, functions or responsibilities
stated in these Medical Staff Bylaws
shall be indemnified, to the fullest
extent permitted by law, when the
appointment and/or election of the
individual has been approved by the
Board.”
But no hospital insurer conditions
coverage on board interference with and
control over the selection of medical staff
leadership. Check the bylaws to assure
that there are no strings attached to
medical staff leadership.
#3 Threat — “Disruptive
Physicians”
Outrageous actions by physicians
and other medical staff members
threatening hospital employees and
patients are the usual example justifying
language in medical staff bylaws calling
for disciplining disruptive physicians.
Obviously, medical staff members should
be held to a professional standard of
behavior. And, the Joint Commission
has put into place standards that call for
hospitals to implement Codes of Conduct
defining “disruptive,” “appropriate,” and
“inappropriate” conduct. Since codes of
conduct are inevitable, attention must be
paid to how they restrict how physicians
may behave.
Unfortunately, some hospitals use
codes of conduct to control economic
“conduct” by threatening physicians’
privileges and medical staff membership.
For example, some hospitals include
in the code of conduct an obligation
to provide “quality patient care” that
is defined as including, in addition
to medical outcome, matters such as
“timely and thorough communications
with insurers or third party payors as
necessary to effect payment for care.”
If physicians do not jump through the
payor hoops the hospital has agreed to,
they will be branded “disruptive.”
Other codes define as “inappropriate
conduct” any negative statement about
hospital services. This prohibition seems
designed to ban even valuable information
and constructive criticism intended
to result in system improvements. A
common prohibition in medical
staff bylaws applies to conduct that is
“disruptive to hospital operations,” a
term so broad as to be subject to the
interpretation that any competition with
the hospital, including financial interest
in anything from a surgery center to a
gift shop, is prohibited activity. Medical
staff bylaws should be closely reviewed
to assure that standards of professional
conduct are put in place by the medical
staff, for the medical staff.
#4 Threat — Outsourced “Peer”
Review
Physicians are accustomed to
conducting peer review, evaluating
outcomes to improve care for future
patients. Indeed, the purpose of
the medical staff organization is to
provide a structure for ongoing quality
patient care improvement. However,
as physicians are even more stretched
providing patient care, and as hospital
data systems become more sophisticated,
medical staffs may find the reins of the
peer review process slipping away, with
quality measures and the focus of quality
studies being dictated from hospital
administration or from the hospital
system, to be carried out for corporate
reasons.
While Joint Commission
accreditation is the frequent reason
given for gathering and measuring
data, physicians should know that the
Joint Commission actually expects
peer review to be conducted by peers.
Thus, Joint Commission standard
MS 08.01.01 states, “The organized
medical staff defines the circumstances
requiring monitoring and evaluation of a
practitioner’s professional performance,”
and, under its Element of Performance
2, “The organized medical staff develops
criteria to be used for evaluating the
performance of practitioners when
issues affecting the provision of safe,
high quality patient care are identified.”
Medical staff bylaws should clearly keep
the medical staff in the peer review
driver’s seat.
There are many other problems
that medical staff bylaws can cause. To
protect your practice at the hospital,
it is critical that the bylaws work for,
not against, medical staff members.
Reduce the threat by consulting your
state medical society for assistance with
physician-friendly resources for the
medical staff.
Elizabeth “Libby”
Snelson represents
medical staffs and
writes, and writes
about, medical staff
bylaws. She is a
frequent speaker on
medical staff legal
issues at medical
staff retreats and medical society
meetings. For more information check
her Bylawg at www.snelsonlaw.com.

Traditionally, exclusive anesthesia
services contracts have not received
a significant degree of scrutiny with
respect to compliance with the federal
Stark Law. As a result, contracts for
anesthesia services have often fallen
outside the typical compliance review
process that applied to other hospital-
based exclusive arrangements. This
has changed, however, due to a recent
decision from a U.S. Court of Appeals,
which elevates the level of Stark Law risk
to which both anesthesia groups and
hospitals that contract for anesthesia
services might be subject. Specifically,
in U.S. ex rel. Kosenske v. Carlisle HMA,
Inc., the Court of Appeals for the Third
Circuit (there are twelve Circuits in
the federal appellate system; appellate
decisions are only binding in the Circuit
in which they were issued, but they may
influence courts in other Circuits) found
that an exclusive contract between an
anesthesia group practice and a local
hospital raised a potential violation of
the Stark Law. Kosenske was brought by a
qui tam plaintiff under the Federal False
Claims Act (the “FCA”) predicated on the
theory that submitting and billing claims
in violation of the Stark Law constitutes a
false claim under the FCA.
In Kosenske, the Court determined
that the anesthesiologists “received
numerous benefits as a result of [their]
relationship with [the hospital],
including the exclusive right to provide
all anesthesia and pain management
services, and the receipt of office space,
medical equipment and personnel.”
The Court believed that this in-kind
remuneration must meet a Stark Law
exception; otherwise, all of the referrals
from the anesthesiologists to the hospital
were impermissible.
The Court also decided that the
contract (which was never amended)
between the anesthesiologists and the
hospital did not cover the changed
circumstances of the parties, including
the provision of services at a new pain
clinic facility owned by the hospital.
Notably, after the execution of the
contract, the anesthesia group expanded
its services and began providing pain
management services to its own patients.
The group’s pain patients were capable of
being referred to the hospital.
Thus, with the referrals by the
group to the pain management clinic
(which permitted the hospital to bill
the facility fee) the anesthesia group
became a referral source that had a
compensation relationship with the
hospital. Specifically, several years after
the execution of the agreement, the
hospital built a stand-alone facility
containing an outpatient ambulatory
surgery center and a pain management
clinic. The Court noted that the hospital
did not charge the anesthesiology group
rent for the space and equipment, or a
fee for the support personnel it provided
to the anesthesia group practice when it
performed pain management services at
the pain clinic. The Court held that the
contract between the parties did not fall
within the physician services exception
to the Stark Law: because the written
agreement was drafted before the pain
facility existed, there was no evidence
of fair market value or any specific
consideration given for the free use of the
pain clinic. Thus, with respect to pain
management services, the hospital was
furnishing things of value (e.g., space and
personnel), without charge, to physicians
who were then in a position to refer
to the hospital for pain management
services at the hospital’s clinic. As such,
the arrangement was not distinguished
from a situation in which the hospital
was to provide incentives to a medical
staff member to induce the physician
to refer for outpatient hospital services.
Thus, the Court’s comments were based,
in large measure, on a distinction it
made between anesthesia services at the
hospital and pain management services
at a hospital-owned outpatient pain
clinic.
In summary, the important feature
in Kosenske, and what truly distinguished
the operation of the outpatient clinic
ANESTHESIA GROUPS NOT IMMUNE
FROM STARK LAW RISK
Adrienne Dresevic, Esq.
and Carey Kalmowitz, Esq.
The Health Law Partners

from the hospital inpatient service was
provision of hospital space, equipment
and personnel exclusively to the group.
When analyzing relationships from a
Stark Law perspective, hospitals and
anesthesia groups can draw the following
from the Kosenske case:
If a hospital offers a group the
exclusive right to staff a clinic or
department and no other physicians
are permitted to provide these
services, that exclusivity likely will be
characterized as remuneration under
the Stark Law. For the arrangement
to comply with the Stark Law, there
would need to be a written agreement
in place that meets an applicable
Stark Law exception. However, if the
anesthesia group is not billing as if it
is treating patients in their office, and
the hospital is registering the patient
as a hospital patient and billing a
facility or technical component for
any services rendered by the group,
then the mere fact that a group is
staffing a hospital-based clinic does
not create a financial relationship
under the Stark Law. No written
agreement would be required under
Stark in those circumstances.
Granting a physician/group an
exclusive right to provide professional
services has value and thus creates a
financial relationship for purposes
of the Stark Law. If, through
an exclusive arrangement, the
hospital is providing space, staff
and equipment, then so long as
such items are used exclusively by
the physician/group to provide
the exclusive service (the benefit
of which inures to the hospital),
these items should not implicate
Stark Law concerns. However, if
any of these items are not used,
exclusively, to provide the service for
the hospital’s benefit then the Stark
Law is implicated. By contrast, if the
group is seeing private patients for
which the hospital is not billing the
technical component or otherwise
generating revenue, the physician/
group must pay fair market value for
the use of these items and services.
Ultimately, when reviewing an
arrangement among a physician/
group and a hospital, the parties
should determine whether the
physician/group receives anything
of value beyond the mere right to
exercise medical staff privileges at
the hospital. If the physician/group
does not receive anything of value,
then the arrangement does not
create a financial relationship under
the Stark Law. If the physician/
group does receive something of
value, there may be a financial
relationship for purposes of Stark
and the arrangement will need to
be structured in compliance with an
applicable Stark Law exception.
There are several potential Stark
Law exceptions that may apply to an
arrangement between and anesthesia
group and a hospital. One of the major
Stark Law exceptions that could be used
to protect an exclusive services agreement
between an anesthesia group and a hospital
is the Fair Market Value Exception.
This exception protects compensation
between a an entity such as a hospital and
a physician or group of physicians for
providing services to the hospital.
In order to qualify for the
Fair Market Value Exception, the
compensation arrangement must:
(1) be set out in writing, covering
only identifiable items or services;
(2) specify the time frame for the
arrangement;
(3) specify the compensation – the
compensation must be set in
advance, be consistent with
fair market value, and not be
determined in any manner that
takes into account referrals or
other business generated by the
physician;
(4) be commercially reasonable and
further the legitimate business
purposes of the parties;
(5) not violate the anti-kickback
statute or other laws regulating
billing or claims submission; and
(6) not include services that involve
the counseling or promotion of a
business arrangement that violates
the law.
Anesthesia groups that have
exclusive services arrangements with
hospitals may also be able to protect
their arrangements through the Personal
Services Exception which requires the
following:
(1) the arrangement is set out in
writing, is signed by the parties,
and specifies the services covered
by the arrangement;
(2) the arrangement(s) covers all of
the services to be furnished by the
physician;
(3) ) the aggregate services contracted
for do not exceed those that are
reasonable and necessary for the
legitimate business purposes of
the arrangement(s);
(4) the term of the arrangement is for
at least one year;
(5) the compensation to be paid over
the term of the arrangement is set
in advance, does not exceed fair
market value, and, except in the
case of a physician incentive plan,
is not determined in a manner
that takes into account the volume
or value of any referrals or other
business generated between the
parties; and

(6) the services to be furnished under
the arrangement do not involve
the counseling or promotion of
a business arrangement or other
activity that violates any law.
Finally, when the anesthesia group
has an exclusive arrangement with a
hospital under which the hospital is
providing space, but the a group is not
using the space exclusively to provide
the professional services that underlie
the parties’ entry into the arrangement
and permit other hospital services (e.g.,
surgical and labor delivery services) to
be the anesthesia group must pay fair
market value for the use of the space.
The Fair Market Value Exception set
forth above will not protect the lease of
space. Instead, the lease of space should
be structured to comply with the Rental
of Office Space Exception, which requires
the following:
(1) the lease is in writing, signed by
the parties and specifies the space;
(2) the term of the lease must be at
least one year;
(3) the space leased must not exceed
what is reasonable and necessary
for the legitimate business
purposes of the lease, and the
lessee uses it on an exclusive basis
(except for common areas);
(4) the rental charges over the term
of the lease are set in advance and
consistent with fair market value;
(5) the rental charges over the term of
the lease are not determined in a
manner that takes into account
the value or value of any referrals
or other business generated
between the parties; and
(6) the lease would be commercially
reasonable even if no referral
were made between the parties.
Anesthesia groups must be
cognizant of the fact that effective
October 1, 2009, percentage-based
compensation and “per-click”
payments in space leases will no
longer be permitted under the
Stark Law.
This article is intended as only
a brief overview of the Stark Law’s
applicability in the anesthesia context.
The Kosenske case should serve as a
means to ensure that anesthesia groups
consider that the Stark Law may apply
to their current arrangements with
hospitals. Accordingly, anesthesia
groups should have experienced health
law counsel review their financial
arrangements with hospitals to ensure
that they are structured to comply with
an applicable Stark Law exception.
ANESTHESIA GROUPS NOT IMMUNE FROM STARK LAW RISK
Adrienne Dresevic, Esq. is a founding
member of The Health Law Partners, P.C.
She graduated Magna Cum Laude from
Wayne State University Law School in
2002. Ms. Dresevic practices in all areas
of healthcare law and devotes a substantial
portion of her practice to providing clients
with counsel and analysis regarding Stark
and fraud and abuse. She is a member of
the American Bar Association, State Bar of
Michigan, Health Law Section, American
Health Lawyers Association, and serves as
an editorial board member for the ABA’s
e-Source. Ms. Dresevic can be reached at
adresevic@thehlp.com
Carey F. Kalmowitz, Esq. is a founding
member of The Health Law Partners,
P.C. He graduated from New York
University Law School in 1994. Mr.
Kalmowitz practices in all areas of
healthcare law, with specific concentration
on the corporate and financial aspects
of healthcare, including structuring
transactions among physician group
practices and other healthcare providers,
development of diagnostic imaging and
other ancillary services joint ventures,
physician practice, IDTF and home health
provider acquisitions, certificate of need,
compliance investigations, and corporate
fraud and abuse/Stark analyses. He is a
member of the State Bar of Michigan, the
Michigan Society of Hospital Attorneys,
the American Health Lawyer’s Association,
and the American Bar Association. Mr.
Kalmowitz can be reached at ckalmowitz@
thehlp.com
Adrienne Dresevic Carey F. Kalmowitz

Fifth, the engagement agreement may
provide that, upon termination of the
agreement, the anesthesiologist must com-
plete all documentation in accordance with
applicable standards to allow the group
to bill for the services rendered consistent
with usual and customary business prac-
tices. To enforce this provision, most states
will allow withholding of monies owed to
the anesthesiologist until completion of
such documentation if an express provi-
sion allowing the withhold is also added to
the agreement.
Sixth, the scope of services covered
by the engagement agreement should be
clearly defined (e.g., operative v. non-op-
erative anesthesia services, medical direct-
ing of CRNAs, performing labor epidurals,
onsite schedule, and on-call responsibili-
ties). A clear delineation of the scope of
services will avoid potential conflicts be-
tween the anesthesiologist, the hospital and
other health care providers at the hospital
who may have different understandings of
the services to be covered by the anesthesi-
ologist under the agreement.
Seventh, covenants not to compete
are quite common in physician contracts
today as the majority of states will uphold
them (for the most part). However, where
a group has an exclusive contract with a
hospital that includes a provision for the
co-termination of medical staff privileges
with termination from the group, a cov-
enant not to compete is not really neces-
sary since the anesthesiologist is not likely
to have a significant number of patients
following him or her to a competing facil-
ity for general anesthesia services. In such
instance, if the anesthesiologist is able to
find another position within the relative
vicinity of the hospital, he or she does not
really pose a competitive threat to the hos-
pital and therefore he or she should not
be forced to uproot his or her family and
move due to a covenant not to compete.
Nonetheless, a covenant not to compete
may be appropriate where chronic pain
management services are to be provided by
the anesthesiologist at the hospital as such
patients are more likely to follow the anes-
thesiologist to a new location that is within
relatively close proximity to the hospital. If
a covenant not to compete is included in
the engagement agreement, it should be
reasonable in scope, duration and geog-
raphy to adequately protect the legitimate
business interests of the group but not to
place an unfair burden upon the anesthe-
siologist. Additionally, the engagement
agreement should provide that if the an-
esthesiologist is terminated by the group
without cause, then the covenant not to
compete will not apply.
Eighth, the engagement agreement
should provide that while the group is
deemed to be the owner of all medical, fi-
nancial and billing records related to the
professional services rendered by the an-
esthesiologist, the anesthesiologist should
have access to all such records during,
and after termination of, the engagement
agreement as reasonably necessary in order
to defend against third party payor actions
(e.g., malpractice actions or insurance
payor audits) and/or to verify compensa-
tion paid and/or owed to the anesthesiolo-
gist under the engagement agreement.
Ninth, the engagement agreement
should clearly address the responsible
party for obtaining and paying for profes-
sional liability insurance, including who is
responsible for obtaining and paying for
“nose” and “tail” insurance and the limits
of coverage.
Lastly, in order to avoid significant po-
tential issues in the future, the engagement
agreement should, at a minimum, include
an outline of the partnership opportuni-
ties being offered to the anesthesiologist.
Although the “buy-in” price and other
important terms and conditions may not
be known with certainty at the time the
parties are entering into the engagement
agreement, an outline of the partnership
track should be included which provides
each party a reasonable understanding of
when the opportunity will be available and
the key features of the partnership.
By including the provisions described
above within the engagement agreement,
and making sure that each party’s under-
standing of the engagement agreement is
set forth clearly in writing at the onset of
the relationship, the parties can protect
themselves against many of the adver-
sarial issues that can arise during such en-
gagements—facilitating a smooth entry
into, and exit from, the anesthesia group.
Hiring an attorney with knowledge and
experience in drafting and negotiating an-
esthesia employment contracts can fur-
ther facilitate a smooth entry into, and exit
from, the anesthesia group. As Benjamin
Franklin once said: “an ounce of preven-
tion is worth a pound of cure.”
WRITING YOUR CONTRACTS FOR SMOOTH ENTRY INTO AND
EXIT FROM ANESTHESIA GROUPS
Robert S. Iwrey is
a founding partner
of The Health Law
Partners, P.C., where
he focuses his prac-
tice on contracts,
litigation, dispute res-
olution, licensure, staff
privileges, Medicare,
Medicaid and Blue
Cross/Blue Shield audits and appeals,
defense of health care fraud matters,
compliance and other healthcare related
issues. He may be contacted at riwrey@
thehlp.com.

Surgeries are never fun, but they
are necessary. Recently my family
member received excellent surgical care
at our community’s surgery center. This
encounter yielded ten separate provider
bills. Each bill came to my home
through the postal service in a separate
envelope. The insurance company also
mailed me “explanations of benefits” for
each encounter. Thus just the postage
for these mailings was nearly $10.00, and
we know cost of each mailing was much
more than just the postage amount. I
then spent $4.40 in stamps to mail my
payments to the providers. Three of
these bills were for less than $10.00
each. The absurdity of this is that the
money for their payment was sitting at
the insurance company in my flexible
spending account. Why are we wasting
all of this money asking multiple care
providers to communicate with and
collect from the same patient? Our
current process needs to change.
This proposal is offered as a
challenge to the current standard
practices used in the healthcare industry.
Currently, patient deductible and
coinsurance amounts are assigned to
claims as they are adjudicated by the
insurance company. The collection of
these amounts is then the responsibility
of the care provider. I would like to
propose that insurance companies hold
the responsibility to bill and collect these
deductibles and coinsurance amounts.
This change would result in tremendous
cost savings to healthcare as a whole
and improved simplicity for patients.
Following are reasons to support this
change:
Simplicity:
Patients would receive one bill
from one entity – their insurance
company – and would only need to
make payment to this single entity.
Plan benefits are designed and
administered by insurance companies.
They hold the contracts with the
employers and patients. Only the
insurance company understands
the intricacies of how any claim
was adjudicated and thus should
be responsible for explaining and
administering these benefits to its
contract holders.
Care providers should be allowed to
concentrate on being care providers.
They should not need to employ
financial counselors, and patient
account representatives to collect
their patient accounts.
A MODEST PROPOSAL: INSURANCE
COMPANIES, NOT PROVIDERS,
SHOULD BILL AND COLLECT
DEDUCTIBLES AND COINSURANCE
Cynthia M. Roehr, CPA
Legislative Liaison for the MGMA Anesthesia Administration Assembly

Some patients are underinsured.
Under the current system, insurance
companies and employers are
never made aware of patients
that are unable or unwilling to
uphold their responsibilities under
their insurance contracts. If the
insurance company were aware of
the non-payment, perhaps a more
appropriate plan design could be
adopted for the patient.
Cost Savings:
Current deductible levels are
high enough that multiple care
encounters are assigned to each
patient’s deductible amount. This
results in multiple providers mailing
statements to the same patients.
Coinsurance is also applied to
numerous claims for most patients.
The processing of every check or
credit card payment has a cost
associated with it. Because multiple
providers are being paid, this
duplicative effort results in added
costs to healthcare.
Insurance companies already send
patients “explanation of benefit”
reports for each adjudicated claim,
so this mailing is already occurring.
Changing it to a “billing” instead of
an informational “mailing” would
not add any additional costs to
healthcare.
Insurance companies have excellent
data on patient addresses and
contact information for the patient.
This would allow them to efficiently
locate and communicate amounts
owed. Currently every provider
has to maintain and update their
systems for every address change.
Financial Ability:
Insurance companies are financial
institutions; medical practices are
not. Smaller medical practices
lack the systems and personnel to
efficiently administer and monitor
patient payment plans.
Currently medical care providers
are forced to employ “financial
counselors” to assist patients in
establishing payment arrangements.
Thus multiple providers’ counselors
work with the same patient and
require that patient to complete each
entity’s financial request forms. Under
this proposal, only one counselor and
form would be necessary.
Many insurance companies own or
are affiliated with banks, which will
allow them to help patients arrange
appropriate credit when necessary to
pay for unplanned medical expenses.
Insurance companies already
administer most of the flexible
spending, health reimbursement,
and many health savings accounts.
By having knowledge of and access
to these funds, insurance companies
can streamline the savings accounts’
release to pay amounts owed
according to the plan design.
Because insurance companies
manage the patients’ health care
accounts, they know the patient’s
ability to pay, which gives them a
significant information advantage
over providers.
Insurance companies can accept
payments by ACH from patient’s
bank accounts. Most care providers
do not have access to such payment
mechanisms.
Through their relationships with
employers, insurance companies
also have the ability to allow for
payroll deductions to fulfill unpaid
obligations.
Co-Payments:
Copayments differ from coinsurance
and deductible amounts as these
are typically fixed amounts and
clearly understood by the patient as
being owed at the time of service.
This proposal would require that
any office copayment amounts be
clearly printed on the insurance
card. One recommendation to this
policy is that any benefit design
where copayments are based on a
percentage of the billed or allowed
amounts should be treated like
coinsurance or deductibles and be
collected by the insurance company.
It is for these cost savings and
simplification to the collection process
that I assert insurance companies
are best positioned to bill and collect
deductibles and coinsurance amounts.
I believe this simplification would be
well accepted by patients and providers.
While the insurance industry may
have some objections, this proposal,
if fully considered, would eliminate
much unnecessary duplication and
waste. Please review the above proposal
as a viable means to help current
medical practices eliminate inefficient
and unnecessarily costs which do not
promote patient care or quality.
If you agree with my assessment and
would like to see this change enacted,
legislative action will be necessary.
The insurance industry isn’t going to
just capitulate and make this change.
Please assist me by contacting your
state and federal legislators to help me
convince them of the millions of wasted
administrative dollars that would be
saved.
Cynthia M. Roehr
Chief Administrative
Officer,
Linn County
Anesthesiologists, PC,
Cedar Rapids, Iowa
cmroehr@
cr-anesthesia.com

PROFESSIONAL EVENTS
ANESTHESIA
BUSINESS CONSULTANTS
255 W. MICHIGAN AVE.
P.O. BOX 1123
JACKSON, MI 49204
PHONE: (800) 242-1131
FAX: (517) 787-0529
WEB SITE: www.anesthesiallc.com
DATE EVENT LOCATION CONTACT INFO
Sep. 24-27, 2009 New England Society of Anesthesiologists
Annual Meeting
The Sagamore Resort,
Bolton Landing, NY
www.nesa.net
Sep. 18-20, 2009 Ohio Society of Anesthesiologists
Annual Meeting
The Hilton Columbus at Easton,
Columbus, OH
www.osainc.org
Oct. 16, 2009 American Society of Critical Care
Anesthesiologists Annual Meeting
New Orleans, LA www.ascca.org
Oct. 16, 2009 Society for Pediatric Anesthesia
Annual Meeting
New Orleans, LA www.pedsanesthesia.org
Oct. 16, 2009 Society of Neurosurgical Anesthesia &
Critical Care Annual Meeting
New Orleans Marriott,
New Orleans, LA
www.snacc.org
Oct. 17-21, 2009 ASA Annual Meeting Morial Convention Center,
New Orleans, LA
www.asahq.org
Oct. 11-14, 2009 MGMA Annual Conference Colorado Convention Center,
Denver, CO
www.mgma.com
Oct. 26-30, 2009 CSA Fall Hawaiian Seminar Grand Hyatt Kauai Resort & Spa,
Poipu Beach, Kauai
trowe@csahq.org
Nov. 6-8, 2009 Association of Anesthesiology Program
Directors/Society of Academic
Anesthesiology Chairs Annual Meeting
Boston Park Plaza,
Boston, MA
www.aapd-saac.org
Dec. 11-15, 2009 New York State Society of Anesthesiologists
Postgraduate Assembly in Anesthesiology
Marriott Marquis,
New York, NY
www.nyssa-pga.org
Jan. 17-22, 2010 Clinical Update in Anesthesiology,
Surgery and Perioperative Medicine
Paradise Island, Bahamas Helen.phillips@mountsinai.org
Jan. 18-22, 2010 CSA Winter Hawaiian Seminar Hyatt Regency Maui Resort & Spa,
Ka’anapali Beach, Maui
trowe@csahq.org
Jan. 29-31, 2010 ASA Conference on Practice Management Marriott Marquis,
Atlanta, GA
m.teister@asahq.org

Anesthesia Business Consultants: Communique summer09

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (7)

Similar to Anesthesia Business Consultants: Communique summer09

Similar to Anesthesia Business Consultants: Communique summer09 (20)

More from Anesthesia Business Consultants

More from Anesthesia Business Consultants (12)

Recently uploaded

Recently uploaded (20)

Anesthesia Business Consultants: Communique summer09