Independent practice associations (“IPAs”) are gaining momentum in response to healthcare reform and market changes responding to healthcare reform. In an era when consultants are selling one-size-fits-all solutions, physicians have to consider IPAs as a viable option once again, but they have to fine tune their expectation to recent changes.
In the thunderous noise wrought by talk about accountable care organizations (ACOs), physicians are scrambling to see where they might fit in the future of healthcare. While we think those changes will be neither as severe or as pervasive as feared, we do see huge opportunities for ANY organization which can (1) reduce healthcare expenditures, and (2) improve quality. Healthcare businesses of the future will view utilization skeptically. Hospitals of the future will look like medical practices with beds. Medical practices of the future will have a stake in the cost and quality of care being delivered and will view utilization skeptically.
While we think healthcare reform laws may ultimately be found to be unconstitutional, we see that the marketplace has shifted in anticipation of those changes. And we see that, once again, IPAs have a place. But physicians have to understand what they are, how they work, their limitations and how recent changes will impact them.
IPAs are essentially organizations that allow physicians (who may be competitors) to obtain managed care agreements. Since they MUST function to reduce costs and improve quality, and since payment will likely be tied to meeting quality metrics, successful IPAs will have to—
- Have strong physician leadership to police “their own” to ensure lower cost and higher quality;
- Have strong and sophisticated administrative management to obtain contracts and really understand what payers and patients want and how to give it to them;
- Be capitalized sufficiently to pay for a successful organization;
- Contract ONLY on a financial risk basis, which means they will not contract with managed care payers on a pure fee for service basis; and
- They will create patient accountability.
Understanding applicable antitrust restrictions is key to successful IPA formation and operations. Along with the Sherman Act and other antitrust laws, the revised Statements of Antitrust Enforcement Policy in Health Care issued by the Department of Justice are required reading for those who want to know how far they can go in discussing payer conduct like bundling claims and routine downcoding. The core changes brought by the revised Statements are: (1) expansion of the “rule of reason” analysis for determining whether the antitrust laws have been breached, (2) expansion of shared financial risk beyond capitation; and (3) expansion of the role of the “messenger.” A messenger is someone who operates like a confidential middle man running payer offers back and for the between payer and IPA physician member, generally a huge disappointment. Instead, IPAs ought to abandon the idea of the messenger altogether and embrace the idea of financial risk sharing—cost savings sharing, capitation and the like.
Physicians ought to keep in mind that the Statements have not changed the longstanding prohibition against price fixing and boycotting, the claims IPAs tend to be most vulnerable to in discussing anything with payers. That is, it is still 100% illegal for: (1) two or more competing physicians to agree to charge specific fees for certain procedures in their respective, independent practices, and (2) two or more competing physicians to agree not to do business with a particular HMO.
Given the cost/quality focus of today’s regulations and marketplace, healthcare organizations MUST find ways to enlist patients in the mission to reduce costs and improve quality. Any parent of a teenager knows, expectations without consequences are meaningless. As such, healthcare organizations will have to lean on patients in any permissible way to reward healthy behavior and to punish costly behavior.
For those who experienced the 90s, with networks and IPAs and the like and observed predatory behavior by business owners dedicated primarily to skimming physician income off the top, remember that now quality metrics will be tied to payer compensation. If you wanna get paid, you will have to meet certain measurable quality expectations. If you wanna earn substantially more than you are now, you will have to show cost savings and enhanced quality. Which is causing many to reconsider the cost savings-quality enhancing role of primary care physicians. Today’s regulatory and market changes are definitely presenting huge opportunities for primary care physicians! For specialists concerned about that, they ought to consider that if they are part of an organization with (1) has primary care and (2) contracts on a cost savings basis, the “wealth” would be shared with them.
IPAs in these early years of healthcare reform will be different from those in the past. For one thing, government regulators are promising to ease up on the anti-trust restrictions if the organization can demonstrate reduced cost and improved quality. Moreover, sharing substantial financial risk is something which is desired by the government and payers alike and which also serves to reduce legal risks.
Like it or not, IPAs are coming back. More forward thinking physicians will embrace the opportunity and will step carefully through the minefield of regulatory compliance.