As the various sectors within the health care industry continue to evolve and adjust as a result of health care reform, many questions remain regarding the state of the industry and how our businesses and local population are affected. To help answer some of those questions, the Los Angeles Business Journal turned to a diverse group of experts with various perspectives, including some of the most knowledgeable and active participants in the regional equation. Following is a series of questions the Business Journal posed to these health care stewards of the region and the unique responses they provided – offering a glimpse into where health care stands today – from the perspectives of those in the trenches delivering and facilitating health services for the people of the Los Angeles area.
There appears to be more uncertainty about our nation’s healthcare system than ever. What are your projections for how the system will evolve over the coming year or two and what impact will it have on businesses?
ALVARNAS: Over the past six months, patients, physicians, healthcare systems and business leaders have endured a rollercoaster ride as the administration and Congress have struggled to deliver upon their numerous promises to replace the Affordable Care Act (ACA). The reality is that unfortunately we are likely to remain in an uncertain state for the foreseeable future. Any future system, regardless of its funding mechanism, will have to deliver greater and more transparent value to its beneficiaries. As business leaders grapple with the central question of how to best overcome the challenges of variability in care quality and the conundrum of how to rein in healthcare costs, the opportunity to forge stronger relationships with physicians and health care systems will help us navigate past this point of uncertainty. The best path forward is a renewed focus on how best to increase the value of health care, how best to understand clinical risk, and how to develop more meaningful performance metrics. Value is the way forward.
‘Over the past six months, patients, physicians, healthcare systems and business leaders have endured a rollercoaster ride as the administration and Congress have struggled to deliver upon their numerous promises to replace the Affordable Care Act (ACA). The reality is that unfortunately we are likely to remain in an uncertain state for the foreseeable future.’ JOSEPH C. ALVARNAS
KHOURI: We agree that there are many uncertainties. Children’s Hospital Los Angeles relies substantially on diverse revenue sources and takes care of many patients who rely on publicly funded insurance. As employers, patients, families and payers experience uncertainty, this affects us substantially as well. We project that over the next year or two, we will continue to face uncertainty. We are really focused on making sure that our fundamentals are strong. We’re making sure that we are delivering high quality, family-centered patient care, and assuring that patients and families have convenient access to our care by increasing our access points. This is an important focus and we are confident that these are the right things to do even as we face a lot of uncertainty with respect to healthcare reform and the threat to Medicaid funding.
What about providers? How will the current administration’s attempts to “re-boot” our nation’s healthcare system affect them?
KHOURI: Just like other businesses, we as providers value certainty and clarity around the future. At Children’s Hospital Los Angeles, we see advocating for children and seeking to assure insurance coverage for children as major priorities. The uncertainty that we all face today we expect will continue over the next several years. This means that we need to focus on our business fundamentals. It also means that we have an opportunity and an obligation to advocate for children’s health as the dialogue occurs around what potential changes to the delivery system we provide.
ALVARNAS: Physicians, like business leaders and other key stakeholders, face enormous uncertainties regarding the future evolution of our health care system. Programs like MACRA (the Medicare and CHIP Reauthorization Act) have placed an enormous administrative burden upon physicians while offering relatively little opportunity in return. The challenges of navigating compliant electronic health records (EHRs), adapting to evolving practice guidelines, and surviving large-scale consolidations within the health care industry continue to challenge physicians and undermine their ability to focus upon their principle mission of caring for patients and their families. Health and Human Services Secretary Tom Price has promised to look for ways in which he and the administration can help reduce administrative burdens on physicians. I am hopeful that as focus shifts from the recent failure to pass a repeal/replace of the ACA, we will see more efforts from the secretary and the administration to help support physicians by reducing their “unfunded mandates.” As a physician, I believe that Secretary Price may have a well-informed sense of many of the “busy-work” burdens imposed upon physicians by the government. I look forward to HHS redirecting some of its efforts toward enabling physicians to deliver better patient care and improve outcomes.
‘We’re making sure that we are delivering high quality, family-centered patient care, and assuring that patients and families have convenient access to our care by increasing our access points. This is an important focus and we are confident that these are the right things to do even as we face a lot of uncertainty with respect to healthcare reform and the threat to Medicaid funding.’ LARA M. KHOURI
What trends do you see or anticipate in physician reimbursement?
RIFENBARK: Although many physicians will at least initially participate in the Merit Based Incentive Payment System (MIPS) program under Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), I think we will increasingly see more physicians aligning with hospitals and other larger providers to participate in advanced Alternative Payment Models (APMs), which provide an opportunity for better reimbursement and coordinated care among providers. Given the information that must be submitted to the Centers for Medicare & Medicaid Services (CMS) under MACRA, we will also likely see an increase in audits of physician practices to ensure that the data that is submitted is valid. In this regard, it will be important for practices to carefully document the source data for the submissions to CMS under MACRA to withstand regulatory scrutiny and avoid recoupments and potential false claims act liability.
In your view, what is the current outlook for the “end users” – the patients?
ALVARNAS: In many ways, this question helps to frame the source of many of the deficiencies of our health care system. Patients frequently endure a system in which their needs, considerations, values, and suffering are subordinated in importance due to fundamental systemic flaws in our health care system. The idea of patient-centeredness is frequently an afterthought or a platitude rather than a consistent focus. As key health care stakeholders grapple with the issue of how best to improve the value of our care delivery system, we need to ensure that the primary attribute of any resulting new system is that it be increasingly patient-centered. I am fortunate to work at a health care organization that has placed a central focus upon improving the patient centricity of care. City of Hope leadership empowers us to “always do what is right for the patient.” Our clinical leaders live by the ethos that we serve a person and his/her family throughout the journey to wellness, rather than treat a disease. Our care delivery system has been strategically designed to ensure that as cancer care advances through extraordinary leaps in innovative technologies, it also becomes increasingly more patient and family-centered. Our health care system would be better grounded and more effective if this priority was more universally implemented.
KHOURI: I would say the most significant trends that we’re seeing for patients and families are pushed towards consumerism and encouraging patients and families to be more engaged in decisions about healthcare services, including paying attention to the costs of those services. Coupling that with feedback on the patient and family experience, which includes satisfaction, convenience, and acceptability. Looking to the future, I think that the outlook for the patient and family experience is a good one with institutions like Children’s Hospital Los Angeles. We bring to the local market nationally ranked care and we are making sure that all of the children of Los Angeles are able to access us — and doing that in a family centered way, which means that we are working to assure convenience and affordability while also delivering exemplary quality of care.
‘I think we will increasingly see more physicians aligning with hospitals and other larger providers to participate in advanced Alternative Payment Models (APMs), which provide an opportunity for better reimbursement and coordinated care among providers.’ RICK RIFENBARK
With the rise of telemedicine and electronic health records – how does technology affect the way your business innovates to meet the needs of patients?
ALVARNAS: I sometimes think of myself as a Luddite, especially as I sometimes enter coffee houses and see a room full of people staring into their respective devices in a strange, disconnected silence. That said, I am extraordinarily enthusiastic with the possibility that telemedicine can better connect patients with expert care across vast distances that separate urban, suburban, and rural communities. Telemedicine can help bridge the potential barriers of language and culture that may undermine the success of a patient’s care experience. The extraordinary immediacy that technologies like FaceTime, and the numerous social media platforms, uniquely offer can lead to greater connectedness between patients and their health care providers. For patients with cancer, the potential of telemedicine to allow for better early detection and management of distress (depression, pain, insomnia, anxiety) can help us better meet their needs without requiring that they traverse the sometimes enormous distances (or time stopped in traffic in our region) that separate them from their health care providers. As we think about ways of improving the patient-centeredness of care, Telehealth technologies offer the promise of improved access and health care outcomes while empowering our patients to become more effective advocates for their immediate needs. Effective use of telehealth technology has the potential to reduce unnecessary ER visits or hospitalizations while minimizing inconvenience to patients and their families.
RIFENBARK: As a law firm, we regularly work with clients on health information technology issues. Technology has been an increasingly important aspect of the practice of medicine. Through the Medicare and Medicaid “Meaningful Use” programs, the government spent approximately $37 billion to incentivize providers to adopt and meaningfully use electronic health records technology. This led to significant changes in the way that information is stored, practitioners interact with patients, information is shared (e.g., through health information exchanges), and how patients access their medical information. While electronic health records and telehealth have led to many advances in the practice of medicine, hospitals and medical professionals also need to be aware of important legal issues that potentially arise as well, such as maintaining the privacy and security of patient information in accordance with HIPAA and state law counterparts, the risks of taking short cuts with respect to documentation (e.g., cutting and pasting of medical records, use of pre-filled templates, etc.), and potential coding and billing issues.
KHOURI: Technology is more important than ever in healthcare — and at Children’s Hospital Los Angeles we’ve been recognized as a technologically advanced organization. We’ve also been recognized as a “Most Wired” hospital by Hospitals & Health Networks. And we have achieved a level seven information technology rating by Healthcare Information and Management Systems Society (HIMSS) accreditation, reflecting our investment and commitment to technology. When we think about the benefits of technology, we think about what different innovations we bring to children and their families as we provide care, and we also see an opportunity to support our teams of doctors, nurses, and other care providers , among others, in helping them do their jobs better and more efficiently while driving safety and quality as our primary outcome.
What are the predominant legal issues that physicians need to focus on when entering into managed care contracts today?
RIFENBARK: There are many contract provisions that physicians should consider when entering into managed care contacts. These include termination provisions (and continuity of care provisions following termination), provisions that require physicians to participate in all of a managed care company’s products or the products of their affiliates (“all products” or “all affiliates” clauses), dispute resolution procedures, provisions that require physicians to give their best rates (“most favored nations” clauses), indemnification provisions, and exclusivity provisions that restrict physicians from entering into arrangements with other managed care companies. In addition, all financial provisions should be carefully reviewed and considered, particularly if the agreement transfers risk to the physicians through capitated payments.
‘As a law firm, we regularly work with clients on health information technology issues. Technology has been an increasingly important aspect of the practice of medicine. Through the Medicare and Medicaid “Meaningful Use” programs, the government spent approximately $37 billion to incentivize providers to adopt and meaningfully use electronic health records technology.’ RICK RIFENBARK
Does it make sense for large physician groups create their own managed care entities?
RIFENBARK: If physicians have the capacity and infrastructure to take on institutional risk, then it may make sense to pursue a limited HMO license. In recent years, we have seen an increase in the number of physician groups that are interested in considering some form of HMO license. However, medical groups should go into the process with their eyes open that obtaining a limited HMO license in California can be a time consuming and expensive process. Once a license is obtained, the medical group will have reporting requirements to the Department of Managed Health Care that will subject the practice to an additional source of regulatory oversight. Any decision to create a manage care entity would need to be carefully balanced against the expense and increase in regulatory requirements.
At this stage in the game, what do hospitals and physicians need to do to offset the fact that reimbursements have been reduced?
KHOURI: On the provider side, we have been experiencing pressure on our reimbursement for quite a while, so none of this is new to us. The challenge, as always, is to do everything that we need to do to assure safe, high quality care while also managing our costs. The opportunity that we see is to make sure Children’s Hospital Los Angeles is accessible to more and more families. As we are able to care for more and more children and youth, we will be able to bring economies of scale to the major investments that a free standing children’s hospital like ours can make to assure that services are available to all children — including patients with medically complex conditions.
Might concierge medicine be an alternative for physicians who wish to avoid today’s market pressures and reduced reimbursement?
RIFENBARK: Depending on the particular market in which a physician practices, concierge medicine may be an attractive option for a physician practice. Concierge practices typically offer patients increased access to their physicians for a monthly or annual fee. The potential benefits to the practice include an additional income stream, the ability to spend more time with patients, and the cache of being a concierge practice. However, there are also potential drawbacks to that model, including the risk of upsetting (and losing) existing patients who do not want to pay additional fees to see their physicians, the expense of setting up the concierge practice, and potential regulatory risk if the concierge structure is not implemented correctly.
‘Telehealth technologies offer the promise of improved access and health care outcomes while empowering our patients to become more effective advocates for their immediate needs. Effective use of telehealth technology has the potential to reduce unnecessary ER visits or hospitalizations while minimizing inconvenience to patients and their families.’ JOSEPH C. ALVARNAS
Can non-physician providers help reduce costs and fill the gap with the insufficient number of primary care physicians?
RIFENBARK: The use of non-physician providers, such as physician assistants (PAs) and nurse practitioners, in a team-based care model can offer a variety of benefits to medical practices and patients. Non-physician providers can play a valuable role in expanding the scope of primary care that is offered to patients, particularly in areas that do not have sufficient access to primary care services. These mid-level providers generally command lower salaries than physicians, yet still provide excellent care and favorable reimbursement opportunities for medical groups. In California, physicians can supervise up to four PAs, which significantly increases the amount of primary care services that a medical practice can provide.
How are the quality and review websites (Healthgrades, Yelp, etc.) influencing consumers today?
KHOURI: In our experience, quality and review websites have had a limited impact. We are actively engaged with patients and families through social media, and certainly work to identify concerns and issues that are identified through these types of sites. We expect that over time, websites that focus on healthcare will get better at helping patients and families distinguish high quality providers that can meet their healthcare needs from those that may not necessarily have the expertise to address those needs. We are in the early days with quality and review websites, but over time, it will be better if patients and families are engaged with healthcare decisions, and getting accurate and credible information about the quality of care that’s provided. At Children’s Hospital Los Angeles, we really seek to make sure that we have the expertise that’s required to care for children who have a variety of conditions and needs. We find that families that use web resources to find us often come equipped with good information. So we hope that these tools will ultimately allow for even better access of care for kids.
What types of issues do businesses in the healthcare sector experience that are similar to or different from those of other businesses when it comes to managing growth or expanding into new markets?
RIFENBARK: There are a number of health care laws both at the state and federal levels that make health care a unique industry for businesses that are attempting to expand. For example, in other industries, the payment of referral fees and the existence of quid pro quo arrangements is a common means to increase business. However, in the health care industry, such arrangements can create serious risk under various state and federal anti-kickback laws. Other unique challenges include restrictions on what types of individuals and entities can own health care providers (i.e., California’s corporate practice of medicine doctrine), which can also limit potential investors and growth opportunities. In other respects, health care is similar to other businesses that are looking to grow. Health care is a competitive business and providers of all types are looking to increase the reach of their brand, attract new business, provide better quality of service, and increase in size to leverage more favorable relationships with their vendors and other partners.
Are there laws specific to California that restrict the growth of business and innovation in the health care industry?
RIFENBARK: There are several California laws that make certain business models and practices more challenging. For example, California’s prohibition on the corporate practice of medicine, which provides that unlicensed persons and non-professional entities generally may not own a medical practice or directly participate in the profits of a medical practice, makes it more difficult for general business corporations to participate in certain health care business models. Other laws, such as the Confidentiality of Medical Information Act (California’s equivalent to HIPAA) and the Physician Ownership and Referral Act of 1993 (California’s equivalent to the Stark physician self-referral law), also present traps for the unwary when structuring particular types of health care businesses in California. However, with careful business and legal planning, health care innovation and growth is achievable.
‘Urgent care centers and other non-institutional facilities are increasingly popular avenues to help keep non-emergent patients out of hospital emergency rooms. In addition, many patients find the hours and locations of urgent care clinics to be very user friendly. Many urgent care centers are structured as arrangements between professional medical corporations and management companies.’ RICK RIFENBARK
What issues do businesses establishing urgent care centers and other non-institutional facilities face in California?
KHOURI: We’re seeing the proliferation of new locations of care, oftentimes by entrants to nontraditional healthcare companies. In many cases this is a response to consumer needs for convenient and affordable care. Businesses that are establishing urgent care centers and other non-institutional care facilities are challenged when they don’t have the right expertise and don’t have the experience to understand how to navigate the complexities of healthcare. Whether it’s around payer arrangements, real estate, regulatory requirements, or simply the expectations of patients and families. We also find that, if not careful, new entrants can fall short in delivering quality and safe care, especially for children.
RIFENBARK: Urgent care centers and other non-institutional facilities are increasingly popular avenues to help keep non-emergent patients out of hospital emergency rooms. In addition, many patients find the hours and locations of urgent care clinics to be very user friendly. Many urgent care centers are structured as arrangements between professional medical corporations, which employ the physicians and other licensed professionals to deliver the health care services to patients, and management companies, whether affiliated with a health system or private equity sponsor, which often provide the space and turn-key management services to facilitate the business aspects of the urgent care centers. Navigating the economics and division of labor between the medical and business functions is both a practical business issue and a legal issue, as there are laws that regulate what services the management company can provide and how the management company can be paid for its services.
Every large multifaceted organization carries with it a multitude of demands and shifting priorities; how do you define what is most important to your organization?
ALVARNAS: This is an extremely powerful and ultimately empowering question. In their day-to-day operations, health care systems are challenged by rapidity with which health care technologies evolve, the unprecedented escalation in pharmaceutical costs, the shifting competitive health care environment, the effect of health care consolidation on patient access, and the relentless downward pressure on reimbursement. It is easy to become fixated upon each of these issues and fail to invest adequately in strategic planning or transformational efforts directed at ensuring that the health care system evolves in order to meet future needs. The questions of whom do we serve, how can we serve them more effectively, how will their needs evolve in the future, how can we create/differentiate ourselves to serve those needs most effectively, and how we can leverage a more creatively engaged workforce and technology to serve these needs have to be asked over and over again. In the cancer care domain, the rapid evolution of highcost genomic diagnostic technologies and extraordinary (and increasingly expensive) targeted therapies can bring immense value, previously impossible cures, and enhanced quality of life for our patients and their families. The litmus test for knowing that we are on the right path includes asking ourselves if we are creating a system that can deliver these technologies sustainably, efficiently, and with greater patient-centricity.
KHOURI: Institutions like Children’s Hospital Los Angeles seek to make sure that we are meeting the needs of patients and families beyond inpatient and hospital care. We work to provide access to Children’s Hospital Los Angeles and delivery of care that tracks patients across the continuum of care, so not just hospital care but also primary care and other outpatient services in the community. One of our most exciting ventures this past year, has been the formation of the CHLA Health Network. The CHLA Health Network brings together pediatricians in the community who affiliate with CHLA, which allows us to provide access to CHLA-connected care across the continuum, which is what CHLA has traditionally been known for. We’re excited that we’ve brought together more than one hundred pediatricians into the CHLA health Network representing a geographically distributed set of practices that are able to demonstrate high quality care and excellent access to patients and families in the communities we serve.
‘Businesses that are establishing urgent care centers and other non-institutional care facilities are challenged when they don’t have the right expertise and don’t have the experience to understand how to navigate the complexities of healthcare. Whether it’s around payer arrangements, real estate, regulatory requirements, or simply the expectations of patients and families. We also find that, if not careful, new entrants can fall short in delivering quality and safe care, especially for children.’ LARA M. KHOURI
We’re seeing more consolidations and more alignments among providers. Does this mean consumers will have fewer choices moving forward?
KHOURI: It’s hard to say whether consolidations and alignments will lead to fewer choices. It’s certainly something that there is concern about. We’re seeing in the market, however, that consolidations and alignments more often shore up community based resources that have not historically had the capital or access to the workforce that is required in order to perform at the highest levels. It is my expectation that, especially with alignments and partnerships, such as the one that Children’s Hospital Los Angeles has established with Providence Tarzana Medical Center, we’re able to bring expertise closer to home — and that means that patients and families have more choices than they historically have had in their local community. At Providence Tarzana, we operate their Neonatal Intensive Care, Pediatric Intensive Care and Pediatric units. We have a similar arrangement with Providence St. John’s Health Center in Santa Monica and Providence Holy Cross in Mission Hills. The alignments that we have established actually increase the choices that families have in each area.
ALVARNAS: The challenges to consumers, particularly when it comes to cancer care, are profound. It is extraordinarily difficult for consumers to effectively self-advocate when the pace of diagnostic and therapeutic innovation outpaces the ability of even many physicians to remain current in best practices. As our health care system has undergone unprecedented consolidation, provider networks have narrowed such that patients have little guarantee that their health care system will provide access to adequate physician expertise in order to ensure the best outcomes. As cancer care becomes increasingly more complex, and what we used to treat as a single cancer now becomes dozens of molecular subtypes — each of which require a different therapeutic approach — patients are ill prepared to navigate this level of complexity. This is exacerbated by the fact that there is little transparency about system and provider cancer care outcomes that patients really care about, such as survival rates and quality of life. I fear that patients are increasingly likely to encounter barriers to the level of expertise that they require in order to achieve the best possible outcomes.
‘‘We’re seeing in the market that consolidations and alignments more often shore up community based resources that have not historically had the capital or access to the workforce that is required in order to perform at the highest levels. It is my expectation that, especially with alignments and partnerships, we’re able to bring expertise closer to home — and that means that patients and families have more choices than they historically have had in their local community.’ LARA M. KHOURI
What are some regulatory barriers to entry for startup companies in the health care industry?
RIFENBARK: It is important for entrepreneurs to be mindful of the regulatory complexity of the health care industry and the need to structure companies in a compliant manner from the very outset. Laws that can create regulatory risk and may be barriers to entry include state and federal anti-kickback and patient brokering laws, state corporate practice of medicine doctrines, HIPAA and state privacy laws, federal and state self-referral laws, and antitrust laws. In addition, depending on what services are provided and how they are paid for, risk-sharing arrangements may implicate state insurance laws and HMO statutes, which also must be considered. All of these regulatory considerations should be factored into the business structure at the outset to minimize problems down the road.
Looking to the future, what do you think the health care landscape will look like, say, five years from now?
ALVARNAS:Being a clinical hematologist who cares for people with very aggressive blood cancers, I am an optimist by nature. I hope that our health care system, regardless of methodology, will become more patient-centered and more scalable. By scalability, I mean that we will achieve far greater cost-efficiency in the care of populations of patients affected by hypertension, diabetes, hyperlipidemia, and comparable conditions. For this population, I really do believe that more effective care can be delivered at a lower population-based cost while achieving much better outcomes. This will have to be achieved through better patient engagement models (including patients advocating for themselves so their voices are heard balanced with linguistically and culturally appropriate clinical outreach) through technology, and by leveraging the powerful skills of advanced practice nurses and dedicated primary care physicians. At the other end of the spectrum, we will need to have the ability to bring leading edge, technology-intensive care solutions to patients whose survival depends upon it. The ideal health care system would have the ability to move patients efficiently and quickly from one domain to the other (and eventually back) in a way that best reflects the patients’ individual risk-based care needs. Some visionary payers are beginning to look for models like these. I am hoping that a system that better aligns health care payment with the best outcomes can ultimately prevail.
‘The ideal health care system would have the ability to move patients efficiently and quickly from one domain to the other (and eventually back) in a way that best reflects the patients’ individual risk-based care needs. Some visionary payers are beginning to look for models like these. I am hoping that a system that better aligns health care payment with the best outcomes can ultimately prevail.’ JOSEPH C. ALVARNAS
RIFENBARK: There is a lot of uncertainty these days on the legislative front, but there are a few trends that appear to have legs regardless of what happens to the Affordable Care Act. First, we will continue to see a great deal of emphasis by payers (government and private) on payment systems that reward quality and efficiency. This is evident by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which established a new physician reimbursement program, and various other payment programs by the Centers for Medicare & Medicaid Services (for example, accountable care organizations and other alternative payment models, Hospital Value Based Purchasing Program, Hospital Readmissions Reduction Program, etc.), and other similar value-based payment models used by commercial insurance payers. Second, there will continue to be significant government enforcement activity. Eliminating fraud, waste, and abuse in Medicare and Medicaid is a priority for Republicans and Democrats, and the government receives a significant return on investment for every dollar spent to combat health care fraud. Third, providers will continue to expand the use of technology in their practices. The Medicare and Medicaid “Meaningful Use” programs incentivized hospitals and medical practices to adopt electronic health records systems, many more providers now exchange information through health information exchanges, and telemedicine has become a viable option to expand the reach of health care.
