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Presenting a live 90-minute webinar with interactive Q&A

Urgent Care Centers: Key Legal and Business Considerations

Complying With Corporate Practice of Medicine Laws, State Licensure Requirements, EMTALA Mandates, and Reimbursement Laws

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific WEDNESDAY, SEPTEMBER 21, 2016

Jon M. Sundock, General Counsel and Chief Administrative Officer, CareSpot Express Healthcare, Brentwood, Tenn. David F . Lewis, Esq., Butler Snow, Nashville, Tenn.

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5

Forming Urgent Care Centers: Addressing Complex Legal Challenges

September 21, 2016

David F. Lewis Jon Sundock Butler Snow CareSpot and MedPost

6

What is an Urgent Care Center?

• No universal definition
• Provide services that fall in between primary care and emergency

department

• Can also include some primary care services and could branch into other

areas, e.g., weight loss, allergy care, wellness, etc.

• Urgent Care Association of America:
• The delivery of ambulatory medical care outside of a hospital emergency

department on a walk-in basis, without a scheduled appointment

• Generally focused on episodic, acute care rather than
• n long-term management of chronic illness or preventive care

7

Common Features of Urgent Care Centers

 Retail healthcare

 High focus on customer convenience  No appointments required and short wait times  Extended hours, including weekends and evenings

 Broad list of services beyond primary care offices

 X-ray  EKG  Onsite lab for CLIA waived testing  Ability to perform minor procedures like laceration repair and

splints

8

Why the Growth in Urgent Care Centers?

• Growth spurt began in mid-1990s and has continued
• Since 2008, the number of urgent care centers has increased from 8,000

to more than 11,000

• Why the continued growth?
• Acceptance by the public
• Lack of access to primary care (no access or delayed access)
• Overcrowding in Emergency Departments (ED)
• Affordable Care Act has not slowed growth in ED visits
• Long wait times at other providers (EDs especially)
• Convenience of longer hours and walk-ins
• Emphasis on high-quality care
• Increased healthcare consumerism spurred by

high-deductible plans

9

Current State of Urgent Care Centers

 Over 150 million patient visits to urgent care centers

each year in the United States

 By 2018, total urgent care industry revenue is projected

to exceed $18 billion

 There have been significant transactions in the urgent

care industry

 Tenet Healthcare’s purchase of CareSpot Express Healthcare  Wellpoint’s purchase of Physicians Immediate Care  Dignity Health’s purchase of US Healthworks

10 10

Current State of Urgent Care Centers

 Would anticipate additional consolidation in the industry

 More health systems acquiring urgent care centers and

developing additional urgent care centers

 Continued interest by private equity players in having interests in

urgent care companies

 Various strategies remain viable:

 Urban focus  Rural focus  Pure play urgent care  Hybrid models  primary care focused  Telemedicine

11 11

Current State of Urgent Care Centers

 2015 UCAOA Benchmark Report

 Nearly 90% of urgent care centers saw an increase in the

number of patient visits from 2013 to 2014

 Nearly 25% of all urgent care centers are owned by hospitals or

health systems

 Approximately 20% of urgent care centers are owned by two or

more physicians

 About 27% of all emergency room visits could take place in

urgent care centers (with approximate cost savings of $4.4 billion)

 By 2019, large metropolitan areas could support two to three

times the number of current urgent care centers

12 12

Current Distribution of Urgent Care Centers

13 13

Key Legal Considerations

 Corporate Practice of Medicine  Staffing Models  State Licensure and Permits  Documentation and Coding  Other Focus Areas

 Medical Director  Accreditation  EMTALA  Other Compliance Matters

14 14

Corporate Practice of Medicine

 The corporate practice of medicine doctrine prohibits

employment of clinical personnel by corporations

 Purpose is to protect the integrity of medical profession

by keeping it separate from corporate interests

 State laws vary on the doctrine

 Strict prohibitions  Some Limitations  No prohibitions

15 15

Corporate Practice of Medicine

 Certain states are very strict - any corporation

employing a licensed physician to treat patients and receive fees for those services is unlawfully engaged in the practice of medicine

 Texas, New York, California, and Illinois are examples of states

with strict corporate practice of medicine perspectives

 Employee-physician subject to disciplinary action or

license revocation

 In strict states, structuring arrangements carefully is very

important.

16 16

Strict Prohibition Against Corporate Practice of Medicine

 Narrow exceptions could apply:

 Professional corporations formed by physicians – this is a

common permitted corporate structure in states

 Texas utilizes the “501(a)” structure as a unique exception  California permits the use of a “foundation” model

 The “Friendly PC Model” is commonly used in strict

corporate practice of medicine states

 Physician owned professional corporation is managed by a

corporate entity for a fair market value management fee.

17 17

Less Strict Approach to Corporate Practice of Medicine

 Permits physician employment as long as the terms of

relationship do not violate statutory requirements:

 “Entity does not direct or control independent medical acts,

decisions, or judgment of the licensed physician”

 Most physician-entity employment relationships

permitted as long as physician’s professional medical discretion is preserved

 Indiana and Florida are examples of states with this

approach.

18 18

Urgent Care Staffing Models

 Common staffing models for urgent care centers:

 Physician-only staffing  Primarily physician staffing supplemented on a limited basis by

mid-level providers

 Primarily mid-level staffing with supervision provided by

physicians most often through “indirect supervision”

 Considerations for choice of staffing models:

 Economic considerations  Public perception considerations  Availability of staffing to meet needs

19 19

Urgent Care Staffing Models

 Here are some 2014 statistics on staffing models used at

urgent care centers:

 11% are physician only

 Will this percentage decrease over time?

 29% have a physician and midlevel working together  54% have physician supervision with the physician not onsite  4% have no physician supervision (permitted by state regulation)  For non-clinicians, over half of the urgent care centers use

medical assistants (40% used RNs) and nearly all urgent care centers (93%) use X-Ray Technicians

20 20

Urgent Care Staffing Models

 Direct Supervision versus Indirect Supervision

 Direct supervision - when the physician is working at the same

time in the same building with the mid-level provider

 Indirect supervision – when the physician and the mid-level

provider are not working at the same time but the physician is available for consultation

 State requirements impact supervision arrangements

 Scope of practice for nurse practitioners and physician

assistants may not be the same

 Supervision requirements for NPs and PAs may not be same  State requirements may be harder to satisfy

21 21

Urgent Care Staffing Models

 Items to Consider when Exploring Indirect Supervision

 Can PAs and NPs perform the same scope of services?  What written agreement is required?  With what agencies are forms or agreements to be submitted?  What requirements must the supervising physician fulfill?

 Chart reviews – a certain percentage each month, other charts?  Availability?  Regular meetings?  Periodic reviews of protocols?  Clinical quality assessments?

 What are the legal consequences for the supervising physician?

22 22

Urgent Care Staffing Models

 Additional considerations for indirect supervision:

 Limits on the number of mid-levels that may be supervised at

any one time

 Prescription pad requirements vary widely by state  Prescribing controlled substances  How do you document that supervision requirements are met?

 Key to indirect supervision – follow the rules and do

more than simply “check the box” in satisfying the state requirements

23 23

State Licensure

 Facility licensing varies greatly from state to state

 The general rule is that most states do not have an urgent care

license or any state licensure for urgent care centers

 Will that remain the case?

 Some states do have license requirements for urgent care

centers:

 Florida  Massachusetts  Arizona

 States with urgent care licensure require pre-opening surveys

and periodic surveys thereafter

24 24

State Licensure (continued)

 Case Study: Massachusetts

 State license process is very involved, complicated and lengthy  Massachusetts has many requirements with respect to the

physical layout of the urgent care center, for example

 The application is substantial and the review process is very

detailed.

 At the inspection, multiple inspectors took three days to

complete the review

 Case Study – Florida

 While not as involved as Massachusetts, Florida has an

application and physical space review requirement prior to

• pening

25 25

State Licensure (continued)

 Even if a state does not have an urgent care license,

patient complaints may lead to an inspection or survey

 Urgent care centers should have documented policies

and procedures in place and a way to confirm that those policies and procedures are consistently followed

 An example of a key policy and procedure is a triage

policy:

 Front desk staff need to understand what to do when an

emergent patient comes into the center and requires immediate attention

26 26

State Licensure (continued)

 These licenses and permits are commonly required:

 CLIA Certificate

 Necessary if the center offers certain clinical laboratory testing  Make sure the correct level of CLIA certificate is obtained (i.e,

waived versus provider performed microscopy)

 X-ray permit

 Watch out for extra requirements (Texas, for example)

 Pharmacy license - in some states, highly restrictive pharmacy

provisions have led urgent care centers to forego offering prescription medications

 Other licenses and requirements depend on the location

 City or county business permits or special signage requirements

27 27

State Licensure (continued)

 Be aware of additional requirements that may come with

licenses and permits

 Annual inspection of the lab  Inspection of the X-ray equipment and other diagnostic

equipment not located in the lab

 Proper storage of medicines and supplies  Signage requirements:

 Notice to patient requirements  X-Ray notices  Posting of provider licenses  Notification to patients if a mid-level provider is on duty

28 28

Documentation and Coding

 Not unlike other areas of healthcare, a key area of

compliance for urgent care is appropriate documentation and coding of claims for services

 Expectation is that proper training and oversight is

maintained for clinician documentation and coding

 Evaluation and Management (E/M) coding is a key

aspect of urgent care coding:

 New patients (99201 – 99205)  Established patients (99212 – 99215)  1995 versus 1997 Guidelines

29 29

Documentation and Coding

 If using an electronic health record system:

 Does the system suggest an E/M code?

 If so, then need to understand how the system determines

 Is it entirely up to the provider to determine the E/M code?  Does the system have one check box that results in multiple

boxes being checked?

 Is “copy – paste” features available to clinicians?  Who is responsible for completing the Review of Systems and

Past Family and Social History?

 Medical Decision Making

 Do providers understand the elements in deciding the proper level?  How much time they spend with the patient is not a factor

30 30

Documentation and Coding

 Even if an electronic medical record system is used, the

urgent care center should have a paper process for documentation available with related policies and procedures for proper completion

 A paper documentation process is necessary when the

electronic medical record system is not available

 When locum tenens are used, they may need to document on

paper because they are not trained on the electronic system

 Do you give the regular clinicians the option to document on

paper when the center is busy or when they are still new in using the electronic system?

31 31

Documentation and Coding

 Beyond E/M coding, other aspects of documentation are

important to consider

 Is a modifier, like the 25 modifier, appropriate to use?  Are procedures, like fracture care and laceration repair, properly

documented to support the charge for the procedure?

 Does the documentation contain all of the elements to establish not

• nly the results of testing but what action the provider takes in

response to testing results?

 The “hindsight test” is a good way to evaluate documentation –

would the documentation in a professional liability case stand up to scrutiny if challenged by the patient?

32 32

Documentation and Coding

 How do you properly monitor documentation and

coding?

 No financial incentive for providers with respect to coding  Monitoring programs should be implemented, followed and

documented

 Random claims reviews  Statistical analyses should also be performed to detect outliers  Particular focus paid to high coding – 99205/99215

 Proper documentation also avoids malpractice issues

 Does the electronic medical record system prompt clinicians at all?  Balancing complete documentation and need for efficiency is a

constant effort

33 33

Other Areas of Focus

 Medical Directorship Requirements

 Some states require urgent care centers have a medical director

 Florida requires a “market medical director” (maximum of 5

locations per medical director)

 Massachusetts requires a “professional services director” for each

urgent care center

 Those states with required medical directors, applicable statutes

spell out the duties of those medical directors

 Florida requires medical directors review charts to ensure proper

documentation and coding  Most states have no medical director requirement

 How does an urgent care center ensure proper provision of medical

services to patients without medical directors?

34 34

Other Areas of Focus

 Case Study – Allstate Ins. Co. v. Vizcay (No. 14-13947

(11th Cir, June 23, 2016)

 Company was accused of violating False Claims Act because

medical director did not review documentation and coding as required by Florida statute spelling out medical director duties

 Court found medical director did not fulfill the statutory duties

and permitted claims to go out for services not provided and incorrectly documented and coded

 “The plain meaning of the statutory language shows that the

Florida legislature intended to establish, not eschew, a principal- agent relationship between a clinic and its medical director.”

35 35

Other Areas of Focus

 Accreditation

 There is no regulatory requirement that urgent care centers seek

and obtain accreditation

 Two organizations will provide urgent care accreditation:

 Joint Commission  Urgent Care Association of America

 Benefits of Accreditation

 Forces operational discipline and consistency across locations  Establishes minimum requirements, particularly for states which do

not license urgent care centers

 Creates perception of quality to patients  May differentiate urgent care centers with payors

36 36

Other Areas of Focus

 EMTALA

 Emergency Medical Treatment & Labor Act

 Treatment obligations of EMTALA do not apply unless

the urgent care center is owned by a hospital or in a joint venture with a hospital AND services provided are billed as a department of the hospital

 No obligation to treat patients who arrive at the center  Triage policy – stabilize and transport

37 37

Other Areas of Focus

 Additional Compliance Focus Areas

 Regular and consistent compliance training  HIPAA privacy requirements

 Small spaces and thin walls  Front desk personnel – critical staff member  Medical records requests

 HIPAA security requirements  Agreements with providers

 Compensation and bonus arrangements

38 38

Other Areas of Focus

 Liability Risks

 Malpractice risk for urgent care centers generally falls between

that of primary care practitioners and emergency departments

 Risk factors for UCCs

 Lack of long-term, well established patient relationships  Target for drug seekers  Discharge management—patient follow-up plan  Potential for underdiagnosing patients  Rely on patients to correctly self-triage and select appropriate facility for

care

 Example of risk area – pulmonary embolism

39 39

Key Business Considerations

 Location, management, and services  Issues in buying or selling an Urgent Care Center  Partnering with hospitals and investors

40 40

Location

 Volume key to financial success

 One study showed that a population of 20,000 to

30,000 was needed to sustain an urgent care center

 Currently, urgent care centers are concentrated in urban

areas

 Convenience for patients  Population demographics, e.g., age, average income  Free-standing v. hospital-associated

41 41

Management of Urgent Care Centers

 How will the urgent care center be managed?

 Physician managed  Management company

 Customer service oriented management improves

financial success of urgent care centers

 Leadership with a healthcare background is key

42 42

Services Provided

 Target population

 Know the community’s demographic in order to tailor services to

community’s needs

 Specialty v. General

 For example, some urgent care centers focus specifically on

pediatric care

 One stop shop

 All services within the urgent care center or nearby referral

locations

 Goes back to the convenience factor

43 43

Buying or Selling an Urgent Care Center

 Buying an existing urgent care center

 Location  Competition  Reputation  Property—leased or owned

 Valuation  Due Diligence  Exclusivity Agreement  Employment & Non-Compete Agreements

44 44

Buying or Selling Urgent Care Centers

 Due Diligence – areas of focus

 Documentation and coding  Policies and procedures  Training for staff  Marketing  Lines of business  Patient satisfaction  Turnover rates  Litigation experience  Operational audit results

45 45

Buying or Selling an Urgent Care Center

 Governing and Ownership Agreements

 Voting  Officers  Compensation  Decision making—Management and Control

 Retirement  Sale of Ownership Interest  Tax Considerations

46 46

Partnering with Hospitals and Investors

 Possible Ownership Models

 Physician or group of physicians  Hospital  Corporation  Non-physician individual  Franchise

 With the wide range of services offered and extended

service hours, integration is key to the successful growth

• f an urgent care center

47 47

Management Company Model

 Provides the facilities, office space, equipment, non-

physician personnel, and non-professional services to an existing practice or other healthcare services provider

 Must be commercially reasonable and reflect fair market

value payment for the goods and services

 Do you obtain a third party fair market valuation?  Does state law permit a percentage-based management fee or is

a flat fee required?

 May the fee be adjusted and how?

48 48

Investor Model

 Private equity firm or investor group provides equity

funding for the business

 Investors typically own a majority of the equity in the

company

 Management holds a minority stake

 Board of Directors is dominated by the investors  Ultimate fate of the company’s control is up to the investors  Timing and consideration for when and to whom to sell may not

be what management anticipates

 Timing to achieve center-level profitability and

completing beneficial acquisitions are very important

49 49

Joint Venture Model

 Hospital or health system and company jointly own

urgent care centers

 Proper structure is very important  Operating agreement describes key business terms

 How are decisions made on important decisions  What decisions may the manager make without Board

participation

 How are the centers branded  Do each of the members to the joint venture have the same

goals in mind for the jointly owned locations

50 50

David F. Lewis Butler Snow The Pinnacle at Symphony Place 150 3rd Avenue South, Suite 1600 Nashville, TN 37201 david.lewis@butlersnow.com Jon M. Sundock CareSpot Express Healthcare MedPost 115 East Park Drive, Suite 300 Brentwood, TN 37027 jonsundock@solantic.com