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Cal Ortho On-LineEMERGING ORTHOPAEDIC-LEGAL ISSUESOrthopaedic Legal NewsElectronic Submission of Medicare Claims: CMS has delayed the implementation of theVersion 5010 and NCPDP D.0 for all HIPAA standard transactions until March 31, 2012.This means beginning April 1, 2012, HIPAA Version 4010A1 will no longer be accepted byMedicare. In addition, one of many data reporting changes in the Version 5010 transactions is the requirement to report only a street address or physical location as the billingprovider address. If you submit claims electronically, you will be required to use only astreet address and a physical location as the billing provider. Continuing to report a P. O.Box in the billing provider address field will cause your claims to reject. Practices thatwish to continue having payments sent to a P. O. Box or lock box must report this addressin the “pay-to” address field.To prevent against claims rejections/cash flow interruptions, physicians are advised towork with whoever is responsible for their claims submission to see whether changes areneeded to comply with this requirement.CMS strongly encourages providers to take advantage of the many resources it has provided on this issue. They can be found 01 overview.aspwww.CMS.gov/MFFS5010D0/2012 Targets for Medicare RAC AuditsMedicare Tightening Screws on Providers on Unnecessary Procedures: In 2012, CMS willallow the RAC to perform an audit before paying for several big ticket procedures.California is one of 11 states that will be targeted. There will be a 100% pre-paymentaudit on 15 DRGs, 11 of these are cardiac and 4 orthopaedic procedures—- DRG 458—Spinal fusion except cervical w/spinal curve- DRG 460—Spinal fusion except cervical w/o MCC- DRG 470—Major joint replacement or reattachment of lower extremity w/o MCC- DRG 490—Back and neck procedures except spinal fusionOther audits included in the Federal Office of the Inspector General (OIG) Work Plan. ThisFederal fraud and abuse enforcement agency has identified areas it has asked its agentsto examine in connection with Medicare services. Most relevant to orthopaedic surgeonsare the following:Assignment: The OIG will review the extent to which physicians are complying withassignment rules and determine to what extent beneficiaries are inappropriately billedin excess of Medicare.High Cumulative Part B Payments: For the first time, the OIG will look at a “high cumulative payment” defined as an unusually high payment made to an individual physician, or on behalf of an individual beneficiary, over time. The OIG is concerned thatsuch payments may indicate incorrect payments or fraud and abuse.Physician-Owned Distributors (PODs) of Spinal Implants: Also for the first time, theOIG will determine the extent to which physician-owned distributors provide spinalimplants purchased by hospitals and whether PODs are associated with a high use ofimplants. This item was placed in the work plan due to Congress’ concern that PODscould create conflicts of interest and safety concerns for patients.Incident-To Services: A 2009 OIG review found, among other things, that unqualifiednonphysicians performed 21 percent of the services that physicians did not personallyperform. (For example, under Medicare, physicians cannot bill for physical therapyservices provided by a medical assistant.) The OIG believes that the incident-to rulesrepresents a vulnerability to the Medicare program and potentially exposes beneficiaries to overutilization and care that does not meet professional standards.

Cal Ortho On-LineEMERGING ORTHOPAEDIC-LEGAL ISSUESOrthopaedic Legal NewsOther News of InterestPhysician Payment Sunshine Act Data Collection: This Act was enacted as a part ofhealth reform and requires, among other things, pharmaceutical and medical devicemanufacturers to report all payments worth more than 10 to physicians, including consulting fees, honoraria, travel and entertainment, and for the Department of Health andHuman Services to publically disclose the identity of the manufacturer, physician, and thedrug or device associated with the payment. While CMS missed the October 1, 2011deadline to promulgate rules to implement the Act, beginning in 2012, companies arerequired to start collecting the data to be publically reported. (The public reporting of theinformation is scheduled for March 31, 2013.)American Board of Medical Specialties (ABMS) disclosure: ABMS plans to make publicwhether physicians who are Board Certified by its member Boards are meeting the ABMSMaintenance of Certification (ABMS MOC ) program requirements established by theircertifying Board(s). The public reporting initiative is being rolled out during 2012 beginning with seven Member Boards, including the American Board of Dermatology, AmericanBoard of Family Medicine, American Board of Nuclear Medicine, American Board of Otolaryngology, American Board of Physical Medicine and Rehabilitation, American Board ofPlastic Surgery and American Board of Surgery. The remaining 17 Member Boards ,which includes the American Board of Orthopaedic Surgery, will make the MOC status oftheir Board Certified physicians available in August 2012 or sooner. The MOC status ofphysicians Board Certified by an ABMS Member Board(s) will be displayed by ABMS licensees, official display agents and on www.CertificationMatters.org.Maintenance of Licensure: There is also some discussion about tying state licensure toparticipation in the MOC process. If you do not take part in the MOC you would potentially put your medical license in jeopardy. This change could not automatically be implemented in California and would require that state licensure laws be changed. Thischange will be very controversial and likely opposed by many medical specialties.Private Payers: Finally, payers too have been significantly impacted by health reform inways that may affect orthopaedic surgeons. For example, private payers are now subjectto federal medical loss ratios whereby they are required to spend 80% (individual andsmall group market) or 85% (large group market) of premium revenue on medical andquality improvement expenses or provide premium rebates if they do not meet the required thresholds. As a result, they have an added incentive to maximize their qualityimprovement activity expenses. Further, in response to the increased market power exercised by hospital-physician alignments, payers are finding opportunities to collaboratewith physicians in one form or another. In fact, in 2011, payers took a number of unprecedented steps to do so in California. For example, United Healthcare acquired themanagement arm of Monarch Healthcare, the largest medical group (2300 physicians) inOrange County, California. In addition, Blue Shield of California distributed nearly 20million in grants to 18 California hospitals, health systems, clinics and physician groupsto help them participate more effectively in commercial accountable care organizations.The grantees are spread throughout California. Physician interested in seeing who obtained these funds can access that information at ees-2011.jpg. More efforts from third party payers to align themselveswith physicians in 2012 are expected.

Cal Ortho On-LineEMERGING ORTHOPAEDIC-LEGAL ISSUESOrthopaedic Legal NewsNew State Laws Affecting Orthopaedic SurgeonsDespite the stalemates and gridlock of the Legislative process, this year’s Legislative process resulted in the passage of 761 bills, some of which affect orthopaedic surgeons. WhileCOA will continue its legislative efforts on a wide range of issues on behalf of its membersduring next year’s legislative session, there are a number of new laws that take effect January 1, 2012 that may impact COA members.COA LegislativePriorities for 2012 Clarify that a medicalcorporation may employ physical therapists and other licensed health careprofessionals neededin an integratedhealthcare system. Update the Workers’CompensationOfficial Medical FeeSchedule—PhysicianServicesSB 233—Physician Assistants (PAs) Working in the ERPractice Impact: PAs are now able to treat patients in the ER without the supervisingphysician first evaluating the patient.California’s EMTALA now allows “other appropriate personnel acting within their scope oflicensure, under the supervision of a physician and surgeon” to perform consultative andtreatment services in the Emergency Department. Federal EMTALA enforcers have alloweda physician’s representative (such as a physician assistant or nurse practitioner) to work inthe emergency department on behalf of an on-call physician subject to the medical staff’spolicies and state scope of practice laws. California’s Department of Health Care Servicesinterpreted California law differently to require that the on-call physician see the patientfirst. Health and Safety Code §1317.1 has been amended to conform California law to Federal law and practice by allowing on-call physicians to send appropriately licensed and supervised representatives to the ER.This change is important to orthopaedic surgeons who are using physician assistants toassist them in all aspects of orthopaedic practice including treating patients in the ER. Itshould be noted, however, that the on-call physician “is ultimately responsible for the providing the necessary consultation to the patient, regardless of who makes the in-personappearance.” (Health & Safety Code §1317.1(i).) Further, where the treating physician inthe ER disagrees with the decision to send a representative and requests the actual appearance of the on-call physician, EMTALA requires the on-call physician to appear in person. This is not a new change. EMTALA has always contained this requirement. Thereare exceptions to the requirement including when the on-call physician is not available because they are already treating patients in another emergency room.Practices utilizing PAs may want to interface with their emergency department concerningthis change and make sure this change is reflected in the medical staff by-laws.AB 378—Workers’ Compensation —In-Office Dispensing/Compounded MedicationsPractice Impact: Practices may continue to dispense in-office medications for injuredworkers, however, a fee schedule has now been implemented for compounded medications.In response to concerns that Workers’ Compensation costs were rising in part due to physician’s dispensing medications to patients at “inflated” rates, the Legislature limited reimbursement for a compounded drug by a dispensing physician to 300 percent of documented paid costs, but in no case more than twenty dollars ( 20) above documented paidcosts. (Labor Code §5307.1.) The maximum reimbursement for a “finished drug product”approved by the FDA that is dispensed by a physician shall be according to the OfficialMedical Fee Schedule—Pharmaceutical Fee Schedule—adopted by the administrative director (OMFS).For a dangerous device dispensed by a physician, the reimbursement shall not exceed either of the following:The maximum amount allowed for by the OMFS, or

Cal Ortho On-LineEMERGING ORTHOPAEDIC-LEGAL ISSUESOrthopaedic Legal News120% of the documented paid cost, but not less that 100% of the documented paidcost plus the minimum dispensing fee (per the OMFS) and not more than 100% of thedocumented paid cost plus 250.For “pharmacy goods” not described above, the maximum reimbursement for a dispensingphysician may not exceed:The amount set by the OMFS:120% of the documented paid cost to the physician100% of the documented paid cost to the physician plus 250.This bill had the potential to prohibit physicians from dispensing any pharmaceuticals fromtheir offices. COA was instrumental in amending the bill to preserve in-office prescribing .(Labor Code §139.31)AB 507—Pain ManagementThe Department of Justice may no longer require that a patient be interviewed and examined by a physician before a controlled substance can be prescribed. Concerned that thisauthority “chilled” the proper treatment of pain, the Legislature repealed the authority forthe department to require that patients prescribed a controlled substance be required toundergo a physician interview and examination. (Health & Safety Code §11453)SB 850—Changes to EHRs\EMRs must be preserved.Practice Impact: Offices must ensure that their EMR systems track the identify of staffmaking changes to a patient’s medical record.In response to a number of cases where patient’s electronic records were missing or altered, the law now mandates that an electronic health or medical record system:-Protect and preserve the integrity of electronic medical informationAutomatically record and preserve any deletion of change of any electronicallystored medical information. Such changes or deletions must include the identity ofthe person who accessed and changed the information, the date/time the information was accessed, and the change that was made. (Civil Code §56.101)SB 459—Employees or Independent ContractorsPractice Impact: Offices must ensure that staff are properly classified to avoid fines andpenalties.There are now increased penalties for the “willful misclassification” of an independent contractor. To combat the willful misclassification of employees as independent contractorsand ensure that misclassified workers do not lose rights (such as wage protections, Workers’ Compensation insurance etc), there are now enhanced monetary penalties for employers who misclassify their employees (between 5,000 and 25,000 in addition to any otherfines and penalties permitted by law.) “Willful misclassification” means avoiding employeestatus for an individual by voluntarily and knowingly misclassifying that individual as anindependent contractor. (Labor Code §226.8) While physicians are not the target of thisbill, to the extent they either are independent contractors or contract with them, theyshould be mindful of this issue.For more information on determining the proper status of an employee/independent contractor, see www.irs.gov/businesses/small/article/0,,id 99921,00.html.

Cal Ortho On-LineEMERGING ORTHOPAEDIC-LEGAL ISSUESOrthopaedic Legal NewsNew Regulations for Physician AssistantsPractice Impact: Practices utilizing PAs must ensure that patients are notified of how PAsare licensed and regulated.Your InputCOA wants to hearfrom you so that CalOrtho On-Line canbe of the most valueto its members.Please let us knowof any issues thatyou would like to seeaddressed or otherideas for inclusion infuture editions.Comments can beforwarded tocoa1@pacbell.netThe Physician Assistant Committee also adopted a regulation of interest to those orthopaedic surgeons that use licensed physician assistants (as opposed to unlicensed orthopaedic assistants that function pursuant to Business & Professions Code §2077). Effective August 11, 2011, Section 1399.547, Title 16 of the California Code of Regulations,requires that physician assistants inform patients that they are licensed and regulated bythe Physician Assistant Committee. The notification must include the following statementand information:NOTIFICATION TO CONSUMERSPHYSICIAN ASSISTANTS ARE LICENSED AND REGULATED BY THEPHYSICIAN ASSISTANT COMMITTEE(916) 561-8780pac.ca.govPhysician assistants may provide this notification by one of the following three methods:Prominently posting a sign in an area of their offices conspicuous topatients, in at least 48-point type in Arial font.Including the notification in a written statement, signed and dated bythe patient or patient’s representative, and kept in that patient’s file,stating the patient understands the physician assistant is licensed andregulated by the Committee.Including the notification in a statement on letterhead, discharge instructions, or other document given to a patient or the patient’s representative, where the notification is placed immediately above the signature line for the patient in at least 14-point type.A downloadable copy of the form is available on the Physician Assistant Committeewebsite at www.pac.ca.gov. Make sure your patients are properly notified.

Cal Ortho On-LineEMERGING ORTHOPAEDIC-LEGAL ISSUESOrthopaedic Legal NewsPHYSICIANS KEY TO HEALTH MAINTENANCEORGANIZATION POPULARITY IN ORANGE COUNTYCommunity Report No. 10What’s Happening inOrange County , CAPhysicians Key to HealthMaintenance Organization Popularity in OrangeCountyCommunity Report 10August, 2011Center for Studying HealthSystem ChangePresident: Paul Ginsburg600 Maryland Ave, SW #550Washington, DC 20024Www.hschange.orgAugust 2011Laurie E. Felland, Genna R. Cohen, Paul B. Ginsburg, Elizabeth A. November, Ha T.Tu, Tracy YeeReprinted with permission from the Center for Studying Health System ChangeIn June 2010, a team of researchers from the Center for Studying Health SystemChange (HSC), as part of the Community Tracking Study (CTS), visited OrangeCounty, Calif., to study how health care is organized, financed and delivered in thatcommunity. Researchers interviewed more than 45 health care leaders, includingrepresentatives of major hospital systems, physician groups, insurers, employers,benefits consultants, community health centers, state and local health agencies,and others. The Orange County metropolitan area comprises the same borders asOrange County.The extent of health plan delegation of financial risk and utilization management tophysicians caring for health maintenance organization (HMO) enrollees makes Orange County a somewhat unusual market. Although preferred provider organizations (PPOs) and new product designs have gained some traction in recent years,the HMO model remains popular among Orange County employers and consumersbecause of cost advantages and a wide choice of providers. Physician organizations, including large, multispecialty medical groups and independent practice associations (IPAs), provide the practice infrastructure to support care coordination andhave fared well under capitated, or fixed per-member, per-month, payments. Indeed, the so-called delegated model, where physicians assume the financial riskand associated care management of patients from health plans, is thriving in Orange County despite predictions to the contrary.At the same time, hospital and physician interest in tighter affiliations has grown.While hospitals must work within California’s restrictions on physician employmentby forming foundations, they, nonetheless, are aligning with physicians to securepatient referrals, support specialty-service lines and prepare for national healthreform. Indeed, expected payment reforms will likely provide incentives to integrate care delivery and expand opportunities for physicians to assume risk for newpatient populations.Key developments include: After coexisting for years in somewhat distinct areas of Orange County, hospitals are impinging on each other’s territories in the wealthier southern and coastalparts of the county to attract well-insured patients. Kaiser Permanente, an integrated delivery system and closed-panel HMO, hasattained a higher profile in the market by building a new hospital and becomingless reliant on contracts with other providers for enrollees’ care. Safety net providers and stakeholders have increased their focus on obtainingfederal dollars to expand capacity and programs, including developing a managedsystem of care to help transition uninsured residents into Medi-Cal—the state’sMedicaid program—or subsidized insurance coverage under national health reform.More Diverse Than ThoughtUnconsolidated Hospital and Health Plan MarketsPhysicians Coming TogetherHospital-Physician Alignment

Cal Ortho On-LineEMERGING ORTHOPAEDIC-LEGAL ISSUESOrthopaedic Legal NewsWhat’s Happening inOrange County , CAPhysicians Key to HealthMaintenance Organization Popularity in OrangeCountyCommunity Report 10August, 2011Center for Studying HealthSystem ChangePresident: Paul Ginsburg600 Maryland Ave, SW #550Washington, DC 20024Www.hschange.orgBalanced Provider-Health Plan LeverageGeographic Competition Heats UpHMOs Remain Robust and Kaiser's Presence ExpandsSafety Net BroadensCalOptima Regains FootingTransitioning to InsuranceIssues to TrackFunding AcknowledgementMore Diverse Than ThoughtCommonly perceived as a wealthy, southern California coastal community, OrangeCounty does have a high proportion of households with annual in

Medicare and Medicaid EHR Incentive Program: These programs provide incentive pay-ments to eligible physicians as they adopt and/or demonstrate meaningful use of certi-fied EHR technology. February 29, 2012 is the last day for eligible professionals to reg-ister and attest to receive an incentive payment for calendar year 2011. For more infor-