The Health Care Investor : Healthcare Lawyers & Attorneys for Life Science Companies & Investors

Various themes emerged from the day, including the following:

1)      Many people continue to view investment in the dialysis industry as a viable option.   Even with the uncertainties of the bundling system and the impact of healthcare reform generally, many believe there are still great opportunities for investment in dialysis programs and nephrology/dialysis-related vendors. 

2)      Not surprisingly, the impending conversion to bundled reimbursement by Medicare for dialysis providers is a focal point for providers.   The response from small dialysis organizations (SDOs), large dialysis organizations (LDOs) and others is varied, but most look forward to the results of a General Accounting Office (GAO) study on the impact of the inclusion of oral drugs in the dialysis bundle, which was mandated by the PPACA.  The deadline for delivery of the GAO report is a year from passage (i.e., March 23, 2011). Most dialysis companies are encouraged by the mandate for investigation and are hopeful that it will help illustrate whether or not those drugs are being adequately priced and if there are any quality of care concerns. For more detail regarding the bundled payment structure and its potential impact on different dialysis providers, see our prior post entitled twww.thehealthcareinvestor.com/2010/03/articles/healthcare-services-investing/dialysis-industry-prepares-for-new-payment-methodology-how-might-bundling-effect-providers-differently/

3)      Nephrology physician practices face a variety of challenges these days, including both from a patient care and daily practice administrative perspective as well as from the perspective of their roles in the delivery of dialysis care as Medical Directors and/or joint venture partners. We discussed opportunities for facing those challenges through practice merger or other consolidation into larger organizations such as a hospital system or Physician Practice Management (PPM) or Management Services Organization (MSO).

4)      The industry is closely examining the potential for increased liability of dialysis companies under various state and federal laws aimed at curbing fraud and abuse, including The Fraud Enforcement and Recovery Act (FERA) which was signed into law by President Obama in April of 2009. FERA implemented significant changes tothe federal False Claims Act, including the expansion of prohibited conduct under the False Claims Act to include not justthe improper filing to collect monies, but also the known retention of overpayments by hospitals or other health careproviders. The 2009 amendments also make clear that false claims submission to a state Medicaid program, although not directly submitted to the federal government, does constitute a violation of the False Claims Act. We discussed the impact of these changes and other compliance concerns for the dialysis industry.

5)      Accountable care organizations (ACOs) are a hot topic for many healthcare sectors, including dialysis providers. ACOs have been officially endorsed in the PPACA, Section 3302. Under the ACO provisions, groups of providers that work together to manage and coordinate care for Medicare beneficiaries can qualify to receive additional Medicare payments if they achieve specified cost savings and meet a range of criteria, including standards established by CMS relating to quality, reporting, and governing structure. In essence, if they are able to improve outcomes and lower costs then those ACOs can potentially share in the savings. The PPACA provides that the ACO program is to be established no later than January 1, 2012.   It leaves much discretion to the Secretary of the Department of Health and Human Services (DHHS) to determine the policies and procedures that will apply to ACOs. 

6)      Various existing and new laws effect day-to-day clinical care and administration in dialysis facilities such as the revised Conditions for Participation in the Medicare/Medicaid programs. Changes to the National Fire Protection Association's Life Safety Code (commonly called the Life Safety Code) applicable to dialysis providers and other recent changes in the Conditions for Participation must be understood and properly implemented by dialysis providers. In their article entitled Applying the Life Safety Code: Are you Ready?, Bob Bednar and Ron Reynolds discuss the Life Safety Code changes implemented in 2010 in detail.

7)      Compliance plans, which were previously highly recommended for the dialysis industry and nephrology providers, are now mandated by the PPACA for certain providers who participate in Medicare/Medicaid.  While details of the compliance plan requirements for skilled nursing facilities (SNFs) are set out in detail in the PPACA, the Secretary of DHHS was given the authority to designate the types of providers that will be required to have compliance programs in place and the details of such programs. State Medicaid programs also must require participating providers to have programs in place that meet the federal guidelines to be issued. DHHS has indicated that details of those programs will likely be issued on an industry-by-industry basis, and we generally expect the components of the programs to be similar to the key components of the DHHS Office of Inspector General model compliance plan first published for healthcare providers in 1997 and since updated. 

8)      Investment opportunities in businesses ancillary to the dialysis industry, including nephrology-specific electronic health records (EHR) systems and vascular access programs remain attractive options for some investors. Vascular access centers provide a particularly critical service to patients suffering from end-stage renal disease (ESRD), who require, prior to beginning dialysis, the surgical creation of a site in which the patient’s vascular system can be accessed during dialysis. The various methodologies for creating the access site are reimbursed by Medicare and other payors.  There are a number of regulatory issues governing the investment and referral relationships that need to be examined prior to creating vascular access company.

All of these topics will be addressed in further detail in future posts. For additional details on any of these issues in the interim, please contact the authors.