Co-Management Agreements

By: Normand F. Pizza, Andrew R. Capitelli and Sarah A. Fisher

Co-Management Agreements are agreements between a hospital and physicians to manage a hospital service line. Service lines frequently include Cardiology, Gastroenterology, Orthopedics
and Neurosurgery. One that is infrequent, but perhaps very useful, would be in Emergency Room Medicine.

The basics of such contracts are to provide:

  1. Qualified physicians (usually Board-Certified in the field), along with clinical and non-clinical support personnel;
  2. For the setting of quality standards and rewards for meeting defined measurable performance goals;
  3. Methods to reduce costs and overhead while achieving better patient care.

Usually, payments to physicians are distributed in two categories.

  1. The first are fixed payments over a defined period (at least one year, but more often over three years), and,
  2. Payments made quarterly or semi-annually up to a fixed amount based on meeting goals or performance measures set. There are annual audits of the payments to ensure payment and goals coincide.

Items that vary contract to contract are:

  1. Is the physician group hired or are individual physicians hired, or both;
  2. Does the hospital or the group hire and fire nurses, nurse practitioners, physician assistants and mid-level staff;
  3. Who provides the medical director;
  4. Is there a program manager or clinical manager who hires this individual?
  5. What level of exclusivity exists, if any?
  6. How often physicians and hospital reps meet to discuss performance, performance measures, and quality metrics.
  7. Will goals be established to meet regional, national and international awards recognition?

I. Qualified Personnel:

  • Physicians
    Physician qualification for participation in a Co-Management Agreement can be achieved by requiring board certification. An outside board determines a physician’s ability to perform
    adequately in the chosen field for the Co-Management Agreement. However, certification, while highly useful, is not mandatory, and it is not a legal requirement. It will also limit the number of
    providers available within the service area, and it will require that providers continue to maintain certification. Board eligibility with a requirement to be Board Certified within a minimum time period is sometimes chosen as the requirement. And occasionally, even this requirement is waived. In place of it, the hospital might only require that the physician have privileges at the hospital in the selected field.
  • Medical Director
    A Medical Director will be appointed for management of the selected service line. Typically, the Medical Director will be appointed from among the physician group joining the Co-
    Management Agreement. In addition to managing clinical care, the Medical Director acts as a liaison between the hospital and its contracted physicians.
  • Program Manager
    An administrative program manager is also usually appointed for the service line. The Program Manager facilitates communication among the parties, collects and reviews data, monitors metric compliance, ensures supply needs are met, and generally administers the daily operation of the program. While a physician can serve in this role, it is not mandatory.
  • Cath Lab Manager
    Depending on the service line, additional administrative support personnel may be required. For example, cardiology Co-Management Agreements also appoint a Cath Lab Manager. Among other duties, the Cath Lab Manager facilitates scheduling, ensures supply, staff and procedure needs are met within the Cath Lab, and resolves conflicts between physicians and support staff.
  • Nurses, Nurse Practitioners and Physician Assistants (“PAs”)
    Co-management programs run well with motivated, knowledgeable physicians. But they are even more successful when the support staff is stable, trained and well-motivated. Support staff include nurses, nurse practitioners and PAs.

A common difficulty is the turnover in these positions. Another problem is a cloudy line of authority regarding who is responsible for training and direction. When support staff work directly for the doctors, the hierarchy is clear, but valuation of becomes murky. Hospitals are accustomed to hiring and controlling support staff. This allows them to shift support staff as needed and to have the staff fit into the hospital’s culture.

The Co-Management Agreement should define the optimum number of support staff based on historical trends and the projected future growth of the product line. The agreement should also
allocate responsibility for clinical support staff, though the relationship between the physicians and clinical support staff will also be guided by other healthcare mandates. For example, a collaborative practice agreement will be required between physicians and nurse practitioners in Louisiana, while physician assistants need regular meetings and guidance in accordance with state

II. Metrics: The Setting of Quality Standards

The hospital and its providers will need to dedicate time to developing, adopting and refining measurable quality metrics for the service line. Indeed, it is nearly mandatory to establish, and enforce, quality metrics in a Co-Management Agreement. These are the goals that the hospital and its providers agree upon and establish, in an effort to measurably improve patient care.

Examples include:

  • For Cardiology
    • Set a time standard for performing angiograms; the emergency “door to
      balloon” time.
    • Less Complications or Hospital Returns.
    • Reduced/minimal length of hospital stay.
  • For Gastroenterology
    • The first case of the day must start on time.
    • Set a withdrawal time for the Cecum from the procedure start. Because these can change year to year, it is recommended that the standard fee be established in an addendum to the contract.
  • For Ophthalmology
    • Specify any specialties associated with the practice related to a Co-Management Agreement, such as cataract surgery.
    • Specify who will track patient referrals, appointments, drugs dispensed, medical records, etc.
    • Clearly define how the ophthalmologist as surgeon will properly share pre-and postoperative responsibilities with non-surgeon providers.
    • Clearly define how physician and non-physician providers will be reimbursed for services.
    • For more, see Comprehensive Guidelines for the Co-Management of Ophthalmic Postoperative Care, published by the American Academy of Ophthalmology.

Metrics, however, will become far more developed and complex through provider input. For example, in OIG Advisory Opinion 12-22 issued December 31, 2012 and posted on January 7,
2013, the opinion Requestor cited the following as proposed performance goals for a Cardiology Co-Management Agreement:

  1. The (Cath) lab must be ranked at the 96th percentile in the Annual Independent Patient
    Satisfaction Survey.
  2. The physicians must start the first lab surgical case each day by 8:15 a.m. at least 85% of the days the lab operates.
  3. The physicians, as a group, must reduce the time a physician spends between surgical cases in the lab to 25 minutes or less in at least 50% of the cases.
  4. The physicians, as a group, must receive a rank between 94.5 to 96th percentile compared to other hospitals surveyed nationally.
  5. Physicians must reduce “door to balloon time” (catheter insertion) so that at least 85% of cath lab patients “door to balloon time” is below 90 minutes.
  6. Prescribe a beta blocker at discharge and to rank between the 70th and 90th percentiles at hospitals measured.
  7. Prescribe an ACE-1 or ARB for left ventricular systolic dysfunction at discharge to rank between the 70th and 90th percentiles of all hospitals measured.
  8. Prescribe Aldosterone blocking agent at discharge to rank between the 70th and 90th percentiles of hospitals measured.
  9. Document LDL-c level in hospital records to rank between the 70th and 90th percentiles of hospitals measured.
  10. Reduce occurrence of Percutaneous Coronary Intervention (PCI) complications to a level between 1.4% and 1.7% of patients.
  11. Reduce the incidence of bleeding in lab patients within 72 hours of surgery to a level between .9% and 1.1% of patients.
  12. Reduce PCI Risk Adjustment Complications Index to between 1.25% and .96% of patients.

There are other standards used which can also be considered that are not listed in the OIG opinion, including the following:

  1. ASA or (Acetyl Salicyclic Acid) on discharge – acute myocardial infarction (AMI) targeted 99% incentive 10%.
  2. Angiotensis – converting enzyme inhibitors (ACEI) – angiotensis – receptor blocker (ARB), left ventricular systolic dysfunction (LVSD) – heart failure (HF) target 100%,
  3. Percentage evaluation of LVSD – HF 99%,
  4. MD communication 90%,
  5. Readmissions (AMI-no filters)
  6. Readmissions (HF)
  7. Mortality (AMI no filters)
  8. Mortality (HF)

Overall, the adoption of detailed quality metrics will drive improvement in patient care.

Standard Boards

To obtain the portion of the performance fee allocable under the quality components, the system must improve performance as measured by standards promulgated by various groups.
These include the Joint Commission for Accreditation of Hospitals (JCAHO), the Centers for Medicare and Medicaid Services (CMS), and, for cardiology, the American College of Cardiology(ACC) and the National Cardiovascular Data Cath PCI Registry or NCDR. Hospitals can also establish metrics that will assist them in getting various certifications. These establish the hospital as preeminent in the chosen field. The physicians who help them reach these achievements can be rewarded through performance metrics.

III. Reduction of Costs and Overhead While Achieving Better Patient Care

Co-Management Agreements couple cost reduction with patient quality improvement as the second goal of the program. Indeed, for cardiology, the OIG cites reduction of cardiac
catheterization costs per case, and a reduction in the average contrast cost per case, as a baseline level that must be reached for cost savings. The decisions regarding cost savings must be done in the best interest of patient care and utilizing products that are clinically safe and effective. Cost savings are achieved also through better management and product standardization.

Valuation of Fees

The fees, rewards or payments made to the physicians under any Co-Management Agreement must meet the rules, regulations, laws and requirements of federal and state law. The
most prominent of these are the anti-kick back law, 42 USC 1302 a-7b and the Ethics In Patient Referrals law, commonly called the Stark Law, found at 42 USC 1395nn, 42 CFR §411.350-389.
Similar and very important regulations related to the Anti-Kickback Law are found in the Safe Harbor Regulations at 42 CFR §1001 et seq.

The general requirement for fees paid is that the entire compensation for aggregate compensation paid must be set at the fair market value for the services rendered. Payments must
be paid on terms that are commercially reasonable without regard to the value or volume of referrals made. In connection with Co-Management Agreements this means that the physician
group payment or payment to individual doctors meets this standard requirement. It is prudent to have an independent evaluator or appraiser review the agreement and determine if the entire payment made meets the required standard. For example, Advisory Opinion 12-22 notes that the Anti-Kickback Statute requires that “… aggregate compensation paid for the services be set in advance and consistent with fair market value in arms- length transactions”1 Valuation for the services is not just salaries but also benefits, training and recruitment. But a payment that is made must be evaluated by an appraiser because it is part of the overall compensation paid to the physicians.

IV. Other Co-Management Contract Possibilities

Very few hospitals consider making co-management agreements for emergency department (ED) operation. This is likely related to the view of most hospitals that ED, itself, is a money drain for the hospital. Nevertheless, virtually all hospitals will have an emergency department. Having an ED is thought of as being part of a full-service hospital. But equally important is that a large number of patients get admitted to the hospital through emergency admissions. In short, hospital revenue is significantly affected by patients admitted from the ED.

In the Co-Management opinion, the standard set does not meet the safe harbor because the payment was not set in advance, but the opinion went on to add that this was not a “fatal flaw.” Hospitals are also judged by the population at large by the effectiveness, efficiency and success of the hospital’s ED. Hospitals want the smallest number of ED physicians necessary because of their expense, but they want doctors to meet standards for getting patients out of the ED and either discharged or admitted to the “floor” of the hospital. They additionally want the doctors to achieve good patient satisfaction scores. And they want to eliminate, or reduce, malpractice and bad outcomes. Hospitals further need to meet the legal obligations imposed, including EMTALA requirements.

An ED Co-Management Agreement may well be the solution to the foregoing challenges. Patient care standardization would improve outcomes and limit poor outcomes. Quality metrics would allow the hospital to monitor performance over time, and to adjust patient care as needed. An effective ED Co-management agreement between the hospital and an ED group should have
at least some of the following components:

  1. The ED group will provide Board Certified hospital credentialed physicians.
  2. It will also provide registered nurses, physician assistants and nurse practitioners who will be hired, credentialed and trained by the ED group. The ED group will also have the responsibility to hire and fire these support staff.
  3. The ED group will provide a medical director.
  4. The ED group must be credentialed and given privileges for the hospital and by Payors.
  5. They must agree to no-balance billing to patients.
  6. The hospital will collect the technical component for all work done.
  7. The ED group will collect professional component for all work done.
  8. The ED group will comply with EMTALA. It will provide membership in any committees.
  9. The ED group will call specialists listed by the hospital for specialized care.
  10. The hospital will maintain an on-call list that the ED group will comply.
  11. The ED group and the hospital will establish performance measures, including metrics focused on:
    1. reduction of readmissions;
    2. reduction of wait times;
    3. reduction of costs per discharge;
    4. standardization of supply costs;
    5. meeting all triage rules agreed to between the ED group and the hospital;
    6. meeting required patient satisfaction scores; and
    7. establishing special emergency procedures for a pandemic, for Ebola and for any other matters that the hospital and the ED group agree upon.

Overall, Co-Management Agreements establish an effective partnership for improving patient care and lowering cost. Careful consideration must be given at the outset to avoid legal hurdles, and to ensure the success of the service line. Our experienced healthcare team is available to assist through all stages of development and implementation of an effective Co-Management venture.

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