Mergers and acquisitions compliance.
By Nancy J. Beckley, MS, MBA, CHC
The mergers and acquisitions frenzy: It is likely to hit your market, or about to hit your market. At the Private Practice Section (PPS) annual meeting 18 months ago, two major market acquisitions were announced, which lit up conversations in the exhibit hall for the duration of the conference. Practice owners are accustomed to looking at exit strategies or succession plans unique to their practice; however, now practice owners have to take notice of major therapy companies migrating around the country and immersing themselves into new, untapped markets as well as penetrating deeper into existing markets.
An exit strategy that a practice owner may be contemplating on a 10-year horizon may have to be moved up before the market is gobbled up. We are now facing market factors affecting the therapy landscape locally, regionally, and nationally—including accountable care organizations (ACOs), Medicare’s Comprehensive Care for Replacement of Joint that just rolled out in 67 markets, Medicare reimbursement penalties for Physician Quality Reporting System (PQRS) reporting deficiencies, and the Office of Inspector General (OIG) Work Plan’s continued inclusion of physical therapists in private practice. Not to mention physician offices with therapy, and hospitals gobbling up physician practices.
A recent presentation to physical therapists and practice owners by Paul Martin provided context to the heat being generated in the hot outpatient therapy market1:
- Outpatient therapy is a $29.6 plus billion industry with strong growth prospects.
- There is relatively stable reimbursement compared with other health care sectors.
- The outpatient therapy market is fragmented, even with the presence of large companies owning over 500 plus clinics.
- The population is aging.
- Outpatient therapy business is “scalable” and not hard to grow once in a market area.
- There are relatively few barriers to entry into the outpatient therapy market.
- The de novo cost to build new clinics is minimal.
- There are three to five regional therapy companies in each state.
- Performance factors of the publicly traded therapy companies provide a positive outlook.
- The “invasion” of private equity has fueled growth; it seems everyone wants in on the action generated by the prospects of positive returns with an investment in outpatient therapy.
And according to Martin, “The private equity groups studied all the above dynamics, and the battle for outpatient therapy market share began.”
What should a practice do? Whether your practice is simply formulating a succession plan or an exit strategy, or is on the market, open to the opportunity for a sale, or a reluctant seller, compliance should figure in your practice plan now and in the future. What? In the middle of this article on hot revenue prospects in the outpatient physical therapy market, we are discussing compliance? Yes, indeed we are! Maybe you were thinking that only if you are seeking to sell, or find yourself a reluctant seller due to market conditions, a compliance program is in order. For all practices an effective compliance program will potentially assist in mitigating problems—and that could be anything from having an excluded provider on your roster, inappropriate use of provider numbers, lack of proper supervision for physical therapist assistants, documentation errors, or the mother lode of coding and billing errors. You are probably wondering what this has to do then with selling a practice? Or mergers and acquisitions? Is it not the case that potential buyers are looking at my practice in terms of revenue and other metrics such as units per visit, visits per referrals, and associated costs and the like? Maybe you are working with a business broker or legal firm representing your practice to develop a business portfolio and practice profile to shop around to potential buyers. A potential buyer or investor in your practice will be interested in risk that may accrue over the future horizon related to the civil and criminal statutory lookback period for violations of the major health care laws including the False Claims Act, Anti-Kickback Statute, Civil Monetary Penalties laws, Exclusion Authorities, and the Stark law. In a stock purchase the buyer is buying your past acts, which can be discovered long after the closing, with the buyer on the hook for potential paybacks, fines, and penalties.
While this is not intended as a primer on health care laws, suffice it to say that an understanding may prevent violations including improper use of the group therapy code payments to physicians for referrals that are presented as “medical directorships.”
All that notwithstanding, in today’s market there is value in compliance even if it is seemingly intangible. Compliance does not produce revenue, but it presents an opportunity for goodwill on your financials. As with all goodwill valuations, compliance goodwill may not be as clear a valuation as a revenue run based on patient referrals, but rather signals commitment to a program that is designed to detect, correct, and prevent compliance problems. The operative definition, of course, implies an effective compliance program.
So where to start building compliance goodwill? Implementing a scalable compliance program based on a compliance plan following the OIG Compliance Program for Individual and Small Group Physician Practices is the perfect place to start.2 A couple of takeaway recommendations to elevate your compliance program should include, but not be limited to3:
- Complete a practice risk assessment in which you actively seek to identify issues to be addressed by your compliance program.
- Develop and scale a compliance plan that identifies your company’s code of conduct, compliance program guide, and relevant policies and procedures.
- Have your employees, contractors, board members, and owners attest to their understanding of and obligations under your compliance program.
- Verify and document that all employees have not been excluded from participation in federal health care programs, and be sure to include Medicaid exclusion lists.
- Verify and document the licenses of all employees including all states in which they have practiced.
- Conduct new employee compliance training and education as well as training on the prevention of fraud and abuse for all employees, with documentation and evidence of successful completion and a passing quiz grade.
- Provide further training and education in documentation, coding, and billing for therapists and those responsible for claims submission.
- Review your Electronic Medical Record (EMR) to ensure compliance with Medicare requirements not only on “teeing” up due dates and the proper forms, but verifying compliance with reporting of time and billing of codes.
- Conduct a claims review test of your billing system to ensure that the codes on the claim were the codes that the rendering therapist identified for billing and are supported by documentation.
- Establish an auditing and monitoring program that expands beyond chart review to include other risk areas identified. Be sure to document findings and follow-up plan.
How are things in your market? Are you concerned or excited about mergers and acquisitions? Are you concerned and excited about compliance? Do you want to add value to your practice? It’s time to build goodwill.
1. Martin P, The war for independence. Clinicient Empower: Boston; September 2015.
2. Office of Inspector General (OIG). Fed Regist. 2000;65 (194). Notices.
3. We have not addressed HIPAA compliance in this article, which in no way suggests it is not a part of compliance.
Nancy J. Beckley, MS, MBA, CHC, is certified in health care compliance by the Compliance Certification Board and is a frequent speaker and author on outpatient therapy compliance topics. She advises practices on compliance plan development and audit response. Questions and comments can be directed to firstname.lastname@example.org.