Per the Charlotte Business Journal this morning:

The board of MedCath Corp. has formed a committee to consider the sale of either the company or its hospitals.

Charlotte-based MedCath has hired Navigant Capital Advisors as it financial adviser to assist the committee of independent directors.

MedCath owns and operates specialty hospitals that diagnose and treat cardiovascular diseases. Its 10 hospitals have a total of 825 licensed beds.

The company recently agreed to sell the Heart Hospital of Austin to St. David’s HealthCare Partnership. Financial terms of the deal, which is slated to close by June, weren’t disclosed.

The 58-bed hospital in Austin, Texas, opened in 1998.

MedCath lost $2.66 million, or 13 cents per diluted share, in its first quarter ended Dec. 31, down from a net gain of $2.25 million, or 11 cents per diluted share, in the first quarter of fiscal 2009.

Its loss from continuing operations, net of taxes, was $2.5 million, or 13 cents per diluted share, compared with a loss of $1.9 million, or 10 cents per diluted share, a year ago.

Revenue decreased 2 percent to $147.3 million. MedCath (NASDAQ:MDTH) cited fewer cardiovascular services, primarily heart surgeries, for the drop in revenue.

Navigant Capital Advisors has offices in Atlanta, Los Angeles, New York, Chicago and Skokie, Ill.

Dialysis & Physician Practice Management Investments: Key Business,  Deal Structure & Diligence Issues

Complimentary Webinar

Thursday, March 25, 2010
11:30 a.m. – 12:30 p.m. (CT)

Online Registration

Please join us for the first in a series of informative webinars where we will delve into investing in different healthcare segments. Our first program deals specifically with the physician practice management and dialysis businesses. Topics will include:

• An overview of business models, revenue generation and key players
• Options for structuring deals
• Key diligence considerations for each niche

Who Should Attend:
Private equity firms currently investing in healthcare or considering investing in healthcare.

McGuireWoods Presenters:
Scott Downing
Amber Walsh
Krist Werling

Login information will be sent to registrants prior to the event. For more information, contact David Bellamy at 804.775.4755 (dbellamy@mcguirewoods.com) or Amy McGlynn (amcglynn@mcguirewoods.com).

A recent Business Week article prominently featured Providence Regional Medical Center in Everrett, Washington, praising the hospital for its ability to cut costs while improving quality. The article did a very job of providing context for the cost challenges facing hospitals along with an overview of some of Providence’s initiatives that produced excellent results. Following are a few highlights from the article.

Providence has made a number of key innovations that has allowed it to succeed:

1. “Single Stay” Wards. In 2003, they introduced one of the first “single stay” wards in the country. Under this model, the patient stays in one room during their entire stay, but the equipment and personnel move from patient to patient. The average length of stay at the hospital has dropped by a day or more and patient satisfaction has soared.

2. Two Hour Checks. The Hospital implemented a policy that requires nurses to check on patients every two hours. As a result, they have experienced a 25% decrease in falls.

3.  Hospitalists. In 2003, Providence placed almost all of its patients’ care in the hands of hospitalists. Since the shift, the hospital has published data showing decreases in infections, length of stay and surgical complications.

4. Value Analysis Committee. A Value Analysis Committee (“VAC”) of doctors, nurses and administrators evaluates and approves every major equipment purchase. Providence also offers financial training on cost effectiveness and efficiency to its physicians.

You can read the full article here:  http://www.businessweek.com/magazine/content/10_03/b4163040943750.htm

The American College of Radiation Oncology has a brief write-up on their site regarding the recent elimination of consultation fees for radiation oncology effective January 1, 2010. You can find their full summary here.

Instead of billing for a yearly consultation, the radiation oncologist can now only bill for a new patient visit every three years. This represents a significant reduction for most radiation oncologists.

Class Action Lawsuits Between Nurses & Hospitals:
Practical Guidance to Prevent & Defend Against Suits & Current Summary of Actions

Wednesday, February 17, 2010
12:30 – 1:15 p.m. (ET)

McGuireWoods Speakers
Kimberly Q. Cacheris, Partner
Benjamin R. Holland, Associate

McGuireWoods Moderators
Scott Becker, Partner
Thomas J. Stallings, Partner

Automatic 30-minute deductions for non-exempt employee lunch periods remain the healthcare industry standard. A lack of specific guidance from the Department of Labor recognizing the special demands inherent with patient care facilities has caused class or collective action lawsuits to become more prevalent.

These lawsuits – many times spearheaded by law firms specializing in and advertising the ability to sue hospital systems for overtime issues – are prohibitively expensive and represent the possibility of significant damages or settlements. However, there are steps healthcare systems can take to limit their exposure to such suits, and, in some instances, eliminate exposure altogether.

Please join us as we outline the risks for hospitals, and discuss the corrective actions needed to ensure compliance. We will address specific questions as time permits, so please send questions by Monday, February 15 to anorris@mcguirewoods.com.

Online registration is available. Dial-in information and presentation materials will be sent via e-mail closer to the event. If you have questions or comments, please contact Amy Norris at anorris@mcguirewoods.com or 704.343.2228.

This week, a highly critical article on radiation therapy was published in the New York Times. The full text of the article can be found here:

http://www.nytimes.com/2010/01/24/health/24radiation.html?pagewanted=all

I have not seen a response yet from radiation oncology industry groups or equipment manufacturers yet, but would expect a statement will be forthcoming.

8th Annual Business & Legal Issues in Dialysis & Nephrology Symposium

Wednesday, May 12, 2010
7:30 a.m. – 5:30 p.m.
Westin Chicago O’Hare
6100 River Road
Rosemont, Illinois 60018

Online Registration

Save the date for an engaging full-day seminar covering business and legal issues in dialysis and nephrology. Geared toward nephrologists; hospital and dialysis facility CEOs, CFOs and COOs; lawyers; administrators; and consultants, the symposium will cover:

• Effects of healthcare legislation and regulations on dialysis and nephrology
• Year in review and trends in 2010
• Regulatory and reimbursement issues affecting
  the industry
• Structuring and financing dialysis facility transactions
• Organizational issues for nephrology practices
• Structuring relationships between dialysis facilities and nephrologists, including medical director arrangements and other collaborative efforts

If you are interested in exhibiting at this conference or need more information, please contact Amy McGlynn at amcglynn@mcguirewoods.com or 804.775.7892. Exhibition space is limited.

The fee for attending the conference is $300, and $250 for each additional registrant from the same organization.

Conference Co-chairs:

James B. Riley Jr.
Robert J. Pristave
Scott P. Downing
Kimberly J. Kannensohn

Here is a pithy and concise commentary by Scott Becker on some of the key takeaway points from the Massachusetts special election:

http://www.beckersasc.com/news-analysis-asc/business-financial-benchmarking/republican-wins-senate-seat-in-massachusetts-8-quick-thoughts-by-scott-becker.html

I view this as a fair and non-partisan analysis that echoes many of the comments we have been hearing from both sides of the aisle. It is worth a quick read.

On December 30, 2009 a U.S. district court in Illinois declined to grant summary judgment to Saint Francis Medical Center (the “Hospital”) in an antitrust suit initiated by Peoria Day Surgery Center (the “ASC”) (Peoria Day Surgery Center v. OSF Healthcare System d/b/a Saint Francis Medical Center, C.D. Ill., No. 06-1236, 12/30/09).  The ruling means that the ASC has presented “sufficient evidence” to proceed to trial on its claims.

The ASC claimed that the Hospital’s agreement with Caterpillar, Inc. (“Caterpillar”), a large corporation headquartered in the area, to provide their employees with inpatient and outpatient surgical services violated certain antitrust and business competition laws.  The Hospital’s agreement with Caterpillar stated that once the Hospital’s surgery center had the capacity to meet all of Caterpillar’s surgical needs that Caterpillar was to no longer use the ASC or other providers for surgical services.  The ASC claims, and the court is willing to consider at trial, that this type of agreement by one of the three largest hospitals in the area is an illegal “tying arrangement” in that the Hospital has the market power to tie the product (surgical services) in a substantial volume.

The key to the court’s analysis, and most important for North Carolina hospitals and surgery centers, is that there must be a “geographic market” that the hospital is controlling.  If a hospital commands a substantial share of a “rough” market then direct evidence of anticompetitive effects is enough to establish the hospital’s market power without showing a precisely defined market.  The ASC must then show anticompetitive effects by demonstrating consumer injury (i.e. higher prices or lower quality of care) or injury to competition.

Many hospitals in the southeastern part of the United States are the primary health care providers in their respective regions. As a result, exclusive contracts could become targets for litigation if there are “anticompetitive effects.”  It will be important for both hospitals and surgery centers to be aware of the type of arrangements which could lead to these types of disputes.  The court’s decision is available here.

McGuireWoods LLP has committed to matching attorney and staff donations of up to $50,000 (resulting in total donations of $100,000). The firm will donate its matching funds to the American Red Cross, but attorneys and staff may donate to any relief organization they choose.

The Wall Street Journal Law Blog also has a running list of the various large national law firms that have committed to making donations or matching contributions to relief efforts in Haiti. http://blogs.wsj.com/law/2010/01/15/biglaw-stepping-up-on-haiti-aid/

The Winston-Salem Journal is reporting that Novant Health is sending some 37 pallets of medical supplies to Haiti to assist in the relief efforts. The supplies are being donated through international relief organization Samaritan’s Purse. The full article can be found here.

Effective January 1, 2010, Charlotte Radiology, P.A. and Cabarrus Radiologists, P.A. merged their practices, operating under the Charlotte Radiology name, to provide sub-specialized radiology services to health care providers in the North Carolina area.  The newly merged entity will employee approximately 80 radiologists in sub-specialty areas such as pediatric imaging, breast imaging, neuroradiology and musculoskeletal radiology and will provide services to a number of North Carolina hospitals, including those Carolinas  Healthcare System hospitals located in Mecklenburg, Cabarrus, Union, Lincoln and Anson counties, Scotland Memorial Hospital, Davis Regional Medical Center and FirstHealth Richmond Memorial Hospital.  Collectively, Charlotte Radiology now owns and operates: 

• five outpatient imaging centers;
• one vein and vascular center;
• one interventional clinic;
• twelve breast imaging centers;
• two mobile MRIs; and
• one mobile ultrasound.

 Click here to read the press release accompanying the merger.  To obtain further information on Charlotte Radiology, visit www.charlotteradiology.com.  For further information on Cabarrus Radiologists, visit www.cabarrusradiologists.com.

From time to time, The Centers for Medicare & Medicaid Services (CMS) holds “Open Door Forums” to provide an opportunity for live dialogue between CMS and the provider community at large.

The goal is to learn from other providers’ discussions and to get clarification on various rules and instructions associated with coverage, coding, and payment.

The next Home Health, Hospice & Durable Medical Equipment Open Door Forum will be on Wednesday, January 20, 2010 at 2:00 PM Eastern Time (ET).

Here are the participant instructions provided by CMS:

1. To participate by phone:
Dial: 1-800-837-1935 & Reference Conference ID: 45247192
Persons participating by phone are not required to RSVP. TTY Communications Relay Services are available for the Hearing Impaired. For TTY services dial 7-1-1 or 1-800-855-2880. A Relay Communications Assistant will help.

2. To participate onsite at the Hubert H. Humphrey Building, RSVP and Security Clearance is required. Please RSVP no later than 2:00 PM ET, January 14, 2010. To RSVP, send your name, organization and telephone number to HOMEHEALTH_HOSPICE_DMEODF-L@cms.hhs.gov . Be sure to include “Home Health” in the subject line.
Upon entry into the building, you will be required to present to Security a Government-issued photo identification, preferably valid driver’s license.
Please arrive no later than 1:30 PM.

Address:
Hubert H. Humphrey Bldg.
200 Independence Avenue S.W.
Washington, D.C. 20201
Map & Directions: http://www.hhs.gov/about/hhhmap.html .

Encore: 1-800-642-1687; Conference ID# 45247192.
Encore is an audio recording of this call that can be accessed by dialing 1-800-642-1687 and entering the Conference ID, beginning 2 hours after the call ends and will expire after 3 business days.

For ODF schedule updates, E-Mailing List registration and Frequently Asked Questions, visit the CMS website at http://www.cms.hhs.gov/OpenDoorForums/.

Effective January 1, 2010, the outlier payments made to each home health agency (“HHA”) in 2010 will be subject to an annual limit of 10% of the HHA’s total Medicare PPS payments for the year.

Generally, payments for Home Health PPS claims are based on a certain number of “episodes of care.” Each episode of care consists of a 60 day period. Medicare pays a flat rate for each episode of care to the home health agency. When the episode of care involves an unusually high level of services in that 60-day period, then the HHA can be eligible for an additional “outlier” payment.

The Medicare Claims Processing Manual states how outlier payments are calculated: “If (i) the total product of the number of the visits and the national standardized visit rates is greater than (ii) the case-mix specific payment amount plus the fixed loss threshold amount, [then] a set percentage (the loss sharing ratio) of the amount by which the product exceeds the sum will be paid to the HHA as an outlier payment in addition to the episode”

Beginning January 1, 2010, each time a claim is submitted, it will be compared to the total amount of reimbursement the HHA has received during the year. If the amount of the outlier payment would exceed the 10% threshold, then Medicare will not make the payment. Partial outlier payments will not be made.

There will also be a quarterly reconciliation. For example, if an outlier claim is initially denied, it may later become payable if the threshold is not ultimately met for the timely filing period. The reconciliation process will be conducted in February, May, August and November.

The most recent CMS clarification of this limitation can be found here.

The final 2010 HHA Prospective Payment System update can be found here.

Bloomberg is reporting that effective January 1, the Mayo Clinic will no longer see primary care Medicare patients at its Glendale, AZ facility. Mayo cited inadequate reimbursement rates as one of the primary drivers of this decision. They claim that their hospital and four clinics in Arizona collectively lost a total of $120 million on Medicare patients last year.

This is a growing trend that we’ve been seeing for a number of years in niche specialties, and may be a sign of things to come as business economics continue to conflict with political efforts to control costs/reimbursement rates.

Here is a link to the full article.

American Medical News reported yesterday that Blue Cross Blue Shield of North Carolina has agreed to give up its demand that its participating physician providers accept an amendment to their existing provider agreements that would have potentially allowed BCBS to unilaterally change reimbursement rates.

The North Carolina Medical Society along with the NC Medical Group Managers and two other physician groups had written a letter to Insurance Commissioner Wayne Goodman on October 26 asking that his department intervene in the matter. The physicians argued that the proposed amendment was an attempt to circumvent a law enacted earlier this year designed to promote fair dealing between payors and providers. The Bill, North Carolina Senate Bill 877, will go into effect on January 1, 2010. It will require payors to notify providers at least 60 days in advance of any changes to their agreements. If the providers object to the changes, then the payor would be able to terminate the agreement upon 60 days notice.

BCBS has denied that the proposed amendment was an attempt to circumvent or alter the new law.

This is the most recent chapter in the ongoing conflict between healthcare providers and healthcare payors.  Providers have long criticized the perceived overwhelming bargaining power that payors have over them. Recently payors have been more aggressively pursuing ways to reduce reimbursement rates. Most notably, we’ve seen this in the area of out of network reimbursement, but in-network rates have also been under pressure.

You can find a copy of the letter sent by the North Carolina Medical Society here.

You can find a copy of Senate Bill 877 here.

Becker’s Hospital Review is reporting that six hospitals in North Carolina are being asked to repay approximately $2.5 million in overpayments made by the state health plan, which is administered by Blue Cross Blue Shield of North Carolina. The full report can be found here.

The News and Observer also has an article, which can be found here.

Today, CMS released the Final Rule for the 2010 Home Health Prospective Payment System Rate Update.  The complete text of the Final Rule can be found here.

According to CMS, the final rule makes three key changes:

- continues with the previously promulgated 2.75 percent reduction to the HH PPS rates in CY 2010 (to account for the increase in case-mix not due to the underlying condition of the home health patient),

- updates the HH PPS rates by a 2.0 percent home health market basket update, and as part

- of efforts to address potential fraud and abuse regarding outlier payments to home health agencies revises its outlier policy (for CY 2010) by capping outlier payments at 10 percent of total HH PPS payments, updating the fixed dollar loss ratio to 0.67, and targeting outlier payments to be no more than 2.5 percent of total HH PPS payments (returning 2.5 percent back into the base rate).

CMS will also require the submission of OASIS as a condition for payment, and is implementing a new version of OASIS, OASIS-C, beginning January 1, 2010. CMS is also adding payment safeguards to improve the enrollment process, improve quality of care, and reduce fraud.

We’d like to invite you to share with us your top business and legal concerns. Please either leave your thoughts in the comments or reach out to us by email, Twitter or the “Contact Us” tab on the site.

We will do our best to address your suggestions in future posts.

The text of the proposed Senate Finance Committee Healthcare Reform Bill has been released. You can find a copy here:

http://finance.senate.gov/press/Bpress/2009press/prb102009c.pdf