Private Equity Beware!

According to a Department of Justice press release, the United States has filed a complaint against a compounding pharmacy, alleging that the pharmacy paid illegal kickbacks to induce prescriptions for compounded drugs reimbursed by TRICARE. The government’s  claim also charges two pharmacy executives, and a private equity firm which manages both the pharmacy and the private equity fund that owns the pharmacy, for their involvement in the alleged kickback scheme.

The private equity firm allegedly invested in the pharmacy company in 2012 with the goal of increasing the company’s value and then selling it for a profit in 5 years. The private equity firm allegedly “managed and controlled” the pharmacy company through two of its partners who served as “officers and/or directors” of the company. During its investment, the private equity firm was allegedly actively involved in developing and implementing the company’s business strategy around maximizing reimbursement so as to enhance the value of the company, prior to selling its interest.

The complaint describes statements in e-mails sent by the private equity firm principals, about opportunities to capitalize on ‘the extraordinarily high profitability’ which could result in a ‘quick and dramatic payback’ on its investment.” According to the U.S. Attorney, the private equity firm acknowledged in emails that “‘overcharging the product’ in its ‘pain management business’ risked ‘cross[ing] the line from an ethics standpoint.’”

The take away from this complaint is that private equity investors are not immune from prosecution for health care fraud. Private equity investors need to consider the risks associated with managing and controlling their health care investments.



Telemedicine/Telehealth What is the Difference?

Telemedicine generally refers to the use of information technologies and electronic communications to provide remote clinical services to patients. Examples of telemedicine are the transmission of medical imaging and video consultations with patients and specialists. Telemedicine is the first generation description of the clinical application of technology to medicine.

As the application of technology to health care has evolved, the term “telehealth” has become the second generation of terminology and describes the evolution of health care technology beyond the delivery of clinical services using remote means. Telehealth encompasses a broader collection of means or methods to enhance care delivery and education. While the terms are often used interchangeably, telemedicine and telehealth are not precisely the same thing.

In 2014, the Department of Health & Human Services Department sought to clarify the two terms in a post on

“Telehealth is different from telemedicine because it refers to a broader scope of remote healthcare services than telemedicine. While telemedicine refers specifically to remote clinical services, telehealth can refer to remote non-clinical services, such as provider training, administrative meetings, and continuing medical education, in addition to clinical services.”

The Health Resources and Services Administration (HRSA) of the U.S. Department of Health and Human Services defines telehealth as the use of electronic information and telecommunications technologies to support and promote long-distance clinical health care, patient and professional health-related education, public health and health administration. Technologies include videoconferencing, the internet, store-and-forward imaging, streaming media, and terrestrial and wireless communications.

According to The Center for Connected Health Policy, “telemedicine” often refers to traditional clinical diagnosis and monitoring that is delivered by technology, while “telehealth” describes the wide range of diagnosis and management, education and other related fields of healthcare.

In 2014, the journal Telemedicine and e-Health published a study that found seven different definitions of telehealth in use in federal agencies alone.

“Although many definitions are similar, there are nuanced differences that reflect each organization’s legislative intent and the population they serve,” the study concluded. “These definitions affect how telemedicine has been or is being applied across the healthcare landscape, reflecting the U.S. government’s widespread and influential role in healthcare access and service delivery. The evidence base suggests that a common nomenclature for defining telemedicine may benefit efforts to advance the use of this technology to address the changing nature of healthcare and new demands for services expected as a result of health reform.”

Telemedicine is a component part of telehealth, but telehealth goes beyond traditional telemedicine. For now, in most cases, the context in which the terms “telehealth” and “telemedicine” are used will be the key to understanding the intent of the word. Usage of the terms will continue to evolve and I predict that the broadest possible term defining the application of technology to health care will survive the test of time.






Practice Departures and Breakups: Costly, Painful and Tumultuous

Physician practices break up in one form or another as often as physician marriages breakup and the breakup of a physician practice can be as costly, tumultuous and painful as the breakup of a marriage. The best advice is to plan ahead and develop a “pre-nuptial” type arrangement or exit plan, when the practice is set up and when new providers are brought into the practice. Unfortunately, many physician practices have no exit plan for practice departures or breakups and suffer unnecessarily as a result.

Even those practices with an exit plan, often encounter rough waters as they work through issues. The biggest disputes seem to be over competition and post termination compensation. The practice may or may not have a non-compete provision in its physician contracts, if there is a contractual non-compete, it may or may not be enforceable. Even with an enforceable non-compete, the departing provider may choose to ignore the non-compete and poach patients and referral sources.

With respect to post-termination compensation, practices may need to hold back some money to account for payer audits,  recoupments, fines,  penalties, practice debt,  contractual obligations, limited liquidity and other miscellaneous costs. It is important to protect the remaining providers and make sure they are not saddled with the departing provider’s expenses and debt.

In addition to the big picture issues, there are a myriad of other issues associated with practice breakups. Patient notification can be a sticky issue. For instance, an academic medical center practice was forced to pay a penalty for violating HIPAA, when the medical center provided protected health information to a departing provider without first obtaining authorization from patients. Conversely, practices have also been penalized for not notifying patients about departing providers.

With respect to practice departures and breakups, the best defense is a good offense. Plan ahead working with experienced health care counsel.


Can a Physician Be Too Old to Practice Medicine?

We know that the Americans with Disabilities Act (ADA) restricts the ability to make age-related decisions, unless it can be established that age is a “bona fide occupational qualification”. A bona fide occupational qualification generally means that the individual has a trait that precludes safe and efficient job performance. Under certain circumstances, the courts have allowed some industries to force the retirement of a class of individuals (pilots for example) at a certain age, based on the belief that it is too complicated to deal with such individuals on an individualized bases.

So, is a physician’s age a factor that precludes safe and efficient job performance? To my knowledge, no court has approved a mandatory retirement age for physicians and no credentialing or licensing body has set a firm mandatory retirement date for physicians. However, some credentialing bodies have established age related policies, mandating an evaluation process for physicians of a certain age.

Because physicians’ duties vary widely by practice area, a one size fits all policy doesn’t work. For example, the physical and other skills required to practice orthopaedic surgery are vastly different than the physical and other skills required to practice psychiatry. Even within orthopaedics, the physical and other skills required for joint replacement are vastly different than the skills required for sports medicine. Credentialing and licensing entities need to focus on the individual physician and his or her fitness to safely provide patient care, not age.

Every medical staff should have a medical staff health committee to receive and investigate reports relating to a physician’s fitness for clinical privileges, health, physical and mental disorders, chemical dependency and well-being, etc. Age alone should not be the basis for reviewing and evaluating a physician’s fitness to safely provide patient care. And, it should never be assumed that youth assures that a physician is able to safely provide patient care.


A new policy recently issued by the Justice Department states that the Department will not use its enforcement authority to effectively convert agency guidance documents into binding rules. The new policy has broad ramifications and applies to government enforcement actions as well as civil lawsuits. The policy prohibits Department components from issuing guidance documents that effectively bind the public without undergoing formal rulemaking.

The term “guidance documents” includes any agency statement of general applicability and future effect, such as Medicare billing manuals, special fraud alerts, and frequently asked questions. The Department may continue to use guidance documents to simply explain or paraphrase legal mandates from existing statutes or regulations, but guidance documents cannot create binding requirements that do not already exist by statute or formal regulation.

While the new policy is viewed favorably by most in the health care industry and gives health care providers a new tool to fend off allegations of wrong doing, it may lead to confusion as providers try to interpret complex and confusing statutes and rules.

PHI Goes Beyond Medical Records

In the 1990s, I wrote about a health care entity’s responsibility for medical waste. At that time, a hospital client had contracted with a low cost medical waste disposal company thinking that they would be saving money. The medical waste disposal company dutifully picked up the hospital’s medical waste and provided documentation to the hospital showing that the waste had been properly disposed of in accordance with legal and regulatory requirements. The hospital was happy, until the day they received notice that the hospital was a potentially responsible party for a super fund waste site located several thousand miles away from the hospital. It turned out that the medical waste disposal company had forged the documentation and dumped the untreated medical waste at the super fund waste site. The hospital was linked to the waste site through IV bags found at the site, with patient names and the hospital’s identification attached.

HIPAA had not yet been enacted in the 1990s and protected health information (PHI) was not the hospital’s primary concern. However, had the medical waste dumping happened today, the hospital would have to address not only the EPA super fund waste problem, but also HIPAA issues.

The take away. Think beyond medical records when addressing PHI and beware of low cost solutions to waste disposal.

eNLC and Telehealth

Licensure compacts allow nurses to have one multistate license, with the ability to practice in their home state and other compact states. The Enhanced Nursing Licensure Compact ( eNLC) was recently implemented and allows nurses to practice in person, or via telehealth, across states that are a part of the compact. The eNLC covers registered nurses, licensed practical nurses and vocational nurses. The Enhanced Nurse Licensure Compact (eNLC) is intended to increase access to care while maintaining public protection at the state level. Under the eNLC, nurses are able to provide care to patients in other eNLC states, without having to obtain additional licenses. Nurses with an original NLC multistate license will be grandfathered into the eNLC. New applicants residing in compact states will need to meet the uniform license requirements for a multistate license.

Advanced practice nurses are covered by the Advanced Practice Registered Nurse (“APRN”) Compact. The APRN Compact, approved May 4, 2015, allows an advanced practice registered nurse to hold one multistate license with a privilege to practice in other compact states. The APRN Compact will be implemented when 10 states have enacted the legislation. So far, fewer than 10 states have enacted the APRN Compact. Hopefully, eNLC implementation and the expansion of telehealth will spur additional states to enact the APRN Compact.

With the implementation of the eNLC, a licensed nurse residing in compact states may treat a patient located in any of the compact states under one multistate license. Nurses are further enabled to provide services via telehealth with the added protection and standards of the eNLC. Reimbursement remains a concern.

OIG Rescinds Advisory Opinion

Health care providers have come to rely on the Office of the Inspector General (OIG) Advisory Opinions (AO) as regulatory guidance. For the first time ever, late last fall, the OIG rescinded an advisory opinion, that was originally issued in 2006 and modified in 2015.

According to the OIG, the charity that sought and received the AO, breached two commitments made in its AO request. The original AO, which contained assurances about protection from anti-kickback statute liability and civil monetary penalties was revoked retroactively, exposing the charity to potential liability for past acts that the charity believed were protected by the AO. The charity had proposed modifications to the AO when it learned of the potential revocation. But, the proposal was rejected by the OIG with the OIG stating that it did not trust the charity.

The take away for providers is that commitments made in a request for an AO must be kept. An AO is not a blank check. It can be revoked retroactively.

The Importance of Credentialing

Dr. Oluwafemi Charles Igberase entered the United States in October 1991 on a nonimmigrant visa. In November 1991, January 1995, and September 1998, Igberase obtained fraudulent social security numbers using other names and false identifying information. Between 1992 and 1998, Igberase obtained three certifications from the Educational Commission for Foreign Medical Graduates (ECFMG) under different names, dates of birth and fraudulent social security numbers, in order to practice medicine and get into a residency program in the United States. The ECFMG Committee on Medical Education Credential subsequently revoked or suspended two certifications in December 1995, after learning that they were fraudulently obtained. In 1998, after receiving his third ECFMG certification in the name of Charles John Nosa Akoda, Igberase was admitted to a residency program in New Jersey. Igberase was dismissed from the program two years later after officials learned that the social security number he used did not belong to him.

In 2016, Dr. Igberase pled guilty to using a fraudulent Social Security number to obtain his medical license. His medical license was subsequently revoked. Prior to revocation of his medical license, Dr. Igberase obtained medical staff privileges at a hospital and delivered hundreds of babies. The hospital was sued in a putative class action for negligent credentialing and the case is pending. In its defense of credentialing Dr. Igberase, the hospital recently argued that it had no duty to ensure that a physician is using his real name and placed the blame on the Maryland Board of Physicians for granting Dr. Igberase a medical license.

To our hospital clients, you should verify that a physician is using his or her real name and that he or she has proper training and credentials.

The Importance of Documentation

A Health System recently agree to pay $6 million to settle allegations that a subsidiary submitted false claims to Medicare for unnecessary rehabilitation therapy services. The Health System was also required to enter into a 5-year corporate integrity agreement with the U.S. Department of Health and Human Services Office of Inspector General. The billed services were allegedly unreasonable, not medically necessary and unsupported by the medical records.


The case was originally filed by whistle blower employees. In its defense, the Health System argued that the not medically necessary findings were highly subjective conclusions and that the care was appropriate. The Health System settled the case for $6 million, however, to avoid “an unsustainable and ultimately unacceptable allocation of financial and personnel resources.”  Assuming that the care was appropriate, better documentation of medical necessity might have saved the Health System $6 million.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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