Category Archives: Health Law

The CARES Act Amends Federal Law Governing the Confidentiality of Substance Use Disorder Patient Records

The CARES Act (the “Act”), enacted on March 27, 2020, makes notable changes to federal law governing the disclosure of substance use disorder (“SUD”) records.  The Act amends 42 U.S.C. 290dd-2, the governing statute of the regulations at 42 C.F.R. Part 2 (“Part 2”) to better align certain of its confidentiality requirements with HIPAA. The amendments do not change the basic premise that prior written consent of the patient is required for disclosure of SUD treatment records. However, once prior written consent of the patient is obtained, the amendments allow a covered entity, business associate, or Part 2 program to use or disclose SUD records for purposes of treatment, payment, and health care operations as permitted by HIPAA. Any information so disclosed may then be redisclosed in accordance with the HIPAA regulations. The amendments also allow a patient’s prior written consent to be given once for all such future uses or disclosures for purposes of treatment, payment, and health care operations, until the patient revokes his or her consent in writing. Continue reading The CARES Act Amends Federal Law Governing the Confidentiality of Substance Use Disorder Patient Records

HHS Activates DEA Exemption to Allow Remote Prescribing of Controlled Substances

In order to facilitate social distancing measures during the COVID-19 pandemic, state and federal regulatory agencies are moving quickly to permit providers to continue to provide medical care through telemedicine. On March 16, 2020, Alex Azar, the Secretary of Health and Human Services, has declared a public health emergency and, therefore, activated the telemedicine allowance under 21 U.S.C. § 802(54)(D). Per the Secretary, this applies to all schedule II-V controlled substances in all areas of the United States for as long as the public health emergency declaration is in place so long as the following conditions are met: (1) the prescription must be issued for a legitimate medical purpose by a practitioner acting within his or her usual course of professional practice; (2) the telemedicine communication must be carried out using an audio-visual, real-time, two-way interactive communication system, and (3) the practitioner must act in accordance with all applicable state and federal laws.

In Pennsylvania, Act 96 of 2018 provides exceptions to electronic prescription requirements “in an emergency situation pursuant to Federal or State law and regulations of the department.” Each state regulates the prescription of controlled substances differently and will respond to this ongoing emergency in a different way. Although many restrictions have been eased, providers are urged to ensure that they comply with all applicable laws and regulations when prescribing controlled substances.

 

OCR Loosens HIPAA Enforcement Amidst Coronavirus Pandemic

Let’s face it, there has not been much positive news lately surrounding the Coronavirus (“COVID-19”).  However, the Office For Civil Rights (“OCR”), the agency within the Department of Health and Human Services (“HHS”) that enforces the Health Insurance Portability and Accountability Act (“HIPAA”) Privacy and Security Rules, announced several recent measures to allow health care providers avoid certain HIPAA penalties and sanctions amidst the COVID-19 pandemic.

There are several measures OCR/HHS has taken to lessen the regulatory burden of HIPAA for health care providers amidst COVID-19.  Here is the latest breakdown of important pronouncements and guidance set forth by OCR/HHS to help providers deal with COVID-19 and HIPAA compliance:

Continue reading OCR Loosens HIPAA Enforcement Amidst Coronavirus Pandemic

Solo Practitioner Pays $100,000 Settlement to the Office of Civil Rights (OCR) for Self-Reported HIPAA Breach

OCR began investigating the solo practitioner after his medical practice (the “Practice”) filed a breach report with OCR related to the Practice’s dispute with its electronic health record (EHR) provider. The Practice’s breach report alleged that the EHR provider was blocking access to the Practice’s medical records, until the Practice paid the EHR provider $50,000.

Upon receipt of the breach report, OCR initiated a compliance review of the Practice and found that the Practice demonstrated significant noncompliance with the HIPAA rules. Specifically, the OCR investigation determined that the Practice had never conducted a risk analysis at the time of the breach report, and despite significant technical assistance throughout the investigation, had failed to complete an accurate and thorough risk analysis after the breach and failed to implement security measures sufficient to reduce risks and vulnerabilities to a reasonable and appropriate level.

In addition to the $100,000 settlement, the Practice entered into a Resolution Agreement with OCR and Corrective Action Plan.

OCR issued a press release regarding the settlement stating: “All health care providers, large and small, need to take their HIPAA obligations seriously,” said OCR Director Roger Severino. “The failure to implement basic HIPAA requirements, such as an accurate and thorough risk analysis and risk management plan, continues to be an unacceptable and disturbing trend within the health care industry.”

The take away “All health care providers, large and small, need to take their HIPAA obligations seriously,” and maybe the age old wisdom, people in glass houses should not throw stones.

PHYSICIAN COMPENSATION – FAIR MARKET VALUE

A recent whistleblower case led to the filing of a false claims act complaint against Community Health Network (CHN) by the United States of America Department of Justice on January 7, 2020. The complaint, filed in the U.S. District Court for the Southern District of Indiana, alleges that CHN compensated providers significantly over fair market value (FMV) in order to roll up referrals from the provider’s practices in violation of the Stark Law, which prohibits a hospital from billing Medicare for services referred by a physician with whom the hospital has a financial relationship that does not meet any statutory or regulatory exception.

In its complaint, the government alleges that CHN had employment relationships with numerous physicians that did not meet any Stark Law exception, because the compensation paid to the providers by CHN was well above FMV. In addition to the excessive compensation allegation, the complaint alleges that CHN conditioned the physician’s incentive or bonus compensation based on the physician meeting a target of hospital downstream revenue specific to the physician.

According to the complaint, CHN wanted to tie physicians with existing business in lucrative specialties to CHN. A number of the recruited physicians already had medical staff privileges at CHN hospitals and were already referring patients to CHN hospitals. The government complaint states that the physician integration strategy was defensive in nature meaning that CHN recruited and employed the providers to secure their referrals and out of concern that referrals would otherwise leak to CHN’s competition.

The whistleblower provided information to the government suggesting that CHN knew the compensation exceeded FMV and had withheld details of the proposed compensation from FMV consultants in order to obtain a more favorable FMV analysis. The whistleblower also claimed to have documentation showing that CHN executives calculated the provider’s excessive compensation based on the value of expected referrals. The January 6, 2020 amended complaint claims that CHN ignored the consultant’s warnings that the proposed compensation was in excess of FMV.

While the Stark law strictly prohibits a hospital from paying a physician in excess of FMV, the calculation of FMV is subjective and influenced by a wide variety of factors. There can be good reasons for paying a physician in excess of what other doctors are paid. The rationale for paying a physician in excess of what other doctors are paid should be objective, legitimate and well documented.

Hospitals should obtain a FMV analysis of physician compensation arrangements, make sure that the valuator has the necessary information and understands any unique circumstances. Hospitals should consider obtaining the FMV analysis in draft form under attorney-client privilege, in case the valuator failed to consider a relevant factor and meet with the valuator to discuss the valuation, before the analysis is finalized. Finally, it is imperative that hospitals consult with legal counsel throughout the valuation process to assure compliance with legal and regulatory requirements.

Insurers Preempting Upcoming Changes for E/M Visit Documentation

On November 15, 2019, the Centers for Medicare and Medicaid (“CMS”) published the 2020 Physician Fee Schedule Final Rule in the Federal Register. Among the several changes outlined in the rule, this post specifically focuses on the changes to documentation requirements for Evaluation and Management (“E/M”) Visits. The first important note is the CMS will maintain the existing documentation requirements for all E/M codes for the year 2020.

However, in an effort to update the currently applicable guidelines (published in 1995 and 1997), the E/M documentation requirements will be revamped in 2021 for office visits only. In other words, the emergency department E/M code documentation will remain unchanged. But the focus of the E/M code documentation for office visits will be based solely on Medical Decision-Making (“MDM”) or E/M visit time with patient. Continue reading Insurers Preempting Upcoming Changes for E/M Visit Documentation

HOW TO ASSURE A SUCCESSFUL PHYSICIAN PRACTICE INVESTMENT OR ACQUISITION

As physician practices, health care entities, private equity and venture capital firms consider physician practice investments and acquisitions, the players need to address the unique nature of physicians and physician practices in order to assure a successful deal. Peter Drucker is quoted as saying that “Only three things happen naturally in organizations: friction, confusion and underperformance. Everything else requires leadership.” With respect to physician practice investments and acquisitions, communication is key to the ultimate success of the transaction.

Understanding The Deal: Case Study One

Effective communication is absolutely essential. Too often, physician practices view a practice merger or acquisition as easy access to cash, without understanding that the cash comes with a price.

A physician group was selling their practice to a publically traded company. A few members of the group believed that each physician would walk away with a substantial amount of cash with no strings attached. Those physicians told the rest of the group not to worry about the written agreements, as the agreements were just words put on paper by lawyers who did not understand the “real deal”. The “real deal” as described by those physicians was that the non-compete was not enforceable and that there would be no changes to the group or the way the group practiced medicine, despite the written agreement.

Legal counsel, who continuously tried to get the group to focus on the terms of the agreement, was viewed as an obstacle to the cash prize. The group’s legal counsel repeatedly told the group that the buyer would not spend millions of dollars to purchase the practice and then not enforce the non-compete and furthermore, according to the written agreements, there would be changes to the group and the way the group practiced medicine.

The deal makers for the buyer were soft-pedaling the non-compete and the proposed changes in order to make the deal and purchase the practice. Finally, at the urging of the group’s legal counsel, the buyer’s legal counsel stepped in and made it clear to the group that the non-compete would be enforced and that there would be changes.

Once the group understood that the deal on paper was the “real deal”, the physician group negotiated a higher sales price, the physicians who opposed the sale of the practice were provided with a pre-closing exit plan option and the transaction closed. Years later, the practice continues to be successful, because the sellers and the buyers understood the deal and had a meeting of the minds.

What Not To Do: Case Study Two

A health system hospital acquired a large multi-specialty practice. The practice was responsible for the majority of admissions to the hospital. However, the practice had a number of underperforming physicians. Day one after the acquisition, based on the advice of a recent business school graduate, the health system sent 120-day contract termination notices to every one of the practice’s physicians and advised the physicians to reapply for their jobs. The termination notice stated that the physicians were not guaranteed employment and that individual physicians would be notified within 90 days, if they were being rehired. The notice also stated that the terms and conditions of employment, including compensation, would likely be substantially different.

What happened next should not have been a surprise. Many of the physicians immediately began looking for new positions outside the health system. Many physicians, including the entire OB/GYN practice, ended up at a nearby hospital, owned by a competing health system. The acquiring health system went to court seeking an injunction to enforce the non-compete and the providers and their patients went to the media and the court of public opinion. At the preliminary injunction hearing, several pregnant women testified that enforcement of the non-compete would cause irreparable harm to them and furthermore the hospital no longer had the capacity to care for the pregnant women as all of the OB/GYN providers had been terminated by the health system.

In order to avoid an adverse decision, the health system withdrew their preliminary injunction complaint and ceased efforts to enforce the non-compete. While a few physicians stayed with the health system, most went elsewhere and took their patients with them. The physician group disintegrated. The health system lost money and suffered substantial collateral damage from the public outcry.

“The most important thing in communication is to hear what isn’t being said.” Peter Drucker. The health system never shared their plan to terminate all physicians and then selectively rehire physicians post-closing and the physicians assumed that it would be business as usual post-closing. Both the health system and the practice failed to communicate and that failure to communicate quickly doomed the practice acquisition.

The Dog And The Tail: Case Study Three

A large orthopedic practice that owned a specialty hospital, received an unsolicited proposal from a health system to purchase a minority interest in the hospital. The physicians entered into negotiations with the health system. The physicians were in the driver’s seat with respect to negotiations, because the health system wanted the transaction and the physicians did not need the cash. The physicians and their attorney were tough negotiators. At one point, the health system CEO was exasperated and declared that the health system was not going to let the tail wag the dog. The physician’s attorney tried not to laugh-out-loud, but the CEO observed the attorney’s amusement and repeated that the tail was not going to wag the dog. The attorney agreed, but pointed out that while the health system’s CEO was accustomed to being the dog, in this case, the health system was the tail and the physician group was the dog. The transaction closed on the physician’s terms.

The Take Away

Ideally in physician practice investments and acquisitions, neither party feels like the dog or the tail. All parties to the transaction must understand the deal and effectively communicate and agree on plans for the future. Post-closing with respect to physician practice investment and acquisition, the buyer and the seller will continue to work together. Effective communication will minimize the risk of friction, confusion and underperformance.

Skilled Nursing Facilities, Beware of ACOs

Providers in the long term care industry often ask me whether they should sign on with their local accountable care organization (“ACO”). My answer has always been, for years now, absolutely! After all, ACOs can be a good source of referrals for skilled nursing. Plus, a team-oriented ACO can foster better patient care, quality care and wellness in the ACO setting in the community. However, more of our skilled nursing facility clients have been experiencing problems with certain ACOs operating as dictatorships. Perhaps this is because more and more skilled nursing facilities are finally entering the realm of ACO involvement.

While it is good for a skilled nursing facility to be on the ACO’s “A List” of skilled nursing home providers, skilled nursing facilities need to carefully review their contracts with ACOs to make sure they are not taken advantage of or subject to increased liability. For example, recently one skilled nursing facility relationship with its ACO was so strained that it fired its ACO due to problems with patient care.  See Alex Spanko, “How One Skilled Nursing Operator Navigates The Occasional Single ‘Dictatorship’ of ACOs,” Skilled Nursing News, October 16, 2019. In some cases, there were reports that ACOs are placing too much pressure on skilled nursing facilities to discharge residents earlier than indicated, or forcing facilities to provide less care in order to reduce ACO costs, often times to the detriment of residents. Continue reading Skilled Nursing Facilities, Beware of ACOs

New CMS Final Rule Strengthens Enforcement Authorities To Bolster Fraud and Abuse Prevention

On September 5, 2019, the Centers for Medicare and Medicaid Services (“CMS”) issued a final rule that strengthens a number of enforcement measures.  The new rules go into effect beginning November 4, 2019.  The goal for CMS is to keep those providers and suppliers that have committed fraud out of the federal healthcare programs.

For one, the new final rules provide CMS with new revocation and denial authorities, as part of the Provider Enrollment Process, for “affiliations” that pose an undue risk of fraud, waste or abuse. Continue reading New CMS Final Rule Strengthens Enforcement Authorities To Bolster Fraud and Abuse Prevention

Trump Administration Proposes Rule Requiring Hospitals to Disclose Negotiated Rates with Insurers

The rule proposed by the Centers for Medicare and Medicaid Services (CMS) would require that all facilities licensed as hospitals within their respective states (including the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands) disclose their “Standard Charges.” The rule would define “Standard Charges” as the hospital’s gross charge for an item or service as well as the charges that it negotiates with insurance companies and other payors. The rule would require hospitals to publish these “Standard Charges” for at least 300 shoppable services, with the rule defining a “shoppable service” as one that can be scheduled by a healthcare consumer in advance. These pricing disclosures—subject to annual updates—would be required to appear prominently on publicly available websites.

President Trump, who signed an executive order last month calling for changes that would allow healthcare consumers to compare prices for shoppable services, argues that the disclosed price discounts would enhance transparency and enable consumers to make informed, educated choices. The healthcare industry has already voiced opposition to this plan by arguing that the discounted rates are trade secrets or that they promote competition.

A few months ago, the Trump administration made headlines when it took another step aimed at lowering the cost of healthcare; that time, the administration announced a new rule that would require pharmaceutical companies to disclose the prices of prescription drugs in television commercials. The response, by the pharmaceutical industry, was swift, raising a number of arguments in opposition, including that the rule would confuse the public. According to the industry, there would be no practical way to disclose the “price” of a given drug, because different end-user consumers pay different out-of-pocket costs based on varying co-insurance requirements, co-pays, etc. The drug industry also argued that the required disclosure would violate First Amendment free speech protections, and further insisted that the Department of Health and Human Services (HHS) didn’t have the authority to force the pharmaceutical companies to publish their prices in their ads. In that case, pharmaceutical industry representatives, including a number of manufacturers, as well as the Association of National Advertisers, filed suit against the Trump administration to block the rule from taking effect. A federal court sided with the industry, blocking the initiative on the grounds that HHS lacked the requisite regulatory power.

Whether the negotiated rate proposal from CMS will face the same fate as the HHS advertising proposal is unclear. Stakeholders are encouraged to submit comments to the agency. The deadline for comment submission is September 27, 2019.

This blog post was co-authored by Justin M. L. Stern and Ryan Wesley Brown.