“Per-click” fees OK but don’t count on it

The Stark Law, 42 U.S.C. 1395nn, places restrictions on lease arrangements between physician groups and hospitals for equipment owned by the physicians, leased to the hospitals and then used by the same physicians to treat patients at the hospital.  Under the Stark Law, such leases are prohibited unless the arrangement complies with the equipment rental exception, 42 U.S.C. 1395nn(e)(1)(B).

One requirement of the equipment rental exception, which is both statutory and regulatory (42 C.F.R. 411.357(b)), is that the rental charges be “set in advance.”  In a recent case from the D.C. Circuit Court of Appeals, Council for Urological Interests v. Burwell, the court considered whether a “per-click” or “per-use” fee could be considered “set in advance” and otherwise meet the criteria for the exception.  In an oddly constructed opinion, the court struck down a regulatory prohibition on per-click arrangements, but remanded under terms that would permit the restriction to be re-instated. Continue reading ““Per-click” fees OK but don’t count on it”

California Medicare Appeal Applies Strict Standing Rules

The Medicare Part B appeal process is lengthy and cumbersome, typically requiring full exhaustion of administrative remedies, including an administrative request for reconsideration, an ALJ hearing and Departmental Appeals Board review.  The process is especially frustrating when the appeal involves a challenge to a Local Coverage Determination (“LCD”), likely to have spawned several individual appeals of the same decision.

The Medicare Act does provide a shortcut to a legal review by way of 42 U.S.C. § 1395ff(f)(3) which provides that a Medicare recipient “may seek review [of an LCD] by a court of competent jurisdiction without  … otherwise exhausting other administrative remedies.”  This direct access to court review applies only if “there are no material issues of fact in dispute, and the only issue of law is the constitutionality of a provision of this subchapter or that a regulation, determination or ruling by the Secretary is invalid.” Continue reading “California Medicare Appeal Applies Strict Standing Rules”

SCOTUS Limits Claims Brought by Healthcare Providers’ for Denied Medicaid Reimbursement

In a recent 5-4 decision by the U.S. Supreme Court, Armstrong v. Exceptional Child Center, Inc., Slip. Op., 575 U.S. ____ (March 31, 2015), Justice Scalia, writing for the majority, took aim at health care providers seeking to enforce Medicaid rate-setting provisions against a state that refused to incorporate those provisions in the state’s Medicaid plan, and instead reimbursed providers for Medicaid services at lower rates.

In Armstrong, the plaintiffs, providers of habilitation services under Idaho’s Medicaid plan sought an injunction to prevent Idaho’s State Department of Health from violating Section 30(A) of Medicaid, 42 U.S.C. § 1396(a)(30)(A), which requires a state to “assure that payments are consistent with efficiency, economy, and quality of care,” while “safeguard[ing] against unnecessary utilization of. . . care and services.”  The Court reversed the Ninth Circuit’s decision that the Supremacy Clause gave the providers an implied right of action to seek an injunction requiring Idaho to comply with Section 30(a). Continue reading “SCOTUS Limits Claims Brought by Healthcare Providers’ for Denied Medicaid Reimbursement”

Specific Facts Suggest Hospitals and Insurers Agreed to Group Boycott

A per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, generally requires an agreement among horizontal competitors that unreasonably restrains trade. To withstand a motion to dismiss, a Section 1 plaintiff must allege facts that suggest direct of evidence of an agreement among the defendants, as opposed to alleging facts that merely are consistent with parallel conduct. These principles have been referred to by some courts as creating a heightened pleading standard for Section 1 claims.

In Arapahoe Surgery Center, LLC, et al. v. Cigna Healthcare, Inc., et al., 2015 U.S. Dist. Lexis 28375 (D. CO.), the Colorado District Court determined that the plaintiffs’ allegations of a group boycott were sufficient to meet the pleading requirements under Section 1, and therefore denied a motion to dismiss filed by three insurance carrier defendants. The specificity of the factual allegations concerning the agreement among the defendants, and the acts in furtherance thereof, underscore the importance of antitrust compliance in the healthcare and health insurance industries. Continue reading “Specific Facts Suggest Hospitals and Insurers Agreed to Group Boycott”

On-call coverage contracts are OK

An  orthopedic surgeon agreed on two separate occasions to an on-call coverage contract with a local hospital in which he warranted that no portion of his compensation was in exchange for referrals.  When the contracts were terminated by the hospital after the surgeon invested in a competing surgery center, the surgeon brought a whistleblower False Claims Act action against the hospital, alleging that the contract was intended to induce his referrals.

The U.S. District Court for the Eastern District of Pennsylvania, in Cooper v. Pottstown Hospital Co., LLC, et al., dismissed the surgeon’s complaint.  The district court’s description of the failure of the complaint illustrates the characteristics of on-call contracts that make them a permissible relationship between hospitals and physicians.  Continue reading “On-call coverage contracts are OK”

Consultants’ Communications Privileged from Discovery

In healthcare, companies often hire consultants to review billing and coding, privacy and security and a host of other technical issues that regular staff does not have the time or expertise to pursue.  A recent discovery ruling in federal court in the Eastern District of Pennsylvania holds that communications with such outside consultants are privileged from discovery if they are made for the purpose of assisting the company in securing legal advice or making legal decisions.

In Smith v. Unilife Corporation, a whistleblower brought an action under Sarbanes-Oxley and Dodd-Frank alleging shareholder fraud and failure to comply with certain FDA requirements.  The plaintiff sought discovery of two non-lawyer consultants regarding drafts of the company’s SEC Form 10-K filing.  The Court’s decision to deny the plaintiff’s motion to compel was based on the “functional equivalent” doctrine, a principle already adopted in the 8th, 9th and D.C. Circuits, but not yet in the 3rd Circuit.

Continue reading “Consultants’ Communications Privileged from Discovery”

Health System Integration and Antitrust Laws on Collision Course

Health systems attempting to fulfill the mandate of integrating hospitals and physicians may find themselves accused of going too far.  Although the Affordable Care Act, shared savings, gainsharing and other alternative payment methodologies have made integration of physicians, hospitals and other providers an operational goal, success in reaching that goal may be challenged by private antitrust actions.

In a recent Florida federal court decision, the antitrust complaint of “several of Southern Brevard County’s physicians and physicians practice groups” was held to have stated a monopolization claim against Health First, Inc. and three of its wholly-owned subsidiaries —  an insurer, a hospital and a physician practice group.  Essentially, by fully integrating its business, and incentivizing in-network referrals and managed care pricing, Health First became vulnerable to claims of tying, exclusive dealing, price discrimination and monopolization.

Continue reading “Health System Integration and Antitrust Laws on Collision Course”

Health Care Workers May Think Twice Before Becoming a Relator

The Federal False Claims Act (and many similar state false claims acts) allow an individual—called a “relator”—to file a lawsuit on behalf of the United States Government. If successful, the relator stands to collect a portion of the amount collected. Since the False Claims Act provides for treble damages and statutory penalties of up to $11,000 per false claim, the reward to the relator can be considerable.

Complaints by relators must filed under seal. This allows the Government time to investigate the relator’s allegations before deciding whether to intervene in the case. Cases in which the Government intervenes tend to have higher judgments or settlements. Once the Government makes this decision, the complaint is unsealed and the case can move forward.

Earlier this week, an Alabama judge ruled that the relators could not keep their identities secret, even though they voluntarily dismissed their lawsuit against Great Bend Regional Hospital. Frank Coyle and Randy Bruce argued that their careers in health care may be damaged if their identities are revealed. However, the court agreed with the Government, that the reason for sealing the complaint is for the limited purpose of protecting the Government’s investigative process.

It may have been a bad choice for Coyle and Bruce to ask for anonymity. If they had merely dismissed their case, the dismissal may have been a mere footnote or back page news item. By seeking anonymity and losing, it is front page news. When filing a case, relators may think that they will no longer have to work once they win millions of dollars. As these relators have learned, you don’t always win. And there are consequences to your actions.

Mayo Lawsuit Against Former Exec Raises Numerous Health Care and Business Litigation Issues

A recent settlement between Mayo Collaborative Services d/b/a Mayo Medical Laboratories (“MML”) and Mayo Clinic (together with MML,  “Mayo”) and a former Mayo executive, Dr. Franklin Cockerill, reveals the potential legal issues that may arise when health care executives seek new employment and the high stakes litigation that may ensue-regardless of which party may or may not be at fault.

As set forth in Mayo’s complaint, Dr. Cockerill was a former senior officer and director of MML and Chair of the Mayo Clinic Department of Laboratory Medicine and Pathology, where he managed several thousand medical professionals handling laboratory testing and intellectual property development for Mayo and MML.  According to Mayo’s complaint, as a result of Dr. Cockerill’s various positions he had first-hand knowledge of confidential strategic, business, marketing, sales, pricing, and data management information from MML and Mayo.  Eventually, Dr. Cockerill retired and obtained employment with a Mayo competitor.

Continue reading “Mayo Lawsuit Against Former Exec Raises Numerous Health Care and Business Litigation Issues”

Real Estate Tax Exemption Issue Muddied Again

On December 23, 2014, the Commonwealth Court of Pennsylvania logged another frustrating mile down the confused and confusing road of property tax exemption for purely public charities.  In Fayette Resources, Inc. v. Fayette County Board of Assessment Appeals, the Court overturned a lower court finding that an operator of group homes for intellectually disabled adults satisfied the requirements for tax exemption as a “purely public charity.”  The Commonwealth Court held that Fayette Resources failed to show that it satisfied the second requirement of the so-called HUP test (declared in Hospital Utilization Project v. Commonwealth, 487 A.2d 1306 (Pa. 1985))that it donate or render gratuitously a substantial portion of its services.

While this opinion may be viewed simply as Fayette Resources failing to make an adequate record below, the case also illustrates the confusion created by the Pennsylvania Supreme Court’s decision in the 2012 Mesivtah case, Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Board of Assessment Appeals, 44 A.3d 3 (Pa. 2012), which held that non-profit entities must satisfy both the statutory requirements of the Purely Public Charity Act (“Charity Act”), codified at 10 P.S. 371-385, and the court-established HUP test. Continue reading “Real Estate Tax Exemption Issue Muddied Again”

© 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.

Proudly powered by WordPress