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.


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.

Congress Investigates “Surprise Billing” for Out-of-Network Doctors at In-Network Facilities

By Ryan Wesley Brown

In December, several members of the House and Senate expanded a bipartisan investigation into what is commonly referred to as “surprise billing.” Their investigation focuses on the practice of billing patients for medical services when patients receive care by out-of-network physicians at an in-network facility. The legislators sent letters to several of the largest insurers and physician staffing companies in order to gather more information about this practice.

In these letters, legislators sought further information about the reasons for surprise bills as well as “the current incentives behind the negotiations between providers and insurers.” The letters focus particularly on those services that are “outsourced” by hospitals to physician staffing companies. Generally, these physician staffing companies and hospitals will have negotiated separately with insurers, resulting in a discrepancy between insurance coverage for the facility versus the provider.

These letters follow earlier efforts by legislators to investigate private equity firms with ownership interests in physician staffing and emergency transportation companies.

At the time of this investigation, several states have implemented laws to prohibit or regulate this practice, and congressional debate on the topic is ongoing. The bipartisan support for these investigations suggests that there is some momentum in Congress for passing federal legislation, but it is not yet clear what form that will take and where partisan lines may be drawn.

Federal legislation in this area may ultimately regulate ERISA plans. This is significant because state laws are generally preempted by ERISA with respect to surprise billing and only some states have allowed ERISA plans to “opt in” to their surprise billing schemes.

We will continue to closely follow these developments at the federal level along with our ongoing analysis of state-level efforts to regulate surprise billing practices.

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


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

Discovery Ruling in District of Minnesota May Have Far-Reaching Implications for FCA Defendants

In a concise, six-page discovery order, a federal judge in Minneapolis may have just started the proverbial shifting of tectonic plates undergirding routine defense procedures in False Claims Act (FCA) litigation by requiring a defendant in an FCA lawsuit to produce the information provided to the Department of Justice (DOJ) during the DOJ’s process of determining whether to pursue the matter.

The FCA creates liability for persons or entities found to have knowingly submitted false claims to the government or having caused others to do so. Like some other federal laws, the FCA creates a private right of action; under the act, a private party—a whistleblower or “relator”—may bring a qui tam action on behalf of the government. When initially filed, the court seals the complaint pending the government’s investigation of the case. If the government chooses, it may intervene and pursue the matter. If not, the relator may pursue the case on its own. (In either case, the relator is entitled to a percentage of the government’s recovery.)

View the full Alert on the Duane Morris LLP website.

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

Class Action ADA Lawsuit Filed Against Hospital – A Sign of More to Come?

Disability discrimination lawsuits against hospitals have become relatively common in recent years as former hospital employees allege that their former employers discriminated against them on the basis of various disabilities in violation of the Americans with Disabilities Act of 1990. Other ADA lawsuits have been filed against hospitals and other healthcare providers, claiming that their websites or parking lots do not adequately accommodate those with disabilities. Yet others have been filed accusing hospitals of failing to accommodate deaf patients by not providing a live interpreter. But few, if any, major lawsuits had been brought against hospitals and healthcare providers alleging that the facilities themselves fail to accommodate patients with physical disabilities. That may have changed with a putative class action lawsuit filed in the U.S. District Court for the Western District of Pennsylvania in late July, which may be the first of many cases to come.

View the full Alert on the Duane Morris LLP website.

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.