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Healthcare
Can an MSO Get Paid More Than Fair Market Value?
In this video, we’re going to talk about the MSO and whether it is possible to transfer all the money from the professional medical corporation or practice actually to the MSO. It’s like MSO fee. Hi, I’m Michael H. Cohen. I’m founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients like you navigate the complex terrain of healthcare and FDA law so you can grow, launch, scale your healthcare business. So, the answer is no. You cannot simply transfer, like all of the funds from a medical practice to an MSO. California laws require that the percentage that’s paid to the MSO represent fair market value for the MSO services. Now, there’s no bright line rule for what is and is not fair market value, but there are appraisers in this industry, people who could give you a valuation opinion. As a law firm, we don’t provide opinions about valuation, but we do have kind of a general rule of thumb. So, if the MSO’s fee is really high, people assign different percentages. Some say 50, 60, 75%. The point is, at some point, it tips the balance toward looking like there’s so much control by the MSO that it’s a corporate practice of medicine problem. Please note that the fees, how they calculated, should be fixed in the agreement. And they shouldn’t just wobble up and down, you know, based on circumstances, because that would be a kickback. Unless they represent the fair market value of the MSO services, they’re at arm’s length and there’s some other, you know, conditions on that which we can go over when we talk. Now, having said that, as we said, California law does allow a variable fee, but it doesn’t just wobble up and down all over the place, depending on how many patients are treated, how many clients are served. It’s fixed in the agreement that there’s, for example, a percentage of revenue that represents the fair market value of MSO services and that’s going to be the MSO fee. And that percentage, you know, might vary over time, but it’s not going to wobble all over the place, because varying a fee by value and volume of patients, especially doing it willy nilly regularly, without any preset arrangement, that’s going to be regarded with heavy scrutiny. We can take you deeper in a legal strategy session. We appreciate you watching, and we look forward to your call and we hope to work with you soon. Testimonials
October 12, 2024
Healthcare
Can a Paramedic Own and Operate an IV Hydration Business?
Today’s question is: Can a paramedic own and operate an IV hydration clinic? Glad you asked that question. Hey, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. We help you navigate healthcare and FDA laws so you can grow your healthcare venture. Call us with any questions. We’re here to grow your health care business. Now here from the wild, a question of who can own and operate an IV hydration business really varies by state and by professional. And as well, owning is different from providing services or operating the business. So that’s even different because that could be management. So, the first thing to do is to look at the legal definition of paramedic scope of practice in a given state. And this means looking at the licensing statute. Oftentimes, the licensing statute will give the paramedic legal authority to administer IV in an emergency situation. Now, an IV hydration clinic doesn’t exist for emergencies. It’s for general wellness. And so, regulators here could see some kind of line crossing into unlicensed practice in medicine. So generally, no go. Recently, we researched a statute that allows paramedics to administer IV hydration in non-emergency situations, for example, in urgent care clinics. Now, that’s urgent, but maybe not an emergency, but the statute that we’re talking about limited the paramedic to providing IV hydration during their official duties. Now, what is official duties mean? We asked the local state board, and of course, we got no response. They said, consult a lawyer or lawyers. We asked a federal agency, and the tone was conservative enough for us to warn the client against practicing medicine without a license. Now, we know how clients would like the phrase to be interpreted, because my competitors are doing it. But wishful thinking can get you in trouble when it comes to the line between a given clinical service and scope of practice on one hand and the practice on medicine on the other. At the end of the day, it’s really the client’s judgment call as to whether to accept the regulatory risk. But bear in mind that licensing statutes for practicing medicine without license typically carry criminal penalties. Now, there is this bureau of EMS. It’s an authoritative body, and it does allow IV hydration within the scope of practice for paramedics in both emergency and non-emergency situations. But that’s not the end of the matter. There are number caveats. The care must be delivered as part of the paramedic’s official duties. As we said, otherwise, it could be considered practical medicine. So, you know, you come back to that. What are official duties? So, we’re here to help you interpret it as well as read the rules. See you soon. Let us know if you have questions. We look forward to working with. Testimonials
September 10, 2024
Healthcare
FDA Guidance on Direct-to-Consumer Prescription Drug Advertisements
In December 2023, the Federal Drug Administration issued guidance on the topic “Presentation of the Major Statement in a Clear, Conspicuous, and Neutral Manner in Advertisements in Television and Radio Format Final Rule” This guidance is not binding on the public or the FDA. The guidance does represent the current view of the FDA. The guidance was created to help advertisers advertise drugs to consumers. The FDA, under its authority based on the Food, Drug, and Cosmetic Act (FD&C Act), regulates drugs, food, medical devices, vaccines, blood, biologics, cosmetics, tobacco, and animal and veterinary products. The FD&C Act, as amended in 2007 requires that direct-to-consumer (DTC) TV and radio ads identify the name of the drug and the conditions of use including the side effects and contraindications (“major statement”) in a clear, conspicuous, and neutral (CCN) manner. The guidance set forth in the agency’s CNN Final Rule creates standards to ensure the major statement in these DTC TV and radio ads is properly presented. The CNN Final Rule generally applies to pharmaceutical companies that use TV and the radio to advertise their products. These companies should also review with legal counsel the various regulations that govern advertising through the Internet and through print and social media advertising. Questions and answers about the Direct to Consumer TV and Radio drug ads The FDA begins by stating that that list of major side effects and contraindications is not a list of every risk. The guidance documents do not create “legally enforceable responsibilities.” The guidance recommendations are recommendations. To understand what FDA requirements are enforceable, please speak with our experienced FDA compliance lawyers. We’ll explain what laws and regulations govern FDA compliance and what steps you can take to help show that you are in compliance. We’ll also explain that while the guidelines may not be directly enforceable, compliance with the rules is generally advisable. Avoid common FDA mistakes marketing health products Avoid these common FDA mistakes marketing health products: communicating with FDA without legal counsel, making disease claims, misunderstanding the rules. Which advertisements are subject to the standards established in the CCN Final Rule? The FDA DTC guidance recommendations apply to human prescription drug ads that: Are presented directly to consumers Are in television or radio format State the name of the drug and its condition(s) of use. What is the compliance date for the CCN Final Rule? Advertisers should work to show that their DTC TV and radio ads are in compliance by no later than November 20, 2024. Do the standards established in the CCN Final Rule change the content of the major statement? No. The identification of major side effects and contraindications “is not changed by this final rule.” How can pharmaceutical companies and other advertisers know whether their major statement is “presented in a clear, conspicuous, and neutral manner?” FDA established the following five standards to help ensure that the major statement is being presented – clearly, conspicuously, and that the major statement is neutral. The five standards are: Standard 1 (21 CFR 202.1(e)(1)(ii)(A)). The major statement language should be consumer-friendly and consumers should be able to readily understand the terminology. Standard 2 (21 CFR 202.1(e)(1)(ii)(B)). The audio part of the major statement that discusses the major statement should be at least as understandable – in terms of the “volume, articulation, and pacing used” – as the audio information presented in the rest of the advertisement. Standard 3 (21 CFR 202.1(e)(1)(ii)(C)). In television advertisements, the major statement should be “presented concurrently using both audio and text (dual modality).” Dual modality should be obtained: Either by displaying the key terms or phrases of the text verbatim with the corresponding audio or the text should be displayed verbatim with the complete transcript of the corresponding audio The text should be shown for a sufficient duration so the text can be read easily. The CNN Final Rule further details the amount of time that is considered “sufficient.” Standard 4 (21 CFR 202.1(e)(1)(ii)(D)). TV ads should include a text portion of the major statement. The size and style of the font, the contrast with the background, and the placement on the screen should all allow for the text/information to be read easily. Standard 5 (21 CFR 202.1(e)(1)(ii)(E)). While the major statement is being presented, the advertisement should “not include audio or visual elements, alone or in combination, that are likely to interfere with comprehension of the major statement.” Standard 1 compliance requirements – the major statement should be consumer-friendly and understandable The emphasis on consumer-friendly language and readily understandable terminology means that advertisers should avoid using medical or technical jargon or terms that healthcare providers are more likely to use and understand. The language and terms should not be ambiguous or vague – open to different interpretations. The CCN Final Rule does not use a reading scale or grade level scale such as – understandable at a 10th-grade level. FDA does understand that some medical language (such as referring to a disease like “tuberculosis”) will be necessary. Standard 1 does require that ordinary consumers should be able to understand the risks – but does give advertisers some flexibility in designing their DTC TV/radio ads. When Will FDA Likely Regulate Your Product as an OTC Drug and Not a Cosmetic? In today’s video, we talk about when your product is likely to cross the line and be regulated by the federal Food & Drug Administration (“FDA”) as a cosmetic and not a prescription or Over the […] Standard 2 compliance requirements – the major statement should be comparable to the rest of the advertisement The CNN Final Rule requires that advertisers review the volume, the articulation, and the pacing of the audio. The volume shouldn’t be softer than the rest of the ad. The pace shouldn’t be faster than the rest of the ad – consumers need to be able to absorb the information. The articulation should enable consumers to understand the words in the major statement. Standard 3 compliance requirements – the dual modality (audio and text) requirement for television advertisements Advertisers have some discretion about how they present the text which explains the key parts of the major statement. Advertisers can either use the “same words used in the corresponding audio presentation of the major statement (not synonyms), or advertisers can display a complete transcript of the corresponding audio, using the same words used in the corresponding audio.” For example, if the audio part of the TV ad states, “The most common side effects of DRUGX are dry mouth, headache, and heartburn,” the firm could display on the screen either of the following: Key phrases and terms – “• dry mouth • headache • heartburn.” The full transcript – “The most common side effects of DRUGX are dry mouth, headache, and heartburn” Standard 3 also requires that “the ad begins displaying the major statement text at the same time that the corresponding major statement audio information begins and stops displaying the text at approximately the same time that the corresponding audio information ends.” In other words, the visual presentation and the audio sound must be in sync. Standard 4 compliance requirements – TV ad text format, size, font style, contrast, and background requirements of the major statement Standard 4 applies only to the major statement presentation. The presentation conditions should ensure that consumers should be able to easily read the advertisement. Bigger fonts are more legible than smaller fonts. Some fonts are easier to read than other fonts. Contrasts between the text and the background are also easier to read. The placement of the text should be where the consumer will focus their attention. The key focus is the overall combination of conditions. For example, smaller font sizes may be just as readable as bigger font sizes if a more legible type of font is used. Standard 5 compliance requirements This standard also only applies to the major statement portion – not the rest of the drug advertisement. Generally, the major statement presentation should not include sounds, music, text, or images that “alone or in combination, are likely to interfere with comprehension of the major statement.” The CNN Final Rule does recognize that “multiple elements can actually be used to reinforce risk information.” The Rule doesn’t specifically prohibit drawings, music, or sound effects. These elements may even help. The bottom line is that the consumer must be able to fully understand the risks and contraindications of the drug being advertised. Does FDA provide any resources to firms to help ensure that an advertisement complies with the CCN Final Rule? Advertisers can seek comments from the FDA about their ads – before the ad airs. The ads will be reviewed by people in “FDA’s Office of Prescription Drug Promotion (OPDP) within the Center for Drug Evaluation and Research (CDER) and reviewers in the Advertising and Promotional Labeling Branch (APLB) within the Center for Biologics Evaluation and Research (CBER).” Consumers have the right to know what side effects and contraindications of the drugs they take may be dangerous so consumers can make informed decisions. FDA in November 2023 provided a guide (a Final Rule) for advertisers about whether their TV and radio ads that promote drugs directly to consumers properly inform consumers about the drug’s side effects and contraindications. The clear, conspicuous, and neutral (CNN) Final Rule provided by the FDA includes 5 standards that pharmaceutical companies and advertisers should meet. Informed Consent and Risk Waivers The doctrine of informed consent is based on the principle that adults of sound mind should have the right to decide what can be done to their bodies. Pharmaceutical companies and advertisers should contact Cohen Healthcare Law Group, PC to discuss their FDA compliance requirements. Our experienced healthcare attorneys advise medical companies about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
August 1, 2024
Healthcare
MSO Ownership issues for Medical Spas
There are a number of compliance issues involved with running a medical spa. These issues often overlap. Our experienced healthcare compliance lawyers can help you sort out these issues which include: What is a Medical Spa? What entity should a medspa use? What do medical professionals need to understand about owning and operating a medical spa? Medical spas and the practice of medicine Medical spa compliance requirements Who can own a medical spa? What is the role of an MSO in a Medical Spa? Additional benefits of using an MSO for a medical spa Some of these issues we’ve discussed already (just follow the red links). What is a Medical Spa? According to the American Med Spa Association, a “medical spa” (also called a medspa, a med spa, and a Medi Spa) is a: “Branded term for a medical practice where a patient can go for a variety of cosmetic and (typically) non-invasive procedures, ranging from Botox to chemical peels and laser treatments.” Investors and owners of medspas need to review the legal compliance issues that medspas must follow based on their type of practice, the state where the medspa is located, and other factors. Health businesses such as health and wellness centers and IV hydration centers should understand their comparable regulatory compliance issues. What entity should a Medical Spa use? At Cohen Healthcare Law Group, “owning” a healthcare venture usually involves two business entities: A PC (professional corporation) or PLLC (Professional limited liability corporation) A second company (an MSO) that owns the management and marketing team. An MSO is usually either an S-corporation (for a small number of owners) or an LLC The three legs of a medical practice are: Generally, the medical staff (doctors, physician assistants, and nurses) work for the PC or LLC. Generally, the bookkeepers, accountants, marketers, schedulers, and phone staff are hired by the MSO. A contract between the PC/LLC and the MSO explains the services the MSO will provide – at fair market value – to the healthcare entity. WHAT ENTITY SHOULD I USE FOR MY MEDSPA? Many medical spa, IV hydration, and health and wellness center clients call us with this question: can you help us with “entity formation”? Which entity should I use? What do medical professionals need to understand about owning and operating a medical spa? Medical spas and the practice of medicine Medspa businesses need to understand which of the services the medspas provide are “medical.” In most states, many more services are considered medical than an investor or owner might think. Examples include any diagnosis, treatment, or operation of a patient. Any prescription for any human disease, injury, pain, deformity, or other physical or mental condition of someone is considered as the practice of medicine in most states. Many “cosmetic” treatments are “medical treatments.” Each state has specific qualifications for who can perform medical services on a patient and to whom that healthcare provider can delegate the specific services– provided the delegation is in the appropriate scope of practice. Medical spa compliance requirements Owners of medical spas should consult with experienced healthcare lawyers to understand their legal requirements. Each state has different requirements. One common requirement is called “the corporate practice of medicine (CPOM). “This state law requirement is enacted to ensure that ‘only licensed physicians or entities wholly owned by licensed physicians practice medicine, thus limiting the commercialization of medicine by non-physicians.’” Generally, licensed MDs and DOs can own and operate a medspa in every state. Who can own a medical spa? Some states permit a licensed physician to partner with nurse practitioners (NPs), physician assistants (PAs), or registered nurses – to open a medspa. There are often limitations. California’s CPOM law requires that at least 51% must be owned by the licensed physicians. Non-physicians can have an interest in a medspa through an MSO. The MSO’s purpose is to provide different types of support (management, marketing, technical, and administrative) to other businesses such as medical practices. The core idea to keep in mind is that the medical practice and the MSO work together so that the medical practice can focus on providing the best medical care possible to the practice’s patients while the MSO manages the business side of the practice. In this way: The physicians are providing care based on the patient’s best needs and the financial needs of the patient. The medical practice keeps its responsibility to house the medical equipment and hire the medical staff. The MSO is providing the best care for the business side of the practice while ensuring that the MSO does not interfere with medical/clinical decisions. The MSO agreement (also called a management services agreement – MSA) helps establish these parameters. The MSO receives a fair market value fee and has no investment in the profits of the business. The MSO will also provide the terms for any leasing arrangements. Often, for example, the MSO will purchase office space and medical equipment that the MSO leases to the medical practice. Leasing is just one of the one the use of an MSO can help the medical practice comply with Stark Law and the Anti-Kickback Statute (AKS). The owners of the medspa determine the salaries and profit shares for each owner through their corporate bylaws, partnership agreements, or other legal methods. One related issues, we’re often asked about regarding the structure of a medical spa is: Can non-physicians hire a medical doctor for their medical spa? As we’ve discussed: Medical practices such as medspas should avoid using the term “medical director.” Medical physicians direct clinics, not business ventures. The MSO should not make flat-fee payments to a medical director because that could violate Stark Law and the federal and state anti-kickback laws. Only doctors can own a majority stake in the medical spa. Licensed nurses and other designated clinicians can own up to 49% of the medical spa. Anyone (a doctor, clinician, or layperson) can own any percentage or even 100% of an MSO. DO YOU KNOW THE KEY DIFFERENCES BETWEEN THE 4 AMBULATORY SAFE-HARBORS TO THE FEDERAL ANTI-KICKBACK STATUTE (AKS)? There are four types of ambulatory safe harbors in the federal Anti-Kickback Statute. We explain the key differences between the ambulatory safe harbors to the federal anti-kickback statute (AKS) CAN YOU GET A MEDICAL DOCTOR OR MEDICAL DIRECTOR FOR YOUR MEDSPA? We’re awash–pardon the pun–in medical spas, IV hydration centers, nurses opening healthcare practices, multidisciplinary centers, and health and wellness groups of all types. This stuff is […] Additional benefits of using an MSO for a medical spa An MSO can help a medical spa in many ways including: Helping the medspa comply with various federal and state regulatory compliance requirements such as the three we discussed above – The corporate practice of medicine, Stark Law, and the AKS. You should always start with a legal review of your healthcare compliance issue. An experienced MSO can help create and enforce procedures such as keeping accurate records, implementing HIPAA compliance, and many other compliance laws and regulations. Handling the administrative work. An MSO can help a medical spa by managing payroll, managing human resources (provided medical decisions are left to the clinical side of the practice), and implementing a scheduling system. Handling the medical coding and billing. MSOs can help medical spas by setting up an invoicing system, assigning the proper insurance codes so the insurance carriers will pay the medspa’s claims, and working to collect the payments for the medspa service from the insurance companies and whatever sums the patient owes. Providing the technological support the medical practice needs. This support includes such software as practice management software, electronic health records (EHR) systems, and software tools to increase the productivity of the medical practice. Providing financial support. An MSO for a medical spa can provide billing management, regular financial reports, and handle the contracts with insurance companies. Obtaining and leasing office space. An MSO can help a medical spa find office space, negotiate the lease, and manage the office. As we mentioned above, the MSO can even buy the office space and lease the space to the medical practice. Leasing office space, if properly done, is considered an exception/safe harbor under the Stark Law and AKS statutes. Training the staff. While MSOs cannot provide any clinical training, MSOs can ensure that the medical staff understands their compliance requirements as reviewed with legal counsel. Helping with the hiring of administrative staff. MSOs can decide who to hire provided the people being hired are not working for the clinical side of the medical practice. Helping with healthcare professionals’ credentials. While an MSO for a medical spa can’t decide which healthcare professionals to hire, the medspa can review a healthcare professional’s credentials. Our healthcare professionals will help your medical practice determine which personnel are considered healthcare professionals and what their medical license and certification requirements are. Purchasing equipment, supplies, and medications. An MSO can’t make decisions about the medical quality of medical product purchases but the MSO can purchase specific medical products for the medical spa. We’ll review your medspa’s Stark Law and AKS compliance issues and how an MSO can help. Helping a meds spa practice in differing locations. Healthcare providers and non-healthcare providers who wish to operate a medical spa need to understand the laws in their state that determine who can own a medical spa and who can manage a medical spa. Once there is a determination about who the owners should be, legal decisions need to be made regarding the business structure of the medical spa. Generally, an MSO is a preferred choice for helping to separate the medical side of the practice from the business side of the practice to ensure patient care comes first. Doctors, nurses, investors, and anyone interested in owning or running a medical spa should contact Cohen Healthcare Law Group, PC to discuss their legal and healthcare compliance requirements. Our experienced healthcare attorneys advise medical practices about how to address healthcare compliance laws and regulations issues, protect patients, and financially support the owners and members of the medical spa. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
July 22, 2024
Healthcare
Using the terms “Organic,” Healthy,” and “Natural” on Food Labeling
The term “natural” is often used to describe food. The question is – what does the term mean? The same confusion applies to terms like “organic” and “healthy.” The FDA provides little guidance on these issues. Legislation has been proposed that would help clarify these terms but so far, generally, there are no specific laws that define these terms and how the FDA is supposed to monitor and regulate the use of these terms. FDA authority over labeling food The Food and Drug Administration has the authority to regulate food based on the Food, Drug, and Cosmetics Act (enacted in 1938) and amended in 1997 by the United States Food and Drug Administration Modernization Act of 1997 (FDAMA). The claims that can be made on food labels include “health claims, nutrient content claims, and structure/function claims.” REGULATORY COMPLIANCE FOR COSMETICS, NUTRITION, AND CANNABIS COMPANIES – PART 2 Regulatory compliance of cosmetics, diet, and CBD products including FDA misbranding and adulteration, FTC compliance, labeling requirements, and other legal issues. The use of the term “organic” on food labels The FDA “does not regulate the use of the term ‘organic’ on food labels.” Any regulation of the term “organic” on food labels is regulated by the National Organic Program (NOP) which is regulated by the US Department of Agriculture (USDA). These regulations are separate from the FDA regulations. “Food products that are ordinarily under the FDA’s jurisdiction and labeled with organic claims must comply with both USDA NOP regulations for the organic claim and FDA regulations for food labeling and safety.” WHY AM I A HEALTHCARE AND FDA LAWYER At a surface level this is a story of professional development whose roots go deep into my childhood, the fact that I’m I healthcare lawyer. The use of the term “healthy” on food labels According to the FDA, foods that use the claim “healthy” must meet specific “nutrient-related criteria.” The FDA is seeking to update when the term “healthy” can be used so the term comports with current nutrition science and federal dietary guidance. For example, the FDA states that: “The agency also remains committed to continuing to create a healthier food supply through its recently released guidance to reduce sodium in processed, packaged and prepared foods; to providing consumers with valuable and accessible nutrition and labeling information about the foods they eat; and to providing industry with recommendations on how to use and improve dietary guidance statements on food packaging.” The FDA issued a proposed/rule defining the word “healthy” on September 28, 2022. The use of the term “natural” on food labels The FDA did request around 2016 for comments on the use of the term “natural” on food labeling for humans. The FDA stated that the agency was seeking comments based on three Citizen Petitions asking the FDA to define the term “natural” in food labeling and one Petition asking that the term be prohibited. The FDA also sought comments based on federal court comments requesting “administrative determinations from the FDA regarding whether food products containing ingredients produced using genetic engineering or foods containing high fructose corn syrup may be labeled as ‘natural.’” The FDA states that the agency (while it hasn’t announced a specific rule): “Has considered the term ‘natural’ to mean that nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in that food.” “This policy was not intended to address food production methods, such as the use of pesticides, nor did it explicitly address food processing or manufacturing methods, such as thermal technologies, pasteurization, or irradiation. The FDA also did not consider whether the term ‘natural’ should describe any nutritional or other health benefit.” The FDA sought guidance on: “Whether it is appropriate to define the term ‘natural?’” What the definition of “natural,” should be “How the agency should determine appropriate use of the term on food labels.” FDA PROPOSES UPDATES TO NUTRITION FACTS LABEL ON FOOD PACKAGES The U.S. Food and Drug Administration today proposed to update the Nutrition Facts label for packaged foods to reflect the latest scientific information. The Nutrition Facts Label The FDA, in 2016, updated its Nutrition Facts label requirements on packaged foods and drinks. The new design and information aim to help consumers make better and healthier food choices. The 2016 label requirements address the following issues: The serving size. The servings per container and how big a serving size is will appear in large, bold font. The serving size (which is not a recommendation of how much to eat) will better reflect what people truly eat and drink. The amount of calories. The amount of calories in the package will also be in large, bold font. The standard amount of calories (allowing for adjustments based on age, height, weight, sex, and physical activity level) is 2,000 calories each day. The percent daily value. This value “shows how much a nutrient in a serving of food contributes to a total daily diet.” Generally low value is 5% or less of a nutrient per serving while 20% is considered high. Nutrient list. Information that is no longer required includes the calories from fat (because the type of fat is more important) and whether the food or drink has Vitamin A or C. The nutrition label does need to include the amount of added sugars (sugars added to the food process, sweeteners, and “sugars from syrups and honey, and sugars from concentrated fruit or vegetable juices.”) The levels of calcium and iron continue to be required. The presence and level of Vitamin D and potassium. These nutrients can help reduce the risk of osteoporosis and high blood pressure, respectively. The Food Safety Modernization Act of 2011 The Food Safety Modernization Act (FSMA) of 2011 (not 2023), according to the FDA, is “transforming the nation’s food safety system by shifting the focus from responding to foodborne illness to preventing it.” FDA has: “Finalized several rules to implement FSMA, recognizing that ensuring the safety of the food supply is a shared responsibility among many different points in the global supply chain for both human and animal food. The FSMA rules are designed to make clear specific actions that must be taken at each of these points to prevent contamination.” A proposed Food Labeling Modernization Act of 2023 According to Food Navigator, the Food Labeling Modernization Act of 2023 (revised since 2018) has been proposed in both houses of Congress to establish a “single, standard front-of-package nutrition labeling system that would clearly distinguish between produces of greater or lesser nutritional value.” According to the Centers for Science in the Public Interest, the Food Labeling Modernization Act (FLMA) of 2023 would “align labeling regulations with the latest nutrition science and advance national public health priorities through food labeling policies.” The proposed law aims to provide online information, new health information, and counter misleading claims. The 2032 proposed FLMA aims to address the following issues: Front-of-Package Labeling. The proposed law directs the FDA “to establish a standard front-of-package nutrition labeling system for all of the packaged foods it regulates.” This system would complement the Nutrition Facts Label discussed above and “would clearly convey when high levels of sodium, added sugar, or saturated fat (nutrients linked to chronic disease)” are present– comparable to what has already been done in Canada, Child, and other countries. Sodium substitution. “The FLMA would amend ‘standards of identity’ to allow salt substitution across all packaged foods.” Reducing the amount of sodium intake can lower the risk of hypertension and cardiovascular disease. Online grocery items. The proposed law would require that Nutrition Facts, ingredient, and allergen information now on packages be available for online grocery items. Consumers can benefit from online information while they’re shopping. Deceptive labeling. The proposed law aims to address promises that food is healthy when it’s not. For example, “many people don’t know that terms like ‘wheat,’ ‘multigrain,’ and ‘made with whole grain’ tell us nothing about the amount of whole grains in a food.” The new law would require that products that have whole grain claims include the percentage of whole grains in the products. Fruit & Vegetable Claims. Many products that look or sound like there is a lot of fruit or vegetables only have a minimum amount that don’t “provide the same health benefits as fresh, frozen, or canned produce.” Access to concealed information. The FLMA will require that the risks of certain food products like too much caffeine (especially for people who are pregnant, take certain medications or supplements, or have certain health conditions) be disclosed. “The FLMA would require disclosure of caffeine content in foods with more than 10 milligrams of caffeine per serving.” The proposed 2023 FLMA will address other issues including gluten-containing grains. “Passage of the FLMA will require food labels to reveal potentially harmful ingredients.” Food manufacturers and sellers should inform consumers about their products honestly and according to the current laws. Claims such as that a food or drink is “organic,” “healthy,” or “natural,” may be subject to review by the FDA, the USDA, and other agencies – especially if new laws such as the Food Labeling Modernization Act of 2023 are enacted. Food manufacturers, retailers, and sellers should contact Cohen Healthcare Law Group, PC to review their legal and healthcare compliance requirements including FDA compliance. Our experienced healthcare lawyers advise companies making healthcare claims about compliance laws and regulations issues. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
July 16, 2024
Healthcare
Should NPs, PAs and MDs be 1099 or Employees?
In today’s video, we’ll discuss whether nurse practitioners and physician assistants can be 1099 contractors in a medical practice in California. Hi, I’m Michael H. Cohen. I’m founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients like you navigate the complex terrain of healthcare and FDA law so you can grow, launch, scale your healthcare business. So generally, it’s almost always legally safer in a highly regulated, highly litigious environment such as California or similar states for a practice, a medical practice to pay its clinical service providers as W2 employees. In general, depending on the state, penalties can be very high for misclassifying employees as independent contractors. Classifying nurse practitioners and physician assistants as employees can bring several risk mitigation benefits. Secondly, mitigates the risk of a disgruntled worker leaving the practice and then finger pointing at the practice on, you know, the behest of a plaintiff’s attorney saying that they were illegally misclassified as 1099 when they should have been a W2 and received salary and employment benefits. Now, of course, contractors can be more profitable and healthcare startups weigh the legal risk against the business advantages. So, some healthcare entities do assume the risk of misclassification. I mean, I wouldn’t push it too far, but they do pay workers on a 1099 basis. But they should know that the control test is what normally applies. So, the more control the healthcare business has over the worker, the more likely the worker is going to be classified as an employee, not a 1099. Now, if the worker is providing minimal part time services to the practice, arguably there’s less control. But even then, you can never totally eliminate the risk of misclassification. Now be aware that physicians, aka licensed medical doctors, cannot be employed by general corporation or LLC like an MSO, like a medical spa or IV hydration clinic. That’s not a professional corp if there’s a strong corporate practice of medicine doctrine. So, in those cases, the MSO contracts with the professional medical corporation in a medical service agreement. This is the well-known MSO model and it’s designed to protect against unlicensed and corporate practice of medicine. Thanks for watching. Please let us know if you have questions. We help industry clients just like you every day in similar ventures and we wish you all the success and we look forward to talking to you soon. Testimonials
July 16, 2024
Healthcare
Aromatherapy and FDA Compliance
Aromatherapy uses natural plants and essential oils to promote beauty, health and well-being. According to Healthline, aromatherapy “enhances both physical and emotional health.” Aromatherapy has been used for thousands of years. Aromatherapy uses diffusers, inhalers, aromatic spritzers, body oils, lotions, facial steamers, cold and hot compresses, bathing salts, and other methods to help users smell the products and help the skin absorb the products. There are many different types of products. Generally, the oils are not regulated by the FDA. The key factor that determines FDA regulation is whether the product is considered or advertised as a cosmetic or a drug. FDA does not generally need to pre-approve cosmetic products or ingredients. There is an exception for color additives which must be approved for their intended use. This doesn’t mean businesses that sell cosmetics have no responsibility to consumers. Businesses and individuals who market cosmetics must ensure the safety of their products. The FDA can still take action if the agency has “reliable information showing that it is unsafe when consumers use it according to the directions in the labeling or in the customary or expected way.” Generally, cosmetic products that the FDA does provide information to the public about include: Aromatherapy Disposable Wipes EOS Lip Balm® Products Hair Products (Dyes, relaxers, removers, and cleansing products) Makeup Nail Products Soaps & Lotions (Soap makers’ FAQs, anti-aging products, cellulite treatments, and more) Tanning Products Tattoos & Permanent Makeup The FDA also has resources for cosmetic Ingredients. FDA oversight of aromatherapy You should also review how the FDA regulates aromatherapy with our experienced healthcare compliance lawyers. Generally, the FDA does not get involved with the preapproval of aromatherapy products that are considered cosmetics. The FDA will get involved if there is reason to believe aromatherapy products are being used as drugs. FDA may review whether an aromatherapy product is a cosmetic or a drug based on the intended use of the product. FDA will review various factors such as claims about what the product can do for a user. The claims that FDA can review include the labels, websites, advertising, and marketing – and what consumers expect the product will do. FDA reviews aromatherapy products on a case-by-case basis. According to the National Association for Holistic Aromatherapy, the most popular essential oils are: Clary Sage Cypress Eucalyptus Fennel Geranium Ginger Helichrysum Lavender Lemon Lemongrass Mandarin Neroli Patchouli Peppermint Roman Chamomile Rose Rosemary Tea Tree Vetiver Ylang Ylang When aromatherapy is considered a cosmetic FDA will likely consider that your product is a cosmetic if the intended purpose is to cleanse the body or make the person who uses the product more attractive. For example, perfumes and colognes that are used to make a person smell better will likely be considered cosmetics. Similarly, a shower gel will likely be considered a cosmetic because the purpose of the shower gel is to make the user cleaner. Again, cosmetics do not require pre-approval by the FDA. However, the FDA can file an action against the makers, sellers, or marketers of a cosmetic if the FDA reasonably believes the aromatherapy product is not safe when users follow the directions on the label, “or in the customary or expected way, or if it is not labeled properly.” When aromatherapy is considered a drug An aromatherapy product may be considered to be a drug if the product is intended for therapeutic use. Examples of therapeutic uses include preventing or treating diseases and claims that a product can affect the function or structure of the body. FDA states that, for example, “claims that a product will relieve colic, ease pain, relax muscles, treat depression or anxiety, or help you sleep are drug claims.” Other claims associated with aromatherapy that may lead the FDA to believe the product is a drug include claims that the aromatherapy product can treat asthma, insomnia, tiredness, depression, inflammation, menstrual issues, cancer, menopause, arthritis, and other conditions. Just because an ingredient or fragrance comes from a plant doesn’t mean the product can’t be regulated as a drug. FDA requires that drugs must be pre-approved by the FDA for safety and effectiveness before the drug can be marketed. You can learn more about how the FDA regulates drugs by reviewing its website and contacting our experienced healthcare lawyers. WHEN WILL FDA LIKELY REGULATE YOUR PRODUCT AS AN OTC DRUG AND NOT A COSMETIC? In today’s video, we talk about when your product is likely to cross the line and be regulated by the federal Food & Drug Administration (“FDA”) as a cosmetic and not a prescription or Over the […] Can a product qualify as both a cosmetic and a drug? Yes. Some products qualify as both cosmetics and drugs. As an example, if a baby lotion is marketed with claims that the baby lotion “both moisturizes the baby’s skin and relieves colic” that product would be both a cosmetic and a drug. The FDA will need to pre-approve the product as a drug and can regulate the product if the claims about the product’s benefits and uses fail to protect consumers. ARE THESE DRUG CLAIMS OR COSMETICS CLAIMS? In today’s video, we focus on anti-aging products to determine whether FDA will likely regulate your product as a drug instead of cosmetic. Can an aromatherapy product be regulated outside the FDA? Yes. The Consumer Product Safety Commission (CPSC) does regulate some fragrance products – including “air fresheners, scented candles, laundry detergents, and household cleansers.” If an “essential oil” or other fragrance is “natural” or “organic,” doesn’t that mean it’s safe? Products that come from plants aren’t inherently safe. Essential oils and other aromatherapy ingredients may be “toxic, irritating, or likely to cause allergic reactions when applied to the skin.” The FDA provides the example that “cumin oil is safe in food, but can cause the skin to blister.” Some citrus oils that can be used safely in food may cause harm if they are applied to skin that has been exposed to the sun. “FDA doesn’t have regulations defining “natural” or “organic” for cosmetics.” The key requirement is that the product must be safe. Healthcare providers can learn more by reviewing the following FDA sites “Organic Cosmetics” and “FDA’s Poisonous Plant Database.” How are advertising claims about aromatherapy products regulated? Generally, the FDA regulates the labeling of cosmetics and drugs. Advertising claims are regulated by the Federal Trade Commission. Aromatherapy oils and products may be regulated by the FDA if the products are considered drugs because the companies that make and market the oils and products make therapeutic claims – such as that the aromatherapy products can treat cancer. Many marketing claims may be considered therapeutic even if the claims are made by other individuals and companies. Aromatherapy oils and products may also be subject to FDA oversight, if the claims about substances may endanger the safety of the consumers who use or apply the oils and products according to the labels or expected usage. Aromatherapy products may also be subject to FTC oversight. Medical companies and medical practices should contact Cohen Healthcare Law Group, PC to discuss their aromatherapy products to review whether FDA or FTC oversight may be required. Our experienced healthcare attorneys advise medical businesses and medical practices about healthcare compliance laws and regulations. Book Your Legal Strategy Session TodayContact Us First Name Last Name Email Address Phone Number Please tell us how we can help you. setTimeout(function(){var ct_input_name = "ct_checkjs_cf7_1141938ba2c2b13f5505d7c424ebae5f";if (document.getElementById(ct_input_name) !== null) {var ct_input_value = document.getElementById(ct_input_name).value;document.getElementById(ct_input_name).value = document.getElementById(ct_input_name).value.replace(ct_input_value, '41f20cea9e9849e070bd4af0152cd428a9ab0fa2b93319c4ec5e404b9bc72267');}}, 1000); Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
May 22, 2024
Healthcare
Collaborative Practice Agreements for Independent Pharmacies
Healthcare providers regularly write prescriptions for all types of healthcare conditions. These prescriptions are then filled out by a pharmacist of the patient’s choosing – not the physician’s choosing. While many doctors and pharmacists work independently, there are suggestions by both doctors and pharmacists that coordinating all types of pharmaceutical care with healthcare may be beneficial to patients. These suggestions have been placed into practice through the use of collaborative practice agreements (CPAs) between pharmacists and healthcare providers. Why collaborative practice agreements are being encouraged The National Community Pharmacists Association (NCPA) states that as more patients seek medical care, the administrative requirements increase, and payment is tied to quality; prescribers are finding the ability to meet their patients’ needs more challenging. Some patients can wait months for an appointment. The NCPA emphasizes that pharmacists can “increase patient access to care, decrease the overall number of hospitalizations, improve patient outcomes, and reduce total net healthcare spend.” A CPA is a contract between a pharmacist and a prescriber that defines what patient care functions –“like prescribing or modifying drug therapy” can be delegated to the pharmacist and when and how the pharmacist can provide those functions. The CPA “delegates patient care functions to pharmacists beyond the pharmacist’s typical scope of practice.” “This collaboration improves the efficiency and reduces the fragmentation of patient care.” “When used to their full potential, collaborative practice agreements have the ability to increase access to care, expand available services to patients and increase the efficiency and coordination of care,” said Jeff Durthaler, pharmacist consultant in the Division for Heart Disease and Stroke Prevention with the U.S. Centers for Disease Control and Prevention (CDC). What are collaborative practice agreements? The NCPA defines collaborative practice agreements as voluntary, formal relationships between the pharmacist and physician or other healthcare provider that allows for certain patient care functions, including but not limited to: Modification or initiation of drug therapy Performing, interpreting, or ordering laboratory tests Conducting physical assessments, as authorized by the practitioner under specified situations and conditions. “Expanding enhanced services opens the door for community pharmacists to embed themselves within a provider’s practice or provide additional patient care services directly in the pharmacy.” Pharmacists may be able to help patient outcomes (and be compensated) through chronic care management. “Chronic Care Management is a monthly management program for Medicare patients with two or more chronic conditions. Community pharmacists can provide just about every CCM activity under a physician’s supervision, and can assist prescribers obtain a more complete picture of their patients. Pharmacists are in a prime position to manage patients with complex medication regimens and improve a physician’s quality measures.” How do collaborative practice agreements improve patient health? According to the US Centers for Disease Control and Prevention (CDC), a CPA between healthcare providers and pharmacists can help improve a patient’s health by: Reducing “fragmentation of care,” lowering healthcare costs, and improving health outcomes. Recognizing that team-based care can improve blood pressure control when a pharmacist is included on the team. According to PBA Health, “Collaborative partnerships between pharmacists and physicians empower team-based care, which has been proven to result in better quality care and health outcomes for patients,” said Anne Burns, R.Ph., vice president, professional affairs at the American Pharmacists Association (APhA). Collaborative practice agreements, as mentioned above, are very useful for patients who have chronic disease management problems. CPAs and compliance issues While there are many benefits to collaborative practice agreements, there are some major compliance issue concerns. The CPA arrangements cannot violate Stark Law and the Anti-Kickback Statute which govern referral arrangements between healthcare providers and companies. There are also state laws that govern the scope of practice of medicine that must be reviewed if a pharmacist’s medical duties are expanded by a CPA. CPAs also need to comply with any other relevant state laws and the rules and regulations of the state pharmacy and medical practice boards. PBA Health states that federal and state laws place limits on the ability of pharmacists to improve patient healthcare. A CPA, PBA Health asserts, is a way to help solve those limitations. Before entering into a CPA, pharmacists and physicians should review these limitations and the terms of any CPA with experienced healthcare compliance lawyers. A CPA provides the way for a pharmacist, if certain conditions are met, to “directly adjust patients’ medication regimens to optimize outcomes without constantly consulting the physician for approval.” Without a CPA, a pharmacist would normally need permission for the doctor to modify a patient’s drug therapy. A CPA can reduce a lot of fax, email, and phone call communications so that the pharmacist can authorize drug therapy modifications without having to wait for a doctor’s permission each time. What are the terms of a collaborative practice agreement? PBA Health states that the CPA can specify the patients, the disease states, and the medications that the CPA covers. CPAs can be adjusted, depending on state law, to meet the needs of the community. Each CPA is different. Common CPA services, depending on the state’s laws and regulations include: Authorizing refills. The physician/prescriber grants the pharmacist the ability to “extend refills based on the pharmacist’s assessment of the patient.” Chronic disease management. “The prescriber authorizes the pharmacist to initiate, modify or discontinue medications.” Laboratory tests. “The CPA may authorize the pharmacist to order and interpret laboratory tests essential to effectively monitor medications or the status of chronic conditions.” Therapeutic Interchange. “The prescriber authorizes the pharmacist to substitute another drug in the same drug class for the medication originally prescribed.” A few examples of CPAs PBA Health discusses how a pharmacy in Rhode Island was able to enter into a CPA to help the community by enabling the pharmacy to provide emergency prophylactics to patients with Lyme Disease. The pharmacy is still required to evaluate patients according to detailed criteria outlined in the agreement such as requiring that the patient “bring in the tick or a photograph of the tick for the pharmacist to identify as a deer tick.” Another criterion is that the tick bite must have occurred within the prior 72 hours. The CDC examples include: The El Rio Community Health Center at Arizona’s El Rio Community Health Center switched to an electronic health record system that helped healthcare providers “Set up CPAs with local pharmacists for the center’s 800 patients who are receiving diabetes management services. Doctors and nurse practitioners refer patients to the pharmacist through the EHR. The pharmacist care plan is then documented in the EHR, along with a copy of the CPA.” “Changes to patients’ medications—such as the introduction of a new medication or a change to a current prescription—are tracked in the system, and this information is accessible to the provider and pharmacist.” In Asheville, North Carolina: The Asheville Project, the Patient Self-Management Program for Diabetes (PSMP), and the Diabetes Ten City Challenge (DTCC) were efforts by self-insured employers to provide education and mentoring for employees with chronic health problems such as diabetes, high blood pressure, and high cholesterol. Patients were enrolled in collaborative care programs that included a community pharmacist on their health care team. Health spending savings included: The Asheville Project. Average net savings of $1,622–$3,356 per person per year. PSMP. Average net savings of $918 per person per year. DTCC: Average net savings of $1,079 per person per year. Patient care improved as follows” Asheville: 50% average reduction in number of sick days. PSMP: 100% of study participants had their glycosylated hemoglobin (A1C) level tested; 94% of patients met the Health Plan Employer Data Information Set (HEDIS) goal of 7% or less for A1C. DTCC: A1C and screening rates improved to 97%; 91% of patients achieved an A1C level that met the HEDIS goal. What are the business benefits of a CPA for pharmacists? Some of the factors that should be reviewed with an experienced healthcare lawyer when considering a CPA include: Whether the service is reimbursable How much more efficient is the CPA? Does more efficiency mean more business and more retention of patients? Does the CPA mean more patients for the pharmacy or the physician? What conditions may limit the ability of the pharmacist to provide a service to the patient? Another benefit may be obtaining more referrals – provided that the referral arrangement does not violate Stark Law or the AKS. PBA Health states that “Collaborative practice agreements also help pharmacy businesses adapt to evolving payer preferences because they position pharmacists as providers.” There are also a lot of practical issues involved with determining which physicians pharmacists may want to work with, developing a working relationship with that physician, preparing and negotiating the CPA, and ensuring that the arrangement complies with federal and state laws and regulations. State limitations of collaborative practice agreements Some of the state limitations that may govern a pharmacist/physician CPA include: Limiting which kinds of practitioners can participate What terms must be included in the CPA That length of time the CPA is valid The functions that the pharmacist can legally perform How can a seasoned healthcare lawyer help pharmacists and physicians prepare collaborative practice agreements? Some of the issues experienced healthcare lawyers will review include: Whether the CPA needs to be registered with a pharmacy board or any other medical boards. Negotiating the terms of the agreement. Reviewing any business associate agreements and data sharing arrangements – to comply with HIPAA and for other reasons. Addressing the scope of service issues. Other formalities such as obtaining a pharmacist National Provider Identifier number. The lawyer will also review any referral arrangements, Stark Law and AKS compliance, and whether any Stark Law exceptions or AKS safe harbors apply. Stark Law. Stark Law is a federal law that prohibits physicians from making referrals to any business entity where the physician or an immediate family member has a financial interest in the business entity. Possible Stark Law exceptions include “physician services” if the pharmacist is a member of the group practice and other conditions apply, “preventive services” covered by Medicare, a “personal service arrangement” that meets specific criteria, and the arrangement qualifies as “fair market value compensation.” The AKS. The Anti-Kickback Statute prohibits either the pharmacist or physician from paying anything of value to the other healthcare provider in order to receive referrals. Scope of practice laws. The scope of practice laws govern the type of services healthcare providers can provide and when and how one healthcare provider may be able to provide healthcare services if that healthcare provider is properly supervised and monitored by another healthcare provider who is providing care clearly within the scope of his/her practice. Exceptions to the Stark Law Prohibition of Medical Referrals The Stark Law governs what types of referrals doctors can make if they bill for Medicare and Medicaid. The presumption is that that referrals made by a doctor to a designated health service are […] Anti-Kickback vs. Stark: When do these laws apply? In today’s video, we give a brief refresher on the difference between Stark and anti-kickback laws. California’s New Scope of Practice Law for Nurse Practitioners – Part One California passed a new law, effective January 1, 2023, that permits nurse practitioners in specific settings to provide care (under certain conditions) that does not meet “standardized procedures.” Pharmacists, physicians, and patients may all benefit from collaborative practice agreements. These agreements expand the opportunities for pharmacists to provide essential health care subject to the conditions set by the physician. Collaborative practice agreements may be profitable for the healthcare providers while providing more efficient and timely care for patients. There are compliance issues though. The agreements should be reviewed with legal counsel to help ensure the agreements comply with Stark Law, the AKS, scope of practice laws, and any other federal or state regulations – as well as medical board requirements. Pharmacists and physicians should contact Cohen Healthcare Law Group to discuss the pros and cons of collective practice agreements and the relevant compliance concerns. Our experienced healthcare attorneys advise pharmacists and medical practices about healthcare compliance laws and regulations. Schedule a Legal Strategy Session TodayContact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
April 8, 2024
Healthcare
How Much is a Medical Practice Worth?
Medical practices that want to purchase another medical practice need to understand the different ways of valuing a medical practice depending on whether the whole practice is being purchased or whether it will be merged with an existing practice. There are many factors that determine the value of any medical practice, including the value of the assets, the income the practice can yield, the liabilities of the medical practice, the type of care being provided, the reputation and experience of the medical practice being acquired, and many other factors. When two medical practices merge, many of the same factors that are used to value a medical practice should be reviewed by both practices to help determine if the merger is wise. Experienced healthcare lawyers help medical practices understand the factors that are used to determine the financial value of a medical practice, the ability to obtain financing, other factors that may affect the ability of the new medical practice to produce income, the ability to expand the medical services to more patients, and many other financial value issues. We also work with financial appraisers who are skilled at placing a value on a medical practice. LEGAL KEYS EVERY MEDICAL DOCTOR MUST KNOW BEFORE MERGING WITH OR ACQUIRING A MEDICAL PRACTICE If you plan to acquire a medical practice or any healthcare venture, consult a healthcare and FDA attorney who understands the specific legal and regulatory landscape Medical practice valuation methods include the following: Using a multiplier This method examines the general revenue of the business – the amount of yearly receipts for medical services – and then multiplies that amount by a “multiplier” which varies depending on the type of practice, the location, and many other factors. The fair market value (FMV) approach This financial appraisal method examines similar medical practices in the region where you practice. Whether a practice is similar must take into account the type of practice, the number of physicians, the services that are offered, how long the medical practice has been in office, and other factors. The FMV is commonly used in the buying and selling of a home or a building. The difference is that the sales of homes are generally of public record because the sale is recorded with the local county offices. Medical sales are generally not publicly recorded. Even if the sales of comparable medical practices are recorded, there often are not enough comparable sales to make a reliable analysis. The income approach This approach examines the cash flow of the practice – usually for the past few years – and the potential future income that the practice can expect to generate. The income approach analyzes the following: Analyzing the stream of income. This analysis normally examines prior tax returns and financial statements along with other documents to determine the “net” income of the business. The net figure considers the liabilities of the practice starting with the federal, state, and local tax returns. The analysis may differ depending on the type of medical practice, how the bills are submitted and paid, and other standards. Forecasting the future income flow. This analysis reviews market trends, the overall industry outlook for your type of practice, and any other information that can indicate how much income the medical practice will generate over the next 3-5 years. Growth and risk factors. This part of the income analysis examines the competition, how much the practice is regulated, the possibilities for providing additional services, and the growth potential of the medical practice. Applying a discount rate. An analysis of future income needs to be discounted to reflect the rate of return the practice would obtain if the practice just invested the funds in safe investments such as certificates of deposit. “The discount rate is typically based on industry benchmarks, market rates of return, and the specific risk profile of the practice.” The discount rate is then used to determine the current value of the medical practice. The termination value. This analysis estimates the value of the practice at the end of a specific term such as 3-5 years. Whether the income approach is the best way to value a medical practice is debatable. We’ll explain whether this approach is reliable – especially in light of other factors such as an aging population or any likely expenditures over and above normal overhead. The asset approach This method is more common for valuing a medical practice. The approach examines the tangible assets of the practice, the intangible assets, and the goodwill of the medical practice. This approach helps determine the value of each type of asset. The approach is useful for accounting and tax purposes. The asset approach generally uses the following analysis: The tangible assets. This portion of the value includes the physical items in the office including the medical equipment, fixtures, furniture, and filing cabinets. The value is what a willing buyer would pay for these items – not what the practice originally paid for the items or how much the seller thinks the assets are worth. A big expense for any medical practice is the cost of medical equipment such as diagnostic equipment, software and hardware, surgical tools, and other types of healthcare equipment. A key question is whether the new practice will buy these assets or rent them. The revenue of the medical practice. This figure represents the total receipts of the practice before considering the expenses. This sum is the gross income. For a medical practice, gross income generally means the accounts receivable and any income from lectures or other health services. The net income of the medical practice. This sum is the profit – the amount the medical practice receives (takes in) minus – the amount of the expenses and operating costs – such as the computer costs, salaries, and rental costs. Any add-backs. These items include such things as the benefits to the doctors such as healthcare, travel reimbursements, salary, and other items. Goodwill. This asset is essentially the medical practice’s reputation. Generally, the practice that is buying the business also wants to acquire the patients of the other practice (or keep those patients) if there is a merger. As we explained in our general discussion on acquiring or merging a medical practice, there are certain legal and ethical considerations to ensure that patients can make free decisions about which doctors the patients will use and their electronic health records. Goodwill is essentially a calculation as to whether the old patients will continue to see the doctors in the new medical practice. Goodwill also includes the location of the practice, how well the staff connects with patients, and other factors. Other factors include the expenses of the business and any intellectual property such as patents. Another issue is that the new practice may not assume some of the expenses of the old office. For example, the buyer may keep some of the staff but not all of the staff or some of the equipment but not all of the equipment. Additional valuation factors for a medical practice A few other notable factors that will affect the value of a medical practice include: The general state of the economy. The payment arrangement including whether there is a full payment or the sale of the practice is financed by having the seller accept payments over time as the new practice evolves. The payment terms may also have tax consequences. Tax considerations. The tax considerations do affect how much a buyer will be willing to pay for a medical practice and how much the seller will accept. The need for cash. A doctor who is retiring may be more in need of cash now than a younger doctor who is quitting to pursue other interests and has the time to accept a payout. Whether other medical practices are interested in the same practice that is being sold Generally, the more a medical business has been in existence and the better reputation that practice has, the higher the value of the medical practice will be. Many other factors may also affect the value of a medical practice. HEALTHCARE M&A: DO’S AND DON’TS OF BUYING OR SELLING A MEDICAL PRACTICE Buying and selling a medical practice is much different than selling a commercial business. Due diligence must address special healthcare legal compliance issues, licensing requirements, patient […] Other factors to consider regarding the cash flow of a business include: Income cash flow issues The cost of replacing office space or equipment that cannot be transferred to the new practice. The cost to hire new physicians and other medical care providers. Whether Stark Law or AKS affects these purchases and compensation needs. How likely the doctors in the practice that is being bought are to help the new practice during the transition period Legal costs The cost of any litigation if the business being acquired has any judgments, current lawsuits, or lawsuits that may be filed. Any outstanding contracts and other obligations that should be obtained through a due diligence review. According to Medical Economics, the appraisal of a medical practice should also examine where existing and new patients are coming from, and examine all the contracts with doctors and nonphysician providers. It’s very important to actually visit the medical office you’re acquiring. Some offers may be subject to negotiation. Other offers may be one-time offers. Aesthetics can add value to a medical practice. If the medical practice you’re acquiring has an MSO, that can add value by simplifying the need to separate the business side of the practice from the medical/clinical side of the practice. Medical practices can be valued in different ways – by using a multiplier, fair market value comparables, estimating net income, and the value of tangible and intangible assets including goodwill. Our seasoned healthcare lawyers work with medical appraisers who are skilled at placing value on a medical business. Our team is skilled at all the related issues such as legal and healthcare compliance, financing issues, agreements of sale, and other issues. Any medical practice that is considering buying from, selling to, or merging with another medical practice should contact Cohen Healthcare Law Group to discuss their legal and healthcare compliance requirements. Our experienced healthcare attorneys advise doctors and practices about valuing a medical practice and healthcare compliance laws and regulations. Book Your Legal Strategy Session TodayContact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
April 1, 2024
Healthcare
Can the MSO Management Fee be More Than 90% of the Revenue of the Medical Practice?
The anti-kickback laws require these fees to be fair market value and not take into consideration the referral of any patients that might come from the MSO to the medical practice. It so happens these days that a lot of MSOs will provide marketing services for the medical practice. And depending on your state law, it could open the door to interpretations that there are patient referrals and that part of that fee may be in consideration for the volume or value of the patient referrals. There’s no one answer, what is fair market value? 90%, just kind of my gut reaction to it, is that’s way too high for a management company to be charging. And I always tell clients, at the end of the day, put yourself in the position where you’re defending this fee, and if you’re in court and you see the person up there in the black robes and you’re trying to justify this fee, it might look a little strange that the lion’s share of the practice is going to a lay business, the management company. And so that would raise a number of alarm bells to most judges, to most enforcement agencies out there. Testimonials
March 23, 2024
Healthcare
The MSO/Physician Contract: Compliance with Stark Law’s personal service agreement and the fair market value compensation exceptions.
Many medical practices enter into contracts with a Managed Service Organization (MSO) to help separate the clinical and administrative sides of the medical practice. There are many federal and state laws that regulate both aspects of medical practice. State medical boards also regulate medical practices in various ways. Skilled healthcare professionals understand how MSOs can assist medical practitioners in focusing on practicing medicine while the MSOs concentrate on the medical business—complying with relevant Stark Law exceptions and other compliance requirements. Stark Law and the AKS The Stark Law, also known as the federal physician self-referral law, prohibits doctors from recommending that patients obtain designated health services (such as lab tests) that Medicare and Medicaid pay for from entities in which the doctor (or an immediate family member) has a financial interest—unless a Stark Law exception applies. The federal Anti-Kickback statute (AKS) authorizes criminal penalties when entities or individuals knowingly provide or receive any remuneration: In return for any service paid for by a federal healthcare program, including Medicare or Medicaid. In return for “purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal healthcare program.” (Source: Legal Information Institute) Remuneration includes cash payments, vacation, positions on medical boards, and many other improper benefits. An Anti-Kickback statute (AKS) violation may result in a prison sentence of up to 5 years, fines of up to $25,000 per occurrence, and exclusion from participating in federal healthcare reimbursement programs. Violations of the Stark Law and the AKS may also constitute a breach of the federal False Claims Act. Doctors, medical practices, and Managed Service Organizations (MSOs) also need to understand their state’s corporate practice of medicine laws, which regulate who can have an ownership interest in a medical practice. The benefits of an MSO An MSO helps medical practices do more than just manage the business side of a medical practice. It can assist medical practices in demonstrating that the business side is separate from the clinical side by specifically meeting the exceptions to the Stark Law and the safe harbors to the Anti-Kickback Statute (AKS) as defined in those statutes. An MSO can also help demonstrate that a medical practice is not violating the False Claims Act and is meeting the requirements of state and local medical boards. Additionally, an MSO can aid a medical practice in coming into compliance with corporate practice of medicine laws. WHEN USING A MANAGEMENT SERVICES ORGANIZATIONS (MSO) IS THE RIGHT CHOICE FOR YOUR MEDICAL PRACTICE Managed Services Organizations help physicians focus on practicing medicine by freeing doctors from many administrative tasks. Failure to consult with an MSO healthcare lawyer can cause civil and […] What tasks can MSOs perform? MSOs can undertake various administrative tasks and assist medical physicians/practices in complying with the Stark Law and the Anti-Kickback Statute (AKS) if specific requirements, such as the Stark Law’s personal service arrangement exception and fair market compensation exception, are met. Some of the general services that MSOs can perform, according to the Physicians Practice Group, include: Medical billing and collection Training of the medical staff Compliance with HIPAA (Health Insurance Portability and Accountability Act), the FMLA (Family and Medical Leave Act), and other laws Obtaining and verifying credentials IT needs Financial matters including marketing, payroll, procurement, and audits Risk management Scheduling Medical record transcription Public relations Disaster management Negotiating contracts Quality assurance Other administrative duties Stark Law, MSOs, and personal service arrangements The Stark Law provides for a personal service arrangement exception, allowing the medical practice and the Managed Service Organization (MSO) to enter into a contract where the MSO provides personal services to the medical practice, and the medical practice provides remuneration for the MSO. Generally, services from the physician/medical practice to the MSO need to comply with the personal services arrangement Stark Law exception. Services from the MSO to the physician/medical practice need to comply with the fair market value Stark Law exception described below. Compliance with the personal services arrangement exception requires the following: The personal services arrangement is set forth in writing; both the physician/medical practice and the MSO sign the contract, and the specific services that will be provided are detailed in the written contract. Unless the services satisfy another section (Section Z, involving the limited remuneration of a physician) of the Stark Law exceptions, the personal services arrangement should cover all the services that the physician (or an immediate family member of the physician) will provide to the MSO. This requirement is met if: All separate arrangements between the entity (MSO) and the physician and the entity (MSO) and any family members incorporate each other by reference or cross-reference a master list of contracts that is maintained and updated centrally and is available for review by the Secretary upon request. The master list must preserve the historical record of contracts, and a physician or family member may furnish services through employees they have hired for the purpose of performing the services, through a wholly-owned entity, or through locum tenens physicians. (Source: Legal Information Institute) The combined services that the personal services arrangement covers must not exceed the services that are reasonable and necessary for the legitimate business purposes of the arrangement(s). The personal services arrangement must last for one year or longer. To comply with this requirement, if the personal service arrangement is terminated, with or without cause, the parties may not enter into the same or substantially the same arrangement during the first year of the original arrangement. The compensation to be paid during the duration of each personal service arrangement should be: Set in advance Not exceed the fair market value Not consider the value or volume of any referrals or other business generated between the physician/medical practice and the MSO, unless there is a valid physician incentive plan. The personal service arrangement services should not involve the counseling or promotion of a business arrangement or other activity in violation of state or federal law. If the personal services arrangement ends after at least one year: A holdover arrangement immediately following the expiration of the arrangement [should] satisfy the requirements of paragraph (d) if additional requirements are met. If remuneration to the physician is conditioned on the physician’s referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4). Our skilled healthcare compliance lawyer can clarify whether the physician incentive plan exception applies to the relationship between the medical practice and the MSO. The specific terms of the incentive plan exception are outlined in the Stark Law exceptions. To gain a comprehensive understanding of how these exceptions may impact your situation, we invite you to schedule a Legal Strategy Session with our expert healthcare compliance attorney. Take proactive steps to ensure compliance and navigate the complexities of the Stark Law. Stark Law, MSOs, and the fair market value compensation exception The fair market value compensation exception to the Stark Law applies to compensation arrangements where the MSO provides services to the physician or medical (group) practice in exchange for remuneration from the physician/medical group. Compliance with the fair market value exception generally requires satisfaction of the following requirements: The arrangement between the physician/group practice and the MSO must be in writing, signed by the physician/medical practice and the MSO, and cover services specifically outlined in the written contract. The writing should specify the compensation under the arrangement’s terms and the timeframe for the arrangement. The arrangement, which includes services provided in return for fair market value compensation, can be for any period and include a termination clause. Renewal is allowed, one or more times, provided the terms and compensation remain consistent with the prior arrangement, though exceptions may apply. The compensation: Must be set in advance. Should be consistent with fair market value and “not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.” Compensation for the rental of office space or equipment may not be determined using certain formulas set forth in the Stark Law. The contract should be “commercially reasonable even if no referrals were made between the parties.” The contract should not violate the Anti-Kickback Statute (AKS) or involve counseling, business promotion, or other activities in violation of state or federal law. The arrangement satisfies the requirements of § 411.354(d)(4) (directed referral requirement) in the case of certain types of physician remuneration, group practice remuneration, or other Stark Law terms. Experienced healthcare lawyers understand how MSOs can be utilized to help medical professionals demonstrate compliance with the Stark Law, along with the conditions that must be met to fulfill those compliance requirements. Our healthcare lawyers can also provide insights into whether the contract between the MSO and the physician/medical practice might violate the Anti-Kickback Statute (AKS) and whether any AKS safe harbors apply. Many AKS safe harbors share similarities (though not identical) with the Stark Law exceptions. A Managed Service Organization (MSO) is a valuable method for assisting medical practices in focusing on practicing medicine while the MSO takes care of the administrative side of the practice. MSOs are also instrumental in demonstrating that a medical practice is in compliance with federal referral laws such as the Stark Law. The MSO contract itself must comply with the Stark Law and any other relevant laws. Achieving compliance often involves drafting MSO/physician practice contracts that meet the personal service arrangement and fair market value compensation exceptions of the Stark Law. Physicians, medical practices, and MSOs are encouraged to contact Cohen Healthcare Law Group to discuss how an MSO can help address federal and state compliance laws and regulations. Our experienced healthcare attorneys provide guidance to physicians and medical practices on healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 15, 2024
Healthcare
What Can a Nursing Corporation in California be Used For?
I just want to make extra clear that in California, the Medical Board has issued a number of different opinions that the medical spa must be a medical corporation, not a nursing corporation. I can’t tell you how many times people have formed a nursing corporation, and then we have to unwind everything and fix it, and it gets expensive to do that. So to the extent any of you are on the verge of forming an entity, it would be a medical corporation in California, not a nursing. Testimonials
March 9, 2024
Healthcare
HIPAA Compliance for Pharmacies – Violations and FAQs
This is our second article about what pharmacies should know about complying with HIPAA. In the first part, we discussed which HIPAA rules apply to pharmacies, as well as the best practices for pharmacies to demonstrate HIPAA compliance. This article provides examples of HIPAA violations and the potential consequences of violations. This article also answers FAQs about pharmacies and HIPAA compliance. GOT HIPAA? GET HIPAA? JOYCE EXPLAINS WHY AND HOW Interview with an expert in healthcare privacy and security, both on the federal side with HIPAA, and the state side, especially California law. What conduct by a pharmacy is considered a violation of HIPAA? A few examples of HIPAA privacy violations include disposing of Patient Health Information (PHI) in the trash instead of shredding it, leaving prescription information in areas that can be accessed by the public, and disclosing any prescription information to third parties without patient’s consent. HIPAA violations include the following: Unauthorized access. This includes intentionally or accidentally accessing patient health information – without patient authorization or a legitimate need – thus violating the patient’s privacy rights. Improper disposal. Pharmacies may be cited for HIPAA violations if they improperly or incompletely dispose of patient records, medication information, or prescription labels that potentially expose sensitive data to people who are not authorized to see the information. Inadequate Physical Security. This type of violation includes the failure of the pharmacy to develop and implement physical safeguards to protect Patient Health Information. Improper handling of prescriptions. Pharmacies may violate HIPAA if they disclose patient’s prescription information to a third party without the patient’s consent or failing to follow specific verification procedures, thus compromising the patient’s confidentiality. Failing to train the staff and volunteers. Pharmacies need to educate and train their workers and volunteers about HIPAA’s privacy, security, and breach notification rules. What are the consequences for pharmacies that violate HIPAA’s requirements? According to the HIPAA Journal, when the Health and Human Services (HHS) Office for Civil Rights (OCR) receives a complaint or a notice of a breach, the office will conduct a review to determine if an enforcement action is required. If OCR believes a violation has been committed, the agency has the right to impose a civil penalty. Often, the Health and Human Services Office for Civil Rights will provide technical help to prevent future violations from occurring or require that the pharmacy implement a corrective action plan if the violation is attributable to an underlying culture of non-compliance. In a small minority of cases the Health and Human Services Office for Civil Rights will impose a civil penalty. Depending on the severity (tier) of the penalty and the level of culpability, the HIPAA Journal states that the following penalties can be imposed (subject to any HHS changes): Tier 1 – Reasonable Efforts. The penalties range from $127 – $63,973. The maximum yearly penalty for each violation is $1,919,173. Tier 2 – Lack of Oversight. The penalties range from $1,280 – $63,973. The maximum yearly penalty for each violation is $1,919,173. Tier 3 – Neglect – Rectified within 30 days. The penalties range from $12,794 – $63,973. The maximum yearly penalty for each violation is $1,919,173. Tier 4 – Neglect – Not Rectified within 30 days. The penalties range from $63,973 – $1,919,173. The maximum yearly penalty for each violation is $1,919,173. The Attorney Generals for the different states also have the authority to impose civil penalties for each violation. If a pharmacy’s violations involves criminal activity, the violation may be referred to the US Department of Justice. A few examples of violations and penalties, according to the HIPAA Journal, include the following: In 2009, CVS Pharmacy settled potential HIPAA violations with OCR for $2.25 million after it was discovered that prescription bottles and receipts had been disposed of improperly. In 2010, Rite Aid Corp settled with OCR for $1 million to resolve violations of HIPAA relating to the improper disposal of PHI. In 2014, Walgreens was fined $1.4 million for the impermissible disclosure of a patient’s PHI. A pharmacist shared a patient’s PHI with her husband and at least three other people. In 2015, Cornell Pharmacy, a small pharmacy in Denver, was fined $125,000 for the improper disposal of PHI. Even if there is no civil fine, the costs of technical help and corrective action plans can be expensive. To minimize the risk of HIPAA violations and to help address all other compliance issues, pharmacies should speak with experienced healthcare lawyers. HIPAA COMPLIANCE IS NOT THE END OF LIABILITY FOR COMPROMISING PATIENT PRIVACY You think you’ve got HIPAA compliance handled, in order to try to stay ahead of steep federal penalties, and then learn that is just the beginning of the story. HIPAA compliance itself is thorny. […] FAQs about Pharmacies and HIPAA Compliance When could a pharmacy not be considered a HIPAA-covered entity? While pharmacies generally are considered “Covered Entities” and must thus comply with HIPAA’s Privacy and Security Rules – some exceptions do apply: A pharmacy doesn’t transmit health information. This may occur for example for campus pharmacies where a student’s medical records may be considered part of the student’s educational records under FEPRA – the Family Educational Rights and Privacy Act. A pharmacy doesn’t send or receive health information electronically. Paper and phone conversations that are not digital are not considered electronic communications under HIPAA. A pharmacy exclusively sells or dispenses drugs, devices, or equipment for which no prescription is required. If just one transaction involves a prescription, then “every operation becomes covered by HIPAA.” How does individually identifiable health information differ from Protected Health Information? Individually identifiable health information is health information that alone or with other common identifiers could be used to identify an individual. When common identifiers such as an individual´s name, date of birth, or address are stored in a designated record set with health information, the common identifiers and the health information become Protected Health Information. When can a pharmacy be able to disclose PHI to law enforcement officers? PHI generally includes a patient’s name. The PHI could include their physical description. Pharmacies (and staff members) may be permitted (but generally are not required) to disclose PHI to law enforcement officers in the following six instances: There is a court order, court-ordered warrant, or subpoena that requires disclosure. To help identify a suspect, a missing person, a witness, or a fugitive. An official request by a law enforcement official about a victim or someone suspected of being a victim of a crime. To inform law enforcement that someone has died – if the pharmacist thinks that the death is due to criminal conduct. When the manager of a pharmacy believes that protected health information is evidence of a crime that occurred on the premises. When essential to inform law enforcement about the commission and nature of a crime not occurring on the premises, the location of the crime or crime victims, and the perpetrator of the crime. Permitted disclosures of PHI to federal and state law enforcement officers are subject to the Minimum Information Necessary Standard. What is the Minimum Information Necessary Standard? The Minimum Information Necessary Standard requires that pharmacies (and pharmacy staff) should only use, disclose, or request the minimum amount of PHI necessary to achieve the objective of the use, disclosure, or request. A pharmacist, for example, doesn’t normally need to send a patient’s entire medical history to an insurance company to check if the patient is eligible for any prescriptions. Which laws may be even more strict than HIPAA? Most states have their own privacy and licensing laws that were enacted to protect patients. Many of these laws require even more stringent protections than HIPAA. For example, some laws also protect a patient’s genetic or biometric data. Generally, the HIPAA requirements must be followed but state laws may need to be followed – if stricter protections are required. Pharmacies should review with experienced healthcare lawyers any other federal compliance laws regarding patient privacy and any state compliance laws. For example, pharmacies may need to consider “the confidentiality of substance abuse disorder patient records (42 CFR Part 2) and privacy requirements within the Combat Methamphetamine Epidemic Act, Food and Drug Administration Amendments Act, and Patient Protection and Affordable Care Act.” Why should all people who work for a pharmacy undergo HIPAA security and privacy training? In today’s world, even employees who do not regularly access patient health information may be affected indirectly by a phishing email or malware which could provide an outsider with the credentials needed to access the pharmacy’s computer system – including any PHI in that system. HIPAA violations include unauthorized access to patient health information, the improper disposal of PHI, a lack of security, improper handling of prescriptions, and failing to train staff about HIPAA compliance. Fines may be imposed by the US Department of Health and Human Services and the local states for violating patient’s healthcare privacy rights. A few commonly asked questions include when might a pharmacy not be considered a covered entity, when can a pharmacy disclose PHI to law enforcement, and what is the minimum information necessary standard? Pharmacies should contact Cohen Healthcare Law Group to discuss their HIPAA compliance requirements. Our experienced healthcare attorneys advise pharmacies and medical practices about healthcare compliance laws and regulations. Book a Legal Strategy Session TodayContact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 8, 2024
Healthcare
Should the MSO be an S-Corp and the Medical Practice be a C-Corp or Vice Versa?
The S-Corp C-Corp distinction is a tax distinction. Under the IRS, you have the ability to do an S election or remain a C-Corp, and C-Corp is double taxation on the corporate level, and the individual S-Corp is on the individual only. It’s a pass-through. We always recommend getting a CPA involved to help determine what tax election you should make and so that would be the answer to that one. It really depends on revenue projections and things like that. Testimonials
March 2, 2024
Healthcare
Why Posting Patient Photographs on Social Media Accounts May Violate HIPAA and FTC Advertising Regulations
Many doctors seek to use patient photos as testimonials for their medical practices. The photos are often before and after pictures to show how a patient looked before the medical care was provided and after the treatments were provided. Photos can also be used along with text to state that the patient recommends a doctor due to the care that was provided. Medical practices and organizations also may want to use patient photos to announce when certain services are available, to promote healthy lifestyles, and to discuss current health issues – and for many other reasons. Doctors and medical practices that provide plastic surgery, beauty, or anti-aging services are among the practices most likely to want to post patient pictures – but almost any medical practice could promote its practice through patient photos. Healthcare providers need to understand the ethical requirements and federal and state laws that govern the use of patient photos. For starters, the posting of patient photos must comply with the Health Insurance Portability and Accountability Act (HIPAA) of 1996 and with the Federal Trade Commission’s (FTC’s) social media rules. The HIPAA Journal states that medical practices and healthcare organizations do need to comply with HIPAA even though HIPAA was enacted before most social media platforms came into existence. These practices and organizations also need to comply with the FTC rules on advertising. GOT HIPAA? GET HIPAA? JOYCE EXPLAINS WHY AND HOW Interview with an expert in healthcare privacy and security, both on the federal side with HIPAA, and the state side, especially California law. FTC ENFORCES FALSE ADVERTISING RULES AGAINST ‘CELL REPAIR’ PRODUCTS In today’s video, we discuss the dangers of marketing products without proper legal review—in this case, not just FDA enforcement, but even more significantly, FTC (Federal Trade Commission) […] The FTC rules on social media The Federal Trade Commission Act applies to all types of advertising and marketing including social media. The FTC has the authority to review online and offline advertising. The agency can file warning letters and seek injunctive relief to stop any improper advertising. In addition, the FTC can seek civil penalties. Advertising and marketing are considered deceptive if: “A representation, omission, or practice misleads or is likely to mislead the consumer; A consumer’s interpretation of the representation, omission, or practice is considered reasonable under the circumstances; and The misleading representation, omission, or practice is material.” FTC REGULATIONS YOU MUST KNOW FOR HEALTHCARE ADVERTISING Lots of physicians and healthcare companies have had us reviewed their marketing materials, and inevitably, we’ve quickly spotted gaping holes where they’ve left themselves vulnerable to […] The HIPAA Social Media Rules? Covered entities and business associates can use social media to promote their practices and products – provided the HIPAA and FTC requirements are met. Covered entities are: “Healthcare providers, like doctors, dentists, and pharmacies. Health plans, like HMOs and employer health plans. Healthcare clearinghouses, which process health information.” Business associates are partners of the covered entities that need access to health information to perform certain services. HIPAA applies to Protected Health Information (PHI) by “covered entities and business associates.” The PHI must comply with HIPAA’s privacy and security rules. “Protected health information (PHI) is individually identifiable health information transmitted or maintained in any form or medium by a Covered Entity or its Business Associate. Individually identifiable health information is information, including demographic data that relates to an individual’s physical or mental health or the provision of or payment of health care, which identifies the individual.” Patient authorization and HIPAA (HIPAA’s privacy rules) Any PHI that is disclosed requires the individual consent of the patient. The HIPAA authorization rules can be found in §164.508 of the HIPAA Privacy Rule. Valid authorizations must include the following core elements: “A meaningful description of the information to be used or disclosed A meaningful description of the purpose of the use or disclosure An explanation that the information may be further disclosed The individual’s right to revoke the authorization An expiration date for the authorization” The patient should be informed that the social media post with their PHA may be widely shared, published, and republished. This means that even if the patient does request a revocation of the authorization, the medical practice/organization may not be able to comply because the PHI has already moved quickly across the various social media platforms. What steps can medical practices and organizations take to comply with HIPAA? The consequences for violation of HIPAA’s privacy rule can include large fines and even possible imprisonment. Medical practices and medical organizations that use social media should consult with experienced healthcare providers to understand the do’s and don’ts of posting medical information (including patient) photos online. The practice/organization should establish social media policies, train the staff on permissible and impermissible uses, enforce policy violations, and create safeguards to protect against inadvertent disclosures. Access to social media accounts within the medical office should be limited to specific staff members. A few FAQs about social media postings and HIPAA The HIPAA Journal provides a few commonly asked questions about social media and HIPAA. What is one reason that social media increases the risk for HIPAA violations? Photographs are a large driver of social media content. The staff in medical offices can take someone’s picture and load the picture to the Internet almost immediately. The posting of the photograph will likely violate HIPAA unless the medical practice has the patient’s consent. Is the posting of a photograph of a patient a HIPAA violation if the patient’s name is not provided? Generally, the posting of the photograph will be a violation if the patient’s identity can be determined from the image. Medical practices should expect that patients can identify themselves in a social media photo. The medical practice should obtain the patient’s permission before posting a photograph online. Do the HIPAA social media rules apply to all accounts or just corporate accounts? HIPAA applies to business and personal social media accounts. In fact, posting a patient’s photo from a corporate account onto a private account will likely violate both HIPAA’s privacy rule and security rule. Practical suggestions for medical practices regarding social media Medical practices should train their staff about HIPAA’s privacy and security requirements, what information constitutes patient health information, and what the consequences will be for violating these requirements. The medical practice should also establish protocols, with the help of experienced healthcare lawyers, for obtaining permission from patients to use their patient health information. The patients should understand what information is being disclosed, where it’s being disclosed, why it’s being disclosed, who may see the information, and the other consequences for seeing their photo on social media accounts. The written consent form should be drafted to address the patient’s legal rights and ethical concerns. American Medical Association Guidelines for social media posts The American Medical Association (AMA) reviewed a case study of a woman who consented to having her images posted on social media. She broke down in tears when she discovered that images of her breast (the doctor performed breast reduction surgery) were posted online. While the doctor emphasized that the images were for educational purposes, the woman complained that the images were not respectful. The AMA analysis stated that informed consent may not be enough to protect a doctor in the age of social media. The AMA recommended that the plastic surgeon change “his social media practices for future patients,” and share his specific plans for change so the patient could feel “like she is making a difference and thus ease the tension.” The AMA stated that there must be: (1) Fully informed consent (2) A commitment to professional content (3) Avoidance of abusing the patient-physician power differential. The AMA summarized the basic principles for using patient images on social media as follows: “Complying with the Health Insurance Portability and Accountability Act (HIPAA) Maintenance of separate private and personal social media accounts Minimal online interactions with patients Familiarity with hospital policies on social media. Patient confidentiality must be protected at all times, as HIPAA’s security rule protecting identifiable health information that a provider creates, receives, maintains, or transmits electronically applies to social media as well.” This means that the images should be “deidentified” – though some images cannot be completely deidentified. Online communications between the doctor and patient should not be a substitute for the patient-physician relationship. Doctors, such as plastic surgeons, should understand any hospital policies or medical practice policies in addition to the applicable social media laws. The AMA states that some entities, like the Social Media Task Force of the American Society of Plastic Surgeons (ASPS) are still in the process of developing applicable policies. Both the physician and the patient should understand that many social media viewers are under 25 years of age. A practical suggestion is to show the patient the pictures that are going to be posted BEFORE the pictures are posted. HIPAA Violations – Civil and Criminal Penalties HIPAA violations are classified as follows: Tier 1: A violation that the covered entity was unaware of and could not have realistically avoided, had a reasonable amount of care had been taken to abide by HIPAA Rules Tier 2: A violation that the covered entity should have been aware of but could not have avoided even with a reasonable amount of care. (but falling short of willful neglect of HIPAA Rules) Tier 3: A violation suffered as a direct result of “willful neglect” of HIPAA Rules, in cases where an attempt has been made to correct the violation Tier 4: A violation of HIPAA Rules constituting willful neglect, where no attempt has been made to correct the violation within 30 days. The penalties for HIPAA violations, by tier, are as follows: Tier 1: Minimum fine of $100 per violation up to $50,000 Tier 2: Minimum fine of $1,000 per violation up to $50,000 Tier 3: Minimum fine of $10,000 per violation up to $50,000 Tier 4: Minimum fine of $50,000 per violation The penalties increase based on an inflationary index. “If healthcare professionals knowingly obtain or use protected health information for reasons that are not permitted by the HIPAA Privacy Rule, they may be found to be criminally liable for the HIPAA violation under the criminal enforcement provision of the Social Security Act.” [Emphasis added]. Doctors and medical practices also need to understand that obtaining consent near the time of the actual procedure is problematic since the patient is focused primarily on their health – patients may not dissent because patients don’t want to upset their doctor when he/she is about to perform a medical procedure. Another concern raised by the AMA is that posting images online may be detrimental to the medical practice in addition to the patient because photos that seem inappropriate may suggest that the plastic surgeon or other type of physician does not respect the physician-patient relationship. Doctors and medical practices need to understand how HIPAA, the FTC social media rules, and state and local ethics rules govern the posting of photographs on corporate and personal social media sites. At a minimum, health professionals and practices should obtain a proper written consent to post photographs online for marketing purposes, education, and other reasons. The consequences for violating HIPAA, the FTC rules, and doctor-patient confidentiality can be quite severe. Physicians and medical practices should contact Cohen Healthcare Law Group to discuss the requirements for posting patient photographs on social media accounts. Our experienced healthcare attorneys advise physicians and medical practices about healthcare compliance laws and regulations. Book Your Legal Strategy Session TodayContact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
February 22, 2024
Healthcare
Can a Dentist be a Medical Director?
The medical director, and again, just because a doctor has to own 51% of the medical practice doesn’t mean that doctor has to act as the medical director. The vast majority of times, yes, they do because they don’t have to do a whole lot and it beats finding someone and paying them separately, but you don’t have to be the medical director if you’re the owner, but you do have to be an MD to own a medical practice. If you get a doctor who’s a 51% owner or a doctor who is the full-owner, say in the state of New York, or if it’s a corporate practice at medicine state, that allows anybody to own it, and you just go and hire a medical director, the medical director has to be trained in the procedures that are being performed. You just have to make sure that the medical director has at least enough training in the particular procedures that the nurse will be performing in the clinic. Testimonials
February 15, 2024
Healthcare
Physician Recruitment Compliance Issues, Stark Law Exceptions, and MSOs
When hospitals and medical practices hire new doctors, they must consider various balances — the need for doctors capable of providing essential medical care to patients, the doctor’s capacity to attract new patients, and the imperative to comply with federal and state laws governing physician recruitment. The fundamental requirement of these laws is that patient care must always take precedence. Our experienced healthcare lawyers are prepared to elucidate how these balances operate. We strive to assist hospitals, medical practices, and doctors in delivering high-quality medical care, fostering business growth, all while adhering to legal requirements. Two key legal issues we help healthcare professionals address are compliance with Stark Law and the Anti-Kickback Statute (AKS). We excel in negotiating and drafting contracts that not only demonstrate compliance with Stark, the AKS, and other legal obligations but also ensure that all parties prioritize patient care and financial success. Additionally, we can explain how a Managed Service Organization (MSO) can assist medical practices in managing the business side of their practice once a new physician is hired. Stark Law generally provides exceptions that aid hospitals and medical practices in hiring qualified physicians. Violations of Stark Law and the AKS can lead to civil and criminal actions, potentially resulting in the loss of a medical license. While MSOs can offer administrative support, such as credential verification, it’s important to note that they cannot provide recruitment support, as MSOs are not authorized to practice medicine. As we’ve previously discussed, hospitals and medical practices regularly find the need to hire physicians who fulfill specific specialty requirements and engage in research. Newly graduated talent from medical school requires training, while experienced professionals often undergo an adjustment period and address practical issues, such as the new doctor’s preference to practice in a specific geographical area. Often, hospitals, which grant the right to practice within their facilities, collaborate with medical practices to recruit new physicians. Ideally, from the hospital’s perspective, the physician will “refer” patients to the hospital for surgeries and specialized care, with such referrals needing to comply with Stark Law, the Anti-Kickback Statute (AKS), and state laws. From the medical practice’s standpoint, the goal is for the practice to receive fees for the services the doctor provides both at the hospital and within the practice, while the physician also refers patients to the medical practice. The ideal scenario involves the doctor earning a base fee until their medical practice can be expanded. Each of the three participants—the hospital, the medical practice, and the doctor—has their own set of concerns during the physician recruitment process. These concerns include: The geographical area where the doctor will practice, including the potential need for relocation. The amount of compensation. The duties of the physician. The length of the employment contract. The loan – “The agreement by the hospital to pay the salary or part of the salary is considered a loan.” Covenants not to compete – where legally applicable. It’s important to note that covenants not to compete are generally not enforceable in California. Other contract terms. Useful Stark Law exceptions for physician recruitment Hospitals and medical practices offering inducements to attract doctors to work within their facilities must ascertain whether such inducements or the working relationship violate anti-referral laws, namely Stark Law and the Anti-Kickback Statute (AKS). Generally, recruitment arrangements that meet specific criteria may be deemed valid under the following Stark Law exceptions: Bona Fide Employment Exception: Applicable to medical practices, organizations, and hospitals hiring physicians. The physician has a bona fide employment relationship if: The employment services are clearly identified. The remuneration paid to the physicians is consistent with the fair market value of the services. Unless an exception applies, the remuneration is not based on the volume or value of any referrals by the referring physician (the newly hired physician). The remuneration is provided under an arrangement that would be commercially reasonable even if no referrals were made to the employer. Productivity bonuses based on services personally performed by the physician (or an immediate family member of the physician) may be permissible. If the physician’s remuneration is conditioned on referrals to a particular provider, practitioner, or supplier, the referral arrangement must meet other Stark Law exceptions. Hiring the Physician as an Independent Contractor: The contract or services should be in writing, identify all the services the physician will perform, be for specific time periods, contain a termination clause, specify the terms of payment in advance, and be consistent with the fair market value of the services. The arrangement should not factor in the volume or value of any referrals or business generation. The arrangement should be commercially reasonable (even if there were no referrals) and further the legitimate business purposes of the employer and the contractor-physicians. Physician Recruitment Exception: Remuneration provided by a hospital to recruit a physician that is paid directly to the physician may meet this Stark Law exception if certain conditions are met: The agreement is placed in writing and signed by the hospital, the physician, and the medical practice if all three are involved. The agreement is not conditioned on the referral of patients by the physician to the hospital. The amount of remuneration under the arrangement is not determined in any manner that takes into account the volume or value of actual or anticipated referrals by the physician or other business generated between the parties. The physician is allowed to establish staff privileges at any other hospital(s) and to refer business to any other entities (some exceptions may apply). The terms of the employment contract generally can’t be altered once the contract is signed. The medical practice must also sign the agreement if the doctor is going to work for the medical practice and not full-time at the hospital. Other conditions may apply depending on the terms of the agreement. As previously mentioned, our healthcare lawyers elucidate the additional conditions that must be met (to comply with a Stark Law exception) for a medical practice (without using a hospital) to be able to hire a doctor as an employee or as an independent contractor. Generally, payment should be based on fair market value and not on the amount or worth of any referrals. The AKS may provide safe harbors for certain physician employment relationships and recruitment efforts if specific conditions are met. Notably, the AKS uses the term “practitioner recruitment” instead of “physician recruitment.” Physician recruitment agreements must also adhere to any IRS 501(c)(3) requirements. In addition to hiring physicians, hospitals, and medical practices must understand whether Stark Law, the AKS, and other federal or state laws regulate the hiring of non-physician healthcare providers. Our experienced lawyers represent one of the three participants in physician recruitment, with the signer we represent varying depending on our client. We work diligently to address all other relevant legal, business, and medical issues. PHYSICIAN RECRUITMENT AGREEMENTS OBLIGATE THE HOSPITAL, MEDICAL PRACTICE AND THE PHYSICIAN – MAKE SURE YOU KNOW WHAT YOUR OBLIGATIONS ARE Physician recruitment agreements involve the rights and duties of three parties. Experienced healthcare lawyers craft the proper exceptions to the Anti-Kickback Statute and Stark Law What is a managed service organization (MSO)? An MSO is often utilized to manage the administrative and marketing aspects of a medical practice. In California, physicians typically own the medical corporation, while ownership interest in an MSO is open to anyone. An agreement outlining the duties and obligations of each party to the agreement should be established between the medical corporation and the MSO. Beyond addressing a state’s corporate practice of medicine (CPM) laws, MSOs are employed to demonstrate the medical practice’s compliance with Stark Law and the Anti-Kickback Statute (AKS). The medical practice’s primary focus should be on providing healthcare, with the MSO supporting the business side of the medical practice. Our healthcare lawyers comprehend how MSOs can benefit a medical practice and identify tasks exclusive to the medical practice. Generally, the MSO cannot participate in the recruitment of physicians, as decisions regarding physician employment pertain to the physician’s ability to provide healthcare to patients. The MSO may be able to assist with several issues when a medical practice is considering hiring (or has hired) new physicians or other medical staff who must be under the supervision of appropriate medical personnel, such as nurses, physician assistants, medical assistants, and other healthcare staff requiring supervision. These issues include: Scheduling appointments Leasing office space or equipment to the medical practice Billing and collection on behalf of the medical practice Checking the credentials of the physician, such as their medical licenses and their status Educating and training medical staff on topics such as compliance training, various diseases, office software systems, and other non-medical issues. MSOs can also perform additional tasks, including: Educating and training medical staff on compliance and various diseases Medical coding Regulatory compliance with federal and state laws, such as HIPAA (Health Insurance Portability and Accountability Act), OSHA (Occupational Safety and Health Administration) regulations, FMLA (Family and Medical Leave Act), CLIA (Clinical Laboratory Improvement Amendments of 1988), and state laws Credentialing staff and hiring clinical and administrative staff, credentialing health plans, and managing enrollment Public relations Disaster management Hospitals and medical practices require physicians and other healthcare providers to attend to their patients, especially when expanding to other locations or offering additional services. In the process of recruiting or hiring physicians, hospitals, medical practices, and the physicians involved must seek guidance from experienced healthcare lawyers. This consultation is essential for understanding employment incentives, conditions, and duties that align with Stark Law, the Anti-Kickback Statute (AKS), and other pertinent federal and state laws. Utilizing Stark Law exceptions during the drafting of employment contracts can be beneficial. Employing an MSO is an effective method for ensuring that a newly hired physician can concentrate on practicing medicine while leaving the administrative side to the MSO. Ensure Legal Compliance in Physician Recruitment Hospitals, medical practices, and physicians, are you navigating the recruitment of new physicians? Consult with Cohen Healthcare Law Group, where our experienced healthcare attorneys provide guidance on compliance with healthcare laws and regulations. Book a Legal Strategy Session NowContact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
February 15, 2024
Healthcare
Key Considerations When Merging or Acquiring A Medical Practice – Part Two
In part one of our discussion of the legal issues involving buying a new medical practice or merging your practice, we discussed many of the practice issues such as cultural compatibility issues, how to determine if the merger is working, and why one medical practice decides to acquire another medical practice or merge with an existing medical practice. In this article, we discuss some of the many legal and healthcare compliance issues such as Stark Law, the Anti-Kickback Statute (AKS), and HIPAA. We also discuss the corporate practice of medicine, due diligence, healthcare compliance issues such as the need to keep patients informed, and the agreement of sale or merger agreement. In subsequent articles, we’ll discuss the different ways to place a financial value on a medical practice, the use of an MSO to manage the new medical practice, Stark Law exceptions and AKS safe harbors, and other specific legal issues. When Using a Management Services Organizations (MSO) Is the Right Choice for Your Medical Practice Managed Services Organizations help physicians focus on practicing medicine by freeing doctors from many administrative tasks. Failure to consult with an MSO healthcare lawyer can cause civil and […] Legal compliance issues when merging or acquiring a medical practice The Corporate Practice of Medicine California law requires that medical practices must be owned by a medical corporation. As we’ve discussed earlier in our article on buying and selling a medical practice: The Moscone-Knox Professional Corporation Act regulates “who can invest in and own the professional medical corporation and the limits that apply to non-medical practitioners.” The bottom line is that the clinical/medical operation of the business must be separate from the administrative side of the business. The medical side generally must be owned by physicians while the administrative side can be owned by the doctors and by “investors, managed service organizations, and other non-professional managers.” California medical corporations must also comply with “The Medical Practice Act, Business and Professions Code section 2052, which provides that the unauthorized practice of medicine is illegal.” “The California Business and Professions Code section 2400 which prohibits corporations and “other artificial entities: from having “professional rights, privileges, or powers.” Other laws including federal and state privacy laws The state and medical regulations for each type of medical practice Other states have their own specific medical practice requirements. Stark and AKS When one medical practice buys out or merges with another, these anti-referral laws need to be reviewed to ensure compliance with how the bills are submitted and paid, whether the fee arrangements violate any of the terms of these laws, whether the manner of payment of the physicians violates these laws, whether the purchase or leasing of the office space or equipment violates any of these laws, and other possible Stark or AKS violations. Our skilled healthcare lawyers will also review whether any exceptions or safe harbors may apply and how to implement those exceptions or safe harbors. Experienced healthcare lawyers also review how a managed service organization (MSO) can be used to address any possible Stark or AKS violations. We’ll explain what payment arrangements may be permissible and what documentation and evidence is necessary to confirm those arrangements are legal. Healthcare M&A: Do’s and Don’ts of Buying or Selling a Medical Practice Buying and selling a medical practice is much different than selling a commercial business. Due diligence must address special healthcare legal compliance issues, licensing requirements, patient […] Financing Buyers and sellers may have different thoughts and due diligence requirements with regard to financing. If a buyer is willing to pay a lump sum at the time of settlement, that removes the financing issues. Since many medical practices have substantial value, a buyer may ask the seller to be allowed to pay the sales price in installments. The seller may also extend credit – by allowing the buyer to pay in installments based on the funds received from patients and insurance companies during the length of the new medical business operation. A seller may require a security interest in the new medical practice in return for accepting a payout. A buyer may not want to pay a lump sum in order to have time to complete any necessary conditions such as repairs or obtaining consent from patients. There are many different possibilities that we’ll review with you. Due Diligence In part one we discussed the need to conduct due diligence reviews about the legal, financial, and operational aspects of the medical practice you’re buying or merging with. Due diligence includes reviewing any existing or likely new legal, financial, or regulatory claims or complaints such as legal actions, judgments, or security interests. Other due diligence issues include: Any current MSO agreements Any corporate practice of medicine issues All open contracts with vendors, suppliers, third parties and administrators Any open litigation Any open rental or lease agreements All open contracts with contractors and employees Any other open contracts of any nature Our skilled lawyers will review whether these contracts can be assigned to the new practice and all related legal issues. The Agreement of Sale/Merger Agreement Perhaps the most critical part of the purchase, sale, or merger of a medical practice is the agreement of the sale or the merger agreement. The agreement of sale/merger establishes the price of the sale, the legal and business structures of the medical practice, the terms and conditions of the sale, the remedies of each practice for any breaches, the handling of the legal compliance issues, the handling of the medical compliance issues, the rights of each medical practice and the physicians in each practice, and many other legal, medical, financial, and practical issues. In our prior discussion of the sale of business, we reviewed the following issues – most or all of which apply to merging medical practices (though many additional terms will likely need to be addressed). Identifying what items are being sold and what is not being sold. The “professional and personal obligations of each party to the sale” “The terms of the sale. This includes the consideration and purchase price. It includes the time for the buyer to obtain financing or the terms of any payments if the seller is giving the buyer time to pay for the medical practice. The agreement of sale should make clear what happens if the buyer can’t get the necessary financing or defaults on any payments.” The remedies on default including the right to demand arbitration Identifying any representations of either medical practice The licenses, credentials, education, and qualifications of each physician That there “are no current complaints pending or disciplinary action with the state and local medical boards” The terms of the integration topics we reviewed in our general article on this topic – integration planning, stakeholder communication, cultural compatibility, integration planning, human resources integration, and performance management. The healthcare M&A lawyers should also review the following topics with their clients: Drug Enforcement Agency (DEA) requirements. “Normally, the DEA will not allow controlled substances to be sold with the practice. The seller should understand its duties regarding drugs in its possession when the practice is sold. The buyer normally needs to make new arrangements regarding the acquisition of new controlled medications.” Insurance issues. The agreement of insurance should determine which insurance coverage applies, from which medical practice, for medical malpractice claims, general liability claims, workers’ compensation claims, and other claims that may be filed after the date of sale. New insurance policies may be required. Liabilities and warranties. The buyers in acquisition and sales and both buyers in mergers will normally want representations as to any liabilities and warranties as to their status. Non-compete clauses. Physicians who buy new practices generally do not want the selling physicians to compete with them. Non-compete clauses should be in writing and definite as to their terms. California specifically forbids non-compete clauses. The legality of these clauses in other states will vary. Additional legal compliance issues Experienced healthcare lawyers also help medical practices that are obtaining, selling, or merging medical practices with: Determining the value of a medical practice. We will discuss this issue in a separate article. Any open contracts Employee and staff retention and relations Patient list and patient rights requirements Many other legal issues With proper planning and analysis, “Sellers can get the right price for their practice, satisfy their legal requirements to their patients, and feel confident that the sale won’t have any after-shocks. Buyers, with the use of skilled lawyers, will be able to focus on their new medical practice while understanding their medical and legal obligations.” Healthcare compliance issues involved with the purchase, sale, and merger of medical practices Medical practices that buy other practices or merge with other practices need to work with lawyers who understand the healthcare compliance issues for medical practices. Some of these issues our healthcare lawyers will review include: Healthcare compliance laws. In addition to Stark Law and the AKS, medical practices need to understand all other federal and state laws that regulate medical care and their specific types of practice. One important law that needs to be reviewed is the Health Insurance Portability and Accountability Act (HIPAA) which requires that medical practitioners comply with privacy and security requirements for electronic health records. There are also state privacy laws that must be reviewed. Additional healthcare compliance issues include how to bill public healthcare programs and private insurers, the False Claims Act, FTC compliance issues, FDA compliance issues, and many other compliance requirements. Patient notification. Patients have the right to know about any sales or mergers that involve their doctors. Patients should be informed of their HIPAA rights. Our lawyers will review the need to obtain authorizations from the patients to transfer medical records from one medical practice to another. Patients should also be informed about the new medical practice so the patients can decide whether they want to be treated by the new medical practice or be treated by a different medical practice. We’ll help draft these medical letters so the practices don’t put undue pressure on a patient. Medical records. The agreement of sale should make clear who owns the medical records after the sale and the requirements for keeping those records. Billing and coding. The medical practices need to review their billing codes and how bills are submitted so that the codes comply with the False Claims Act or any state false claims acts. Insurance carriers and medical programs. The Agreement of Sale should “also review which insurance carriers and medical programs the medical practice works with, how quickly and how much of the bills those insurance carriers and programs pay and any issues that have been raised in the past or currently regarding payment.” The insurance carriers, Medicare, Medicaid, and other payors should be notified about the new medical practice arrangement so the payors know who can submit bills and to whom payments should be made. License requirements. The medical licenses and qualifications of each doctor should be analyzed. Financial records and tax records. Due diligence requires reviewing these records for at least the prior three years. There should also be a review of “any withholding taxes that may be due, unpaid vacation pay, the status of any worker’s compensation and unemployment compensation accounts, business and medical insurance, and many other financial issues.” The medical practices should also review their relationships with their nurses, technicians, and other medical and non-medical staff so these personnel understand their roles in the new practice and so that the practices can keep the staff the practices need on their payroll. Contractors and vendors should also be informed about the new medical practice. When leaving a medical practice, can you take patient records? When leaving a medical practice, can you take patient records? Experienced legal counsel helps medical practices review the federal and state laws that regulate the practice of medicine along with the various requirements to keep patients informed. When a doctor or medical practice is considering buying or merging with another practice, our skilled healthcare lawyers will review your goals, the legal and healthcare compliance requirements, and the rights and remedies of the medical practices after the sale or merger is completed. We’ll help negotiate the proper legal documents and with the preparation of compliance plans. Medical practices that wish to buy, sell, or merge their medical practice should contact Cohen Healthcare Law Group to discuss their legal and healthcare compliance requirements. Our experienced healthcare attorneys advise physicians and medical practices about healthcare compliance laws and regulations. Schedule a Legal Strategy Session TodayContact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
February 8, 2024
Healthcare
Key Considerations When Merging or Acquiring A Medical Practice – Part One
Merging or buying a healthcare practice or clinic is complicated. You need to understand the legal compliance issues, the medical compliance issues, the financial concerns, and many practical issues. Experienced healthcare lawyers can help you understand these requirements. Healthcare lawyers can explain the pros and cons of the various issues and help you anticipate all the things that may go wrong as well as the things that should go right. Skilled healthcare lawyers will prepare and negotiate the contracts that are necessary to specify the terms of the merger or buyout. In this article, we will begin the discussion of the overall concerns that doctors need to address. In subsequent articles, we will focus on some of the more complex issues such as how to value a business, Stark and Anti-Kickback requirements, and other legal compliance issues. We’ll also discuss how a management services organization (MSO) can help provide the new medical practice the business services it needs so the practice can focus on providing medical services to their patients. Practical considerations in merging or buying a medical practice Some of the issues that affect a merger or acquisition of a medical practice are: What type of medicine are your physicians authorized to practice? What states can you practice in? Are you buying a practice or merging the practice with your current practice? Do you have a letter of intent? What part of the practice is being sold? Is the whole practice being sold? Are just the assets being sold? Who will be responsible for the liabilities of the business? What will be the role of each of the physicians from the current practices in the new practice? Who has the responsibility for preparing the agreement of sale or the terms of the merger? What will be the payment terms? Will there be a lump sum payment or a buyout? Strategic planning issues when merging or acquiring medical practices Before considering the buyout or merger, physician practices need to review many different issues with their healthcare lawyer. Some of these issues include the following: Why do you want to buy, merge, or sell your medical practice? Possible purposes include expanding the medical services you can provide, increasing marketing share, expanding the territory where you practice, and other reasons. What regulatory and compliance issues do you need to review? Some of these issues include complying with federal and state anti-referral laws, licensing, accreditation, privacy laws, and laws requiring notice to patients about the new business arrangement. There are also laws that need to be reviewed about the corporate practice of medicine, the type of supervision required of the medical staff, and many other factors. Why do you need a legal and financial due diligence review? Medical practices that wish to acquire a medical practice or merge their medical practice need to conduct due diligence reviews about the legal, financial, and operational aspects of both organizations. These reviews can inform your practice of any current or likely future claims or issues that you may be assuming if you buy or acquire another medical practice. The review should also disclose any legal, financial, or regulatory challenges that need to be addressed. Experienced healthcare counsel can explain how to conduct due diligence, what issues should be reviewed, and how to handle or negotiate any issues that arise. Another key consideration is which is the bigger practice. The bigger practice will normally want to control the terms of any merger. HEALTHCARE M&A: DO’S AND DON’TS OF BUYING OR SELLING A MEDICAL PRACTICE Buying and selling a medical practice is much different than selling a commercial business. Due diligence must address special healthcare legal compliance issues, licensing requirements, patient […] Integration Planning Each medical practice must have a detailed integration plan that outlines the timeline, tasks, and responsibilities for each phase of the merger or acquisition. The integration plan should identify key leadership roles and responsibilities for the integrated organization – including medical roles and business roles. Stakeholder Communication The parties to the merger or acquisition should develop a comprehensive communication plan for employees, patients, vendors, and other stakeholders. These communications should address such issues as the reasons behind the merger, the benefits, and the potential changes in services. There are laws that require that patients be notified of their rights to keep the same doctors or choose other physicians outside of the new medical practice – and their rights to take possession of their medical records. Cultural Compatibility A key factor that helps determine whether the new practice (whether obtained by purchase or a merger) is culturally compatible. Some of the issues that should be reviewed are the work cultures of each medical practice, the financial values of the practices, and how the work cultures may affect the integration process. Information technology (IT) and Data Integration Virtually every medical practice has hardware and software to manage their business. The practices should have electronic health records (EHRs) and data management systems. There are technical concerns that should be addressed to make the integration of the IT systems, including access to patient records, as seamless as possible. There will also be HIPAA and possibly other privacy issues that need to be reviewed in order to properly integrate the EHRs. Human Resources Integration The buyout or merger of medical practices requires reviewing the credentials and skills of the healthcare providers and healthcare staff. Some of the issues that should be reviewed on a personnel level include staffing redundancies, compensation, benefits, and cultural integration. The new medical practice will want to retain key talent and manage any necessary staff transitions after the merger or buyout. Performance Measurements The new practice should create metrics to track the success of the merger or acquisition. The metrics should monitor the financial, operational, and clinical performance of the new venture to ensure that objectives are being met. The metrics and evaluation should be ongoing. Adjustments should be made as needed. The strategies should be refined when necessary. The status of the facilities and the equipment of both practices should be reviewed. Some facilities and equipment may need to be sold. Some can be combined. The Stark and AKS laws need to be reviewed to help ensure there are no violations of these anti-referral laws. Resources should be consolidated or optimized when necessary. A critical performance measurement involves the quality and continuity of patient care. During the transition to the new practice, patient care should not be disrupted. Ideally, patients will be happy with the new medical practice. A major goal of the buyout or merger is aligning the clinical practices, treatment protocols, and patient care standards. These practices, protocols, and standards need to be assessed. It’s a good idea – before the acquisition or merger, to obtain input from all of the medical staff members. THE NEW STARK AND AKS LAWS Physicians and medical practices should review their MSO and referral arrangements to help comply with the new Stark Law and AKS changes. Why do medical practices consider buying, selling, or merging with a medical practice? The reasons for wanting to acquire or merge a medical practice include the following: Increased leverage with paying patients Sharing overhead costs and other operational costs Merging the brand image of the practices The potential for growth Diversifying a practice within the limits of the original practice areas The senior leadership of each medical practice should have a clear vision of why the leadership wants to buy, sell, or merge a medical practice. The practices need to ask – “Why do we want to change our medical practice?” When conducting due diligence, the medical practices should understand on a daily basis what bills will be due, should look for any conflicts of interest, and should examine the online reputation of each medical practice. The North Carolina Medical Society recommends that medical practices consider the following when buying, selling, or merging their medical practice. Consider that much of the revenue of a medical practice comes from the doctor’s knowledge, skills, personality, and reputation. These features are generally not transferrable. The patient list generally should be valuable. Doctors may consider buying, selling, or merging their medical practice to obtain better professional support, more stability, the prospect of internal referrals from within the new organization, and a better work-life balance. The doctors should recognize that the other physicians in the practice may have different interests. While one doctor may want to retire, the other doctors may want to continue practicing. Generally, the buyers of medical practices are: New physicians who want to purchase a seller’s medical practice A small medical practice that wants to grow – in the same or a related specialty A larger medical practice that wants to acquire new patients, decrease overhead expenses, or move into a new geographic location A large specialty group entering a new market, for example; kidney dialysis, radiation oncology, or anesthesia A hospital or healthcare system A physician wants to relocate due to personal or professional reasons The types of medical practices that may be sold include: Private practices Group practices Emergency practices A broad range of specialty practices Direct family care practices Hospital-based practices HMOs Urgent care centers There are many pros and cons to acquiring a new medical practice or merging with an existing practice. Once a practice has decided to buy or merge with another practice, both practices should speak with experienced healthcare counsel who can explain the legal and healthcare compliance issues along with many financial, medical, and practical considerations. The more legal, medical, business, compatibility, and performance issues that are reviewed at the start, the more likely the new practice is likely to be successful. Medical practices of all sizes and practices that are considering buying a new practice or merging with a practice should contact Cohen Healthcare Law Group to discuss their legal and healthcare compliance requirements. Our experienced healthcare attorneys advise physicians and medical practices about healthcare compliance laws and regulations. Book a Legal Strategy Session TodayContact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
February 1, 2024
Healthcare
Should an MSO be an LLC?
There’s no particular state requirement. It’s just a regular business, and that’s what a management company is. Even though it’s in the healthcare space, it’s just a regular business, and so there’s no requirement that business be a certain structure. So a LLC is the easiest way to do it. It’s the cheapest kind of entity to file, and I think it affords you the greatest protection personally and professionally. That’s why LLCs were created. So that’s what I would suggest. But again, a good idea is to check with the CPA with your particular needs and concerns and make sure you’re getting the right advice and you file the right entity. Testimonials
January 4, 2024
Healthcare
Can a Physician Assistant (PA) Set Up a California Medical Spa?
In today’s video, we turn to the question of whether a physician assistant (PA) can set up a California medical spa, or an integrative medicine, functional medicine, or any other multidisciplinary wellness center. Hi, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients like you, navigate the complex terrain of healthcare and FDA law so you can grow, launch, scale, your healthcare business. Here’s a familiar medical spa scenario. Paul, a Physician Assistant, excels at marketing and getting patients. He wants to set up a medical spa. He wants to hire an exercise physiologist, a registered nurse, personal trainer, a bunch of other practitioners. Can he do it? First, as we know the Corporate Practice of Medicine prohibits the practice of medicine by an unlicensed person or corporation. So, Paul should look for an MD or DO, who can bring a professional medical corporation to the table to run the medical side of the spa. The physician should supervise all the services to be offered by the medical spa, all the clinical services. In California, either the MD or DO, PA under the physician’s supervision, or the NP in a collaboration agreement with the physician, can perform that initial, good-faith exam. The physician should have standardized procedures for each medical procedure, and properly supervise the PA and registered nurse. The physician should also be responsible for hiring and firing these clinical providers within their professional medical corporation. Exercise physiology, personal training, those are independent. They could even be hired by the MSO that manages and markets the branded medical spa. Paul, the PA, can potentially have several streams of income. First, he has his own professional practice under supervision of the MD. Second, he might be a shareholder in the professional medical corporation, if the MD agrees. And third, he might be full or part-time owner in the MSO. All the marketing materials, including the website, should identify who does what services and what are the licensure and credentials for so performing these services. The marketing materials should be reviewed by legal counsel to ensure that there are not red flags for enforcement as being false and misleading advertising. We’ve seen a lot of stuff happen. California now includes increased penalties for medical spa owners who violate the corporate practice of medicine and engage in unlicensed medical practice. The law targets many popular medical spas that provide non-surgical, cosmetic procedures out there today like laser skin resurfacing, dermal fillers, cellulite treatments and much more. So, that’s why it’s important for Paul to have his business model vetted by healthcare counsel that understands the nuances of laws applicable to medical spas. Corporate practice of medicine is just one area of risk though. As mentioned, the PA got to be supervised by the physician. According to the California regulatory boards the supervising physician oversees the activities of and accepts responsibility for the medical services rendered by the PA. The supervising physician must adhere to the following mechanisms to provide supervision. Adherence to adequate supervision as agreed to in a practice agreement that meets the requirements of Business and Professions Code section 3502.3. And the physician must be available by telephone or other electronic communication method at the time the PA examines the patient. The supervising physician does not have to be on-site but has to be available as indicated. Before a PA can issue drug orders, the supervising physician must first prepare and adopt a written, practice specific formulary and protocols that specify all criteria for the use of a particular drug and any contraindications. The drugs listed constitute the formulary and can only include drugs that are appropriate for use in the practice. Any variations require advance approval from the supervising physician for the particular patient before the PA may issue a drug order. Thanks for watching. Please contact us with any questions. We helped healthcare clients in the industry just like you every day build their dream. We look forward to talking to you and we wish you well on your journey to success! Testimonials
October 28, 2023
Healthcare
HIPAA Compliance for Pharmacies Part One: HIPAA Rules and Best Practices
Pharmacies across the country need to understand and comply with the Health Insurance Portability and Accountability Act of 1966. According to the US Centers for Disease Control and Prevention (CDC), HIPAA is a federal law that provides national standards to protect sensitive patient information from being disclosed without their knowledge or consent. The US Department of Health and Human Services (HHS) issued a Privacy Rule and a Security Rule to implement the law’s requirements and to specifically protect a subset of the information (electronic patient information) that the Privacy Rule covers. HHS also has an Enforcement Rule to ensure compliance with HIPAA. The HIPAA Privacy Rule The HIPAA Privacy Rule applies to the use and disclosure of “protected health information” (PHI) by “covered entities.” The Privacy Rule also includes standards for how the PHI is used. The aim of the Privacy Rule is to ensure that there is a proper balance between protecting PHI and “allowing the flow of health information needed to provide and promote high-quality healthcare, and to protect the public’s health and well-being. FIVE STEPS TO MEET HIPAA OBLIGATIONS AND PRIVACY & SECURITY COMPLIANCE If you’re submitting claims electronically for reimbursement, you are under HIPAA. This subjects you to all the privacy and security obligations of HIPAA. Simply having an electronic medical record system that says, HIPAA Compliant, is not going to be enough. The HIPAA Security Rule The HIPAA Security Rule protects the confidentiality, integrity, and availability of electronic protected health information. Electronic refers to the subset of PHI that is digital. Covered Entities HIPAA’s Privacy and Security Rules apply to “covered entities.” Covered entities are defined as: Healthcare providers. “Every healthcare provider, regardless of size of practice, who electronically transmits health information in connection with certain transactions. These transactions include: Claims Benefit eligibility inquiries Referral authorization requests Other transactions for which HHS has established standards under the HIPAA Transactions Rule.” Health plans. Health plans include: Health, dental, vision, and prescription drug insurers Health maintenance organizations (HMOs) Medicare, Medicaid, Medicare+Choice, and Medicare supplement insurers Long-term care insurers (excluding nursing home fixed-indemnity policies) Employer-sponsored group health plans Government- and church-sponsored health plans Multi-employer health plans An exception may apply for smaller self-administered employer plans Healthcare clearinghouses. These are defined as “Entities that process nonstandard information they receive from another entity into a standard (i.e., standard format or data content), or vice versa. In most instances, healthcare clearinghouses will receive individually identifiable health information only when they are providing these processing services to a health plan or healthcare provider as a business associate.” HIPAA also applies to “business associates” who are people and organizations (with some exceptions) who use the PHI for claims processing, data analysis, utilization review, and billing. Business associates may be directly liable for HIPAA violations. Pharmacies and other healthcare practices may be liable for any HIPAA violations of their business associates. HIPAA compliance for pharmacies – The Rules According to the HIPAA Journal (which provides numerous articles on HIPAA compliance, HIPAA certification, HIPAA software, and many other HIPAA-related topics), most pharmacies do need to comply with HIPAA’s Privacy and Security Rules and, possibly, other even more stringent requirements. Pharmacy-related HIPAA topics include the following: How Do Pharmacies Qualify Under HIPAA While most pharmacies qualify as HIPAA Covered Entities, how they qualify is a little more problematic. HIPAA’s Administrative Simplification Regulations defines HIPAA Covered Entities as “a health plan, a health care clearinghouse, or a health care provider who transmits any health information in electronic form in connection with a transaction covered by this subchapter”. Most, but not all, pharmacies transmit health information electronically. Pharmacies are generally considered health care providers. The HIPAA Journal states that the complexity of whether a pharmacy is “covered” arises as follows: Health care providers are defined in 45 CFR §160.103 as: “A provider of services (as defined in 42 U.S.C. 1395x(u)), A provider of medical or health services (as defined in 42 U.S.C. 1395x(s)), and Any other person or organization who furnishes, bills, or is paid for health care in the normal course of business.” Most pharmacies do not qualify based on the first two criteria – 42 U.S.C. 1395(x) – either u or s. Most pharmacies do qualify based on the third category because health care is defined in the Administrative Simplification Regulations as including “[the] sale or dispensing of a drug, device, equipment, or other item in accordance with a prescription.” This means that any pharmacy that does qualify as a covered entity must comply with HIPAA’s Administrative Requirements which include the Privacy Rule, the Security Rule, and “if a breach of unsecured Protected Health Information occurs – the HIPAA Breach Notification Rule.” Pharmacies should already be familiar with these rules but periodic reviews can help eliminate mistakes and poor practices. The HIPAA Privacy Rule. This rule can be the hardest HIPAA rule to comply with for pharmacies because the rule may be hard for customers to ask questions and for pharmacists to answer questions – in retail environments – without being overheard and without disclosing PHI to the public. “It may also be difficult to comply discretely with requests for a permitted disclosure from (for example) law enforcement officers.” This means that employees of pharmacies need to be educated on what uses and disclosures of PHI are permissible and what standards must be met to protect the patient’s HIPAA rights. Pharmacy owners and managers also need to have policies in place to make sure each customer receives and acknowledges the receipt of the Notice of Privacy Practices. Each employee must also understand the contents of this Notice to “avoid unintentional violations of HIPAA.” The HIPAA Security Rule. This rule requires that covered entities implement safety measures to protect the “confidentiality, integrity, and availability” of electronic PHI. Pharmacy owners and managers (or a company compliance owner) must identify threats to the security and data that are likely to occur and “protect that data and the computer systems used to store that data – from unauthorized access, alteration, theft, or other impermissible uses and disclosures.” All pharmacy members should take security training – even if they do not access PHI. The members of the pharmacy staff should also be subject to the pharmacy´s HIPAA sanctions policy. The Breach Notification Rule. This HIPAA rule mandates which procedures pharmacies must use to protect unsecured PHI if the PHI is exposed to a third party – such as being overheard in a retail setting. Generally, pharmacies need to notify the individuals whose PHI was involved and the HHS Office for Civil Rights. The notification should identity the breach including what occurred, what information was not protected, and what steps the pharmacy is taking to mitigate any harm. The individual should be given advice about what steps they can take to mitigate any harm. Any use or disclosure (electronic, paper, or verbal) of PHI that is not authorized and not permitted is presumed to be a breach – unless the pharmacy can show that there is little likelihood that the Protected Health Information has been compromised. Best Pharmacy Practices for HIPAA Compliance While there is not one overall standard, each state has its own laws, and different pharmacies may operate differently. The HIPAA Journal recommends the following best practices for HIPAA compliance. We also recommend that you speak with our experienced healthcare compliance lawyers who will explain HIPAA’s provisions and the recommended ways for becoming compliant. The best practices include: The appointment of privacy and security officers. Pharmacies can choose any staff member to be a designated privacy and/or security officer. The responsibilities of this position include risk assessment, identification of confidentiality threats, and maintaining the integrity and availability of patient health information. The officer(s) should develop and implement HIPAA policies and procedures to reduce the risks to an appropriate level. Ensuring that PHI is not disclosed impermissibly. It’s not just the deliberate disclosure of PHI in violation of HIPAA’s Privacy Rule that is problematic. Pharmacies need to work to protect PHI information that is accidentally disclosed. Pharmacies need to create and implement policies and procedures to reduce the risk of all types of disclosures. “Care must also be taken not to disclose more than the ‘minimum necessary’ PHI.” Obtain authorizations when necessary. Pharmacies need to disclose PHI if requested by a patient or the HHS´ Office for Civil Rights. Pharmacies may use PHI for “treatment purposes, requesting or receiving payment, and pharmacy operations.” All other disclosures and uses must be authorized by the patient – in writing – and before the PHI is disclosed or used. Obtain business associate agreements. If a third party needs to access PHI to perform a service on the pharmacy’s behalf, that party is considered a “business associate.” “A business associate must provide reasonable assurances to the pharmacy, by means of a business associate agreement, that the requirements of HIPAA have been understood and that HIPAA Rules will be followed.” Inform patients of the pharmacy’s privacy practices. Pharmacies should place their privacy practices in writing and share those written policies with their patients. Patients should sign that they have received these policies. The policies should inform the patient how they can complain if they think their HIPAA privacy rights have been violated. Give patients copies of their PHI. Patients have the right to see their PHI (subject to some possible exceptions) on requests made to the pharmacy. Handle the disposal of PHI properly. Prescription labels and other documents should be disposed of so the PHI cannot be reconstructed or viewed. “Paperwork such as labels should be shredded, pulverized, pulped, or incinerated. ePHI on electronic devices must be permanently erased before disposal.” Educate the pharmacy staff. The staff and anyone who assists the pharmacy should be trained about HIPAA’s Privacy and Security Rules if they may come into contact with any patient health information. These workers and volunteers should also be trained about any federal or state PHI rules that may be stricter. Pharmacies generally qualify as “covered entities” under HIPAA and must therefore comply with HIPAA’s Privacy Rule regarding patient health information (PHI), Security Rule regarding electronic PHI, and the Breach Notification Rule in case protected information is improperly used or disclosed. Best practices include appointing HIPAA compliance officers, making sure patients have written copies of their rights, obtaining authorizations when necessary, and entering into business association agreements with outside companies. Pharmacies should contact Cohen Healthcare Law Group, PC to discuss their HIPAA compliance requirements. Our experienced healthcare attorneys advise pharmacies and healthcare practices about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
August 15, 2023
Healthcare
Are Anti-Aging Claims Drug Claims or Cosmetics Claims?
In today’s video, we focus on anti-aging products to determine whether FDA will likely regard your product as a drug instead of a cosmetic, which where you wanted to be. Hi, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. It’s a sunny day, it’s really me, and the glasses are photogray. We’ve helped lots of clients just like you, navigate the health and wellness industry through the legal requirements. Let’s talk about the Intended Use Doctrine. FDA determines that the intended use of a product could make it a drug, it looks to the labeling. And “labeling,” under the federal Food, Drug & Cosmetic Act (FDCA) will mean “all labels and other written, printed, or graphic matter (1) on any article or any of its containers or wrappers, or (2) accompanying such article.” In other words, “labeling” includes everything on the website, such as the blog, the product name, all the marketing. Everything is “labeling.” Worse (for you), this “intended use” doctrine gives FDA broad enforcement discretion. FDA can look at everything you’ve put out about the product and say, hey, this sounds like a drug to us. That’s the intended use, gleaned from the totality of the contents. Next, FDA gives particular scrutiny to some kinds of products, for example, Weight loss. The market is flooded with weight loss products whose claims go too far, and if you get to the end of this video, I guarantee you’ll lose two inches off your waist! That is, if you simultaneously engage in caloric restriction, read the fine print please. Okay, weight loss products, big problems for the FDA and the FTC. Now, you can’t look to what other companies are doing as evidence that they are successfully beyond enforcement scrutiny. Lots of people out there, not everyone gets caught. People are doing things, sometimes it takes years, but it can happen and it does happen. So, enough about weight, let’s talk about wrinkles. And there are some fine lines here, pardon the pun. If a product is intended to make lines and wrinkles less noticeable, simply by moisturizing the skin, the FDA will likely regard the product as a cosmetic. Similarly, makeup or “primers” intended to make the signs of aging less noticeable just by hiding them, are also considered, cosmetics. But products intended to affect the structure or function of the body, such as skin, are regulated as drugs. Note, if they’re not applied topically to the skin, and are machines, they might be considered medical devices. So, for example, if a product is intended to remove wrinkles or increase the skin’s production of collagen, it’s likely a drug or a medical device. Put another way, FDA emphasizes that products that are merely “intended to make people more attractive” generally are cosmetics. FDA states that its concern is with claims “that involve supposed effects on the structure of function of the skin.” Sound familiar? That’s part of the definition. Remember that drugs and medical devices are much more expensive to bring to market, and the regulatory burden is much higher, so it’s better if you can tame your claims to keep your product in the regulatory bucket of a cosmetic—assuming you can do this without sacrificing too much marketing power. And that’s where legal strategy comes in, as FDA lawyers we enjoy working with language, our goal is to help you choose marketing claims that won’t likely make the FDA bull charge at you, yet will also waive the flag sufficiently for marketing so that you’ll gain market share. Along these lines, we’d like to refer you to other materials on our Healthcare & FDA blog that talk about ten ways you can unwittingly end up making an implied disease claim for your product. Thanks for watching. Please contact us with your questions, comments. We have helped hundreds, thousands of healthcare companies just like you, market their products, navigate the legal and regulatory boundaries. We look forward to working with you on the journey to your success! Testimonials
August 8, 2023
Healthcare
The “Complementary and Alternative Medicine” Safe Harbor to Unlicensed Practice
In today’s video, we talk about the safe harbor to unlicensed medical practice and what it requires of the practitioner. Hi, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients like you, navigate the healthcare and FDA legal landscape so you can grow, or scale, or launch your healthcare business. Some years ago, a number of laws were enacted in various States to help create greater access to complementary and alternative medical therapies. These were generally known as “medical freedom” statutes, because they increased consumer access and choice. There are two types of such laws. The first limits the ability of State medical boards to discipline a licensed medical doctor solely on the basis that the physician choose to use a complementary therapy. It’s a pretty old statute. The second is a legal safe harbor for limited practice by someone who is not a licensed medical doctor or DO. In California, this safe harbor became known as SB 577 and was codified into the Business & Professions Code. Typically, this kind of healthcare freedom statute has a number of components. One, the practitioner cannot perform surgery or any kind of invasive procedure, prescribe, or otherwise practice “medicine.” Prescribing medication is disallowed but recommending dietary supplements might be allowed depending on what is said either there or elsewhere in State law. Two, the practitioner must disclose that they are not State licensed. Three, they have to talk about their training, methodology and disclose that. Four, they must recommend that the client consult their own primary care or other relevant physician. There can be a number of other requirements, such as that the practitioner have adequate liability insurance. There are of course other things to watch for, like whether the particular kinds of services offered by the practitioner, as well as their marketing claims, might potentially bring their work outside of the legal safe harbor and back into the prohibition against unauthorized practice, and that’s something we can help evaluate. And it might be unlicensed practice of medicine, nutrition, psychology, or some other prohibited professional practice. Thanks for watching. Please contact us with your questions. We have helped so many healthcare industry clients build their dream. We look forward to working with you on your journey to success! Testimonials
July 18, 2023
Healthcare
Nurse Practitioner Telehealth Functional Medicine vs. Coaching (Laws & Legal)
In today’s video, we are going to combine three different threads: a Nurse Practitioner wants to start a functional medicine practice, via telehealth, multi-state, and she wants to call it “coaching.” Hi, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients just like you, navigate healthcare and FDA legal issues so you can lunch, or grow and scale your healthcare business. The first piece here is you have an NP. While Nurse Practitioners typically do have a lot of practice autonomy, and we know that, normally there must at least be some collaborative relationship with a physician. Granted, “collaboration” is less than “supervision.” The point is, though, there is a medical doctor somewhere in the picture, and there is a legal agreement between the two that has to satisfy the requirements of State law for collaboration agreements between MDs and NPs. The next piece is telehealth. As we know, while the legal map for telehealth varies by State, there are some common elements across most States. Normally, a fax or email is not considered “telehealth,” so while it might be subject to HIPAA, it’s not subject to telemedicine rules. Then, in telehealth, the standard of care is the same as for in-person healthcare practice. So, practitioners must follow that standard of care. And healthcare providers who are not MDs or DOs must practice within their standard of care and scope of practice as well. We also know that typically, the practitioner must do certain things to “establish” the patient relationship. This can involve, for example, verifying the identity of the patient and also, ensuring that the patient has the ability to verify the identity and licensing status of the healthcare provider. In many states, the physician-patient or NP-patient relationship can be established virtually, as long as these criteria are satisfied, and the communication includes visual as well as audio. Informed consent must be given and documented. In some states, prior to prescribing, the provider must perform a medical interview sufficient to establish an informed diagnosis, it has to be as good as if the provider had performed an in-person physical examination. And an online questionnaire alone is not considered enough, it’s “static”, it’s insufficient. The supervising or collaborative physician must be available in person or electronically to consult if and as needed. If you dig more deeply into the statutes and regulations, you will also typically find a prohibition against advertising or promoting goods or services in which the healthcare provider has a financial interest. The telehealth portal can link to education and information, as long as there’s no profit for the licensee. Please look to our other videos for more drill-down on legal issues relevant to a functional medicine practice, or to telehealth and other issues. Thanks for watching. If you still have questions, give us a call, contact us via our website. We have helped so many healthcare industry clients on their journey to business success and we look forward to working with you too. Testimonials
July 2, 2023
Healthcare
The Possibilities and Legal Risks of ChatGPT for Doctors and Medical Practices
According to News Medical Life Sciences, ChatGPT, which was launched in November 2022, is an artificial intelligence (AI) chatbot developed by Open AI. ChatGPT can do many things that humans can do which is exciting and frightening. Some of these tasks include writing articles, completing job applications, and writing jokes and poetry. Already, Chat GPT has shown that ChatGPT can pass law school and business exams given at prestigious universities. “ChatGPT is poised to disrupt numerous industries, and search engines, education, graphic design, research, healthcare, retail, banking, manufacturing, logistics, and travel are already identified as those that stand to benefit from the technology.” News Medical Life Sciences states that ChatGPT will help healthcare professionals in many ways including the remote management of healthcare, clinical decision-making in real-time, drug management, medical record-keeping, real-time translation, clinical trials, and many other functions. How could ChatGPT be used to help healthcare providers and patients? Some of the possibilities for ChatGPT usage in the medical profession, according to Forbes, include personalized treatment plans, monitoring patients remotely, and the following: Telemedicine – virtual assistants. ChatGPT will be used to help patients schedule their appointments, manage their health information, and even receive treatments. Many patients are already using telemedicine to review their appointments, prescriptions, test results, and other aspects of their medical care. Clinical decision support. ChatGPT will be used to help doctors provide “real-time, evidence-based patient recommendations.” ChatGPT could review dangerous drug interactions, suggest possible treatments, and provide clinical guidelines. Recordkeeping. ChatGPT will help doctors and nurses dictate their notes so these healthcare providers can focus more on their patients. The AI software will also help summarize and analyze patient interactions and the patient’s medical histories. Chat GPT should also make test results more readily available. Medical translation. ChatGPT can be used to “translate medical jargon, technical terms, and common expressions, allowing patients to understand their diagnosis, treatment options, and medication instructions.” Managing medications. ChatGPT will help doctors keep track of the various medications their patients are taking and the dosages for each medication. The AI software should also help explain the possible adverse reactions, side effects, drug interactions, contraindicators, and other medication management issues. Disease surveillance. Doctors, researchers, and even regular citizens will be able to use ChatGPT to review global health data which can provide “real-time insights into potential outbreaks and facilitate early response efforts.” The AI software can look for patterns and anomalies that indicate a new disease is spreading or how quickly and where a known disease is spreading. In turn, public health officials, doctors, and others should then be able to take a more measured response to this new information. Medical writing and documentation. ChatGPT could be used to help doctors and other healthcare professionals write and document their medical reports including clinical notes and discharge summaries – along with “real-time suggestions and corrections.” Clinical trial research. ChatGPT could be used to identify possible participants in clinical studies by analyzing large sections of patient data to find eligible participants. “By leveraging ChatGPT’s capabilities, clinical trial recruitment efforts can become more efficient, targeted, and effective in reaching diverse populations.” Checking for symptoms. ChatGPT can be used to help patients understand their symptoms and the seriousness of their symptoms so patients can decide when medical care is necessary, what “self-care measures a patient can take before seeking medical attention, such as home remedies or over-the-counter medications,” and what other immediate steps are necessary. Triage of patients. ChatGPT could be used to determine which patients require priority care (including the need for surgery) by asking the patients questions about their medical history and their symptoms. Medication information. As discussed in the medication management section, ChatGPT can be used to see what drug side effects, consequences, and possible contraindications are possible. Patients will be able to ask questions in their layman’s language and ChatGPT can respond “with accurate and timely information, helping patients make informed decisions about their medications.” ChatGPT should also be able to quickly provide details about the “proper dosage, administration, and storage of medications, as well as potential alternatives for patients who are allergic or intolerant to specific prescriptions.” ChatGPT will help doctors stay current about new drugs, drug recalls, and other critical pharmaceutical information. Medical education. ChatGPT will help students, doctors, and other healthcare professionals obtain medical information and resources to help with their studies and with ongoing medical learning. Mental health support. ChatGPT “can be used to provide behavioral health support to patients, including screening for mental health conditions, offering coping strategies, and connecting patients with resources for further support.” Remote monitoring of patients. ChatGPT will work with patients who are wearing medical devices and sensors to help doctors and healthcare providers have access to real-time patient information – to alert the doctors/providers that a patient is in danger or has health issues that should be addressed. Early intervention should lead to better health outcomes. Medical professionals and hospitals will need to keep current with the latest AI tools to better serve their patients. What are some of the concerns about the use of ChatGPT in the healthcare sector? There are many different legal and ethical issues involved with the use of ChatGPT. Some current and federal laws already do apply to the use of any type of artificial intelligence in the healthcare sector. Many laws and regulations will likely be enacted as the use of ChatGPT and AI expands and the consequences of using this computer software become better understood. Confidentiality. Much of the data involved with ChatGPT comes directly from patients. There are already laws that protect patient information such as the Health Insurance Portability and Accountability Act of 1966 (HIPAA) and various federal and state laws. In addition to these laws, state medical agencies also regulate the use and storage of patient information. The manufacturers of ChatGPT software and the doctors who recommend and use the AI software will need to ensure that their patient information is private, secure, and complies with the applicable laws. Patients will need to be consulted about how their medical information is used. Generally, patients will likely have to “opt-in” for the AI software to be able to use a patient’s data. Healthcare providers will need to understand when their patient’s information is being used by ChatGPT and what information the providers need to explain to their patients about how ChatGPT may use their patient data. Many medical practices may need to update their HIPAA forms and their relationships with their various healthcare vendors. Accuracy. The software does need to be tested for accuracy. Patients’ lives are at risk. The information that is being analyzed needs to be accurate. The unauthorized practice of medicine. On the surface, the ability of ChatGPT to be used for clinical trials and medical research sounds like a worthy goal – but ultimately doctors and licensed healthcare professionals need to make medical decisions for their patients. The line between gathering and analyzing data and making medical decisions is likely to become a very fine one – and the subject of further laws and regulations about the medical and legal limits of ChatGPT. ARTIFICIAL INTELLIGENCE AND THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996 (HIPAA) AI in the healthcare industry almost by definition, requires constant access to patient information. Developers and covered health providers need to understand when and how HIPAA applies to their […] Other legal issues regarding ChatGPT may involve: Intellectual property issues Bias issues FDA compliance – there are already FDA regulations regarding the use of artificial intelligence as medical devices and for medical treatment. FDA oversight of ChatGPT is just beginning and is likely to expand. Many other developing issues ChatGPT offers many possibilities and promises for providing quality healthcare for patients and allowing doctors to provide better and more advanced healthcare to their patients. The AI services aim to both help the doctor better communicate with the patient and provide better patient outcomes. Both the developers of new software and the medical practices that use ChatGPT for their patients will need to understand the medical and legal limitations of ChatGPT. The legal limitations include issues of patient privacy, data security, the unauthorized practice of medicine, and many other issues. FDA POLICY ON WHEN SOFTWARE THAT USES ARTIFICIAL INTELLIGENCE AND MACHINE LEARNING QUALIFIES AS A MEDICAL DEVICE As more artificial intelligence products become available, the FDA is reevaluating its approval criteria. For now, De novo approval and 501(k) are being used along with premarket approval. Physicians and developers should contact Cohen Healthcare Law Group, PC to discuss the legal and ethical concerns about using ChatGPT. Our experienced healthcare attorneys advise physicians and developers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
June 8, 2023
Healthcare
Can Physicians Legally Invest in a Startup-Owned Pharmacy?
In today’s video, we address whether a physician can legally invest in a pharmacy that is owned by a startup that provides online telehealth services, including diagnosis and prescription based on a questionnaire to its customers. Hi everyone, I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare industry clients just like you, navigate healthcare and FDA legal issues so you can grow your healthcare business. In a prior video we said that the proposed venture that we’re talking about is legally risky from a variety of standpoints, including the way that telehealth rules in many States tend to require an in-person, good faith exam prior to physician prescribing, and the way regulators can frown upon prescription based solely on an online questionnaire. So, there are risks there depends on how aggressive you want your model to be. On the pharmacy side, many States do prohibit physicians from owning or investing in a pharmacy. So, that’s problematic. One State that is a little bit unusual in this regard is Texas. In Texas, physicians may own or invest in a pharmacy, as long as the ownership structure fits within the Texas Patient Non-Solicitation Law exceptions. So, we have to look at those. Now, even with that, physicians have to bear in mind that there is a federal Stark law, which prohibits self-referral; and the federal Anti-Kickback Statute (AKS), which prohibits payment in exchange for referrals for items or services paid for by Federal health care programs. Texas like many states has its own State law prohibitions against self-referral and kickbacks. Wherever you look: New York, California, you’ll find those prohibitions. So, in analyzing the proposed compensation arrangement, one thing physicians and startups should bear in mind is that legal or regulatory trouble can come from a variety of places, including some side doors that one might not expect. For example, many States have, as we know, been reviewing physician investment into compounding pharmacies and looking there for unlawful or medically unnecessary referrals. So, it might be that kind of regulatory activity that triggers legal jeopardy. Regulators possibly could see, for example, this as an arrangement where physicians are given a financial incentive (also known as an inducement) to refer patients to medications, where the physicians themselves benefit or profit as soon as the patient buys the medicine from the pharmacy where the physician has an ownership interest. Some of these arrangements, for example, might involve creams to alleviate pain; DNA tests; genetic tests; or referrals to affiliated labs for urine testing, there are lots of different varieties and flavors. Some States will impose on physicians the requirement of disclosing their ownership or investment or other compensation interest to an entity or in an entity to which they refer patients. Remember that kickbacks are often defined to involve any remuneration, “direct or indirect.” This is a powerful catch-all, “indirect,” it can be used where the business structure involves multiple entities and a roundabout way of getting compensation to the clinician. So, it pays to have these innovative business structures well vetted by experienced legal counsel, and we’ve seen many. Thanks for watching. Feel free to contact us with your questions or book an appointment. We have helped hundreds and hundreds of healthcare industry clients just like you build their dream. We look forward to working with you on your journey to success! Testimonials
April 24, 2023
Healthcare
How MSOs Help Medical Practices with Office and Equipment Rental
A Managed Service Organization (MSO) has numerous benefits. At the core, an MSO helps doctors and other healthcare professionals separate the administrative side of a medical practice from the clinical side. The clinical side is regulated in many ways through federal laws, state laws, and the regulations and policies of state and local medical boards. Federal and state laws the regulate medical practices Stark Law is a federal law that prohibits referrals by doctors to entities called designated healthcare services that the doctors (or a close relative) have a financial interest in – when medical practices submit bills for payment to Medicare and Medicaid. Stark Law imposes civil penalties including fines and the possible cessation of the medical practice for violations. The Anti-Kickback Statute (AKS) regulates referrals to and from physicians by entities such as pharmaceutical companies if the referral is based in any way on an improper financial incentive such as the payment of cash, positions on medical boards that are just ways to pay a doctor who does little or no work for the payment, vacations, and other benefits. The AKS applies to bills submitted to Medicare, Medicaid, and any other federal healthcare agency that pays medical bills such as TRICARE. Violations of the AKS can result in civil and criminal penalties. Violations of Stark Law or the AKS may also result in complaints that the doctor/medical practice violated the federal False Claims Act or a state false claim law because bills to federal agencies such as Medicare or Medicaid were made fraudulently. Physicians who have an ownership interest in a medical practice also need to understand their state’s corporate practice of medicine laws. These laws regulate who can have an ownership interest in a medical practice. The aim of all these laws – Stark Law, the AKS, the False Claim Act, and the corporate practice of medicine laws is to ensure that the health of the patients comes before any financial interests of the physicians. The benefits of an MSO An MSO helps medical practices do more than just tend to the business side of a medical practice. An MSO can help medical practices show that the business side of the practice is separate from the clinical side by specifically meeting the exceptions to Stark Law and the safe harbors to the AKS that are defined in those statutes. An MSO can help show that the medical malpractice is not violating either the federal or state False Claims Acts and is also meeting the requirements of the state and local medical boards. An MSO can help a medical practice come into compliance with corporate practice of medicine laws. As we’ve discussed, MSOs supply the business side of a medical practice – with human resources, payroll and employee benefits, education, compliance, and other non-medical matters. While MSOs mainly provide services for physicians, Physicians Practice Group states that “MSOs can help hospitals and other medical ventures. MSOs can be owned by different entities including hospitals, physician groups, investors, and others.” MSOs can also provide the capital for a medical practice and then offer the practice office space, equipment, and other essentials. In order for an MSO to show the medical practice is compliant with the various federal and state laws that prioritize patient safety over financial profit, a medical practice should review the specific statutory exceptions and safe harbors, what tasks the MSO can and can’t perform, and what contractual arrangements should be entered into between the medical practice and the MSO with an experienced healthcare lawyer. WHEN USING A MANAGEMENT SERVICES ORGANIZATIONS (MSO) IS THE RIGHT CHOICE FOR YOUR MEDICAL PRACTICE Managed Services Organizations help physicians focus on practicing medicine by freeing doctors from many administrative tasks. Failure to consult with an MSO healthcare lawyer can cause civil and […] What tasks can MSOs perform? Some of the general tasks MSOs can perform, according to Physicians Practice Group, include: Medical coding for billing, payment, and collection to help ensure False Claims Act compliance and other federal/state compliance issues Educate and train the medical staff Compliance with HIPAA (Health Insurance Portability and Accountability Act), OSHA (Occupational Safety and Health Administration) regulations, FMLA (Family and Medical Leave Act), CLIA (Clinical Laboratory Improvement Amendments of 1988), and state laws Ensuring that the medical and administrative staff have the proper credentials The information technology needs of the medical practice Various financial issues including procuring supplies and medications, audits, financial management, payroll and benefits, marketing, sales Risk management Scheduling Transcription of medical records Public relations Disaster management Quality assurance Contract negotiations Insurance risks Other administrative aspects of the medical practice According to Physicians Practice MSOs can: Provide business services that allows the medical practice to be quite independent of the MSO Own/buy the tangible assets of the practice and manage the assets directly In this type of MSO- the MSO owns the office space, equipment, and supplies – and leases the space/equipment/supplies back to the medical practice. “That is, the physicians continue to practice in their existing office space and own their medical records, keep their existing insurance plan contracts, staff, and so on, but no longer own the administrative expense and burden of managing those assets.” This makes it hard for the medical practice to terminate the agreement with the MSO but can help the medical practice meet its compliance issues and shifts the burden of administering the medical practice to the MSO. Stark law exceptions and office space rentals Stark law provides numerous exceptions to help medical practices come into compliance. One exception is for compensation arrangements involving payments for office space made by a lessee to a lessor. “This exception would also apply when a solo-practice physician establishes such a relationship through his/her practice or wholly owned legal entity, or where a physician stands in the shoes of his/her physician organization for purposes of the office space lease arrangement.” Stark Law provides the following exception for the rental of office space: Payments for the use of office space made by a lessee to a lessor should comply with this Stark Law exception if the arrangement meets the following requirements: The lease agreement must be in writing, signed by the parties (such as the MSO and the medical practice), and specify what property is covered. The length of the office space rental must be at least one year. If the lease contract terminates with or without cause, the parties (such as the MSO and the medical practice) can’t enter into a new lease contract for the same space for the remainder of the first year of the original lease contract. The office space that is rented/leased cannot be more than what is reasonable and necessary “for the legitimate business purposes of the lease arrangement” and shouldn’t be shared with the lessor or any person/entity related to the lessor. – unless certain specific conditions set forth in the Stark Law exception statute are met. The rental charges during the term of the lease should be set in advance and should be “consistent with fair market value.” The rental charges during the term of the lease should not be based in any manner on: “The volume or value of referrals or other business generated between the parties; or By using a formula based on A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space; or Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee.” The lease contract should be “commercially reasonable even if no referrals were made between the lessee and the lessor.” If the lease arrangement expires after a term of at least 1 year, a holdover lease arrangement immediately following the expiration of the lease arrangement satisfies the other requirements of the exception and other specific conditions set forth in the Stark Law exception statute. Generally, tenants can make payments for common areas such as central reception areas if the lease payments meet certain pro-rate share and fair market value conditions. Stark law exceptions and equipment rentals In many respects, the Stark Law exception for renting equipment is similar to the exception for office space. Again, for our discussion, the MSO should be considered the lessor and the medical practice the lessee – though Stark Law permits the physician to be either the lessor or the lessee – provided the specific terms of the exception are met. The equipment rental exception: “Would also apply when a solo-practice physician establishes such a relationship through his/her practice or wholly owned legal entity, or where a physician stands in the shoes of his/her physician organization for purposes of the lease arrangement.” The essential terms of the lease arrangement require: That the rental or lease agreement is in writing, signed by the parties, and specifies what equipment is covered. The equipment rented or leased should meet the reasonable and necessary business needs of the medical practice and be used exclusively by the lessee (not shared with the lessor or people/entities related to the lessor). The lease should be one year or more. Similar termination conditions to the office space rental requirements apply. The rental charges are set in advance, are based on fair market value, and are not based on the volume or value of any referrals or other business generated between the parties (the MSO and the medical practice), or other criteria set forth in the statute. The lease contract would be commercially reasonable even if there were no referrals between the parties. “A holdover month-to-month rental for up to six months immediately following an agreement with a term of at least one year is allowed,” provided certain conditions are met. The AKS and – office space rentals and equipment rentals The Office of Inspector General does permit similar office and equipment agreements between an MSO and a medical practice. Normally, payment for rental space wouldn’t violate the AKS – provided the payment isn’t below fair market value or the tenant/medical practice rents more than is commercially necessary. Payments below fair market value or for more spaced than commercially necessary could be considered “kickbacks.” Generally, for either the office space rental or equipment rental safe harbors to the AKS to apply: The lease must be signed by both parties (the MSO and the medical practice) The lease should cover the premises leased or the equipment leased. The lease should specify any lessor access rights. The length of the lease should be at least one year. The rental should be set forth in advance and be consistent with fair market value, The office space/equipment should be what is necessary for the practice and no more. MSOs and the Corporate Practice of Medicine For more information about how MSOs can help with corporate practice of medicine compliance, please see our prior discussion of this topic. There are some direct exceptions to the California laws that prohibit the corporate practice of medicine, such as creating a professional medical corporation. There are also strategies that can be used such as the use of a management services organization (MSO) to help ensure that the medical practice meets its financial needs while also ensuring that the care and treatment of patients are the priority. Medical practices should consider using a managed service organization to administer the business side of their practice so the medical practice can focus on the medical side of the practice – and also help show the practice is in compliance with Stark Law, the Anti-Kickback Statute, corporate practice of medicine laws, and other laws that serve to prioritize patent safety over financial profit. EXCEPTIONS AND ALTERNATIVES TO THE CORPORATE PRACTICE OF MEDICINE California has a strict corporate practice of medicine law. Physicians should consider a professional medical corporation. Doctors need to be aware of Stark Law and the AKS. An MSO may be advisable. Physicians and medical practices should contact Cohen Healthcare Law Group, PC to discuss how an MSO can help address federal and state compliance laws and regulations. Our experienced healthcare attorneys advise physicians and medical practices about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
April 15, 2023
Healthcare
Stem Cells Therapy Clinic Startups – Legal Compliance Issues
The FDA has the authority to regulate a practice’s regenerative medicine products or treatments. Healthcare companies that don’t understand and comply with these regulations may receive warning letters. Their products may be seized. The FDA may seek injunctions against the companies. There could even be fines and criminal penalties. Stem cells are one form of regenerative medicine. Other forms include platelet-rich-protein (PRP) therapy, and gene therapy. WHY THE FDA WON’T APPROVE YOUR REGENERATIVE MEDICINE PRACTICE Regenerative medicine includes many treatments and products such as stem cell therapy, PRP, and gene therapy. An experienced stem cell and regenerative medicine lawyer can explain the FDA requirements. What are stem cells products and therapies? According to the Mayo Clinic, stem cells are the cells of the human body: “From which all other cells with specialized functions are generated. Under the right conditions in the body or a laboratory, stem cells divide to form more cells called daughter cells. These daughter cells become either new stem cells or specialized cells (differentiation) with a more specific function, such as blood cells, brain cells, heart muscle cells or bone cells. No other cell in the body has the natural ability to generate new cell types.” Stem cells are useful in understanding how diseases happen. Stem cells can generate healthy cells that replace deceased cells or repair damaged cells (regenerative medicine). Some of the possible beneficiaries of stem cell therapy may include helping people with “spinal cord injuries, type 1 diabetes, Parkinson’s disease, amyotrophic lateral sclerosis, Alzheimer’s disease, heart disease, stroke, burns, cancer, and osteoarthritis.” Stem cells may be used to test drugs for safety and quality. For example, “nerve cells could be generated to test a new drug for a nerve disease.” Stem cell sources include: Embryonic stem cells. Embryos that are 3-5 days old and are considered versatile enough to “regenerate or repair diseased tissue and organs.” Adult stem cells. These cells are usually found in bone marrow or fat (or the hip). Adult stem cells have more limited utility than embryonic cells though researchers are discovering evidence that “adult stem cells may be able to create various types of cells. For instance, bone marrow stem cells may be able to create bone or heart muscle cells.” Currently, “adult stem cells are currently being tested in people with neurological or heart disease.” Adult cells altered to have the properties of embryonic stem cells. Using genetic programming, “researchers can reprogram the cells to act similarly to embryonic stem cells.” Scientists aren’t sure yet about the adverse effects in humans. Perinatal stem cells. Scientists have also found stem cells in amniotic fluid as well as umbilical cord blood that have the ability to change into specialized cells. There is some controversy (including moral and ethical concerns) about the use of embryonic stem cells. Stem cell products and therapies generally are injected into a person’s damaged anatomy – with the aim of regenerating a healthy anatomy. There are concerns with all types of regenerative medicine including the concern that cells could mutate which could cause cancer. The National Institutes of Health created guidelines for human stem cell research in 2009. FDA oversight of stem cell therapies and regenerative medicine Stem cell products are treated like biological drugs. Stem cells are regulated through the FDA’s Center for Biologics Evaluation and Research (CBER). “The Center for Biologics Evaluation and Research (CBER) regulates cellular therapy products, human gene therapy products, and certain devices related to cell and gene therapy. CBER uses both the Public Health Service Act and the Federal Food Drug and Cosmetic Act as enabling statutes for oversight.” “Cellular therapy products include cellular immunotherapies, cancer vaccines, and other types of both autologous and allogeneic cells for certain therapeutic indications, including hematopoetic stem cells and adult and embryonic stem cells. Human gene therapy seeks to modify or manipulate the expression of a gene or to alter the biological properties of living cells for therapeutic use.” The National Institutes of Health states that, in 1997, the FDA began a “Risk-based, tiered approach to regulating cellular and tissue-based products. As a result, human cells, with the exception of those deemed minimally manipulated and used for autologous treatments, would be subject to FDA premarket approval as biologics.” So far, the FDA has been slow to place products in the “minimally manipulated category.” In addition to FDA regulation, state medical boards and the states themselves can regulate experimental stem cell therapies and do regulate the practice of medicine. The FDA’s authority to regulate stem cells is derived from Section 361 of the Public Health Service Act (providing authority for the FDA to establish regulations for all HCT/Ps to prevent the introduction, transmission, and spread of communicable diseases) and a series of rules known as the HCT/P regulations. HCT/P stands for human cells, tissues, and cellular and tissue-based products. Manufacturers of stem cell therapies and other products in this category must comply with the HCT/P regulations including registering the stem cell therapy with the FDA’s CBER. “Manufacture means, but is not limited to, any or all steps in the recovery, processing, storage, labeling, packaging, or distribution of any human cell or tissue, and the screening or testing of the cell or tissue donor.” We’ve written about these regulations including discussing such terms as homologous use, autologous use, reproductive use, minimal manipulation, and other terms. Since stem cell therapies are handled by the FDA as drugs – these therapies are also subject to current Good Manufacturing Practices (cGMPs). Section 351 of the Public Health Service (PHS) Act defines a biological product as a “virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, or analogous product, … applicable to the prevention, treatment, or cure of a disease or condition of human beings. “Both the FDA’s Center for Drug Evaluation and Research (CDER) and Center for Biologics Evaluation and Research (CBER) have regulatory responsibility for therapeutic biological products, including premarket review and oversight.” Again, since stem cell products are intended to treat disease, stem cell products fall within the definition of a biological drug, requiring FDA approval. California has its own stem cell regulations. CALIFORNIA STEM CELL REGULATIONS GUIDE THE EMERGING STEM CELL RESEARCH EFFORT AND INDUSTRY California stem cell laws boost the stem cell industry by funding stem cell research, but the product side of industry is largely in the hands of the FDA. FDA and stem cell warnings The FDA has raised concerns about stem cells. The FDA has expressed concerns that “stem cells have been called everything from cure-alls to miracle treatments.” The agency states that stem cell therapies do offer the hope that the therapies can treat diseases or conditions for which few treatments exist. The FDA is expanding its oversight of stem cell products because the products may be illegal, potentially harmful, and offer false promises. Stem cell therapies – FDA safety concerns The FDA has numerous safety concerns about unproven stem cell treatments. For example, “attendees at a 2016 FDA public workshop discussed several cases of severe adverse events. One patient became blind due to an injection of stem cells into the eye. Another patient received a spinal cord injection that caused the growth of a spinal tumor.” Some of the safety issues include: “Administration site reactions The ability of cells to move from placement sites and change into inappropriate cell types or multiply Failure of cells to work as expected The growth of tumors” The FDA emphasizes that even when stem cell therapies involve your own cells, there are still safety risks. “In addition, if cells are manipulated after removal, there is a risk of contamination of the cells.” STEM CELL LAWS AND REGULATIONS: FDA REGULATION OF STEM CELL THERAPIE If you wanted to upgrade the old film, “The Graduate,” you’d have Dustin Hoffman’s character shouting out “stem cells!” instead of “plastics!” Of course, he would immediate meet his favorite […] FDA approval of stem cell therapies Generally, stem cells products cannot be approved for market use unless the stem cell products are either approved by the FDA (premarket approval or 510 (k) clearance)) or are studied in a clinical investigation that is approved by the FDA. A clinical investigation is called an Investigational New Drug Application (IND). An IND is a “clinical investigation plan submitted and allowed to proceed by the FDA.” The review process also generally investigates how the stem cell therapy will be manufactured so the “FDA can make sure appropriate steps are being taken to help assure the product’s safety, purity, and strength (potency). The FDA also requires sufficient data from animal studies to help evaluate any potential risks associated with product use.” Clinical trials that aren’t conducted pursuant to a formal IND investigation may be subject to FDA warning letters or oversight. What is an IND? An Investigational New Drug Application (IND) is a clinical study sponsor request for FDA authorization to “administer an investigational drug or biological product to humans.” Unless an exemption applies, the sponsor for a clinical study must obtain FDA authorization for conducting the study by submitting an IND Application. Before a new drug or biological product such as a stem cell therapy treatment can be shipped in interstate commerce, the IND must be filed if the drug/biological product is not “the subject of an approved New Drug Application or Biologics Product License Application.” “Clinical studies must follow a set of laws and regulations, which are intended to protect the right, safety, and welfare of human subjects participating in human trials, ensure the quality, validity, and integrity of the clinical trial data, and promote the availability of new medical products to the public. These laws and regulations define the roles and responsibilities of entities, such as sponsors, clinical investigators, and institutional review boards. In addition, various guidance documents and standard operating procedures are available to clarify policies and procedures for the IND process.” The content and format of an IND submission must be “complete, well-organized as per 21 CFR 312, and include all applicable FDA Forms.” These forms can also be found in FDA’s Form Database. There are specific submission requirements including requirements for electronic submissions for commercial INDs. The current status of FDA-approved products derived from Stem Cells FDA’s approval of stem cell products is minimal. The only stem cell-based products that are FDA-approved for use in the United States consist of blood-forming stem cells (hematopoietic progenitor cells) derived from cord blood. One approved stem cell product is Hemacord, a cord blood-derived product manufactured by the New York Blood Center and used for specified indications in patients with disorders affecting the body’s blood-forming system…. Other approved licensed HCT products from the Office of Tissues and Advanced Therapies (OTAT) can be found on the FDA’s website. PHYSICIAN STEM CELL THERAPIES LEGALLY AMBIGUOUS, WHILE REGENERATIVE CLINICS PROSPER Recent press calls into question widespread “regenerative” and anti-aging medicine, and physician practices that use stem cell therapies. Possible FDA actions on for unapproved stem cell products The FDA may issue warning letters and seek many types of administrative and judicial actions, including criminal enforcement, depending on the violations involved. In August 2017, the FDA announced that the FDA would be increasing its oversight of stem cell therapies and regenerative medicine. And in March 2017, the FDA published a perspective article in the New England Journal of Medicine in March 2017, to further clarify the benefits and risks of stem cell therapy. The FDA has also provided Important Patient and Consumer Information About Regenerative Medicine Therapies. Stem cell therapies usually are reviewed through an Investigational New Drug (IND) process (otherwise a more formal premarket approval process is required). In turn, clinical studies are normally used to obtain IND approval. There are other legal compliance issues including privacy and diversity in clinical studies. Since stem cell therapies often involve cutting-edge technology and research, there are also intellectual property issues including possibly patent issues that need to be addressed. The developers and users of stem cell therapies should contact Cohen Healthcare Law Group, PC to discuss the FDA and other compliance issues. Our experienced healthcare attorneys advise medical companies and the doctors who prescribe stem cell therapies about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 28, 2023
Healthcare
New California Laws for Physicians and Surgeons for 2023
The Medical Board of California (MBC) recently discussed many of the new California laws that govern the practice of medicine in California. We summarize a few of those new laws here starting with – AB 2178 (Bloom) – Physicians and surgeons: special faculty permits: academic medical center. This law, according to MBC, updates how a medical center is defined and certain Board specific permit programs. AB 2178 states that the Medical Practice Act generally prohibits physicians and surgeons from practicing medicine unless the physician/surgeon has a certificate issued by the Medical Board of California. The Medical Practice Act also authorizes a person who “meets certain eligibility requirements to apply to the board for a special faculty permit.” The special faculty permit authorizes the applicant to “practice medicine without a physician’s and surgeon’s certificate only within: The medical school itself Any affiliated institution of the medical school, or An academic medical center, and Any affiliated institution in which the permit holder is providing instruction as part of the medical school’s or academic medical center’s educational program and for which the medical school or academic medical center has assumed direct responsibility.” Current California law defines an “academic medical center” for these purposes as a facility that meets specific requirements, including: Training a minimum of 250 residents and postdoctoral fellows annually Having foreign medical graduates in clinical research, and Offering clinical observership training. AB 2178 changes the definition of “academic medical center” by: “Requiring the facility to train a minimum of 250 resident physicians in specified residencies Removing the requirement that the research of the foreign medical graduates be clinical, and Requiring the facility to instead offer clinical observer experiences.” AB 2168 specifically updates the definition of the term “academic medical center” as follows: “A facility licensed by the State of California. The facility conducts both internal and external peer review of the faculty for the purpose of conferral of academic appointments on an ongoing basis. The facility conducts clinical and basic research for the purpose of advancing patient care. The facility trains a minimum of 250 resident physicians in Accreditation Council for Graduate Medical Education accredited residencies on an annual basis commencing each January 1. The facility has more than 100 research students or postdoctoral researchers annually. The facility has foreign medical graduates in research. The facility offers clinical observer experiences. The facility is accredited by the Western Association of Schools and Colleges and the Accreditation Council for Graduate Medical Education.” The time that a special faculty permit holder spends in a faculty position is not “counted toward the postgraduate training required for licensure and shall not qualify the holder of the permit for waiver of any written examination required for licensure.” The medical school or academic medical center shall not “appoint the holder of a special faculty permit to a position as a division chief or head of a department without express written authorization from the board.” California Medical Board lowers supervision threshold for medspa and cosmetics affiliated physicians California law now lowers the threshold of supervision of nurses and other appropriate licensed healthcare practitioners in medical spas.In recent rule-making the Medical Board of California […] Other physician and surgeon laws summarized by the Medical Board of California Other California laws (effective in 2023) that MBC suggests physicians and doctors understand include the following: AB 852: (Wood) – Health Care Practitioners: Electronic Prescriptions. This law governs when healthcare providers must provide electronic prescriptions, what exemptions may apply, the obligations of the pharmacies to fill electronic prescriptions, and the need for prescribers who qualify for an exemption to register with the Board of Pharmacy. AB 1102: (Low) – Telephone Medical Advice Services. This law addresses the requirements for providing telephone medical advice services from an out-of-state location. AB 1120: (Irwin) – Clinical Laboratories: Blood Withdrawal. This California explains how a certified phlebotomy technician can collect blood including the requirement that the “blood collection procedure is performed under the general supervision of a physician and surgeon and the blood collection procedure is performed using a device or devices approved by the United States Food and Drug Administration.” AB 1278: (Nazarian) – Physicians and Surgeons: Payments: Disclosure: Notice. AB 1278 requires written, office, and website notice requirements that physicians must provide “informing patients of the federal Centers for Medicare and Medicaid Services Open Payments online database.” “Physicians working in a hospital emergency room are exempted from these requirements.” AB 1636: (Weber) – Physician’s and Surgeon’s Certificate: Registered Sex Offenders. This law explains the Board’s authority regarding a physician and surgeon (P&S) license who is convicted or disciplined for acts of sexual misconduct. AB 1797: (Weber) – Immunization Registry. This law provides for the disclosure of certain patient information (such as race and ethnicity) that must be disclosed to certain local, regional, or state health departments regarding immunization information. AB 1954: (Quirk) – Physicians and Surgeons: Treatment and Medication of Patients Using Cannabis. This law prohibits physicians and surgeons “from automatically denying treatment or medication to a qualified patient based solely on a positive drug screen for tetrahydrocannabinol (THC) or report of medical cannabis use without first completing a case-by-case evaluation of the patient that includes a determination that the qualified patient’s use of medical cannabis is medically significant, as defined, to the treatment or medication.” Other conditions also apply. AB 2098: (Low) – Physicians and Surgeons: Unprofessional Conduct. AB 2098 “establishes that it is unprofessional conduct for a physician and surgeon to share mis/disinformation to a patient under their care in the form of treatment or advice, as defined.” AB 2176: (Wood) – Live Birth Registration. Changes the deadline to register live births. AB 2288: (Choi) – Advance Health Care Directives: Mental Health Treatment. “Clarifies that advance health care directives include mental health and treatment” and other provisions. AB 2338: (Gipson) – Health Care Decisions: Decisionmakers and Surrogates. “Creates a list of relatives who can make medical decisions for an incapacitated adult who does not otherwise have a legally recognized health care decisionmaker.” AB 2436: (Bauer-Kahan) – Death Certificates: Content. Updates the information that should be included. SB 189: (Committee on Budget and Fiscal Review) – State Government. Addresses MBC public meeting requirements. SB 528: (Jones) – Juveniles: Medication Documentation. “Requires certain forms related to the provision of psychotropic medications be included within a foster youth’s case plan.” Other new California laws of concern to physicians and surgeons include: SB 872: (Dodd) – Pharmacies: Mobile Units SB 923: (Wiener) – Gender-affirming Care SB 1029: (Hurtado) – One Health Program: Zoonotic Diseases SB 1184: (Cortese) – Confidentiality of Medical Information Act: School-linked Services Coordinators SB 1237: (Newman) – Licenses: Military Service SB 1259: (Laird) – Pharmacists: Furnishing Opioid Antagonists SB 1346: (Becker) – Surplus Medication Collection and Distribution SB 1440: (Roth) – Licensed Midwifery Practice Act of 1993: Complaints A summary of recent MBC enforcement actions The MBC’s recent newsletter also discusses its enforcement actions for 2022. The MBC stated that: For the fiscal year 2021-2022, nearly 10,00 complaints were filed with the Board. More than 82% of these complaints were closed. Administrative actions were taken on 438 complaints. “A physician who fails to provide the requested records may be subject to a civil penalty of $1,000 a day for each day the records have not been provided, up to $10,000.” “In FY 2021-2022 (pg.17), the following case types had administrative action taken: Gross Negligence/Incompetence – 211 Licensees Inappropriate Prescribing – 44 Licensees Unlicensed Activity – 1 Licensees Sexual Misconduct – 14 Licensees Mental/Physical Illness – 15 Licensees Self Abuse of Drugs/Alcohol – 64 Licensees Fraud – 10 Licensees Conviction of a Crime – 14 Licensees Unprofessional conduct – 65 Licensees” California enacted many laws in 2022 that are now effective including AB 2178 which explains licensing requirements and issues for physicians and surgeons who work at academic medical centers. AB 2178 updated the definition of an academic center. Other new California laws address many other licensing, treatment, practice, and do’s and don’ts of the medical profession. Physicians and other healthcare providers should contact Cohen Healthcare Law Group, PC to discuss the newest federal, state, and medical board laws and requirements. Our experienced healthcare attorneys advise doctors and other types of healthcare providers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 22, 2023
