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Does Healthcare Law Favor or Smash Integrated Healthcare Practices Between Medical Doctors and Chiropractors?
Many aspects of healthcare are now becoming integrated. Medical practices that used to specialize are now trying to broaden their services by contracting with other medical providers who provide related services. So are chiropractors. Medical practices can be integrated by combining medical specialties such as orthopedic care with psychological care or pain management care with rheumatology care. Practices can also integrate by combining medical specialties with complementary or alternative care. For example, combining pain management with acupuncture care. The medical practice / chiropractic care combination is a particularly good model for examining which laws regulate how this combination can and cannot work. Many chiropractors use pain management doctors because chiropractors can’t give steroid injections while pain management doctors can. Many pain management doctors work with chiropractors because patients often see a chiropractor first. The chiropractors thus become a good source of referrals for the pain management doctors. Integrated arrangements may split the administrative duties or may allow one practice to assume the administrative duties for both practices – for the patients who use both medical services. Before starting any practice with a chiropractor; a pain management doctor orthopedist, or any other doctor, or buying any practice, you should review the legal dangers with an experienced medical business regulation attorney. Violations of the applicable federal and state laws can result in substantial fines, criminal charges, civil damages, and loss or suspension of a medical license. Improper combined practices can result in disciplinary actions from state medical boards and licensing authorities. For example, medical doctors have a broader authority to conduct a diagnosis than does a chiropractor. LEGAL RISKS ARISE IN INTERDISCIPLINARY MD-DC PRACTICE, CHALLENGING INTEGRATIVE MEDICINE MODEL When medical doctors collaborate with other licensed healthcare providers (such as chiropractors) in a multidisciplinary, clinical care or integrative medicine setting, legal risks can arise that […] Federal legal restriction Integrated chiropractic offices must follow the Stark Law, the Anti-Kickback Statute (AKS), the False Claims Act, the Health Insurance Portability and Accountability Act (HIPAA) and other relevant federal laws. Some laws only apply if Medicare or Medicaid are involved. Others apply to a broad range of government services. States also have their own laws and regulations that need to be reviewed with experienced medical regulation attorneys in the respective states. The key concern in the review of every financial or medical transaction between a medical clinic and a chiropractor is NOT what is in the best interest of the medical practice or the chiropractor. They key concern is what is in the best interest of the patient. Anti-Kickback Statute The federal Anti-Kickback Statute (AKS) is a federal criminal law that forbids exchanging or offering to exchange anything of monetary value to obtain getting referrals of any federal government health care business. Conviction of even one charge ca result in five years in jail and $25,000 in fines and exclusion from the right to participate in any federal healthcare program (not just Medicare or Medicaid which is all the Stark statutes cover). Civil damages may also be assessed including treble damages for each violation. ANTI-KICKBACK, FEE-SPLITTING & STARK Fraud and abuse issues permeate healthcare regulatory concerns. Our health care law attorneys regularly counsel clients on compliance with Federal and State anti-kickback statutes. Our lawyers […] The Safe Harbor Regulations. Safe Harbor is a way that some transactions can be protected. This means that the U.S. Department of Health and Human Services (US DHHS) and the Office of Inspector General (OIG) won’t enforce the Anti-Kickback Statute if medical providers and chiropractors engage in activity these federal agencies have said is OK to do. Medical practices, chiropractors, and medical practice/chiropractor combinations can seek an advisory opinion about whether their operation/transactions qualify for safe harbor protection. For example, one transaction that can possibly qualify for safe harbor is the agreement by the doctor to refer a case to the chiropractor in return for an agreement by the chiropractor to refer the patient back to the original doctor. Provided that fees aren’t split and there’s no other financial arrangement, this type of transaction could be legal. There are many other transactions that can qualify for the safe harbor which change periodically. The safe harbor regulations, by year, are posted on the OIG website. An experienced chiropractor medical practice lawyer can explain when you should seek an advisory opinion and what the exact request should include. The Stark Law Stark Law, named after it’s enactor, California Congressman Peter Stark, is the federal law(s) that prohibit a referral of patient who is on Medicare or Medicaid by a doctor to an entity that provides designated health services (DHS) – if the doctor has a financial interest in the DHS. This type of arrangement (also known as self-referral) creates a conflict of interest. Doctors with a stake in another health service will be likely to refer their patient to that health service even though other health providers may offer better care. On the surface, an arrangement by a physician to refer patients to a chiropractor likely violate the Stark Law if the physician has a financial interest in the chiropractor’s practice – or vice versa. Group Practice Exception. As with the Anti-Kickback statute, there are many exceptions that can apply. For example, a chiropractor could lease office space to a pain management doctor if the lease agreement is in writing and is commercially reasonable – or if the chiropractor is an employee of the doctor. The most common exception is called the “Group Practice” exception. This exception applies if there are: More than one doctor. Multiple doctors (such as a chiropractor and an orthopedist) who have formed a professional corporation, foundation, nonprofit corporation, partnership, or similar legal entity A shared enterprise. The doctors who are members of the group share their offices and equipment and provide their normal range of medical services to the DHS A unified practice. The doctors share decisions about the billing, budgets, and finances and makes decisions for the chiropractor/medical clinic integrated combination – as a whole. Chiropractic and medical services should be provided under a group billing number and a single taxpayer ID number. Other conditions your lawyer who understand medical laws and restrictions can explain. The group practice rules generally don’t apply to independent contractors. The chiropractor and other doctor(s) might even share profits if there are five or more doctors; the combined practice is formed logically by seniority, specialty, or location; and the profits are divided equally and compose just a fraction of their overall income. Productivity arrangements may also be legal. Consult an experienced medical clinic/chiropractic lawyer to see how to qualify for the group practice exception. Note, however, that the arrangement also must meet state-law requirements such as, for example, prohibitions against corporate practice of medicine; and also, for example, in California – the Moscone-Knox Professional Corporation Act and the way it specifies how clinicians from different disciplines (i.e., MD, DC) can be co-shareholders in a professional corporation. ANTI-KICKBACK, FEE-SPLITTING & STARK Fraud and abuse issues permeate healthcare regulatory concerns. Our health care law attorneys regularly counsel clients on compliance with Federal and State anti-kickback statutes. Our lawyers […] The False Claims Act This law prohibits doctors from presenting false claims to the government for payment of medical bills. False claims include overbilling and billing for services that were never performed. The chiropractor/medical clinic combination can create the risk of false claims since the health providers often bill at different rates and provide different services. Additional legal concerns for the medical practice/chiropractic care relationship Some of the underlying issues that must also be resolved in chiropractic/medical provider relationships are: Responsibility. Determining which doctor is ultimately responsible for the patient’s care and treatment Outside referrals. Reviewing when referrals to outside specialists must be made Diagnostic tests. Analyzing what tests are required Control. Deciding who has the authority to hire and fire staff Who can perform treatment. Determining which tasks can be done by nurse practitioners Doctors who work with chiropractors may be allowed to be compensated for giving consultations provided the compensation is fair and reasonable and is not based on referrals or the number of patients treated. The providers also need to make sure they comply with HIPAA which governs the privacy of electronic medical records. CAN YOU MAKE HIPAA PRIVACY & SECURITY EASY FOR A SMALL DOCTOR’S OFFICE OR OTHER PRACTICE? Making HIPAA compliance easy is like trying to catch a firefly in your hand. How the practice is legally structured? Most states try to balance the priority that medical businesses should provide services to the community (the common good) versus making a profit. There are restrictions on when medical practices can incorporate and whether they can provide professional medical services. Corporations that provide medical services must be professional medical corporations. States laws need to be reviewed to determine if a chiropractic corporation can hire a medical doctor. The reverse, a professional medical corporation hiring a chiropractor, is more likely to be approved. There are many different types of corporations. Medical practices need to know which types of corporations they can form and which ones they can’t. For example, California does not allow LLCs (Limited Liability Corporations) for professional services that require a license, certification, or registration. Business formation alternatives to a corporation include a partnership arrangement which requires a written document, a nonprofit, a foundation, and a sole-proprietorship. BUSINESS FORMATION (PARTNERSHIP, CORPORATION, LLC) Choice of Entity: Corporation vs. Partnership vs. LLC We advise entrepreneurs and start-up businesses on the best legal structure to form their enterprise. We will advise on the choice of […] Practical solutions to creating a chiropractic/medical clinic integrated practice Some of the ways chiropractors and doctors can work together without violating federal or state law may include (depending on review by respected medical business lawyers) are: Leasing. If a chiropractor leases space to a pain management doctor or a medical practice for commercially reasonable rates Hiring. If the medical practice employs the chiropractor Administrative work. If the chiropractor does administrative work for the medical clinic or marketing services for a flat rate marketing amount Using the management services organization (MSO) model. Here, the chiropractor acts a manger for the professional medical corporation. The chiropractor earns a fair market fee. The management agreement is written down in an MSO agreement. Chiropractors and Physicians Should Review Their Working Relationship with an Experienced Integrative Medical Practice Lawyer Doctors and chiropractors should review their contracts, referral arrangements, and business arrangements before they start working together. There are many laws, regulations, and policies that need to be reviewed to avoid criminal, civil, and disciplinary penalties. Please contact our integrated healthcare practice lawyers to learn what you can and can’t do- and how to best implement your working relationship. We are experienced integrated medical practice lawyers. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 15, 2018
Healthcare
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 not legal if the doctor has a financial interest in a designated health service. The presumption also applies to immediate family members of the referring doctor. A designated health service is generally a health facility that provides clinical tests, therapy, medical equipment, hospital services, or home-health services. Medical practices who improperly refer work can be denied payment, face substantial civil penalties for violating Stark, and lose their right to bill Medicare/Medicaid. Fortunately, Stark Law does allow referrals – if it can be shown the financial interest meets an approved exception. Some Stark Law approved exceptions are related to just compensation. Other exceptions are related to just ownership and investment. Many exceptions are related to all three – compensation, ownerships, and investment. QUICK SUMMARY OF FEDERAL “STARK” SELF-REFERRAL & ANTI-KICKBACK LAW AND CALIFORNIA SELF-REFERRAL AND FEE-SPLITTING PROHIBITIONS Here is a quick summary of federal self-referral (“Stark law”) and anti-kickback law, and California self-referral and anti-kickback / fee-splitting rules. The best course of action for any medical practice is to consult with an experienced Stark Law medical practice lawyer. The attorney will review your business structure, the way you make referrals, and how your medical operations work. The attorney can then advise you whether you risk being charged with noncompliance with Stark. The lawyer can suggest various ways you can lessen the risk of noncompliance by showing your practice qualifies for an approved exception. If you have been charged with a Stark violation, a respected Stark lawyer can help you argue any meritorious defenses. Showing your practice is on the exception list is one such meritorious defense. General exception requirements All exceptions, whatever the type of financial interest: Must comply with the regulations of the Centers for Medicare & Medicaid Services (CMS) and the Stark Must comply with the Anti-Kickback statute and any other relevant state and federal laws. Generally, apply only if the amount and volume of the referrals are not excessive. Some exceptions require that the doctor be a member of a “group practice.” A group practice is a complicated term that has many requirements. In short, it requires that at least five doctors work together for the common good of the practice. Your Stark Law medical practice exception lawyer can explain whether your practice is a group practice. ANTI-KICKBACK, FEE-SPLITTING & STARK Fraud and abuse issues permeate healthcare regulatory concerns. Our health care law attorneys regularly counsel clients on compliance with Federal and State anti-kickback statutes. Our lawyers […] Stark Law referral exceptions that are related to compensation, ownership, and investment Some of exceptions that can benefit medical practices are: Physician services. Referrals are permissible if the medical services are: Performed by a doctor who is a member of the group practice Performed by a doctor under the supervision of a doctor who is a member of the group practice In-Office Ancillary Services. Referrals are generally acceptable if the following conditions apply: Who performs the services. The services are achieved by: The referring physician or A doctor who is a member of the same practice group as the referring doctor or Someone who is supervised by the referring doctor or someone in the referring doctor’s practice group Where the services are performed. The services are done: In the same location the treating doctor: Normally performs his/her practice or The patient who is getting the service usually gets medical help from the referring doctor or someone in the group. Clinical laboratory services. In a building that the referring doctor’s practice group exclusively uses for all or some of the group’s clinical laboratory services. Non-clinical laboratory services. In a building the group practice of the referring doctor uses for some or all its services – other than the clinical laboratory services How the services are billed. The billing to Medicare/Medicaid used an approved billing number Services Furnished by an Organization to Enrollees. Doctors can make referrals to organizations that provide prepaid health services to enrollees. Prepaid health plans include: Approved HMOs, Approved CMPs (Competitive Medical Plans), Plans approved by the Centers for Medicare & Medicaid Services Other plans identified in the Stark Law statute This section applies to organizations and entities that contract with the organization. Academic Medical Centers. A doctor who has a financial relationship with an academic medical center can make referrals to that center if: The doctor is “bona fide” employee of the medical center Has a valid state license in the state where the medical center is located Is a member of the facility’s faculty Provides clinical teaching services at the center and is paid for providing those services The academic medical center meets the Stark Law criteria for approval All conditions must be met for the exception to apply. Implants furnished by an ASC. An ASC is an Ambulatory Surgery Center. Acceptable implants include: Cochlear implants (for hearing) Intraocular implants (for eyes) Prosthetic devices that are implanted Other approved implants The implant procedure must be done at the ASC by the referring doctor or a physician who belongs to the referring doctor’s medical group. Eyeglasses and Contact Lenses after the patient has cataract surgery. This exception does require that Medicare approved the eyeglasses or contact lenses. EPO (Erythropoietin) and other prescription drugs for dialysis patients who need outpatient treatment. Referrals must be for specified drugs (preapproved) that are given in an end-stage renal disease (ERSD) facility. Preventive services. Vaccines, immunizations, and screening tests are generally allowable Stark exceptions provided they aren’t given too often. The tests must be covered by Medicare. Intra-family rural referrals. Additionally, some referrals in rural areas are allowed if the services are for an immediate family member. To quality, there can’t be any nearby facilities or people that can provide the same service. Stark Law compensation exceptions that are related to just compensation arrangements Our Stark law attorneys acceptable forms of compensation may include: Rental of office space. Doctors can lease office space to lessees if the lease is in writing, the term is at least one year, the lease is commercially reasonable, and other conditions are met. Equipment rental. Like office rentals, equipment leases are acceptable forms of compensation if the lease is commercially reasonable, is in writing, lasts for a year or more, and other Stark Law conditions are met. Bona fide employee relationship. An employer can pay a physician or family member: If the doctor/family member has a true bona fide employment relationship with that employer, The compensation is fair It’s clear what services are required to earn the pay. For example, serving as a department chair or performing specific administrative duties. Other factors are met Some productivity bonuses may also be acceptable. Personal service arrangement. A doctor can also receive compensation if he/she is an independent contractor, instead of an employee. The conditions that must be met are similar to those for the bona fide employee relationship exception. Doctor incentive plan. Incentive plans are generally acceptable provided they don’t limit necessary medical services to those who are eligible. Physician recruitment. Hospitals need to spend money to attract the top medical talent. Compensation that the hospital pays a doctor to persuade the doctor to work for the hospital is an acceptable if certain conditions are met including: The agreement is in writing The agreement does not require that the doctor refer patients to the hospital The amount of the inducement is not related to the value or volume of any referrals The doctor can obtain staff privileges at other hospitals Charitable contributions. Charitable donations by a doctor or immediate member of the doctor’s family may be acceptable if the charity is an approved IRS tax-exempt charity. As with other exceptions, the donation can’t be based on the value or volume of referrals. It also can’t violate the Anti-Kickback statutes. Nonmonetary compensation. Referrals from a doctor to a designated health service are allowable if the compensation isn’t monetary – cash, check, money, etc. The compensation should be services or items that have small value – $300 or less. It can’t be solicited by the doctor or his/her staff. For example, it may be Ok for the doctor or staff to receive birthday presents or holiday presents. Fair Market Value Compensation. Some referrals are OK if several compensation basics are met: There is an agreement in writing that defines when and how compensation will be paid The amount of compensation to be paid is clear There is a timetable for services The transaction is commercially reasonable The services are legal This exception is a broad catch-all exception. It is often used when the other exceptions don’t apply Medical staff incidental benefits. Hospitals can provide non-cash benefits to their medical staff provided: The benefit is provided at the hospital For all members of the medical staff The benefit is comparable to benefits given at other hospitals The value of the benefit is less than $25 Other conditions are met An experienced Stark Law exception attorney can explain what your medical practice needs to do to comply with these exceptions. Other compensation exceptions There are many other exceptions set forth in the Stark Law statutes. These exceptions cover the following compensation areas: Risk-sharing arrangements Compliance training Indirect compensation arrangements Obstetrical malpractice insurance subsidies Professional courtesy Retention payments in underserved areas Community-wide health information systems Electronic prescribing items and services Electronic health records items and services Assistance to compensate a non-physician practitioner Timeshare arrangements Certain individual and group practice arrangements with hospitals may also be acceptable. Stark Law exceptions related to just ownership or investment interests The following ownership interests or investment interests may also be acceptable: An interest in publicly traded securities that are traded on standard exchanges such as the New York Stock Exchange and were publicly available An interest in mutual funds covered by the IRS rules if certain time and financial conditions are met An interest in certain providers such as rural providers, hospitals located in Puerto Rico, and hospitals that meet specific criteria. DO ONLINE COUPONS FOR DISCOUNTS TO PHYSICIAN AND OTHER CLINICIAN SERVICES VIOLATES STARK, ANTI-KICKBACK AND FEE-SPLITTING LAWS? Many online ventures want to know whether Stark, anti-kickback, and fee-splitting laws are violated by business arrangements that offer online coupons or Web-based coupons to customers. Make an appointment with a trusted California Stark Law exception attorney today There are many Stark Law exceptions that can benefit your medical practice. Learn what those exceptions are and how to implement them. Please contact our healthcare law and Stark lawyers to understand your options. We are respected Stark Law exception attorneys. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
January 15, 2018
Healthcare
MedSpa: Physician Supervision of RNs—Do You Need It?
There can be a lot of confusion in the industry—and medical spa treatment by RNs under physician supervision is an enforcement hot bottom. How Much Treatment Can RNs Do in a Medical Spa? While every state is different, we’ll start here with California. The most helpful resources are The Medical Board of California (MBC), FAQs – Cosmetic Treatments, and MBC, The Bottom Line: The Business of Medicine—Medical Spas. In Cosmetic Treatments, Question 1 says: “Physicians may use lasers or intense pulse light devices. In addition, physician assistants and registered nurses (not licensed vocational nurses) may perform these treatments under a physician’s supervision. Unlicensed medical assistants, licensed vocational nurses, cosmetologists, electrologists, or estheticians may not legally perform these treatments under any circumstance, nor may registered nurses or physician assistants perform them independently, without supervision.” Question 2 says: “Physicians may inject Botox, or they may direct registered nurses, licensed vocational nurses, or physician assistants to perform the injection under their supervision. No unlicensed persons, such as medical assistants, may inject Botox.” As to fillers, MBC states in Bottom Line that “the use of prescriptive medical devices and injections for cosmetic reasons is the practice of medicine…. There is a tendency for the public, and some in the profession, to view laser treatments, Botox and cosmetic filler injections as cosmetic rather than medical treatments. The use of prescriptive drugs and devices, however, is the practice of medicine, and the same laws and regulations apply to these types of treatments as those driven by medical necessity. There are no separate laws governing these procedures, and physicians will be held to the same standard as they are for their routine medical practices.” Question 6 of Cosmetic Treatments addresses microdermabrasion—if “it’s a medical treatment that penetrates to deeper levels of the epidermis,” then it “must be performed by a physician, or by a registered nurse or physician assistant under supervision.” Physician Supervision and Standardized Procedures for Nurses With respect to supervision, in Bottom Line MBC states: “While current law allows the delegation of laser treatments and injections to the above mentioned licensees, the law requires supervision by the physician. In the current environment, many have operated under the opinion that since the nursing regulations are broadly written, nurses may perform anything anywhere with essentially no supervision as long as there are “standardized procedures” or “delegation of services” documents on file. MBC also states: “Standardized procedures for nurses allow nurses to perform procedures while the physician is not on-site; however, they do not absolve physicians of their supervision responsibilities. Nor does the law allow nurses to set up a practice in a salon, hire a physician supervisor, or perform medical procedures independently. The law does not contain a legal definition of supervision, and therefore, absent a legal definition, the plain English definition applies. “Supervision” is defined as the act of supervising, which is to oversee, to direct, to have charge, to inspect, to provide guidance and evaluation.” MBC provides the following example: “As an example, the regulations for “standardized procedures guidelines” require physicians to be responsible for ensuring the experience, training, and education requirements for performance of the delegated function – and this must be documented. The regulations require that a method of initial and continuing evaluation of the nurses’ competence be established.” (emphasis added) Regarding your physical presence as the supervising physician, MBC in Bottom Line states: “When functioning under “standardized procedures,” physicians need not be present in the facility when the procedures are being performed. The facility, however, must be a medical setting. Regulations require that the location be an “organized healthcare system,” which is not a salon, spa, or other facility not under the control of the physician.” (emphasis added) Thus, if you are in a setting other than your own office, you should rent at fair market value and have exclusive control of the medical space during the time you are using it. As well: “The guidelines further require the standardized procedures to describe the circumstances under which the registered nurse is to immediately communicate with a patient’s physician concerning the patient’s condition. While there is no actual mileage limit relating to supervision, this requirement certainly means that the physician must be immediately reachable and able to provide guidance in the event of an emergency or the need for a higher level of care that must be provided by the physician. Physicians must be within a geographical distance that enables them to effectively provide supervision and support when needed or upon request.” 16 CCR 1364.50 states: “Whenever an elective cosmetic procedure involving the use of a laser or intense pulse light device is performed by a licensed health care provider acting within the scope of his or her license, a physician with relevant training and expertise shall be immediately available to the provider. For the purposes of this section, “immediately available” means contactable by electronic or telephonic means without delay, interruptible, and able to furnish appropriate assistance and direction throughout the performance of the procedure and to inform the patient of provisions for post procedure care. Such provisions shall be contained in the licensed health care provider’s standardized procedures or protocols.” (emphasis added) See also Board of Registered Nursing, Standardized Procedure Guidelines. The Good Faith Exam What is a good enough for a good faith exam in a medical spa or similar healthcare venture, and when do you need it? MBC states in Bottom Line: “Further, it is the responsibility of the physician to examine the patient before delegating a task to a registered nurse.” However, a nurse practitioner (NP) “may be delegated the task of providing the appropriate prior examination and ordering the drug or prescriptive device for the patient, if acting under standardized procedures.” MBC clarifies: “An appropriate prior examination is required where prescriptive drugs and devices will be used, and this examination may not be delegated to registered nurses. After performing the examination, the supervising physician may delegate a procedure that utilizes a prescriptive device to a nurse working under standardized procedures.” Videoconference Exam Regarding the “appropriate prior examination,” California law generally holds physicians to the same standard of care whether the patient encounter is in-person or via telehealth (e.g., videoconferencing), and requires informed consent, documentation in the medical record, compliance with privacy and security laws, and other adherence to law. (See Bus. & Prof. Code 2290.5; CMB, Practicing Medicine Through Telehealth Technology). However, CMB indicates that an in-person examinations for prescribing will “not only enhance the opportunity to confirm if a patient needs the identified medication or to rule out other medical conditions, but ensures the patient is advised of alternative treatment options and is aware of potential side effects.” (See CMB, Internet Prescribing – Information for Physicians; FAQs – Internet Prescribing and Practicing; Internet Prescribing—Information for Consumers). Although Business & Professions Code section 2242.1 only speaks to “an appropriate prior examination and medical indication therefor,” CMB has made its policy clear that the exam should be in-person, and “continues to investigate cases” that raise enforcement scrutiny. (Note 2242.1(a) states: “(a) No person or entity may prescribe, dispense, or furnish, or cause to be prescribed, dispensed, or furnished, dangerous drugs or dangerous devices, as defined in Section 4022, on the Internet for delivery to any person in this state, without an appropriate prior examination and medical indication, except as authorized by Section 2242.” 2242(b) has a limited 72-hour supply exception). On its webpage describing telemedicine, the California Medical Board (CMB) appears to default to the standard of care as the test as to whether telemedicine is permissible; however, on its webpage concerning Internet prescribing, CMB states that the law prohibits prescribing, without an “appropriate prior examination,” notwithstanding that standard of care may be satisfied or that it might be considered within the range of acceptable professional practice by peers not to have an in person exam (for example, in some tele-dermatology). On this page, CMB cites California Business & Professions Code, Section 2242. Notably, as of October 11, 2019, the California legislature amended and liberalized Section 2242 via AB 1264, to provide that an appropriate prior examination does not require a synchronous interaction between the patient and the licensee and can be achieved through the use of telehealth, as specified, provided that the licensee complies with the appropriate standard of care. Thus, 2242 now provides: “Prescribing, dispensing, or furnishing dangerous drugs as defined in Section 4022 without an appropriate prior examination and a medical indication, constitutes unprofessional conduct. An appropriate prior examination does not require a synchronous interaction between the patient and the licensee and can be achieved through the use of telehealth, including, but not limited to, a self-screening tool or a questionnaire, provided that the licensee complies with the appropriate standard of care.” Cal. Bus. And Professions Code § 2242. Yet even so, there are also standard of care concerns, as noted in a 2019 disciplinary action by the Medical Board of California entitled, In re Richard J. Holmes, M.D Operating Your Medi-Spa in a Legally Compliant Way Healthcare compliance is complex and there are multiple elements to a good compliance programs. Also, there are different kinds of healthcare ventures that require special attention to structure. For example, there are compliance similarities and differences between and among healthcare ventures such as: Medical spas Telemedicine, telepsychology, teledermatology, telehealth, telepsychiatry Mobile health and fitness apps or software with a health advice component Other online and mobile / virtual healthcare businesses Here are some basics for the brick-and-mortar medical spa, at least in California: Procedures: An aesthetic RN can inject Botox or fillers, or perform laser treatment or medical microdermabrasion under your medical supervision. Standardized Procedures: You should have standardized procedures in place for the RNs. These standardized procedures should comply with all the requirements of California law.We noted above MBC’s example of “ensuring the experience, training, and education requirements for the performance of the delegated function”—and documenting the same, as well as evaluating the RN’s competence on an ongoing basis. Supervision: Be sure the supervision is real and not token. As noted, MBC wants you “to oversee, to direct, to have charge, to inspect, to provide guidance and evaluation.”MBC also wants you, the physician, to be “knowledgeable and competent in the procedure being delegated” and “capable of performing it.” This does not require board certification to perform the cosmetic procedure, but it does require “sufficient knowledge and training in the procedures being performed.”Further, you must be “immediately reachable to provide guidance in the event of an emergency or the need for a higher level of care that must be provided by the physician,” and within a “geographical distance” that allows you to provide appropriate supervision and support upon request. If you are using an elective cosmetic procedure involving the use of a laser or intense pulse light, you must be “immediately available” to the provider—which means “contactable by electronic or telephonic means without delay, interruptible, and able to furnish appropriate assistance and direction throughout the performance of the procedure and to inform the patient of provisions for post procedure care.” Further, you must place such provisions in the licensed health care provider’s standardized procedures or protocols.Your name (or that of your professional medical corporation), not the RN’s, must show in advertisements about the treatments. No “medical director”: You should not be “medical director” for the medi-spa (see Q4 of Cosmetic Treatments) but should operate under your medical practice or professional medical corporation. Control of medical space: As noted above, if you are in a setting other than your own office, you should rent at fair market value and have exclusive control of the medical space during the time you are using it. Appropriate prior examination: An RN may not be delegated the appropriate prior examination. A nurse practitioner (NP) may be delegated the task of providing the appropriate prior examination and ordering the drug or prescriptive device for the patient, if acting under standardized procedures.Videoconference: Regarding the “appropriate prior examination,” California law generally holds physicians to the same standard of care whether the patient encounter is in-person or via telehealth. We recommend that physician see the patient in-person prior to prescribing. Among other things, CMB will want to be sure that there was a valid medical indication for the prescription, and the in-person exam can potentially bolster the record of such. We can discuss the nuances with you if you would like. Some Additional compliance points—record, documentation, standard of care, informed consent: As we discussed, the patients belong to you and are your responsibility as the physician. You are held to the standard of care and have to follow all the usual legal and regulatory requirements such as, for example, a robust informed consent process and documentation (see CMB, Medical Spas—What You Need to Know). Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
December 8, 2017
Healthcare
Prompt pay, cash discounts, dual fees legal for healthcare providers (physicians, chiropractors, acupuncturists)? (Part 2)
Are prompt pay, cash discounts, dual fees legal? In this Part 2 (Part 1 Click Here), let’s focus on differential payment schemes. When physicians, chiropractors, acupuncturists, and other healthcare providers provide prompt pay discounts to patients, or cash pay discounts to non-insured patients, are these legal? California’s allowance for prompt pay and cash pay The legal rules differ by state. California law, for example, allows healthcare providers to charge a prompt payment discount. Business & Professions Code, Section 657 provides: (b) To encourage the prompt payment of health or medical care claims, health care providers are hereby expressly authorized to grant discounts in health or medical care claims when payment is made promptly within time limits prescribed by the health care providers or institutions rendering the service or treatment. (c) Notwithstanding any provision in any health care service plan contract or insurance contract to the contrary, health care providers are hereby expressly authorized to grant discounts for health or medical care provided to any patient the health care provider has reasonable cause to believe is not eligible for, or is not entitled to, insurance reimbursement, coverage under the Medi-Cal program, or coverage by a health care service plan for the health or medical care provided. Any discounted fee granted pursuant to this section shall not be deemed to be the health care provider’s usual, customary, or reasonable fee for any other purposes, including, but not limited to, any health care service plan contract or insurance contract. We mentioned in our prior blog post on Prompt Pay, Cash Pay & Dual Fees that it is straight-forward when a statute tells you in plain language what is allowed. Here, Business & Professions Code 657(b) allows healthcare providers and institutions to “grant discounts in health or medical care claims when payment is made promptly within time limits prescribed by” the healthcare provider or institution (hospital, clinic, etc.). So the prompt pay discount is expressly allowed. Business & Professions Code 657(c) allows healthcare providers to “grant discounts for health or medical care provided to any patient the health care provider has reasonable cause to believe is not eligible for, or is not entitled to, insurance reimbursement … or coverage.” So the cash pay discount is allowed for non-insured patients. The statute is even so clear as to say that the discount “shall not be deemed to be the health care provider’s usual, customary, or reasonable fee for any other purposes, including, but not limited to, any health care service plan contract or insurance contract.” So there can be no argument that the discount is somehow insurance fraud. Contrast New York Contrast this with the somewhat intricate discussion of one of New York’s enforcement authorities, below. Really, what they are saying is that New York does not have a clear allowance like California, and therefore the provider who engages in such a practice is at risk. This is a good example of state-by-state variations. The variation also shows how the language of the statute can either be unambiguous in either allowing or prohibiting something, or ambiguous in leaving things up to the enforcement authorities. New York’s more somber approach One physician asked about the legality of charging non-insured patients in New York a lower rate for the same service. bottom line is that the practice seems risky, as expressed by the Office of General Counsel (“OGC”) of the New York Department of Financial Services (“NYDFS”), which regulates insurance in New York. Insurance Fraud Concerns In a 2000 opinion entitled, Chiropractic Group Office, OGC asked: 2) May a chiropractic group charge its uninsured patients a lower rate than it charges its insured patients for the same services? 3) May a chiropractic group charge its patients who pay by cash lower rates than it charges patients who pay by credit card for the same services? OGC concluded: 2) A chiropractic group that charges its uninsured patients lower rates than it charges its insured patients for the same services may be in violation of N.Y. Penal Law § 176.05 (McKinney 1999). 3) A chiropractic group that charges patients who pay by cash lower rates than it charges patients who pay by credit card for the same services may be in violation of N.Y. Penal Law § 176.05 (McKinney 1999). OGC explained: If the insurer is paying the chiropractic group a percentage of the usual and customary fee, then the waiving of co-payment fees on a regular basis and the charging of lower rates to non-insureds, or to patients who pay by cash, may be construed as insurance fraud because these practices may suggest that the chiropractic group’s ususal and customary fee is not being accurately reported to the insurer. When a rate discount is provided, the question arises as to whether the discounted rate is actually the service provider’s usual and customary charge, making the non-discounted rate an inflated rate. Thus, waiving co-payment amounts and charging higher rates to insureds than to non-insureds, or to those who pay by credit card, for the same services may constitute insurance fraud under N.Y. Penal Law § 176.05(2) (McKinney 1999). OGC expressed its views again in 2007 in Fees charged by a chiropractor; insurance fraud? However, OGC’s positive take on the practice, was limited to a situation involving a non-participating provider. OGC stated: Question Presented: If a chiropractor were to charge a lower fee for services to “non-insurance” patients – that is, patients without insurance or whose contractual benefits under an insurance policy have been exhausted – than to patients whose cost of services is covered by insurance, could the chiropractor’s conduct alone constitute insurance fraud? Conclusion: No. If a chiropractor charges a lower fee to non-insurance patients who pay cash, that activity would not constitute insurance fraud, because neither the chiropractor nor the insured would submit any claim for services to an insurer, self-insurer, purported insurer, or any agent thereof. However, if a chiropractor submits a claim to an insurer for an insured patient, or issues a bill to an insured patient for services knowing that the bill will be presented to the insurer, then the chiropractor would be wise to fully disclose to the insurer that it charges non-insurance patients who pay cash a lower fee. Note the sentence we have bolded above. The background facts included: The inquirer proposes to charge a patient without insurance who pays cash a lower fee for services than an insured patient. The scenarios presented assume that the inquirer would be a “non-participating” provider vis-à-vis any insurer involved, and would have no contractual relationship with the insurer. OGC further explained: The inquirer proposes to charge a non-insurance patient who pays cash a lower fee for chiropractic services than he charges an insured patient. With respect to non-insurance patients, neither the chiropractor nor the patient submits any claim for chiropractic services to an insurer, self-insurer, purported insurer, or any agent thereof. Accordingly, in processing such a claim, there is no insurance act involved, fraudulent or otherwise. This part seems, in one sense, tautological—i.e., there is no insurance fraud where no bill is submitted to any insurer. But note the next sentence (which we bold): However, if a chiropractor submits a claim to an insurer for an insured patient, or issues a bill to an insured patient for services knowing that the bill will be presented to the insurer, then the chiropractor runs the risk of being charged with a fraudulent insurance act if the chiropractor were to mislead the insurer by, for example, failing to disclose that he charges non-insurance patients a lower fee for the same services he provides to insured patients. Thus, the prudent chiropractor should fully disclose to the insurer that it charges non-insurance patients who pay cash a lower fee. Note that there are two messages here. First, OGC warns that “the chiropractor runs the risk of being charged with a fraudulent insurance act.” Second, OGC cuts back on this warning, by saying that “the prudent chiropractor should fully disclose to the insurer that it charges non-insurance patients who pay cash a lower fee.” This seems to suggest an allowance, and best practices, but may be ‘cold comfort,’ given the warning of the risk. According to the OCG opinion, New York Education Law also contains various prohibitions, although the Department of Education in this case referred the matter to OCG. Participating provider concerns, kickback issues There are additional legal risks beyond those of insurance fraud as outlined by OGC above. One online article raises another issue: the contractual relationship of the participating practitioner, with the insurer: “the terms of that contract may limit the Practice’s discretion to charge lower fees to different categories of patients.” Another article, Cash Discounts for Patients: Navigating the Legal Minefield, suggests that legal challenges include: “Medicare reimbursement limitations, state anti-kickback laws, the anti-beneficiary inducement provision of the Health Insurance Portability and Accountability Act (“HIPAA”), the Medicare exclusion provision that relates to Medicare and non-Medicare charges, and state insurance anti-discrimination provisions.” Of course, the article includes under “cash discounts,” waivers of out of network penalties. Even so, the article suggests that particularly with a Medicare-covered service, “the effect of this discount typically will be to take the actual charge below the Medicare fee allowable.” The article further cites prohibitions in state anti-kickback laws against inducing patient referrals; anti-discrimination laws; and clauses in participating provider insurance contracts that require a provider to give the lowest price it has offered to anyone else automatically to the private insurance company, regardless of what the insurer would otherwise pay. Some Best Practices If a healthcare provider does make a business judgment to charge non-insureds a lesser charge, the healthcare provider should at the least be sure to disclose this to your insurer(s); that the usual and customary charge is clear; and that any cash discount has a logical basis or can readily be explained in way that creates an argument against potential kickback concerns. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
June 14, 2017
Healthcare
Prompt pay, cash discounts, dual fees legal for healthcare providers (physicians, chiropractors, acupuncturists)?
Are prompt pay, cash discounts, dual fees legal? There are lots of questions and many different variations. Let’s explore a few, focusing on the idea of providing differential services to a population of patients. Superbills and Codes Recently a chiropractor called us with the following scenario: The chiropractor is not contracted with any insurance and not “in network” anywhere The chiropractor will provide “corrective care” to a car accident victim and submit a claim to an injured patient’s health insurance provider. The chiropractor wants to provide superbills, yet not get caught giving wrong codes for treatments. The superbill contains a diagnosis and procedure code. Here it would be good to implement some basic ‘best practices.’ For example: Be sure the superbill accurately reflects the healthcare services that were performed, and the usual and customary charges for such services. Have a billing and coding expert verify that all the right procedure codes are in place. Be sure all accounting is accurate with respect to patient funds. That leads to the next arena, which is that the chiropractor wanted differential prices for different services. Dual Fees This is very common – healthcare providers thinking of their services in terms of diagnostic and therapeutic services on one hand, and healthcare services aimed at holistic health on the other. The chiropractor had read that “dual fees” are problematic, but want to charge: One price for “corrective care” A lower price for “wellness care” So often these questions fall in the gray zone. There may be legal rules that apply, but one must search and figure out which ones could come back and bite. For example, in many states, there are statutes prohibiting “discrimination” among categories of patients. This means that a physician or chiropractor cannot stratify patients by “type” of service—only by diagnostic or therapeutic category according to accepted procedure codes. Some Best Practices & the Concierge Medicine Model Some best practices here and for the earlier scenario would be: Use recognized billing codes for each healthcare service. Use Evaluation & Management (E&M) codes to designate level of complexity of the procedure. Use the more complex codes for more complex “corrective” situations. Provide patient with a statement of financial responsibility to sign, by which the patient undertakes to pay for services if no insurance is involved or no insurance kicks in. Have a clear patient agreement which sets out the scope of services. One possibility is that the physician or chiropractor might create a hybrid practice. One portion of the practice will be insurance-based or fee for service; the other will be a concierge, wellness plan that will involve payment for a bundle of services. See our earlier posts such as: · LEGAL REVIEW OF CONCIERGE MEDICINE CONTRACTS IS NEEDED · HOW TO ROCK CONCIERGE MEDICINE LAWS · NEW YORK CONCIERGE MEDICINE LAW ARCHIVES · HOW MEDICARE.GOV HELPS WITH LEGAL REVIEW OF CONCIERGE MEDICINE Potential Legal Red Flags Note several potential legal red flags here with having two different levels of service: Discrimination: Charging different amounts to different patients for the same service would probably raise discrimination and other legal red flags. Malpractice & standard of care: Another question the practitioner should address is whether, when providing “wellness only care,” the standard of care for “corrective” or regular care would apply—i.e., whether it could be considered malpractice if the practitioner failed to make in inquiry or perform care that would have been done in the ‘regular’ practice. Kickback issues: Bundling and giving discounts can create anti-kickback concerns (e.g., “pay for 9 sessions, and the 10th is free!”). See: Concierge medicine – is packaging legal services legal. Auto-renewal laws: Many state statutes require specific disclosures whenever there is a charge that will beautomatically renewed periodically (say, every month). The legal parameters can be straight-forward where there is a clear statute that obviously applies to a simple situation. The analysis is more complex when there are multiple legal rules involved; the practice develops a hybrid model; and the legal terrain consists of risks that must be decoded and interpreted. In this situation, consult an experienced healthcare to navigate the regulatory landscape. Click here to see Part 2 of this Post. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
June 7, 2017
Healthcare
Physician Advertising of Medical Services: Avoiding 5 Legal Traps
When medical doctors advertise their professional medical services (including online advertising) they can easily run afoul of legal and regulatory traps. Watch out for these 7 legal traps in physician advertising, and understand possible ways to navigate important legal restrictions. 1. Physician Advertising must be Truthful & Non-Misleading The key here is that anything a medical doctor posts in print or online that could be considered “advertising” must be “truthful” and “non-misleading.” No deception, period. The First Amendment protects commercial speech. However, states can regulate deceptive advertising. 2. Watch out for advertising that the law specifically considers “deceptive.” While every state has its own laws, in California the relevant statute is Business & Professions Code, Section 651. Section 651 prohibits not only physicians, but any person licensed under Division 2 (for example, also acupuncturists, dentists, nurses, chiropractors, psychologists, social workers, and others) from: false, fraudulent, misleading, or deceptive statement, claim, or image for the purpose of or likely to induce, directly or indirectly, the rendering of professional services or furnishing of products in connection with the professional practice or business for which he or she is licensed. false, fraudulent, misleading or deceptive advertising. Under 651(j), the California Attorney General can commence legal proceedings to enjoin physician advertisements that violate the law. Section 651(b) contains a long list of statements, claims, or images that could be considered false, fraudulent, misleading, or deceptive, such as one that: (1) Contains a misrepresentation of fact. (2) Is likely to mislead or deceive because of a failure to disclose material facts. (3) (A) Is intended or is likely to create false or unjustified expectations of favorable results, including the use of any photograph or other image that does not accurately depict the results of the procedure being advertised or that has been altered in any manner from the image of the actual subject depicted in the photograph or image. (B) Use of any photograph or other image of a model without clearly stating in a prominent location in easily readable type the fact that the photograph or image is of a model… (C) Use of any photograph or other image of an actual patient that depicts or purports to depict the results of any procedure, or presents before and after views of a patient, without specifying in a prominent location in easily readable type size what procedures were performed on that patient is a violation of subdivision (a). Any before and after views (i) shall be comparable in presentation so that the results are not distorted by favorable poses, lighting, or other features of presentation, and (ii) shall contain a statement that the same before and after results may not occur for all patients. (4) Relates to fees, other than a standard consultation fee or a range of fees for specific types of services, without fully and specifically disclosing all variables and other material factors. (5) Contains other representations or implications that in reasonable probability will cause an ordinarily prudent person to misunderstand or be deceived. (6) Makes a claim either of professional superiority or of performing services in a superior manner, unless that claim is relevant to the service being performed and can be substantiated with objective scientific evidence. (7) Makes a scientific claim that cannot be substantiated by reliable, peer reviewed, published scientific studies. (8) Includes any statement, endorsement, or testimonial that is likely to mislead or deceive because of a failure to disclose material facts. Section 651 also contains rules about: advertising prices disclosing compensation given for publicity using letterhead Violation can be a misdemeanor. Section 651 goes on to list the items that can legitimated be advertised, such as the name of the school where physician graduated. The California Code of Regulations (16 CCR 1363) supplements the above prohibitions by stating that physician advertising must not promote excessive or unnecessary medical services. 3. Get a Fictitious Name Permit if practicing under a name different than the physician’s own name. In California, Business & Professions Code Section 2272 states: Any advertising of the practice of medicine in which the licensee fails to use his or her own name or approved fictitious name constitutes unprofessional conduct. See our earlier post, The Strange World of the California Medical Board Fictitious Name Permit. There are some exceptions, such as medical doctors in a group practice where the professional medical corporation has a fictitious name permit. In some states, there might be a simple DBA or other regulatory requirement by the local medical board. 4. Follow the rules for “board certification” claims. States can have different rules. This can have particular implications for physicians practicing integrative medicine, functional medicine, or anti-aging medicine. In California, Business & Professions Code §651(h)(5) limits advertising statements as to board certification or eligibility. Physicians may include statements that they are certified or eligible for certification by a private or public board or parent association (including multidisciplinary boards or associations) only if that board or association is among those listed or with credentials in the statute. There are additional rules in the California Code of Regulations (governing advertising a non-ABMS specialty board certification if approved by the Medical Board of California). The Medical Board of California advises consumers in, Can I find out if my doctor is board certified: Physicians can identify their practice specialty on their Medical Board profile and that information IS available through the Breeze Online License Lookup. You can also obtain this information by contacting the physician’s office directly, reviewing the physician’s and/or medical group’s website, or by contacting the local medical society if the physician is a member. Most physicians have a practice specialty, which is the area of medicine they have received additional training in, but not all physicians have medical specialty certification. Medical specialty certification is a voluntary process granted by a member board of the American Board of Medical Specialties (ABMS), a private organization, or other equivalent board. Board certification is not required by the Medical Board for a physician to practice. Please use the links below to access the ABMS website and other boards recognized by the Medical Board of California and learn more about board certification and whether your doctor is board certified. American Board of Medical Specialties American Board of Facial Plastic and Reconstructive Surgery American Board of Pain Medicine American Board of Sleep Medicine American Board of Spine Surgery On the same page, the medical board addresses advertising about “specialization:” Physicians can identify their practice specialty on their Medical Board profile and that information is available through the Breeze Online License Lookup. You can also obtain this information by either contacting the physician’s office directly, reviewing the physician’s and/or medical group’s website, or by contacting the local medical society if the physician is a member. Most physicians have a practice specialty, which is the area of medicine they have received additional training in, but not all physicians have medical specialty certification. Medical specialty certification is a voluntary process granted by a member board of the American Board of Medical Specialties (ABMS), a private organization, or other equivalent board. Board certification is not required by the Medical Board for a physician to practice. (See question below on board certification). 5. Watch out for violations involving physician “discounts” “Discounts” on medical services are often considered kickbacks and can violate not only federal law but also state law (such as in California, Business & Professions Code Section 650). Section 650(a) states: the offer, delivery, receipt, or acceptance by any person licensed under this division or the Chiropractic Initiative Act of any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for referring patients, clients, or customers to any person, irrespective of any membership, proprietary interest, or coownership in or with any person to whom these patients, clients, or customers are referred is unlawful. See many of our posts here such as Corporate Practice of Medicine & Anti-Kickback & Fee-Splitting Rules: Deep Down the Regulatory Rabbit Hole. States vary on whether discounts can be given for cash payment by the insured patient. In California, Business & Professions Code 657 states: Notwithstanding any provision in any health care service plan contract or insurance contract to the contrary, health care providers are hereby expressly authorized to grant discounts for health or medical care provided to any patient the health care provider has reasonable cause to believe is not eligible for, or is not entitled to, insurance reimbursement, coverage under the Medi-Cal program, or coverage by a health care service plan for the health or medical care provided. Any discounted fee granted pursuant to this section shall not be deemed to be the health care provider’s usual, customary, or reasonable fee for any other purposes, including, but not limited to, any health care service plan contract or insurance contract. Back to Section 651, for a moment: it says that price advertising may not include “statements or advertisements of bait, discount, premiums, gifts, or any statements of a similar nature.” We discuss some of the implications for concierge medicine models of practice in, Packaging Services Raises Anti-Kickback Issues, Even in Concierge Medical Practice. MSO Arrangements Because of these varied rules governing physician advertising, in our management services organization (MSO) agreements, we typically insert a provision that any physician advertising done by the MSO must be in conformity with state law. This is to set the boundaries straight right in the MSO agreement, and also provide protective language to create an arguable defense for the physician with respect to compliance around advertising law. Contact our healthcare attorneys who understand the laws governing physician advertising—or advertising or marketing for any healthcare professional—whenever contemplating an advertising or marketing arrangement. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
May 8, 2017
Healthcare
Independent contractor physician – kickback or compensation?
If you’re a successful physician, chiropractor, acupuncturist, or other licensed healthcare provider, and you want to provide overflow patients to another practitioner you hire, is it a kickback if you pay that second practitioner as an independent contractor? Are payments to an independent contractor physician a kickback? Kickback Basics Let’s review some kickback basics, to start. Stark (or self-referral) arises when the physician refers patients to an entity in which the physician has a financial interest (for example, the physician refers patients to a clinical lab that the physician owns). Stark only involves certain “designated health services.” For example, the physician refers the patient to a clinical lab that the physician owns. That does not sound like the situation here, where the physician simply refers to another doc in the physician’s office. Kickbacks can arise in a variety of contexts; a key definition is that if compensation depends on value or volume of referrals, as opposed to for the work itself, then there is a kickback. If there is a self-referral problem, then you must find an exception. On the other hand, if there is a kickback problem, then the arrangement is not necessarily illegal, but we look to a safe harbor and see if there is a fit, and evaluate the arrangement as a whole. Employee and Personal Services Arrangement Safe Harbors The safe harbors that one uses with respect to anti-kickback prohibitions, in this kind of situation of overflow patients, typically involve either: (1) A bona fide employee (i.e., the employer can pay the employee a salary, yet profit from the employee’s services), or (2) if an independent contractor, a personal services arrangement, in which the aggregate compensation is set in advance (as opposed to being a percentage of collections). A kickback issue potentially can arise when the independent contractor physician is paid on a net collections basis, which means that essentially, compensation varies by value or volume of patients. Although potentially, the independent contractor agreement can be drafted so that compensation is based on a percentage of gross collections and it becomes clear that the independent contractor is paying a fee for management and administrative services. For this reason, we typically prefer to use the MSO model. The MSO model is very clean. The MSO (management services organization) provides management and administrative services, and in exchange collects a fee. The physician either wears two hats – clinician and MSO – or, preferably, has a professional medical corporation for the clinical role, and creates a separate corporation or LLC to serve as the MSO. See our prior posts: · CORPORATE PRACTICE OF MEDICINE & ANTI-KICKBACK / FEE-SPLITTING RULES … · IS IT FEE-SPLITTING TO SHARE REVENUES WITH MEDICAL DOCTORS? · FEE-SPLITTING 101 FOR MEDICAL DOCTORS, CHIROPRACTORS, ACUPUNCTURISTS … · CREATING LEGALLY SUCCESSFUL, MULTIDISCIPLINARY HEALTH CARE PRACTICES … The MSO model tries to use to the personal services and management safe harbor. Under California law, the equivalent is the more amorphous, Business & Professions Code Section 650(b). The Independent Contractor Arrangement—Kickback? The independent contractor arrangement is very common, and we’ve reviewed many such agreements. It is somewhat problematic as mentioned above but very pervasive. From an anti-kickback perspective, the key is that the net collections reflect fair market value (FMV) for the services the independent contractor physicians provide, and that the balance (which gets retained by the hiring physician) also represent fair market value for the services that the hiring physician provides back to the independent contractor doctor. For example, these services could involve overhead, staffing, a medical assistant, and space. These are essentially MSO functions, only here they are provided by the hiring physician or his professional medical enterprise. If the independent contractor is being underpaid for his medical services and the hiring physician is being overpaid, then a regulator could argue that the differential against fair market value, represents an illegal inducement or compensation for the hiring physician to refer patients to the independent contractor physician—and is therefore an illegal kickback. Conversely, if the independent contractor is being overpaid for his medical services and the hiring physician is being underpaid, then a regulator could argue that the differential against fair market value, represents an illegal inducement or compensation for the independent contractor refer patients to the hiring physician—and is therefore an illegal kickback. Note that the risks are exacerbated in a multidisciplinary clinical center where, for example, you have an MD and a chiropractor (DC), acupuncturist (LAc), physical therapist (PT), or other provider. Payment based on gross collections is not uncommon in arrangements between a hiring physician and the MD who is hired. If other healthcare providers are involved such as DC, LAc, or PT, this could be seen as an illegal joint venture or a scheme, or, a kickback arrangement in which the MD leverages off other providers by paying for referrals received or paying for referrals being given. This is why, in the multi-disciplinary center, collaborative clinical center, integrative medicine center, or center that includes say an MD and a DC collaborating on pain management, the MSO model is, in our view preferable. Medical Marketing Services Where marketing services for medical practices are involved, we recommend that those services be explicitly called out in the agreement (or in a separate marketing services agreement), and be designated for a flat fee. The reason is that marketing services can generate enforcement scrutiny on kickback grounds. This is different than management services such as rental of space and the all the admin functions that the underlying practice provides. Important Independent Contractor Provisions It is important that both sides have legal review of the independent contract provisions themselves to be sure nothing vital is missing. For example: There should be a provision about the timing for paying the independent contract physician, as well as timing for billing and collection from the patient – and what will happen if the hiring physician neglects to perform these functions. Failure to specify these details in writing can lead to collections disputes, and litigation. Who is responsible for whose negligence? What if the hiring physician makes billing errors? Some thought should be given to indemnification. The agreement should be readable. The more readable the agreement, the less likely to generate litigation in case of a later disagreement. Non-competition language may or may not be enforceable, depending on the state. Certainly both parties should pay attention to related provisions, such as prohibitions against solicitation and those safeguarding confidentiality (trade secret provisions). The MSO is almost always a more compliant solution, or at least one that is well recognized and often stands up well against enforcement scrutiny. Contact an MSO lawyer for legal advice related to setting up a more compliant business structure. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
May 3, 2017
Healthcare
The strange world of the California medical board Fictitious Name Permit
The strange world of the California medical board Fictitious Name Permit inhabits one of those arcane places in healthcare law that many physician clients wonder about. Here’s everything you wanted to know about the California medical board Fictitious Name Permit, and weren’t afraid to ask. The significance of the fictitious name permit One reason this byzantine byway matters is because medical boards sometimes get up in arms about too much perceived intrusion by the medical management company (MSO) into the practice of “medicine.” And the name of the MSO, as well as the name of the physician practice, medical spa, telemedicine company, mobile medical app, or device manufacturer can raise legal challenges on the ground of public confusion between the non-physician venture on one hand, and the medical doctor on the other. Somehow, this asserted public confusion and decision-making around name equates to “too much control” which then means medical board investigation and possible allegations of non-compliant or illegal practice. So buckle your belts for a quick regulatory ride. Corporate Practice of Medicine The corporate practice of medicine doctrine imposes strict rules on contractual arrangements between physicians and non-physicians. One of the purposes of the corporate practice of medicine doctrine is to separate medical from business decision-making. Under this doctrine, neither non-physicians nor lay corporations (corporations that are not medical professional corporations) may contract to provide medical services. Nor may they contract with a physician to have the physician provide medical services, either as an employee or an independent contractor. In addition, California law places limits on the activities of non-medical corporations managing health care practices. Other states may have similar limits. New York, for example, has a strong corporate practice of medicine doctrine and requires clear separation of professional from non-clinical, management or medical services activities. For this reason, laypersons often form a management company (or medical services organization) that contracts with a professional medical corporation to provide administrative and management services. As discussed elsewhere on this blog, such a structure can help alleviate concerns regarding: anti-kickback fee-splitting Stark and self-referral laws so long as properly structured and with relevant exceptions and safe harbors to the relevant laws and regulations in mind. MSOs can often serve as billing and collecting agents for a medical practice. However, medical boards are closely watching the MSO structure, as they are increasingly concerned that physicians will abuse such contractual arrangements and create disguised kickbacks, where laypersons are in fact exercising too much control over clinical practice by virtue of the decision-making inherent in the model. For this reason, it is critical to have any business model reviewed by an attorney experienced in Stark, self-referral, anti-kickback, fee-splitting, and corporate practice of medicine laws. As well, healthcare legal counsel should be able to provide guidance on the differences between a corporation, an LLC (limited liability), and a professional corporation, as well as on rules regarding naming conventions and licensing of names and other intellectual property. This might be a recap for some of you, but it’s relevant to the fictitious name permit when the underlying venture (non-medical) and the physician clinical component share a name. Although it’s a common industry practice – more and more these days – some enforcement authorities can interpret this as too much intrusion by the non-physician venture into medical train. Perception is reality, and it sometimes depends on who is in charge of the investigation and enforcement decision. One strategy suggestion we offer management companies is that they include the name “management” in their corporate name. At the very least, this clarifies that the company is an MSO, hopefully warding off inquiries based entirely on misperception. Of course there’s more to legal strategy than this but we want to at least start by making a dent in the regulator’s mental world. The strange world of the Professional Medical Corporation Closely related to the fictitious name permit (FNP) process is the arcane world of the professional medical corporation (PMC). Every state has laws governing formation of professional corporations. There can be subtle differences among states which an experienced attorney can point out, as statutes and regulations can be highly detailed and nuanced. In California, the Moscone-Knox Professional Corporation Act regulates professional corporations, including the professional medical corporation (“professional medical corporation”). For those who want legal citations, see Calif. Corp. Code §§13400-13410. Section 13404 requires the Articles to specify that the corporation is a professional corporation within the meaning of the statute. See also 16 CCR §1343 (Requirements for Professional Corporations), which is a citation to the California Code of Regulations. Under Section 13401.5(a) of the Moscone-Knox Professional Corporation Act, certain enumerated, licensed health care professionals other than physicians may be “shareholders, officers, directors, or professional employees” of the professional medical corporation, so long as the sum of shares these non-physician, licensed professionals own does not exceed 49% of the total. In addition, Section 13406(a) provides that only a licensed person in the jurisdiction may be issued shares in the professional corporation. For a professional medical corporation, the list includes: licensed doctors of podiatric medicine licensed psychologists, registered nurses licensed optometrists, licensed marriage and family therapists licensed social workers licensed physician assistants licensed chiropractors licensed acupuncturists naturopathic doctors. In each case, the physician or physicians must own 51% or more of the total shares. California Labor Code section 3209.3 defines “physician” to include “physicians and surgeons holding an M.D. or D.O. degree.” “’Professional services’ means any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act.” Calif. Corp. Code §13401(a). “’Licensed person’ means any natural person who is duly licensed under the provisions of the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act to render the same professional services as are or will be rendered by the professional corporation or foreign professional corporation of which he or she is or intends to become, an officer, director, shareholder, or employee.” Id. §13401(d). With regard to employees, although Section 13401.5(a) refers to “professional employees,” which implies licensed health care professionals, Section 13405 provides that the professional corporation may render professional services through employees who are licensed persons, and may employ “persons not so licensed;” the latter “shall “not render any professional services rendered or to be rendered by that corporation in this state.” In other words, in the case of a professional medical corporation, such employees would have to be limited to non-clinical tasks, so as to respect the corporate practice of medicine doctrine. Section 13405 further states that a professional corporation may render services outside California, “but only through employees who are licensed to render the same professional services in the jurisdiction in which the person practices.” There are additional laws governing a telemedicine presence. Section 13408.5 provides that no professional corporation may be formed to cause any violation of law, including rules and regulations relating to “fee splitting, kickbacks, or other similar practices by physicians and surgeons or psychologists, including, but not limited to, Section 650 or subdivision (e) of Section 2960 of the Business and Professions Code. The California medical board Fictitious Name Permit The California medical board Fictitious Name Permit is really a regulated version of the good old-fashioned dba that the physician acquires after forming the professional medical corporation. California currently has a number of rules apply to naming a professional medical corporation and applying for a fictitious name, including these: “A professional corporation may adopt any name permitted by a law expressly applicable to the profession in which such corporation is engaged or by a rule or regulation of the governmental agency regulating such profession.” “The use of any fictitious, false, or assumed name, or any name other than his or her own by a licensee either alone, in conjunction with a partnership or group, or as the name of a professional corporation, in any public communication, advertisement, sign, or announcement of his or her practice without a fictitious-name permit obtained pursuant to Section 2415 constitutes unprofessional conduct.” “Any physician and surgeon or any doctor of podiatric medicine, as the case may be, who as a sole proprietor, or in a partnership, group, or professional corporation, desires to practice under any name that would otherwise be a violation of Section 2285 may practice under that name if the proprietor, partnership, group, or corporation obtains and maintains in current status a fictitious-name permit issued by the Division of Licensing, or, in the case of doctors of podiatric medicine, the California Board of Podiatric Medicine, under the provisions of this section.” “Unless a fictitious name permit is obtained, the name of a professional medical corporation shall be restricted to the name or surname of one or more of the present prospective or former shareholders who are physicians or podiatrists, as the case may be, for a medical or podiatry corporation.” “When the applicant uses any fictitious, false or assumed name or any name other than the name or surname of one or more of the present, prospective or former shareholders, or any other words or names in addition to those of the shareholders, it shall obtain a permit pursuant to Section 2415 of the code.” “No licensed person shall render professional services using a fictitious, false or assumed name or any name other than his or her own unless and until a fictitious name permit has been issued by the division.” “A group or clinic containing both a corporate and noncorporate entity or a partnership of corporations shall not use wording or abbreviations denoting corporate existence.” “The division shall not issue a fictitious name permit for a name-style which (1) May be a violation of Section 17500 of the [Business & Professions C]ode; (2) Is so similar to a name currently authorized as to be deceptive, misleading or subject to confusion.” “(a) The purpose of a fictitious name is to allow an individual, a partnership, a group, or a professional corporation to use a name in advertising and in practice other than his or her own personal family name. (b) No licensed person shall render professional services using a fictitious, false, or assumed name or any name other than his or her own unless and until a fictitious name permit has been issued by the Board. (c) A fictitious name permit may be suspended or revoked for failure to comply with the provisions of Code Section 2415 and this article or may be revoked after the individual license has been revoked.” In terms of naming style: (a) Any fictitious name shall contain the designation “medical group,” “medical clinic,” “medical corporation,” “medical associates,” “medical center,” or “medical office.” Such designation shall be contiguous in the name style and not separated by intervening words. This requirement also applies to those applicants who are sole practitioners. (b) A group or clinic containing both a corporate and non-corporate entity or a partnership of corporations shall not use wording or abbreviations denoting corporate existence. When a professional corporation is an applicant, it shall use in its fictitious name style one of the word(s) or abbreviation(s) denoting corporate existence as required by these regulations. (c) The Board shall not issue a fictitious name permit for a name style which is false or misleading or which is so similar to a name previously authorized in the same geographical area as to be deceptive, misleading, or subject an individual consumer to confusion with a previously permitted fictitious name. (d) The use of word(s) or abbreviation(s) following a licensed person’s name denoting affiliation with a professional medical society or association shall not create a fictitious name; however, the use of any word(s) or abbreviation(s) which denotes a particular specialty in medical practice which is advertised or disseminated in public in connection with that practice shall require a fictitious name permit. The California Medical Board describes some of the above legal rules on its webpage for FNPs. The Board states that a fictitious name permit is not needed if only the name or surname (last name) of the physician or podiatrist is used, followed by Medical Doctor, M.D., Podiatrist, Doctor of Podiatric Medicine, D.P.M., Medical Corporation, Medical Corp., Podiatry Corporation, Podiatry Corp., Professional Corporation, Prof. Corp., Corporation, Corp., Incorporated or Inc. Examples: “John Doe Medical Corporation” or “John Doe, M.D. Inc.” would not require a fictitious name permit as long as John Doe matches the legal name on the physician’s medical license. The Board also notes that as long as the names are different from each other, and separate applications are filed there is no limit as to how many fictitious name permits a physician or professional medical corporation may be issued. It is not clear that in actual practice and enforcement, boards are entirely congruent with the naming conventions and other rules that are promulgated. Contact us today to learn how the Cohen Healthcare Law Group can help with your legal needs. Our team is here to provide experienced guidance and practical solutions. It is important to get legal advice from an attorney familiar with legal rules applicable to multi-disciplinary practices, and who advise on business models that involve both physicians and non-physicians, and analyze corporate practice of medicine, Stark and self-referral, anti-kickback and fee-splitting, and laws applicable to professional corporations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
December 15, 2016
Healthcare
When leaving a medical practice, can you take patient records?
When leaving a medical practice, can you take patient records? A tale of woe: physician former employee accused of theft of Trade Secrets We’ve seen a litigation battle where a departing physician wrote to his former patients, proudly announcing his new practice location — and then was sued by his aggrieved former employer for misappropriation (theft) of trade secrets. The litigation was vicious and costly for the defending physician. It lasted a long time, and sucked the life out of his new venture. One of the key questions turned out to be whether the departing physician merely fulfilled his duty to not abandon patients, or, went beyond and actively solicited them. There were also questions as to who “owned” patients he had brought to the practice, what files he was able to access, and what were the expectations of confidentiality. As well, the letter he wrote to patients of the practice he was leaving, was carefully read for evidence of intent. This might have been avoided had the two worked out, in advance, what they would do if the employment relationship soured. A joint notification letter could have been pre-agreed and placed in the employment contract. The Bottom Line: Watch Your Liability Exposure Healthcare law is highly regulated, and there are always enforcement authorities ready to nip at your heels even if you escape a lawsuit. Here, for example, HIPAA requires patient authorization, so even if you don’t have an angry former employer trying to sue you for theft of trade secrets, you also have to satisfy the regulators by honoring your privacy and security obligations. It Matters How You Leave a Medical Practice When we advise clients with respect to taking patient records, charts, lists, or databases with them on departing a practice, we are sensitive to the nuances of the outgoing physician’s departure. For example, a physician might: Close a medical practice and retire Sell a medical practice to a purchasing physician or medical group Leave a medical practice where a management company (medical services organization, MSO) or telemedicine company plans to continue marketing to the patients, and/or to try to “swap in” another medical doctor without running afoul of corporate practice of medicine rules In all these scenarios, there are HIPAA privacy and security concerns, issues under state law, medical ethical considerations, and other legal exposure (such as we’ve seen: in some cases, risks of trade secret litigation). Transfer of Patient Records During Sale of Medical Practice The transfer of medical records might be done as part of a sale from the Outgoing MD to the Incoming MD. In this case, normally the sale document will contain provisions for safe-keeping and/or transfer of the patient’s medical records, so that, among other things, the Incoming MD can access records on-site for those patients who will be under the Incoming MD’s care, and the Outgoing MD can retain records in case patients request access pursuant to HIPAA, or as otherwise needed. Sometimes the selling and purchasing physician will mutually designate a custodian for the practice’s medical records, and then that custodian will sign a business associate agreement under which the custodian agrees to comply with HIPAA. With regard to records retention by the Outgoing MD, HIPAA requires retaining policies and procedures, including patient authorizations (discussed further below), for six years (45 CFR 164.530(j)(2)); as well, there are California statutes requiring retention of medical records; and there are reasons for the Outgoing Physician to retain a copy of medical records for review in case of a negligence action. Transfer of Records Where MD Leaves a Practice Location to an MSO Where the Outgoing MD leaves a practice location, and in lieu of a sale from Outgoing MD to Incoming MD, there is only a management services organization (“MSO”) or, physician assistant (“PA”) remaining at the practice location (awaiting the arrival on the Incoming MD), this is a difficult situation. We have counseled clients in this situation, where the remaining MSO or PA desires to build the practice by bringing in another physician. However, the MSO or PA cannot practice medicine. Also, state laws usually prohibit general corporations and LLCs from practicing medicine (this is unlawful corporate practice of medicine). For example, the California Medical Board states in its webpage on Corporate Practice of Medicine: “Ownership is an indicator of control of a patient’s medical records, including determining the contents thereof, and should be retained by a California licensed physician.” This suggests that any impression that the MSO or PA is in charge of medical records creates enforcement peril. Navigating HIPAA waters for MSO or telemedicine company (or app, where the app founders have created an LLC, for example, and contract with doctors) in these situations is somewhat tricky. Among other things, the management agreement between the MSO and the professional medical corporation has to carefully specify who owns the medical records, who has access to them, and what happens if and when the relationship dissolves. We do careful drafting in these situations. We turn from these issues to questions of patient notification and patient authorization which are central to regulatory authorities in any scenario. Patient Notification A physician terminating a physician-patient relationship must give notice to the patients; otherwise, there is patient abandonment. The California Medical Board (“CMB”), in Closing Your Medical Practice, provides guidance to physicians regarding the “closure of or departure from a medical practice office.” To ensure “a smooth transition from the current physician to the new treating physician,” and, to reduce liability of patient abandonment while ensuring a “minimum of disruption in continuity of care,” CMB suggests that the Outgoing MD “notify patients sufficiently in advance.” Specifically, without defining what “sufficiently in advance” means, CMB recommends the following: The Outgoing MD should send patients a letter explaining the change in practice, including the final date of the Outgoing MD’s practice. “The California Medical Association (CMA) recommends, if possible, that letters be sent by certified mail, return receipt requested, and that a copy of the letter with the return receipt be kept. To inform inactive patients or those who have moved away, the CMA also recommends placing an advertisement in a local newspaper.” Patients must be advised (presumably in the letter) “as to where their medical records will be stored including how they may access them. To facilitate the transfer of medical records to the new treating physician, an authorization form should be included in the letter.” Patients should be transitioned to another healthcare provider, which can be the Incoming MD (either the physician who is taking over the practice, or, another physician whom the Outgoing MD can recommend). CMB does not define “active” nor “inactive” patients. The AMA defines active patients at least those patients who have been seen by the physician within the past two years, as well as patient who have chronic or complicated conditions. Other associations such as the Oregon Medical Association define “active” patients as those patients who have been seen by the physician within the past 3 years. Patient Authorization In addition to patient notification, we typically recommend that the Outgoing MD have patients sign an authorization form, in which the patient authorizes the release of his or her medical records to either the Incoming MD, or to a physician of the patient’s choice. This is because of what HIPAA requires, and also because of state law (below, we look briefly at California law). The next part is a little technical. Before we get to it, we note that in 2015, the New York Attorney General announced a settlement under HIPAA with the University of Rochester Medical Center arising out of the Center’s release of patient lists to a formerly employed nurse practitioner (NP): The settlement, reached with University of Rochester Medical Center (“URMC”), requires the medical center to train its workforce on policies and procedures related to protected patient health information, notify the Attorney General of future breaches, and pay a $15,000 penalty… The settlement is in response to a data breach that occurred in the spring of 2015, when a URMC nurse practitioner gave a list containing 3,403 patient names, addresses, and diagnoses to her future employer, Greater Rochester Neurology (“GRN”), without first obtaining authorization from the patients. On April 21, 2015, GRN used the information to mail letters to the patients on the list informing them that the nurse practitioner would be joining the practice and advising them of how to switch to GRN. URMC learned of the breach three days later, when calls began coming in from patients who were upset about the letter. The nurse practitioner was subsequently terminated, notification letters were sent to the affected patients, and the media was alerted The settlement, among other things, requires the Center to annually certify to the New York Attorney General for the next three years that it has implemented HIPAA training. With the state AG getting in on regulatory enforcement, the perils of not paying attention to compliance rules regarding medical records have increased. Notably, this case involved disclosure to a nurse practitioner, not a physician. HIPAA and Disclosure of Patient Records How does HIPAA come into play for the departing clinician? Here is some detail for HIPAA afficionados. If HIPAA applies, then, we start with 45 CFR 164.508(a)(1), which states that except as otherwise permitted or required, a covered entity (i.e., an MD) “may not use or disclose protected health information [("PHI")] without an authorization that is valid under this section.” The authorization must contain the core elements and requirement statements specified in 45 CFR 165.508(c) and must be in plain language, and a copy must be provided to the patient. However, 45 CFR 164.506 provides that, except with respect to uses or disclosures that require an authorization under 164.508(a)(2)-(4), a covered entity may use or disclose PHI without an authorization, for the purposes of “treatment, payment, or health care operations as set forth in paragraph [164.506](c) of this section, provided that such use or disclosure is consistent with other applicable requirements of this subpart.” (Subsections (2)-(4) deal, respectively, with psychotherapy notes; marketing; and sale of PHI as defined in 164.501. Sale of PHI involves remuneration (164.502(a)(5)(ii)) and does not include treatment and payment purposes pursuant to 164.506(a).) “Treatment means the provision, coordination, or management of health care and related services by one or more health care providers, including the coordination or management of health care by a health care provider with a third party; consultation between health care providers relating to a patient; or the referral of a patient for health care from one health care provider to another.” 45 CFR 164.501 Section 164.506(c) further provides: (1) A covered entity may use or disclose protected health information for its own treatment, payment, or health care operations. (2) A covered entity may disclose protected health information for treatment activities of a health care provider…. (4) A covered entity may disclose protected health information to another covered entity for health care operations activities of the entity that receives the information, if each entity either has or had a relationship with the individual who is the subject of the protected health information being requested, the protected health information pertains to such relationship, and the disclosure is: (i) For a purpose listed in paragraph (1) or (2) of the definition of health care operations; or (ii) For the purpose of health care fraud and abuse detection or compliance. (5) A covered entity that participates in an organized health care arrangement may disclose protected health information about an individual to other participants in the organized health care arrangement for any health care operations activities of the organized health care arrangement. This is a bit ambiguous with respect to transfer of medical records to the Outgoing MD. To the extent the Outgoing MD is not in the same “organized healthcare arrangement” as the Incoming MD, (5) would not apply, and, most likely, (1) and (4) would not apply either. This would mean that disclosure, without a new patient authorization, would not be allowed. The question is whether 164.506(c)(2) would allow disclosure without a new patient authorization, by the Outgoing MD to the Incoming MD—i.e., whether the Incoming MD would be considered a “healthcare provider.” Consistent with the view that such disclosure would be allowed, the U.S. Department of Health and Human Services (“HHS”) offers this guidance: Question: Does a physician need a patient’s written authorization to send a copy of the patient’s medical record to a specialist or other health care provider who will treat the patient? Answer: No. The HIPAA Privacy Rule permits a health care provider to disclose protected health information about an individual, without the individual’s authorization, to another health care provider for that provider’s treatment of the individual. See 45 CFR 164.506 and the definition of “treatment” at 45 CFR 164.501. However, 45 CFR 164.506 speaks to use or disclosure of PHI by the covered entity for treatment. This may not necessarily mean, someone in the position of the Outgoing MD (i.e., may not mean, just any covered entity; presumably the Outgoing MD cannot simply transfer patient records, willy-nilly, to any MD, anywhere). Our brief review of HIPAA leads us to recommend getting a patient authorization executed for transfer of patient medical records (or copies thereof) to the Incoming MD. California Law Even when HIPAA applies, state law (here we’ll look at California law) must be considered if it is more stringent than HIPAA; and even when HIPAA does not apply, California law must be considered. Under California Civil Code, Section 56.10(a), which is part of the California Medical Information Act (“CMIA”), a healthcare provider “shall not disclose medical information regarding a patient … without first obtaining an authorization,” with several limited exceptions. One of the exceptions is disclosure to “providers of health care … or other health care professionals or facilities” for purposes of diagnosis or treatment of the patient.” (Cal. Civ. Code, Section 56.10(c)(1)). Whether or not Section 56.10(c)(1) would allow the Outgoing MD to transfer a patient’s medical records to the Incoming MD without patient authorization, CMB’s position in Closing Your Medical Practice appears to be that an authorization is required. Further, Section 56.11 provides that any person or entity who wishes to obtain “medical information,” other than a person or entity authorized to receive medical information” pursuant to 56.10(b) or (c), “shall obtain a valid authorization for the release of this information.” Section 56.11 then sets forth requirements for the authorization, including that it must be handwritten by the person who signs it, or in at least 14-point type. Upon demand by the patient or person who signed the authorization, the healthcare provider must furnish a true copy of the authorization (Section 56.12). Leaving a Medical Group or Practice or Employment situation? Closing a Practice? Questions? Call us. As you can see, the rules are quite complicated. Tales of woe come from not paying attention to the many arcane rules that can, apparently, trip up even an established medical center that probably has an advanced legal team. Whether you’re a telemedicine company, a medical management services organization, or a departing physician, nurse, or physician assistant, be cautious before you up and away with patient records. Get legal counsel before departure — and ideally, get legal counsel before you join that medical group or facility. Contact our healthcare legal team if you’re departing a medical practice. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
October 7, 2016
Healthcare
Can chiropractors legally practice functional medicine?
Functional medicine is rapidly gaining traction (pardon the pun) among chiropractors, but can chiropractors legally practice functional medicine? Let’s look at definitions of functional medicine as well as scope of practice issues faced by non-MD healthcare practitioners. Functional Medicine Practice More and more physicians are leaving primary care and opening a specialized medical practice in functional medicine. Meanwhile other professionals–such as chiropractors, and even psychologists–are looking to functional medicine as a way to help patients (and also develop new revenues lines and avenues of professional satisfaction). What is “functional” medicine? According to the Institute for Functional Medicine: Functional medicine addresses the underlying causes of disease, using a systems-oriented approach and engaging both patient and practitioner in a therapeutic partnership. It is an evolution in the practice of medicine that better addresses the healthcare needs of the 21st century. By shifting the traditional disease-centered focus of medical practice to a more patient-centered approach, functional medicine addresses the whole person, not just an isolated set of symptoms. Functional medicine practitioners spend time with their patients, listening to their histories and looking at the interactions among genetic, environmental, and lifestyle factors that can influence long-term health and complex, chronic disease. In this way, functional medicine supports the unique expression of health and vitality for each individual. This sounds a lot like integrative medicine, with its emphasis on a systems-oriented approach, therapeutic partnership, patient-centered approach, the whole person and not just symptoms, unique expression of health and vitality. More specifically, though, the above definition of functional medicine emphasizes “the interactions among genetic, environmental, and lifestyle factors that can influence long-term health and complex, chronic disease.” Whether or not patients understand the emphasis and branding of functional medicine, functional medicine is increasingly popular among clinicians. Medical Malpractice and Medical Board Discipline Our law firm recently conducted a website review for a physician opening a functional medicine practice. This physician already had her consent forms prepared by another healthcare attorney, but she wanted to be sure her website didn’t unduly expose her to risk of medical malpractice or medical board discipline. One of the issues with online marketing is that practitioners (and companies) can make aggressive therapeutic claims that run afoul of various legal rules (for dietary supplements companies, FDA and FTC rules; but for practitioners, rules governing advertising, laws against unfair business practices, or whatever else plaintiff lawyer trolls or aggressive boards can find in an investigation). For years, from a risk management perspective, we’ve emphasized using two defenses to medical negligence: assumption of risk by the patient (within reason) respectable minority In one version of assumption of risk, the patient and physician contract for a different style of medicine than the usual community approach. This is not necessarily a deviation from standard of care–simply a different therapeutic approach. As to the “respectable minority,” no one knows exactly what is considered “respectable” or why it rhymes with bespectacled; but with the gathering popularity of functional medicine among more and more sizable physician segments, one can argue that the respectable minority is present. Some of the decision points we discussed with our functional medicine physician included: disclaiming primary care and agreeing with the patient to enter into a specialist medical role requiring the patient to designate a primary care physician of record using clear consent forms to document a robust informed consent process following some of the ground rules laid out by the Federation of State Medical Boards in its Guidelines on Use of Complementary and Alternative Medical Therapies by Physicians using evidence-based approaches and documenting the literature supporting therapeutic approaches evaluating safety and efficacy of chosen therapies and selecting the ones with the best benefit/risk ratio Negligence can lead to both a malpractice lawsuit and medical board discipline, so reviewing the website for claims and language, as well as paying attention to the other risk management strategies, is critical. For more information, see our post, 4 Legal Tips for Setting Up a Functional Medicine Practice. Practice of Functional “Medicine” by Chiropractors, Psychologists, and Other Practitioners There’s an inherent problem when non-medical doctors advertise and practice functional medicine, in that the word “medicine” is included and only medical doctors (and DOs) can practice “medicine.” Analyzing scope of practice in detail is important. For example, we reviewed some law in Texas about chiropractic scope of practice and found an Attorney General Opinion from 2000, which asked: Does the Chiropractic Practice Act, as amended in 1999, permit doctors of chiropractic to order and receive the results of diagnostic testing from licensed medical laboratories, including urinalysis, arthritis panel, urine count, glucose tolerance test male-female endocrine profile, standard blood profile (CBC with differential) and pregnancy testing? The AG likes to ask yes/no questions in this way. We also reviewed the statutory definition of chiropractic: … the science and art of locating and removing interference with nerve transmission and nerve function. A chiropractic physician diagnoses and treats neuromuscular and musculoskeletal conditions through physical agent modalities and manipulative therapies. The adjustment, manipulation or treatment shall be directed toward restoring and maintaining the normal neuromuscular and musculoskeletal function and health of the patient. A chiropractic physician will also make appropriate health referrals for conditions that may not be treated by physical agent modalities and manipulative therapies. Patient care shall be conducted with due regard for nutrition, environment, hygiene, sanitation and rehabilitation designed to assist in the restoration and maintenance of the patient’s health. Nothing in this chapter shall be construed to authorize the chiropractic physician to practice any branch of medicine osteopathy, as defined in chapters 6 and 9 of this title, or surgery, including venipuncture or the prescribing of medication, acupuncture being the exception. We added some bold for emphasis. Here, the statute is clear, and as we’ll discuss below, the AG read it straight. A Narrower Scope of Practice No matter what the state, almost always the additional caveat exists, prohibiting the chiropractor (or other non-MD) from practicing “medicine.” Put simply: If it ain’t chiropractic, it’s medicine! The reason is that medical doctors have unlimited licensure to diagnose and treat disease, whereas other practitioners have limited licensure as defined by their scope of practice, which is inherently narrower. As the AG opinion put it, citing a Texas court: the field of chiropractic [is] limited to the treatment of those illnesses and diseases of the human body which doctors of chiropractic reasonably believe can be aided by the manual manipulation of the spine. On the other hand, the field of doctors of medicine covers all human illnesses and diseases and their diagnosis, treatment and prevention. The ground is clear: chiropractors, limited; on the other hand, medicine, covers all human illnesses and diseases and their diagnosis, treatment and prevention. If you want to change this, Option A is: lobby legislatures to change the rules of the regulatory landscape for medicine and chiropractic so that the whole limited/unlimited licensure concept bubbles away. Or option B: Buy a time machine Go back to the 1800s and challenge the AMA’s political dominance and influence over health care legislation; or create an alternate timeline in which the ACA (American Chiropractic Association) is ascendant. Note: I am in the middle of Terminator Genisys so Option B seems plausible. The Texas AG concluded that Texas law “did not change the established principles regarding the scope of chiropractic practice with regard to diagnostic testing so as to permit doctors of chiropractic to order and receive the results of diagnostic testing from licensed medical laboratories, including urinalysis, arthritis panel, urine count, glucose tolerance test,male-female endocrine profile, standard blood profile (CBC with differential) and pregnancy testing.” The AG did bat the question to legislative lobbying: We think additional legislation is required before chiropractors may order and receive from licensed medical laboratories the results of the diagnostic tests. Re-Brand I do have another suggestion, in case there’s a run on time machines and stock is temporarily out. That is: re-brand. The legal definition of medicine is typically broad and historically, chiropractors, acupuncturists, massage therapists, naturopathic physicians, and other practitioners have had to battle in the state legislatures for their own licensure or for exemptions and carve-outs, enabling them to practice. It you are a chiropractor practicing functional medicine, then in addition to having your attorney review scope of practice issues relevant to your practice, you might rebrand what you’re doing as functional health, not medicine. Language means a lot to regulators and enforcement authorities. As lawyers, we’re wordsmiths. Attention to language is what we do. Many times, what’s required is to titrate marketing vs. compliance. Neither is all-or-nothing. The more aggressive the marketing, the greater the risk of regulatory enforcement; conversely, the tighter and more thoroughly the compliance, the less room for edgy marketing. Legal compliance is really about understanding the rules and playing the edge so that 21st business models can have the right legal boundaries under rule systems that essentially arose in prior centuries. In the case of FDA law for dietary supplements, cosmetics and medical devices, we only have to go back to the 20th century, but for medical licensure we’re in the late 19th. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
August 22, 2016
Healthcare
Is Your Medical Assistant Practicing Medicine Illegally?
Is your medical assistant practicing medicine illegally? Understand the difference between medical assistance and medical practice. Don’t Confuse the Roles of the MD and the MA What happens when the MD and MA work together so seamlessly that patients can misunderstand who’s who? What if one of the “patients” is an undercover medical board investigator? Consider this practice scenario. Dr. Barbara is a licensed medical doctor (MD), and her best friend Gina is a non-licensed medical assistant (MA). Gina studied medicine in Germany, got her license and practiced there, but she is not licensed anywhere in the U.S. However, she is very knowledgeable, and good with patients. Gina is particular good with patients who have stomach upset. Barbara has her palpate these patients to assess where there might be some gastrointestinal disorder requiring treatment or referral to a specialist. Gina also gives patients nutritional advice when she accompanies Dr. Barbara on rounds. Dr. Barbara usually nods her head, and once in a while will make her own comments on the dietary supplements Gina recommends. Gina is expert in homeopathy as well and may recommend various homeopathic remedies that are commonly available at the local dietary supplement store, pharmacy, or holistic grocery store. Dr. Barbara wants to know if she is following the rules (in California) for her medical assistants. Watch The Perils of “Unlicensed Practice” of “Medicine” Let’s start with the definition of “practicing medicine.” This varies by state, but there are many commonalities. California’s definition of “practicing medicine” in California Business and Professions Code Section 2052(a) is typical of many: any person who practices or attempts to practice, or who advertises or holds himself or herself out as practicing, any system or mode of treating the sick or afflicted in this state, or who diagnoses, treats, operates for, or prescribes for any ailment, blemish, deformity, disease, disfigurement, disorder, injury, or other physical or mental condition of any person. Violation can result in a fine of up to $10,000, imprisonment in a county jail of up to a year, or both. Know The Safe Harbor for Non-Licensed Practitioners In a minority of states, the legislature has provided a safe harbor for non-licensed practitioners to offer services, so long as they are not “practicing medicine” or another licensed profession (such as, for example, psychology). In California, this legal shelf is known as “SB 577,” after Senate Bill 577. SB 577 is codified into the provisions of Sections 2053.5 and 2053.6 of the California Business and Professions Code. Referencing the prohibitions against “practicing medicine” in Sections 2051 and 2052, Section 2053.5 provides: (a) Notwithstanding any other provision of law, a person who complies with the requirements of Section 2053.6 shall not be in violation of Section 2051 or 2052 unless that person does any of the following: (1) Conducts surgery or any other procedure on another person that punctures the skin or harmfully invades the body. (2) Administers or prescribes X-ray radiation to another person. (3) Prescribes or administers legend drugs or controlled substances to another person. (4) Recommends the discontinuance of legend drugs or controlled substances prescribed by an appropriately licensed practitioner. (5) Willfully diagnoses and treats a physical or mental condition of any person under circumstances or conditions that cause or create a risk of great bodily harm, serious physical or mental illness, or death. (6) Sets fractures. (7) Treats lacerations or abrasions through electrotherapy. (8) Holds out, states, indicates, advertises, or implies to a client or prospective client that he or she is a physician, a surgeon, or a physician and surgeon. (b) A person who advertises any services that are not unlawful under Section 2051 or 2052 pursuant to subdivision (a) shall disclose in the advertisement that he or she is not licensed by the state as a healing arts practitioner. Section 2053.6 provides: (a) A person who provides services pursuant to Section 2053.5 that are not unlawful under Section 2051 or 2052 shall, prior to providing those services, do the following: (1) Disclose to the client in a written statement using plain language the following information: (A) That he or she is not a licensed physician. (B) That the treatment is alternative or complementary to healing arts services licensed by the state. (C) That the services to be provided are not licensed by the state. (D) The nature of the services to be provided. (E) The theory of treatment upon which the services are based. (F) His or her educational, training, experience, and other qualifications regarding the services to be provided. (2) Obtain a written acknowledgment from the client stating that he or she has been provided with the information described in paragraph (1). The client shall be provided with a copy of the written acknowledgement, which shall be maintained by the person providing the service for three years. (b) The information required by subdivision (a) shall be provided in a language that the client understands. This basically references the SB 577 Disclosure (or Consent) that a non-licensed practitioner provides for the client. Last, 2053.6(c) provides that the statutes does not: (1) Affect the scope of practice of licensed physicians and surgeons. (2) Limit the right of any person to seek relief for negligence or any other civil remedy against a person providing services subject to the requirements of this section. Although this legal shelf exists, and provides some legal umbrella for non-licensed practitioners, this is still subject to other statutory prohibitions, such as the prohibition against unlicensed practice of medicine. Under the Legal Rules about Nutritional Advice Certain titles are protected by licensing statutes and cannot be used without the license. In some states, only a person with designated training can offer nutritional advice as this is reserved for licensed healthcare practitioners. In California, the law allows persons to give “nutritional advice” or “advice concerning proper nutrition,” so long as such individuals do not practice medicine (i.e., do not violate B&P 2052), and “post in an easily visible and prominent place the following statement in his or her place of business: NOTICE State law allows any person to provide nutritional advice or give advice concerning proper nutrition—which is the giving of advice as to the role of food and food ingredients, including dietary supplements. This state law does NOT confer authority to practice medicine or to undertake the diagnosis, prevention, treatment, or cure of any disease, pain, deformity, injury, or physical or mental condition and specifically does not authorize any person other than one who is a licensed health practitioner to state that any product might cure any disease, disorder, or condition. The notice required “shall not be smaller than 81/2 inches by 11 inches and shall be legibly printed with lettering no smaller than1/2 inch in length, except the lettering of the word “NOTICE” shall not be smaller than 1 inch in length.” Our healthcare law team usually also includes such a notice in the SB 577 disclosure (as well as other provisions aimed to reduce legal risk for the practitioner). Understand the Legal Rules about Medical Assistants There is a fair amount of statutory verbiage around what medical assistants can and can’t do. In California, there are: Statutes Regulations Interpretations or discussions by the California Medical Board The relevant statutes are California Business & Professions Code Sections 2069 through 2071. Section 2069 provides in part (we’ve added bold below). (a) (1) Notwithstanding any other law, a medical assistant may administer medication only by intradermal, subcutaneous, or intramuscular injections and perform skin tests and additional technical supportive services upon the specific authorization and supervision of a licensed physician and surgeon or a licensed podiatrist. A medical assistant may also perform all these tasks and services upon the specific authorization of a physician assistant, a nurse practitioner, or a certified nurse-midwife. (2) The supervising physician and surgeon may, at his or her discretion, in consultation with the nurse practitioner, certified nurse-midwife, or physician assistant, provide written instructions to be followed by a medical assistant in the performance of tasks or supportive services….. (b) As used in this section and Sections 2070 and 2071, the following definitions apply: (1) “Medical assistant” means a person who may be unlicensed, who performs basic administrative, clerical, and technical supportive services in compliance with this section and Section 2070 for a licensed physician and surgeon or a licensed podiatrist, or group thereof, for a medical or podiatry corporation, for a physician assistant, a nurse practitioner, or a certified nurse-midwife as provided in subdivision (a), or for a health care service plan, who is at least 18 years of age, and who has had at least the minimum amount of hours of appropriate training pursuant to standards established by the board. The medical assistant shall be issued a certificate by the training institution or instructor indicating satisfactory completion of the required training. A copy of the certificate shall be retained as a record by each employer of the medical assistant. (2) “Specific authorization” means a specific written order prepared by the supervising physician and surgeon or the supervising podiatrist, or the physician assistant, the nurse practitioner, or the certified nurse-midwife as provided in subdivision (a), authorizing the procedures to be performed on a patient, which shall be placed in the patient’s medical record, or a standing order prepared by the supervising physician and surgeon or the supervising podiatrist, or the physician assistant, the nurse practitioner, or the certified nurse-midwife as provided in subdivision (a), authorizing the procedures to be performed, the duration of which shall be consistent with accepted medical practice. A notation of the standing order shall be placed on the patient’s medical record. (3) “Supervision” means the supervision of procedures authorized by this section by the following practitioners, within the scope of their respective practices, who shall be physically present in the treatment facility during the performance of those procedures: (A) A licensed physician and surgeon. (B) A licensed podiatrist. (C) A physician assistant, nurse practitioner, or certified nurse-midwife as provided in subdivision (a). (4) (A) “Technical supportive services” means simple routine medical tasks and procedures that may be safely performed by a medical assistant who has limited training and who functions under the supervision of a licensed physician and surgeon or a licensed podiatrist, or a physician assistant, a nurse practitioner, or a certified nurse-midwife as provided in subdivision (a)…. (c) Nothing in this section shall be construed as authorizing any of the following: (1) The licensure of medical assistants. (2) The administration of local anesthetic agents by a medical assistant. (3) The board to adopt any regulations that violate the prohibitions on diagnosis or treatment in Section 2052. (4) A medical assistant to perform any clinical laboratory test or examination for which he or she is not authorized by Chapter 3 (commencing with Section 1200)…. Section 2070 provides that “a medical assistant may perform venipuncture or skin puncture for the purposes of withdrawing blood upon specific authorization and under the supervision of a licensed physician and surgeon or a licensed podiatrist, or a physician assistant, a nurse practitioner, or a nurse-midwife as provided in subdivision (a) of Section 2069, if prior thereto the medical assistant has had at least the minimum amount of hours of appropriate training pursuant to standards established by the Division of Licensing. The medical assistant shall be issued a certificate by the training institution or instructor indicating satisfactory completion of the training required. A copy of the certificate shall be retained as a record by each employer of the medical assistant.” Section 2071 provides for the California Medical Board to adopt and administer “regulations that establish standards for technical supportive services that may be performed by a medical assistant.” As for regulations, look to the California Code of Regulation (CCR) Title 16 (Professional and Vocational Regulations), Division 13 (Medical Board of California), Chapter 3 (Affiliated Healing Arts), Article 2 (Medical Assistants), Section 1366-1366.4. These supplement what is said in the statutes. The Medical Board Hotly Enforces Violations Involving Medical Assistants IF you want to know what your medical assistant can and can’t do, it’s best to consult an attorney, who can work through the statutes and regulations and advise you as to what is allowed. You can get a sense by seeing what the California Medical Board says on its website. The warnings are fairly stern. First, the California Medical Board warns against medical assistants practicing beyond their scope of training: Medical assistants are unlicensed, and may only perform basic administrative, clerical and technical supportive services as permitted by law. An unlicensed person may not diagnose or treat or perform any task that is invasive or requires assessment. The responsibility for the appropriate use of unlicensed persons in health care delivery rests with the physician…. (emphasis added) Under the law, “technical supportive services” are simple, routine medical tasks and procedures that may be safely performed by a medical assistant who has limited training and who functions under the supervision of a licensed physician, podiatrist, physician assistant, nurse practitioner, or nurse midwife. “Supervision” is defined to require the licensed physician, podiatrist, physician assistant, nurse practitioner, or nurse midwife to be physically present in the treatment facility during the performance of those procedures…. (emphasis added) Medical assistants are not allowed to perform such invasive procedures as: placing the needle or starting and disconnecting the infusion tube of an IV. administering medications or injections into the IV line. charting the pupillary responses. inserting a urine catheter. independently performing telephone triage. injecting collagen. using lasers to remove hair, wrinkles, scars, moles or other blemishes. administering chemotherapy. Medical assistants may not interpret the results of skin tests, although they may measure and describe the test reaction and make a record in the patient’s chart. In summary, medical assistants are not licensed, and it is not legal to use them to replace highly trained, licensed professionals. The medical assistant is present to assist and perform basic supportive services in the physician’s office. (emphasis added) Those duties must be appropriate with the medical assistant’s required training. On its FAQ page for Medical Assistants, the California Medical Board outlines a number of common MA practices that are either legal or illegal. For example: Are medical assistants allowed to take a patient’s blood pressure? Yes. Medical assistants are allowed to take the necessary information to prepare a patient for the physician’s or podiatrist’s visit. This information may include taking the patient’s height, weight, temperature, blood pressure and noting the information on the patient’s chart. Are medical assistants allowed to perform telephone triage? No. Medical assistants are not allowed to independently perform telephone triage as they are not legally authorized to interpret data or diagnose symptoms. Can medical assistants call in refills to a pharmacy? Yes. Under the direct supervision of the physician or podiatrist, a medical assistant may call in routine refills that are exact and have no changes in the dosage levels. The refill must be documented in the patient’s chart as a standing order, patient specific. Medical assistants may not call in new prescriptions or any prescriptions that have changes. The physician should view carefully his or her decision to allow medical assistants to perform this task, as the authority to prescribe or refill prescriptions is only granted to licensed physicians and surgeons, podiatrists, or those individuals authorized by law to do so. The California Medical Board is particularly concerned about improper use of medical assistants in medical spas. The Board has a webpage, Frequently Asked Questions—Cosmetic Treatments, in which it has the following What is the penalty if I get caught using or helping an unlicensed person to perform medical treatment? The law provides a number of sanctions, ranging from license discipline to criminal prosecution, for aiding and abetting the unlicensed practice of medicine. Physicians could be charged with aiding and abetting unlicensed practice, and the employee could be charged with unlicensed practice. The Board is clear that its enforcement posture here is strong. Clarifying Roles Should Help In our practice scenario above, Dr. Barbara the MD and Gina the MA have to be very clear about their practice roles. Even though Gina may have been a licensed medical doctor in Germany, that license does not allow her to practice “medicine” in the U.S. She cannot diagnose or treat. She can only provide “technical, supportive” and other designated services as outlined in the medical assistant laws and regulation. (In California, look to the regulations for a list of additional technical supportive services). Gina should not be palpating patients; this sounds like a diagnostic function that should be left to the medical doctor. As well, Gina’s homeopathic recommendations could be construed as the practice of medicine. Even though the remedies might be commonly available, homeopathic medicine is a medical art. A handful of states designate licensure for homeopathy physicians; and homeopathy may be within the scope of practice of some licensed practitioners; but to the extent it involves diagnosis and treatment, it could be seen as the practice of medicine. Nutritional advice is separate from the medical assistant function. This might require an SB 577 disclosure with the required disclosure for nutritional practice (if in California), or other documentation depending on state law. Many physicians assume that someone like Gina can practice “under” their licensure. This is a false concept. There is licensed practice, allied health practice under physician supervision (or independent), and complementary and alternative medical practice (licensed or non-licensed). The fact that Dr. Barbara nods her head doesn’t mean that Gina is not giving medical advice. The California Medical Board makes clear that the physician is responsible for appropriate use of medical assistants. If the use is inappropriate, the physician could be aiding and abetting unlicensed medical practice, and prosecuted and/or disciplined accordingly. Both clinical practitioners and patients have to be clear about the professional roles and boundaries of clinical staff within the medical practice. Ask your healthcare lawyer if you have any questions about who can do what, within the medical center, clinical or group. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
August 1, 2016
Healthcare
How Can A Healthcare Clinical Practice Bonus Its Staff, Employees, & Marketing Personnel Without Trigger Fee-Splitting and Anti-Kickback Issues?
Healthcare bonuses raise fee-splitting and antikickback issues; is there a workaround” A California-based chiropractic clinic visited our law office to find out whether its compensation and bonus plans potentially violated anti-kickback and fee-splitting laws, and whether we could recommend more compliant arrangements. The compensation and bonus plans in place at the clinic were for clinician employees, independent contractor staff, the case manager, and the marketing manager. The chiropractic clinic treated each of these differently, and asked about very specific arrangements. Bonuses and Anti-Kicback/Fee-Splitting Rules The compensation arrangement the chiropractic clinic was implementing prior to the consult, is fairly common in the healthcare industry. It was a bonus structure in use not only by chiropractors, but also by physicians (MDs, DOs, and NDs), acupuncturists, veterinarians, and others. In a nutshell, the bonuses involved a “per-patient reward.” Before we get to this, let’s look at some of the other glaring fee-splitting and anti-kickback issues. Discounts and Rewards Many healthcare practices offer freebies. Under federal law, there is a de minimus exception for very small ticket items. For example, most dentists give patients a free toothbrush and toothpaste after the visit. Good idea–keep brushing! If the physician, chiropractic, or acupuncture practice (or integrative care center) does not submit claims to Medicare and Medicaid, then federal anti-kickback law is not implicated. So we’re left with state law. Most states, though, have their own statutory prohibition against kickbacks and fee-splitting, and many will follow federal law and overlook a minimal, small-ticket gift to the patient. Usually, the state-level anti-kickback and fee-splitting prohibition contains very broad language, such as forbidding the receipt or delivery of any discount, rebate, kickback, or compensation as an inducement to refer a patient. Here, the chiropractic clinic was organized as a professional chiropractic corporation (PC). The chiropractic PC does not take insurance, but is a cash-only practice. It employs a front desk person for scheduling, a case manager, and a marketing manager. Like many clinics, this one offers patients prepaid “packages” of healthcare services.Patients get “corrective plans” or “relief care plans” (or some similarly named “plan”) which involves a bundle of services. Although it is not uncommon to bundle, for example, an exam plus treatment, offering various packages with more discounts the more the patient purchases, raises several regulatory challenges. First, as noted in Packaging Medical Services: Is It a Legal Concierge Medicine Arrangement, or an Illegal Kickback: The notion of a prepaid, discounted services definitely raises regulatory questions. For example, an arrangement involving the initial prepayment or periodic payment in exchange for discounted medical or dental services is different than the practice of granting discounts for payment in cash. Although both practices are common in the industry, the former could be seen by the Department of Managed Health Care Services in California (as one example) to fall within the Knox-Keene Act, while the latter is expressly allowed under California law. The discounted services could be seen to fall within the statutory sweep of one who “provides, administers or otherwise arranges for the provision of health care services.” Second: In general, the legal risk is that enforcement authorities may choose to view the packaging medical or other health care services, as an illegal inducement for to refer the patient. If your healthcare venture involves a clinic, and the idea is to package, for example, one medical visit and one chiropractic visit, then enforcement authorities could argue that you are creating an unlawful inducement for the medical doctor to refer to the chiropractor, and the reverse; the more referrals within the clinic, the more that the clinic owners and practitioners financially benefit from the incentive given to the patient. Discounts for cash services are another matter. They are often permitted by law, as the differential is explainable as interest. Discounts other than cash problematic Per-Patient Bonuses: Legal or Illegal In general, “per patient” compensation raises enforcement scrutiny. It’s simply against the letter and spirit of the law in most cases to reward a staff member for the number of patients they corral into a clinic. Remember that compensation arrangements for marketing can get heavily scrutinized by regulatory authorities. Of course, a practitioner can be compensated for productivity. And a practitioner can ask a patient to come to another office that the practitioner runs (for example, Doctor’s San Francisco as opposed to Burlingame office) and this is not necessarily a “referral.” Sometimes, though, it’s difficult to tell whether the compensation is for productivity as opposed to being for the referral. Scrutinize arrangements carefully, with appropriate legal advice. For example, here are some of the chiropractic clinic’s practices, that struck us as likely to raise enforcement scrutiny: bonus staff based on the number of patients they steer to the healthcare clinic bonus practitioner based on number of packages “closed” (sold to patients) bonus marketing director for number of new patients brought in during marketing person’s tenure bonus front desk person for total revenue of “packages” purchased during front desk person’s working hours All of these different variations suggest a per-patient reward or inducement for referring the patient for more services. Note that many states contain anti-kickback provisions which apply not only to practitioner licensees (physicians, chiropractors, acupuncturists, nurses, psychologists, dentists, clinical social workers, and others) but to any person who induces a referral based on volume or value of patients referred. For example, California law prohibits steering patients to physicians for a fee. A More Compliant Way to Bonus As we’ve said, regulators do not like to see practitioners or staff rewarded for the “volume or value of patient referrals.” This is why we nix most of the ideas above. However, both practitioners and staff can get paid for productivity. The difference is that a bonus for production reflects effort, whereas a bonus for the volume (number of patients) or value of (e.g., revenue generation related to) patients is a reward for referring the patient. One solution is to use KPI, key performance indicators of productivity. For example, KPI for a marketing manager might include: Hours worked Number of patients seen at the clinic this year as opposed to last Measurable increase in patient loyalty Increase in market share in target market Effectiveness in resolving patient complaints Measurable overall increase in patient satisfaction Measurable increase in patient engagement as documented by patient participation in social media mentioning healthcare center or its practitioners Patient loyalty as measured by metrics of patients maintaining appointments. Note that the second factor, number of patients seen, is the same as volume of patients. However, now this is simply one factor among many, and as such, is being used as a surrogate endpoint for performance and productivity. Because we felt our chiropractic clinic was over-complicating the problem by trying to create micro-distinctions among the various bonus structures, we recommended implementing one overarching system. This bonus system would have clear KPI metrics. At least, we recommended one set of KPI for practitioners (targeted and tailored to metrics of practitioner productivity) and a second, slightly variant one for staff (keyed to staff performance). Caveats As with other regulatory and compliance matters, we cannot guarantee that a given arrangement will free a healthcare practice from regulatory scrutiny. Physicians, chiropractors, psychologists, and other clinicians and healthcare executives get in legal trouble for a variety of reasons. Sometimes a complaint based on one issue, will bring about a regulatory investigation and then once all the other arrangements are scrutinized, enforcement authorities will “throw in the kitchen sink.” Arrangements that might have otherwise looked acceptable are viewed with greater skepticism or even hostility. This is why it’s important to get nuanced legal advice on a spectrum of compliance fronts. HIPAA Compliance Our chiropractors expressed concern about HIPAA compliance: as a cash-based practice, do they even have to bother? The short answer is: technically, no; practically, yes. If they do not transmit patient billing information electronically, they are not under HIPAA; but they would subject to state law that mirrors HIPAA in terms of requiring safeguarding the privacy and security of patient information. State laws and regulations usually do not contain the dizzying, byzantine rules of HIPAA, but they do generally require that healthcare practitioners and practices maintain reasonable privacy and security safeguards. HIPAA is a default gold standard for this requirement. However, if practices want a less burdensome solution, it can be crafted. Some of the basics that we recommend are: A Notice of Privacy Practices (NPP) for patients Policies regarding EMR – electronic medical record/chart A Security Risk Assessment, identifying potential IT security leaks Implementation of reasonable security measures, scaled to the institution, with an explanation of why these were chosen and others (such as, for example, encryption) are not Appointment of a Privacy Official Conclusion How Can A Healthcare Clinical Practice Bonus Its Staff, Employees, & Marketing Personnel Without Trigger Fee-Splitting and Anti-Kickback Issues? Healthcare is a regulated enterprise, plain and simple. So compensation and bonus arrangements that might be creative and rewarding in other settings, have to undergo careful legal review in the health and wellness setting. KPI offer a useful tool; however, the metrics must be carefully thought through, to ensure they will not be viewed as a kickback in disguise. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
May 1, 2016
Healthcare
Are physician online dietary supplement sales, kickbacks or fee-splitting?
Are physician online dietary supplement sales, kickbacks or fee-splitting? The Challenge of Physician Online Dietary Supplement Sales Can physicians, chiropractors, acupuncturists, and other healthcare licensees create a legally defensible contractual arrangement with a dietary supplement manufacturer, in which the healthcare clinician receives a discount, rebate, or commission when referring a patient for online purchase of the manufacturer’s dietary supplements? Let’s take Singularity Supplements, a fictional dietary supplement manufacturer, and Dr. Bob, a physician who wants to sign up for Singularity’s rebate program. Singularity Supplements comes to our law office with an online program for licensed healthcare practitioners. The practitioner gets his or her own webpage which is doubly branded for the practitioner and for Singularity Supplements. This means that once Dr. Bob signs up, whenever Dr. Bob sends a patient to Dr. Bob’s Singularity Supplements website and the patient purchases supplements recommended by Dr. Bob, Singularity Supplements gives Dr. Bob a 25% rebate on the total retail purchase. Dr. Bob can then either pocket the 25%, or give it back to the patient. Either way, Singularity Supplements ships the dietary supplements to the patient and sends the check to Dr. Bob (or makes a direct deposit in his account). This is a very common arrangement in the dietary supplements industry; but is it legal? Self-Referral, Anti-Kickback, & Fee-Splitting Issues We talk a lot about self-referral, anti-kickback, and fee-splitting on this blog. While there are federal prohibitions against self-referral (“Stark”) and kickbacks, in general we are only looking at state law, because by and large, sales of dietary supplements are not reimbursed by Medicare or Medicare. Every state has its own statutes and regulations, but there are some commonalities. In general: Fee-splitting refers to a situation in which a physician literally splits his or her fee with a non-physician. For example, the doctor gets $100 for a visit and gives you $50 for referring the patient. Self-referral refers to a situation in which the physician refers the patient, for another healthcare service in which the physician has a financial interest. For example, your doctor sends you for lab tests where he or she owns the laboratory. Some types of self-referral (usually for what are known as “designated health services” or DHS) are prohibited, whereas others are allowed but require a disclosure of financial interest by the physician. There are both federal and state law prohibitions that vary in significant detail as to what activities and what streams of payment are a violation. A kickback refers to a situation where the physician pays, or receives, compensation in exchange for a referral. In the fee-splitting scenario, for example, the physician is paying for the referral. This can be a federal violation where federal payment is involved, and a violation of state statutes, which also vary in significant detail. Some state statutes speak to “brokering” or “steering” patients. In addition to these rules, some states have: Prohibitions against “patient brokering” (for example, Florida), or against “steering” patients to medical centers for a profit Prohibitions against exploiting patients for financial gain (for example, in Michigan, promotion for personal gain of an unnecessary service). Some states limit the prohibition explicitly to medical services, not goods; others, to “medical” goods but not services; and others, to goods and services reimbursed by private insurance. Some states extend their prohibitions to all licensed healthcare practitioners, whereas others only speak to violations by medical doctors. AMA and Federation of State Medical Boards Weigh in Against Physician Conflicts of Interest The AMA and Federation of State Medical Boards generally do not approve of in-office sales by physicians of health products. In Opinion 8.063 (Sale of Health-Related Products from Physicians’ Office), the American Medical Association wrote: In-office sale of health-related products by physicians presents a financial conflict of interest, risks placing undue pressure on the patient, and threatens to erode patient trust and undermine the primary obligation of physicians to serve the interests of their patients before their own. The AMA warned that physicians “should not sell any health-related products whose claims of benefit lack scientific validity.” Further, due to the “risk of exploitation,” AMA noted that physicians should: Limit sales to products that serve the immediate and pressing needs of their patients. Distribute other health-related products to their patients free of charge or at cost, in order to make useful products readily available to their patients. Disclose fully the nature of their financial arrangement with a manufacturer or supplier to sell health-related products. Disclosure includes informing patients of financial interests as well as about the availability of the product or other equivalent products elsewhere. Not participate in exclusive distributorships of health-related products which are available only through physicians’ offices. The AMA noted that such guidelines also apply to sales through websites. The Federation of State Medical Boards (FSMB), in its Model Guidelines for the Use of Complementary and Alternative Therapies in Medical Practice, also addresses sale of goods from physician offices. FSMB similarly warns about the “potential for patient exploitation” and states that “physicians should not sell … health-related products or engage in exclusive distributorships and/or personal branding.” Further, physicians should “provide a disclosure statement with the sale of any goods, informing patients of their financial interest.” The Somewhat Concerning Case of Charell v. Gonzales In this case, a New York trial court reviewed a jury verdict of negligence against a physician who incorporated nutritional advice into cancer care. The court also reviewed the jury’s punitive damages award to see if it was appropriate. The court concluded that the punitive damages were justified because the physician’s: practice of prescribing nutrition as a cure was designed to enable companies in which he had a financial interest to sell product. While there was evidence offered by the defendant to the contrary, the jury was entitled to find that defendant’s intent in dealing with plaintiff was motivated by greed and that he was reckless in his care of her. As it turns out, the appellate court vacated the award for punitive damages after finding that defendant’s conduct was neither grossly dishonest, or indifferent to patient care. Are Physician Dietary Supplement Sales Covered by Insurance The Charell case is concerning to practitioners who have a financial stake in sales of supplements, because here the financial stake allowed the Court to label the physician not only negligent, but worse–“motivated by greed” and “reckless.” Punitive damages are designed to punish the defendant, and thus are different from damages for negligence, which are only meant to be compensatory. As well, a physician’s medical malpractice insurance may not necessarily cover punitive damages — or even nutritional recommendations or those involving dietary supplements. If in doubt, it’s best to check in writing with your insurance carrier. The Side Telemedicine Issue If Dr. Bob makes his recommendations to his patient while the patient is out of the state in which Dr. Bob’s practice (i.e., Dr. Bob is in the “home” state in this scenario, and his patient is in the “remote” state), then Dr. Bob might be viewed as practicing in the “remote” state. While some states provide allowances for temporary consultations while the patient is visiting the remote state, other more aggressive states might conclude that in recommending dietary supplements to a patient who is traveling through or located in a remote state, Dr. Bob is “prescribing” in the remote state. Typically, prescribing without an in-person, good faith exam, is unlawful. Standard of Care Concern If dietary supplements and nutritional therapies are not widely accepted as the (or part of the) course of treatment, there is a risk that enforcement authorities could find a standard of care violation. As Charell suggests, the legal ante gets upped if the practitioner also made a profit off a therapeutic recommendation that was non-standard or outside conventional medical bounds. Some On-Point Legal Authority California has an Attorney General opinion from 2001, that provides some sense as to how a clinician’s financial interest in dietary supplements could be perceived. IIn this situation (Op.Atty.Gen. No. 00-1002 (February 1, 2001), 2001 WL 117913), the Attorney General found that chiropractors are prohibited, under the terms of Business and Professions Code section 650, from participating in an Internet marketing plan in which they agree to promote the naturopathic products of an Internet company and to refer their patients to the company’s website in exchange for fees of 20 percent of the price of the products purchased by their patients from the company’s website. There is a temptation to dismiss this opinion as reflective of the early, wild West days of the Internet. However, it’s still resonating out there, unless and until the AG offers a different view. Some Suggestions The AMA and FSMB opinions make clear that they expect physicians to follow certain guidelines, including these: Physicians have a burden to justify the scientific and medical validity of their recommendations for dietary supplements. Physicians should fully disclose their financial interest in arrangements with dietary supplement manufacturers. Physicians risk malpractice liability, and medical board discipline, when they run afoul of these kinds of parameters. There are also state rules prohibiting kickbacks and fee-splitting to consider. These can also impact dietary supplement manufacturers and distributors who create and promote these kinds of programs. These laws can be very broad yet tough. For example, California Business and Professions Code, Section 650(a), prohibits a physician from receiving any “rebate” or “commission” as “compensation for referring patients…to any person.” Similarly, in New York, a physician may not receive any rebate or commission “in connection with the furnishing of professional care or service.” This prohibition is amplified by prohibitions on: (1) promoting the sale of services or goods for financial gain; (2) receiving any fee in exchange for “the referral of a patient;” (3) permitting any person to share in the fee for professional services; or (4) ordering unwarranted treatment. New Jersey limited a physician’s markup to cost plus 10% to cover administrative expense. This was changed by Assembly Bill 4133. Self-referral laws are often less critical, because they frequently focus only on certain designated health services set out in the governing statute — for example, referrals to clinical laboratories or for physical therapy; dietary supplements usually are not included. However, such statutes may require that physicians disclose their financial interest in the supplements when directing the patient to a website where the clinician makes a profit. One option that a Singularity Supplements might consider is to restructure its program as follows. Dr. Bob purchases, say, $100 retail worth of dietary supplements from Singularity Supplements at a wholesale price of $60, which is 40% off the retail price. Singularity Supplements charges Dr. Bob 25% of the retail price ($25) for the Website platform, and for the fulfillment / drop-ship / back-office function. Since Dr. Bob has bought $100 worth at a wholesale price of $60, and has paid $25 for platform and back-office services, he effectively earns $35. The argument to enforcement authorities would be that the $35, rather than being a kickback from Singularity Supplements to Dr. Bob for referring the patient, in fact represents the difference between wholesale and retail, less the admin charges at fair market value. Those charges have to be at fair market value (FMV). (And in New Jersey, the total profit to Dr. Bob cannot exceed $10.) Ideally, this can be worked out so that Dr. Bob does not have to purchase physical inventory, and so that the patient’s payment flows first through Dr. Bob’s account and then from Dr. Bob’s account to Singularity Supplements, as otherwise it appears as if Singularity Supplements is paying Dr. Bob a commission. Dr. Bob should disclose his financial interest at the time he sends the patient to the co-branded Webpage for purchase of supplements. A Call to Action! If you are a dietary supplement manufacturer or distributor with a rebate program for physicians, chiropractors, or other healthcare providers who direct patients to buy dietary supplements from your online store, or if you are such a practitioner, contact us. We can provide legal counsel tailored to your situation. Or, if you’d simply like more information, search this blog for more posts about dietary supplement sales. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 31, 2016
Healthcare
Is practicing hypnotherapy legal in California?
Is practicing hypnotherapy legal in California? That all depends on what the practitioner is doing and claiming. Are Hypnotherapists Licensed The first thing to understand is the different between licensure and scope of practice. You’re either a licensed healthcare practitioner or non-licensed. If licensed, you’re either: A physician (MD or DO). You have “unlimited licensure.” This means you can offer whatever therapies are appropriate to prevent and treat disease — subject to concerns about professional standards of care (i.e., don’t be negligent) and medical board discipline (ditto; and don’t commit fraud). An Allied Health Professional (such as clinical psychologist, nurse or nurse practitioner, or dentist). Your licensure is limited to the scope of practice set forth in your licensing statute, or by your board’s regulations (and sometimes interpreted by case law). You cannot diagnose and treat disease, generally speaking. You can use the accepted tools of your profession to do the things your licensure allows; this may or may not require physician supervision, depending on whether you are an independent or a dependent healthcare professional. A Complementary and Alternative Medicine Practitioner (such as a chiropractor, an acupuncturist, or a massage therapist). As with allied health practitioners, your licensure is limited to your scope of practice. For example, as a chiropractor, you can manipulate the spine; but can you do colonic irrigation? It depends on your state; this may require legal research. Similarly, as an acupuncturist, can you order X-rays or recommend herbs? Again, it depends. In California, there is no separate licensing category called “hypnotherapist.” Rather, as in most states, hypnotherapy would be considered a modality that would be part of the scope of practice of a specific profession. For example, physicians may employ medical hypnosis; dentists, dental hypnosis; and clinical psychologists, clinical hypnotherapy. California Addresses Hypnosis (hypnotherapy) California Business & Professions Code Section 2908 addresses hypnosis: Nothing in this chapter shall be construed to prevent qualified members of other recognized professional groups licensed to practice in the State of California, such as, but not limited to, physicians, clinical social workers, educational psychologists, marriage and family therapists, optometrists, psychiatric technicians, or registered nurses, or attorneys admitted to the California State Bar, or persons utilizing hypnotic techniques by referral from persons licensed to practice medicine, dentistry or psychology, or persons utilizing hypnotic techniques which offer avocational or vocational self-improvement and do not offer therapy for emotional or mental disorders, or duly ordained members of the recognized clergy, or duly ordained religious practitioners from doing work of a psychological nature consistent with the laws governing their respective professions, provided they do not hold themselves out to the public by any title or description of services incorporating the words “psychological,” “psychologist,” “psychology,””psychometrist,” “psychometrics,” or “psychometry,” or that they do not state or imply that they are licensed to practice psychology;except that persons licensed under Article 5 (commencing with Section 4986) of Chapter 13 of Division 2 may hold themselves out to the public as licensed educational psychologists. Note: attorneys can use hypnosis. (You are getting sleepy … in a moment you will pick up the phone and call our law firm…..) Let’s break this down. California law does not prohibit: licensed professionals from practicing hypnosis (for example, physicians, clinical social workers, educational psychologists….) persons using “hypnotic techniques” when referred by doctors, dentists or psychologists persons from using “hypnotic techniques” for “avocational or vocational self-improvement” so long as they do not offer therapy for emotional or mental disorders duly ordained members of the recognized clergy, or duly ordained religious practitioners from “doing work of a psychological nature consistent with the laws governing their respective professions” provided that these individuals: do not hold themselves out to the public by any title or description of services incorporating the words “psychological,” “psychologist,” “psychology,””psychometrist,” “psychometrics,” or “psychometry” do not state or imply that they are licensed to practice psychology This is a variation on title licensure: essentially, individuals listed in the statute, can use hypnotic techniques for the purposes and within the limitations identified in the statute, so long as they do not use the “psychologist” title or reference practice of psychology. Although the drafting and language are not the clearest, the main concern here seems to be to prohibit non-psychologists from using hypnosis for “emotional or mental disorders,” since those are considered the province of the licensed psychologist. Suggestions If you’re a licensed provider, make sure that hypnosis would be considered within your scope of practice. From a regulatory standpoint, one sanction for violating these rules could be prosecution of unlicensed of psychology. To stay on the safer side, avoid referencing mental or emotional disorders. In general, it’s safer to talk about things like: relaxation and balance goals and goal-setting habits (as long as we’re talking about improving habits, and not about some obsessive-compulsive habit or some other indicator of what could be considered, mental pathology) performance (again, steering clear of psychological conditions that can be impediments to improved performance) Also, if you’re in California and non-licensed, we recommend an SB 577 disclosure / consent form to provide services under the umbrella of law. My Voice Will Go With You Sure, the legal rules can be scary. I wrote in Future Medicine that the laws were initially written from the perspective of preventing fraud. We are talking about licensing laws, not about the Bill of Rights. They were not necessarily written from an evolved consciousness with the intention to promote transformation of human potential. Professional licensure has largely been acknowledged to be a political process, rife with turf battles. Having said that, my journey as a healthcare lawyer began with my own study of Ericksonian hypnotherapy – a long time ago and in a galaxy far, far away. (Well, actually it was New York City). I’m a big believer in the power of the unconscious mind, and in the importance of personal and societal healing. As a lawyer, I set my clients straight about the legal boundaries, so they can practice in a way that is mindful of our existing legal framework. Do contact our healthcare legal team for legal counsel whenever setting up a hypnotherapy practice, any practice when you are non-licensed, or any therapy where you are unsure of the legal and regulatory boundaries and consequences. Understanding your legal risk, and implementing good risk mitigation strategies, both are important in protecting your professional services from legal jeopardy. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
August 1, 2015
Healthcare
If your medical device requires FDA 510k clearance but you put it on the market without a 510k, what happens?
If your medical device requires FDA 510k clearance but you put it on the market without a 510k, what happens?Many clients have asked us: do we have a medical device? Do we need to submit a 510k? What happens if we don’t file a 510k submission? Can we fly under the FDA radar? Bob has a new consumer product, consisting of an antenna and a receiver, which “beam information at the quantum level” to sync patients’ brainwaves and help patients heal. Anecdotally, the product has been wildly successful. Bob has 50 distributors across the country, and consumer testimonials about remarkable results, from reversing hearing loss to recovering from neurological conditions. Must Bob file a 510k? To properly advise Bob, we have to go back to the definition of a medical device, review classification of devices, talk about the intended use doctrine and labeling, and let Bob know about FDA’s enforcement options. Medical Device Definition The first question is whether you have a medical device. Look to the definition. A medical device is: an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component, part, or accessory, which is – (1) recognized in the official National Formulary, or the United States Pharmacopeia, or any supplement to them, (2) intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease in man or other animals, or (3) intended to affect the structure or any function of the body of man or other animals, and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of its primary intended purposes. One of the keys here is whether the intended use of the product is for diagnosis or treatment of disease. Remember that FDA has announced it will be more hands-off if you have a low-risk, general wellness product. The product must be intended for only general wellness use, and must present a very low risk to users’ safety. For example: exercise equipment, audio recordings, video games, software programs, and other products commonly available from retailers — again, provided the intended use is not to diagnose or treat cancer, obesity, diabetes, hypertension, migraines, or any other disease or condition. General wellness can include: maintaining or encouraging a general state of health or a healthy activity, or, associating the role of healthy lifestyle with helping to reduce the risk or impact of certain chronic diseases or conditions. For example, claims can be made about weight management, physical fitness, stress management or relaxation, sleep management, or even enhancing flow of qi. Sometimes it can be difficult to determine whether the intended use is diagnostic or treatment-oriented, as opposed to something else such as “general wellness.” In such cases, it’s best to contact FDA lawyers who can advise on whether you have a regulated medical device. 510k v PMA The next step is regulatory classification. Class I devices typically are exempt from premarket review requirements. Class II devices usually require a 510k, while Class III devices usually require a PMA. The 510k has a lower regulatory burden than the PMA, in that the 510k must demonstrate that the medical device is substantially equivalent to a legally marketed “predicate device.” This boils down to the new medical device having either the same technological characteristics as the predicate device (including appropriate clinical or scientific data, if deemed necessary by FDA), or, having different technological characteristics but essentially being as safe and effective. The PMA is not a comparative submission, but rather must demonstrate that the medical device is safe and effective in and of itself. During research and development of a new device, or of a new use for an existing device, manufacturers collect safety and effectiveness data to support their PMA or 510k by, among other things, conducting clinical trials. Before starting the clinical trial, the manufacturer must obtain an approved investigational device exemption (IDE). OTC Medical Device vs. Prescription Medical Device OTC medical devices must include in their labeling, “adequate directions for use” which inform the layperson how to use the device safely and for the purposes for which it is intended. This includes intended use; quantity of dose; frequency, duration, time. route or method, of application or administration; and preparation for use. Prescription medical devices need not have adequate directions for use on the label. Prescription devices must be prescribed under the supervision of a licensed practitioner, and the label must include: “Rx only” or “Caution: Federal law restricts this device to sale by or on the order of ” (physician, dentist, veterinarian, etc.). Adulteration and Misbranding The federal Food, Drug & Cosmetic Act (FDCA) prohibits adulteration and misbranding. A device is adulterated if there is something wrong with it that makes it unsafe and/or ineffective. For example, the device was made under unsanitary conditions or did not comply with the requirement for PMA approval. A device is misbranded if there is something wrong with its labeling that could lead to unsafe or ineffective use. This includes false or misleading advertising, inadequate instructions for use, or failure to obtain the required 510k clearance. As well, a device that requires 510k clearance but lacks such clearance is considered by operation of law to be a Class III device that requires a PMA, and therefore is also adulterated. (21 USC 513(f)(1)). And, a device that is “about to be significantly changed or modified in design, components, method of manufacture, or intended use” (21 C.F.R. § 807.81(a)(3)) requires a 510k. Significant changes include: (1) a change or modification of the device that could significantly affect the safety or effectiveness of the device; or (2) a major change or modification in the intended use of the device. The bottom line is that failing to submit a PMA or 510k when required for a medical device, is illegal and can trigger FDA enforcement action. Penalties What can FDA do? Civil monetary penalties (CMPs) have a maximum penalty of $15,000 per violation, not to exceed $1 million for all violations in a single proceeding. FDA can issue prior warnings before more serious enforcement. Prior warnings can include: FDA warning letter FDA civil suit, administrative action, or other regulatory correspondence Notification by other state, municipal, or federal agencies involving the same or similar violations FDA-483 (list of inspectional observations) provided by an FDA investigator at the conclusion of an inspection Discussion of objectionable conditions by FDA investigator with firm, as documented in the 483 Verbal notification from FDA to top management Written or oral advisory communication by FDA Industry meetings during which FDA discusses violations, if firm’s attendance is documented FDA’s current policy is that will usually provide prior warning before taking more serious enforcement action, but there are exceptions–notably, patient harm. FDA has a matrix for CMP fees, and will look at factors including: Nature of violations Circumstances Extent of violations Gravity (including patient harm) Ability to pay Effect on continued business History of prior violations Degree of culpability Other factors “as justice may require” In its Guidance for FDA Staff, Civil Money Penalty Policy, FDA states that civil monetary penalty (CMP) cases “should serve to eliminate the profit from violative activity and/or to provide non-compliant firms with the financial incentive to correct violations.” When a firm markets a device without required 510k clearance, the Guidance states, FDA usually documents prior warning of the violation, before imposing CMP, unless the violations represent a danger to health or are egregious in nature. Further, persons who are repeat violators (including those that fluctuate between being ‘out of compliance’ and ‘in compliance’ from one inspection to the next) may be good candidates for CMP action. FDA may also impose CMP for promotion and advertising violations, failure of sponsors to meet IDE reporting requirements, or failure of clinical investigators to submit completed case reports. Interestingly, the Guidance states that where in the past, FDA has used seizure or injunction for low-risk devices, FDA now will likely impose civil monetary penalties. In cases where there has been fraud or other criminal activities, FDA’s Office of Criminal Investigation (OCI) may investigate. Should the investigation reveal evidence of criminal activity, FDA would work with the Department of Justice for possible prosecution of those involved. For misdemeanor violations, the government need not show criminal intent. An FDCA misdemeanor may be punished by a maximum of year in prison and a fine of $100,000 for an individual, $200,000 for a corporation. Felonies involve violations where there was “intent to defraud or mislead,” or a repeat offense. Company officers can be held personally (criminally) responsible in both criminal prosecution and monetary proceedings. Back to Bob One item that’s critical in Bob’s marketing is that he targets his product toward patients with a variety of named conditions. FDA can easily search for these terms online and find Bob’s products. Bob has to be careful not to make diagnostic or therapeutic claims for his products. He should monitor the testimonials his company posts, or LIKES on social media, as these too could indicate a diagnostic or therapeutic intended use. If Bob has a medical device, we will need to find out whether it is Class I, II or III. We’ll need to know more about Bob’s product. He may have a biofeedback device (21 CFR 882.5050): “an instrument that provides a visual or auditory signal corresponding to the status of one or more of a patient’s physiological parameters (e.g., brain alpha wave activity, muscle activity, skin temperature, etc.) so that he patient can control voluntarily these physiological parameters.” FDA regulates a biofeedback device as a Class II device if it is a prescription battery-powered device that is indicated for relaxation training and muscle reeducation. Otherwise, the device may be Class III. When Bob talks about brainwave optimization he may be indicating a different mechanism and intended use than when he talks about “quantum” effects. Bob may or may not have a general wellness, low-risk medical device. As well, Bob must have substantiation for the claims he makes regarding efficacy. If Bob does not have competent and reliable scientific evidence, he may find himself at the butt of enforcement action by FTC as well as FDA, and, sued by private plaintiffs as well. Overall, Bob will need legal advice by FDA lawyers experienced with medical device regulation, to properly assess what he has. One thing is for sure: unless Bob nefariously beams his quantum device so that regulators will say, “these droids are not worth your trouble,” he’ll be on FDA’s radar – it’s no surprise that the Agency has Internet access too, and can easily find Bob’s website and all the claims he makes about his consumer product. With radar ubiquitous, flying under is no longer an option. (See FDA exerts authority over medical devices with genomics). Also, if Bob wants to have a realistic exit strategy, he should pay close attention to regulatory strategy, compliance, and documentation. M&A due diligence will uncover any holes in Bob’s FDA legal strategy. Our FDA lawyers have counseled ventures and entrepreneurs like Bob as to their medical device, FDA obligations. Particularly given our interest in complementary and alternative medical therapies and holistic health, we’ve been interested in FDA legal issues long before FDA issued its guidance on general wellness products. Connect with us if you want to assess whether your product is a regulated medical device. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
July 22, 2015
Healthcare
Does your concierge medicine advertising create legal jeopardy and liability?
Advertising and marketing are two areas that concierge medicine practices frequently neglect when assessing liability risk. But legal jeopardy can arise from advertising and marketing claims on your website or in your brochures, patient handouts, and other marketing materials–whether you have an integrative medicine clinic, functional medicine practice, anti-aging medicine group, concierge or retail medicine practice, or even a conventional medical or surgical practice. The large medical malpractice verdict against MDVIP is a case in point. The Malpractice Verdict Against MDVIP That MDVIP, one of the nation’s leading concierge medical management companies, could be held liable for the negligence of one of its physician clients, came as shocking news. MDVIP has experienced skyrocketing success in promoting concierge medicine in the U.S. MDVIP has focused on preventative medicine and wellness, and profited by providing quick access to physicians and “exceptional care,” in exchange for an annual membership fee. For this promise, MDVIP got socked with an $8.5 million malpractice liability verdict in Florida. The verdict resulted from the negligence of a physician contracted with MDVIP, who had been sued for misdiagnosing a patient, resulting in amputation of the patient’s leg. To be sure, MDVIP did not actually provide the care nor did it supervise the physician’s care. So why should MDVIP be held liable? Potential MSO Liability for Managing and Marketing Patient Care In one sense, MDVIP is acting like any medical services organization (MSO) in managing and marketing patient care–albeit in the specialized arena of concierge medicine. An MSO (or any organization that manages and markets physician or other clinical services) can face several legal risks, particularly in states that have a strong corporate practice of medicine law, and in all states due to fee-splitting and anti-kickback concerns. See, for example: Corporate Practice of Medicine & Anti-Kickback / Fee-Splitting Rules: Deep Down the Regulatory Rabbit Hole Fee-Splitting 101 for Medical Doctors, Chiropractors, Acupuncturists, and Others Is it Fee-Splitting for Medical Doctors to Share Revenues with Non-Medical Business Owners Are You Handling Licensing, Corporate Practice of Medicine, Fee-Splitting, Standard of Care, Informed Consent, HIPAA (privacy & security), Scope of Practice, Liability, Advertising, Contract, & FDA Issues in Your Telemedicine Venture Let’s be clear that liability for negligence can come in two basic forms: direct and vicarious. Direct Liability vs. Vicarious Liability for Medical Negligence For example, when a physician is negligent by misdiagnosing the patient (as happened in the MDVIP case), the physician is directly liable for his or her conduct. This is direct liability. A person can be directly liable in several ways, including: a negligent act or omission negligent failure to supervise, if the person has legal authority of supervision (for example, MD over RN) other, related negligent failures — for example, negligent credentialing if the person has undertaken legal responsibility to vet the provider (for example, hospital’s failure to vet physician when giving hospital privileges) A person can also be vicariously liable for someone else’s conduct. Vicarious liability can arise in various ways; perhaps the most surprising is that there is an “apparent agency” (in other words, A is negligent but B is held liable because the arrangement makes it appear as though A was B’s agent). In one sense, we can look at the MDVIP verdict as a version of vicarious liability, in which liability is transferred up the chain to another party who was not “directly” negligent (by act or omission). Because MDVIP did nothing, as far as we can tell, that resulted in the leg amputation. All MDVIP did was contract with the physician. MDVIP had nothing to do with the clinical care itself–nor could it, as MDVIP is not a professional medical corporation. Whether or not MDVIP is involved, vicarious liability is a concern in any medical practice–conventional, functional, anti-aging, integrative, concierge, or otherwise; and broadly speaking, vicarious liability can affect other healthcare professionals as well as those managing and marketing the practice. Of course, management companies are not often the targets of medical malpractice lawsuits; nor, for example, is a physician typically liable for referring to a chiropractor (or the reverse). But here are some of the ways vicarious liability can arise: all providers could be held vicariously liable for negligence of their colleagues–particularly if they share clinical approaches and consult among one another within an integrative clinical care setting those who are organizing, arranging, or marketing the services could be seen as vicariously liable for the negligence of the clinicians, because they could be seen as agents for the practitioners the organizers, arrangers, marketers, could be seen to be making implied promises about the quality of care or level of competence of the practitioners (this is a variation on negligent credentialing) The bottom line is that MDVIP was held responsible for promising “exceptional care,” and a misdiagnosis that results in leg amputation is obviously not “exceptional care.” New Awareness of Potential Liability Risks When Promoting Concierge Medicine Awareness of potential liability risks can lead to better risk management–and hopefully, lower risk (and improved patient care as a downstream result). In Concierge Medicine Firm Found Liable for Doctor’s Negligence, Kaiser Health News reports: Industry experts say the ruling is significant because it shows concierge companies can be held liable for the care provided by their contracted doctors. The companies typically argue they do not actually provide care but merely act as brokers between doctors and patients…. [O]ne of the plaintiff’s attorneys, said the verdict will push MDVIP and similar companies to scrutinize doctors more carefully before they affiliate with them because they may be liable for the doctors’ actions. Such companies will also be more cautious about advertising that they offer better care. Unfortunately for such companies, by taking more care to vet physicians, they will run into the risk of liability for negligent credentialing, if their vetting efforts fail to prevent a doctor’s negligence. While MDVIP lookalike companies will be more cautious in vetting clinicians as well as in their marketing, negligent credentialing and other liability theories are not the only source of risk. Plaintiffs’ lawyers no doubt now will look to many different legal theories to get the MDVIPs and MSOs of the world on the hook, including: direct liability / negligent credentialing vicarious liability / apparent agency federal advertising law (FTC prohibition on false, misleading, and deceptive advertising) consumer protection laws, including state advertising law and statutes such as, in California, Business & Professions Code Section 17200 (prohibiting unfair competition) Risk Management for Concierge Medical Practices Concierge medicine practices will still have to monitor other legal and liability issues, such as being careful not to violate federal law if the physician remains Medicare par or non-par (but not opted out). See, for example: How Medicare.gov helps with legal review of concierge medicine services Concierge v. Direct Primary Care: Legal Issues Packaging Medical Services – Is it a Legal Concierge Arrangement, or An Illegal Kickback? Concierge Medicine (Legal Issues) These legal and regulatory issues can be tackled, but this requires an overall vision of the various potential rocks in shallow waters–the different sources of liability that should be reckoned with and, ideally, mitigated. Conclusion Some say medicine is dead; but the reality is that it is morphing into different forms. Today, “concierge” practice, retail medicine, boutique medicine, hybrid models, direct primary care, cash-only practices, VIP care, executive physicals, personalized medicine; tomorrow, mobile medical apps, wellness care through your integrative care clinical team or via your latest wearable health tech tracking technology; after that, nanotechnology and your personal wearable or cloud robot. The forms of delivery of wellness and health care keep changing–as do the business models and legal strategies for delivering these new forms of care. We still have these relatively archaic pillars of jurisprudence that have been handed down from time immemorial (unless anyone remembers Hammurabi). Companies and counsel who represent them, must stay adept and deploy risk management strategies as the market keeps changing. Contact our healthcare, FDA and FTC legal team for strategy on your path to market. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 18, 2015
Healthcare
How can you organize a Massachusetts medical spa or integrative care center legally without fee-splitting?
Unlike California, which provides clear guidance regarding legal and enforcement hot buttons for medical spas and integrative care clinics, Massachusetts law requires more digging. As with New York and other states’ laws, Massachusetts does not offer us the clearest picture of medical spa or integrative medicine compliance legal obligations. For example, suppose you have a chiropractor who wants to start an integrative care center in Massachusetts, New York, California, Texas, Michigan, Oregon, Arizona, New Jersey, or any other state. The chiropractor wants to give the medical doctor an incentive to cross-refer, yet not run afoul of anti-kickback rules (which prohibit giving something of value in exchange for a referral). Is there a more lawful or compliant way to create incentives within the business structure between the D.C., the M.D., and their respective entities – and should they form LLCs or professional corporations? The chiropractor knows something about corporate practice of medicine, fee-splitting / anti-kickback prohibitions, and similar rules, but wonders whether the integrative care clinic will be difficult because it is a D.C. and not an M.D. who proposes to organize the clinic. There’s the rub, indeed. In this situation, there are several areas of law to track. These include: Corporate practice of medicine concerns, as mentioned. Massachusuetts has an informal policy prohibiting undue intrusion from management companies, medical service organizations (MSOs) and others into clinical medical care. In other words, there is a strong prohibition against corporate practice of medicine. Law of professional organizations. Physicians can form professional medical corporations, and chiropractors can form professional chiropractic corporations, per Masachusetts General Law, Chapter 156a. However, the corporate practice of medicine is likely still a bar against a chiropractor hiring an MD into a professional chiropractic corporation. Kickback and fee-splitting prohibitions. For example, Chapter 175H of Massachusetts General Law deals with False Health Claims. Section 2 (false statements on applications for coverage and claims; failure to disclose) provides: Any person who (1) knowingly and willfully makes or causes to be made any false statement or representation of a material fact in any application for a payment of a health care benefit;[1] or (2) knowingly and willfully presents or causes to be presented an application for a health care benefit containing any false statement or representation of a material fact; or (3) knowingly and willfully makes or causes to be made any false statement or representation of a material fact for use in determining rights to a health care benefit, including whether goods or services were medically necessary in accordance with professionally accepted standards; or (4) having knowledge of the occurrence of any event affecting his initial or continued right to any health care benefit, conceals or fails to disclose such an event with an intent to fraudulently secure such benefit either in a greater amount than is due or when no such benefit is due; or (5) having knowledge of the occurrence of any event affecting the health care benefit of any other individual in whose behalf he has made or presented an application for such benefit, or in whose behalf he is receiving any health care benefit, conceals or fails to disclose such an event with an intent to fraudulently secure such benefit either in a greater amount than is due or when no such benefit is due, shall be punished by a fine of not more than ten thousand dollars, or by imprisonment in a jail or house of correction for not more than two and one-half years or in the state prison for not more than five years, or by both such fine and imprisonment, and may be held liable in a civil action under section seven. Notwithstanding the foregoing, a person who is not a provider of services for which a health care benefit may be paid shall not be subject to prosecution hereunder for any statement or representation which such person makes without fraudulent intent. Section 3(a) (solicitation, improper inducement to use goods, facilities, services, or products covered by insurance) provides: Any person who solicits or receives any remuneration, directly or indirectly, overtly or covertly, in cash or in kind in return for purchasing, leasing, ordering or arranging for or recommending purchasing, leasing, or ordering of any good, facility, service, or item for which payment is or may be made in whole or in part by a health care insurer, or any person who offers or pays any remuneration, including any bribe or rebate, except as provided in subsection (b), directly or indirectly, overtly or covertly, in cash or in kind to induce any person to purchase, lease, order or arrange for or recommend purchasing, leasing or ordering of any good, facility, service, or item for which payment is or may be made in whole or in part by a health care insurer, shall be punished by a fine of not more than ten thousand dollars, or by imprisonment in a jail or house of correction for not more than two and one-half years or in the state prison for not more than five years, or by both such fine and imprisonment, and may be held liable in a civil action under section seven. The authority to prosecute offenses under this chapter rests with the Attorney General’s Office (section 5); penalties, as noted, include fines and imprisonment, as well as civil liabilities such as restitution (sections 2, 5, 7). Chapter 175H does not set forth any statutory exceptions (other than those set forth in section 3(b) which relate to retail pharmacies) Fee-splitting prohibitions are alive and well in Massachusetts. What are some options for the chiropractor, acupuncturist, or other non-MD healthcare service provider? Rent space only. Create a “medical mall” in which the integrative care center is basically a storefront with independent practices. The problem is that rentals only do not provide sufficient incentive to the physician who believes they can do better without the chiropractor or non-MD provider. Create a management company (MSO) and consider giving the MD a stake in the MSO. The issue is that this creates a conflict of interest for the physician, may require disclosure to the patient and the medical board, and requires that the MD do something specific to earn the management company stake. Create a professional chiropractic corporation. One challenge here is that the corporate practice of medicine doctrine makes it difficult to manage an MD-drive integrative care clinic or multidisciplinary clinical enterprise. Provide management / MSO services to a professional medical corporation. This can be financially advantageous if the MSO charges well (but at fair market value) for management and marketing services; but, this structure can give a lot of power to the MD president of the professional medical corporation. These are just some of the potential configurations. There are pros and cons to the various alternatives. And, there are enforcement risks depending on how strongly a given state cares about corporate practice of medicine or takes fee-splitting seriously enough to routinely investigate multi-disciplinary practices. The main challenge here is that we have chiropractor-driven integrative care (in the integrative clinic scenario) and layperson-driven medical spa services (in the medical spa scenario). Once a licensed healthcare provider or non-licensee is at the top of the chain – and not the MD – then corporate practice of medicine and fee-splitting rules create issues. Our healthcare & FDA lawyers track health care and FDA legal developments so we can counsel our clients on their compliance legal obligations. Contact our healthcare & FDA legal team for laws and updates relevant to your situation. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 9, 2015
Healthcare
Do acupuncturists have to comply with HIPAA when they share an electronic medical record?
Whether HIPAA applies to acupuncturists who share a medical record, is one of those arcane questions our healthcare lawyers get. The answer isn’t all that easy to obtain. Like many healthcare & FDA legal issues, this HIPAA question is a fun treasure hunt through the legal rules. HIPAA itself is really a statute, under which the U.S. Secretary of Health and Human Services has promulgated at least five regulations, of which only the first two (Privacy and Security) are the ones we normally care about. Before we even start, there’s a preemption rule to tackle: HIPAA will supersede relevant state law, unless state law is found to be more stringent. HIPAA does not preempt state requirements related to reporting of disease, child abuse, birth and death, or that authorize public health surveillance or public health investigation or intervention. Let’s move past preemption now. HIPAA regulates electronic data exchange of health care information. The relevant provisions of HIPAA, known as the “Administrative Simplification” provisions, essentially amend the federal Social Security Act’s Medicare and Medicaid provisions. HIPAA is intended to protect the privacy of patients’ protected health information (“PHI”). PHI means individually identifiable health information that is transmitted by electronic media, maintained in electronic media, or transmitted or maintained in any other form or medium (whether electronic or hardcopy). PHI is a subset of the individual’s health information; identifiable health information means health information (including demographic information) that identifies the individual, or with respect to which there is a reasonable basis to believe the information can be used to identify the individual. HIPAA requires covered entities to: Provide information, in writing, to patients about their privacy rights and how their information will be used. Develop policies, procedures, and systems to protect patient privacy and patients’ ability to access, addend and amend their records. Train staff on these procedures. Appoint a “privacy officer” to ensure privacy procedures are developed, adopted, and followed. Appoint a “security officer” to ensure security procedures are developed, adopted, and followed. Secure patient records that contain PHI from individuals who should not see them. Account for specified disclosures of PHI. Establish a complaint mechanism for privacy concerns. Establish and enforce a system of sanctions for employees who violate privacy policies and procedures. Notify patients and government agencies in the event of a breach, where required. Typically, health care plans subject to HIPAA will have a compliance plan, including a compliance manual with a full set of policies, procedures and forms. HIPAA only applies to the following types of covered entities (for the moment, we’re omitting business associates and their subcontractors): (1) a health plan; (2) a health care clearinghouse; (3) A health care provider who transmits any health information in electron form in connection with a transaction referred to in section 1173(a)(1). Here, “262” refers to the section of HIPAA, and “1173” to the section being inserted into the Social Security Act; HIPAA is, as noted, codified in Title 42 of the U.S.C. Under HIPAA, the term “health care provider” includes: “a provider of services (as defined in section 1861(u)), a provider of medical or other health services (as defined in section 1861(s)), and any other person furnishing health care services or supplies.” Next, under section 1861(u), the term “provider of services” means a “hospital, critical access hospital, skilled nursing facility, comprehensive outpatient rehabilitation facility, home health agency, hospice program, or … a fund.” The term “medical or other health services” has a lengthy definition, which includes: (1) physicians’ services; (2) services and supplies furnished as a “incident to a physician’s professional service;” (3) diagnostic X-ray tests …. (6) durable medical equipment; (7) ambulance service; and other services which do not appear to apply to services an acupuncturist might furnish The catch-all, “any other person furnishing health care services or supplies” is not limited to medical services or physicians. It would appear to encompass services by an acupuncturist. This conclusion is bolstered by the definition of “health care” under the HIPAA regulation Health care means care, services, or supplies related to the health of an individual. Health care includes, but is not limited to, the following: (1) Preventive, diagnostic, therapeutic, rehabilitative, maintenance, or palliative care, and counseling, service, assessment, or procedure with respect to the physical or mental condition, or functional status, of an individual or that affects the structure or function of the body; and (2) Sale or dispensing of a drug, device, equipment, or other item in accordance with a prescription. Further, the U.S. Department of Health & Human Services (“HHS”), on its webpage dedicated to Health Information Privacy, states that a “health care provider” includes: doctors, clinics, psychologists, dentists, chiropractors, nursing homes, pharmacies, and others (but only if they transmit any information in an electronic form in connection with a transaction for which HHS has adopted a standard (see b. below)). The list suggests that other providers, such as acupuncturists, would be included. HHS also provides an easy-to-use question and answer decision tool to determine whether one is a covered entity. This links to a decision chart on the website for the Centers for Medicare & Medicaid Services. The first question is: “does the person, business, or agency furnish, bill or receive payment for, health care in the normal course of business.” It does sound as though acupuncturists would be considered healthcare providers subject to HIPAA. However, HIPAA only applies to a “health care provider who transmits any health information in electronic form in connection with a transaction referred to in section 1173(a)(1).” This statutory section requires HHS to adopt (1) …. standards for transactions, and data elements for such transactions, to enable health information to be exchanged electronically, that are appropriate for— (A) the financial and administrative transactions described in paragraph (2); and (B) other financial and administrative transactions determined appropriate by the Secretary, consistent with the goals of improving the operation of the health care system and reducing administrative costs. (2) TRANSACTIONS.–The transactions referred to in paragraph (1)(A) are transactions with respect to the following: (A) Health claims or equivalent encounter information. (B) Health claims attachments. (C) Enrollment and disenrollment in a health plan. (D) Eligibility for a health plan. (E) Health care payment and remittance advice. (F) Health plan premium payments. (G) First report of injury. (H) Health claim status. (I) Referral certification and authorization. Under the HIPAA regulations, transaction means the transmission of information between two parties to carry out financial or administrative activities related to health care. It includes the following types of information transmissions: (1) Health care claims or equivalent encounter information. (2) Health care payment and remittance advice. (3) Coordination of benefits. (4) Health care claim status. (5) Enrollment and disenrollment in a health plan. (6) Eligibility for a health plan. (7) Health plan premium payments. (8) Referral certification and authorization. (9) First report of injury. (10) Health claims attachments. (11) Other transactions that the Secretary may prescribe by regulation. Of these, the question is whether sharing patient medical information in-office via an EHR constitutes “health claims or equivalent encounter information. HIPAA regulations define “health claims or equivalent encounter information” as either of the following: (a) A request to obtain payment, and the necessary accompanying information from a health care provider to a health plan, for health care. (b) If there is no direct claim, because the reimbursement contract is based on a mechanism other than charges or reimbursement rates for specific services, the transaction is the transmission of encounter information for the purpose of reporting health care. So, the scenario of acupuncturists sharing an EHR in and of itself does not appear to trigger HIPAA compliance necessarily. The short form of this is that we typically look to whether providers electronically transmit patient health information for insurance reimbursement. This isn’t legal advice, per se – it’s a journey through the regulatory treasure hunt. Our HIPAA attorneys track privacy and security legal developments, as we counsel our clients on their compliance legal obligations. Contact our HIPAA legal team for laws and regulatory updates relevant to your situation. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
February 7, 2015
Healthcare
Is it fee-splitting for medical doctors to share revenues with non-medical business owners?
”I provide medical (or acupuncture, chiropractic, osteopathic, massage) services on an hourly basis and get paid a percentage of revenues in return.” Is that fee-splitting? The fee-splitting question is a typical one that clients bring to our firm. The client may be the venture owner / entrepreneur, the medical director for a medical group, or a practitioner who is a medical doctor or osteopathic physician, or a chiropractor, acupuncturist, homeopath, massage therapist, or other clinical care provider. The answer to the fee-splitting question depends both on the kind of provider, and on state law – and the other underlying circumstances, such as whether the healthcare provider is an employee or independent contractor. For example, some statutes do not apply fee-splitting prohibitions to massage therapists, but do apply the prohibitions to medical doctors, chiropractors, and acupuncturists. It’s important to read the rules carefully and apply them to the facts. Let’s first talk about federal Stark and anti-kickback legal rules. Federal Law – Stark, Anti-Kickback Law Let’s assume for now that the provider is a healthcare licensee and that no Medicare or Medicaid reimbursement is involved. If the healthcare provider submits claims for reimbursement to Medicare or Medicaid (or in California, Medi-Cal), then our healthcare lawyers would do a Stark and anti-kickback analysis under federal law. (See Federal Self-Referral (Stark) and Anti-Kickback Analysis for Integrative Care Center, for a summary of federal self-referral and anti-kickback law, and its application in particular to integrative medicine). We would first analyze compensation arrangements. We would look, among other things, to: Corporate practice of medicine and unlicensed medical practice concerns. Scope of practice rules for each practitioner. State laws prohibiting kickbacks, fee-splitting, self-referral, and exploitation of patients for financial gain. If Medicare or Medicaid are not involved, then we look only to state law. Let’s look at New York for a sample of what’s in store under state law. Corporate Practice of Medicine Some states have a “weak” corporate practice of medicine rule. This means they typically prohibit non-clinicians from practicing medicine or intruding into clinical practice. But they do not prohibit laypersons from employing physicians, so long as the layperson has no actual control over the practice of medicine. By contrast, New York State has a “strong” corporate practice of medicine prohibition. (See New York’s Strong Corporate Practice of Medicine Requires a Professional Corporation for Professional Services). Laypersons cannot hire physicians, period (with very limited exceptions). Under this rule, medical service organizations (MSOs) must be structured properly as they can blur the distinction between professional judgment and administrative services. California, Texas, and various other states similar have a strong corporate practice of medicine legal prohibition. In New York, a corollary of this strong corporate practice of medicine, is the rule requiring separation of activities between professional medical corporations and general business corporations. All professional services can only be offered within a professional service corporation (“PC”), or a professional limited liability company (“PLLC”). Business services have to be performed with a simple LLC or general business corporation, but the MSO cannot perform professional services. So, for example, who hires the nurse? The professional medical corporation. Who hires the front desk person? The general corporation. Can the MSO handle the payroll for the nurse, physician assistant, and other clinical providers? The MSO can administer payroll, but it cannot be the employer, as the employer has supervisory responsibilities and clinical control over dependent practitioners’ activities. Scope of Practice The next issue is legally authorized scope of practice; scope of practice rules require that non-medical practitioners (such as licensed acupuncturists) remain within the practice boundaries specified by their licensed statute, as clarified by any subsequent regulations promulgated by the state acupuncture board. See, for example, Legal Rules Restrict Scope of Practice Boundaries in Acupuncture. Practicing beyond the scope of practice can: Put the healthcare practitioner at risk of unlicensed practice of medicine. Put the organization at risk of aiding and abetting unlicensed practice of medicine. Both are criminal violations. Additional risks include professional discipline, and, vicarious liability for the negligence of others. Two things our healthcare lawyers do, in addition to researching the legally authorized scope of practice for each clinician, are: Draft contract language that limits the clinician’s activities to appropriate practice boundaries. Implement a strong credentialing scheme before hiring. This helps reduce risk of vicarious liability—liability for the actions of others. Note that this can at the same time create a risk of liability for negligent credentialing should patient injury ensue, so there are pros and cons to being a directory only an organization that credentials providers. Self-Referral and Fee-Splitting New York has several rules addressing self-referral and kickbacks / fee-splitting. It’s worth citing some of these specifically, because they provide a more extensive web of regulation than exist in many states. New York State Education Law, Section 6509-a Within Title VIII, the general provisions of Article 130 are applicable to all the health care professions. (See NYS Health Care Provider Licensing Laws Spell Out Who Can Practice). This is important, because we’ll want to know which clinical care practitioners are within the regulatory umbrella. Subarticle 3 (Section 6509 of NYS Education Law) contains a list of activities that constitute professional misconduct. Professional misconduct includes such conduct as: Practicing the profession fraudulently, beyond its authorized scope, with gross incompetence, with gross negligence on a particular occasion or negligence or incompetence on more than one occasion. Permitting, aiding or abetting an unlicensed person to perform activities requiring a license. Committing unprofessional conduct, as defined by the Board of Regents in its Note that these definitions pick up the ideas articulated earlier about scope of practice and unlicensed practice. Section 6509-a of NYS Education Law contains the following additional definition of professional misconduct: That any person subject to the above enumerated articles, has directly or indirectly requested, received or participated in the division, transference, assignment, rebate, splitting or refunding of a fee for, or has directly requested, received or profited by means of a credit or other valuable consideration as a commission, discount or gratuity in connection with the furnishing of professional care, or service… Here note the language, “directly or indirectly.” Clients sometimes ask, “does it matter if the money goes first to X and then Y?” The money could flow through a hole in the Earth to China, but “directly or indirectly” is pretty clear. Also, Section 6509-a applies to some of the licensed health care professionals under Title VIII (including chiropractors, nurses, and physical therapists), but the list does not include providers such acupuncturists (see Group 6509 to Kickback Prohibition Under State Law). Again, it’s important to see who is included and who is not included. However, there still could be fee-splitting provisions in the licensing laws governing the professions not covered by 6509-a. Further, such professionals would likely be covered the Rules of the Board of Regents (below). This is why it’s important to have your healthcare lawyers look at all the rules that could potentially apply to a fee-splitting question. Just because one rule doesn’t apply, does not mean there aren’t others (if you follow both double negatives; put another way, there are lots of rules that could conceivably apply!). Even though 6509-a does not, by its terms, apply to acupuncturists, 6509-a does have an exception that becomes important in light of other provisions of law covered further below: Nothing contained in this section shall prohibit such persons from practicing as partners, in groups or as a professional corporation or as a university faculty practice corporation nor from pooling fees and moneys received, either by the partnerships, professional corporations, university faculty practice corporations or groups by the individual members thereof, for professional services furnished by any individual professional member, or employee of such partnership, corporation or group, nor shall the professionals constituting the partnerships, corporations or groups be prohibited from sharing, dividing or apportioning the fees and moneys received by them or by the partnership, corporation or group in accordance with a partnership or other agreement…. We will describe the “group” exception in more detail later. Kickbacks, Fee-Splitting, and Exploitation of Patients (Rule 29b-1 of the Rules of the Board of Regents) Unlike 6509-a, Section 29.1b applies to “any profession licensed, certified or registered” under Title VIII. This is big. Each of those professions is included. Section 29.1b contains three different prohibitions: Exercising undue influence on the patient or client, including the promotion of the sale of services, goods, appliances or drugs in such manner as to exploit the patient or client for the financial gain of the practitioner or of a third party. Directly or indirectly offering, giving, soliciting, or receiving or agreeing to receive, any fee or other consideration to or from a third party for the referral of a patient or client or in connection with the performance of professional services; Permitting any person to share in the fees for professional services, other than: a partner, employee, associate in a professional firm or corporation, professional subcontractor or consultant authorized to practice the same profession, or a legally authorized trainee practicing under the supervision of a licensed practitioner. This prohibition shall include any arrangement or agreement whereby the amount received in payment for furnishing space, facilities, equipment or personnel services used by a professional licensee constitutes a percentage of, or is otherwise dependent upon, the income or receipts of the licensee from such practice….. These rules are a handful. First, exploiting patients is prohibited, but what does that mean? Does selling dietary supplements in-office constitute exploiting patients for financial gain? Second, there is the language again about “directly or indirectly” agreeing to give or receive a fee in exchange for a referral. Third is a powerful prohibition against “permitting any person to share in the fees for professional services.” This expresses a strong disfavor for any percentage-based arrangement. Whereas in California, an MSO can accept a percentage of gross revenues of the medical practice at fair market value, in exchange for designated management services (Business & Professions Code Section 650(b)), in New York, the above rule appears to prohibit percentage-based MSO fees. The rule contains an exception for a partner, employee, associate in a professional firm or corporation, professional subcontractor or consultant authorized to practice the same profession, to share fees. Again, California Business & Professions Code Section 650(b), provides a fair market value safe harbor to the anti-kickback and fee-splitting prohibition in California Business & Professions Code Section 650(a). New York appears to knock out this potential safe harbor with a broader prohibition against revenue shares, except where a partner, employee, associate is concerned. And, even with a partner, employee, associate, we also have to think about New York’s Rule 29.2a-7, which prohibits “ordering excessive tests, treatment, or use of treatment facilities not warranted by the condition of the patient.” One never knows how enforcement authorities will view a given arrangement. The goal is to create as defensible a position as possible. Self-Referral (NYS Public Health Law Section 238-a; NYCRR) NYS Public Health Law Section 238-a prohibits referral of certain designated health services to an entity (or an immediate family member) with which the practitioner has a financial relationship. Those services include: clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services. The rule contains a complicated number of exceptions (including for a group practice, and for a lease at fair market value for over a year). (See Mini-Stark Statute Addresses Self-Referral Issues). The prohibition in 238-a is a New York State version of Stark. (That’s mini-Stark, not mini-Me). However, the so-called designated health care services must be involved, for the rule to be triggered in the first place. In addition to 238-a, Part 34, Chapter II, the Administrative Rules and Regulations of the NYS Codes, Rules & Regulations (“NYCRR”), Title 10, deals with Health Care Practitioner Referrals (as well as Laboratory Business Practices, among other topics). (See Health Care Referrals for Designated Health Services Raise State Law Issues). So here is yet one more legal rule to reckon with. Section 34-1.5 (Disclosure: other health or health related items or services) provides that: (a) With respect to referrals for health or health related items or services other than clinical laboratory services, pharmacy services, radiation therapy services, or x-ray or imaging services, and except as provided in subdivision (c) of this section, a practitioner may not make a referral to a health care provider for the furnishing of health or health related items or services where such practitioner or immediate family member of such practitioner has any of the following financial relationships without disclosing to the patient such financial relationship (emphasis added): (1) an ownership or investment interest with such health care provider; or (2) a compensation arrangement with such health care provider which is in excess of fair market value, or which provides for compensation that varies directly or indirectly based on the volume or value of any referrals of business between the parties. (b) The disclosure shall provide notice of any such financial relationship and shall also inform the patient of his or her right to utilize a specifically identified alternative health care provider if any such provider is reasonably available, and shall be in the form specified in section 34-1.6 of this Subpart. Such form shall also be posted prominently in the practitioner’s office. (emphasis added) …. (d) A practitioner shall maintain documentation of each instance of disclosure to a patient pursuant to this section. Section 34-1.6 provides a sample disclosure form (See Sample Disclosure Form for Self-Referrals). The answer doesn’t stop with an analysis of the earlier fee-splitting rules. More New York Anti-Kickback and Fee-Splitting Law One thing that can be helpful in interpreting this maze of legal rules, is to look for court cases interpreting the self-referral, anti-kickback, and fee-splitting rules. Fortunately, New York has a number of cases. In these cases, New York courts frequently invoke § 6509-a, Rule 29.1b, and §238-a together, making it difficult to determine the contours of the “group” exception and the limits of permissible arrangements (See Do Percentage-based, Revenue-sharing arrangements Between a Clinic and its Health Care Practitioners Violate Stark, Antikickback and Fee-splitting Laws?) Moreover, New York courts are rather mixed in their assessment as whether different percentage-based arrangements fall within relevant legal boundaries, or are prohibited by the various statutes and rules referenced above. On balance, the courts disfavor revenue-sharing arrangements involving MSO services for medical groups and practices. For example, New York courts have found a variety of fee-splitting arrangements to violate § 6509-a. Cases include: Sachs, Toffler—arrangements in which dentists remitted a percentage of revenues to landlords. Katz—arrangement wherein MD would pay technicians a percentage of test fees. Bell—arrangement whereby dentist paid a non-dentist a commission to garner patients. LoMagno—fee-splitting arrangement. Necula—payment by radiologist of a percentage of receipts for billing services. Splitting fees between clinicians and MSOs were explicitly disapproved and disallowed in several cases: Calendar—remission by physicians of a percentage of their gross earnings to a corporation constituted both illegal fee-splitting and the corporate practice of medicine. Mukendi—sharing of a percentage of net receivables or of collected receivables from a clinic, and the clinic was illegal. This may somewhat shocking to the person who wants to create a medical spa, for example, and revenue share with physicians based on the argument that “everyone is doing it.” As noted, the rules themselves are drafted broadly, suggesting any percentage-based payment creates some potential enforcement risk, even if the practice is defensible in theory. Some portion of “everyone” gets investigated by undercover agents posing as patients (while collecting evidence). “Mall Model” vs. “Center Model” and MSO Arrangements Every situation has to be analyzed separately to see how it meets the symphony of legal rules about self-referral, kickbacks and fee-splitting, Percentage-based, revenue share arrangements in the healthcare environment often require a detailed written analysis. In New York, some of the more useful exceptions are: Revenue-sharing arrangements in a properly constituted “group,” as defined by relevant rules, and embodied in appropriate contract language; and Compensation to an employee that reflects (and does not grossly exceed) fair market value for services actually rendered. A properly constituted “group” in New York has to meet not only legal rules governing self-referral, kickbacks and fee-splitting, but also corporate practice of medicine concerns. So, for example, the group: Requires an appropriate entity (i.e., corporation/PC, LLC/PLLC or partnership/PLLP with bylaws or other appropriate agreement binding the shareholders, members or partners). Cannot include non-professionals (non-clinicians) (per Okere). Can include licensed professionals (who can also be employees) (per Rubin). Can allow revenue-sharing among its members, assuming the above argument succeeds; but cannot share revenues with the MSO. Further, under the corporate practice of medicine doctrine, as we’ve read the rules at one point, the “group:” Can include practitioners from different disciplines, subject to the caveat that the corporate practice of medicine doctrine requires that professions of medicine, dentistry, veterinary medicine, licensed clinical social work, mental health counseling, psychoanalysis, creative arts therapy, or marriage and family therapy be placed in their own professional corporations. The “group” entity may not serve as a management services corporation. With many of our clients who are seeking to implement a revenue-sharing arrangement between their centers and practitioners, we sometimes recommend the “Mall Model” or the “Center” models as possible ways to structure compensation without running afoul of relevant kickback and fee-splitting rules. Of course, as noted, there is never any guarantee that a proposed arrangement will not be investigated or subject to enforcement action; nonetheless, we have attempted to design structures that take account of legal roadblocks and attempt to create a flow of payments that respect existing legal rules. In a nutshell, in the Mall Model, the flow of payments is from the patient to the practice for health care services, and from the practice to the Clinic for management, administrative and marketing services. The argument is that this does not involve kickbacks or fee-splitting, because there is no unearned fee going to either the practitioner or the Clinic in exchange for patient referrals. The Mall Model is preferred in a strong corporate practice of medicine state such as New York or California. In the mall model, the lease should be a separate written contract. Lease payments will have to be for the market value of the lease, and not be tied to the volume of patients the practitioner sees or refers to the Clinic. However, in order to accommodate ramp-up time in the practice, the lease can establish a rising amortization payment over time. In addition: The practitioner is an independent contractor, with independent medical (or other professional) judgment, to see its own patients at the Clinic. The medical records are owned and maintained by the practitioner, although the practitioner can give the Clinic a right to a copy of those records. The practitioner pays the Clinic a monthly management or administrative fee. The patient makes payment out to the practice. The Clinic can serve as the billing and collecting agent for the practice, and be authorized to: deposit payments directly into the practitioner’s account for services rendered to the patient by the practitioner; and withdraw its administrative or management fee from the account it maintains for the practitioner. In the Center Model, the flow of payments is from the patient to the Clinic for health care services, and from the Clinic to the practitioner for services rendered to the patient. The argument is that this does not involve kickbacks or fee-splitting, because there is no unearned fee going to either the practitioner or the Clinic in exchange for patient referrals. But this argument is more difficult in a strong corporate practice of medicine state. Among other things, the agreement between Clinic and practitioner specifies that: The practitioner is an independent contractor, with independent medical (or other professional) judgment, to see the Clinic’s patients. If the state has a strong corporate practice of medicine doctrine and the practitioner is a medical doctor, then the medical records should be owned and maintained by the practitioner, although the practitioner can give the Clinic a right to a copy of those records. Otherwise records can be shared among practitioners or a central (i.e., electronic) record can be created, with each having the right to contemporaneous access and copies upon termination. Patients should be required to execute a consent authorizing access by multiple caregivers within the Clinic. The Clinic can serve as the billing and collecting agent for the practice (or farm this out to a third-party MSO or medical billing & collections service). The patient makes payment out to the Clinic. The Clinic pays the practitioner, typically a flat fee such as $X per Botox injection, $Y per hour of medical services, or $Z per month. To avoid the appearance of a kickback, it is better if the payment from the Clinic to the practitioner is a flat fee and not a percentage, because regulators can always view a percentage-based arrangement as suspiciously looking like a kickback (or in addition, in states prohibiting fee-splitting, like a fee split). The argument that can be made to try to defend a revenue-sharing arrangement is that the percentage fee is earned by the practitioner’s production. If the percentage also reflect referrals by the practitioner to other health care providers within the Clinic, this can potentially involve a second level of kickback and fee-splitting analysis, and one must look to “group practice,” “ancillary services,” and other potential exceptions and safe harbors. In either case, there could be an MSO that contracts with the professional corporation to act for it as a management service organization, which can provide claims management, accounting, marketing, and other management services, and even hold assets. For example: an MSO would provide office space through leasing arrangements to the group, as well as front desk, patient scheduling, claims submission and collections, accounting, marketing, and other non-clinical services. Conclusion The combination of fee-splitting prohibitions and the corporate practice of medicine rule can be daunting to the entrepreneur in the health care industry who wants to own and operate an enterprise that involves medical diagnosis and treatment—whether it’s a medical group, medical spa, or even a mobile medical app or Web-based platform that provides telehealth or other online or mobile healthcare services. Our healthcare lawyers can craft ways to handle these imposing legal rules, but this requires creativity and savvy, and a strong working knowledge of all the various law and regulations, and how they work together. Healthcare & FDA lawyer Michael H. Cohen is a credible, authoritative voice on healthcare & FDA legal and regulatory issues. Book Michael for speaking on cutting-edge issues in health and wellness; contact our legal team for compliance counsel concerning any healthcare venture, including wearable health tech, mobile medical apps, nanotechnology health products, or other legal and regulatory issues – or call us for a one-hour consult. Join our online community of health and wellness ventures and practitioners, sharing solutions to common legal and regulatory challenges as they pursue their business dream. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
January 8, 2015
Healthcare
How does a dual-licensed healthcare provider wear two hats and satisfy both professionals boards?
How do you wear two licensed hats at the same time – if, for example, you’re an medical doctor (MD) and a chiropractor (DC), or a chiropractor and an acupuncturist – or, a naturopathic physician and a shaman? Well, if you’re a naturopathic doctor (ND) who is licensed and a shaman, you have to ask yourself whether your state allows non-licensed providers to offer healthcare services, because you’re wearing the hat of a healthcare licensee ND and the hat of a non-licensed healthcare provider. Many healthcare providers have dual roles. I know an MD who is also a DC and an LAc (acupuncturist); a psychotherapist who is a licensed clinical psychologist who also does “Journey” work for groups on the side; a physician who only teaches meditation and Kabbalah; an integrative medicine doctor who prefers to instruct patients in lifestyle modification, nutrition, and yoga; and many other combinations. These days, with integrative medicine, telemedicine, concierge medicine, and much of health and wellness care being done by mobile medical apps or “doctor Google,” we are saying more cross-disciplinary collaboration, more reliance on self-care and lifestyle, and less narrow, silo care unless someone is in need of emergency care, urgent care, or acute care. When wearing two hats, here are a few basic ground-rules: Both licensing boards have a say in your conduct. You are bound to each licensing board’s rules and regulations, and the underlying statute. Each licensing board may have its own definition of professional misconduct. You may be held to both standards of care – or, in fact, to the higher standard of care. Let’s say, for example, that you’re an MD but only seeing the patient for acupuncture. In a negligence (malpractice) case, the court may impose the medical standard of care. What can you do? You can try to disclaim primary care, in your informed consent form. This is a strategy our integrative medicine legal team uses with physicians who want to focus only on modalities such as functional medicine, or, to provide specific therapeutic modalities in a complementary medicine fashion. You can clarify the patient’s expectations. For example, we’ve used this approach with an MD who provides only homeopathic medical care based on a constitutional analysis of the patient’s overall well-being, and not being on diagnostic categories of conventional care. Now let’s stretch the framework. Suppose you have a dual-licensed DC-PA (chiropractor/physician assistant). This is interesting because the PA is a conventional practice, dependent on the MD; the chiropractor is a CAM (complementary and alternative medicine) provider, independent of the MD. Must the DC-PA act as a PA, under medical supervision, and beholden to medical standards of care, or should the DC-PA act as an independent chiropractic professional, bound only to chiropractic standards of care (with a duty to refer to the MD where the condition is beyond the DC’s scope of practice)? Absent express prohibitions (and even in the presence of an express, general authorization for dual licensees), DC-PAs are carving out new regulatory (and practice) territory. In such case, the most legally sensible way to practice is to abide by existing restrictions on each license, and to pro-actively exercise caution in cases where one license might allow activities that the other either prohibits, or simply does not authorize. The bottom line is that the dual licensee is accountable to both professional licensing board, and in addition, remains accountable to patients (as well as consumer protection and other government agencies) to maintain clear practice boundaries in any given role or circumstance. Here are some quick do’s and don’ts — and these are generalizable to other professional combinations. The DC-PA should do the following: Respect the scope of practice of their respective license, when functioning within that license. If functioning as a PA, ensure that physician delegation complies with state law (for example, when required, is memorialized in a written agreement that conforms to state law). When functioning as a PA, mind physician compliance with applicable law. As noted, the physician must abide by specified rules, such as mandatory physician filings with the medical or other regulatory board (for example, of employment, discharge, or supervisor control of the PA), and limitations on the number of PAs the MD may supervise. The DC-PA should be aware of such rules and have an eye toward physician compliance. Wear an appropriate name badge. Inform the patient of the professional role in which the dual licensee is acting. When functioning as a DC, recognize when the duty to refer is triggered. Where the patient’s condition exceeds chiropractic skill and expertise, refer the patient to an MD, notwithstanding having the PA license as well. Document and chart appropriately. Follow all other legal requirements. For example, as noted there are billing restrictions applicable to PA’s. The DC-PA should not do the following: Misuse the title “doctor.” Engage in false, deceptive, or misleading advertising. Bill unlawfully. Mislead the patient. The above is not a comprehensive exhaustive list of do’s and don’ts, but rather, a sensible set of guidelines in this emerging area. The perils of violating the above boundaries include professional discipline by one or more regulatory boards, investigation and enforcement action by state prosecutorial authorities, and exposure to liability for negligent practice (malpractice) in a civil action by the patient. While the pressures contributing to shortage of primary care physicians come from federal law, it is state law that governs scope of practice. Therefore, irrespective of Obamacare or any related federal legislation, we must look to state laws for guidance on how the dual-credentialed practitioner can sensibly manage the two clinical hats. Because our law firm represents so many integrative medicine clinics and practitioners, we understand the holistic and biopsychosocial models of health, and the legal perils of innovative healthcare practice. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
December 6, 2014
Healthcare
Key Points for Physicians and other Healthcare Licensees to Consider When Selling Dietary Supplements to Patients
Sales of dietary supplements by physicians, acupuncturists, chiropractors, and other licensed professionals raise thorny legal issues. This can be confusing, because on one hand, “everybody does it” — i.e., sales of dietary supplements by clinicians such as medical doctors is widespread in the industry; on the other hand, the American Medical Association actively discourages the practice through its ethics opinions, which explicitly prohibit such conflicts of interest between care for the patient, and the doctor’s financial self-interest. If you are a medical or osteopathic doctor, chiropractor, acupuncturist, or other licensed health care provider, and you believe it’s best for your patients (and practice) to sell dietary supplements within your practice (or to generate income by doing so through a third-party dietary supplement manufacturer, where you get a “cut” by referring patients to the website, here are the most important legal considerations: Yes, selling dietary supplements to your patients does pose a conflict of interest; and yes, the AMA, among other professional organizations, considers this an ethical violation. Technically, this might be considered a “kickback” or “fee-splitting” violation. Much depends on what your state law says–some state laws only address kickbacks and fee-splitting in the context of services and not goods. The way your compensation is structured also can make a difference. If, for example, patient funds flow first to the dietary supplement manufacturer, to whose site you have directed the patient, and then the dietary supplement manufacturer writes your a check, then this might be considered a “kickback” to you for “referring” the patient to the dietary supplement manufacturer. Beware of state laws prohibition patient “exploitation.” These legal rules could be used against you when you sell dietary supplements to your patients. One New York lower court has found that because a physician who used alternative medicine also sold a patient dietary supplements, the patient could sue the physician not only for negligence, but also for recklessness. Legally, recklessness carries a higher degree of culpability than medical malpractice–opening the door to punitive damages. This can be a whopper. Check with your state licensing board. The Board may have its own regulations, additional to statutes. For example, the Massachusetts Board of Registration in Medicine has a rule that expressly disfavors physician profit on in-office sales of health-related products (such as dietary supplements). The Massachusetts Board describes the practice as “exploitative.” See below Check any state law rules on in-office ancillary services (IOAS) to see whether there is any carve-out for the sale of dietary supplements. Check state law to see whether there is a legal (statutory) limit on the profit or markup you can make from the dietary supplement sales. This is, for example, the case in New Jersey (see Physician Sale of Dietary Supplements – Legal and Regulatory Restrictions). Check state law to see whether you must make any disclosure of your financial interest in the dietary supplement sale; and even if no disclosure is required, consider making such as disclosure as a risk management gesture. See below. These are general guidelines; they will not guarantee freedom from enforcement activity, but they will supplement (pardon the pun) good clinical sense and judgment with a beginning legal roadmap. It’s always best to contact an integrative medicine attorney to review the legal rules in your state that are relevant to your situation. Quoting the Massachusetts Board here: Physicians should not sell, lease or rent any product in a manner that has the potential to exploit patients, including but not limited to exclusive distributorships or personal branding. Physicians should not use their office or their professional relationship with patients to promote any business venture or solicit investors. In limited circumstances, when it is beneficial to the patient, it may be appropriate for physicians to sell durable medical goods essential to the patient’s care. Prior to any such sale physicians should disclose to patients any financial interest they may have in the transaction. Patients should be informed that they are under no obligation to purchase durable medical goods from the physician and should be informed of the availability of the product or other equivalent product elsewhere. This information shall be conveyed via an easily understood notice prominently posted in the office. One more guideline we offer is for the practitioner to provide the patient with a disclosure (whether or not required by law), such as the following: “My office sells dietary supplements to you at a % markup from cost. This still represents a discount to you of % from what you would pay for the same products as a retail customer. However, you are under no obligation to purchase these products from my office; you may purchase the same products elsewhere; and your quality of care in my office will not be affected by your decision to purchase or not purchase products from my office.” Here, the practitioner is informing the patient about the markup, that the patient is free to buy elsewhere, and that clinical decision-making remains unaffected by the purchase decision. Note that if you a non-licensed practitioner who wants to offer nutritional advice, different legal rules apply. See, for example, California Law for Non-Licensed Practitioners and Nutritional Advice. And, if you are a dietary supplement manufacturer, private labeler, or distributor who wants to make claims about the product’s benefits, you must comply with FDA legal rules — primarily those governing structure-function claims and prohibiting claims about the effect on disease. The slippery slope between permissible and impermissible claims can be tricky – for example, you can talk about “weight loss” but not about “obesity.” As well, there are limits on implicit claims that are made by hyperlinking to medical literature. And, beware of FTC prohibitions on deceptive and misleading advertising for health products. See, for instance, FTC Statement to Congress on Deceptive Marketing of Dietary Supplements. If you are part of a multi-level marketing company that sells dietary supplements, there are other legal pitfalls. To be on the safe side: Contact our integrative medicine lawyers for legal advice on your integrative medicine project, including proposed in-office sales of dietary supplements. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
December 2, 2014
Healthcare
Quick Summary of Federal “Stark” Self-Referral & Anti-Kickback Law and California Self-Referral and Fee-Splitting Prohibitions
Here is a quick summary of federal self-referral (“Stark law”) and anti-kickback law, and California self-referral and anti-kickback / fee-splitting rules. Each state has its own laws, of course. This is only a summary; if you have a Stark, anti-kickback, or fee-splitting issue, contact our attorneys. A. Federal Concerns 1. Federal Self-Referral (“Stark”) The federal self-referral statute (“Stark”)[1] provides that if a physician (or immediate family member)[2] has a financial relationship with an entity, then, unless the arrangement qualifies for a specific exception: The physician may not refer[3] patients to the entity for “designated health services” (“DHS”)[4] payable by federal health care programs (including Medicare, Medicaid or CHAMPUS, and in California, Medi-Cal), and Where DHS are involved and the referral is prohibited, the physician may not present a claim to any third-payer for the same.[5] Penalties for violation of Stark can be significant. In a recent case, a large health system agreed to pay more than $25 million to resolve self-disclosed allegations that it illegally paid bonuses to doctors based on how much the system earned from their patient referrals. According to an article in Modernhealthcare.com entitled, Intermountain to pay $25.5 million to settle Stark case, the health system reportedly “characterized the violations as ‘technical in nature’ and said they arose partly because of the 300 pages of federal regulations and commentary that govern financial relationships between hospitals and physicians. “ Note the following definitions under Stark: The financial relationship can be an ownership or investment interest in the entity, or a compensation arrangement between the physician (or immediate family member) and the entity.[6] A compensation arrangement is any arrangement involving remuneration between a physician (or an immediate family member) and an entity.[7] The Stark regulations define a physician as a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor.[8] In general, “remuneration” means “any payment or other benefit made directly or indirectly, overtly or covertly, in cash or in kind.”[9] A first step is to determine whether DHS is involved. DHS within Stark include:[10] clinical laboratory services; physical therapy services; occupational therapy services; outpatient speech-language pathology services; radiology services, including nuclear medicine, MRI, CAT scans, and ultrasound services; radiation therapy services and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment and supplies; prosthetics, orthotics, and prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospitalization services With regard to the first six categories of DHS, the Stark regulations identify the specific insurance billing codes in each category, which are considered to constitute DHS. These are updated annually by CMS. [11] The remaining six categories of DHS are defined in the Stark regulatory text. If DHS is involved, then proposed arrangements must be structured to fit an exception.[12] [At this juncture we have omitted discussion of exceptions.] 2. Federal Anti-Kickback The federal anti-kickback statute[13] prohibits the knowing and willful offer or receipt of remuneration[14] to induce the referral of business or services covered by a federal health care program, including Medicare. Even in the presence of other legitimate purposes, the courts have interpreted the statute to cover any arrangement where one purpose of the payment or offer of payment (albeit not the only purpose) was to obtain money for the referral of services or to induce further referrals.[15] Federal anti-kickback law can apply to all practitioners, not just physicians, where federal reimbursement monies are involved. Practitioners may benefit from cross-referrals and be induced by the financial benefit to cross-refer to Medicare-reimbursed practitioners, irrespective of medical benefit. Among other dangers, enforcement authorities can potentially view an arrangement as a disguised kickback scheme. One of the ways this could be expressed is an unlawful joint venture between the two entities. The Office of the Inspector General (“OIG”) has expressed concern about joint ventures violating federal anti-kickback law. In order to protect beneficial arrangements, the federal Centers for Medicare and Medicaid Services (“CMS”) has published certain statutory safe harbor regulations that define practices that are not subject to the anti-kickback statute. If the conditions in the safe harbors are met, neither party will be prosecuted or sanctioned for the arrangement. Fitting into an exception under Stark is mandatory, whereas under anti-kickback law, if an arrangement does not meet every element of a safe harbor, it is not necessarily unlawful, but rather, is at risk of scrutiny by the OIG. In the preamble to the 1991 final safe harbor rules, [16] the OIG explained that the anti-kickback statute “on its face prohibits offering or acceptance of remuneration, inter alia, for the purposes of ‘arranging for or recommending purchasing, leasing, or ordering any . . . service or item’ payable under Medicare or Medicaid.” The OIG has also observed that “many marketing and advertising activities may involve at least technical violations of the statute.”[17] As a result, it is critical to scrutinize payments for marketing activity involving physicians for the risk of falling within the anti-kickback prohibition. If a proposed arrangement fully complies with all the detailed requirements of the safe harbor, the arrangement is not subject to enforcement under the anti-kickback statute; but practices that do not fit within a safe harbor are not necessarily illegal. The arrangement must be carefully scrutinized. The OIG will “evaluate both the form and substance of arrangements,”[18] and take enforcement action against arrangements that are merely disguised kickbacks. Potential safe harbors[19] to many healthcare transactions include: Bona Fide Employees Personal services and management contracts These have to be analyzed individually. Although federal anti-kickback law only applies where federal reimbursement monies are involved, out of an abundance of precaution, a venture may wish to ensure that any contracts with practitioners comply with one or more available safe harbors. (a) Bona Fide Employee The bona fide employee safe harbor applies to “any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services,” for which payment may be made under Medicare, Medicaid or another federal health care program. Compensation must be: Reasonable; Fair Market Value; Arm’s Length Negotiations; and Not based upon number or value of referrals. The individual must be an employee, not an independent contractor. All referrals must meet the above criteria. (b) Personal Services and Management Contracts This safe harbor applies only if all of the following standards are met: The agency agreement is set out in writing and signed by the parties. The agency agreement covers all of the services the agent provides to the principal for the term of the agreement and specifies the services to be provided by the agent. If the agency agreement is intended to provide for the services of the agent on a periodic, sporadic or part-time basis, rather than on a full-time basis for the term of the agreement, the agreement specifies exactly the schedule of such intervals, their precise length, and the exact charge for such intervals. The term of the agreement is for not less than one year. The aggregate compensation paid to the agent over the term of the agreement is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs. The services performed under the agreement do not involve the counseling or promotion of a business arrangement or other activity that violates any State or Federal law. The aggregate services contracted for do not exceed those which are reasonably necessary to accomplish the commercially reasonable business purpose of the services. Note that unlike in the Stark exception, there is a reference to “aggregate compensation,” and that there is language regarding services to be provided on a part-time basis. In addition, note the language regarding what must be set forth if services are to be part-time. B. California Concerns 1. Self-Referral (“PORA”) California law contains prohibitions against self-referral in the Physician Ownership and Referral Act of 1993 (“PORA”),[20] as well as California Labor Code Section 139.3 (workers compensation). PORA applies to healthcare licensees. Under PORA: A “financial interest” includes “any … compensation,” whether direct or indirect.[21] In other words, a physician need not have a stock ownership in the entity to which the physician is referring, in order for PORA to apply. Spouses are considered an immediate family member under PORA.[22] Unlike the Stark law, PORA applies to designated health care services regardless of the source of payment, i.e. for private insurers and cash patients. California’s definition of “physician” is broader than that under federal law, and includes, for example, acupuncturists. For purposes of PORA, under section 650(b)(4), the term “licensee” means “a physician as defined in Section 3209.3 of the Labor Code.”[23] Under section 3209.3(2) of the Labor Code, the term “physician” “includes physicians and surgeons holding an M.D. or D.O. degree, psychologists, acupuncturists, optometrists, dentists, podiatrists, and chiropractic practitioners licensed by California state law and within the scope of their practice as defined by California state law.” The PORA prohibition on referrals only applies if the services provided are those designated as health services triggering the prohibition by PORA, Section 650.01(a) (laboratory, diagnostic nuclear medicine, radiation oncology, physical therapy, physical rehabilitation, psychometric testing, home infusion therapy, or diagnostic imaging goods or services). In connection with PORA, a physician must report to the California Medical Board of any “financial interest” in a “health-related facility.”[24] The term “financial interest” is broadly defined to include, among other things:[25] Any type of ownership interest, debt, loan, lease, compensation, remuneration, discount, rebate, refund, dividend, distribution, subsidy, or other form of direct or indirect payment, whether in money or otherwise, to a licensee or the licensee’s immediate family from a health-related facility. The term “health-related facility:”[26] shall include a facility for clinical laboratory services, radiation oncology, physical therapy, physical rehabilitation, psychometric testing, home infusion therapy, diagnostic imaging, and outpatient surgery centers. “Diagnostic imaging” shall include, but is not limited to, all X-ray, computed axial tomography, magnetic resonance imaging, nuclear medicine, positron emission tomography, mammography, and ultrasound goods and services. (emphasis added). If any of designated health services in PORA apply, then we must look to a PORA exception, such as the following:[27] The prohibition of Section 650.01 shall not apply to any service for a specific patient that is performed within, or goods that are supplied by, a licensee’s office, or the office of a group practice. Further, the provisions of Section 650.01 shall not alter, limit, or expand a licensee’s ability to deliver, or to direct or supervise the delivery of, in-office goods or services according to the laws, rules, and regulations governing his or her scope of practice. PORA defines “licensee’s office,” and also has a more extensive definition of “office of a group practice” which would need to be analyzed to the extent PORA indeed applies.[28] More notably, there is also a personal services arrangement exception in 650.02(b)(6): (6) A personal services arrangement between a licensee or an immediate family member of the licensee and the recipient of the referral if the arrangement meets all of the following requirements: (A) It is set out in writing and is signed by the parties. (B) It specifies all of the services to be provided by the licensee or an immediate family member of the licensee. (C) The aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement. (D) A person who is referred by a licensee or an immediate family member of the licensee is informed in writing of the personal services arrangement that includes information on where a person may go to file a complaint against the licensee or the immediate family member of the licensee. (E) The term of the arrangement is for at least one year. (F) The compensation to be paid over the term of the arrangement is set in advance, does not exceed fair market value, and is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties. (G) The services to be performed under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates any state or federal law. Disclosure of Financial Interest If none of the designated health services in the statute are being provided, then the prohibition is in applicable; however, a disclosure of the financial interest must be provided to patients at the time of the referral.[29] Thus a disclosure of financial interest by the principals to the patients is advised. California Business & Professions Code Section 650.02(d) provides: (c) (1) A licensee may refer a person to a health facility, as defined in Section 1250 of the Health and Safety Code, or to any facility owned or leased by a health facility, if the recipient of the referral does not compensate the licensee for the patient referral, and any equipment lease arrangement between the licensee and the referral recipient complies with the requirements of paragraph (2) of subdivision (b). (2) Nothing shall preclude this subdivision from applying to a licensee solely because the licensee has an ownership or leasehold interest in an entire health facility or an entity that owns or leases an entire health facility. (3) A licensee may refer a person to a health facility for any service classified as an emergency under subdivision (a) or (b) of Section 1317.1 of the Health and Safety Code. (4) A licensee may refer a person to any organization that owns or leases a health facility licensed pursuant to subdivision (a), (b), or (f) of Section 1250 of the Health and Safety Code if the licensee is not compensated for the patient referral, the licensee does not receive any payment from the recipient of the referral that is based or determined on the number or value of any patient referrals, and any equipment lease arrangement between the licensee and the referral recipient complies with the requirements of paragraph (2) of subdivision (b). For purposes of this paragraph, the ownership may be through stock or membership, and may be represented by a parent holding company that solely owns or controls both the health facility organization and the affiliated organization. 2. California Law – Anti-Kickback With respect to potential kickbacks, California Business & Professions 650 provides:[30] (a) …. the offer, delivery, receipt, or acceptance by any person licensed under this division or the Chiropractic Initiative Act of any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for referring patients, clients, or customers to any person, irrespective of any membership, proprietary interest, or coownership in or with any person to whom these patients, clients, or customers are referred is unlawful. (b) The payment or receipt of consideration for services other than the referral of patients which is based on a percentage of gross revenue or similar type of contractual arrangement shall not be unlawful if the consideration is commensurate with the value of the services furnished or with the fair rental value of any premises or equipment leased or provided by the recipient to the payer. Section 650(b) is often used to justify payment of the management fee based on a percentage of gross revenues at fair market value. The California Attorney General (“AG”) has interpreted the term “referral” very broadly; for example, according to the AG, “in selecting a particular medical device for use by his or her patient, a physician is ‘referring’ the patient to the company that supplies the device.”[31] In addition, California Health & Safety Code, Section (“H&S”) 445, prohibits any person from profiting from referring patients to a physician or clinic for care; California Business & Professions Code, Section 2273(a) prohibits “the employment of runners, cappers, steerers, or other persons to procure patients.” The California Attorney General opinions sometimes reference H&S 445 in connection with B&P 650(a) opinions. And, as suggested, Section 13408.5 of the California Corporations Code prohibits the formation of a professional corporation to cause any violation of law, including prohibitions against fee-splitting and kickbacks. Kickbacks and fee-splitting are closely related, in that a “kickback” involves the payment to or from a physician in exchange for a referral, while fee-splitting involves splitting the physician’s fee to the patient between the physician and a third-party. B&P 650 prohibits both.[32] Fee-splitting often implicates CPM concerns. Thus, whether the financial arrangements constitute excessive involvement and effective “control” over the physicians would also be scrutinized by the medical board in investigating a possible B&P 650 violation. As noted, state regulators are often influenced by opinions and publications of the OIG. In addition to flagging statutory prohibitions on kickbacks, the OIG states that “many marketing and advertising activities may involve at least technical violations of the statute.”[33] As a result, it is critical to scrutinize payments for marketing activity involving physicians for the risk of falling within the anti-kickback prohibition. California Attorney General Opinions (Business & Professions Code Section 650) Several opinions California Attorney General interpret the notion of “referral” very broadly, and prohibit various arrangements that have some similarity to your proposed arrangement. Among these: Cal. Atty. Gen. Op. No. 00-1002 (February 1, 2001)[34]: The AG opined that B&P 650 prohibits chiropractors from participating in an Internet marketing plan in which they agree to promote the naturopathic products of an Internet company and to refer their patients to the company’s website in exchange for fees equaling 20 percent of the price of the products purchased by their patients from the company. Cal. Atty. Gen. Op. No. 99-611 (December 16, 1999)[35]: The AG opined that a physician may not enter into an agreement with a group of licensed and certified professionals to perform working hardening and rehabilitation services for patients, where the physician would control the scope of the services by prescription, obtain payment from a workers’ compensation insurance carrier for the services, and retain a portion of the fee after compensating the group. The AG determined that the physician would be receiving a “discount” from the group, and would be keeping a “rebate” in retaining a portion of the fee after compensating the group. Cal. Atty. Gen. Op. No. 98-611 (January 20, 1999)[36]: The AG opined that a corporate entity licensed as a health care service plan may not enter into an agreement with a network of providers of cosmetic medical services, a specialty not covered by any of the entity’s health benefit plans, according to the terms of which the entity would: (1) refer its enrollees to a participating provider, or to a provider selected by the enrollee from a directory of participating providers, for medical services at a discounted rate, and (2) collect and forward to the provider the fees for such services after deducting an “administrative fee.” The AG rejected the argument that B&P 650 would be inapplicable simply because the proposed arrangement would allow the enrollee to select from a list of professionals. Cal. Atty. Gen. Op. No. 93-807 (June 30, 1994)[37]: The AG opined that a podiatry referral service for profit may not direct callers on the following basis: (1) to a service subscriber who pays $500 monthly for a nonexclusive listing according to geographic proximity; (2) to a service subscriber who pays $750 monthly for a semi- exclusive listing within a five-mile radius; and (3) to a service subscriber who pays $1000 monthly for an exclusive listing within a five-mile radius, where the caller may, during the call, request and select an alternative referral. The AG concluded that the proposed referral plan for podiatrists “comes squarely under our 1982 dental referral opinion,” and that the legislative enactment of express authorization for dental referral services (B&P 650.2) and chiropractic referral services (B&P 650.3) is subject to “strict limitations,” and supports the conclusion that a referral plan for podiatrists violates B&P 650. The AG emphasized that the proposed plan would constitute “consideration … as compensation or inducement for referring patients” to the podiatrist. Cal. Atty. Gen. Op. No. 90-304 (October 25, 1990):[38] The AG opined that where a group of radiologists contracts with physicians to provide imaging services for the patients of the physicians, and the agreement provides that (1) the group will charge each patient a fee for the services, (2) the fees collected will be transmitted to the physicians, (3) the physicians will pay stipulated amounts to the group for the services, and (4) the total amounts paid by the physicians will be independent of but increase proportionately less than the total fees collected from the patients, performance of the agreement would violate B&P 650. The AG broke down B&P 650 into five elements: (1) An offer, delivery, receipt or acceptance (2) by any person licensed under this division (the healing arts provisions) (3) of consideration to any person (4) as compensation or inducement for (5) referral of patients, clients or customers. The AG also noted that: “With each referral, the referring physician will receive an economic benefit that is not based solely upon the imaging services rendered the patient. An increment of the consideration will be tied exclusively to the referral itself in that the physician will receive a proportionately greater share of the payments by increasing the number of referrals. Cases Some of the key California cases on kickbacks and fee-splitting include the following: Defendant paid for “referrals,” in violation of B&P 650, in hiring marketers to hand out cards offering defendant’s services and drive patients to defendant’s office, and paying the marketers $20 for each referred patient who was qualified to enroll, and who did enroll, in the Family Planning Access Care and Treatment (Family PACT) or Child Health and Disability Prevention Program (CHDP), even though defendant did not pay for patients who were not qualified to enroll in those programs.[39] Contract between medical doctor and lay hospital administrator whereby the administrator was to contact fellow hospital administrators on behalf of the medical doctor in an effort to persuade them to contract for their emergency room services with the medical doctor and under which the administrator was to receive $250 per month for each hospital client successfully referred by administrator was void in that it violated B&P 650, inasmuch as the referred hospitals became the “clients” or “customers” of the medical doctor and, in turn, the emergency room patients of the hospitals contracted with became referred “patients.”[40] Clinical laboratory’s practice of offering discounted payments to certain patients was not illegal; payment of sales commissions to independent contractor who marketed laboratory’s services to physicians (not patients) did not violate B&P 650, but it did violate the Medi-Cal statute’s prohibition on kickbacks, which is broader and includes referrals of “individuals” to “persons” for the furnishing of “services” which may be paid for by Medi-Cal.[41] The bona fide employee exception to the anti-kickback prohibition regarding Medi-Cal, subsumes the common law definition of “employee,” and excludes independent contractors.[42] The bottom line is that California is a state that takes anti-kickback and fee-splitting prohibitions, very seriously. The term “referral” is interpreted broadly, and there are cases and Attorney General opinions that provide grounds for legal caution when entering into a healthcare venture that may trigger these rules. If you have any questions, contact an attorney experienced in self-referral, anti-kickback, and fee-splitting legal issues. Footnotes [1] 42 USC §1395nn(a)(1); Section 1128B(b) of the Social Security Act. The Centers for Medicare and Medicaid (“CMS”) has issued a series of regulations interpreting the federal self-referral prohibition and the exceptions. See 42 CFR Sections 411.350-411.361. [2] The term “immediate family member” is defined broadly to mean a husband or wife; birth or adoptive parent, child or sibling; stepparent, stepchild, stepbrother, or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild. [3] The request by a physician for an item or service, including the request by a physician for a consultation with another physician (and any test or procedure ordered by, or to be performed by (or under the supervision of) that other physician), constitutes a “referral” by a “referring physician.” 42 USC §1395nn(h)(5). [4] See below for discussion of DHS. [5]The penalties for violating the Stark law include denial of payment, refunding of payments received, and imposition of significant civil monetary penalties ranging from $15,000 to $100,000, and exclusion from participation in federal health care programs, including Medicare. [6]42 USC §1395nn(a)(2); 42 CFR §354(a). [7] 42 USC §1395nn(h)(1)(A); 42 CFR §411.354(c). [8] 42 CFR §411.351. [9] 42 USC §1395nn(h)(1)(B); 42 CFR §411.351. There are various exceptions under Stark, some of which are relevant to the MSO model. [10] See the summary at Centers for Medicare & Medicaid Services (“CMS”), Physician Self-Referral: Overview. The physician self-referral law can be found in section 1877 of the Social Security Act (42 U.S.C. 1395nn). The regulations are located in Title 42 of the Code of Federal Regulations §411.350 – §411.389. [11] See CMS, Physician Self-Referral: Code List for Certain Designated Health Services; 42 CFR §411.351 (defining DHS categories without reference to the Code List). The code list includes x-rays, ultrasound, CT, MRI, nuclear medicine, and other imaging services. [12] See 42 CFR Part 411. [13] 42 U.S.C. §1320a-7b(b); Section 1128B(b) of the Social Security Act. Violation of this statute is a felony punishable by a fine, imprisonment, automatic exclusion from Medicare and Medi- Cal, and civil monetary penalties. [14] For purposes of the anti-kickback statute, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. [15] United States v. Kats, 871 F.2d 105 (9th Cir. 1989); United States v. Greber, 760 F.2d 68 (3d Cir.), cert. denied, 474 U.S. 988 (1985). The statute ascribes liability to both sides of an impermissible “kickback” transaction. [16] 56 Fed. Reg. 35952 (July 29, 1991). [17] See 56 Fed. Reg. 35974. [18] 64 Fed. Reg. 63518, 63530 (Nov. 19, 1999). [19]42 C.F.R. §1001.952. With respect to the discount safe harbor, according to the OIG Special Advisory Bulletin on Contractual joint Ventures: “Simply put, the discount safe harbor does not protect—and has never protected—prices offered by a seller to a buyer in connection with a common enterprise. To be protected under the discount safe harbor, a price reduction must be based on an arms length transaction.” [20] Cal. Bus. & Prof. Code §650.01. [21] Calif. Bus. & Prof. Code §650.01(b)(2). [22]Calif. Bus. & Prof. Code §650.01(a)(3). [23] Calif. Bus. & Prof. Code §650.01(b)(4). [24] Calif. Bus. & Prof. Code §2426(a). See also the California Medical Board’s webpage on Financial Interest Statement. [25] Cal. Bus. & Prof. Code, §2426(b)(1). [26] Cal. Bus. & Prof. Code §2426(b)(6). [27] Cal. Bus. & Prof. Code §650.02. [28] Cal. Bus. & Prof. Code §650.01(b)(5)-(6). [29] Cal. Bus. Prof. Code §650.01(f). See also AG Opin. No. 05-614 (Feb. 27, 2006) (physician may refer a patient “to a company in which he or she has an ownership interest as long as the referral is for a medical device that is not covered by section 6501.01, subdivision (a).” [30] In addition, California Health & Safety Code, Section 445, prohibits any person from profiting from referring patients to a physician or clinic for care; California Business & Professions Code, Section 2273(a) prohibits “the employment of runners, cappers, steerers, or other persons to procure patients.” And Section 13408.5 of the California Corporations Code prohibits the formation of a professional corporation to cause any violation of law, including prohibitions against fee-splitting and kickbacks. [31] Cal. Atty. Gen. Op. No. 05-614 (February 27, 2006) (citing People v. Duz-Mor Diagnostic Laboratory Inc. (1998) 68 Cal.App.4th 654, 664). See also Major California Attorney General Opinions Involving Business & Professions Code Section 650. [32] As well, the OIG Special Fraud Alert on Joint Ventures cautions against arrangements where the joint venture is a “shell” intended to induce referrals. [33] See 56 Fed. Reg. 35974. [34] 84 Ops. Cal. Atty. Gen. 25 (Cal.A.G.), 2001 WL 117913. [35]82 Ops. Cal. Atty. Gen. 225 (Cal.A.G.), 1999 WL 1213591. [36] 82 Ops. Cal. Atty. Gen. 1 (Cal.A.G.), 1999 WL 26906. [37] 77 Ops. Cal. Atty. Gen. 143 (Cal.A.G.), 1994 WL 287652. [38] 73 Ops. Cal. Atty. Gen. 321 (Cal.A.G.), 1990 WL 484782. [39] People v. Guiamelon (App. 2 Dist. 2012) 140 Cal.Rptr.3d 584, 205 Cal.App.4th 383, review denied, certiorari denied 133 S.Ct. 547, 184 L.Ed.2d 343/ [40] Mason v. Hosta (App. 2 Dist. 1984) 199 Cal.Rptr. 859, 152 Cal.App.3d 980. [41] People v. Duz-Mor Diagnostic Laboratory, Inc. (App. 2 Dist. 1998) 80 Cal.Rptr.2d 419, 68 Cal.App.4th 654, as modified, review denied. [42] People v. Palma, 40 Cal. App. 4th 1559 (1995). tate. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
July 23, 2014
Healthcare
Neurofeedback Laws & Licensing: Unlock Brains’ Potential But Be Legally Safe–Part 1: Unlicensed Practice
Who can legally practice neurofeedback—only licensed professionals—and what laws govern neurofeedback practice? Neurofeedback Law Case Studies—Sneak Preview 1. Paul the Psychologist writes: “I had begun to mentor an individual with a Ph.D. in psychology, but someone who was/is not licensed in any mental health or health profession. They maintain their own office and had been operating a private practice solely doing educational evaluations. They have begun to do neurofeedback with children and adults with a wide variety of issues (ADHD, anger, oppositional behavior, sleep issues, anxiety, RAD). I became concerned that I had liability exposure for their activities and discontinued the consultation. Were my concerns well founded? How is liability for mentoring or consultation determined?” 2. Phyllis the Psychiatrist writes: “Thanks for this opportunity. As a psychiatrist, I wonder if my offering neurofeedback (NF) to clients increases the risk of being sued. For example, if someone comes in with an anxiety disorder, and I suggest a trial of NF instead of medication, then what is my risk? If the patient does not respond well, and in fact his condition deteriorates, I’m left very exposed — this is outside standard psychiatric guidelines. In fact most psychiatrists have never heard of NF. So my question is, how can I best protect myself?” 3. Chris the Chiropractor has studied neurofeedback and wants to advertise on his website a spectrum of conditions that he can treat through neurofeedback, including not only stress, reduction and peak performance, but also: chronic pain, headaches, insomnia, mental fogginess, ADD/ADHD, autism, bruxism, chronic fatigue, cerebral palsy, fibromyalgia, IBS, Parkinson’s, PMS, TBI- Traumatic Brain Injury, stroke, tics, Tourette Syndrome, addictions, anxiety, anger, depression, irritability, mood swings, fear, phobias, PTSD, mental disorders. What legal issues does Chris face? The $64,000 Question There is a lot of Internet chat about neurofeedback being used by various practitioners, licensed and unlicensed, with questions rolling back and forth about what’s permissible or not. One comment asks: Would someone please state the actual law in regards to using neurofeedback and licensing??? This is the proverbial “$64,000 question.” I often liken healthcare regulation to a Rubik’s Cube. Just when you line up a row of colors, something else pops out of place, and you have to reconfigure the cube. Or, it’s like going to a casino where all the horizontal and vertical lines have to line up. A diagonal “bingo” is not sufficient. In lawyer terms: big caveat and disclaimer. You have an emerging area of healthcare practice where the legal rules can be ambiguous, archaic, or simply anarchic. Controversy surrounds the practice, and different professional societies and groups each have different answers. Any time anyone puts forth information on the Web, a hundred comments spring up ready to attack, and defend an antithetical position. Caution: this discussion may create unusual and interesting brainwave patterns. The Ideal Future and the Likely Reality Let’s frame the discussion of licensure with this quote: There are two fundamental issues that need to be discussed. One is the ideal future toward which we should strive. The other is the likely reality to which we must accommodate. Neurofeedback cannot succeed as a fringe discipline, or even as a subset of alternative and complementary medicine. Feedback and stimulation techniques will inevitably move to become the central organizing principle of psychology, of psychiatry, and of neurology. The core of these disciplines will be the increasing understanding of network relations within the cerebrum, and that will quite simply become the headline story for the decades to come. I will even acknowledge that up to now we have not been able to hasten the day of mainstream acceptance. One can make just as good a case that we have induced mainstream professionals to take an adverse position prematurely, so that now there is a degree of hostility to neurofeedback that is unmatched among the related technologies such as deep brain stimulation, repetitive transcranial magnetic stimulation, vagal stimulators, etc. But who could have foreseen such mindless opposition by intelligent people? Siegfried Othmer, The Unlicensed Practitioner Again Introduction to Licensing Issues: “Unlicensed Practice of Neurofeedback” A recent article online mentioned the “unlicensed practice of neurofeedback.” This is actually a misnomer. There is no unlicensed practice of neurofeedback, which is a modality. States license practitioners—physicians, chiropractors, acupuncturists, dentists, nurses, psychologists, social workers, physician assistants, physical therapists, and others. Unlicensed practice of one of these professional practices (for example, the unlicensed practice of medicine or of psychology) is prohibited by law. There are really two fundamental legal questions: • Is the practice of neurofeedback by a given individual who does not have any professional healthcare license, the unlicensed practice of medicine, psychology, or another licensed profession? • Is the practice of neurofeedback by a licensed healthcare provider, such as a psychologist, within the legally authorized scope of practice for that licensed profession, according to state law? These questions are related, in that a practitioner (say, a physical therapist where state law would not authorize the PT to practice neurofeedback) who goes beyond the authorized scope of practice, can be said to be practicing a licensed practice (for example, medicine or psychology). What Is Neurofeedback ISNR states: Like other forms of biofeedback, NFT uses monitoring devices to provide moment-to-moment information to an individual on the state of their physiological functioning. The characteristic that distinguishes NFT from other biofeedback is a focus on the central nervous system and the brain. Neurofeedback training (NFT) has its foundations in basic and applied neuroscience as well as data-based clinical practice. It takes into account behavioral, cognitive, and subjective aspects as well as brain activity. NFT is preceded by an objective assessment of brain activity and psychological status. During training, sensors are placed on the scalp and then connected to sensitive electronics and computer software that detect, amplify, and record specific brain activity. Resulting information is fed back to the trainee virtually instantaneously with the conceptual understanding that changes in the feedback signal indicate whether or not the trainee’s brain activity is within the designated range. Based on this feedback, various principles of learning, and practitioner guidance, changes in brain patterns occur and are associated with positive changes in physical, emotional, and cognitive states. Often the trainee is not consciously aware of the mechanisms by which such changes are accomplished although people routinely acquire a “felt sense” of these positive changes and often are able to access these states outside the feedback session. NFT does not involve either surgery or medication and is neither painful nor embarrassing. When provided by a licensed professional with appropriate training, generally trainees do not experience negative side-effects. Typically trainees find NFT to be an interesting experience. Neurofeedback operates at a brain functional level and transcends the need to classify using existing diagnostic categories. It modulates the brain activity at the level of the neuronal dynamics of excitation and inhibition which underlie the characteristic effects that are reported. Research demonstrates that neurofeedback is an effective intervention for ADHD and Epilepsy. Ongoing research is investigating the effectiveness of neurofeedback for other disorders such as Autism, headaches, insomnia, anxiety, substance abuse, TBI and other pain disorders, and is promising. (emphasis added) In general, when a practitioner makes claims that a given modality (e.g., neurofeedback) treats disease—or a mental health condition—then that practice is considered practice of medicine (or possibly psychology). So to the extent neurofeedback is used as “an effective intervention” for conditions, of ADHD, then neurofeedback is within the province of physicians (including psychiatrists) or clinical psychologist, or other mental healthcare practitioners (depending on their scope of practice. Unlicensed Medical Practice All states require a license to practice “medicine” and make it a crime to violate this requirement. State licensing laws typically define medicine in terms of diagnosis, operation, prescription, and treatment for any illness, disease or injury. Corporations cannot practice medicine and hence medical licensing laws are also said to prohibit the “corporate practice of medicine.” Here is a typical statutory definition of medical practice: ‘Practice of Medicine,’ which shall include the practice of medicine alone, the practice of surgery alone, or both, means the diagnosis, treatment or correction of, or the attempt to, or the holding of oneself out as being able to diagnose, treat or correct any and all human diseases, injuries, ailments or infirmities, whether physical or mental, organic or emotional, by any means, methods, devices or instrumentalities, except as the same may be among the acts or persons not affected by this chapter. This one is from Florida: “Practice of medicine:” the “diagnosis, treatment, operation, or prescription for any human disease, pain, injury, deformity, or other physical or mental condition.” Where did this come from? As I’ve written elsewhere (see also the AMA Virtual Mentor piece): For over 120 years, the Supreme Court has upheld the principle that states may regulate the practice of medicine and determine what is and is not lawful [1]. In Dent v. West Virginia, the State of West Virginia refused a license to Frank Dent, a member of the “eclectic” sect of physicians who incorporated botanical remedies into medicine. Dent had graduated from the American Medical Eclectic College of Cincinnati, but could not establish that he had attended a medical college recognized by West Virginia, passed a designated examination, or practiced in West Virginia for 10 years. Dent argued that, by refusing him a license, West Virginia deprived him of due process of law. The Supreme Court disagreed, holding that “the power of the State to provide for the general welfare of its people authorizes it to prescribe all such regulations as in its judgment will secure or tend to secure them against the consequences of ignorance and incapacity, as well as of deception and fraud” [2]. Around the time of Dent, the states began enacting medical licensing statutes. Today, all states define the “practice of medicine,” in part, by using such words as diagnosis, treatment, prevention, cure, and prescribe, in connection with disease, injury, and mental or physical condition [3]. State law came to designate the practice of medicine without a license as a crime. Subsequent cases relied on the Dent holding to interpret the medical licensing statutes and uphold prosecutions against a variety of complementary and alternative medicine (“CAM”) practitioners. For example, in People v. Amber, an acupuncturist argued that the statutory prohibition on unlicensed “practice of medicine” referred only to “Western allopathic medicine” and did not encompass systems such as Chinese acupuncture, which differs in its “philosophy, practice and technique” [4]. The court disagreed, holding that any “‘sizing up’ or a comprehending of the physical or mental status of a patient” constitutes diagnosis, which is part of the practice of medicine [5]. Similarly, other cases involved prosecutions of practitioners of modalities such as hands-on healing [6], iridology [7], and homeopathy [8]. In each case, courts interpreted statutory terms such as “diagnosis” and “treatment” broadly. Courts have also resisted constitutional challenges to health care licensure on a variety of fronts, including challenges based on free exercise and due process limitations [3]. [Citations omitted.] The courts, and state attorneys general, interpret the practice of “medicine” very broadly. Even the “Caveman Blogger” has gotten in trouble with the state medical board for making nutritional and dietary recommendations to his followers in North Carolina. See also, Legal lines blur between coaching, hypnotherapy, and psychology (unlicensed practice). California Law for Non-Licensed Practitioners In California, SB 577 (codified into the Business & Professions Code) allows non-licensed practitioners of the healing arts to engage in certain practices, so long as they provider a disclosure document and meet other statutory criteria. This statute gives non-licensed healers and other practitioners a legal foothold. However, one of the criteria is that the practitioner must not practice medicine. And, medical and psychological licensing laws exist side by side with the statute allowing non-licensed practice. Other states, such as Minnesota, have similar statutes for non-licensed practice—again, coexisting with medical and psychological licensing statutes. (If you need help structuring a non-licensed healthcare practice, contact our law firm.) Neurofeedback, Life Coaches, Nutritionists: Enforcement Priorities & Discretion Many “life coaches” skirt the legal and regulatory edges of the practice of psychology, and attempt to carve out a space in which they focus on setting and achieving goals. The practice of psychology is defined so broadly in most states that it sweeps in a great deal of activity. In part, life coaches exist at the legal periphery because enforcement priorities vary by state and by agency and prosecutor. Broad statutory and administrative definitions of professional practice, however, leave life coaches at legal risk. Witness again, for example, the case of the Caveman Blogger—whose area of coverage, nutrition, was slightly different, but who found himself embroiled in an investigatory process for unlicensed practice, for counseling clients about the Paleolithic diet. Boards of nutrition, like boards of psychology and medicine, have investigatory discretion to pursue unlicensed activity. Many of our clients have found themselves targets of investigation and enforcement, and contacted our firm to deal with unexpected and unwanted regulatory attention for activities the clients’ previously considered not only legally safe, but beneficial for their own clients. Does Working Under Physician Supervision Mitigate Unlicensed Practice Issues Some people believe that working “under the supervision” (or “under the license”) of a doctor or psychologist, mitigates unlicensed professional practice issues. This is a myth. There is no such thing as physician or psychologist supervision of an unlicensed person. We have licensed physician assistants, psychological assistants, nursing assistants, chiropractic assistants, medical assistants, and other licensed adjunctive providers. And we have providers that practice dependently under the supervision of another provider (for example, an RN under an MD). These categories are all defined by law, and their legal parameters must be met for practice. But you could not walk into my law office, for example, and ask me to adjust your spine “under the supervision” or “under the license” of a chiropractor. A lawyer doesn’t have the legal authority to perform spinal manipulation. Nor does your grocer, even under the chiropractor’s supervision. Here’s what New York State says about working “under” a psychologist: May psychologists use unlicensed individuals to perform any practices defined as the “practice of psychology” in Article 153? No. The use of unlicensed persons, persons without a limited permit, or persons who do not meet the exemption requirements, by licensed psychologists to perform any services or activities that fall within the statutory definition of psychology could result in professional misconduct charges or in the criminal charge of aiding and abetting illegal practice. The same principle applies with respect to what may be considered medical practice. Now, it may be that there is a role for technicians with respect to biofeedback—but this would exclude anything considered diagnosis and treatment. Here is a statement to contemplate from the ISNR Standards of Practice: Those providing neurofeedback services to individuals with diagnostic conditions as defined in ICD or DSM manuals and who are not licensed to work with such conditions should be evaluated and supervised by a professional who is licensed to treat such condition(s) and is on-site providing full time face-to-face supervision with the person providing the direct service. They should provide supervised services only after the licensed professional has evaluated the patient and set a treatment plan. The tasks assigned to such unlicensed individuals should be in keeping with their demonstrated level of competence and training and with applicable state law governing the health professions and the statute under which the supervisor is licensed. It is recognized that the level of supervision may vary depending on the complexity of the condition and individual being treated. The ultimate ethical responsibility and accountability for services performed by unlicensed persons to persons with diagnostic conditions rests with the licensed supervisor who reviews the assessment, treatment plans, course of treatment, and outcomes. Thus the nature of the supervisory relationship should be explicitly communicated in writing and written agreements with the unlicensed technician. Such a document should detail their duties, range of responsibilities, types of services, limits of independent actions, and responsibilities for reporting side effects or adverse reactions to their supervisor. This is one attempt to delineate what the licensed vs. unlicensed person does, although it does not provide any detail on what tasks are contemplated for the non-licensed person. Unlicensed Medical Practice: A Continuing Saga There are many older cases of iridologists, energy healers, hypnotherapists, and others hoisted on the petard of unlicensed medical practice. Before chiropractic was licensed, the profession’s slogan was, “go to jail for chiropractic!” Unlicensed practice of medicine investigations and prosecutions continue. In more recent times, an acupuncturist dispensed pills and advertised curing cancer. In appeal from a Department of Health determination, the court stated: As to the severity of the penalty, the Court finds that the DOH had overwhelming evidence to conclude that the Appellant preyed upon vulnerable individuals in times of personal crisis. He made numerous empty promises to extort disproportionate sums of money for the services he provided. To add insult to injury, he published advertisements that contained reproductions of his State-issued license to practice acupuncture to lend credence to this disgusting operation. As such the record evidence demonstrates the necessity of the penalty to protect the public from potential harm at the hands of Dr. Mai. Therefore, the Court not only refuses to disturb the decisions and orders of the DOH but, rather, wholly endorses the penalty imposed on Dr. Mai. See Unlicensed health care provider statute interpreted in RI. In Colorado, a hypnotherapist received a cease and desist for practicing hypnotherapy. Medical and psychological licensing statutes define the scope of their licensed professions very broadly, so that unlicensed practitioners can easily run afoul of regulatory tripwires. If you have specific legal questions about neurofeedback legal issues, consult our healthcare and FDA lawyers. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
July 5, 2014
Healthcare
What anti-kickback and fee-splitting legal issues arise when physicians or other healthcare providers lease space?
Many physicians, chiropractors, acupuncturists, and other healthcare practitioners want to know whether they are fee-splitting when they rent a room hourly from a medical practice or other healthcare facility or practitioner. The answer, of course, depends on the arrangement, including whether other aspects of it raise fee-splitting, Stark, or anti-kickback considerations. Let’s focus for now just on the hourly rental. The problem with this is that the payment for the space varies by volume or value of patients seen. On its face, that raises anti-kickback enforcement red flags. We have to think through these potential anti-kickback and fee-splitting legal issues when drafting a sublease for the healthcare practitioner. Note that there are pros and cons to having a separate sublease with the LLC/Management Company as lessor and practitioners as lessees. In part, this depends on whether your landlord for the overall space requires that the practitioners sign a separate sublease (which typically has space for landlord consent), or, can simply sign a consent to sublease arrangements that are agreed to by practitioners in the management agreement. As to the terms of the sublease, OIG addressed rental arrangements in its Special Fraud Alert on Rental of Space in Physician Offices by Persons or Entities to Which Physicians Refer. States such as California, New York, Massachusetts, Texas, Arizona, and so on, often look to federal law as guidance when interpreting or applying their own fee-splitting and anti-kickback law. In this case, the anti-kickback Fraud Alert restates the space rental safe harbor to federal anti-kickback law (42 CFR §1001.952(b)).In this safe harbor, all of the following criteria must be met: The agreement is set out in writing and signed by the parties. The agreement covers all of the premises rented by the parties for the term of the agreement and specifies the premises covered by the agreement. If the agreement is intended to provide the lessee with access to the premises for periodic intervals of time rather than on a full-time basis for the term of the rental agreement, the rental agreement specifies exactly the schedule of such intervals, their precise length, and the exact rent for such intervals. The term of the rental agreement is for not less than one year. The aggregate rental charge is set in advance, is consistent with fair market value in arms-length transactions, and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare or a State health care program. The aggregate space rented does not exceed that which is reasonably necessary to accomplish the commercially reasonable business purpose of the rental. Elaborating on the space rental safe harbor, in its Fraud Alert, the OIG expressed concern that rental payments may be disguised kickbacks to induce referrals. The OIG pointed to three “questionable features” of rental arrangements: The appropriateness of rental arrangements. The rental amounts. Time and space considerations. With respect to rental amounts, OIG states that rent should be: At FMV. This means that among other things: The rent should not exceed the amount paid for comparable property. Moreover, where a physician rents space, the rate paid by the supplier should not exceed the rate paid by the physicians in the primary lease for their office space, except in rare circumstances. Fixed in advance. Not take into account, directly or indirectly, the volume or value of referrals or other business generated between the parties. Thus, an hourly rental arrangement would raise enforcement concerns, as it would not be “fixed in advance” (i.e., as compared with an annual lease), and, the overall rent would vary based on the volume of patients, unless the total number of leased hours over the 12-month period is set forth in the sublease and is treated on a “use it or lose it” basis. To give an example of “use it or lose it:” the sublease could specify that that the sublessee practitioner is leasing 10 hours per month, with a schedule mutually agreed-upon in advance of each month; if the parties cannot agree on a schedule for a particular month, the prior month’s schedule would remain in place; if, during a given month, the sublessee needs the space for only 5 hours, the sublessee would still need to pay for the full 10 hours (i.e., still pay for 5 unused hours); conversely, if during a given month, the sublessee needs the space for more than 10 hours, the sublessee would not be able to use the space for any excess time beyond 10 hours during that month. The sublease can specify that the number of hours can be adjusted by mutual agreement prospectively (and not retroactively to account for any “unused hours”) but only on an annual basis (i.e., every 12 months). “Use it or lose it” arrangements can reduce the risk of scrutiny regarding hourly arrangements. OIG notes that suspect arrangements include, among others: rental amounts in excess of amounts paid for comparable property rented in arms-length transactions between persons not in a position to refer business; rental amounts for subleases that exceed the rental amounts per square foot in the primary lease; rental amounts that are subject to modification more often than annually; rental amounts that vary with the number of patients or referrals; rental arrangements that set a fixed rental fee per hour, but do not fix the number of hours or the schedule of usage in advance (i.e., “as needed” arrangements); rental amounts that are only paid if there are a certain number of Federal health care program beneficiaries referred each month; and rental amounts that are conditioned upon the supplier’s receipt of payments from a federal health care program. (We have added the bold for emphasis). With respect to time and space considerations, OIG notes that: Suppliers should only rent premises of a size and for a time that is reasonable and necessary for a commercially reasonable business purpose of the supplier. Rental of space that is in excess of suppliers’ needs creates a presumption that the payments may be a pretext for giving money to physicians for their referrals. Examples of suspect arrangements include: rental amounts for space that is unnecessary or not used… rental amounts for time when the rented space is not in use by the supplier… non-exclusive occupancy of the rented portion of space. For example, a physical therapist does not rent space in a physician’s office, but rather moves from examination room to examination room treating patients after they have been seen by the physician. Since no particular space is rented, we will closely scrutinize the proration of time and space used to calculate the therapist’s “rent.” Thus, having different practitioners with non-exclusive occupancy of various rooms, is problematic. OIG goes on to note that: In addition, rental amount calculations should prorate rent based on the amount of space and duration of time the premises are used. The basis for any proration should be documented and updated as necessary. Depending on the circumstances, the supplier’s rent can consist of three components: (1) exclusive office space; (2) interior office common space; and (3) building common space. OIG details these three components as follows: 1. Apportionment of exclusive office space – The supplier’s rent should be calculated based on the ratio of the time the space is in use by the supplier to the total amount of time the physician’s office is in use. In addition, the rent should be calculated based on the ratio of the amount of space that is used exclusively by the supplier to the total amount of space in the physician’s office. For example, where a supplier rents an examination room for four hours one afternoon per week in a physician’s office that has four examination rooms of equal size and is open eight hours a day, five days per week, the supplier’s prorated annual rent would be calculated as follows: Physician Office Rent Per Day % of Physician Office Space Rented by Supplier % of Each Day Rented by Supplier No. of Days Rented by Supplier Per Year annual rent of primary lease no. of work days per year X sq. ft. exclusively occupied by supplier total office sq. ft. X 4 hours 8 hours X 52 days (i.e., 1 day per week) = Supplier’s annual rent for exclusive space 2. Apportionment of interior office common space – When permitted by applicable regulations, rental payments may also cover the interior office common space in physicians’ offices that are shared by the physicians and any subtenants, such as waiting rooms. If suppliers use such common areas for their patients, it may be appropriate for the suppliers to pay a prorated portion of the charge for such space. The charge for the common space must be apportioned among all physicians and subtenants that use the interior office common space based on the amount of non-common space they occupy and the duration of such occupation. Payment for the use of office common space should not exceed the supplier’s pro rata share of the charge for such space based upon the ratio of the space used exclusively by the supplier to the total amount of space (other than common space) occupied by all persons using such common space. 3. Apportionment of building common space – Where the physician pays a separate charge for areas of a building that are shared by all tenants, such as building lobbies, it may be appropriate for the supplier to pay a prorated portion of such charge. As with interior office common space, the cost of the building common space must be apportioned among all physicians and subtenants based on the amount of non-common space they occupy and the duration of such occupation. For instance, in the example in number one above, the supplier’s share of the additional levy for building common space could not be split 50/50. Note that the OIG will have enforcement authority over those practitioners billing under Medicare/Medicaid, although the OIG alert will be influential to state authorities as well. We recommend using the OIG formula and criteria to guide your renting arrangements with practitioners, as a risk management strategy with regard to potential anti-kickback enforcement by state authorities, even where practitioners are not billing Medicare/Medicaid and therefore not subject to federal anti-kickback law. Contact our fee-splitting and anti-kickback attorneys whenever you have legal questions such as whether you can rent a room hourly from a medical practice for your professional healthcare practice. Whether you are a physician, physician assistant, physical therapist, nurse, chiropractor, acupuncturist or massage therapist; or whether you operate a medical practice, medical spa, or other kind of healthcare practice, it’s good to know the law. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
July 2, 2014
Healthcare
How to avoid legal pitfalls of physician (MD) collaboration with chiropractors (DC)
How can integrative medicine physicians collaborate with chiropractors, without triggering unnecessary patient liability, medical board discipline, or other legal exposure for fee-splitting, anti-kickback violations and other legal pitfalls? Many medical doctors and chiropractors create collaborative clinical practices that work in terms of patient care, but run afoul of key laws and regulations in ways that jeopardize both the MD and the DC. These legal rules include: laws governing professional corporations (such as the Moscone-Knox Professional Corporations Act in California); statutory and regulatory prohibitions against corporate practice of medicine; federal anti-kickback laws and state laws prohibiting kickbacks and fee-splitting (such as, California Business & Profession Code Section 650); laws governing professional scope of practice (such as medical licensing laws, psychological licensing laws, and chiropractic licensing laws); laws governing medical, chiropractic, psychological, or other professional discipline; formal and informal professional standards of care, which become important when considering whether medical malpractice has occurred; other laws and regulations. Corporate practice of medicine concerns in medical doctor / chiropractor collaboration The place to begin is with the understanding that all licensed healthcare professionals are not created equal. In the Beginning (late 19th century, as explained in Complementary & Alternative Medicine: Legal Boundaries & Regulatory Perspectives), licensing statutes were created for medical doctors. MDs were granted so-called “unlimited licensure” to diagnose and treat disease. Decades later, chiropractors got licensure–a more “limited” licensure with an assigned scope of practice. Licensing laws prohibit unlicensed practice of medicine (or psychology, chiropractic, and other professions); and consequently, corporate practice of medicine–the practice of medicine by a corporation other than a professional medical corporation–is illegal. In many states (including New York and California), this means that if a chiropractor hires a physician, the employment arrangement is likely to be seen as corporate practice of medicine and therefore illegal. Curiously, in California, the Moscone-Knox Professional Corporation Act does allow an MD to be employed by a chiropractic corporation: 13401.5. Notwithstanding subdivision (d) of Section 13401 and any other provision of law, the following licensed persons may be shareholders, officers, directors, or professional employees of the professional corporations designated in this section so long as the sum of all shares owned by those licensed persons does not exceed 49 percent of the total number of shares of the professional corporation so designated herein, and so long as the number of those licensed persons owning shares in the professional corporation so designated herein does not exceed the number of persons licensed by the governmental agency regulating the designated professional corporation. This section does not limit employment by a professional corporation designated in this section of only those licensed professionals listed under each subdivision. Any person duly licensed under Division 2 (commencing with Section 500) of the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act may be employed to render professional services by a professional corporation designated in this section…. (k) Chiropractic corporation. (1) Licensed physicians and surgeons. Note that employment must be by a chiropractic professional corporation, and not by a chiropractor or DBA for a chiropractor or general corporation. Despite this seeming legal permissiveness, the corporate practice of medicine doctrine, as well as other areas of law, mean that the MD who becomes an employee to a chiropractic corporation is in legal peril. Among other things, the California Medical Board’s web page on corporate practice of medicine articulates medical board concerns about: Selection, hiring/firing (as it relates to clinical competency or proficiency) of physicians, allied health staff and medical assistants. Approving of the selection of medical equipment and medical supplies for the medical practice. Management service organizations arranging for, advertising, or providing medical services rather than only providing administrative staff and services for a physician’s medical practice. An employment arrangement grants the chiropractic professional corporation a lot of control over the physician as an employee. It is inconsistent with the medical board’s view on corporate practice of medicine, quoted above. Although one option is for the chiropractor to serve as manager for the medical practice (we discuss the MSO model in other blog posts),the California medical board also warns on its corporate practice of medicine page: The following types of medical practice ownership and operating structures also are prohibited…: A physician acting as “medical director” when the physician does not own the practice. For example, a business offering spa treatments that include medical procedures such as Botox injections, laser hair removal, and medical microdermabrasion, that contracts with or hires a physician as its “medical director.” Standard of care and scope of practice concerns in the MD – DC clinical practice A significant question when MDs and DCs collaborate is, are the patients the MD is seeing those of the medical practice, or those of the chiropractic practice? There is less of a concern if the professional medical corporation is hiring the chiropractor. This is allowed by Moscone-Knox and often by other professional corporation statutes in other states. However, the scenario where a chiropractic professional corporation hires the MD raises standard of care issues. The MD must follow a medical standard of care, and not the chiropractic standard of care. If the chiropractor is the employer, then the chiropractor is calling the clinical shots. Among other things, it is important to ask, whose patients are being seen by the physician? If the MD is seeing the chiropractor’s patients, this is problematic. Typically, this means that MD is likely serving as a remote (i.e., token) physician who signs off on procedures the chiropractor has recommended (such as laser therapy, vitamin B12 injections, or other functional medicine, anti-aging medicine, hormone therapies, weight loss, or other therapies at the borderland of chiropractic scope of practice). If these are not medically indicated by the patient’s condition–as diagnosed by the physician–there can be an issue as to whether the medical doctor is practicing standard of care. Scope of practice is also of concern if the chiropractor is treating outside his or her legislatively authorized scope of practice. This can happen by, for example, the chiropractor hiring a nurse practitioner and essentially trying to “rent” the medical doctor’s license and force the illusion of supervision, to create a cover for practice outside chiropractic ken. Any physician in this type of arrangement must take care to get legal counsel to assess whether the chiropractor’s offer was an illegal one. Fee-splitting concerns in the medical doctor – chiropractor practice Most state laws, including California Business & Professions Code section 650, prohibit fee-splitting, and prohibit receiving or giving anything of value in exchange for a patient referral. Federal laws prohibit the same whenever a claim for the patient’s care is submitted to Medicare or Medicaid. One of the danger zones here opens up when the chiropractor offers to pay the medical doctor a fixed amount per patient that the MD sees within the chiropractic office. Per-patient splits are always problematic. (See, for example, our post on fee-splitting issues in the integrative care setting). The chiropractor cannot take, for example, $100 from the patient and split this on a percentage basis with the physician. Models of Physician – Chiropractor Integrative Practice Some of the ways a chiropractic practice can bring a medical doctor into clinical decision-making with a greater success of legal compliance include: Lease at fair market value: leasing space to the medical doctor; the lease must be at fair market value, to help withstand anti-kickback and fee-splitting scrutiny; also, the lease should comply with federal and state safe harbor provisions; Employment by professional medical corporation: the chiropractor can be an employee of the professional medical corporation, and, depending on state law (such as Moscone-Knox), potentially also a shareholder (up to 49% in California); Management (MSO) model: the chiropractic professional corporation can serve as a manager to the professional medical corporation under a management services organization agreement (or management agreement), with the fee at fair market value for services rendered; Marketing services by chiropractor: the chiropractic professional corporation can provide marketing services to the professional medical corporation, with a flat marketing fee at fair market value. Billing & Coding In any arrangement in which the chiropractor is an employee of the professional medical corporation, the physician must take care that appropriate billing and coding rules are being followed when the chiropractor bills under the EIN of the professional medical corporation. Physician Supervision Further, the MD must properly supervise registered nurses (RNs), physician assistants (PAs), and medical assistants. In California, the MD must have a delegation of services agreement in place for physician assistants, and, a collaborative practice agreement with the registered nurses as well as standardized protocols. Dependent practitioners must be properly supervised. Additional rules, such as those governing physical therapists, chiropractic assistants, and others, must be respected. The physician must supervise all medical procedures (for example, whenever the laser is being used for medical purposes). Medical Director title is legally dangerous Physicians, beware the chiropractor’s offer to become “medical director.” Medical boards aggressively enforce their rules where they perceive a violation. Many physicians enter into arrangements with chiropractors or other healthcare practitioners, hoping to ‘get rich quick’ while unwittingly jeopardizing their license. (See our post, If someone asks you to be medical director, run). Conclusion: The Collaborative Practice Healthcare laws and regulations are arcane and esoteric. When you are developing a telemedicine, online health, m-health, or electronic medical platform, or a multi-disciplinary clinic or clinical collobration, contact our healthcare legal team for appropriate healthcare & FDA legal and regulatory advice. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
May 26, 2014
Healthcare
Physician Sale of Dietary Supplements – Legal and Regulatory Restrictions
Note that rules are always changing and these particular limits may have been modified. Some states restrict the markup a physician can have on sales of dietary supplements. For example, New Jersey law has some relevant law. Very generally, New Jersey law provides for restrictions on referrals of patients where the practitioner has a financial interest. Specifically:[1] a. A practitioner shall not refer a patient or direct an employee of the practitioner to refer a patient to a health care service in which the practitioner, or the practitioner’s immediate family, or the practitioner in combination with the practitioner’s immediate family has a significant beneficial interest…. (emphasis added) b. If a practitioner is permitted to refer a patient to a health care service pursuant to this section, the practitioner shall provide the patient with a written disclosure form, prepared pursuant to section 3 of P.L.1989, c. 19 (C.45:9-22.6), and post a copy of this disclosure form in a conspicuous public place in the practitioner’s office. c. The restrictions on referral of patients established in this section shall not apply to: (1) medical treatment or a procedure that is provided at the practitioner’s medical office and for which a bill is issued directly in the name of the practitioner or the practitioner’s medical office…. Relevant definitions are as follows:[2] “Health care service” means a business entity which provides on an inpatient or outpatient basis: testing for or diagnosis or treatment of human disease or dysfunction; or dispensing of drugs or medical devices for the treatment of human disease or dysfunction. Health care service includes, but is not limited to, a bioanalytical laboratory, pharmacy, home health care agency, rehabilitation facility, nursing home, hospital, or a facility which provides radiological or other diagnostic imagery services, physical therapy, ambulatory surgery, or ophthalmic services. (emphasis added) “Immediate family” means the practitioner’s spouse and children, the practitioner’s siblings and parents, the practitioner’s spouse’s siblings and parents, and the spouses of the practitioner’s children. “Practitioner” means a physician, chiropractor or podiatrist licensed pursuant to Title 45 of the Revised Statutes. “Significant beneficial interest” means any financial interest; but does not include ownership of a building wherein the space is leased to a person at the prevailing rate under a straight lease agreement, or any interest held in publicly traded securities. The written disclosure form:[3] shall be prescribed by regulation of the State Board of Medical Examiners. In addition to such other information as the board determines necessary, the disclosure shall inform the patient whether any services or facility fees associated with the referral will be considered to be, and reimbursed at, an “out-of-network” level by the patient’s insurance carrier or other third party payer. Regulations of the New Jersey State Board of Medical Examiners, published in the New Jersey Administrative Code, further elaborate on these requirements, in NJCA §13:35-6.17 Professional fees and investments, prohibition of kickbacks:[4] (a) For the purposes of this rule, the following words and terms shall have the following meanings: 1. “Health care service” means a business entity which provides on an in-patient or out-patient basis: testing for or diagnosis or treatment of human disease or dysfunction or dispensing of drugs or medical devices for the treatment of human disease or dysfunction. Health care service includes, but is not limited to, a bioanalytical laboratory, pharmacy, home health care agency, home infusion therapy company, rehabilitation facility, nursing home, hospital, or a facility which provides radiologic or other diagnostic imaging services, physical therapy, ambulatory surgery, or ophthalmic services. 2. “Financial interest” means a monetary interest of any amount held by a practitioner personally or through immediate family, as defined herein, in a health care service to which the practitioner’s patients are referred. It includes the offer or receipt, directly or indirectly, by the practitioner or immediate family of anything of more than negligible value as a result of a patient’s purchase of a prescribed service, goods or device from the person or entity providing this. Except as set forth in (a)2i through vii below, “financial interest” includes a licensee’s financial interest in a contractual arrangement with a licensed health care facility (such as a hospital, nursing home or clinic, etc.), whereby the licensee agrees to provide health care services on referral, for example, cardiac or radiologic diagnostic testing, to patients including those receiving Emergency Room care or inpatients or outpatients of the health care facility…. 3. “Immediate family” means the practitioner’s spouse and children, the practitioner’s siblings and parents, the practitioner’s spouse’s siblings and parents, and the spouses of the practitioner’s children. 4. “Practitioner” means a physician, podiatrist, bioanalytical laboratory director or specialty laboratory director, acupuncturist, midwife, certified nurse midwife, physician assistant and all other categories of licensee now or henceforth under the jurisdiction of the State Board of Medical Examiners. 5. “Significant beneficial interest” means any financial interest including an equity or ownership interest in a practice or in a commercial entity holding itself out as offering health care service as defined in (a)1 above. This interest does not, however, include ownership of a building or component thereof wherein the space is leased, in writing, to a person or entity at the prevailing rate under a straight lease agreement (that is, a fixed fee for a fixed term), or any interest held in publicly traded securities…. (b) A practitioner shall not refer a patient or direct an employee of the practitioner to refer a patient to a health care service in which the practitioner or the practitioner’s immediate family, or the practitioner in combination with the practitioner’s immediate family, has a significant beneficial interest…. Disclosure shall be made by the practitioner in ways appropriate to the professional circumstances including conspicuous posting of a written disclosure form prepared as set forth below, at least 8 1/2 by 11 inches in size, in the practitioner’s waiting room in all office locations. The patient shall also be provided with a personal copy of the notice. The notice format shall be as follows: Public law/rule of the State of New Jersey/Board of Medical Examiners mandates that a physician, podiatrist and all other licensees of the Board of Medical Examiners inform patients of any significant financial interest held in a health care service. Accordingly, take notice that practitioners in this office do have a financial interest in the following health care service(s) to which patients are referred: (LIST APPLICABLE HEALTH CARE SERVICES) You may, of course, seek treatment at a health care service provider of your own choice. A listing of alternative health care service providers can be found in the classified section of your telephone directory under the appropriate heading. 1. In any inquiry regarding the applicability of the financial disclosure provisions of this rule, including the holding of a significant beneficial interest or exemption therefrom, the Board may require a Board licensee to submit financial and familial information sufficient to determine the financial interest in an investment…. 4. The restrictions on referral of patients established in this subsection shall not apply to: i. A health care service that is provided at the practitioner’s medical office for which the patient is billed directly by and in the practitioner’s name…. (c) The following pertain to miscellaneous monetary arrangements: 1. A licensee shall not, directly or indirectly, give to or receive from any licensed or unlicensed source a gift of more than nominal (negligible) value, or any fee, commission, rebate or bonus or other compensation however denominated, which a reasonable person would recognize as having been given or received in appreciation for or to promote conduct by a licensee including: purchasing a medical product, ordering or promoting the sale or lease of a device or appliance or other prescribed item, prescribing any type of item or product for patient use or making or receiving a referral to or from another for professional services. For example, a licensee who refers a patient to a health care service (such as a cardiac rehabilitation service or a provider of durable medical equipment or a provider of testing services) shall not accept from nor give to the health care service a fee directly or indirectly in connection with the referral, whether denominated as a referral or prescription fee or consulting or supervision fee or space leasing in which to render the services (other than as permitted in (h) below), or by any other name, whether or not the licensee has a financial interest as defined in (a) above…. ii. This section shall be construed broadly to effectuate its remedial intent. It shall not, however, prohibit a flat-fee payment by a licensee for regular advertising services (including placement on a commercially-sponsored “referral list” of licensed health care providers). It shall not prohibit receipt of reasonable payment for bona fide participation as a speaker at a professional workshop or seminar nor attendance by non-faculty licensees at a continuing medical education program whereby in conformance with the guidelines of the Accreditation Council on Continuing Medical Education or the American Podiatric Medical Association commercial sources have been utilized in calculating the registration fees to be charged to all participants. It shall not prohibit receipt of normal, commercially reasonable discounts for volume purchases from vendors, nor prohibit compensation for the sale of medical equipment by a licensee of the Board, in the disclosed capacity of a salesman, to another licensed health care professional. It shall not prohibit a licensee’s participation by permit in an FDA-approved research project. 2. A laboratory director licensee may bill either the patient or the prescribing physician who submits the specimen, as permitted by N.J.S.A. 45:1-10. 3. All other categories of licensees who bill for professional services shall submit the bill directly or via a named designee entity to the patient or patient representative if for treatment services, or to the recipient of the professional services in a non-patient capacity, as applicable. 4. A bill for services of members of a professional service corporation, or services of a physician’s employees which have been rendered by licensed professionals authorized to provide services without medical supervision, shall identify the provider of service by name and degree, as well as the name of the service entity (if different). 5. A licensee may bill for only the actual cost of prescribed professional/technical services (including, for example, laboratory services, radiologic and EKG consultation, fabrication of eyeglasses, orthotics, etc.) ordered by or through the licensee, with the patient’s consent, provided that the name and address of the provider of the professional/technical services and the cost as billed to the licensee, are disclosed to the patient. A licensee may contract with and provide professional/technical services to the prescribing licensee, supplying the information necessary for incorporation in the bill prepared by the prescribing licensee to the patient. (d) A licensee shall not charge for “free samples” or other similar items obtained by the licensee from any source. (e) Acting within the scope of lawful practice, a licensee may offer to and provide to a patient medications, including a prescription drug or an over-the-counter preparation or vitamin or food supplement (emphasis added), but only in accordance with the requirements of P.L. 1991, c. 187, sec. 46 N.J.S.A. 45:9-22.11 and N.J.A.C. 13:35-7.[5] A licensee may also offer to and provide to a patient, at fair market value, medical goods and devices such as hearing aids, eyeglasses, contact lenses, prosthetic devices, orthotics, etc. 1. Where items are prescribed by a licensee, and the consumer elects to fill the prescription elsewhere, the prescriber’s obligation to the patient shall include, if requested by the patient, follow-up to ascertain that the item prescribed is appropriate and/or the fit is acceptable (for example, as in the prescribing of eyeglasses or external contact lenses), and that the result of the prescribed service is properly evaluated and integrated into the treatment plan for the patient….. (j) A licensee having a significant beneficial interest, as defined in (a) above, in a health care service including a professional service corporation or a general business corporation (see N.J.A.C. 13:35-6.16(f)) shall notify the Board of such interest no later than February 18, 1993. Notice is not required for a practice conducted under the practitioner’s own name. Thus, it seems that New Jersey limits a physician’s markup to cost plus 10% to cover administrative expense. If you need legal counsel concerning sales of nutriceuticals or dietary supplements by a medical doctor, osteopathic physician, or other clinician, whether in New Jersey, New York, California, or elsewhere, contact an experienced healthcare lawyer for relevant legal and regulatory advice. The Cohen Healthcare Law Group counsels clinicians, medical and healthcare facilities, and healthcare business on dietary supplement legal and regulatory issues. Call us today. [1] N.J.S.A. 45:9-22.5. [2] N.J.S.A. 45:9-22.5. [3] N.J.S.A. 45:9-22.6. [4] N.J.A.C. 13:35-6.17 (2012); see also the official New Jersey medical board’s publication of these rules. [5] 46 N.J.S.A. 45:9-22.11 provides that when a physician dispenses “medicines:” “The drugs or medicines shall be dispensed at or below the cost the physician has paid for the particular drug or medicine, plus an administrative cost not to exceed 10% of the cost of the drug or medicine.” N.J.A.C. 13:35-7 deals with prescription, administration, and dispensing of drugs. The subchapter defines “drug” as: “any article recognized in the official United States Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States or official National Formulary, or any supplement to those sources, including, but not limited to, a controlled substance, a prescription legend drug, an over-the-counter preparation, a vitamin or food supplement, or any compounded combination of any of the above….” N.J.A.C. 13:35-7.1. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
January 11, 2013
