Category: Healthcare
Clear ResultsBusiness
OIG Advisory Opinion 26-12 Approves Concierge Program Warranty for Surgical Outcomes
On May 22, 2026, the Office of Inspector General ("OIG") issued Advisory Opinion 26-12, concluding that a proposed warranty program offered by an orthopedic surgery provider would not generate prohibited remuneration under either the Federal Anti-Kickback Statute ("AKS") or the Beneficiary Inducements Civil Monetary Penalty ("CMP") provisions. Accordingly, OIG stated that it would not impose administrative sanctions in connection with the arrangement. The opinion provides important guidance regarding the application of the AKS warranty safe harbor to innovative service delivery models. The Proposed Arrangement The Requestor, an orthopedic surgery provider, offers patients an optional concierge program that includes post-operative recovery support services and products for one (1) year following surgery. These services include wellness coaching, educational support, nutritional programs, digital health monitoring tools, and recovery-related products. The provider certified that none of these concierge services are reimbursable by Medicare, Medicaid, or commercial insurance, although the underlying surgical procedures may be covered by Federal health care programs. Patients who elect to participate pay a separate concierge fee and execute a membership agreement before surgery. Under the proposed arrangement, the provider would warrant that a patient's substantial compliance with the concierge program would result in the patient not requiring revision surgery within two (2) years of the initial procedure. If the patient nevertheless required revision surgery during that period, the provider would refund the concierge fees paid in connection with the original surgery. The provider would not refund medical expenses, cover revision surgery costs, or provide any additional remuneration. Nor would the patient be required to return to the provider for the revision procedure. Anti-Kickback Statute Analysis OIG recognized that the arrangement potentially implicates the AKS because the offer of a refund could make the provider more attractive to prospective patients seeking surgeries that are reimbursable by Federal health care programs. As a result, OIG examined whether the arrangement satisfied the regulatory safe harbor for warranties found at 42 C.F.R. § 1001.952(g). The warranty safe harbor protects certain written undertakings to refund, repair, replace, or provide other remedial action when an item, bundle of items, or related services fail to meet specified performance standards. OIG concluded that the proposed concierge fee refund met the regulatory definition of a warranty because: The commitment was memorialized in a written membership agreement The warranty formed part of the bargain between the provider and the patient The provider agreed to take remedial action in the form of a refund The refund would be triggered by the failure of the concierge program and related services to achieve the promised outcome of avoiding revision surgery within two years OIG further determined that the arrangement satisfied the applicable conditions of the warranty safe harbor. Among other things, the provider certified that it would accurately disclose and document any refund, require patients to provide information to government authorities upon request, and refrain from conditioning the warranty on exclusive use of the provider or minimum purchase requirements. Because the arrangement fit squarely within the warranty safe harbor, OIG concluded that it would not constitute prohibited remuneration under the AKS. Beneficiary Inducements Civil Monetary Penalties Analysis OIG likewise found no violation of the Beneficiary Inducements Civil Monetary Penalties (CMP). Although the refund offer could arguably influence a Medicare or Medicaid beneficiary's selection of a provider, the CMP's definition of remuneration excludes practices that are permissible under an AKS safe harbor. Having determined that the proposed arrangement qualified for protection under the warranty safe harbor, OIG concluded that the arrangement likewise posed no risk under the Beneficiary Inducements CMP. Key Compliance Considerations Several facts were central to OIG's favorable determination: The concierge services were separately purchased at fair market value The refund applied only to the concierge fees paid by the patient and not to medical, hospital, or surgical expenses Patients were not required to use the provider for any future procedure, including revision surgery The provider did not condition the warranty on exclusive use arrangements or minimum purchasing commitments Appropriate reporting, documentation, and disclosure requirements were incorporated into the membership agreement Conclusions Advisory Opinion 26-12 demonstrates OIG's willingness to recognize properly structured outcome-based warranty programs tied to non-covered services that satisfy the warranty safe harbor. The opinion may be particularly relevant to providers developing concierge, care coordination, recovery support, or other value-added patient programs. At the same time, OIG emphasized that its approval was limited to the specific facts presented. Notably, the agency distinguished the proposed arrangement from the provision of free concierge services or other free benefits to patients. OIG reiterated its longstanding concerns that free items or services connected to federally reimbursable care may present significant fraud and abuse risks and would not necessarily qualify for safe harbor protection. While advisory opinions bind only the requesting party, Advisory Opinion 26-12 offers a useful roadmap for providers seeking to design patient-centered warranty programs that reward outcomes without running afoul of the AKS or Beneficiary Inducements CMP. Proper structuring, fair market value pricing, careful documentation, and strict adherence to the warranty safe harbor remain essential to achieving a favorable compliance result.
September 9, 2026
Business
Pennsylvania Supreme Court Narrows Scope of Workers’ Compensation Anti-Referral Provision: Implications in Light of Federal Physician Self-Referral Law
On June 16, 2026, the Pennsylvania Supreme Court issued a significant decision interpreting Section 306(f.1)(3)(iii) of the Workers’ Compensation Act (the “Act”), commonly known as the Anti-Referral Provision. The Court held that the placement of the phrase “goods or services” following a list of enumerated medical services does not operate as a broad catch-all prohibition on physician self-referrals. Instead, the Court concluded that the statutory prohibition is limited strictly to the specifically enumerated services that precede that phrase. As a result, physician self-referrals to pharmacies in which they hold a financial interest (e.g., ownership interest or compensation arrangement) fall outside the scope of the Act’s anti-referral restriction. Employers and insurers are therefore required to reimburse for reasonable and necessary prescriptions, even where the prescribing physician has a financial interest in the dispensing pharmacy. This ruling represents a major shift in the interpretation of Pennsylvania’s healthcare cost-containment framework and invites comparison to the federal Ethics in Physician Self-Referral Law, 42 U.S.C. § 1395nn (“Stark Law”) enacted in 1989 and later expanded in 1993. Background The case arose from multiple consolidated claims involving two (2) physicians who issued prescriptions filled by 700 Pharmacy, an entity in which they held a financial interest. When the State Workers’ Insurance Fund (“SWIF”) denied payment for those prescriptions, the pharmacy filed Medical Fee Review Applications seeking reimbursement. The applications were denied at the administrative level, when the hearing officer concluded that the prescriptions constituted unlawful self-referrals under the Act. The Commonwealth Court affirmed that determination, relying on what it viewed as the plain language of the statute. In its view, the phrase “goods or services” reflected a deliberate legislative choice intended to broadly encompass all forms of medical care, including pharmaceuticals and pharmacy services. Supreme Court Opinion The Pennsylvania Supreme Court reversed. The majority applied a textualist approach, concluding that the statutory language does not extend beyond the specific categories of medical services expressly listed in the provision. Because prescription drugs and pharmaceutical services are not included among those specified categories, the Court held that they fall outside the scope of the Anti-Referral Prohibition. In doing so, the Court rejected the argument that “goods or services” should function as a residual clause capturing all forms of medical treatment. Instead, it interpreted the statute as intentionally limited, declining to expand its reach based on broader policy considerations. Two dissenting opinions highlight the stakes of that interpretive choice. Justice McCaffery emphasized that the Anti-Referral Provision was enacted to prevent financially motivated medical decision-making and argued that the phrase “goods and services” should be read broadly to effectuate that purpose. Justice Wecht, in a separate dissent, challenged the majority’s textual analysis, suggesting that the statutory language more naturally supports a broader interpretation. Legislative Context and Comparison to Stark Law The Anti-Referral Provision was enacted as part of Pennsylvania’s workers’ compensation reform efforts in 1993 (Act 44), legislation designed to control rising system costs and curb perceived abuses. Its purpose closely parallels that of the federal Stark Law, which Congress enacted in 1989 to address the risks posed by physician self-referrals and the resulting overutilization of healthcare services. The difference lies in execution. The Stark Law is deliberately expansive, covering a wide range of “designated health services,” including outpatient drugs, and imposing strict liability for prohibited referrals unless a regulatory exception applies. It is grounded in the premise that financial incentives can distort clinical judgment and therefore must be tightly regulated. By contrast, the Pennsylvania Supreme Court’s decision reflects a narrower, text-driven interpretation of state law. Rather than extending the Anti-Referral Prohibition to align with its underlying purpose, the Court confined its application to the statute’s enumerated categories. The result is a regulatory gap: a set of financial relationships that would raise significant concerns under federal law now fall outside the scope of Pennsylvania’s workers’ compensation anti-referral framework. Practical Implications for Healthcare Providers The Court’s decision opens the door for physicians to more freely integrate ancillary services into their practices, particularly in the area of pharmacy ownership. Physicians may now prescribe medications that are filled by a pharmacy in which they have a financial interest without violating the Anti-Referral Provision. This flexibility brings with it clear financial opportunities. Providers now have the ability to capture additional revenue streams tied to prescription medications, including dispensing margins and pharmacy-related services. Given the frequency with which injured workers require ongoing medication management, particularly in chronic or complex cases, this development may have a meaningful economic impact on certain practices. At the same time, the decision does not eliminate compliance risk; rather, it shifts the focus of that risk. Providers remain subject to the Act’s cost-containment measures, including fee schedules and utilization review. Prescribing decisions must still be medically necessary and defensible, and patterns of overutilization or unusually high-cost prescribing are likely to draw scrutiny. In practice, the question is no longer simply whether a referral is permitted, but whether it can be justified. It is also critical to recognize that this ruling is limited to Pennsylvania’s workers’ compensation system and does not alter obligations under federal law. The Stark Law and the Anti-Kickback Statute continue to impose strict limitations on financial relationships tied to referrals in Medicare, Medicaid, and other federal healthcare programs. As a result, providers must take care not to conflate what is permissible in the workers’ compensation context with what is allowed elsewhere. Maintaining clear compliance boundaries between these regulatory frameworks will be essential. From a strategic standpoint, the decision is likely to prompt providers to reconsider how they structure ownership and referral relationships. Investments in pharmacies, compounding operations, and related ancillary services may become more attractive, particularly where those services can be aligned with workers’ compensation patients. The ruling effectively invites more deliberate planning around the integration of care delivery and revenue generation. At the same time, providers should expect increased scrutiny from insurers and payers. Carriers are unlikely to accept this shift passively and may respond by intensifying utilization review and monitoring prescribing patterns more closely. High-cost medications, unusual prescribing volumes, or patterns suggesting financial motivation may face heightened challenge. In that sense, while the legal restriction has narrowed, the practical oversight surrounding these arrangements may increase. Conclusion The Pennsylvania Supreme Court’s decision represents a significant narrowing of the Workers’ Compensation Act’s Anti-Referral Provision, grounded in a strict textual reading of statutory language. While the ruling is consistent with principles of statutory interpretation, it departs from the broader policy approach embodied in the federal Stark Law and from the apparent cost-containment objectives underlying Act 44 of 1993. By excluding pharmaceuticals from the anti-referral framework, the Court has created a gap between legislative intent and statutory reach. For healthcare providers, the decision presents both opportunity and risk: new flexibility in structuring business relationships, coupled with continued regulatory oversight and the possibility of future legislative correction. Whether the General Assembly will act to close that gap remains to be seen, but the decision has already reshaped the compliance landscape for provider self-referrals in Pennsylvania’s workers’ compensation system.
July 28, 2026
Business
Why the Friendly PC Model Remains Critical to Healthcare Private Equity Transactions with Medical and Dental Practices
Private equity (“PE”) activity in healthcare across the United States has caused continued focus by state legislatures and enforcement agencies on the doctrines of corporate practice of medicine and dentistry (“CPOM” or “CPOD”). Notwithstanding this attention, the often-referenced “Friendly PC” model remains the optimal corporate strategy to ensure post-closing compliance with CPOM and CPOD regulations in most jurisdictions. The following identifies some key considerations for the agreement's ancillary to the purchase of the non-clinical assets by the PE company’s management services organization (“MSO”), which are commonly used to ensure compliance with CPOM and CPOD. Friendly PC Model As a general matter, the term “Friendly PC” model in PE healthcare deals most often refers to a business arrangement where a physician or dentist-owned professional corporation (“PC”) sells all of its non-clinical assets to an entity owned by the MSO (controlled by the PE firm), which then takes responsibility for the PC’s non-clinical business operations. This model complies with fundamental CPOM and CPOD legal requirements, which are designed to restrict non-physicians from owning or controlling medical practices. Such a structure prevents the PE buyer from owning clinical assets or unduly controlling the clinical operations and decision-making of the providers employed by the PC. In the “Friendly PC” structure, the parties designate a single clinical professional to serve as the sole owner of the PC post-closing. This individual is referred to as the friendly physician or dentist (“Friendly Provider”), who is then expected to cooperate with the PE buyer in accomplishing its business goals. Such a transaction requires the drafting of a series of agreements to accomplish the necessary purposes of the arrangement. Although the nature and scope of such agreements may vary slightly based upon preference and applicable state law, below is a brief description of certain key agreements, and their most necessary elements, to ensure the PC’s compliance with CPOM and CPOD laws post-closing. Management Services Agreement The Management Services Agreement (“MSA”) is entered into between the PC and the MSO, which is owned by the PE buyer. Through this agreement, the MSO is responsible for providing and arranging for certain non-clinical administrative, business support, and back-office services on behalf of the PC. The MSA will clearly state that the MSO entity will not play any role in the care of patients and will specify the limitations of the actual services to be provided so as to ensure it will not fall within the applicable state’s definition of the practice of medicine or dentistry. It is also very important that the MSA define the independent contractor nature of this commercial relationship and seeks to avoid creating a de facto partnership between the MSO and the PC.1 Overly lengthy initial contract durations, requirements for minimum operational hours per period, the ability to negotiate payor and other agreements without the PC’s consent, and compensating the MSO through a percentage of the PC’s profits are all commonly mishandled deal points that could create an unintended partnership in the eyes of a regulatory agency.2 As such, legal counsel must carefully tailor these provisions to avoid such a problematic presumption. Equity Transfer Restriction Agreement This agreement establishes a highly restrictive framework which governs the ownership and transfer of the Friendly Provider’s interests in the PC, giving the MSO near-complete control over any change in ownership. As a baseline rule, no transfer of equity—whether voluntary, involuntary, or by operation of law—may occur without the MSO’s prior written consent, which may be granted or withheld in its sole discretion. The central mechanism is a set of transfer events (e.g., death, disability, termination of services, loss of licensure, legal disqualification, divorce, regulatory issues, or breach of agreements), upon which the Friendly Provider’s entire ownership interest is automatically and immediately transferred—without notice or further action—to an MSO–designated transferee. This transfer occurs by operation of contract, is effective upon the triggering event, regardless of administrative formalities and is typically priced at a nominal $1.00. In addition, the MSO typically holds a unilateral call option enabling it to trigger a forced transfer of all equity at any time by delivering notice, which itself constitutes a transfer event and results in the same automatic $1.00 transfer to its designated transferee. Following any such transfer, the Friendly Provider is automatically stripped of all ownership, governance roles, and economic rights in the PC. The agreement further reinforces this control structure through ongoing covenants that prohibit the Friendly Provider and the PC from taking a wide range of corporate, financial, and operational actions without MSO approval, ensuring that both ownership continuity and strategic direction remain fully aligned with the MSO’s interests. Provider Employment Agreement The provider employment agreement is often viewed as the most important by medical professionals who are divesting their interest in the PC. It includes terms and conditions regarding compensation and various restrictive covenants (i.e., non-competition, non-solicitation, confidentiality) that are critical to the clinician’s relationship with the PC. Legal counsel should ensure that the employment agreement also contains specific provisions or guarantees that the clinical professionals will maintain broad autonomy in all clinical decision-making and treatment of patients post-closing.3 Under no circumstances may the PC exercise any undue control over this aspect of their clinical professional employees’ job performance, and expressly stating as such within this agreement may help the arrangement survive future scrutiny.4 Clinical Liaison Agreement Lastly, the Clinical Liaison Agreement (“CLA”), typically entered into by the PE management entity and the Friendly Provider, is a frequently used means to outsource the development and implementation of the medico-administrative services of the PC. As a licensed professional in the state of operation, the Friendly Provider is the only party legally authorized to provide such services as the supervision of clinical staff, the development of clinical policies, and the leadership of patient-related programs and initiatives. The existence of such an arrangement is therefore imperative for the post-closing clinical management of the PC. As with the other agreements, the CLA should involve a reasonable term length and consideration for the Friendly Provider’s time and effort, and it should also protect the Friendly Provider’s necessary autonomy to perform their duties as outlined therein.5 Conclusion As scrutiny of “Friendly PC” transactions continues in light of consumer and legislative concerns over the affordability of health care services, the need for proper separation of clinical and non-clinical management post-closing is likely to be more important now than in years past. As such, PE buyers and their counsel must pay close attention to these frequently overlooked ancillary agreements to ensure the truly independent nature of their post-closing relationships. 1See Warren J. Apollon, D.M.D., P.C. v. OCA, Inc., 592 F. Supp. 2d 906; and OCA, Inc., et al . Kellyn Hodges, D.M.D., M.S., et al., 615 F. Supp. 2d 477. 2Id. 3The definitions of “Practice of Medicine” and “Practice of Dentistry” vary by state, however, guidance provided by the Pennsylvania Board of Medicine provides examples of the types of rights and privileges of licensed providers that must not be interfered with or influenced by unlicensed persons or entities. (See 63 P.S. § 422.1, et seq., 63 P.S. § 120, et seq.) 4Id. 5https://journalofethics.ama-assn.org/article/physician-engagement-private-equity-firms/2025-05
June 15, 2026
Healthcare
The CMS ACCESS Model and FDA TEMPO Pilot: Outcome‑Based Payments and Digital Health Innovation
The Centers for Medicare & Medicaid Services’ ("CMS") Advancing Chronic Care with Effective, Scalable Solutions ("ACCESS") Model is a Center for Medicare and Medicaid Innovation ("CMMI") initiative testing outcome-aligned payments ("OAP") tied to measurable improvements in clinical and patient-reported outcomes for Medicare Part B providers. The Food & Drug Administration’s ("FDA") Technology-Enabled Meaningful Patient Outcomes ("TEMPO") pilot program is aligned with and runs concurrently with ACCESS, creating a digital-health technology for Medicare and supporting the introduction of new digital-health technologies so they can be used to support the measurable outcomes for ACCESS. It is important to note that although technology is a crucial component of these models, care delivery remains the core of the model, with digital tools positioned as enablers rather than substitutes. All ACCESS participants must be Medicare Part B enrolled and in good standing, with no flexibility on this requirement. Participants must also designate a Medicare-enrolled medical director responsible for clinical oversight and patient safety. For many digital-health companies, enrolling as a Medicare provider or supplier could represent a significant shift in compliance requirements, including a commitment to ongoing compliance with state and federal laws, as well as heightened fraud, waste, and abuse risks associated with federal healthcare programs. It is likely that CMS may favor ACCESS applicants with prior patient volume, including Medicare-eligible populations, and geographic reach, particularly those that demonstrate operational readiness and the ability to scale. Participation in ACCESS requires full accountability across clinical tracks and comorbidities. Those organizations which participate must be able to manage all conditions within each selected track and report required clinical data, emphasizing “whole person care” and guideline-based management to account for the fact that many chronic conditions are comorbid and occur in the same beneficiary. Participants must also be able to escalate care when necessary, which CMS frames as a patient-safety feature of the model. ACCESS's payment structure introduces substantive downside risk and favors financially stable organizations by providing quarterly, per-beneficiary payments during a 12-month care delivery period, but only 50% of the OAP is paid upfront. The remaining 50% is withheld and subject to reconciliation. During the reconciliation period, CMS will apply a downward adjustment to the withheld amount based on the larger of: Clinical-outcomes performance (up to a 50% reduction of the full OAP), or Substitute-spend impacts (up to a 25% reduction of the full OAP). This structure allows CMS to support care delivery with predictable payments while maintaining accountability for outcomes and spending. Due to the payment structure, CMS is likely to favor applicants that can absorb the associated financial risk. Under TEMPO, manufacturers may request temporary FDA enforcement discretion for certain regulatory requirements when devices are used in ACCESS, which could allow some digital-health devices to be used within the model prior to full FDA authorization. The FDA is contemplating discretion related to premarket authorization and certain investigational device exemption, informed consent, or institutional review board requirements, but has not indicated that such discretion would extend to core device controls such as quality-system or adverse-event reporting obligations. Manufacturers may email the FDA to express interest, identify their device’s current regulatory status, and specify which requirements from which they are seeking relief. Participation is limited to 10 United States-based manufacturers per clinical track and is only available to manufacturers with devices in the four clinical access areas. Manufacturers must collect and share real-world data with the FDA during the pilot.
April 7, 2026
Healthcare
Telehealth Access for Medicare Patients: Consolidated Appropriations Act Extends Key Policies
Healthcare providers that rely on telehealth to serve Medicare patients can continue to do so as a result of an extension of the Medicare telehealth rules that were originally implemented during the COVID-19 Public Health Emergency (“COVID”). On February 3, 2026, the Consolidated Appropriations Act, 2026, H.R. 7148 was signed into law and, among other features, extends key components of the emergency telehealth requirements and will continue to allow for increased provider eligibility, remote care from home, and relaxed site-of-service, all rules upon which providers have extensively relied since COVID. CMS extended these rules in order to provide greater flexibility and remote health care access. Providers should be aware that this extension will only last through December 31, 2027, unless Congress puts a permanent solution in place.
February 17, 2026
Healthcare
Doctors Review Solicitation
Disclaimer: This content is provided for general informational purposes only and does not constitute legal advice. Laws and regulations governing healthcare marketing, patient reviews, and professional conduct vary by jurisdiction and may change over time. You should consult a qualified healthcare attorney regarding your specific circumstances before taking action. Doctors review solicitation is a common search for healthcare providers who want to understand how they can legally encourage patient reviews without crossing ethical or legal lines. In our experience, physicians and medical practices often know reviews matter for prospective patients and local search results, but they’re unsure what federal and state laws actually allow when soliciting reviews or asking patients to leave feedback. In this blog, we’ll break down how doctors can request patient reviews, what the Consumer Review Fairness Act means for medical practices, and why review gating, patient incentives, and incentivizing reviews can create legal risk. We’ll also cover best practices for responding to negative reviews, encouraging satisfied patients to write reviews across multiple channels, and using reviews as a compliant marketing tool that supports patient trust and informed healthcare choices. What is Doctors Review Solicitation? Doctors review solicitation refers to how physicians and healthcare providers encourage patients to leave reviews or provide patient feedback about their experience with a medical practice. In our experience, this usually involves review requests sent after an appointment. It could be asking patients to leave reviews on Google, a clinic website, or through satisfaction surveys. The aim of this is for prospective patients to better understand the patient experience and quality of care. However, doctors review solicitation isn’t as simple as asking for more reviews. Healthcare practices must navigate federal and state laws, ethical guidelines, and industry standards that prohibit undue influence, review gating, or offering patient incentives in exchange for positive reviews. For instance, if a pediatric practice only asks satisfied patients to write reviews while filtering out negative reviews, that review process could raise concerns under the Consumer Review Fairness Act and state laws. We’ve seen many patients rely on online reviews as a deciding factor when making healthcare choices, but we’ve also represented medical practices facing scrutiny for soliciting reviews the wrong way. The key is encouraging patients to leave feedback, whether positive or negative, carefully. These reviews should be done transparently, and without influencing what they say. It ensures the reviews remain trustworthy for other patients and safe for healthcare providers to use as social proof. Legal Guidelines for Doctors Review Solicitation In our experience, doctors review solicit questions usually come up because healthcare providers understand that referrals from other doctors and from patients are essential to growing a successful practice. Today, however, referrals don’t just happen through word of mouth. Many patients now rely on online reviews, testimonials, and social proof across Google, clinic websites, and other platforms when making healthcare choices. The reality is that higher ratings and positive reviews often become a deciding factor for prospective patients, especially in competitive local search results. At the same time, doctors review solicitation is a regulated activity governed by both federal and state laws. Healthcare providers must comply with HIPAA, FTC regulations, and other ethical guidelines that protect patient privacy and prevent deceptive practices. For instance, even encouraging patients to leave reviews must be done carefully to avoid revealing protected health information or exerting undue influence over what patients say. As Michael Cohen often explains: “Reviews can absolutely help a medical practice grow, but the moment a physician pressures a patient, offers incentives, or restricts honest feedback, the legal risk outweighs the marketing benefit.” One major legal framework is the Consumer Review Fairness Act (CRFA), enforced by the Federal Trade Commission. The CRFA was enacted to ensure patients cannot be sued, penalized, or threatened for leaving negative reviews or honest patient feedback. In practice, this means medical practices cannot restrict a patient’s ability to write reviews, impose fees for poor reviews, or claim ownership over a patient’s online feedback, regardless of whether that feedback is positive or negative. We’ve seen real-world examples where practices crossed the line by offering patient incentives, filtering reviews through review gating, or asking only satisfied patients to leave feedback. These impermissible solicitation practices can trigger FTC enforcement, fines, and even scrutiny from state medical boards. By contrast, permissible practices include neutral review requests sent to all patients, transparent review processes, and respect for the patient’s perspective, without steering outcomes or suppressing poor reviews. To reduce risk, we recommend healthcare practices focus on best practices for compliance. We advise that you should obtain informed consent before using testimonials, train staff on how to discuss reviews appropriately, and avoid responding to negative reviews in ways that confirm patient identity. Working with experienced healthcare compliance counsel can help ensure your online reputation management efforts support patient satisfaction, protect patient privacy, and keep your practice on the right side of federal and state laws. The Consumer Review Fairness Act (CRFA) In our experience, the Consumer Review Fairness Act (CRFA) is one of the most misunderstood laws affecting doctors review solicitation and online reputation management for healthcare practices. The CRFA was enacted to protect patients and consumers by ensuring they can write reviews without fear of being sued, penalized, or silenced. At the same time, the law also protects medical practices that operate fairly and earn positive reviews based on quality care, not incentives or legal threats. The CRFA was passed after reports that some businesses, including healthcare practices, used contracts allowing them to punish patients for posting poor reviews. Today, the CRFA protects online reviews, social media posts, uploaded photos, videos, and written evaluations from a patient’s perspective. As enforced by the Federal Trade Commission, the law makes it illegal for any medical practice to use contract provisions that restrict a patient’s ability to write reviews, impose penalties or fees for negative reviews, or require patients to give up intellectual property rights in their feedback. As Michael Cohen often advises clients: “The CRFA draws a clear line as patients must be free to share their honest experience. Any attempt to control, punish, or contract around reviews creates immediate legal exposure for healthcare providers.” That said, the CRFA does allow healthcare practices to remove or prohibit reviews when they have control over the platform and the content crosses certain boundaries. For example, reviews may be restricted if they contain confidential or private information, are libelous or abusive, include discriminatory or obscene language, are unrelated to the services provided, or are demonstrably false. Importantly, a negative patient experience alone does not make a review misleading. Violations of the CRFA can be treated like other FTC actions involving unfair or deceptive practices, which means fines, enforcement actions, and reputational damage are real risks. We regularly recommend that healthcare providers have a skilled healthcare lawyer review contracts, intake forms, website terms, and review policies. The FTC’s Endorsement Guidelines The FTC has its own set of endorsement guidelines that health practices need to understand. Failure to follow the guidelines may lead to an FTC complaint for unfair practices of deceptive practices. At their core, the guidelines require disclosure of any relationship that could affect how consumers evaluate a review. For example, if a testimonial comes from an employee, a relative of a physician, or a patient who received anything of value, that connection must be clearly disclosed. Without disclosure, even a genuine positive review can become legally misleading. Healthcare practices should review several key endorsement questions with a healthcare lawyer, including when disclosures are required, how disclosures should appear, whether testimonials reflect a typical patient experience, and what responsibility the practice has for statements made on social media. This applies not just to physicians, but to clinics, dentists, chiropractors, mental health providers, and healthcare businesses using reviews as a marketing tool. The FTC allows practices to ask patients about their experiences and to quote those comments in advertising, as long as patients are not given a reason to expect compensation before providing feedback. Paying a patient or offering a benefit after feedback is given may be permissible, but only if the relationship is disclosed. Offering discounts or gifts in advance for “good reviews,” however, is generally a bad idea because it incentivizes positive feedback and undermines the credibility of the endorsement. The same rule applies across platforms. If someone receives a free or discounted product or service in exchange for a review, even on just one website, that relationship must be disclosed everywhere the endorsement appears. From the FTC’s perspective, patients and consumers have the right to expect reviews are based on merit, not incentives. We recommend healthcare practices take a conservative approach, document their review process, and seek legal guidance to ensure endorsements enhance trust rather than create compliance risk. The FTC guidelines are set forth in a series of Questions and Answers. A few examples follow: Can my company contact patients/customers and interview them about their experience about the practice’s services or the company’s products? Can the company ask the patient/customer to be allowed to quote the evaluations in their ads? Yes. According to the Federal Trade Commission, healthcare practices may contact patients or customers to ask about their experience and may request permission to quote those comments in ads, testimonials, or on a website. We recommend making these requests neutral and optional so patients don’t feel pressured and informed consent is clear. Can the business pay the patient for using their endorsements? The answer is that it depends. A healthcare practice cannot give a patient any reason to expect compensation or another benefit before they provide their comments. Once feedback has already been given, payment may be possible, but only if the relationship is clearly disclosed. In our experience, even suggesting upfront that comments might be used in advertising can imply a benefit and create compliance concerns. Can “I tell people that if they say good things about my business on Yelp or Etsy, I’ll give them a discount on items they buy through my website?” Generally, this is a bad idea. A discount is an incentive to offer a positive review. If a discount is being offered, the discount should be clear and verifiable that the provider or company told the patient/consumer that whenever the patient or consumer posts their comments the posting should also disclose the discount or other benefit. One verifiable method is to inform the patient that the health provider will examine the site to see if the disclosure was indeed provided and that the discount is conditioned on the company seeing the disclosure on the site. “A company is giving me a free product to review on one particular website or social media platform. They say that if I voluntarily review it on another site or on a different social media platform, I don’t need to make any disclosures. Is that true?” Yes. If a reviewer receives anything of value, the connection must be disclosed everywhere the endorsement appears. It doesn’t matter how the benefit was delivered or where the first review was posted. From the FTC’s perspective, readers have the right to know whether a review reflects merit or an incentive. Additional FTC Guideline Issues Many compliance problems don’t come from whether a healthcare practice solicits reviews, but how those reviews and disclosures are presented. The FTC makes it clear that disclosures are only effective if patients and consumers actually see them. For example, placing a disclosure at the bottom of a webpage or on a separate page entirely does little to inform readers if the review or testimonial appears front and center. We recommend disclosures appear immediately next to the review so the patient’s perspective is fully understood. The FTC also draws firm lines around honesty and authenticity. Endorsers cannot review a service or product they haven’t actually used, and they cannot provide positive reviews if they know the care or service was poor. In healthcare, this matters because misleading endorsements can influence healthcare choices and undermine patient trust. From the FTC’s viewpoint, a glowing testimonial that isn’t grounded in real patient experience is just as problematic as a false claim. Paid spokespeople and professional endorsers may be used, but only with clear disclosure that they are being compensated. The same applies to employees. If a staff member posts a review saying, “This clinic provides excellent care,” the FTC requires that their employment relationship be disclosed. Without that transparency, the endorsement may be considered deceptive, even if the statement is true. We’ve seen practices receive FTC warning letters simply because they overlooked these details. That’s why we recommend healthcare providers work with experienced healthcare compliance counsel before posting, soliciting, or responding to endorsements. A proactive review of your review process can help prevent enforcement actions, forced content removal, fines, and long-term damage to your online reputation. Additional Solicitation Issues Doctors And Health Companies Need To Consider Doctors review solicitation becomes far more complex once you move beyond basic FTC rules and start considering ethics codes, patient vulnerability, and healthcare-specific laws. That’s why we always recommend physicians and healthcare companies review solicitation strategies with a skilled healthcare lawyer before encouraging patients to leave reviews or testimonials. Professional ethics codes play a major role and can vary based on the type of treatment and where services are provided. Some medical boards and specialty organizations allow endorsements only if they are honest and fully disclosed, while others discourage or restrict endorsements altogether. Even when incentives are disclosed, certain practices consider testimonials inconsistent with ethical guidelines, which can expose providers to discipline beyond federal enforcement. Mental health providers face heightened risk. Organizations such as the American Psychological Association and the National Association of Social Workers generally disapprove of soliciting reviews or testimonials from current therapy clients. These patients may feel pressured to leave positive feedback out of fear it could affect their care, making solicitation especially sensitive and potentially unethical. Referral laws also matter. Under the Stark Law and the Anti-Kickback Statute (AKS), healthcare providers must be careful when using testimonials from referring physicians or business partners. In many cases, a safer alternative or parallel strategy is using peer or professional testimonials that do not involve referrals or anything of value exchanged, reducing the risk of improper influence. HIPAA compliance remains a constant concern. Engaging with patients on third-party platforms like Facebook, Yelp, or Google carries the risk of inadvertently disclosing protected health information. Even acknowledging someone as a patient in a response to a review can create exposure. We recommend strict internal policies that limit who can respond to reviews and how those responses are framed. Finally, consent is critical. While many patients are willing to share positive feedback, healthcare providers should obtain written permission before using endorsements in marketing materials. Most reviews live on third-party platforms, and a balanced mix of feedback often builds more credibility than only glowing testimonials. As a general rule, the most effective way to earn positive reviews is still providing quality, caring, and timely service. Effective Strategies for Soliciting Doctor Reviews In our experience, the most effective doctors review solicit strategies are simple, consistent, and compliant. Healthcare providers can request reviews both verbally and in writing, as long as the request is neutral and pressure-free. For example, a front-desk staff member might say, “We value patient feedback. If you’re comfortable, you’re welcome to leave a review about your experience,” while written review requests can be sent via email, text message, or a QR code on a checkout card or clinic website. We recommend training staff to keep these requests optional and uniform for all patients to avoid undue influence. Timing matters. Review requests are generally most appropriate after treatment is completed or at a natural pause in care, when patients have had enough experience to offer meaningful feedback. For instance, asking for reviews immediately after a complex or ongoing treatment, especially in mental health or therapy settings, can feel coercive. Typically, post-visit follow-ups or discharge communications strike the right balance between relevance and respect for the patient’s perspective. Technology can make review collection easier and more consistent. Many healthcare practices use automated review requests through online platforms, satisfaction surveys, or tools like Press Ganey to gather patient feedback across multiple channels. These systems help create a steady, compliant stream of reviews without staff selectively choosing who receives a request. From an online reputation management standpoint, this also improves practice visibility in local search results and search engines like Google. What we strongly caution against is incentivizing reviews. Offering discounts, gift cards, or other benefits even with good intentions can violate FTC rules, ethical guidelines, and state laws. As Michael Cohen often advises clients: “The safest review strategy is one that doesn’t try to shape the outcome. The moment incentives enter the picture, the legal risk usually outweighs any marketing benefit.” Finally, practices should focus on encouraging honest and balanced feedback, not just positive reviews. Prospective patients often trust practices more when they see a realistic mix of experiences, and regulators look favorably on review processes that are transparent and fair. In our experience, healthcare providers who prioritize quality care, patient satisfaction, and ethical review requests tend to build stronger trust and a more resilient online reputation over time. Navigating HIPAA Privacy Concerns in Review Solicitation HIPAA does allow healthcare practices to ask patients to leave reviews, but the request must be neutral and must not include any identifiable health information. For example, sending a generic post-visit email asking patients to leave feedback on Google or via a QR code is typically compliant. By contrast, responding to a poor review by saying, “We explained your treatment plan during your visit,” would likely be non-compliant because it confirms patient status. According to the U.S. Department of Health and Human Services Office for Civil Rights (OCR), HIPAA violations can result in civil penalties ranging from $137 to over $68,000 per violation, with annual caps exceeding $2 million, depending on the level of negligence. To share patient testimonials or detailed reviews, healthcare providers must obtain HIPAA-compliant written authorization that clearly explains what information will be shared, where it will appear (such as a website or social media), and that the patient has the right to revoke consent. We recommend keeping authorization forms separate from intake paperwork and documenting consent carefully, especially for small practices without dedicated compliance teams. From a risk management standpoint, the safest approach is consistency and restraint. Train staff never to reference care details in review responses, limit who can respond publicly, and audit review practices regularly. A compliant tactic is asking all patients to leave feedback without filtering or review gating; a non-compliant tactic is acknowledging a reviewer as a patient or discussing diagnosis or service details. When handled carefully, review solicitation can support patient trust and online reputation—without exposing your practice to HIPAA violations or regulatory scrutiny. Common Legal Pitfalls in Doctors Review Solicitation and How to Avoid Them Below is a compliance-focused table we often use with healthcare providers to spot high-risk review practices early and correct them before they become regulatory or reputational problems. Legal Pitfall Why It’s a Problem Real-World Example How to Avoid It Fee-Splitting Risks Offering anything of value tied to referrals or reviews may violate state fee-splitting rules, the Anti-Kickback Statute, or professional licensing laws. A clinic offers gift cards to patients who leave Google reviews that lead to new patients. Avoid tying reviews to compensation or referrals. Review arrangements carefully, especially where money, discounts, or benefits are involved. For more context, see our guidance on fee-splitting and healthcare marketing compliance. Misrepresenting Reviews or Physician Credentials Editing, fabricating, or exaggerating reviews or overstating physician credentials can be considered deceptive advertising under FTC and state laws. A practice highlights only 5-star reviews while suppressing negative reviews or lists a physician as “board-certified” when they are not. Use reviews as written, avoid cherry-picking through review gating, and verify all credentials before publishing testimonials or marketing content. Violating Employment or Contractor Agreements Soliciting reviews from employees or contractors without disclosures may breach contracts or FTC endorsement rules. A staff member posts glowing reviews without disclosing they work at the clinic. Train employees on disclosure requirements and review employment agreements before encouraging staff endorsements. Unlawful Incentives or Coercion Incentivizing reviews or pressuring patients can create undue influence and violate ethical guidelines, FTC rules, and state laws. A doctor tells patients that positive reviews “help keep the practice open” or affect staff bonuses. Make review requests neutral, optional, and uniform. Never offer incentives or imply consequences tied to patient feedback. Failure to Document Review Solicitation Policies Lack of documentation makes it difficult to defend against complaints, audits, or board inquiries. A practice cannot explain why some patients were asked to leave reviews and others were not. Maintain written solicitation policies, train staff consistently, and document review processes to show good-faith compliance. Best Practices For Responding To Negative Reviews A thoughtful, compliant response can protect patient trust, improve online reputation management, and even influence prospective patients who are evaluating healthcare choices. Below is the step-by-step methodology we recommend: Step 1: Pause and assess the risk before responding Before replying, determine whether the review poses HIPAA, ethical, or legal concerns. Make sure the response will not confirm the reviewer is a patient or disclose any patient information. We recommend designating a trained staff member or compliance lead to review negative reviews first, especially for small practices without legal teams. Step 2: Acknowledge the feedback without confirming patient status A compliant response should be calm, respectful, and neutral. For example: “We strive to provide quality care and value all feedback.” This shows other patients and potential patients that the practice takes concerns seriously, without violating privacy or escalating conflict. Step 3: Never argue facts or correct the patient publicly From the patient’s perspective, arguing details almost always backfires. Even if a review is inaccurate, responding defensively can damage patient satisfaction and credibility. We’ve seen many patients trust a measured response more than a perfect rating, because it signals professionalism and transparency. Step 4: Invite the conversation offline Encourage the reviewer to contact the clinic directly to discuss concerns. This shows accountability while keeping sensitive details out of public view. For instance: “We welcome the opportunity to discuss your concerns directly. Please contact our office.” This approach aligns with ethical guidelines and reduces the risk of further poor reviews. Step 5: Document and analyze the feedback internally Negative reviews are often valuable patient feedback. Track themes such as wait times, communication issues, or service breakdowns, and use them to improve the patient experience. Practices that treat reviews as a learning tool often see fewer poor reviews over time and a more consistent stream of balanced feedback. Step 6: Avoid incentives, threats, or review removal pressure Never pressure patients to edit or delete reviews, and do not offer incentives to offset negative feedback. These actions can violate federal and state laws, including FTC rules and the Consumer Review Fairness Act, and may be seen as undue influence. Step 7: Stay consistent across multiple channels Patients find reviews on Google, healthcare directories, and social platforms. Make sure responses follow the same compliant tone everywhere. Consistency improves practice visibility, supports social proof, and reassures new patients that the practice handles concerns responsibly. Need Help With Doctors Review Solicitation? In our experience, most doctors review solicitation issues don’t come from bad intent, but from uncertainty about what the law actually allows. Between federal and state laws, HIPAA privacy rules, FTC regulations, and professional ethics standards, even well-run healthcare practices can unintentionally expose themselves to compliance risk when encouraging patient reviews. Taking a proactive and compliant approach allows reviews to remain a valuable marketing tool while protecting patient trust and patient privacy. When review requests, responses to negative reviews, and use of testimonials are handled carefully, healthcare providers can support patient satisfaction, improve practice visibility in search engines, and build credibility with prospective patients. FAQs Below, we address the most common questions we hear from physicians, clinics, and healthcare practices trying to encourage patient reviews carefully and compliantly. What Are The Legal Risks of Soliciting Patient Reviews? The main risks include HIPAA privacy violations, FTC enforcement for deceptive practices, and penalties under laws like the Consumer Review Fairness Act if reviews are restricted or manipulated. We’ve seen medical practices face fines, board scrutiny, and reputational damage simply for using review gating or incentivizing reviews without proper disclosures. How Can Doctors Ask For Reviews Without Violating HIPAA? Doctors may ask patients to leave reviews as long as the request is neutral and does not include or disclose any patient information. We recommend generic post-visit review requests and extreme care when responding to negative reviews so patient status or treatment details are never confirmed. Are Incentives Allowed For Patient Reviews? In most cases, offering incentives creates high risk because it can be seen as undue influence and violate FTC rules or ethical guidelines. In our experience, even small discounts or gifts can undermine trust and should generally be avoided by healthcare providers. What Should Be Included In A Patient Review Solicitation Policy? A strong policy should outline who can request reviews, when requests are sent, how reviews are collected across multiple channels, and how staff should respond to feedback. We also recommend documenting HIPAA safeguards, prohibiting review gating, and banning patient incentives to reduce compliance risk. How Do Federal Laws Affect Online Review Solicitation? Federal laws like HIPAA, the FTC Act, and the Consumer Review Fairness Act directly shape how medical practices can solicit, use, and respond to online reviews. These laws are designed to protect patient privacy, ensure honest feedback, and prevent healthcare providers from suppressing negative reviews or misleading prospective patients.
January 14, 2026
Healthcare
Understanding the Medicare Whistleblower Reward Process
The medicare whistleblower reward allows eligible individuals to receive financial compensation for reporting Medicare fraud under the federal False Claims Act. To qualify, a whistleblower must provide original, non-public information about false claims or healthcare fraud, properly report it through a qui tam lawsuit, and meet specific eligibility criteria before any reward is paid. In this post, we will explain how the Medicare whistleblower reward process works, who is eligible to participate, and how to report Medicare fraud correctly. We will also cover how rewards are calculated, what happens during a government investigation, and why legal guidance can make a significant difference in the outcome of a whistleblower case. What is a Medicare Whistleblower Reward? A Medicare whistleblower reward is a financial incentive paid to individuals who report Medicare fraud that leads to a successful government recovery under the federal False Claims Act. Its purpose is to encourage insiders within the healthcare industry to come forward with information about false claims, submitting false claims, Medicare overpayments, and other forms of healthcare fraud that drain taxpayer dollars and misuse Medicare funds. This reward program plays an important role in protecting government healthcare programs by uncovering fraud that would otherwise remain hidden from regulators and government agencies. Individuals who qualify as healthcare whistleblowers are often those closest to the misconduct, such as employees, independent contractors, billing specialists, compliance officers, and business partners of a healthcare provider or drug company. Because of their roles, these insiders may have direct knowledge of fraudulent billing, misrepresentation of designated health services, falsified medical records, or improper claims submitted to the Medicare program. In many cases, whistleblowers are the first to identify patterns of fraud and abuse, making them essential to the federal government’s efforts to detect and stop Medicare fraud and Medicaid fraud across the healthcare industry. How Does The Medicare Whistleblower Reward Work? Medicare whistleblower rewards are governed by the False Claims Act, specifically its qui tam provisions, which allow a private person to file a qui tam lawsuit on behalf of the federal government. When a whistleblower or his or her legal representative files a qui tam case, the complaint is submitted under seal, giving the government time to conduct a confidential government investigation. If the case results in a financial recovery, the whistleblower may receive a monetary reward based on a percentage of the funds the government collects. Under the federal False Claims Act, rewards typically range from 15% to 30% of the total recovery, depending on several relevant factors. These include the quality and originality of the information provided, the whistleblower’s level of involvement in reporting fraud, whether the government intervenes in the case, and the overall impact of the disclosure on stopping committing Medicare fraud. In intervention cases where the federal government takes over the prosecution, the reward is usually lower but more certain. On the other hand, in non-intervention cases where the whistleblower’s legal team pursues the case, the potential reward may be higher but comes with more risk. Through qui tam actions, whistleblowers play a big role in uncovering false claims act cases, enforcing federal law, and holding healthcare entities accountable for civil monetary penalties, damages, and interest owed back to the Medicare program. This system not only rewards individuals who step forward but also strengthens oversight across government programs and reinforces integrity within the healthcare industry. What Are The Key Requirements For A Medicare Whistleblower Reward? To qualify for a Medicare whistleblower reward, a person must meet strict eligibility requirements set out under the federal False Claims Act. First, the whistleblower must provide valid information based on his or her knowledge that shows a healthcare provider, drug company, or other entity is committing Medicare fraud or submitting false claims to the Medicare program. The information must involve fraud against government healthcare programs and be detailed enough to support a government investigation and potential financial recovery. A critical requirement is that the disclosure must involve fraud that is not publicly known. If the allegations have already been reported through the media, court records, or prior government agencies’ actions, the whistleblower may be barred due to prior public disclosure, even if the information is accurate. To preserve eligibility, the individual, or his or her legal representative, must properly file a qui tam lawsuit under the False Claims Act, following all procedural rules, including submitting the claim under seal and providing requested identifying information, such as a recent address supplied and other relevant personal information when required. There are also important disqualifiers. Typically, individuals who meaningfully participated in the fraud, failed to follow proper reporting procedures, or attempted to report misconduct outside the qui tam provision risk being classified as excluded individuals or otherwise ineligible. Eligibility mistakes can permanently eliminate reward potential, regardless of how serious the fraud may be, which is why working with experienced legal counsel early in the process is essential. What Types of Medicare Fraud Can Lead to a Reward? Many forms of Medicare fraud and healthcare fraud may qualify for a whistleblower reward if they involve false claims submitted to the federal government. Common scenarios include billing for services not provided, upcoding to receive higher reimbursement, misrepresenting designated health services, and seeking payment for unnecessary procedures that are not medically justified. These practices often result in Medicare overpayments and misuse of Medicare funds intended for legitimate patient care. Other qualifying misconduct includes kickback arrangements, improper referrals, falsified or altered medical records, and fraudulent billing by allied health providers such as physical therapy practices or diagnostic service providers. When properly reported, these violations may lead to the government imposing civil monetary penalties, recovering actual damages, and requiring responsible parties to pay interest on improperly obtained funds. How Does The Process For Obtaining A Medicare Whistleblower Reward Work? The process for obtaining a Medicare whistleblower reward begins with the proper reporting of fraud based on credible, non-public information. Each step must be handled correctly, as procedural errors can affect eligibility and potential financial compensation. Identification and Reporting of Medicare Fraud: The process begins when a person discovers credible, non-public information showing Medicare fraud, Medicaid fraud, or other forms of healthcare fraud. This may involve a healthcare provider or allied health professional submitting false claims, engaging in improper billing, or causing Medicare overpayments. Since whistleblowers are often insiders, their knowledge and access to billing records or medical documentation are important to detecting fraud within government healthcare programs. Filing a Qui Tam Lawsuit Under the False Claims Act: To preserve eligibility for a reward, the whistleblower must file a qui tam lawsuit in federal court under the False Claims Act. The complaint is filed under seal, which means it is kept confidential while the federal government evaluates the allegations. At this point, the whistleblower may need to give their name, a recent address, and other personal information, as well as supporting documents like medical records or billing data. Government Investigation and Involvement: After the lawsuit is filed, the federal government looks into the case. This usually involves the Department of Justice, the Inspector General, or other government agencies. After reviewing the evidence, the government decides whether it will intervene in the qui tam case or decline to take over prosecution. Government intervention typically strengthens the case but may affect the percentage of the whistleblower’s reward. Resolution of the Case and Determination of the Reward: If the case results in a settlement or court judgment, the federal government calculates the whistleblower’s reward. The reward represents a percentage of the financial recovery the government collects, including actual damages, civil monetary penalties, and interest repaid to Medicare funds. Once approved, the government pays rewards to eligible whistleblowers, recognizing their role in protecting taxpayer dollars and enforcing compliance within the healthcare industry. What Are The Benefits Of A Medicare Whistleblower Reward? A Medicare whistleblower reward offers several important benefits to individuals who report Medicare fraud and other forms of healthcare fraud under the federal False Claims Act. One of the most significant advantages is the financial reward, which allows eligible whistleblowers to receive a monetary reward based on a percentage of the financial recovery the federal government collects. These rewards compensate individuals for the time, risk, and professional impact that may result from reporting fraud, while also ensuring that misused Medicare funds are returned to protect taxpayer dollars. Beyond financial compensation, whistleblowers make a meaningful contribution to fraud detection within government healthcare programs. By exposing false claims, Medicare overpayments, and billing abuses, healthcare whistleblowers play a critical role in strengthening accountability across the healthcare industry. Their actions help prevent ongoing misuse of public resources and promote ethical conduct among healthcare providers, allied health professionals, and organizations participating in the Medicare program. Another key benefit is protection under the law. The False Claims Act includes whistleblower protection provisions that prohibit retaliation by employers against individuals who lawfully report fraud. These legal safeguards are designed to protect a whistleblower’s job, career, and professional standing, particularly when acting within or outside his or her official duties, and reinforce the importance of lawful and responsible reporting. Common Challenges and Solutions Despite the benefits, whistleblowers often face significant challenges when pursuing a Medicare whistleblower reward. One common challenge is the fear of retaliation, especially for employees or contractors who work closely with the healthcare provider involved in the misconduct. While this concern is valid, the False Claims Act provides protections that prohibit retaliation, and reporting through a sealed qui tam lawsuit helps maintain confidentiality during the early stages of the case. Another major challenge is navigating the legal complexities of False Claims Act cases. The rules governing qui tam provisions, eligibility requirements, and reward calculations are highly technical, and procedural mistakes can permanently disqualify an otherwise valid claim. This complexity makes it essential to understand the process before filing and to avoid informal or improper reporting methods. For these reasons, it is necessary to seek legal counsel. Experienced whistleblower attorneys can help assess eligibility, gather valid information, properly file the lawsuit, communicate with government agencies, and protect the whistleblower’s rights throughout the government investigation. With knowledgeable legal representation, whistleblowers are better positioned to overcome challenges and pursue adequate compensation while minimizing personal and professional risk. Risks of Reporting Medicare Fraud Without a Lawyer Reporting Medicare fraud without proper legal guidance can expose whistleblowers to serious legal, professional, and financial risks. One of the most significant dangers is retaliation, especially for employees, contractors, or allied health professionals acting within or outside his or her official duties. Without understanding whistleblower protections under federal law, individuals may face termination, demotion, or professional isolation before safeguards are properly in place. Another major risk is the loss of confidentiality. Informal reporting to a supervisor, a local law enforcement agency, or the wrong government agency can strip a whistleblower of protections available under the False Claims Act. If information is made public or shared inappropriately, the whistleblower may be barred from receiving a Medicare whistleblower reward because they had already made the information public. This is true even if the fraud is very serious. Procedural errors also pose a serious threat. Failing to file a qui tam lawsuit correctly, missing deadlines, or submitting incomplete or incorrect requested identifying information, such as an unknown address or inaccurate relevant personal information, can lead to dismissal of an otherwise valid claim. These mistakes can result in reduced or entirely denied monetary rewards, regardless of the financial recovery ultimately obtained by the federal government. How a Medicare Whistleblower Attorney Protects You A Medicare whistleblower attorney plays an important role in protecting individuals throughout the reporting process. First, the attorney evaluates whether the whistleblower’s information qualifies as valid information under the qui tam provision of the federal False Claims Act, including whether the fraud involves submitting false claims, Medicare overpayments, or other forms of healthcare fraud affecting government healthcare programs. The attorney then ensures the proper filing of a qui tam case under seal, preserving confidentiality while the government investigation proceeds. This includes preparing the complaint, organizing supporting evidence such as billing records or medical records, and ensuring all required disclosures are accurate and complete. Throughout the process, legal counsel serves as the primary point of communication with the federal government, the Inspector General, and other government agencies. By managing these interactions, the attorney helps protect the whistleblower’s identity, avoid misstatements, and respond appropriately if the government intervenes or declines the case. Finally, an experienced whistleblower attorney works to maximize potential rewards by positioning the case to support a higher percentage payout based on relevant factors, such as the whistleblower’s contribution to fraud detection and the outcome of False Claims Act cases. This structured legal protection allows whistleblowers to report fraud responsibly while safeguarding their rights, careers, and eligibility for adequate compensation. Claim Your Medicare Whistleblower Reward! Reporting Medicare fraud is a serious legal step that requires careful planning, proper procedures, and a clear understanding of your rights under the federal False Claims Act. As this post has explained, eligibility for a Medicare whistleblower reward depends on providing valid, non-public information, following strict filing requirements, and avoiding mistakes that can permanently eliminate reward eligibility. When done correctly, whistleblowers play a vital role in stopping healthcare fraud, protecting taxpayer dollars, and strengthening accountability across government healthcare programs. Since the process involves confidential filings, government investigations, and complex legal standards, experienced legal guidance is essential. Working with a knowledgeable Medicare whistleblower attorney helps protect your confidentiality, reduce professional and financial risk, and position your claim to maximize potential compensation while ensuring full compliance with federal law. FAQs The following FAQs address common questions individuals have about reporting Medicare fraud, eligibility for a Medicare whistleblower reward, and how the process works under federal law. How Can I Report Medicare Fraud And Potentially Receive a Reward? To qualify for a Medicare whistleblower reward, you must report fraud by filing a qui tam lawsuit under the federal False Claims Act rather than making an informal complaint. Working with legal counsel helps ensure the information is reported correctly and preserves eligibility for a monetary reward. What Are The Steps To Becoming a Medicare Whistleblower? The process typically involves gathering valid, non-public information, filing a sealed qui tam lawsuit, and cooperating with a government investigation. If the case results in a financial recovery, the federal government determines whether the whistleblower is eligible for a reward. How Long Does A Medicare Whistleblower Case Take? Medicare whistleblower cases can take several years due to the length of government investigations and court proceedings. The timeline depends on factors such as the complexity of the fraud, whether the government intervenes, and how the case is resolved. Are Medicare Whistleblower Rewards Taxable? In most cases, Medicare whistleblower rewards are considered taxable income under federal law. Whistleblowers should consult a qualified tax professional to understand their specific tax obligations. Can I Remain Anonymous As a Whistleblower? Whistleblower cases are filed under seal, which protects confidentiality during the investigation phase, but complete anonymity is not guaranteed. Your identity may eventually be disclosed if the case proceeds, which is why legal guidance is important. What Percentage Do Whistleblowers Typically Receive? Under the False Claims Act, whistleblowers generally receive between 15% and 30% of the government’s financial recovery. The exact percentage depends on factors such as the whistleblower’s contribution and whether the government intervenes in the case.
December 22, 2025
Healthcare
Navigating False Claim Act in Healthcare Litigation
The False Claims Act in healthcare is one of the most powerful federal statutes used to combat fraud, waste, and abuse involving federal healthcare programs, such as Medicare and Medicaid. Originally enacted during the American Civil War, the False Claims Act (FCA) allows the government to pursue anyone who knowingly submits a false or fraudulent claim for federal funds. The method could be through fraudulent billing schemes, medically unnecessary services, or false statements that lead to a fraudulent claim paid by the government. This post will cover what qualifies as a false claim and how healthcare organizations can prevent submitting false claims. It will also break down key enforcement mechanisms used by the federal government, ensuring you understand both the risks and the best practices for compliance. What is the False Claim Act in Healthcare? The False Claims Act in healthcare is a powerful federal statute that allows the federal government to hold individuals and entities accountable when they knowingly submit, cause to be submitted, or participate in submitting false or fraudulent claims for payment from federal healthcare programs, including Medicare and Medicaid. The False Claims Act (FCA) says that a provider is liable not only when they knowingly commit fraud, but also when they submit claims for health care services with actual knowledge, deliberate ignorance, or reckless disregard of the truth. This broad standard is designed to ensure that health care providers, suppliers, and organizations maintain honesty and integrity when requesting government funds. Historically, the FCA was enacted during the American Civil War to address widespread fraud by contractors who were selling defective goods to the Union Army. Over time, the Act evolved to become a central tool for tackling healthcare fraud, especially as federal spending on health insurance and healthcare programs increased. Today, the federal False Claims Act plays a crucial role in safeguarding the integrity of programs like Medicare, Medicaid, TRICARE, and other federal health care systems. It does this by empowering the government and private citizens to report fraud, file lawsuits on behalf of the government, and recover funds lost to fraudulent activities. Its significance in the healthcare sector cannot be overstated, as it helps combat schemes involving false records, false statements, fraudulent billing, medically unnecessary services, controlled substances, durable medical equipment, and more. A key component of the FCA is the whistleblower provision known as the qui tam mechanism. These qui tam provisions allow a private individual, known as a qui tam relator, to file a qui tam lawsuit against offenders. If the relator wins, they may get a share of the government’s damages. This makes it more likely that people will report fraud in the healthcare sector. This system has become one of the most effective tools for combating healthcare fraud, expanding enforcement efforts by agencies such as Health and Human Services, the Inspector General, and the Attorney General. Common Types of False Claims in Healthcare Below are the most common categories of false claims in healthcare: Upcoding and Unbundling: Upcoding occurs when a provider submits claims for a higher-paying service than what was actually performed, while unbundling involves billing separately for services that should be billed as a package. Both practices result in false or fraudulent claims being submitted for inflated payments. Billing for Services Not Rendered: This includes submitting claims for medical services or items such as durable medical equipment that were never provided. Any false claim paid by the government is actionable under the FCA. Billing for Medically Unnecessary Services: Providers violate the FCA when they bill for medically unnecessary services, treatments, diagnostic tests, or procedures that do not meet recognized clinical standards. Kickbacks and Stark Law Violations: Offering or accepting patient referrals in exchange for money or benefits violates the Anti-Kickback Statute, while improper financial relationships with physicians can violate the Stark Law. Claims associated with these violations are considered false or fraudulent under the FCA because they taint the integrity of the billing process. Misrepresenting Patient Diagnoses: Submitting claims that contain false or exaggerated diagnoses constitutes a fraudulent claim and can trigger significant liability. For example, altering a patient’s diagnosis to qualify for higher reimbursement False Certification of Compliance: Healthcare entities may face FCA liability for falsely certifying compliance with federal or state laws, such as the Social Security Act, state laws, or program participation requirements. This includes situations where providers knowingly make false attestations to qualify for federal funds. Pharmaceutical and Device Manufacturer Fraud: Drug and device manufacturers may be liable for causing the submission of false claims by engaging in unlawful marketing practices, improper financial relationships, or providing false information about the safety or effectiveness of controlled substances or medical devices. How Does the False Claim Act Impact Healthcare Providers? The False Claims Act (FCA) has a profound impact on the daily operations, compliance obligations, and risk management strategies of health care providers. Since the Act prohibits the submission of any false or fraudulent claim for payment from federal healthcare programs, providers must ensure absolute accuracy when they submit claims for health care services, medical supplies, or durable medical equipment. Generally, even unintentional errors may be scrutinized if they reflect actual knowledge, deliberate ignorance, or reckless disregard of billing rules. As a result, healthcare organizations invest heavily in compliance programs, staff training, documentation systems, and internal audits to prevent healthcare fraud, fraudulent billing schemes, and false statements that could trigger government action. The FCA also influences relationships with third parties. Providers must carefully manage vendor arrangements, physician contracts, and patient referrals to avoid violations of the Anti-Kickback Statute or Stark Law, as related claims can be deemed false or fraudulent. Moreover, because private citizens can act as whistleblowers under the qui tam provisions, any employee, contractor, or billing specialist may become a qui tam relator if they observe fraudulent activities and file a qui tam lawsuit on behalf of the government. This creates strong incentives for providers to maintain ethical, transparent operations to avoid exposure to costly FCA investigations. Violations of the federal False Claims Act carry some of the most severe consequences in U.S. healthcare law. Providers found liable may face civil monetary penalties for each false claim submitted, often multiplied across hundreds or thousands of claims. In addition, the government can recover treble damages, meaning three times the amount of the government’s damages resulting from a fraudulent claim paid. These penalties can be financially devastating for hospitals, clinics, physician practices, laboratories, and device suppliers. For more serious wrongdoing, especially if it involves deliberate fraud, providers might also face criminal penalties, which can include large fines or even jail time if their actions are considered a federal crime. Additional repercussions may include exclusion from federal health care programs, reputational damage, loss of licensure, and ongoing compliance oversight by government agencies such as the Department of Health and Human Services, the Inspector General, or the Attorney General. What Measures are Taken to Comply with the Act? Staff training is one of the most essential compliance measures. Providers must ensure that all staff, including clinicians, coders, billing teams, and administrative personnel, understand the requirements of the federal False Claims Act, the dangers of submitting false claims, and the significance of avoiding false records or false statements. Education helps teams recognize activities that may create liability, such as upcoding, billing for medically unnecessary services, or mishandling reverse false claims. Given the FCA’s broad reach, ongoing training reduces human error and strengthens the organization’s defenses against allegations of fraudulent activities. Accurate documentation is another cornerstone of FCA compliance. Healthcare providers must maintain complete, consistent, and truthful patient records. This includes diagnoses, treatments, and coding details to justify every claim. If an organization misrepresents a patient’s diagnosis or doesn’t support billed services, the claims can be called false. This can lead to civil monetary penalties, repayment obligations, or, in serious cases, criminal penalties. Strong record-keeping practices also protect providers in the event of audits by Health and Human Services, the Inspector General, or other government agencies. Similarly, routine internal audits help identify discrepancies before they evolve into legal issues. Through self-monitoring, organizations can detect improper patterns such as inconsistent billing, missing documentation, or potential fraudulent billing schemes and correct them proactively. When potential violations are discovered early, providers can take corrective action, return government funds if necessary, and avoid escalating issues into costly enforcement actions. Healthcare entities benefit from promoting open communication and ethical conduct throughout their organizations. This includes maintaining policies that support employees who report fraud or raise concerns internally, reducing the likelihood that issues escalate into qui tam actions filed by a private individual or private citizens acting as qui tam relators on behalf of the government. A proactive compliance culture significantly reduces risk and strengthens trust across the organization. Why is Understanding the False Claim Act in Healthcare Important? The federal False Claims Act plays a critical role in promoting ethical conduct, transparency, and accountability across the healthcare industry. By imposing strict consequences for submitting false claims, the Act encourages health care providers to uphold high standards of integrity when treating patients, documenting care, and billing federal health care programs. This ensures that government funds are used appropriately and that patients receive necessary, high-quality care, not inflated, unnecessary, or fraudulent services. Importantly, the FCA also protects patients’ rights by discouraging practices such as fraudulent billing schemes, unnecessary testing, and improper patient referrals that may compromise clinical decision-making. It safeguards the healthcare system from corruption by enabling private citizens through qui tam provisions to act as qui tam relators and file lawsuits on behalf of the government when they discover false records, false statements, or fraudulent conduct. These actions help expose wrongdoing, deter misconduct, and ensure that affected patients and the public are shielded from deceptive or harmful practices. Through its enforcement mechanisms and collaboration with agencies like Health and Human Services, the Inspector General, and the Attorney General, the FCA strengthens the healthcare ecosystem by ensuring accountability at every level. Ultimately, the Act promotes a culture of compliance and ethical responsibility, helping maintain patient trust while ensuring that health care programs deliver fair, lawful, and medically appropriate services. How FCA Investigations Typically Begin Investigations under the False Claims Act (FCA) can begin in several ways, all of which aim to identify false or fraudulent claims submitted to federal healthcare programs such as Medicare and Medicaid. Since the Act holds people responsible for knowingly making or submitting false claims, there are several ways to catch these mistakes early. Here’s how it typically works: Whistleblower Reports (Qui Tam Lawsuits): One of the most common triggers for FCA investigations is a whistleblower. This person could often be an employee, contractor, or private individual who observes fraudulent activities and files a qui tam lawsuit on behalf of the government. Under the FCA’s qui tam provisions, this person becomes a qui tam relator, providing evidence of misconduct, such as fraudulent billing schemes, false statements, false records, reverse false claims, or submitting false claims for health care services or durable medical equipment. These reports frequently uncover issues that internal systems may miss, making whistleblowers a critical force in detecting healthcare fraud. Government Audits and Data Analytics: Agencies like Health and Human Services, the Inspector General, and the Attorney General use sophisticated data analytics to detect anomalies in claims patterns. Unusual billing behavior may prompt a deeper audit. These audits help the government find out if a provider knowingly broke billing rules, was careless about them, or ignored them on purpose, which could lead to larger investigations and hefty fines. Patient Complaints or Internal Compliance Reviews: FCA cases may also originate from patient complaints, especially when individuals notice incorrect billing or charges for services never rendered. Likewise, many healthcare organizations uncover issues during internal audits or compliance reviews. If an internal review finds false claims, wrong patient referrals, or violations of the Anti-Kickback Statute, providers usually have to report it themselves and pay back any incorrect government funds to prevent the problem from becoming a bigger legal issue. The Role of Whistleblowers in Healthcare Fraud Detection Whistleblowers play an essential role in detecting health care fraud and protecting the integrity of federal health care programs. Under the FCA’s whistleblower protections, individuals with firsthand knowledge of wrongdoing can file confidential qui tam actions, enabling the government to investigate allegations of false claims, fraudulent billing schemes, or violations involving the Social Security Act, a patient’s diagnosis, or billing for medically unnecessary services. If the case succeeds, whistleblowers may receive a percentage of the government’s damages, creating a strong incentive to report fraud that might otherwise remain hidden. The FCA also protects whistleblowers from retaliation such as termination, harassment, or demotion, ensuring they can safely disclose concerns about misconduct without fear. These protections strengthen accountability within healthcare organizations and support ethical behavior across clinical, billing, and administrative teams. Internal accountability is critical because when organizations encourage staff to raise compliance concerns early, they reduce exposure to civil monetary penalties, criminal penalties, and costly FCA investigations. Whistleblowers help combat fraud, protect patients, and uphold transparency and integrity across the healthcare system. Ready to Fight False Claims? As healthcare regulations grow more complex, understanding and complying with the False Claims Act is essential for protecting your organization from costly penalties and reputational damage. Whether you suspect false or fraudulent claims, are navigating an FCA investigation, or simply want to strengthen your compliance program, having experienced legal counsel on your side can make all the difference. You don’t have to confront these risks alone, as expert guidance can help you take informed action, protect your rights, and ensure your practice operates with integrity. FAQs Below are some of the most common questions providers ask about penalties, reporting, compliance costs, and avoiding errors: What Are The Penalties For Violating The False Claim in Healthcare? Penalties can include substantial civil monetary penalties for each false claim, repayment of improperly obtained government funds, and treble damages. In severe cases involving intentional fraud, providers may also face criminal penalties, exclusion from federal healthcare programs, and reputational harm. How Can Healthcare Providers Report False Claims Act violations? Providers can report suspected violations internally through their organization’s compliance program or directly to government agencies such as Health and Human Services or the Inspector General. They may also report misconduct through whistleblower provisions, which allow private citizens to file qui tam actions on behalf of the government. How Can Healthcare Organizations Effectively Analyze The Costs Associated With False Claim Act Compliance? Healthcare organizations can evaluate costs by assessing training expenses, auditing resources, legal fees, and technology tools needed for accurate documentation and monitoring. Regular cost-benefit reviews help determine whether current compliance measures effectively minimize risks associated with false or fraudulent claims and FCA investigations. What Are Common Mistakes That Healthcare Providers Make In Relation To The False Claims Act? Common mistakes include upcoding, billing for medically unnecessary services, poor documentation, improper patient referrals, and failing to correct errors that may lead to false claims. These issues can be avoided by implementing strong compliance programs, conducting regular audits, maintaining accurate records, and providing continuous staff training to prevent fraudulent activities.
December 15, 2025
Healthcare
Stark Law Examples
Stark law examples often involve situations where physicians make prohibited physician referrals for designated health services (DHS) to an entity with which they or an immediate family member have a financial relationship. These violations happen under the physician self-referral law, which means that even if a doctor didn’t mean to break the law, they can still face serious penalties like fines, having to pay back money, and possible legal issues for billing Medicare and Medicaid for the services they referred. Healthcare providers need to know that self-referrals, wrong payment deals, and illegal financial incentives can lead to Stark Law violations in federal health care programs. In this post, you’ll learn what the Stark Law is and review real-world Stark Law violation examples. You’ll also learn how healthcare organizations can remain compliant with the Stark Law. What Is Stark Law? The Stark Law, also known as the physician self-referral law, is a federal law that prohibits physicians from referring Medicare or Medicaid patients to healthcare entities that provide designated health services (DHS) if the physician or an immediate family member has a financial relationship with that entity. At its core, the law was created to prevent financial conflicts of interest that could compromise patient care, fuel overutilization, or inflate costs within federal health care programs. Since it is a strict liability statute, healthcare providers can face civil monetary penalties, repayment obligations, and even False Claims Act exposure simply for violating the law, regardless of intent. This makes understanding the Stark Law essential for physicians, group practices, and other healthcare providers who routinely engage in physician referrals, compensation arrangements, or other financial dealings. The primary purpose of the Stark Law is to ensure that medical referrals are based solely on patient needs, not on financial incentives or ownership interests. By restricting self-referrals for services like clinical laboratory services, imaging services, outpatient hospital services, physical therapy services, occupational therapy services, radiation therapy services, durable medical equipment, and other forms of DHS, the law protects patients from unnecessary tests or procedures that could occur when financial gain is involved. This promotes transparency, safeguards Medicare and Medicaid beneficiaries, and ensures that healthcare compliance remains at the forefront of clinical practice. For patients, this translates into more ethical care, reduced exposure to excessive testing, and greater trust in the medical recommendations they receive. Although the Stark Law is strict, it also contains numerous exceptions designed to support legitimate medical practice operations. Common exceptions include the in-office ancillary services exception, rental of office space at fair market value, bona fide employment arrangements, and certain personal services agreements. These exceptions exist because not all financial relationships are harmful, and many are necessary for day-to-day medical operations. Still, for an exception to apply, the arrangement must meet detailed regulatory requirements, be commercially reasonable, and avoid compensation tied to the volume or value of referrals. This is why healthcare practices must carefully structure their financial arrangements, document them thoroughly, and regularly review them for compliance. What Are Some Examples of Stark Law Violations? Stark Law violations often arise when hospitals, physician groups, or healthcare entities create financial relationships that improperly influence physician referrals for designated health services (DHS) billed to Medicare or Medicaid. Over the years, multiple hospital systems and large healthcare organizations have faced significant penalties, sometimes reaching hundreds of millions of dollars, for engaging in practices that violated federal law, encouraged self-referral, or disguised financial incentives. These real-world cases illustrate how serious Stark Law enforcement can be and serve as powerful reminders of why healthcare providers must maintain strict healthcare compliance when structuring compensation arrangements, investment interests, or office space leases. One of the most well-known examples is the Tuomey Healthcare System case, where the South Carolina hospital was found liable for entering into improper employment contracts with physicians. Tuomey paid doctors compensation that far exceeded fair market value and tied the payments to the volume and value of referred services. Tuomey deemed the arrangement an unlawful financial relationship because these physicians performed outpatient procedures at its facilities, which qualified as DHS services. The result was one of the largest Stark Law judgments in history, with Tuomey facing penalties of more than $237 million, ultimately leading to a settlement of around $72 million and the system’s sale to a larger hospital group. Another major case involved Halifax Health, a Florida-based hospital chain accused of paying physicians bonuses that were tied directly to the revenue generated from their patient referrals. This breached the prohibition on self-referral and improper compensation arrangements. The federal government argued that Halifax knowingly submitted false claims to Medicare for DHS referred by physicians with whom they had illegal financial relationships. The hospital system paid $85 million to settle the case, demonstrating the substantial financial risk for organizations that fail to comply with Stark Law regulations. The Adventist Health System faced one of the most significant settlements related to the Stark Law and the Anti-Kickback Statute, paying more than $118 million for improper financial arrangements with physicians. Investigators found that the hospital chain awarded bonuses and benefits that were not aligned with fair market value and were linked to the volume of Medicare and Medicaid patient referrals. The organization also provided free office space and equipment, another prohibited form of financial incentive. To resolve the issue, Adventist overhauled its internal compliance processes, terminated problematic compensation structures, and invested in stricter auditing procedures. In the case of North Broward Hospital District, the Florida hospital system faced allegations of paying physicians compensation that far exceeded fair market value and was tied to referral volume. These agreements resulted in millions of dollars in improper claims submitted to federal healthcare programs. The hospital agreed to a $69.5 million settlement and was required to implement a multi-year Corporate Integrity Agreement to strengthen its internal compliance and auditing processes. William Beaumont Hospital, a Detroit-based health system, also violated Stark Law by providing physicians with below-market office space, excessive compensation, and other benefits intended to incentivize referrals for DHS, such as imaging, radiation therapy, and inpatient and outpatient hospital procedures. The hospital paid $84.5 million to settle the allegations. Part of the resolution included a complete restructuring of physician compensation and enhanced training around physician self-referral prohibitions. Another notable case involved Atrium Health (formerly Carolinas HealthCare System), which allegedly engaged in compensation arrangements that financially rewarded physicians based on referrals. Although the case did not result in a formal admission of wrongdoing, the hospital agreed to a $6.5 million settlement. As part of its corrective measures, Atrium strengthened its oversight of physician contracts, updated compliance procedures, and improved documentation for all financial arrangements involving medical providers. The Dignity Health system (operating hospitals across multiple states) faced allegations that it submitted Medicare claims for patients referred by physicians involved in improper financial arrangements. These arrangements included free or reduced-cost office space, payments above fair market value, and personal services agreements that did not comply with Stark Law’s strict requirements. The system paid $36.7 million to settle the matter. Following the settlement, Dignity Health instituted new policies for evaluating compensation, monitoring referrals, and ensuring adherence to federal healthcare program regulations. These case studies reveal the wide range of behaviors that can lead to Stark Law exposure, including excessive physician compensation, non–fair market value leases, free office space, financial incentives tied to referral volume, and personal services arrangements that fail to meet regulatory standards. Each organization faced severe financial penalties, operational disruption, and long-term compliance obligations as part of its resolution. For hospitals, group practices, and healthcare entities, these examples show how easily improper financial arrangements can trigger liability and highlight the importance of seeking legal guidance when structuring physician relationships or billing Medicare or Medicaid beneficiaries. How Can Healthcare Providers Stay Compliant with Stark Law? The first step toward compliance is fully understanding the core elements of the law. This includes knowing what qualifies as a prohibited financial arrangement, which services fall under DHS, how referrals work, and when exceptions apply. Practices must be able to identify risky compensation structures, improper investment interests, or office space arrangements that might be interpreted as financial incentives to refer Medicare or Medicaid patients. Legal guidance plays a central role in maintaining compliance. Consulting with experienced healthcare attorneys ensures that any financial arrangement meets fair market value standards and complies with detailed regulatory requirements. Attorneys can also help structure new agreements, review existing contracts, and analyze whether an exception applies to protect the practice from liability. Legal review is especially important when expanding a practice, creating joint ventures, or revising compensation arrangements for referring physicians, as these are the areas where most Stark Law violations occur. Regular internal audits are another essential safeguard for healthcare providers seeking to avoid compliance issues. Audits help identify improper billing patterns, unusual referral trends, and questionable financial relationships before they trigger federal scrutiny. By reviewing documentation, verifying the commercial reasonableness of compensation, and confirming that all financial arrangements align with regulatory standards, healthcare organizations can resolve problems early and avoid submitting claims that violate the Stark Law. Many hospital systems also engage external compliance experts to perform independent reviews, ensuring objectivity and deeper insight into potential risk areas. Employee training is equally important in preventing violations. Physicians, administrators, billing teams, and compliance officers must understand the basics of the Stark Law, the risks associated with improper referrals, and their responsibilities in safeguarding the organization. Training programs should cover key definitions, common pitfalls, documentation requirements, and the importance of avoiding any arrangement that links compensation to the volume or value of referring Medicare or Medicaid beneficiaries. When staff members understand how everyday decisions impact compliance, they are better equipped to identify red flags, escalate concerns, and support a culture of transparency and accountability. What Are the Challenges and Solutions in Stark Law Compliance? One of the most significant challenges healthcare providers face is the sheer complexity of the Stark Law. The statute includes highly technical definitions, strict requirements for financial relationships, and numerous exceptions that must be met exactly. Such complexity makes it difficult for providers to determine whether compensation arrangements, office space leases, or investment interests meet regulatory standards. The solution is to rely heavily on experienced legal advice. Healthcare attorneys can interpret the law, evaluate agreements, and ensure that each relationship involving designated health services (DHS) complies with fair market value and commercial reasonableness requirements. Their guidance helps prevent unintentional Stark Law violations and provides clarity amid complicated federal rules. Another common challenge is the cost of compliance, especially for smaller practices or growing healthcare organizations. Regular audits, contract reviews, and employee oversight can be expensive, and many providers feel stretched by the administrative burden. However, the practical solution is to implement targeted, risk-based compliance programs. Rather than auditing everything at once, providers can prioritize high-risk arrangements such as physician compensation, personal services contracts, or office space agreements linked to Medicare or Medicaid patients. This focused approach reduces costs while still ensuring strong compliance, helping providers avoid massive civil monetary penalties and repayment demands that could financially devastate the practice. Healthcare providers also struggle with the constant evolution of healthcare business models, which can unintentionally create noncompliant financial arrangements. As practices add new service lines, expand group practices, or adopt incentive-based compensation, they often overlook how these changes affect physician referrals and DHS billing. The solution is ongoing compliance monitoring and regular audits. By reviewing new contracts, evaluating updated compensation models, and continually monitoring referral data, organizations can catch potential violations early. This ensures that changes in practice structure remain aligned with federal healthcare program requirements and do not inadvertently trigger liability. Finally, many organizations face the challenge of inadequate employee training. Physicians, billing teams, and administrative staff often misunderstand what the Stark Law prohibits or fail to recognize the red flags associated with self-referral risks. The solution is to establish robust, routine training programs that explain key concepts such as fair market value, prohibited financial incentives, DHS categories, and the strict liability nature of the law. When staff members are well-trained, they become an extension of the compliance team, spotting issues before they escalate and supporting a culture of ethical practice. What Are Some Best Practices for Stark Law Compliance? One of the most effective best practices is appointing a dedicated compliance officer who oversees all Stark-related matters. This individual is responsible for reviewing physician contracts, evaluating financial relationships, monitoring designated health services (DHS), and ensuring that every arrangement meets fair market value and commercial reasonableness standards. A knowledgeable compliance officer acts as the central point of accountability, ensuring the organization stays ahead of regulatory changes and identifying potential risks before they escalate into Stark Law violations. Another essential best practice is investing in ongoing training for physicians, administrators, billing personnel, and operational staff. Because the Stark Law is a strict liability statute, even simple misunderstandings can lead to improper physician referrals or non-compliant financial relationships. Training programs should clearly explain the categories of DHS, the types of financial arrangements that trigger scrutiny, the requirements for exceptions, and the risks associated with submitting improper claims to Medicare or Medicaid. When employees understand the consequences, such as civil monetary penalties, False Claims Act exposure, and repayment obligations, they are far more vigilant in maintaining strong healthcare compliance in everyday decision-making. Regular internal and external audits also play an important role in preventing violations. Auditing enables healthcare providers to verify that compensation arrangements remain compliant, office space leases are properly documented, and any updates to financial relationships are aligned with regulatory requirements. Audits can find patterns in referrals that seem suspicious, spot contracts that lack important details, or show that compensation has gone above fair market value because of changes in operations. By resolving these issues early, organizations avoid submitting problematic claims to federal healthcare programs and significantly reduce the risk of enforcement actions. In addition to audits and training, adopting clear policies and standardized procedures helps streamline compliance. Having clear written guidelines for checking new contracts, documenting fairness in business deals, approving doctor pay, and reviewing DHS services helps keep things consistent throughout the organization. These policies make it easier for staff to follow proper steps, reduce confusion, and ensure that every financial relationship undergoes the same level of scrutiny. Ready to Challenge Stark Law? Understanding Stark Law violations empowers healthcare providers, administrators, and professionals to recognize when their rights may have been compromised and when improper financial relationships may have placed them at risk. By examining real Stark Law examples and learning how compliance works, you position yourself to protect your practice, strengthen your decision-making, and demand fairness within federal healthcare programs. Knowledge is your first line of defense, whether you are navigating complex financial arrangements, questioning a referral pattern, or facing potential penalties. FAQs Understanding how the Stark Law works can help healthcare providers, administrators, and compliance teams avoid costly mistakes and navigate the complex rules governing physician referrals and designated health services. Below are answers to common questions about Stark Law examples: What Are Some Common Stark Law Examples in Healthcare? Common Stark Law examples include physicians referring Medicare or Medicaid patients for clinical laboratory services, imaging services, or outpatient hospital services provided by entities in which they or an immediate family member have a financial relationship. Violations also occur when compensation arrangements exceed fair market value or reward physicians based on referral volume. How Do Stark Law Regulations Impact Physician Referrals? Stark Law regulations restrict physicians from making referrals for designated health services to entities where they have financial ties unless an exception applies. This ensures referrals are based on patient need rather than financial incentives, protecting federal health care programs from fraud and abuse. What Are Common Cost Analysis And Budgeting Considerations When Dealing With Stark Law Examples? Healthcare providers must account for the cost of legal reviews, fair market value assessments, compliance audits, and documentation processes when budgeting for Stark Law compliance. These investments help prevent expensive penalties, repayment obligations, and False Claims Act exposure associated with Stark Law violations. What Are Some Common Mistakes Healthcare Providers Make In Relation To Stark Law Examples? Common mistakes include entering into compensation arrangements without verifying fair market value, failing to document financial relationships properly, and overlooking whether an exception applies. Providers also risk violations by not conducting regular audits or offering adequate employee training on Stark Law requirements.
December 9, 2025
Healthcare
How California AB 1501 Affects Physician Assistants
California AB 1501 is a new law that directly affects how Physician Assistants (PAs) practice, tightening supervision rules, reshaping scope-of-practice requirements, and increasing compliance expectations for healthcare organizations. It matters because it changes how clinics, medical groups, MSOs, and businesses structure their operational and contractual relationships with PAs. It creates both new obligations and potential legal risks if not handled correctly. In this post, you’ll learn what AB 1501 is, how it impacts Physician Assistants, what it means for healthcare organizations and MSOs, and the steps businesses should take now to stay compliant. What Is California AB 1501? California AB 1501 is an assembly bill that updates and clarifies various statutory provisions governing physician assistants, physicians and surgeons, and Doctors of Podiatric Medicine. The bill provides a definition and background for multiple regulatory updates, including how the Medical Practice Act, Physician Assistant Practice Act, and Professions Code reference licensing, fees, and cross-agency procedures. In terms of legislative history, AB 1501 was introduced to correct outdated cross-references, streamline administrative processes within the Medical Board of California, Podiatric Medical Board, and Physician Assistant Board, and support future policy discussions involving allied health professionals, physician associates, and PA practice. Lawmakers proposed it to modernize statutory language, reduce confusion, and ensure that procedures established under existing law accurately align with the responsibilities of the Department of Consumer Affairs and its boards subject to these updates. AB 1501 changes parts of the California Medical Practice Act to make the rules about license renewal fees, endorsement fees, and application fees clearer, while also fixing problems like how duplicate renewal receipts and wall certificates are handled, and how initial license fees are paid. It also aligns the Podiatric Medical Practice Act with updated terminology around the certificate to practice podiatric medicine, ensuring that podiatrists and PAs follow current statutory procedures. This revision is important for physicians, PAs, and podiatrists because it affects how they comply with licensing timelines, respond to credentialing organization verification requests, structure practice agreements, and operate within designated practice settings. The updates ultimately help regulate physician assistants and podiatrists more clearly and support accessible health care across California. What Are the Key Provisions of AB 1501? California AB 1501 provides a detailed summary of administrative and regulatory updates affecting multiple boards, including revisions to biennial license renewal fee requirements, biennial renewal fee timing, and the way a physician assistant license expires under existing law. It explains the rules for submitting renewal applications, lists the fees for getting a duplicate renewal receipt, changes the fees for endorsements, and updates how applicants can pass certain exams from physician assistant or podiatric training programs. The bill also clarifies which parts of the Business and Professions Code apply to each board and corrects cross-references that previously caused procedural inconsistencies. Reporting requirements include improved documentation steps for renewal applications submitted in electronic form, a specification of the duplicate certificate or duplicate wall certificate process, and updated terminology for credential verification and insurance reimbursement structure references. Restrictions and obligations involve maintaining current practice agreement structures, meeting deadlines for renewal fee submission, and ensuring compliance with medical practice and podiatric medicine regulations. Examples of activities covered include submitting the above-described renewal applications, managing fees applicable to PA and podiatric licenses, meeting continuing compliance obligations for practicing podiatric medicine, and ensuring that provisions render accurate implementation across health professions. How Does AB 1501 Affect Managed Service Organizations (MSOs)? Management Service Organizations (MSOs) play a major role in California healthcare by supporting physicians, PAs, and podiatrists in administrative areas such as billing, compliance, contracting, and operational infrastructure. While AB 1501 does not directly regulate MSOs, it influences how MSOs structure services around licensing, credentialing, physician assistant practice oversight, and compliance with the Medical Practice Act applicable to supervising physicians and ancillary providers. Because MSOs often help with onboarding clinicians, maintaining practice agreements, and verifying that statutory provisions establish procedures for compliance, updates in AB 1501 can change how MSOs manage documentation, renewal cycles, and reporting for PAs and podiatrists. Operational impacts include ensuring correct handling of initial license fee data, updating renewal tracking to reflect the revised biennial renewal fee schedule, supporting practices with duplicate renewal receipt requests, and aligning MSO processes with updated Business and Professions Code language. MSOs must also ensure that practice agreement structures stay compliant with regulations on in-home health evaluations, medical practice settings, and supervision requirements under existing law that authorizes and regulates physician assistants. Example scenarios: A clinic using an MSO fails to update its PA onboarding workflow to match the new AB 1501 verification steps. This will result in a compliance gap. An MSO correctly updates its license-tracking software to reflect updated expiration timelines and renewal fee requirements. This ensures seamless compliance for both PAs and podiatrists. A podiatric group supported by an MSO submits an outdated duplicate certificate form. Under AB 1501, this must now be handled electronically in alignment with updated procedures. How Does AB 1501 Change PA Supervision Ratios? Under the previous law, a supervising physician and surgeon could oversee no more than 4 physician assistants at one time, a limit defined within the Physician Assistant Practice Act and related Business and Professions Code provisions. California AB 1501 updates this rule by increasing the allowable supervision ratio to 8 PAs per supervising physician, aligning with evolving practice needs and supporting more accessible health care across clinical settings. This expanded ratio affects practice agreements, workflow structures, and how clinics organize PA practice across various medical practice settings, including podiatric practices when PAs support Doctors of Podiatric Medicine under legally permissible arrangements. With more PAs linked to each supervising physician, clinics must ensure that their practice agreement structures, electronic supervision documentation, and credentialing organization verification processes are all updated to meet existing law as amended by AB 1501. These changes matter for clinics, MSOs, and healthcare facilities because they allow more efficient staffing models, reduce bottlenecks in patient care, and support expanded use of allied health professionals. At the same time, facilities must maintain compliance with the revised supervision standards established by the Medical Board of California, the Physician Assistant Board, and any applicable provisions regulating podiatrists or ancillary providers. Ultimately, the new ratio enhances capacity, but only if organizations update their internal policies and workflows accordingly. How Are Physician Assistant Training Programs Affected? Under prior statutory provisions, the Physician Assistant Board had direct oversight over certain aspects of physician assistant training programs, including approval processes, specified fees, and regulatory requirements tied to PA education. Existing law required these training programs to meet board-established standards, pay endorsement fees or application fee amounts when applicable, and follow procedures that aligned with regulatory guidelines within the Professions Code. California AB 1501 removes several of these approval and fee requirements, eliminating outdated or duplicative obligations and clarifying that the Board no longer regulates these educational programs in the same manner. The bill also repeals unnecessary cross-references and provisions establishing fees that no longer serve administrative or policy needs, simplifying how training programs interface with the Board and the Department of Consumer Affairs. For PA educational institutions, these changes make it easier to handle paperwork, simplify processes, and give some responsibilities back to accrediting bodies instead of state boards that follow older rules. For trainees, the adjustments may mean a clearer, more direct pathway toward meeting examination requirements, completing clinical training, and applying for a physician assistant license without navigating outdated approval processes. The restructuring also helps inform future policy discussions about modernizing PA education while maintaining consistent training standards across the state. What Are the New PA License Fees Under AB 1501? California AB 1501 updates various fees for physician assistant licenses, replacing outdated statutory amounts with a new, standardized fee schedule. Under the new law, the application fee increases from $25 to $60, the initial license fee remains $250, and the biennial license renewal fee stays at $300. The law also raises the delinquency fee from $25 to $75 and increases the cost for letters of endorsement, verification, or good standing from $10 to $50, all now listed as specified fees under the Physician Assistant Board within the Business and Professions Code. AB 1501 further grants the Board expanded authority to increase fees in the future, with statutory ceilings allowing the application fee to rise up to $80 and both the initial license fee and renewal fee to increase up to $500 if necessary. These changes help cover the administrative costs required by current laws and make sure that physician assistants are properly regulated as healthcare professionals under the Medical Practice Act and Physician Assistant Practice Act. Practically, PAs and employers should budget for the higher upfront and processing fees, plan renewals proactively to avoid the increased $75 delinquency fee, and update internal compliance workflows. MSOs, credentialing teams, and clinics should also adjust onboarding procedures, insurance reimbursement structure documentation, and renewal-tracking systems to match the new fee schedule. How Has the PA License Renewal Process Changed? AB 1501 introduces procedural updates to the process for renewing physician assistant licenses, including expanded use of electronic forms or other Board-approved forms for renewal applications. This updates existing law, which previously relied on more rigid filing methods and did not clearly authorize the use of electronic submission formats within the Physician Assistant Board. A key change is the requirement that PA renewal applications include a legal verification under penalty of perjury, confirming that all information is true and complete. This aligns the PA renewal process with verification standards applied under the Medical Practice Act applicable to physicians and surgeons, increasing consistency across allied health professions and reducing ambiguity in statutory provisions. These updates simplify the renewal process by reducing paperwork, improving processing times, and helping ensure more accurate compliance documentation. At the same time, applicants must take the verification requirement seriously, as submitting incorrect information now creates a clearer enforcement pathway under the Business and Professions Code. Overall, AB 1501 aims to make PA renewals more efficient while strengthening accountability across all practice settings. How Does AB 1501 Affect Podiatric Medicine? AB 1501 introduces several updates to podiatric medicine, including modernized terminology, such as replacing outdated references to a “podiatric surgeon” with clearer language consistent with the Business and Professions Code. The bill also updates how Doctors of Podiatric Medicine (DPMs) are classified for reimbursement and practice status, ensuring that podiatric medicine shall align more closely with terminology used across the Medical Practice Act and related regulations. California AB 1501 removes older restrictions on maintaining certain exam records, correcting provisions establishing how the Podiatric Medical Board stores or receives examination results. The bill additionally adjusts fees related to podiatric certificates, such as duplicate certificates, duplicate renewal receipts, and endorsement fees, ensuring that applicable costs are consistent with other boards under the Department of Consumer Affairs. These updates simplify administrative processes for DPMs and help ensure that statutory provisions establish procedures that reflect current podiatric practice, training, and credentialing needs. What Other Changes Does AB 1501 Introduce for PAs and Podiatrists? California AB 1501 includes a broad range of technical corrections and cross-reference updates within both the Medical Practice Act and the Physician Assistant Practice Act, ensuring that references to PA practice, podiatric medicine, and supervising physicians are accurate and internally consistent. The bill supports a comprehensive review of practice agreement structures, replacing obsolete language, clarifying oversight responsibilities, and updating statutory provisions that regulate physician assistants and podiatrists across varying practice settings. It also reflects ongoing collaboration between the Legislature, the Medical Board of California, the Physician Assistant Board, and the Podiatric Medical Board, with the goal of improving clarity, addressing outdated statutory language, and informing future policy discussions. AB 1501 also includes updates related to state costs, including provisions that address when the state must reimburse local agencies or school districts for mandated expenses, though the bill concludes that certain updates impose no state-mandated program. These changes collectively streamline compliance for allied health professionals, support accessible health care, and modernize the structure of California law governing medical practice, podiatric medicine, and PA practice. What Do PAs and Physicians Need to Do to Comply? To comply with AB 1501, physician assistants, supervising physicians and surgeons, and clinics must first review the updated supervision ratios, which now allow physicians to supervise up to eight PAs instead of four, and update their practice agreements accordingly. Medical groups, MSOs, and podiatric practices must also fully integrate all new Board guidelines into their administrative workflow. Clinics should consult experienced healthcare attorneys to ensure that practice agreement structures, documentation requirements, and renewal procedures comply with the amended Medical Practice Act and Physician Assistant Practice Act. Physicians, PAs, and podiatrists must stay updated on ongoing board revisions related to AB 1501’s technical corrections and future policy discussions. Don’t Risk Non-Compliance – Our Experts Can Assist AB 1501 introduces sweeping updates affecting physician assistants, podiatrists, physicians, MSOs, and healthcare organizations across California. The law changes how clinical teams work and how healthcare businesses follow the rules by introducing new fees, licensing steps, supervision ratios, practice agreement requirements, and updates to the Medical Practice Act. With so many cross-reference changes, administrative updates, and Board-driven enforcement shifts, it’s essential for providers to ensure their policies, agreements, and procedures reflect current law. FAQs About California AB 1501 AB 1501 introduces several regulatory changes that impact physician assistants, podiatrists, physicians, MSOs, and healthcare organizations across California. These FAQs address the most common questions providers have as they navigate the new requirements. When Do The New PA Fee Changes Under AB 1501 Take Effect? The new fees become effective once the Physician Assistant Board formally updates and publishes its revised fee schedule under the authority granted by AB 1501. Until then, clinics should prepare for the new pricing and adjust budgeting and onboarding processes accordingly. How Does California AB 1501 Affect PA Supervision Ratios? AB 1501 increases the number of physician assistants a supervising physician may oversee from four to eight. This expanded ratio requires clinics to update practice agreements and ensure workflow systems reflect the new supervision limit. Does California AB 1501 Change How Podiatrists Are Classified For Reimbursement or Licensure? Yes, AB 1501 updates terminology and classification references for Doctors of Podiatric Medicine to improve alignment with medical and reimbursement structures. It also removes outdated exam-related restrictions and clarifies certain certificate fee requirements. Do MSOs Need To Change Their Compliance Processes Because of AB 1501? MSOs may need to update onboarding, documentation, and renewal systems to reflect the revised PA licensure fees, supervision rules, and administrative requirements. Ensuring internal compliance now helps prevent errors once enforcement of the new standards begins.
December 4, 2025
Healthcare
SB 1451 in California
SB 1451 is now in effect (as of January 1, 2025) and brings major updates for nurse practitioners and other health-care professionals. It broadens how clinical experience counts for 103 and 104 NPs, allows cumulative (even non-consecutive) hours over the past five years to qualify for their “transition-to-practice,” and clarifies disclosure and title-use rules (for example, restricting use of “MD,” “DO,” “Dr.,” or “physician/doctor” by non-physicians). This post will cover what SB 1451 does, who it impacts, and how it changes clinical-experience requirements and licensing regulations. It will also touch on disclosure and title-use rules, as well as what this means for independent practice in 2026 under the bill. What Does SB 1451 in California Cover? SB 1451 in California is a major update to the business and professions code, specifically modifying AB 890 to make it easier for nurse practitioners to obtain NP 103 and NP 104 certifications while ensuring that existing law continues to protect patients. The bill, effective January 1, 2025, clarifies the statutory provisions that establish procedures for how a nurse practitioner shall complete their transition to practice, how they may practice independently, and what disclosures they must provide when performing diagnostic and supportive services or interpreting clinical laboratory procedures. It also strengthens patient transparency rules by specifying that only a physician and surgeon with a valid and active license under the Medical Practice Act may use titles such as “doctor,” “Dr.,” “M.D.,” or “D.O.,” preventing misleading representations in any health care setting. SB 1451 updates the evaluation criteria used by the Board of Registered Nursing and the nurse practitioner advisory committee, including how national nurse practitioner certification, completed patient-specific training, and clinical and professional education are recognized. Since SB 1451 reshapes how the state defines qualified nurse practitioner clinical practice, understanding these changes is essential, especially for NPs preparing for the 2026 NP 104 application cycle, where compliance with revised standardized procedures and disclosure rules becomes mandatory. Who Is Affected by SB 1451 in California? SB 1451 affects both individuals and businesses, applying broadly across multiple licensed health professions regulated by the Department of Consumer Affairs. The most directly impacted group includes nurse practitioners, particularly those seeking NP 103 or NP 104 certification, practicing independently, or providing diagnostic and supportive services under the Nursing Practice Act. The law also affects licensed physicians, dental hygienists in alternative practice, licensed vocational nurses, structural pest control operators (for certain examination provisions), and any licensed health care provider whose scope overlaps with direct patient care or clinical laboratory interpretation. Businesses such as medical practices, professional corporations, clinics, dental practices, and entities with operating authority issued under state law must comply with updated requirements involving supervision, disclosure, national certifying body accreditation, and professional liability insurance. For California residents, SB 1451 enhances clarity around who is providing their care. This ensures that reasonable patients are not misled by titles, that practitioners hold current and valid certification, and that the state-mandated local program for licensing fees and renewals maintains public protection standards. How Has SB 1451 Changed Clinical Experience Requirements? One of the most important updates in SB 1451 is the way it redefines eligible clinical experience for NPs transitioning to independent practice. The bill allows NP 103 experience earned before January 1, 2021 to count toward the 4,600 hours required for NP 104, even if those hours were completed in different clinical and professional education settings. This is significant because it lets NPs combine experience across multiple approved population focuses, such as pediatrics, family practice, women’s health, physical and occupational therapy settings, or other direct patient care environments authorized by existing law. SB 1451 explains how the Board of Registered Nursing checks if a nurse practitioner meets the requirements for transitioning to practice, including whether their experience was gained with a licensed physician or through approved procedures that follow the Nursing Practice Act. The law also affects how national certifying body accredited programs, postgraduate training program approved pathways, and certification exams for nurse practitioners are assessed during application and renewal. Because eligibility may vary depending on job duties, health care setting, professional examination services, and whether the NP was practicing medicine or performing diagnostic services, applicants are strongly encouraged to consult legal experts to verify which hours qualify, especially for those preparing complex NP 104 applications for 2026, when SB 1451 standards will be fully enforced. What Are the New Disclosure Rules Under SB 1451? SB 1451 introduces important updates to the disclosure requirements that govern how a nurse practitioner shall communicate their professional status to patients, ensuring compliance with existing law and preventing any confusion with a physician and surgeon. Under the new statutory provisions, verbal notice is no longer required, simplifying how NPs deliver mandatory disclosures while still protecting the reasonable patient in any health care setting. Instead, NPs must now provide written notice stating they are not a physician, consistent with the Nursing Practice Act and the Medical Practice Act, and this written disclosure becomes part of the nurse practitioner clinical practice documentation reviewed by the Board of Registered Nursing and the nurse practitioner advisory committee. To support Spanish-speaking patients, SB 1451 expressly allows NPs to use the title “enfermera especializada”, avoiding misleading references such as “doctor,” “Dr.,” “M.D.,” or “D.O.,” which may only be used by a licensed physician and surgeon with a valid and active license. Nurse practitioners must also inform patients of their right to be seen by a physician, reinforcing existing law authorizing patients to request consultation or referral when appropriate. These new rules make communication standards clear and consistent, make professional titles less confusing, and make sure that diagnostic and supportive services, clinical laboratory procedures, and direct patient care activities are all done in a clear way. By complying fully with SB 1451’s disclosure requirements, nurse practitioners strengthen public trust, reduce legal exposure, satisfy state-mandated local program obligations tied to licensing and renewal, and streamline documentation needed for NP 103 or NP 104 certification, especially for those preparing applications for the 2026 independent practice cycle. What Are the Pros and Cons of NP 103 Certification? As existing law establishes requirements for national nurse practitioner certification, direct patient care, and clinical and professional education, employers and NPs must weigh both the operational benefits and regulatory considerations tied to NP 103 before advancing toward NP 104 independent practice. Pros The benefits of NP 103 certification extend beyond simple credentialing; this pathway strengthens nurse practitioner clinical practice under the Nursing Practice Act while helping healthcare teams operate more efficiently. SB 1451 California updates the statutory provisions that outline how nurse practitioners complete their transition to practice, allowing NP 103 to offer more structured autonomy within standardized procedures approved by the Board of Registered Nursing and informed by the nurse practitioner advisory committee. They include: Reduced physician oversight workload: Under existing law and the updated framework in SB 1451, NP 103 allows nurse practitioners performing diagnostic and supportive services or interpreting clinical laboratory procedures to carry out more functions without constant supervision. This lightens the workload for a licensed physician or surgeon, especially in areas where there aren’t enough dental or primary care professionals. Greater workflow flexibility: NP 103 certification expands what a nurse practitioner practicing under standardized procedures may perform, including clinical expertise across physical and occupational therapy environments, completed patient-specific training, or postgraduate training program approved pathways. This flexibility helps streamline workflow for practices holding business or entity licenses under the Business and Professions Code and allows NPs to take on more responsibility while maintaining a valid and active license. Increased NP autonomy and satisfaction: With NP 103, nurse practitioners have a clearer pathway toward NP 104, which allows them to practice independently once they meet transition-to-practice requirements. As SB 1451 in California clarifies how a nurse practitioner satisfies national certifying body accredited standards and nurse practitioner certification examination requirements, NPs often report greater job satisfaction as they progress toward independent practice. This is especially beneficial in rural or underserved areas where a hygienist in alternative practice, a dental hygienist in alternative settings, a licensed vocational nurse, or another licensed health care provider may not be available. Cons / Considerations While NP 103 certification provides valuable opportunities, it also brings operational, legal, and administrative considerations that organizations must evaluate carefully. These disadvantages are: Employment and managed service contracts: Even with NP 103 certification, existing law requires a licensed physician or surgeon to remain contractually involved in oversight. This affects workflow arrangements, managed service agreements, and obligations related to professional liability insurance, specified licensing fees, and license renewal under a state-mandated local program. Practices must also consider compliance with the Respiratory Care Practice Act, Dental Practice Act, and other specialty regulations, depending on services offered. Workflow arrangements: Since NP 103 does not grant full independent authority, some tasks such as purchasing, grading, and administering certain medications; providing dental hygiene services; or interpreting advanced clinical laboratory procedures still require oversight under existing law authorized provisions. Facilities must establish clear protocols to prevent misleading patients about titles such as “doctor,” “physician,” or the initials M.D. or D.O., which are restricted to licensed physicians with valid state authority. Billing, reimbursement, and insurance implications: Billing rules differ when a nurse practitioner is not authorized to practice medicine independently. Payers may require that services be billed under a supervising physician, affecting reimbursement rates, compliance with specified federal regulations, and documentation used in court or agency processes or with professional examination services. NP training, mentorship, scope review, and liability coverage: NP 103 certification still requires robust mentorship and review of standardized procedures to ensure the vocational nurse has completed appropriate pathways, the medical assistant pursuant to delegated authority is properly supervised, and the NP continues completing continuing education courses required for initial license renewal or ongoing practice. Liability coverage must reflect the tasks the NP performs, especially when working across diagnostic and supportive services or when preparing for NP 104 certification. How Should Practices Work With NP 104s Post-SB 1451? With SB 1451 California easing NP 104 eligibility; more nurse practitioners will qualify to practice independently once they satisfy the statutory provisions that establish procedures for transition to practice. Nurse practitioners must meet national certification, clinical and professional education, and direct patient care requirements approved by the Board of Registered Nursing; therefore, practices must strategically prepare for integrating NP 104s into their care models. This includes looking at the types of health care places and clinical locations where NP 104s can work well, like family practice clinics building patient lists, med spas offering diagnostic and support services, or multi-specialty sites interpreting lab tests according to current laws. Practices must also assess which necessary contracts apply, such as independent contractor agreements, collaborative care arrangements, or professional entities requiring valid operating authority issued by the state. Legal compliance reviews should consider the Stark Law, the Anti-Kickback Statute (AKS), state corporate practice of medicine rules, the Medical Practice Act, and how oversight requirements differ when an NP begins practicing without either a licensed physician or a licensed physician and surgeon directing their workflow. Practices should also look at how workflow changes, how other licensed health care providers (like a licensed vocational nurse, medical assistant following standardized procedures, or dental hygienist in alternative practice) are supervised, and what responsibilities come with taking continuing education courses, renewing a license, and getting professional liability insurance. Organizations lower their risk, make sure that a reasonable patient knows who is taking care of them, and stay in line with the Business and Professions Code by proactively aligning their operational policies with SB 1451 updates. What Legal, Financial, and Practical Factors Should Practices Consider? When preparing to employ or contract with NP 104s under SB 1451, practices must evaluate a range of legal, financial, and operational implications. First, employment and managed service contracts should be reviewed to ensure they reflect updated responsibilities, scope of practice boundaries under the Nursing Practice Act, and requirements set by the advisory committee for nurse practitioners. Contracts must define clinical expertise expectations, indemnification, liability coverage, and alignment with existing law authorizing provisions governing nurse practitioners performing diagnostic functions or providing dental hygiene services under the Dental Practice Act. Financially, billing and reimbursement processes may change because Medicare, Medicaid, and private insurers each have separate rules for nurse practitioners practicing independently versus under supervision. Practices must ensure they meet specified federal regulations, national certifying body accredited documentation standards, and payer-specific policies tied to professional examination services, application and examination fee obligations, and state-mandated local program charges. Training and mentorship costs also increase when preparing NPs to interpret clinical laboratory procedures, manage workflows, supervise medical assistants, or support structural pest control boards or other regulatory intersections depending on the service lines offered. To keep a stable workforce, practices should invest in NP career development and retention strategies like board-approved postgraduate training, completed patient-specific training pathways, and structured advancement plans. Establishing internalSB 1451 readiness checklists helps ensure compliance across business or entity licenses, clinical documentation, reasonable patient communication, inform Spanish language speakers requirements, and rules restricting the use of the words “doctor” or “physician,” the letters or prefix “Dr.,” or the initials M.D. or D.O. unless held by an appropriately licensed physician. Thoughtful planning in these areas allows practices to integrate NP 104s efficiently while maintaining compliance, financial stability, and high-quality patient care. What Steps Should NPs and Practices Take Next? As SB 1451 in California reshapes the statutory provisions that establish procedures for how a nurse practitioner shall complete the transition to practice, both NPs and healthcare organizations must prepare proactively for the coming changes. Since existing law establishes new pathways for national nurse practitioner certification, standardized procedures, and independent practice authority, taking early action will help ensure a smooth shift into the 2026 NP 104 landscape. These steps will also help maintain compliance with the Business and Professions Code, Nursing Practice Act, Medical Practice Act, and requirements of the Board of Registered Nursing and the nurse practitioner advisory committee. For NPs: Review SB 1451 updates: Nurse practitioners should familiarize themselves with how SB 1451 modifies existing law, including rules affecting diagnostic and supportive services, interpreting clinical laboratory procedures, and ensuring a reasonable patient understands provider qualifications. Understanding these updates is essential to maintaining a valid and active license. Document pre-2021 NP 103 experience: Since SB 1451 allows NP 103 clinical experience earned before January 1, 2021 to count toward NP 104 qualifications, NPs should gather evidence of direct patient care, clinical expertise, and supervised practice to demonstrate that the nurse practitioner satisfies transition-to-practice requirements. Prepare for NP 104 certification in 2026: NPs should ensure their national certifying body’s credentials are accredited, they have completed patient-specific training, they have completed continuing education courses, and their clinical and professional education aligns with BRN requirements. Preparing now reduces delays in application and examination fee processing, license renewal, and meeting specified federal regulations. For Practices: Review workflow and staffing policies: Organizations should reassess how NP 104s will integrate into patient care, including the roles of licensed vocational nurses, medical assistants pursuant to standardized procedures, and other licensed health care providers within the health care setting. Update employment contracts: Employment and managed service contracts should reflect new responsibilities, liability coverage expectations, and rules related to words doctor or physician, initials M.D. or D.O., and disclosure obligations under SB 1451. This is especially important for practices with business or entity licenses in family practice, med spas, physical and occupational therapy, or dental hygiene services regulated under the Dental Practice Act. Ensure disclosure and certification compliance: Practices must confirm that NPs provide written notice, inform Spanish language speakers appropriately, and clearly communicate when they are not a physician and surgeon. Compliance with the Department of Consumer Affairs requirements, state-mandated local program obligations, and professional examination services will also be necessary. Consult healthcare attorneys: Given the interaction between SB 1451, the Medical Practice Act, the Nursing Practice Act, reimbursement models, and court or agency process implications, legal review is essential. Attorneys can assess risk exposure, workflow changes, and structural pest control board or other cross-regulatory impacts depending on service lines. This step ensures the organization maintains valid operating authority and reimburses local agencies appropriately where required. How Can NPs and Practices Prepare for 2026 and Beyond? As California moves toward full implementation of SB 1451, both nurse practitioners and healthcare organizations should understand how the law streamlines NP 104 eligibility, especially through the inclusion of pre-2021 NP 103 experience, and simplifies the path to independent practice. These updates give NPs clearer statutory provisions for meeting transition-to-practice requirements and allow practices to more confidently expand staffing models that rely on nurse practitioner clinical expertise. By recognizing the benefits of SB 1451 early, including improved clarity, modernized oversight procedures, and a more predictable certification pathway, NPs and employers can position themselves for long-term operational and regulatory success. Preparing now is essential. NPs should begin documenting eligible hours, reviewing national certification requirements, and aligning their clinical and professional education with Board of Registered Nursing standards. Practices should assess workflow structures, modernize employment and compliance policies, and evaluate how NP 104 autonomy fits into future care delivery. Proactive planning ensures that when the 2026 NP 104 certification wave begins, both practitioners and organizations are ready to meet new demands confidently and compliantly. FAQs About SB 1451 California Below are common questions about SB 1451 in California: How Does SB 1451 Make NP 104 Certification Easier? SB 1451 expands what clinical experience can count toward NP 104 eligibility, allowing NPs to use a broader range of supervised practice hours. It also clarifies transition-to-practice rules, reducing administrative barriers and helping more NPs qualify sooner. Can All Pre-2021 NP 103 Experience Count Toward NP 104? Yes, pre-2021 NP 103 experience can count as long as it meets the state’s requirements for supervised direct patient care under approved clinical settings. NPs must still document their hours thoroughly to show they satisfy NP 104 standards. What Are the New Disclosure Requirements? Nurse practitioners must now provide written notice that they are not physicians, replacing the old verbal notice requirement. SB 1451 also allows the use of “enfermera especializada” for Spanish-speaking patients and requires informing patients of their right to see a physician. How Does SB 1451 Affect Billing and Insurance? Billing and reimbursement may shift as more NP 104s begin practicing independently, requiring updates to payer enrollment and credentialing. Practices must ensure billing policies align with Medicare, Medicaid, and private insurer rules for independently practicing NPs. Can NP 104s Work Independently in Specialty Clinics? Yes, NP 104s can practice independently in many settings, including med spas, family medicine clinics, women’s health practices, and other specialty environments. However, each clinic must ensure compliance with scope-of-practice rules and California’s corporate practice of medicine restrictions. Are There Compliance Risks Practices Should Know? Yes, risks include improper use of titles, incorrect documentation of NP 104 eligibility, billing errors, and failing to update employment or supervisory structures. Practices should review SB 1451 requirements carefully and consult healthcare attorneys to avoid penalties.
December 3, 2025
Healthcare
California AB 890 Guide for NP 103 and NP 104
California’s AB 890 is a landmark law that allows qualified nurse practitioners to practice with greater independence, especially those under NP 103 and NP 104 pathways. It removes the long-standing requirement for physician supervision once specific criteria are met, giving NPs expanded authority to serve patients more efficiently. This shift makes AB 890 essential for NPs navigating autonomy, compliance, and new professional responsibilities. This post will break down AB 890 in simple terms, explain how NP 103 and NP 104 differ, and outline what NPs must do to stay compliant under the new framework. What Is California AB 890 and Why Does It Matter? California AB 890, signed into law by Governor Gavin Newsom in 2020, introduced a major shift in how nurse practitioners can provide health care services within the state’s healthcare system. The Assembly Bill did not expand the NP scope of practice. Instead, it set up two new types of nurse practitioners, NP 103 and NP 104, which let qualified NPs work on their own without needing a doctor to supervise them, as long as they complete certain training, clinical hours, and national certification requirements. Under this law, the Board of Registered Nursing works with national certifying body organizations and certifying agencies to ensure NPs meet statewide standards, including educational training, professional examination services, and national certifications accredited by a national certifying body accredited for various nursing specialties. These pathways are especially important as California approaches full implementation, and additional regulatory clarity is expected by 2026. This is when more proposed regulations and statewide standards will shape how NPs work across medical group practices, medical foundations, professional medical corporations, nursing corporations, home health agencies, health facilities, clinics, state hospitals, and other healing arts provider-based settings. NP 103 licensees can practice within a lawfully organized group with one or more physicians, while NP 104 licensees may operate with even greater practice authority in specific areas, provided they meet conditions related to transition to practice, good standing, and the licensee’s employment environment. With AB 890, NPs gain the ability to function with more full practice authority in defined clinical condition settings, but the law remains limited. It does not increase the NP scope, authorize new procedures, or place NPs on par with surgeons, nurse midwives, or other healthcare professionals outside their established registered nursing role. Instead, it removes administrative barriers, such as enhancing access for patients, supporting underserved communities served, and reducing dependency on supervising physicians, while maintaining existing limits on controlled substances, peer review, medical staff membership, and the types of health care services that NPs may provide. Who Can Apply for NP 103 Certification in California? Under California AB 890, nurse practitioners who wish to gain more practice authority within approved settings may apply for the NP 103 certification, which is issued by the Board of Registered Nursing (BRN). To qualify, an applicant must already hold recognized California NP certification in one of the BRN-approved nursing specialties and maintain national certification from a national certifying body accredited by the appropriate certifying agencies, such as the national commission or the American Board. Applicants must also complete the AB 890 transition to practice requirement, which is 3 full-time equivalent years or 4,600 clinical practice hours within the past five years, performed in California, as a licensed NP, and involving direct health care services to patients. This experience must be verifiable through approved providers such as a medical group practice, home health agency, health facility, clinic, state hospital, medical partnership, professional medical corporation, medical foundation, or nursing corporation, provided the setting is a lawfully organized group with one or more physicians or other healing arts providers based in California. It’s important to note that NP 103 certification is optional. NPs may continue practicing under standardized procedures with physician supervision if they prefer. However, those who meet AB 890 requirements gain the ability to practice independently within specific clinical condition areas, though this does not grant full practice authority or expand NP scope of practice beyond what is allowed under existing registered nursing laws and administrative law constraints. What Are the NP 103 Transition to Practice Rules? The AB 890 transition to practice (TTP) requirement serves as structured professional development designed to prepare NPs for practicing with reduced reliance on physicians and without standardized procedures in NP 103 settings. This TTP period includes mentored practice and supervised healthcare services that build competency in patient management, team-based care, communication, interprofessional collaboration with other healthcare professionals, professionalism, and even foundational business and operational skills relevant to working within California’s evolving healthcare system. Under the law, acceptable TTP activities can occur in the following settings: clinic, health facility, home health agency, medical group practice, state hospital, medical foundation, exempt entities, or any lawfully organized group employing qualifying healthcare providers. To count toward NP 103, TTP experience must include the direct conduct of patient care and align with statewide standards for supervision, professional examination services, and educational training recognized by the California Board. All hours must be completed in California as a licensed NP (not RN) and verified by approved supervising individuals or entities in good standing. Verification is crucial because the BRN will assess whether the practitioner met the AB 890 TTP requirements before granting NP 103 status, which supports expanded but still limited practice authority, not the unrestricted surgeon’s practice or authority given to nurse midwives or other healing arts providers. These TTP rules ensure that NPs transitioning into NP 103 are fully prepared to operate safely within specific areas of practice, maintain compliance with state regulations, and continue serving the best interests of the communities served. Where Can NP 103s Legally Practice in California? Under AB 890, NP 103s may practice independently in defined, lawfully organized group settings, but only within organizations that meet California’s requirements for employing or contracting with nurse practitioners. NP 103s may practice in the following approved environments: Clinics: including licensed community clinics, specialty clinics, and other outpatient settings that qualify as lawfully organized medical group entities. Health Facilities: such as hospitals, skilled nursing facilities, and ambulatory care facilities (excluding correctional facilities and state hospitals, which are not approved NP 103 settings). Medical Group Practices / Medical Foundations: including nonprofit medical foundation organizations, medical group practice entities, professional medical corporations, or any lawfully organized group employing one or more physicians or other healing arts providers. Home Health Agencies: as long as the agency is properly licensed and structured in compliance with California’s employment rules. Licensed Hospice Facilities: provided the hospice meets California licensing standards and operates as an eligible healthcare employer under AB 890. These settings must align with California’s regulatory requirements for employing healthcare providers, and they must operate under legally recognized structures, such as professional medical corporations, nursing corporations, medical partnerships, or medical foundations. However, an important note: Even though NP 103s are permitted to practice independently under California’s AB 890, individual employers may still require standardized procedures, internal protocols, or varying levels of supervision based on their compliance policies, hospital committees, risk management rules, or organizational governance. Who Is Eligible for NP 104 Certification in CA? To qualify for NP 104 status in California, a nurse practitioner must first be an NP 103 in excellent standing and must have completed 3 years or 4,600 clinical practice hours under NP 103 authority. The applicant must also hold a national certification in a BRN-recognized population focus, such as family practice, pediatrics, neonatal, women’s health, gerontology, or psychiatric/mental health, issued by a national certifying body accredited for that specialty. If the NP has a Doctor of Nursing Practice (DNP) degree, the supervised clinical hours they completed during the program can be counted towards the total experience needed, as long as they meet the standards set by AB 890 for clinical practice hours and population focus. As with NP 103, NP 104 certification is optional, and applicants are encouraged to review the benefits, responsibilities, and regulatory expectations before applying, especially since NP 104s operate with significantly more practice authority. How Does NP 104 Independent Practice Work? NP 104s may practice independently without physician supervision or standardized procedures, but they must remain within the legally defined scope of practice established under California’s registered nursing laws. Independent practice does not eliminate the need for good clinical judgment, as NP 104s must still consult, collaborate, or refer to other healthcare providers (including physicians, specialists, or other healing arts providers) when a patient’s clinical condition is outside their training or population focus. NP 104s must also comply with all laws governing prescribing, controlled substances, peer review, medical staff membership, and organizational regulations across clinics, health facilities, medical group practice settings, and other approved environments. For healthcare organizations adopting NP 104 roles, such as professional medical corporations, medical foundations, nursing corporations, home health agencies, or multidisciplinary group practices, best practices include updating workflows, clarifying referral pathways, revising policies previously tied to physician supervision, and ensuring hospital or clinic hospital committees understand how NP 104 integration affects credentialing and access to health care services. Practices should also verify that all NP 104 activities align with statewide BRN proposed regulations, ensure documentation supports good standing, and maintain compliance with administrative rules that govern licensee employment, quality oversight, and best interest standards for the communities served. Do NPs Have to Get NP 103 or NP 104 Status? Not all nurse practitioners in California are required to pursue NP 103 or NP 104 certification under AB 890. Many NPs may continue practicing safely and legally under traditional standardized procedures with physician supervision, especially in organizations where the workflow, staffing structure, or clinical model is already functioning well. Healthcare practices can also operate with a mix of NP types. For example, some NPs work under standardized procedures, some are designated as NP 103, and others achieve NP 104, so long as each NP’s role aligns with their scope of practice, training, and the organization’s compliance standards. The decision to apply for NP 103 or NP 104 should be based on a clear evaluation of the benefits, regulatory requirements, documentation workload, and long-term career goals for each NP. How Should Practices Prepare for AB 890 Compliance? Healthcare organizations should begin by reviewing and revising staffing models to accommodate NP roles under NP 103 and NP 104, ensuring that responsibilities align with AB 890’s definitions of practice authority, settings, and supervision requirements. Compliance teams must update internal policies, employment agreements, collaborative expectations, prescribing procedures for controlled substances, and liability insurance language to reflect the independent practice allowances created by AB 890. Practices should also establish internal systems to track NP certifications, Transition to Practice (TTP) hours, national certification status, and documentation of scope compliance, especially if multiple NP categories are in use. Keeping these processes current helps maintain alignment with emerging statewide standards, proposed regulations, and the operational demands of California’s evolving healthcare system. What Steps Should NPs Take Before 2026? As California moves toward full implementation of AB 890 regulations by 2026, nurse practitioners should begin by reviewing their eligibility for NP 103 or NP 104 based on national certification, population focus, and accumulated clinical practice hours. NPs should actively track and document all Transition to Practice (TTP) hours, ensuring they reflect direct patient care in California and can be verified by qualifying employers or supervising providers. It is also essential to confirm that your national certification aligns with your population focus, since the Board of Registered Nursing will require matching credentials for NP 103 and NP 104 categories. Finally, because AB 890 compliance involves nuanced regulatory standards, employment considerations, and evolving statewide rules, many NPs benefit from legal consultation to ensure they meet all requirements and fully understand how the 2026 changes may impact their practice authority and career options. How Can You Stay Compliant Under AB 890? Staying compliant under AB 890 begins with ensuring you meet the specific requirements for NP 103 or NP 104. This includes maintaining the correct national certification, aligning your population focus, and documenting all qualifying clinical practice hours or Transition to Practice (TTP) experience. It is also essential to verify that your employment setting meets California’s legal standards for NP practice under the bill. Keeping accurate records of certifications, TTP hours, employment history, and scope-related documentation helps protect your license and ensures you remain aligned with the expectations of the Board of Registered Nursing. As AB 890 continues to evolve toward 2026, many practices will update their internal procedures, liability policies, and collaboration guidelines. So, NPs should regularly review their agreements and organizational policies to ensure they match the new practice authority structure. FAQs Nurse practitioners navigating AB 890 often have questions about the differences between NP 103 and NP 104, how Transition to Practice (TTP) works, and what independent practice requires. These FAQs provide clear answers to help NPs understand certification pathways, documentation expectations, and practical considerations as California moves toward full implementation in 2026. What Is the Difference Between NP 103 and NP 104 Certifications? NP 103 allows NPs to practice independently only within approved group settings that meet AB 890’s organizational requirements. NP 104 offers a higher level of autonomy, permitting independent practice across broader settings as long as the NP remains within their scope and population focus. How Long Does It Take to Complete Transition to Practice Hours? The TTP requirement takes 3 years or 4,600 hours of qualifying NP practice completed within the past 5 years. These hours must reflect direct patient care and meet BRN documentation and verification standards. Can TTP Hours Outside California Count Toward Certification? No, TTP hours must be completed in California under a valid NP license to count toward NP 103 or NP 104 certification. Out-of-state experience does not meet the BRN’s AB 890 requirements. Do NPS Need Additional Liability Insurance for Independent Practice? Many organizations recommend or require enhanced liability coverage for NPs practicing independently under NP 103 or NP 104. Coverage needs may vary by employer, setting, and risk level, so reviewing policies with legal or insurance experts is advisable. Can NP 104s Collaborate With Physicians Remotely? Yes, NP 104s can collaborate or consult with physicians and other providers remotely as long as the communication supports safe patient care and aligns with the NP’s scope and population focus. AB 890 does not require on-site physician presence for NP 104 collaboration.
December 2, 2025
Healthcare
Accused Of Intentionally Committing Fraud For Personal Gains
If you’ve been accused of intentionally committing fraud for personal gains, the first thing you should do is stop communicating with investigators and immediately consult an experienced attorney who understands both criminal fraud and healthcare regulatory risk. Typically, fraud allegations can escalate quickly into criminal charges, civil fraud exposure, or investigations under federal law. Therefore, early intervention is important to protect your rights, your financial records, your professional licenses, and your future. In this post, you’ll learn what steps to take after facing fraud charges, the legal consequences of criminal fraud or civil fraud, how prosecutors try to prove guilt, and what types of fraud may apply. You’ll also understand what evidence fraud investigators look for and how an experienced attorney can guide you through the legal process to pursue a favorable outcome. What Is Healthcare Fraud? Healthcare fraud occurs when an individual or organization intentionally uses false statements, deceptive practices, or fraudulent activity to obtain money, services, or benefits they are not entitled to—typically for personal gain. In most cases, prosecutors look for clear evidence of intentional deception, meaning the act wasn’t a mistake but a deliberate effort to mislead insurers, government programs, or patients. The elements of healthcare fraud usually include making a false representation, knowing that the information is incorrect, intending for another party to rely on it, and causing a financial loss or payment based on that misrepresentation. Examples of intentional fraud in healthcare include billing for services not provided, falsifying medical records to justify higher reimbursement, submitting duplicate claims, kickback schemes, or fabricating patient diagnoses to increase payment. These actions can trigger severe consequences under both civil and criminal law, potentially leading to fraud charges, heavy fines, or even prison time. What Counts as “Intentional Fraud for Personal Gains”? Intentional fraud refers to a deliberate act of providing false information, concealing material facts, or manipulating financial data for the purpose of obtaining money or benefits. Under criminal law and federal law, intentional fraud requires proof that the accused knowingly engaged in a fraudulent act, intending to deceive another party for personal gain. The key elements of intentional fraud are: Misrepresentation of a material fact Knowledge that the information is false Intent to deceive Reliance by the victim Damages resulting from the fraudulent act Intentional fraud can occur in business, healthcare, or professional settings, such as submitting false claims, falsifying financial documents, manipulating billing codes, kickback arrangements, or creating fraudulent financial statements. When these actions involve money, financial records, or financial transactions, they can escalate into a criminal fraud case, potentially leading to criminal charges, professional license issues, and other severe consequences. How Does Healthcare Fraud Occur in the Industry? Healthcare fraud occurs when individuals or organizations intentionally submit false claims, manipulate financial records, or engage in fraudulent activity to obtain payments or benefits they are not legally entitled to. While some billing discrepancies stem from clerical mistakes, many high-profile cases show that fraud can also be deliberate, organized, and financially motivated, involving false statements, fabricated documentation, kickbacks, or schemes designed to deceive federal healthcare programs. In these cases, prosecutors focus on fraudulent intent, meaning the actions were taken knowingly and for personal gain, transforming an error into a criminal fraud case under federal law. A clear example of how intentional fraud occurs can be seen in the 2025 National Health Care Fraud Takedown, where 324 defendants nationwide, including physicians, pharmacists, and medical executives, were charged with participating in schemes totaling more than $14.6 billion in alleged fraud. These cases involved medically unnecessary treatments, false billing, and improper kickback arrangements directed at Medicare and Medicaid beneficiaries. Another real-world example involves Prime Healthcare Services, which agreed to pay $65 million after allegations that 14 of its hospitals submitted false claims by admitting patients who only required outpatient care and then billing Medicare at higher inpatient rates. This is a classic case of upcoding for financial gain. These cases demonstrate how healthcare fraud occurs not only through isolated misconduct but also through systemic patterns in large organizations. Typically, these are detailed schemes involving financial documents and sophisticated billing strategies designed to exploit reimbursement structures. Common Methods and Scenarios Healthcare fraud schemes often follow predictable patterns, though the methods of committing it can vary depending on the individuals or entities involved. One common method is billing for services not rendered, also known as phantom billing, where providers submit claims for tests, treatments, or medical equipment that were never provided. State agencies have documented numerous cases of this, including situations where clinics billed for X-rays, lab work, or supplies that patients never received. Another frequent scenario involves upcoding, where providers bill for more expensive services than what was actually performed. The Prime Healthcare settlement mentioned earlier is a prime example of intentional misrepresentation, where medical facilities billed outpatient-level patients as inpatients to receive larger reimbursements. Healthcare fraud also arises through medically unnecessary procedures, such as the nationwide cases in which clinics billed Medicare for amniotic wound allografts on elderly patients even when such procedures were not medically justified. Prosecutors found that some clinics used these treatments solely to increase payouts and even engaged in kickback schemes to recruit patients. In more complex scenarios, fraud involves improper referral arrangements or payments that violate the Anti-Kickback Statute. Providers sometimes disguise these payments as consulting fees, marketing arrangements, or stipends—yet they are illegal inducements under federal law. Healthcare professionals seeking clarity on compliant arrangements often rely on frameworks such as AKS Safe Harbors to avoid crossing legal lines. Fraud can also occur on the patient side. For example, former NFL player Robert McCune was convicted for orchestrating a scheme in which individuals submitted false claims for expensive medical equipment, such as hyperbaric oxygen chambers, that was never actually purchased or used. These scenarios highlight that intentional fraud for personal gain is not limited to one type of actor or method, as fraud can occur in clinical settings, administrative offices, billing departments, large corporate systems, and even among individual beneficiaries. What unites these cases is the presence of fraudulent intent, false representation, and an effort to secure an unearned financial benefit, forming the foundation of both civil fraud and criminal fraud cases. How Is Healthcare Fraud Detected and Investigated? Data analysis, regulatory oversight, whistleblower reports, and proactive monitoring by insurers and federal agencies combine to detect healthcare fraud. Since intentional fraud for personal gains often leaves behind patterns in billing, documentation, and financial records, detection systems look for anomalies. These could include sudden spikes in claims, unusual financial transactions, repeated billing for medically unnecessary procedures, or inconsistencies between patient records and the services billed. Modern detection methods rely heavily on data mining, algorithmic pattern recognition, audits, patient complaints, and internal reports from staff who notice false statements, improper coding, or suspicious referral arrangements. Once potential fraud is detected, a formal investigation begins. The process typically starts with a preliminary review of claims data, financial documents, and medical charts to determine whether discrepancies may indicate intentional deception or simple error. If there are still concerns, investigators move to a more detailed investigation that might involve getting financial records through subpoenas, checking electronic health data, talking to witnesses, looking at patient files, and reviewing communications between providers, billing staff, and administrators. Agencies such as the Office of Inspector General (OIG), the FBI, and state Medicaid Fraud Control Units often collaborate to uncover whether the alleged conduct constitutes civil fraud, criminal fraud, or violations of federal law. Throughout the investigation, authorities assess whether there is sufficient evidence of fraudulent intent, false representation, or misappropriation of funds. They examine whether the accused knowingly submitted false claims, manipulated financial statements, or engaged in fraudulent activity for personal gain. If investigators believe there is enough evidence to prove guilt beyond a reasonable doubt, the case may lead to criminal charges, heavy fines, professional license consequences, repayment demands, or even prison time. The matter may resolve without penalties if the evidence reveals insufficient intent or a mere administrative error. Ultimately, detection and investigation procedures aim to uncover the truth, determine whether fraud occurred, and ensure accountability within the healthcare system. What Are the Consequences of Intentionally Committing Healthcare Fraud? Being found guilty of healthcare fraud extends far beyond fines and prison time, as the professional repercussions can be equally devastating. A fraud conviction can destroy a healthcare provider’s professional reputation, trigger disciplinary action by state licensing boards, and lead to suspension or permanent revocation of professional licenses. Many providers also face exclusion from Medicare, Medicaid, and private insurance networks, which effectively ends their ability to practice. Even if fraud allegations do not result in a conviction, the mere accusation can severely damage credibility, weaken employer trust, and limit future career opportunities. Professionals may also face contract termination, loss of hospital privileges, reputational harm within the medical community, and ongoing financial loss due to reduced employment prospects. Public records of fraudulent activity can follow an individual for years, making it difficult to regain trust from patients, colleagues, insurers, and healthcare institutions. This is why individuals accused of fraudulent acts, false statements, or financial deception must seek early intervention from an experienced attorney who can build a strong defense strategy, mitigate legal consequences, and protect their long-term professional standing. Legal Consequences and Professional Repercussions The legal consequences of a healthcare fraud conviction are extensive because intentional deception is considered a direct violation of both criminal law and federal law. Depending on the severity of the fraudulent act and the money involved, individuals may face felony fraud charges, financial penalties running into hundreds of thousands of dollars, restitution for losses suffered by insurers or federal programs, and the forfeiture of any assets obtained through fraudulent activity. In cases where investigators gather sufficient evidence to prove guilt beyond a reasonable doubt, defendants may also face prison time, probation, community service, and long-term government monitoring. Healthcare fraud cases often trigger additional legal burdens, such as mandatory compliance oversight. Many providers found liable under the False Claims Act or anti-kickback violations are required to enter into corporate integrity agreements, which impose strict monitoring, reporting obligations, and long-term audits by federal authorities. These agreements can last five years or longer and place significant restrictions on how a provider can operate their business, manage financial transactions, or interact with federal healthcare programs. Failure to comply can result in additional sanctions, further civil penalties, or even exclusion from federal healthcare programs. Beyond formal legal punishment, those convicted of healthcare fraud face lasting professional repercussions that can permanently alter their careers. Healthcare professionals found guilty of intentional fraud often suffer irreversible damage to their professional reputation, making it extremely difficult to regain the trust of patients, colleagues, hospitals, and insurers. Licensing boards frequently impose disciplinary action ranging from temporary suspension to permanent revocation of medical, nursing, or professional licenses, effectively ending the ability to practice in the healthcare field. Even without formal license revocation, many individuals face exclusion from Medicare and Medicaid, making employment nearly impossible in hospitals, clinics, or healthcare networks that rely on federal reimbursements. The repercussions also extend to private employment. Employers may immediately terminate individuals accused or convicted of fraudulent activity due to the risk posed to organizational compliance and liability. Background checks will reflect fraud convictions, reducing the likelihood of securing future roles in healthcare, finance, administration, or any position requiring trust and ethical accountability. The public nature of fraud cases, often published in press releases, government sites, or court records, means reputational harm can persist online for decades, creating long-term barriers in both professional and personal contexts. Financially, individuals may experience years of financial loss from court-ordered restitution, legal fees, lost income, and limited employment options. Personal gain obtained through fraudulent means is overshadowed by lasting financial burdens created by fines, penalties, and the inability to reenter the workforce. What To Do Immediately After Being Accused of Intentionally Committing Fraud for Personal Gains If you are suddenly accused of intentionally committing fraud for personal gains, your immediate actions can significantly affect the outcome of your case. The first and most critical step is to stop communicating with investigators, auditors, colleagues, or anyone connected to the case until you have spoken with an attorney. Anything you say, even casually, can be misunderstood or used against you, especially in criminal fraud investigations where prosecutors are looking for signs of fraudulent intent, false representation, or intentional deception. You should also preserve all records, including financial documents, emails, billing logs, patient records, text messages, and internal communications. Do not delete, modify, or alter any files. Even innocent document changes can be interpreted as an attempt to hide evidence, potentially worsening your legal exposure. Likewise, avoid discussing the accusations publicly or on social media. Public statements can complicate your defense strategy and provide investigators with additional material to examine. Healthcare providers should immediately notify their malpractice attorney or healthcare legal team, as fraud allegations often involve medical records, billing systems, financial transactions, and compliance issues that require professional guidance. Whether you are dealing with credit card fraud, tax fraud, securities fraud, civil fraud, criminal charges, or regulatory scrutiny, early intervention from counsel protects your rights and prevents missteps that could escalate the case. The goal at this stage is to safeguard evidence, maintain silence, and secure experienced legal representation as quickly as possible. How a Healthcare Fraud Attorney Can Help An experienced healthcare fraud attorney plays a critical role in defending individuals accused of fraudulent activity, intentional deception, or financial misconduct. The first step is a comprehensive case assessment, where your attorney reviews documentation, billing records, financial data, emails, and communications to determine what evidence exists and whether investigators have sufficient proof to demonstrate fraudulent intent. This early review helps shape your defense strategy and identifies weaknesses in the government’s case. Your attorney will also represent you during audits, interviews, investigations, or law enforcement questioning, ensuring you do not make statements that may be misinterpreted. Healthcare fraud investigations often involve multiple agencies, making legal representation essential. A skilled lawyer can also negotiate with payors, regulators, or federal agencies, helping you avoid harsher penalties or unnecessary escalation into a criminal fraud case. A major component of fraud defense involves demonstrating lack of intent, showing that the issue resulted from misunderstanding, administrative error, or insufficient documentation—not intentional efforts to commit fraud for personal gains. Your attorney may also advise you on compliance steps that show good faith, such as internal audits, policy updates, or training programs that strengthen your position. Additionally, legal counsel helps protect your professional licenses, addressing disciplinary concerns with medical boards, credentialing bodies, and insurers to safeguard your long-term career. Defenses Against Intentional Fraud Allegations One of the strongest defenses is lack of intent. Prosecutors must show that the accused knowingly engaged in a fraudulent act, provided false information, or submitted false claims with the purpose of obtaining financial gain. If the evidence presented shows no deliberate wrongdoing, the accusation may fail. Closely related is the defense of honest mistake or administrative error, which is common in the healthcare industry, where billing systems are complex, coding rules frequently change, and human error can easily appear suspicious without being fraudulent. Another powerful defense is insufficient evidence. Investigators must demonstrate fraud beyond a reasonable doubt in criminal cases, and if the financial records or documentation do not clearly support allegations of intentional deception, the case may not meet the legal threshold for conviction. Defense lawyers often point out holes, inconsistencies, or weaknesses in the government’s evidence to make it harder for them to prove guilt. Intentional fraud allegations also collapse when the actions stem from miscommunication between staff, billing departments, or insurers. Many fraud cases arise from mistakes in interpretation, conflicting instructions, or unclear documentation, not from deliberate misconduct. A breakdown in internal communication can lead to incorrect financial transactions or billing errors that mimic fraud but lack any deceptive intent. In some situations, the defense may argue a violation of due process occurred during the investigation. Investigators may exclude evidence or weaken the case if they improperly obtained records, failed to follow required procedures, or relied on flawed audits. Finally, many allegations result from overly broad or incorrect interpretations of billing rules. Healthcare regulations, especially those involving coding, reimbursement, or medical necessity, are often complex, ambiguous, and subject to differing interpretations. If the accused followed one reasonable interpretation of the rules, even if regulators later disagree, that difference does not establish fraudulent intent. What Are the Measures to Prevent Healthcare Fraud? One of the most effective strategies to prevent healthcare fraud is establishing a comprehensive compliance program that outlines clear policies for billing, coding, documentation, and financial transactions. Compliance programs should incorporate the OIG compliance program guidance, which provides detailed best practices for preventing fraud, waste, and abuse within healthcare organizations. These programs help ensure that employees understand regulatory requirements, recognize red flags, and follow proper procedures when submitting claims or handling patient information. Another essential prevention strategy involves routine internal audits. Regular reviews of billing patterns, financial statements, medical records, and coding practices help identify discrepancies early and correct them before they lead to allegations of fraud. Internal audits also highlight trends that may suggest ineffective workflows, misunderstandings of reimbursement rules, or potential vulnerabilities within the organization. When combined with strong documentation practices and accurate recordkeeping, audits significantly reduce the risk of errors being interpreted as fraudulent intent. Staff training and education play a critical role in fraud prevention. Employees across clinical, administrative, and billing departments must be trained to recognize suspicious activity, identify potential compliance violations, and understand the importance of accurate financial data and medical documentation. Training should include updates on federal law, Medicare/Medicaid requirements, anti-kickback regulations, coding changes, and evolving industry standards. Implementing clear communication protocols between departments also helps prevent misinterpretation or inconsistencies in patient care documentation and billing. Standardized workflows and shared documentation platforms can mitigate the simple miscommunication that often leads to fraud allegations between clinical staff and billing teams. Finally, healthcare organizations should invest in technology-driven best practices, such as automated claims review tools, fraud detection software, and secure electronic health records. These tools help identify unusual billing patterns, flag potentially inappropriate claims, and protect against unauthorized access or alteration of sensitive financial documents. Combining technological safeguards with human oversight creates a stronger defense against fraudulent behavior. Ready to Seek Legal Justice? Accusations of intentionally committing fraud for personal gains can threaten a person’s freedom, finances, career, and professional reputation. These cases usually require complicated investigations, thorough checks of medical and financial records, and strong efforts to show that someone meant to commit fraud. Understanding how healthcare fraud occurs, how it is detected, and the potential legal consequences is essential for anyone facing such serious allegations. With the right legal support, it becomes possible to challenge the evidence, clarify misunderstandings, demonstrate lack of intent, and protect your professional future. Strong defenses, early intervention, and knowledgeable guidance can make the difference between severe penalties and a favorable resolution, especially when your livelihood and reputation are at stake. FAQs These common questions provide clarity on defending yourself, what to expect, and how to avoid missteps that could harm your case: How Can I Defend Myself If Accused Of Intentionally Committing Fraud For Personal Gains? A strong defense focuses on challenging fraudulent intent by showing the issue stemmed from misunderstanding, administrative error, or insufficient evidence. An experienced attorney can analyze documentation, identify weaknesses in the government’s case, and protect you from self-incrimination. What Are The Consequences Of Being Convicted Of Fraud For Personal Gains? A conviction can lead to heavy fines, restitution, probation, or even prison time depending on the severity of the alleged fraud. It may also cause long-term professional damage, including loss of licenses, exclusion from federal programs, and reputational harm. What Are The Potential Costs Involved In Defending Against Accusations Of Intentionally Committing Fraud For Personal Gains? Legal costs vary depending on case complexity, the amount of evidence involved, and how long the investigation lasts. Expenses may include attorney fees, expert analysis, document review, and compliance-related requirements if penalties or agreements are imposed. What Are Some Common Mistakes People Make When Accused Of Intentionally Committing Fraud For Personal Gains And How Can They Be Avoided? Common mistakes include speaking to investigators without counsel, altering documents, or trying to explain the situation informally. These can be avoided by remaining silent, preserving all records, and contacting an attorney immediately for guided legal strategy.
December 1, 2025
Healthcare
California Medical Corporation Name Requirements Explained
California Medical Corporation Name Requirements include strict regulations, restrictions, and guidelines that determine how a medical corporation, professional medical corporation, or California professional medical corporation may legally identify itself. These rules define what a corporate name can include, which words are prohibited, and how the medical board interprets misleading business names for licensed professionals. Understanding these requirements ensures your medical corporation meets California state law and avoids compliance issues from the start. This article will comprehensively explain all the rules, restrictions, steps, and best practices you should be aware of when naming your California medical corporation. Why California Regulates Medical Corporation Names California regulates medical corporation names to prevent the public from being misled about who owns, controls, or provides professional services within a medical business. Medical professionals are authorized to practice medicine under a medical license. Additionally, corporations are legally recognized as distinct business entities, which leads California law to mandate truthfulness and precision in all corporate names. The medical board reviews names carefully to ensure they do not imply unauthorized practice, unearned specialties, or services beyond what California state law allows. For example, the name of a professional medical corporation cannot imply that someone without a medical license is involved in providing care. The same applies to clinical social workers, physical therapists, family therapists, or other licensed professionals in different fields who may not legally operate under certain medical-specific terms. These rules are designed to uphold patient trust while ensuring the public is not confused about who is responsible for the medical practice. Core Legal Requirements for Naming a California Medical Corporation California’s rules for naming a professional medical corporation focus on ensuring accuracy, transparency, and compliance with the Medical Board’s professional standards. These requirements aim to prevent misleading corporate names, safeguard patients, and guarantee that only licensed professionals present themselves as providers of medical services. You can avoid delays in obtaining a compliant and acceptable corporate name from the Secretary of State or the Medical Board of California by being aware of these regulations early in the formation process. Required Professional Designators Your corporate name must include a professional designator, such as those specified by the California Corporations Code and the California Medical Board’s licensing requirements. These designators include: “Medical Corporation” “A Professional Corporation” “M.D., Inc.” or similar corporate designation. A California medical corporation cannot adopt a corporate name that implies it is a general corporation, limited liability company, or sole proprietorship. Only the name of the business entity that appears on your articles of incorporation will be recognized as your legal name, even if your branding uses a different fictitious name or DBA. Restrictions on Facility-Based Terms Certain words, such as “clinic,” “center,” “institute,” “urgent care,” “surgery center,” “pediatric corporation,” or “podiatric medicine center,” trigger additional licensing requirements. If your medical corporation does not hold the appropriate facility licenses, using these terms becomes a misleading business name violation. Using Physician Names Medical corporations often include the physician’s name, such as “John Doe Medical Corporation.” This is permitted as long as: The physician is licensed in California. The physician is a shareholder of the professional corporation. The name does not imply a medical partnership with non-shareholders. Additionally, note that if ownership changes, California law requires your corporate name to be updated accordingly. Misleading Business Names and Advertising Restrictions These restrictions apply equally to business names, fictitious business names, advertising, signage, website content, and all public records. California prohibits any corporate name that misrepresents: A specialty that the medical doctor is not certified in. “Best,” “advanced,” or superiority-based claims. A broader scope of professional services than the medical license permits. A corporate structure that the entity does not actually have. Fictitious Business Names (DBAs) for Medical Corporations Medical corporations commonly use a fictitious business name, or DBA. This allows them to market their practice under a more consumer-friendly or specialty-focused name. However, DBAs must still meet the strict standards set by the Medical Board of California and cannot mislead the public about the professional services offered or the qualifications of the licensed physicians involved. Understanding when you need a DBA and how to file one is an essential part of building a compliant medical business identity. When a DBA Is Required A DBA is required whenever a medical corporation operates under a name that differs from the exact legal name listed on its Articles of Incorporation. This applies to marketing names, branded clinic names, or specialty descriptors that are not part of the official corporate name. If you promote your medical practice under anything other than the corporate name, you must file a fictitious business name. Filing Requirements To file a DBA, submit a Fictitious Business Name Statement to the local county government where your primary physical address is located. After filing, publication in an approved newspaper is required to complete the registration process. The name must also align with Medical Board rules, meaning it cannot include prohibited terminology, misleading phrases, or words suggesting facility licensure you do not possess. Medical Board Rules on DBAs The Medical Board of California requires physicians to obtain a Fictitious Name Permit when using a DBA to offer medical services. This ensures that the public understands who is providing care, what their qualifications are, and that the DBA accurately reflects the medical practice’s scope. Without this permit, using a fictitious business name in advertising, signage, website content, or public documents is considered noncompliant. Business Entity Name Rules Under the California Corporations Code The California Corporations Code outlines how a professional medical corporation must structure its legal name, which designators it must include, and how closely it must align with the services the business is legally authorized to provide. These rules apply to checks for business name availability, the reservation process, and limits on using certain words that may conflict with other registered entities. Ensuring your corporate name meets these standards is essential for forming a valid business entity and avoiding future compliance issues. Name Availability Checks Before filing your articles of incorporation, you must check name availability with the California Secretary of State. The California Secretary reviews the corporate name for conflicts, similarity to existing business names, and compliance with the California Corporations Code and style rules. Name Reservations California allows name reservations, which help secure your preferred corporate name for a specific period while you complete the incorporation process. Reservations are useful for preventing others from registering the name you intend to use only. Court Judgments and Name Conflicts Court judgments can force a medical corporation to change its name if it infringes on another business entity’s rights. Occasionally, a corporate name may be challenged based on: Trademark disputes Unfair competition claims Misleading business practices How to Register a Medical Corporation Name in California Registering a medical corporation name in California requires careful attention to legal, regulatory, and administrative steps. Each step helps ensure that your name complies with the Medical Board’s naming standards, the Secretary of State’s corporate naming rules, and county-level fictitious name requirements. Following these steps in the correct order reduces delays, prevents rejections, and streamlines your overall incorporation process. Step 1: Verify Name Compliance With Medical Board Standards Before filing anything, review your proposed name to confirm it meets all Medical Board rules, including required designators, specialty restrictions, and limitations on facility-based terminology. Step 2: Check Availability With the Secretary of State Use the California Secretary of State’s online database to confirm that your corporate name is not already taken or confusingly similar to another professional corporation or business entity. Step 3: Reserve the Name Filing a name reservation protects your chosen corporate name while you finalize your Articles of Incorporation and other formation documents. This is especially useful if your medical practice is still in the planning phase. Step 4: File Articles of Incorporation for a Professional Corporation Your Articles of Incorporation must include the correct corporate designation, business address, registered agent information, and professional statement required under California law. A misworded or incomplete filing can cause significant delays. Step 5: Register a DBA (If Needed) If your public-facing name differs from your legal corporate name, file a fictitious business name with your county and apply for a Fictitious Name Permit through the Medical Board of California. Best Practices for Choosing a Compliant Name A compliant corporate name should accurately reflect your medical practice, align with California law, and avoid triggering unnecessary licensing requirements. Applying best practices early helps minimize administrative issues, reduce the risk of misleading advertising claims, and support a smooth incorporation experience. Choose a name that reflects your specialty without implying unearned certifications. Ensure your name includes an appropriate professional designator, such as “Medical Corporation” or “A Professional Corporation.” Avoid facility-based terms unless you hold the necessary facility licenses. Check the Secretary of State’s availability before investing in branding or marketing materials. Verify that matching domain names and trademarks are available to avoid future conflicts. Confirm that any DBA aligns with Medical Board standards and file a Fictitious Name Permit if required. Consider long-term branding and corporate structure to avoid repeated name changes. Common Mistakes to Avoid When Choosing a Name Under California Law Many physicians unintentionally choose names that violate California’s professional naming rules, causing delays or compliance issues later. These mistakes often involve using prohibited terms, implying services outside your license, or failing to file the proper DBA paperwork. Avoiding these errors will streamline your incorporation process and protect your medical practice from unnecessary complications with the Medical Board or Secretary of State. Need a Medical Corporation Name that Complies With California Law? California’s rules around medical corporation names are extensive, covering professional designators, prohibited terms, facility-based restrictions, fictitious business name requirements, and corporate naming conflicts. Selecting an appropriate corporate name safeguards your personal assets, mitigates personal liability risks, and guarantees your business’s legal recognition under California state law. Contact our team to safeguard your corporate structure, avoid costly mistakes, and create a compliant, market-ready business name. FAQ: California Medical Corporation Name Requirements Choosing the right corporate name is a key step in forming a California medical corporation, and the state has detailed rules you must follow. These FAQs break down the essentials so you can avoid compliance issues, delays, or rejected filings. Use this section as a quick guide while preparing your business name and filings. What Are the Naming Requirements for a Medical Corporation in California? The name of your corporation must include the full professional designation (such as “Medical Corporation”) and accurately reflect the professional services provided. It must not be misleading or imply qualifications you don’t have. Can I Use Abbreviations or Acronyms in the Name of a Medical Corporation in California? Yes, you can use approved abbreviations like “Inc.” or “Corp.,” but not abbreviations that hide your profession or misrepresent your services. The name must still clearly indicate the specific profession involved. How Long Does It Take to Get a Medical Corporation Name Approved in California? Name approval typically takes a few business days, depending on the Secretary of State’s processing times. Delays happen if the name is too similar to an existing business or violates naming rules. What’s the Significance of a Unique Name for a Medical Corporation in California? A unique name helps you comply with state law, ensures your business entity is distinguishable on the public record, and protects you from rejections during filing. It also reduces confusion for patients and medical boards. Are There Any Naming Restrictions for Medical Corporations in California? Yes. You cannot use misleading terms, imply specialties without proper licensing, or use prohibited words like “clinic” unless permitted. The name must follow California Corporations Code and Medical Board guidelines. How Can I Check if My Medical Corporation Name Is Available in California? You can search the Secretary of State’s business name database to see if the name is already in use. It must be distinguishable from existing corporations, LLCs, and professional entities. Can I Use a Misleading Business Name for My California Medical Corporation? No. California prohibits misleading business names, including those implying broader services or specialties than you are licensed to provide. Doing so can result in rejection or disciplinary action from the Medical Board. How Can I Reserve a Name for My California Medical Corporation? You can submit a Name Reservation Request to the California Secretary of State. A name can be reserved for 60 days, giving you time to prepare your filings.
November 26, 2025
Healthcare
Compliance Tips for Complementary and Alternative Medicine Providers
Complementary and alternative medicine (CAM) includes a range of practices and therapies used alongside or instead of conventional medical treatments, such as acupuncture, herbal remedies, and chiropractic care. Providers must understand the regulatory landscape to ensure their practices meet federal and state healthcare compliance requirements. Key compliance areas include patient consent, accurate billing, proper documentation, advertising standards, and adherence to scope-of-practice laws. This post covers practical steps CAM providers can take to maintain compliance, minimize liability, and operate ethically while delivering high-quality patient care. What is Complementary and Alternative Medicine (CAM)? Complementary and alternative medicine (CAM) refers to a diverse set of healthcare practices used alongside or instead of conventional medicine. CAM practices include acupuncture, herbal remedies, chiropractic care, naturopathy, massage therapy, tai chi, and energy-based therapies such as qi gong. Many CAM therapies aim to restore balance, improve body functions, and promote overall well-being. Complementary medicine typically supports conventional medical care. For example, patients undergoing cancer treatment may use guided imagery, gentle exercise, or dietary supplements to reduce side effects. Alternative medicine, in contrast, replaces conventional treatment with practices such as traditional medicine or herbal medicines. Integrative medicine combines complementary approaches and conventional care into a coordinated treatment plan that addresses various aspects of human health. The popularity of CAM has grown significantly among American adults. Patients often choose complementary and integrative health options to support health, manage chronic conditions, or improve quality of life. Many are drawn to therapies like music therapy, art therapy, or osteopathic manipulation for their potential benefits and noninvasive nature. CAM therapies also appeal to those seeking evidence-based natural interventions, including biologically based practices like green tea, fish oil, and other nutritional products. Scientific research and clinical trials have increasingly studied CAM therapy for health benefits and safety. The National Center for Complementary and Integrative Health and the World Health Organization provide guidance on complementary health approaches and promote research into CAM practices. Healthcare professionals use these findings to guide the safe and effective integration of complementary treatments in patient care. Legal and Regulatory Framework for CAM Practitioners CAM practitioners must navigate a complex legal and regulatory framework to practice safely and ethically. Licensing requirements vary by state or country and often depend on the type of CAM therapy provided. For instance, acupuncturists, chiropractors, and massage therapists may need specific licenses, while dietary supplement advisors may operate under general health regulations. Scope of practice is defined by state or national boards and determines which treatments a CAM practitioner can legally provide. For example, body-based practices such as osteopathic manipulation, the Alexander technique, or the Feldenkrais method may have different regulations than energy-based practices or nutritional counseling. CAM practitioners must adhere to these limits to avoid legal penalties and ensure patient safety. Regulatory bodies, including the Food and Drug Administration (FDA), state boards, and the National Institutes of Health (NIH), oversee CAM therapies. They regulate dietary supplements, herbal medicines, and other biologically based practices to ensure safety and evidence-based claims. The National Center for Complementary and Integrative Health funds scientific research on complementary approaches to evaluate effectiveness and potential risks. Common legal restrictions for CAM providers include limits on claiming to treat or cure specific diseases, requirements for proper informed consent, and rules against practicing beyond their licensed scope. CAM practitioners must also comply with advertising standards, record-keeping, and professional conduct guidelines to maintain credibility and protect patients. Failure to adhere can result in fines, license suspension, or legal action. Common Legal Issues in CAM Practice CAM practitioners must navigate a variety of legal issues to operate safely and protect their patients. Understanding these common challenges helps complementary and integrative health providers maintain compliance and reduce risk. They include: Practicing Without a License: Practicing without a license is one of the most serious legal risks for CAM practitioners. Each state or country has licensing requirements for therapies like acupuncture, chiropractic, massage therapy, or naturopathy. Operating without proper credentials can result in fines, legal action, or closure of the practice. Even complementary approaches, such as dietary supplements or body-based practices, require adherence to specific regulations. Licensed practitioners ensure patient safety and demonstrate professionalism within the medical system. Misrepresentation of Treatments and False Advertising: CAM providers must avoid misrepresenting their treatments or making unproven claims. It is against the law and against the rules to advertise a therapy as a cure for serious illnesses like cancer, heart disease, or other health problems. Evidence-based complementary medicine focuses on possible benefits and scientific research instead of promises. False advertising can hurt a business’s reputation, lead to legal trouble, and make people less likely to trust complementary and alternative medicine. Liability for Patient Harm or Adverse Effects: Liability arises when CAM practices cause harm or adverse effects to patients. This includes complications from herbal medicines, biologically based products, osteopathic manipulation, or energy-based therapies. Providers must obtain informed consent, maintain detailed records, and follow safety protocols. Complementary treatment should support conventional medicine, not replace it, to minimize risks. Proper training and adherence to professional standards reduce potential liability and enhance patient well-being. Confidentiality and HIPAA Compliance for CAM Practices: CAM practitioners handling patient information must comply with privacy regulations, including HIPAA in the United States. Maintaining confidentiality protects patient data, health records, and treatment plans. Even therapies such as massage therapy, guided imagery, or art therapy require secure handling of personal health information. Failure to comply can lead to lawsuits, fines, or reputational damage. Integrative health providers should put in place rules and train their staff to keep private information safe. Insurance Coverage Challenges and Malpractice Risks: Insurance coverage for CAM therapies is often limited, posing challenges for patients and providers. Liability insurance is essential to protect against malpractice claims arising from adverse effects or professional negligence. CAM practitioners should seek specialized insurance that covers complementary and alternative medicine, including integrative health and dietary supplement guidance. Being proactive about coverage ensures continuity of care and safeguards the practice against financial risks. Legal Strategies for Complementary Medicine Providers Complementary and alternative medicine (CAM) providers face unique legal and regulatory challenges. Generally, legal strategies support complementary and integrative health practices while promoting safe, evidence-based care. These strategies include: Ensuring Proper Licensing and Certification Proper licensing is the foundation of a compliant CAM practice. Providers must verify state and national licensing requirements for their therapies, such as acupuncture, chiropractic care, massage therapy, or osteopathic manipulation. Meeting these standards ensures legitimacy within the medical system and protects against legal action. Maintaining up-to-date certifications is essential for therapies offered. Continuing education and recertification demonstrate expertise in complementary medicine and integrative health. It also signals adherence to evolving standards and evidence-based practices supported by clinical trials and scientific research. Regularly reviewing scope-of-practice rules helps CAM practitioners avoid overstepping legal boundaries. Different therapies, from body-based practices to energy-based therapies, have defined limits. Understanding these boundaries ensures that complementary approaches, herbal medicines, and dietary supplements are delivered safely and ethically. Implementing Strong Risk Management Practices Clear informed consent forms protect both the patient and the practitioner. They explain treatment benefits, potential risks, and limitations of therapies such as tai chi, guided imagery, art therapy, and other complementary approaches. Consent forms demonstrate transparency and patient-centered care. Maintaining detailed patient records is critical for legal and medical reasons. CAM practitioners should document treatment plans, progress, and any adverse effects. This practice supports continuity of care and can defend against liability claims related to complementary treatment or integrative medicine. Developing protocols for patient safety and emergencies reduces risk. CAM practitioners should prepare for reactions to herbal medicines, nutritional products, and body-based practices. Safety protocols strengthen trust, protect well-being, and enhance the overall effectiveness of complementary health approaches. Accurate Marketing and Advertising Compliance CAM providers must avoid making unverified claims about treatment outcomes. Therapies such as acupuncture, osteopathic manipulation, or herbal medicines should be promoted with evidence-based language reflecting scientific research. Disclosing limitations or potential risks of therapies is essential. Patients have the right to understand possible adverse effects, especially when using biologically based practices, complementary treatment alongside conventional medicine, or dietary supplements. Transparency prevents misrepresentation and legal consequences. All promotional materials must meet local advertising regulations. CAM practitioners should ensure that claims align with regulatory guidance, National Institutes of Health recommendations, and World Health Organization guidance on complementary health approaches. Compliance protects reputation and ensures safe marketing of CAM therapies. Consulting and Hiring a Healthcare Lawyer Legal counsel supports CAM providers in navigating complex regulations. A healthcare lawyer can provide advice on compliance, liability mitigation, and risk management for complementary and alternative medicine practices. Healthcare lawyers can draft and review contracts, consent forms, and partnership agreements. They help CAM practitioners protect intellectual property, formalize collaborations, and ensure legal safeguards for complementary and integrative health services. Guidance on liability, insurance, and dispute resolution is essential. Legal experts advise on malpractice coverage, patient harm claims, and regulatory enforcement. Partnering with experienced counsel ensures complementary medicine providers operate safely within the legal framework. Continuing Education and Legal Updates CAM practitioners must stay informed about evolving healthcare laws and regulations. Changes in scope-of-practice rules, dietary supplement regulations, and state licensing requirements directly affect complementary and integrative health practices. Attending workshops or seminars on medical-legal compliance improves knowledge and reinforces ethical practice. Education supports evidence-based decision-making in complementary approaches and integrative medicine, including body-based practices and energy-based therapies. Networking with other professionals helps share best practices. CAM practitioners can learn from peers about regulatory challenges, risk management strategies, and safe implementation of therapies such as acupuncture, massage therapy, herbal medicines, and other complementary health approaches. Need Help Navigating CAM Regulations? Complementary and alternative medicine (CAM) practitioners operate in a complex legal and regulatory environment. Providers must ensure that therapies like acupuncture, herbal medicines, osteopathic manipulation, and body-based practices comply with local, state, and federal regulations. Proactive compliance protects both patients and practitioners. Using clear informed consent forms, maintaining accurate records, and adhering to advertising standards reduces liability. CAM providers should also implement protocols for patient safety, emergency response, and proper use of dietary supplements, guided imagery, and other complementary approaches. Frequently Asked Questions (FAQs) Complementary and alternative medicine (CAM) is a growing field, and many patients and practitioners have questions about its practices, safety, and legal requirements. This FAQ section addresses common concerns and provides guidance for safe, evidence-based complementary and integrative health care. What Is Considered Complementary and Alternative Medicine (CAM)? Complementary and alternative medicine includes therapies used alongside or instead of conventional medicine. Examples include acupuncture, herbal medicines, massage therapy, osteopathic manipulation, tai chi, guided imagery, and energy-based practices. Do CAM Practitioners Need a License to Practice? Yes, licensing requirements vary by state, country, and therapy type. Acupuncturists, chiropractors, massage therapists, and naturopaths often require professional licenses to practice legally. Why Should I Hire a Healthcare Lawyer for My Cam Practice? Healthcare lawyers provide guidance on regulatory compliance, liability, and risk management. They help CAM practitioners understand federal, state, and local laws that apply to complementary and integrative health practices. Can CAM Providers Advertise Their Services Online? Yes, but providers must comply with advertising regulations and avoid making unverified claims. CAM practitioners cannot claim their therapies cure or prevent diseases unless supported by scientific research. What Are the Five Categories of Complementary and Alternative Medicine? CAM therapies are generally classified into five categories: Biologically Based Practices: Include herbal medicines, dietary supplements, and nutritional products that influence body functions. Mind-Body Practices: Therapies like guided imagery, meditation, tai chi, and art therapy that support mental and physical health. Manipulative and Body-Based Practices: Chiropractic, massage therapy, osteopathic manipulation, and other treatments involving soft tissues and body systems. Energy Therapies: Practices such as qi gong, Reiki, and therapeutic touch that focus on energy flow in the human body. Whole or Traditional Systems of Medicine: Include Ayurveda, traditional Chinese medicine, naturopathy, and other ancient systems emphasizing balance and well-being.
November 24, 2025
Healthcare
Dietary Supplement Regulation
The Food and Drug Administration (FDA) and the Federal Trade Commission (FTC) primarily oversee dietary supplement regulation in the United States. While the FDA regulates dietary supplement labeling, manufacturing, and safety, the FTC monitors advertising to ensure marketing claims are truthful and not misleading. Together, these agencies protect consumers and uphold public health standards under laws such as the Dietary Supplement Health and Education Act (DSHEA) and the Federal Food, Drug, and Cosmetic Act. In this post, we’ll explore how dietary supplements are regulated and what labeling and packaging requirements apply. We’ll also cover key considerations for dietary ingredient notifications and good manufacturing practices (GMPs). What Are Dietary Supplements? According to the Food and Drug Administration (FDA), dietary supplements are products intended to supplement the diet and contain one or more dietary ingredients. These could include vitamins, minerals, herbs or other botanicals, amino acids, or other substances that add nutritional value to the diet. Under U.S. dietary supplement regulation, these products are classified as a special category of food rather than drugs. This means they are not approved by the FDA before marketing. Instead, manufacturers are responsible for ensuring their products are safe, properly labeled, and compliant with FDA regulations and good manufacturing practices (GMPs). The Federal Trade Commission (FTC) also plays a role by overseeing dietary supplement advertising law. They ensure that any health or structure/function claims are truthful and supported by scientific evidence. Common claims include structure/function claims like “calcium builds strong bones” or “fiber maintains bowel regularity,” which describe how a dietary ingredient affects the body’s structure or function without suggesting disease prevention or treatment. Types of Dietary Supplements Vitamins and Minerals: These are the most widely used supplements, addressing nutrient deficiency diseases and promoting overall wellness. Examples include vitamin C, which supports immune health, and calcium, known for maintaining bone strength. Herbal Products: Derived from plants, these supplements may include ginseng, echinacea, or turmeric, often used for their potential health benefits related to energy, immunity, and inflammation. Amino Acids and Protein Supplements: Popular among athletes and fitness enthusiasts, these supplements support muscle recovery and growth by supplying essential amino acids. Probiotics and Enzymes: These products aid digestion and promote gut health by supporting the balance of beneficial bacteria and enzyme activity. Dietary supplements are commonly used to enhance nutrition, support specific health goals, or address dietary gaps that may exist in the food supply. The industry continues to grow rapidly as consumers seek natural products to maintain wellness and prevent nutrient deficiencies. However, because supplements are regulated differently than drugs, understanding FDA and FTC dietary supplement regulation is critical to avoid safety risks and ensure compliance in labeling, packaging, and marketing. Key Regulatory Agencies for Dietary Supplement Oversight In the United States, the regulatory framework for dietary supplements aims to safeguard consumers and foster innovation and market expansion. Several agencies share responsibility for ensuring that dietary supplement labeling, advertising, and manufacturing practices meet federal safety and transparency standards. The two primary authorities (the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC)) play distinct but complementary roles in overseeing the dietary supplement industry. FDA (Food and Drug Administration) The FDA regulation oversees most aspects of dietary supplement regulation, including labeling, manufacturing, packaging, and safety monitoring. Under the Federal Food, Drug, and Cosmetic Act (FD&C Act) and the Dietary Supplement Health and Education Act (DSHEA), dietary supplements are treated as a special category of food rather than drugs. This distinction means that the FDA does not approve dietary supplements before they reach the market, unlike pharmaceuticals, which require premarket approval and clinical trials demonstrating safety and efficacy. However, dietary supplement manufacturers must ensure their products are safe and properly labeled. The FDA enforces good manufacturing practices (GMPs) to prevent contamination and mislabeling, requires new dietary ingredient notifications (NDINs) when introducing novel ingredients, and regulates claims made on Supplement Facts panels. The agency also evaluates structure/function claims, nutrient content claims, and health claims to ensure they are not misleading and are supported by significant scientific agreement or credible research. FTC (Federal Trade Commission) While the FDA governs product labeling, the FTC oversees dietary supplement advertising law, ensuring that promotional materials are truthful, substantiated, and not deceptive. The FTC’s authority extends to marketing claims that promise disease prevention, weight loss, or enhanced performance without credible scientific backing. For example, the FTC has taken enforcement actions against companies making false claims such as “clinically proven to cure cardiovascular disease” or “burns fat without diet or exercise.” These cases illustrate the importance of substantiated structure/function claims and transparent disclosures in advertising. Compliance with FTC standards protects consumers and reduces the risk of costly legal penalties and reputation damage for supplement companies. Other Agencies and International Oversight In addition to federal oversight, some state-level regulations govern the sale and labeling of dietary supplements within specific jurisdictions, particularly concerning consumer protection and product safety. Internationally, countries such as Canada and members of the European Union (EU) have their own frameworks for regulating food and dietary supplement products. For instance, the European Food Safety Authority (EFSA) evaluates health and nutrition claims, while Health Canada enforces labeling and safety standards for natural health products. Dietary Supplement Regulation Laws and Guidelines The regulatory landscape for dietary supplements in the United States is shaped by a combination of federal laws, agency guidelines, and enforcement policies. Key statutes and standards include the Dietary Supplement Health and Education Act (DSHEA), current Good Manufacturing Practices (cGMPs), and labeling and health claims regulations enforced by the FDA and FTC. Dietary Supplement Health and Education Act (DSHEA) Enacted in 1994, the Dietary Supplement Health and Education Act (DSHEA) provides the primary framework for dietary supplement regulation in the U.S. DSHEA defines what constitutes a dietary supplement, sets labeling requirements, and distinguishes supplements from conventional foods and pharmaceuticals. Under DSHEA, manufacturers can legally market supplements containing dietary ingredients such as vitamins, minerals, herbs, amino acids, and other substances intended to supplement the diet. DSHEA allows companies to make structure/function claims such as “calcium builds strong bones” or “fiber maintains bowel regularity.” However, DSHEA restricts disease claims, which suggest a supplement can prevent, treat, or cure a specific disease (e.g., “reduces risk of cardiovascular disease”). Products making disease claims are considered drugs under the FD&C Act and require premarket approval. Current Good Manufacturing Practices (cGMP) To ensure product quality and safety, the FDA enforces current Good Manufacturing Practices (cGMPs) for dietary supplements. These standards cover every stage of production, including ingredient sourcing, manufacturing, packaging, labeling, and storage. cGMPs require companies to maintain detailed records, conduct identity testing of ingredients, and implement quality control measures to prevent contamination, adulteration, and mislabeling. Compliance with cGMPs helps ensure that supplements meet safety requirements and accurately reflect what is stated on the product label. Labeling and Health Claims Regulations Dietary supplement labels must include a Supplement Facts panel, ingredient list, serving size, and the name and address of the manufacturer. Health-related claims on labels are strictly regulated: Structure/function claims: This category describes the effect of a dietary ingredient on the body’s structure or function (e.g., “Vitamin C supports immune health”). These claims must include the FDA-required disclaimer statement: “This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.” Disease claims: This clause suggests that a supplement that can treat, prevent, or cure a disease is prohibited unless the product is reviewed and approved as a drug by the FDA. How Dietary Supplements Are Monitored Unlike pharmaceuticals, dietary supplements do not require FDA approval before being marketed and sold to consumers. This means manufacturers are responsible for ensuring that their products are safe, accurately labeled, and compliant with dietary supplement regulation before they enter the market. While pre-market approval is not required, companies must comply with current Good Manufacturing Practices (cGMPs), maintain proper records, and ensure that labeling and structure/function claims meet FDA and FTC regulations. Post-market monitoring is a critical component of supplement oversight. The FDA relies on manufacturers, healthcare providers, and consumers to report adverse events associated with supplement use. This reporting system allows the agency to identify potential safety risks, evaluate patterns of harm, and take action when necessary. In cases where products are found to be unsafe, contaminated, or mislabeled, the FDA can issue voluntary recalls in cooperation with manufacturers or, in more serious situations, enforce mandatory recalls. The FDA has removed numerous supplements from the market due to their undeclared ingredients, harmful contaminants, or unsubstantiated claims, underscoring the importance of vigilant post-market monitoring. In addition to federal oversight, many supplement manufacturers participate in third-party certification programs to demonstrate quality and safety. Organizations such as USP (United States Pharmacopeia), NSF International, and other recognized quality seals test products for ingredient accuracy, purity, and manufacturing standards. These certifications give consumers more peace of mind that the supplement meets safety and quality standards. By combining regulatory compliance with third-party verification, the dietary supplement industry can better protect public health while promoting transparency and trust in the marketplace. Best Practices for Consumers Choosing safe and effective dietary supplements requires careful attention to labeling, claims, and regulatory compliance. Start by reading the product label thoroughly, paying close attention to the Supplement Facts panel, dietary ingredients, serving sizes, and any structure/function or health claims. Be wary of products that make unverified promises about preventing, treating, or curing specific diseases, as these are often outside the bounds of FDA and FTC dietary supplement regulation. Look for third-party certifications from organizations like USP or NSF, which test supplements for purity, ingredient accuracy, and adherence to current Good Manufacturing Practices (cGMPs). These seals provide added assurance that the product meets established quality standards and is less likely to contain contaminants or misrepresented ingredients. Consumers should also remain proactive in protecting their health by reporting adverse effects from supplements to the FDA or other regulatory bodies. Timely reporting helps authorities monitor safety risks and enforce recalls when necessary. For individuals navigating complex situations, such as misleading labeling or safety concerns, hiring a healthcare lawyer with expertise in dietary supplement regulation can provide guidance, protect legal rights, and ensure compliance with federal and state laws. By following these best practices, consumers can make informed decisions and safely incorporate supplements into their wellness routine. Unsure If Your Supplement Meets Regulatory Standards? Navigating dietary supplement regulation can be complex, but understanding the rules is essential for both consumer safety and legal compliance. From DSHEA and FDA labeling requirements to structure/function claims, good manufacturing practices (cGMPs), and FTC advertising regulations, knowing the regulatory framework helps ensure supplements are safe, accurately labeled, and marketed responsibly. Consumers and manufacturers alike benefit from reading labels carefully, checking for third-party certifications, and reporting any adverse effects to the appropriate authorities. FAQs These FAQs provide quick guidance on FDA oversight, labeling, safety, and best practices for choosing or marketing supplements. Are Dietary Supplements FDA-Approved? No, dietary supplements do not require FDA approval before being sold. The FDA regulates labeling, safety, and manufacturing practices, but it does not review supplements for efficacy like it does for drugs. How Can I Report a Harmful Supplement? You can report adverse events or safety concerns to the FDA through their Safety Reporting Portal. Reporting helps regulatory authorities monitor products and take action when necessary. What Does “Third-Party Tested” Mean? Third-party testing indicates that an independent organization, such as USP or NSF, has verified the supplement for ingredient accuracy and purity. This certification provides additional assurance that the product meets quality standards. What Are Structure/Function Claims? Structure/function claims describe how a dietary ingredient affects the body’s structure or function, like “fiber maintains bowel regularity.” They cannot claim to prevent, treat, or cure a specific disease without FDA approval. Can Supplements Make Health Claims? Yes, certain health claims are allowed if they are supported by significant scientific agreement or meet FDA standards. Claims must include required disclaimers to avoid misleading consumers. Do I Need a Prescription for Dietary Supplements? No, most dietary supplements are available over-the-counter and do not require a prescription. However, some specialty supplements with higher-potency ingredients may require professional guidance. How Do I Know if a Supplement is Safe? Check for cGMP compliance, read the label carefully, and look for third-party certifications like USP or NSF. Reporting any adverse effects and consulting a healthcare provider also helps ensure safety. Are All Supplements Regulated the Same Way Internationally? No, regulations vary by country. For example, the EU and Canada have different labeling, safety, and health claim requirements compared to the U.S. FDA and FTC rules.
November 21, 2025
Healthcare
Corporate Practice of Medicine Compliance Checklist
A corporate practice of medicine compliance checklist is an essential tool for healthcare organizations to ensure they follow all applicable CPOM laws and regulations. This checklist helps medical practices, professional corporations, and healthcare organizations maintain compliance with state law, protect patients, and safeguard the practice’s reputation. The most important aspects of CPOM compliance include preventing non-physician staff or corporate entities from influencing clinical decisions, ensuring licensed physicians make all medical decisions, and adhering to key OSHA standards, such as the bloodborne pathogen standard and the ionizing radiation standard. This post provides healthcare organizations, medical practices, and compliance officers with a detailed guide to corporate practice of medicine (CPOM) compliance. You’ll learn about state-specific CPOM laws, common compliance issues, and best practices for maintaining adherence to regulatory requirements. What is the Corporate Practice of Medicine? The corporate practice of medicine (CPOM) refers to state laws that prohibit non-physicians or corporate entities from owning or controlling medical practices in a way that influences clinical decisions. These laws exist to ensure that licensed physicians maintain full authority over patient care, treatment plans, and medical decisions, preventing outside business interests from compromising the quality of healthcare services. CPOM is the legal doctrine that restricts corporate influence over healthcare practice management, requiring that medical services and clinical decisions remain under the control of licensed physicians. This doctrine applies to a wide range of healthcare organizations, from single-physician offices to large medical groups. CPOM laws originated in the early 20th century to protect patients from financial or commercial pressures in medical care. The main goal is to make sure that healthcare organizations and business owners don’t put making money ahead of patient care, and that medical decisions are based only on clinical judgment. States with strict CPOM enforcement include California, Texas, New York, and Illinois, among others. These states closely monitor corporate ownership of medical practices, emphasizing the importance of compliance programs to prevent violations. Violations of CPOM laws can occur when non-physician staff or corporate executives influence treatment plans, refer patients in ways that favor financial gain, or dictate clinical decisions. Penalties can include fines, revocation of medical licenses, and legal action that could jeopardize a practice’s reputation and patient care standards. Who Needs a CPOM Compliance Checklist? Using a CPOM compliance checklist helps these organizations implement effective compliance programs, maintain thorough documentation, provide necessary employee training, and mitigate potential regulatory and legal risks. A corporate practice of medicine compliance checklist is essential for healthcare organizations that face CPOM risks, including: Medical practices owned by non-physicians: Ensures business owners don’t improperly influence clinical decisions. Private equity or corporate-owned healthcare groups: Helps large organizations navigate complex CPOM regulations and maintain legal compliance. Multi-specialty practices: Provides guidance on managing diverse medical specialties while protecting patient care and adhering to state law. Telehealth companies expanding across state lines: Ensures compliance with varying CPOM requirements and protects licensed physicians from regulatory risks. Corporate Practice of Medicine Compliance Checklist A corporate practice of medicine compliance checklist is an essential guide for healthcare organizations, medical practices, and compliance officers to navigate CPOM laws and maintain ethical, legal, and safe medical operations. This checklist ensures that physician authority is preserved in clinical decision-making, non-physician staff do not improperly influence patient care, and regulatory and OSHA requirements are met. Healthcare organizations can prevent compliance issues, reduce regulatory risks, and safeguard both patient care and the practice’s reputation by using a CPOM compliance checklist. 1. Understand State-Specific CPOM Requirements For instance, California and Texas enforce CPOM doctrines strictly, while other states may allow more flexibility. A thorough review of these requirements, along with any recent updates or legal changes, ensures your practice avoids violations that could lead to fines, loss of licensure, or other penalties. Keeping current with state-specific CPOM laws also helps healthcare organizations align their corporate and clinical operations with regulatory expectations. 2. Clarify Roles of Key Team Members Clear role definition is critical for CPOM compliance. All physician owners, administrators, managers, and support staff should understand their responsibilities, particularly in separating clinical decisions from business operations. Physicians must retain ultimate authority over treatment plans and patient care, while administrative staff manage operations, finances, and regulatory documentation. Including outside consultants or advisors in this structure requires caution to ensure they do not influence medical decisions. Properly defining roles protects the practice from CPOM violations and reinforces the integrity of clinical decision-making. 3. Confirm Physician Ownership Needs Compliance with CPOM laws often requires that physicians hold majority ownership of the medical practice. Practices structured as professional corporations (PCs), limited liability companies (LLCs), or hospital affiliations must review ownership arrangements to confirm they meet state CPOM requirements. Non-compliant ownership structures, where non-physician investors control the practice or influence clinical decisions, can result in significant legal and financial consequences. Ensuring proper physician ownership safeguards the practice against regulatory risks and protects patient care from undue corporate influence. 4. Set Up or Audit Professional Corporation Structures Healthcare organizations should either establish or periodically audit their professional corporation structures to ensure compliance with CPOM laws. This includes verifying that entity registration is accurate, bylaws reflect physician authority over medical care, and corporate governance aligns with state-specific CPOM rules. Auditing these structures ensures that physicians retain full control over clinical decision-making while the business side operates within legal boundaries. Properly structured professional corporations also support compliance documentation, which is essential during legal reviews, audits, or inspections. 5. Maintain Separation Between Clinical and Business Operations Maintaining a clear separation between administrative oversight and clinical decisions is one of the most important aspects of CPOM compliance. Administrative staff should focus on operational, financial, and regulatory responsibilities, while physicians make all medical decisions. Documenting workflows, training employees on their scope of authority, and implementing written policies and procedures help prevent inadvertent interference. Compliance programs, hazard communication standards, exposure control plans, and adherence to OSHA regulations like the bloodborne pathogens standard further reinforce a compliant and safe healthcare environment. 6. Create Management Services Agreements with Legal Input Healthcare organizations should develop management services agreements (MSAs) that define the responsibilities and limits of administrative managers. These agreements must ensure that non-physician managers handle only operational, financial, and administrative functions, without influencing medical decisions or patient care. It is critical to have legal counsel review all agreements to confirm compliance with state CPOM laws, federal regulations such as the Stark Law and Anti-Kickback Statute, and other applicable standards. Properly drafted MSAs help safeguard the practice from regulatory risks while establishing accountability and clear boundaries between clinical and business operations. 7. Periodically Review Agreements for Compliance CPOM compliance is an ongoing responsibility, and healthcare organizations should regularly review all contracts and agreements to ensure they do not grant corporate control over clinical decisions. Financial arrangements, management terms, and operational roles should be updated as needed to reflect changes in state law, clinical structure, or business strategy. Documenting each review and maintaining records of amendments enhances accountability and demonstrates a commitment to regulatory compliance, supporting the practice’s reputation and protecting patient care. 8. Define Physician Responsibilities Clearly Every CPOM compliance program should include a clear outline of physician responsibilities. This includes authority over clinical decisions, oversight of treatment plans, and monitoring compliance with medical and safety regulations. Physicians should also be assigned duties for reviewing clinical protocols, ensuring adherence to OSHA standards like bloodborne pathogens and ionizing radiation, and overseeing proper documentation of medical records. Clearly defining these responsibilities prevents ambiguity, reduces regulatory risk, and ensures that patient care decisions remain under licensed physician control. 9. Clarify Non-Physician Staff Duties Non-physician employees, including administrative staff, office managers, and business consultants, should have well-defined duties that focus on operational and administrative functions. Boundaries must be established to prevent interference with medical decisions, treatment plans, or patient care protocols. Staff should also understand compliance-related responsibilities, including following safety procedures, using personal protective equipment (PPE), and adhering to written hazard communication and exposure control programs. Proper role delineation reinforces CPOM compliance and maintains the integrity of the healthcare practice. 10. Align Clinical Protocols with Regulations Clinical protocols and patient care guidelines must comply with both state CPOM laws and federal regulations. Practices should document standard treatment plans, quality measures, and clinical workflows while ensuring they meet legal and regulatory requirements. Regularly reviewing these protocols ensures that updates to medical standards, safety regulations, or OSHA requirements are incorporated into everyday operations. Documented review processes help protect patients, reinforce compliance practices, and support thorough recordkeeping for audits or legal reviews. 11. Implement Internal Compliance Controls Healthcare organizations should implement internal controls to monitor adherence to CPOM requirements continuously. This may include compliance dashboards, tracking logs, or automated reporting systems that identify potential violations. Corrective actions should be taken proactively whenever non-compliance issues are detected, such as deviations from clinical authority, improper administrative influence, or safety hazards. A robust internal compliance program protects the practice from legal exposure and reinforces a culture of regulatory adherence and patient safety. 12. Schedule Regular Compliance Audits Regular audits are essential for both clinical and administrative operations to ensure ongoing CPOM compliance. These audits should document findings, identify gaps, and outline corrective actions with assigned accountability. Periodic reviews provide an objective evaluation of the practice’s adherence to state law, OSHA standards, and corporate policies, helping to prevent compliance issues before they escalate. Documented audits also demonstrate a commitment to patient care, safety, and regulatory excellence, which strengthens the practice’s reputation. 13. Educate Staff on Compliance Standards Continuous staff education is critical to maintaining CPOM compliance. Onboarding sessions and regular refresher training should cover clinical authority, administrative boundaries, OSHA requirements, exposure control plans, hazard communication standards, and reporting obligations. Providing real-life examples and scenarios enhances understanding, reinforces proper procedures, and encourages staff to escalate issues when necessary. Well-trained employees are a cornerstone of compliance, helping to protect patient care, maintain regulatory adherence, and uphold the organization’s reputation. 14. Work with Experienced Legal Counsel Engaging attorneys with expertise in corporate practice of medicine (CPOM) laws is essential for any healthcare organization. Legal counsel can provide guidance during practice expansions, acquisitions, or updates to management services and employment contracts, ensuring all actions remain compliant with state-specific CPOM regulations. Documenting legal advice and confirming follow-through on recommendations helps protect the practice from regulatory violations, enforces proper corporate governance, and reinforces physician authority over clinical decisions. 15. Partner with Credentialing, Billing, and Accounting Experts Healthcare organizations should work closely with external partners such as credentialing, billing, and accounting specialists to maintain CPOM compliance. These partners must adhere to guidelines that prevent corporate or financial influence over clinical decision-making. Maintaining proper documentation of their activities ensures accountability and supports thorough records for audits, legal reviews, and regulatory inspections, protecting both patient care and the practice’s reputation. 16. Monitor Changes in Laws Continuously CPOM compliance requires ongoing awareness of legal and regulatory changes. Healthcare organizations should subscribe to updates from state medical boards, federal regulators, and industry associations to track relevant CPOM and healthcare law developments. Internal policies and procedures should be revised promptly in response to new regulations or guidance, ensuring that the practice remains compliant and that compliance officers and staff are informed of any adjustments to clinical or administrative responsibilities. 17. Update Internal Procedures Regularly Internal policies and procedures should be reviewed at least annually or more frequently as needed to reflect changes in CPOM requirements, OSHA standards, or operational practices. Integrating new legal, regulatory, or operational updates ensures that the medical office maintains compliance with state law and federal regulations. Staff must be informed of revisions through training or written communication to reinforce adherence and prevent compliance issues in both clinical and administrative operations. 18. Adjust Agreements and Contracts Over Time Periodically reassess management services agreements, employment contracts, and vendor agreements to ensure alignment with evolving CPOM regulations. Updates may be required to address changes in ownership, staffing, corporate structure, or state-specific laws. Clear documentation of all revisions demonstrates diligence in maintaining compliance, supports regulatory reviews, and reduces the risk of legal exposure or penalties. 19. Keep Detailed Records of Compliance Efforts Thorough documentation is a cornerstone of CPOM compliance. Practices should maintain records of audits, training sessions, policy updates, approvals, and corrective actions. Keeping detailed compliance records ensures that regulatory authorities can review the practice’s adherence to CPOM laws, OSHA standards, hazard communication programs, and internal procedures. These records also support accountability within the organization and provide evidence of proactive risk management. 20. Establish Communication Channels for Compliance Issues Healthcare organizations must create clear communication channels for reporting potential CPOM or regulatory violations. Staff should know the proper procedures for escalating issues, while designated personnel must be assigned to investigate and resolve reported concerns. Establishing defined steps for corrective action and resolution prevents non-compliance from escalating and fosters a culture of accountability, safety, and adherence to compliance practices. 21. Ensure Telemedicine Practices Follow Regulations With the expansion of telehealth services, healthcare organizations must verify that telemedicine operations comply with both state and federal regulations. This includes confirming physician licensing for cross-state practice, protecting patient data and privacy under HIPAA, and maintaining full physician oversight of remote medical care. Adhering to CPOM laws in telemedicine ensures that clinical decisions remain under the control of licensed physicians and prevents non-physician entities from influencing treatment plans or patient outcomes. 22. Maintain Up-to-Date Credentials for All Staff All licensed physicians, physician assistants, and relevant medical personnel must maintain current credentials, certifications, and licenses. Practices should track renewals, organize records for audits, and implement reminder systems for upcoming expirations. Ensuring that all medical staff maintain proper credentials supports CPOM compliance, reinforces patient safety, and protects the practice during regulatory inspections. 23. Protect Against Non-Physician Interference in Clinical Decisions Preventing non-physician influence on patient care is a core element of CPOM compliance. Implementing whistleblower policies, separating financial incentives from medical judgment, and monitoring administrative interactions with physicians help safeguard clinical autonomy. These measures protect patients from inappropriate business-driven influences, reinforce regulatory adherence, and maintain the integrity of treatment plans and medical decisions. 24. Monitor Financial Arrangements for Legal Compliance Healthcare organizations must ensure that all financial arrangements comply with CPOM laws and federal statutes such as the Stark Law and Anti-Kickback Statute. Improper fee-splitting, profit-sharing, or non-compliant physician compensation can expose a practice to severe penalties. Regular audits of contracts, compensation structures, and financial agreements help prevent violations, maintain regulatory compliance, and protect the practice’s reputation. 25. Create a Staff Compliance Reporting System An effective reporting system allows staff to report potential CPOM or compliance concerns safely and efficiently. Anonymous reporting options, prompt follow-up, and thorough documentation of all reports and resolutions ensure that issues are addressed proactively. These systems strengthen accountability, cultivate a compliance culture, and assist in preventing minor issues from turning into significant regulatory or legal breaches. 26. Manage Compliance During Mergers and Expansions During mergers, acquisitions, or expansion into new markets, healthcare organizations must conduct thorough CPOM due diligence. Ensuring that physician control is maintained over clinical decisions is critical, even when incorporating new entities. Internal policies and compliance procedures should be updated post-merger to reflect any operational or structural changes, maintaining regulatory adherence and protecting patient care standards. 27. Prepare Documentation for Audits and Inspections Thorough documentation is essential for CPOM compliance, particularly during audits or regulatory inspections. Practices should keep organized records of contracts, compliance logs, training sessions, and management activities. Quick access to comprehensive documentation demonstrates a commitment to regulatory compliance, provides evidence of proactive risk management, and helps maintain the practice’s reputation and credibility with regulators. 28. Ensure Marketing and Advertising Compliance All marketing and advertising efforts must comply with CPOM laws and avoid implying corporate control over clinical decisions. Physician endorsements should be accurate and verifiable, and promotional materials must be reviewed to confirm legal compliance. Ensuring that marketing aligns with CPOM regulations protects the practice from misrepresentation, regulatory fines, and potential legal action, while maintaining trust with patients and the public. Want to Secure Your Practice Against CPOM Risks? Compliance with the corporate practice of medicine (CPOM) doctrine is critical to protecting your healthcare organization, medical staff, and patients. Adhering to CPOM laws ensures that physicians maintain authority over clinical decisions, prevents non-physician interference in patient care, and safeguards your practice from regulatory and legal risks. Healthcare organizations should regularly review and update their corporate practice of medicine compliance checklist, audit internal procedures, and stay informed of state-specific laws to maintain ongoing compliance. FAQs The following FAQs address common questions about the corporate practice of medicine doctrine, helping practices navigate regulatory requirements and maintain compliance. What Happens if a Medical Practice Violates CPOM Laws? Violating CPOM laws can result in fines, legal penalties, and even revocation of medical licenses. It can also damage the practice’s reputation and compromise patient care by allowing improper influence over clinical decisions. Can a Non-Physician Own a Medical Practice Legally? In most states with strict CPOM laws, non-physicians cannot own or control a medical practice in a way that influences clinical decisions. Exceptions may exist in states without the corporate practice of medicine doctrine, but ownership structures must still comply with federal laws and regulatory standards. How Often Should a CPOM Compliance Checklist Be Updated? A CPOM compliance checklist should be reviewed and updated at least annually or whenever there are significant changes in state laws, practice structure, or federal regulations. Regular updates ensure the practice remains compliant and protects both patients and licensed physicians. What Are The Compliance Issues in Practice Management? Compliance issues can include improper corporate influence over clinical decisions, failure to maintain proper documentation, non-adherence to OSHA standards, and violations of Stark Law or the Anti-Kickback Statute. Addressing these issues proactively helps protect patient care, regulatory compliance, and the practice’s reputation. Which States Allow Corporate Practice of Medicine? States that follow the corporate practice of medicine doctrine strictly prohibit non-physicians from owning or controlling medical practices in ways that influence clinical decisions. Key examples include California, Texas, New York, Illinois, and Florida, among others, where healthcare organizations must structure ownership and operations to ensure licensed physicians retain authority over all medical decisions.
November 18, 2025
Healthcare
Understanding the 5 Elements of Fraud in Healthcare
Understanding the 5 elements of fraud is essential for any healthcare provider seeking to avoid fraudulent behavior patterns, protect their legal rights, and reduce the risk of fraud charges or litigation. In healthcare law, a fraud claim typically requires a false statement, knowledge of its falsity, intent to induce reliance, reasonable reliance by the alleged victim, and resulting harm. These elements help courts decide if a claimed misrepresentation is serious enough to be considered fraud and if the person making the claim needs to show that they reasonably depended on the misleading information. This post explains how regulators and courts analyze intent, material fact disputes, and the circumstances constituting fraud. It will help providers understand what actions may expose them to liability. What Is Considered Fraud in Healthcare? Fraud in healthcare occurs when a person makes a false statement or material misrepresentation with the intent to deceive another party. Typically, this entails actions intended to obtain payment, benefits, or advantages beyond their legal entitlements. Courts treat these actions seriously because fraudulent behavior patterns can harm patients, insurers, and government programs. A fraud claim also exposes the party charged to civil penalties, criminal liability, and extensive litigation. Healthcare fraud involves conduct that satisfies several key elements under common law fraud. The plaintiff must show a false representation of a material fact and prove fraud through clear and convincing evidence. Regulators frequently depend on circumstantial evidence when direct proof is scarce, particularly when the defendant acted with reckless disregard or knew the information was false. These cases require proof that the injured party or alleged victim justifiably relied on the statements and suffered measurable harm. Fraud is different from waste and abuse, even though all three can trigger regulatory action. Waste involves unnecessary services that increase costs without clear intention to deceive. Abuse includes practices that are inconsistent with accepted standards but do not always involve intent. Fraud, however, requires intent, reliance, and a deliberate act that misleads another party. This distinction matters because fraud charges carry far more serious consequences and often result in court action, summary judgment battles, or detailed inquiries into the defendant’s intent. Healthcare fraud can appear in many forms, such as billing fraud, false claims, misrepresentation of services, and deceptive advertising. Kickbacks and improper inducements also qualify as fraud because they distort medical judgment and violate federal law. These actions expose the defendant to liability because the plaintiff’s reliance and loss causation can usually be demonstrated with convincing evidence. Every fraud case depends on specific facts, including the actions based on the defendant’s statements, the knowledge of the person making the claim, and the resulting injury. Courts evaluate how a reasonable person would interpret the statements and whether the plaintiff must show diligent inquiry or due diligence. When allegations arise, both the complaint and the opposing party’s response determine how the court analyzes the five elements of fraud and whether the case proceeds. What Are the Five Elements of Fraud in Healthcare? Fraud in healthcare is evaluated under principles drawn from common law fraud, and courts require specific elements to establish liability. Regulators and judges look closely at the statements, conduct, and circumstances surrounding an alleged misrepresentation. Each element must be supported by clear and convincing evidence, which is a higher standard than most civil claims. These elements help determine whether the defendant knew the statements were false, whether the plaintiff justifiably relied on those statements, and whether the alleged victim suffered real harm. They include: Material Misrepresentation A misrepresentation of a material fact occurs when someone makes a false statement, omission, or deceptive act that influences another party. In healthcare, such allegations can include false claims, inaccurate documentation, misleading medical records, or deceptive advertising. Providers can commit fraud when they present information that appears credible but does not reflect actual services or clinical decisions. Courts examine whether the material representation affected the other party’s actions under the circumstances. Even small inaccuracies in documentation can create legal risk because insurers and regulators rely on precise statements. A single false representation may support allegations that the person making the statement intended to deceive the other party. Healthcare organizations must understand that material misrepresentation does not require dramatic misconduct. A pattern of minor errors can form circumstantial evidence that supports allegations of fraudulent behavior patterns and places the defendant in a difficult position. Knowledge of Falsity The second element requires proof that the defendant knew the statement was false or acted with reckless disregard. Courts do not require direct proof of knowledge, so circumstantial evidence is often used to show that the defendant knew or should have known the truth. This type of case is common in fraud cases involving inaccurate claims, altered records, or reckless billing practices. Regulators also examine whether deliberate ignorance contributed to the false statement. Healthcare compliance requires accurate records and honest communication because reckless disregard can satisfy the knowledge requirement. The party charged with fraud may argue they lacked intent, but patterns of inconsistent statements or missing documentation can undermine their defense. Courts evaluate whether a reasonable person in the defendant’s position would have known the statement was false. When the defendant’s knowledge is established, the plaintiff must only show that the false statement influenced their decision. Intent to Induce Reliance Intent is a key element in proving fraud because the defendant must have acted with the purpose of influencing another party. Regulators evaluate intent by reviewing documentation, communications, billing records, and marketing statements. A false representation made in a claim submission or advertisement often shows intent because the act encourages an insurer, patient, or regulator to rely on the information. Courts consider whether the defendant’s conduct suggests a deliberate plan to mislead the opposing party. In healthcare, intent often appears in billing fraud or deceptive advertising where providers present information that encourages financial payment or trust. The plaintiff must show the defendant’s statements were designed to affect their actions. When a provider submits documentation knowing it will be reviewed by insurers or government agencies, the court presumes they intended those parties to rely on the information. This element is critical because fraud cannot exist without purposeful conduct directed toward another party. Justifiable Reliance Justifiable reliance means the alleged victim relied on the statement in a manner that a reasonable person would under the circumstances. Insurers, patients, regulators, and healthcare payers rely heavily on documentation and representations. Courts evaluate whether the plaintiff justifiably relied on the statements and whether a reasonable person in their position would have interpreted the information as accurate. The plaintiff’s reliance must also be connected to an action based on the misrepresentation. Documentation plays a major role because clear records can support or defeat allegations of reliance. When the plaintiff’s reliance is justified, they may show that the misrepresentation influenced their decisions. Healthcare providers must understand how their statements affect other parties because reasonable reliance often forms the strongest part of a fraud claim. Courts consider whether the plaintiff must have conducted due diligence, but they do not require perfect investigation when trusting a professional. Damages The final element of fraud requires proof of harm. The plaintiff must show that the reliance on the false statement caused injury, such as financial loss, improper reimbursement, or patient harm. In healthcare, harm can also include regulatory penalties, audits, recoupments, or damage to professional reputation. Courts require evidence of loss causation, which links the misrepresentation to the injury. Without damages, the fraud claim cannot succeed, even if the other elements are strong. Fraud cases often involve complex calculations because damages may include restitution, penalties, or statutory fines. Healthcare providers may face license actions or government investigations if fraud is proven. Courts consider whether the plaintiff suffered measurable harm and whether the injury stemmed directly from the false statement. When damages are established, the defendant may be liable for significant consequences that affect their practice and future operations. What Are Common Examples of Fraud Allegations in Healthcare? Fraud allegations in healthcare often arise when regulators believe a provider made a false statement or misleading representation that influenced another party’s decisions. Many fraud cases begin when an insurer, regulator, or patient reports circumstances constituting suspicious billing patterns or deceptive conduct. These allegations can trigger audits, investigations, or litigation where the plaintiff must prove fraud through clear and convincing evidence. One common example involves billing for services not provided, which creates immediate suspicion of fraudulent intent. Regulators review records to determine whether the material representation matches actual treatment. A false representation in billing can support allegations that the defendant knew the statements were inaccurate. Courts often use circumstantial evidence to evaluate whether the statements influenced the other party. Another major category involves upcoding, unbundling, or improper modifiers, which can inflate reimbursement. Even minor inaccuracies can become evidence that the person making the claim acted with reckless disregard. These actions may appear intentional when repeated across many claims, and they can suggest a plan to commit fraud. Insurers may argue that they justifiably relied on the codes and suffered financial harm as a result. Healthcare providers also face allegations for false marketing claims, including guarantees, cure claims, or deceptive advertising. Misrepresentation in marketing can create liability even when the provider does not intend to mislead. Courts evaluate whether a reasonable person would rely on the statements based on the circumstances. When a plaintiff’s reliance is shown, the case may proceed despite citations omitted from marketing materials. Another common allegation involves misrepresenting clinician credentials or scope of practice. This occurs when a provider performs services they are not authorized to perform or advertises qualifications they do not possess. Plaintiffs often argue they relied on these statements and suffered injury. Regulators treat these cases seriously because credibility and trust are essential in healthcare. Kickbacks and improper referrals also trigger fraud charges because they distort medical judgment. These cases often rely on circumstantial evidence showing that the other party received improper inducements. The plaintiff must demonstrate that the conduct influenced decisions in a way that caused harm. Courts evaluate whether a reasonable person would interpret the referral pattern as intentionally deceptive. Finally, telehealth compliance issues have become a significant source of fraud allegations. Misrepresentation of patient interactions, inaccurate documentation, or unauthorized prescribing can lead to claims of fraudulent conduct. Regulators review whether the defendant acted with knowledge or reckless disregard when submitting telehealth claims. These cases often examine intent, reliance, and the impact on insurers or government programs. How Do Regulators Investigate and Prove Fraud? Regulators investigate fraud by examining whether a provider made a false statement or engaged in conduct that suggests a material misrepresentation. Their goal is to determine whether the defendant knew the information was false or acted with reckless disregard for the truth. These regulation agencies look at circumstances constituting suspicious activity, including billing patterns, documentation inconsistencies, or statements that appear misleading. Regulators gather detailed records to analyze intent, reliance, and harm, as they must prove fraud cases with clear and convincing evidence. These efforts help determine whether the injured party justifiably relied on the misrepresentation and suffered measurable damages. Agencies such as CMS, OIG, Medicare contractors, state boards, and insurance regulators begin investigations by reviewing billing data and comparing it to expected norms. Unusual trends may indicate fraudulent behavior patterns or practices that could mislead another party. Regulators also examine whether the defendant’s actions show deliberate ignorance or reckless disregard. If patterns start to show up, regulators may look into the case more closely and see if the plaintiff needs to prove the elements of common law fraud. This initial review often sets the stage for deeper investigation and potential fraud charges. Audits play a central role because they reveal whether claims match the underlying documentation. Regulators request records, communications, and clinical notes to confirm that services were actually provided. When records appear inconsistent, investigators may issue subpoenas to obtain additional information. These documentation requests help agencies determine whether the person making the statement intended the other party to rely on it. If discrepancies persist, regulators may suspect that the defendant tried to commit fraud through misrepresentation or omission. Regulators also use undercover investigations when they suspect deceptive conduct, which paperwork alone cannot prove. Investigators may pose as patients to gather statements directly from the provider. These interactions can reveal false representations, improper inducements, or claims outside the provider’s scope of practice. Courts often view these statements as strong circumstantial evidence, especially when the defendant benefits financially. This evidence becomes important when the opposing party challenges the allegations during litigation. Patterns of conduct help regulators assess intent, because fraud rarely relies on one isolated act. When the same inaccuracies appear repeatedly, regulators infer that the defendant knew or should have known the statements were false. Providers may argue they made mistakes, but patterns suggest deliberate conduct rather than error. Courts evaluate whether a reasonable person in the defendant’s position would recognize the misrepresentation. These evaluations help determine whether the plaintiff’s reliance was justified and whether loss causation can be established. Documentation is often the most important factor because it supports or undermines the entire fraud claim. Regulators review whether records were altered, omitted, or created after the fact. Missing or incomplete documentation may indicate an effort to hide fraudulent statements. When the plaintiff shows that they relied on the documentation and suffered harm, the case becomes stronger. This connection between the misrepresentation and injury is essential because fraud cannot exist without damages. How to Identify and Prevent Fraud in Business Fraud in business settings often begins with patterns of behavior that seem minor but create significant legal risk over time. Healthcare providers need to know how a false statement or misleading action can affect someone else and lead to claims of fraud. Detecting fraud early helps prevent circumstances constituting regulatory violations, civil liability, or litigation. Businesses should train staff to recognize suspicious activity, review internal controls, and ensure that documentation supports all representations to insurers, regulators, and patients. When these safeguards are in place, the risk of a fraud claim decreases, and the organization strengthens its defense if allegations arise. One effective technique for detecting fraud involves reviewing financial and operational data for unusual trends. Sudden spikes in revenue, inconsistent coding patterns, or repeated documentation errors can indicate potential misrepresentation of a material fact. Businesses should also monitor employee behavior for signs of pressure, opportunity, or rationalization, which often appear before fraudulent acts occur. Regular internal audits help businesses find false claims before they turn into formal fraud cases. These audits also help the company demonstrate due diligence if regulators question their practices. Another important step is evaluating communication within the organization. Misleading statements, vague explanations, or pressure to ignore established procedures may indicate fraudulent behavior patterns. In healthcare settings, inaccurate clinical documentation, improper inducements, or claims outside the provider’s scope of practice can signal deeper problems. Companies need to make it easy for workers to report problems without worrying about getting in trouble. Whistleblower programs often provide early warnings that help prevent injury to the alleged victim and reduce exposure to legal action based on alleged misrepresentation. The business must also examine high-risk areas where fraud most commonly occurs. Common schemes include billing for services not provided, creating false invoices, misusing company funds, or altering financial records. In healthcare, additional risks involve upcoding, unbundling, deceptive advertising, and improper referrals. These actions can influence insurers, regulators, or patients and create the appearance of intent to commit fraud. When the company identifies these patterns, it can intervene quickly to correct errors and prevent further harm. How Can Healthcare Providers Avoid Fraud Liability? Healthcare providers face significant risk when their actions appear to involve a false statement, misleading documentation, or a material misrepresentation. Regulators and courts examine every detail to determine whether the defendant knew the information was false or acted with reckless disregard. Providers must therefore adopt systems that prevent conduct resembling fraudulent behavior patterns and reduce the chance of a fraud claim. Strong safeguards also help demonstrate that the provider acted in good faith and did not intend to deceive another party. When compliance systems are consistent, providers are better positioned to defend against allegations involving circumstantial evidence, plaintiff’s reliance, or loss causation. These strong safeguards include: Strong Compliance Programs: A strong compliance program helps prevent conduct that may appear as intentional misrepresentation. These programs establish clear expectations for billing, documentation, and communication within the organization. Regulators often view a structured program as evidence that the provider lacked intent to commit fraud. A good compliance system also reveals inaccurate statements before they lead to litigation or fraud charges. Providers who maintain consistent oversight reduce their exposure to allegations involving reckless disregard. Documentation Best Practices: Accurate documentation is essential because investigators often examine records first when reviewing suspected fraud cases. Courts look for inconsistencies that may suggest a false representation or omission. When documentation is complete and reliable, it becomes difficult for a plaintiff to prove that they justifiably relied on any misleading information. Strong documentation also helps demonstrate that the provider exercised due diligence in every interaction. These practices reduce the risk of injury to the alleged victim and limit claims involving material misrepresentation. Proper Billing and Coding Protocols: Billing and coding errors are major triggers for regulatory audits and fraud investigations. Practices like upcoding, unbundling, and improper modifiers can appear as attempts to commit fraud, even when unintentional. Training and internal audits help ensure that staff follow established protocols and avoid inaccurate claims that may influence another party. These audits also identify patterns that could be misinterpreted as circumstantial evidence of intent. Proper billing systems demonstrate that the provider did not knowingly submit false information. Transparent Advertising and Patient Communication: Transparent communication reduces the risk that a patient or insurer relies on inaccurate or misleading statements. Providers must ensure that advertisements do not guarantee results, promise cures, or exaggerate outcomes. Honest communication helps prevent situations where a reasonable person could claim reliance on a false statement. It also strengthens the provider’s credibility and reduces the risk of complaints based on alleged misrepresentation. Clear messaging supports ethical practice and protects the organization from fraud allegations. Legal Review of Marketing, Scope of Practice, and Telehealth Operations: A legal review of marketing materials and patient communication helps ensure compliance with state and federal law. Attorneys can identify statements that may suggest intent to deceive or mislead another party. They also confirm whether services align with the provider’s scope of practice, which prevents conduct that regulators may interpret as fraudulent. Telehealth systems require additional oversight because documentation and jurisdictional rules can create risk. Legal review ensures accuracy and prevents claims that the provider knowingly submitted false or misleading information. When Providers Should Contact a Healthcare Attorney Healthcare providers should seek legal support whenever circumstances raise concerns about a possible false statement, material misrepresentation, or alleged misrepresentation in their operations. Early guidance helps keep actions from being seen as dishonest or careless disregard for the truth. Regulators and insurers rely heavily on documentation, so even small inconsistencies may influence another party and trigger a fraud claim. When providers see early warning signs, they can seek legal help before the claims turn into audits, investigations, or lawsuits. Early intervention also helps demonstrate due diligence, which can protect the provider if the plaintiff must later prove fraud with clear and convincing evidence. Providers should contact an attorney immediately when they receive red flags such as audits, payer inquiries, or unusual documentation requests. These events often indicate that a regulator suspects circumstances constituting a false representation or improper billing activity. A payer may request records because they believe the provider submitted claims that do not match documented services. Patient complaints and demand letters also require urgent attention because they may reflect reliance by an alleged victim who believes they suffered injury. These complaints can grow into formal fraud cases if not addressed quickly and strategically. Early legal intervention is essential because it helps prevent minor issues from becoming full investigations. Attorneys can review statements, billing practices, and documentation to identify errors that could appear intentional. By correcting issues early, providers reduce the chance that investigators will interpret patterns as circumstantial evidence of intent to commit fraud. Legal counsel also helps shape responses to auditors and insurers, ensuring that statements are clear, accurate, and consistent with the facts. This proactive approach can prevent the matter from progressing to summary judgment or litigation involving allegations of common law fraud. Need a Healthcare Attorney To Navigate Claims? It is essential for every healthcare provider to understand the 5 elements of fraud because even small inaccuracies can appear as a false statement or material misrepresentation. Regulators examine documentation, billing patterns, and communication closely, and they often rely on circumstantial evidence when evaluating intent. Providers who understand how courts analyze intent, reliance, and injury are better equipped to avoid conduct that may resemble fraudulent behavior patterns. This knowledge also helps reduce the risk that an alleged victim will claim they relied on misleading information and suffered harm. FAQs Fraud claims in healthcare and business settings often involve complex legal standards, so providers must understand how courts analyze intent, reliance, and harm. These questions address the core issues regulators examine when determining whether a false statement or material misrepresentation occurred. What Are The 5 Elements of Fraud? The five elements are misrepresentation of a material fact, knowledge of falsity, intent to induce reliance, justifiable reliance, and damages. Courts require clear and convincing evidence to prove fraud under common law standards. How Can I Identify The 5 Elements of Fraud in a Business Setting? Look for false statements, reckless disregard, misleading documentation, or conduct that influences another party’s decisions. Patterns of inconsistent records or unexplained financial activity often serve as circumstantial evidence of fraudulent intent. What is Loss Causation in Fraud Claims? Loss causation refers to the connection between the misrepresentation and the injury suffered by the alleged victim. The plaintiff must show the false representation directly caused financial, regulatory, or reputational harm. What are Common Reasons For The Dismissal of Fraud Claims? Fraud claims are often dismissed when the plaintiff fails to plead facts showing intent, reasonable reliance, or a material misrepresentation. Claims may also fail when evidence does not meet the clear and convincing standard required to prove fraud.
November 17, 2025
Healthcare
Confidentiality Agreement for Medical Practice
A confidentiality agreement for medical practice is a legally binding document that ensures patient information, business data, and proprietary processes within a healthcare setting remain private and protected. In the medical field, confidentiality is a legal requirement under regulations like HIPAA. These agreements establish clear boundaries for how patient records and sensitive business information can be accessed, used, or shared by employees, contractors, and third parties. Without a proper confidentiality agreement, a medical practice risks data breaches, legal penalties, and loss of patient confidence. This post covers what a confidentiality agreement for medical practice is, why it’s essential for protecting patient information and healthcare compliance, and how an experienced healthcare attorney can help you draft one that meets legal standards. What Is a Confidentiality Agreement in a Medical Practice? A confidentiality agreement for medical practice, also known as a nondisclosure agreement (NDA), patient confidentiality agreement, or medical staff confidentiality contract, is a legal agreement designed to protect confidential information shared within a healthcare setting. The main goal is to protect private information, such as patient medical records, trade secrets, technical specifications, and business-sensitive information that belongs to the practice. This written agreement establishes a confidential relationship between the disclosing party (the medical practice) and the receiving party (such as employees, consultants, vendors, or third-party service providers), ensuring that such disclosure of confidential information is limited to permissible use only. It helps prevent unauthorized disclosure, public disclosure, or misuse of proprietary information and intellectual property that could harm the business or patients. In a healthcare context, all parties involved, such as employees, temporary staff, and former employees, must sign this legal contract to confirm their understanding of the obligations created by the agreement. It typically outlines the time period for which confidentiality must be maintained, what qualifies as confidential data, and circumstances that may allow permissible disclosure, such as a court order or prior written consent from the disclosing party. Why Confidentiality Agreements Are Essential in Healthcare In the healthcare environment, confidentiality agreements are vital for maintaining trust, legal compliance, and professional integrity. They help protect patient privacy in accordance with the Health Insurance Portability and Accountability Act (HIPAA) and similar privacy laws. A HIPAA confidentiality agreement ensures that those handling protected health information (PHI), such as medical histories, test results, or billing details, understand what qualifies as confidential data and agree not to disclose it without prior written consent or a court order. Any unauthorized disclosure can lead to identity theft, financial penalties, and loss of patient confidence. Beyond patient care, these agreements also safeguard the practice’s business information, including marketing strategies, pricing structures, medical software, technical specifications, and patient databases. In a competitive industry, such proprietary information and intellectual property represent valuable assets that must be protected from misuse by third parties or competitors. Whether during business negotiations, a joint venture, or when two companies exchange sensitive materials for the same purpose, a confidential disclosure agreement ensures both parties agree on how to handle, share, and protect data. By clearly outlining ownership rights, permissible disclosure conditions, and governing law, this legal contract helps healthcare organizations remain compliant and secure in their operations. What Is a HIPAA Confidentiality Agreement and Why It’s Important A HIPAA confidentiality agreement is a specific type of legal agreement required under federal law to protect protected health information (PHI). It sets out the responsibilities of all parties involved, including healthcare employees, contractors, and other individuals with access to patient records, to maintain strict confidentiality. The agreement defines what constitutes confidential information, such as diagnostic results, medical charts, or financial data, and restricts its use to authorized purposes only. It also explains the consequences of any breach, including disciplinary action or legal penalties. By implementing a comprehensive confidentiality agreement template that includes HIPAA protections, medical practices can ensure they meet legal standards while maintaining patient trust. Such agreements create a clear understanding between one party disclosing information and another party receiving it, emphasizing the obligations and interests of both sides in keeping data confidential. These contracts form the backbone of a secure, compliant, and trustworthy healthcare practice. What Every Healthcare Confidentiality Agreement Must Cover A well-drafted healthcare confidentiality agreement is essential for protecting both patient privacy and a medical practice’s sensitive business information. These legal contracts clearly define what constitutes confidential information, establish the responsibilities of those who access it, and outline the legal consequences of any breach. Whether it’s signed by an employee, contractor, vendor, or third-party service provider, the agreement ensures all parties involved understand their role in maintaining confidentiality and complying with healthcare privacy laws like HIPAA. Definition of Confidential Information Every confidentiality agreement should begin by defining what “confidential information” includes. In healthcare, this typically covers patient data, medical records, test results, billing information, and any other protected health information (PHI). It can also include business-related confidential data such as pricing structures, marketing strategies, medical software, or technical information that gives the practice a competitive edge. Clearly stating what qualifies as confidential information prevents ambiguity and ensures all parties know exactly what must be protected. Obligations of the Employee or Contractor The agreement must specify how the receiving party (an employee or contractor) is required to handle, store, and protect sensitive information. This includes keeping confidential data in secure systems, using authorized communication channels, and avoiding any disclosure of confidential information to unauthorized individuals. It should also prohibit discussing patient details in public or online settings and require the signer to report any suspected breaches immediately. Duration of Confidentiality A strong confidentiality agreement template should make clear that confidentiality obligations apply both during and after employment. For example, the duty to protect patient information usually lasts indefinitely, while business-related information might have a set time (e.g., two to five years). This ensures that even former employees remain bound by the legal obligations of the agreement. Exceptions to Confidentiality Certain exceptions should also be included to outline when disclosure is legally permissible. These may involve information already in the public domain, cases where the patient has given prior written consent, or situations where disclosure of confidential information is required by a court order or governmental body. Defining these permissible disclosure scenarios helps prevent confusion and ensures compliance with governing laws. Consequences of Breach Every nondisclosure agreement should detail what happens in the event of a breach. Depending on the severity, consequences may include disciplinary action, termination of employment, financial penalties, or even legal liability. Clear language about the obligations created by the agreement reinforces accountability and deters negligent handling of confidential materials. Acknowledgment and Signature Finally, both the disclosing party (the medical practice) and the receiving party (the employee, vendor, or consultant) must sign the written agreement. Signatures confirm that both parties agree with the terms and understand their responsibilities under the entire agreement. Keeping signed copies on file is crucial for compliance audits, legal protection, and proof of a valid confidential relationship. How to Implement Confidentiality Agreements in Your Practice Putting a confidentiality agreement into action is just as important as drafting it correctly. The first step is to work with an experienced healthcare lawyer who understand the complexities of HIPAA, patient confidentiality, and healthcare compliance. A qualified attorney can ensure that your legal agreement is properly written, enforceable under governing law, and tailored to your practice’s structure and needs. Every employee, contractor, or third-party service provider with access to confidential data should sign the written agreement before starting work. Introducing the confidentiality agreement during onboarding helps new staff understand their obligations regarding protected health information (PHI) and other proprietary information from day one. It’s also best practice to review the agreement alongside HIPAA training and internal privacy policies, reinforcing the importance of maintaining a confidential relationship with both patients and colleagues. Once the agreements are signed, keep them securely stored in each employee’s HR file as part of your compliance documentation. Practices should also review and update these agreements annually or whenever there are changes in law, internal systems, or staff roles to ensure continued compliance and protection against unauthorized disclosure. Ready to Protect Your Medical Practice’s Privacy? Protecting confidentiality is about safeguarding your patients, your staff, and the reputation of your medical practice. A well-drafted confidentiality agreement helps prevent data breaches, builds patient trust, and keeps your practice aligned with HIPAA and other healthcare privacy laws. Rather than waiting for a legal issue to arise, take a proactive approach to compliance and secure your sensitive information before problems occur. Frequently Asked Questions (FAQs) Below are answers to some common questions that will help you navigate confidentiality requirements in a medical setting: Who Should Sign a Confidentiality Agreement in a Medical Practice? Everyone who has access to confidential information should sign one. This includes employees, contractors, vendors, consultants, temporary staff, and third-party service providers. This ensures that all parties involved understand their responsibilities in protecting patient data, proprietary information, and other confidential materials belonging to the practice. Is a Non-Disclosure Agreement HIPAA the Same as a Confidentiality Agreement? A non-disclosure agreement (NDA) and a HIPAA confidentiality agreement share similar goals but serve slightly different purposes. While an NDA can apply to any type of confidential information, a HIPAA confidentiality agreement specifically addresses protected health information (PHI) and ensures compliance with federal privacy laws governing healthcare data. Many practices use a combined document that covers both. What Happens if an Employee Violates It? If an employee breaches a confidentiality agreement, the consequences can include disciplinary action, termination, financial penalties, or even legal liability. In cases involving HIPAA violations, the practice may also face federal fines or sanctions. A clear legal agreement helps outline these consequences and gives the practice grounds for enforcement. How Long Should Confidentiality Last? The duration of confidentiality depends on the type of information. Patient information is typically protected indefinitely, even after employment ends, while business or proprietary information may be subject to a set period (e.g., two to five years). The agreement should clearly state how long each type of data remains confidential. Can Patients Also Be Asked to Sign One? Yes, patients can be asked to sign one. In certain cases, such as when patients participate in research studies, media projects, or collaborative healthcare programs, they may be asked to sign a patient confidentiality agreement. This ensures that patients understand how their data will be used and shared, maintaining transparency and trust between the practice and the patient.
November 10, 2025
Healthcare
Can a Nurse Open a Med Spa in California?
If you’ve ever wondered, “Can a nurse open a med spa in California?” the short answer is that nurses cannot directly own a med spa, but there are legal pathways available if they establish the right business structure. Under California’s strict corporate practice of medicine laws, only licensed physicians can own medical practices that provide medical services like aesthetic treatments and non-invasive cosmetic procedures performed at a medical spa. However, nurse practitioners (NPs), registered nurses (RNs), and physician assistants (PAs) can play a key role in the operation and management of a med spa, provided they maintain compliance with California medical board regulations. To legally operate, a nurse must partner with or work under a licensed physician serving as a medical director or form a management services organization (MSO) that handles the day-to-day operations of the medical spa. In this post, we explain the legal process, licensing requirements, and ownership rules for nurses who want to open a med spa in California. Can a Nurse Open a Med Spa in California? Many nurses looking to enter the aesthetics industry often ask, “Can a nurse open a med spa in California?” The answer depends on understanding the state’s ownership rules, medical director requirements, and strict regulatory compliance standards. Under California law, only licensed physicians can directly own or operate a medical spa, since offering medical services, even noninvasive cosmetic procedures like laser hair removal or injectables, falls under the practice of medicine. However, nurse practitioners (NPs) and registered nurses (RNs) can play a key role by partnering with a licensed physician who acts as the medical director and oversees all medical treatments. To structure their business legally, nurses often form a Management Services Organization (MSO), which handles administrative and day-to-day operations while the medical director retains control over medical decision-making. Our legal team at Cohen Healthcare Law Group helps nurses and healthcare professionals establish compliant med spa businesses, ensuring they meet all licensure, supervision, and business structure requirements under California medical board regulations. What Are California Med Spa Laws and Regulations? California med spa laws are among the most comprehensive and restrictive in the United States, designed to uphold patient safety, ensure proper medical supervision, and limit ownership of medical practices to qualified professionals. Since most procedures performed in a med spa, such as Botox injections, laser hair removal, microneedling, and other aesthetic treatments, involve the practice of medicine, California law requires that a licensed physician either own or control the medical spa. According to the Medical Board of California, if a facility offers medical treatments, it must be owned by a physician, and all medical decisions must be made by licensed medical professionals, not business managers or non-physician investors. This rule stems from California’s long-standing corporate practice of medicine doctrine, which prohibits non-physicians and corporations from owning, controlling, or influencing a medical practice. In other words, while a nurse, businessperson, or investor can help manage the administrative side of a med spa, they cannot make decisions that involve medical judgment or patient care. The Medical Board of California makes it clear that the law is intended to prevent conflicts of interest and protect patients from unqualified individuals providing or directing medical services. Under California med spa regulations, a medical director, who must be a licensed physician, is required to oversee all clinical activities within the med spa. This physician must establish a genuine doctor-patient relationship with every patient before any treatment is performed, which includes taking a medical history, performing an appropriate exam, and developing a treatment plan. The medical director is also responsible for ensuring that standardized procedures and protocols are in place and that any delegation of medical tasks to nurse practitioners, physician assistants, or registered nurses complies with state law. This includes supervision requirements as defined by both the Medical Board of California and the California Board of Registered Nursing. In practical terms, this means that while nurse practitioners, registered nurses, and physician assistants can perform many aesthetic treatments, they must do so under appropriate supervision and within their legally defined scope of practice. For example, laser treatments and cosmetic injections can be delegated to qualified nurses, but only under a physician’s oversight and with clearly documented standing orders or treatment protocols. A physician cannot merely “rent” their license or act as a distant figurehead, as the California law requires ongoing, active involvement in the clinical operations of the med spa. Violating these rules can have serious consequences. The Medical Board has issued multiple warnings about unlicensed ownership arrangements and “paper medical directors” who do not provide real supervision. Such violations can result in disciplinary action, license suspension, or fines for both the supervising physician and the non-physician operator. As the Medical Board of California explains, even if a med spa appears spa-like, once medical procedures are offered, it is legally treated as a medical practice and must comply with all applicable healthcare laws. How Can Nurses Maximize Their Role in Med Spas? While California med spa laws limit direct ownership by nurses, registered nurses (RNs) and nurse practitioners (NPs) can still play a pivotal role in delivering high-quality patient care, managing day-to-day operations, and expanding service offerings through legally compliant structures. By aligning your practice with the right medical director, maintaining proper licensure, and working closely with a healthcare attorney, you can confidently grow your nurse-led med spa operations while adhering to California’s regulatory standards. Enhancing Nurse Practitioner Capabilities For nurse practitioners, maximizing your role in a med spa means balancing clinical expertise with leadership and management. California recognizes the advanced clinical training and diagnostic authority of nurse practitioners, especially those who meet criteria for full practice authority under state law. This enables NPs to provide a broader range of aesthetic and medical services, from laser treatments and injectables to customized treatment plans, all while ensuring compliance with the California Medical Board’s scope of practice regulations. Expanding your service offerings can also help position your med spa for growth. For example, offering integrated wellness programs, noninvasive cosmetic procedures, or specialized aesthetic treatments under physician supervision can attract a wider patient base. However, clinical expansion must go hand-in-hand with strict adherence to standardized procedures and medical protocols approved by the supervising physician or medical director. Beyond clinical operations, nurse practitioners can strengthen their role by cultivating patient trust and brand credibility. Transparent communication, thorough patient education, and ongoing professional development help foster confidence and repeat business. These are critical qualities that distinguish a legally compliant and patient-centered med spa from one operating outside regulatory boundaries. Navigating Licensing and Permits Here’s a step-by-step guide to help nurses and other licensed healthcare professionals navigate the process legally and efficiently: Obtain and Maintain a Valid Professional License: Before offering any medical spa services, ensure that you hold a valid and active Registered Nurse (RN) or Nurse Practitioner (NP) license from the California Board of Registered Nursing (BRN). If you are collaborating with a physician, that physician must also be licensed and in excellent standing with the Medical Board of California (MBC). These credentials are non-negotiable for performing or supervising medical procedures such as injectables, microneedling, and laser treatments. The California Department of Consumer Affairs oversees these credentials through the Medical Board of California and the Board of Registered Nursing, both of which enforce compliance with the Business and Professions Code and the Nursing Practice Act. Establish a Legally Compliant Business Structure: Under California’s corporate practice of medicine doctrine, only physicians can own or control medical practices. To comply, many nurse-run med spas operate through a Management Services Organization (MSO) model. In this structure:The professional medical corporation owned by a licensed physician handles all medical decisions and patient care. Nurses or non-physicians can own the MSO, which oversees daily business operations like staffing, marketing, and billing. This separation ensures adherence to California law and empowers nurses to actively participate in the business aspects of the medical spa. Partner with a Qualified Medical Director: Every med spa must have a medical director (a licensed physician) who oversees clinical operations, ensures standardized procedures are followed, and supervises any delegated medical tasks. The medical director is also accountable for patient evaluations, treatment plans, and continuous monitoring. This partnership is crucial for meeting California Medical Board requirements and ensuring safe, compliant care. Secure Local Business Licenses and Permits: Before opening, obtain the necessary city and county business licenses and register your fictitious business name (DBA) if your med spa operates under a trade name. Depending on the services offered, you may also need specific permits from your local health department, such as infection control or sanitation compliance for aesthetic treatments. Create Written Protocols and Standardized Procedures: According to California law, all assigned medical tasks must adhere to written standardized procedures or treatment protocols. These documents define which treatments nurses or physician assistants can perform and under what level of physician supervision. They also ensure scope of practice compliance under the California Nursing Practice Act. Comply with HIPAA and OSHA Regulations: Since med spas handle protected health information and perform medical procedures, compliance with HIPAA (for patient data protection) and OSHA (for workplace safety) is mandatory. This includes maintaining secure medical records, ensuring staff training, and implementing infection control protocols. Maintain Ongoing Legal and Regulatory Compliance: Once your med spa is operational, stay current with continuing education, license renewals, and state updates to healthcare regulations. Regular internal audits, policy reviews, and consultations with a healthcare attorney can help you identify potential risks early and maintain long-term compliance. By following these steps, nurses and allied health professionals can create a compliant, profitable, and patient-centered med spa business in California. Cohen Healthcare Law Group provides personalized legal guidance for each phase to help ensure your nurse-led med spa thrives within the framework of California law. Steps to Start a Successful Med Spa Business Starting a medical spa in California goes beyond offering aesthetic treatments. It requires a strong legal foundation, a solid business plan, and adherence to healthcare regulations. From understanding ownership laws to obtaining proper insurance, every step must align with California med spa laws to ensure your business operates safely and successfully. Here’s how to get started: Develop a Comprehensive Business Plan Every successful med spa begins with a well-thought-out business plan. This document serves as your roadmap, outlining your vision, target market, financial goals, and operational structure. A strong plan typically includes: Market Analysis: Research your local competition, identify service gaps, and define your target audience (for example, patients seeking non-invasive cosmetic procedures). Service Offerings: Specify which medical spa services you’ll provide, such as laser treatments, injectables, or skin rejuvenation, and confirm that they align with your team’s licensure and expertise. Financial Planning: Include projected startup costs, recurring expenses, pricing strategy, and break-even analysis to ensure your business is profitable and sustainable. Legal and Regulatory Strategy: Detail how your med spa will remain compliant with California medical board regulations, including the corporate practice of medicine rules and medical director oversight. A comprehensive business plan not only helps guide your decision-making but also reassures investors and lenders that your med spa is structured for long-term success. Strategic planning is especially critical for nurse practitioners, registered nurses, and physician assistants, who must navigate additional layers of licensing and supervision requirements. Choose the Right Legal Structure Your med spa’s legal structure determines how it can operate under California law. Because only licensed physicians can own medical practices in the state, non-physicians, including nurses, must work within a compliant framework such as a Management Services Organization (MSO). In this model, the physician owns the professional medical corporation, while the MSO, owned by a nurse or non-physician, manages non-medical operations like marketing, staffing, and administration. Selecting the right structure early on prevents future compliance issues and ensures you’re adhering to the corporate practice of medicine doctrine. An experienced healthcare attorney, such as those at Cohen Healthcare Law Group, can help you draft the necessary contracts and policies to protect both the medical and business aspects of your spa. Secure Proper Licensing and Permits Before opening your doors, obtain all licenses and permits required by your local jurisdiction. This includes a business license, fictitious business name (DBA) registration, and, if applicable, health department permits for infection control and safety compliance. All medical professionals, such as physicians, nurse practitioners, registered nurses, and physician assistants, must hold active licenses through their respective California boards. Failure to secure or maintain proper licensure can lead to disciplinary action from the California Medical Board or Board of Registered Nursing, jeopardizing your practice. Hire and Train Qualified Medical Staff A successful med spa relies on a team of skilled and licensed professionals. All staff performing medical procedures must operate within their scope of practice under the direct supervision of a medical director. Regular staff training in safety protocols, HIPAA compliance, and patient care standards promotes excellence and minimizes legal risks. Obtain the Right Insurance Coverage Operating a med spa involves unique liability risks due to the medical nature of its services. Appropriate insurance coverage is essential to protect your business and your professional reputation. Common types include: Medical Malpractice Insurance: Covers claims arising from medical treatments and procedures. General Liability Insurance: Protects against accidents or property damage occurring at your facility. Professional Liability (Errors and Omissions) Insurance: Safeguards against claims of negligence or mistakes made during aesthetic or medical services. Cyber Liability Insurance: Protects patient information and business data from cyber threats. Working with an insurance broker who understands healthcare and aesthetic medicine ensures that your coverage meets both legal and practical requirements. Implement Risk Management and Compliance Protocols Beyond insurance, proactive risk management is key to protecting your med spa. Establish clear standardized procedures, maintain accurate medical records, and ensure that all treatments comply with your medical director’s supervision protocols. Regular internal audits and ongoing consultation with a healthcare attorney can help identify potential compliance gaps before they escalate into legal issues. Build a Strong Patient-Centered Brand Finally, focus on creating a med spa that prioritizes patient safety, trust, and results. Transparent communication, informed consent, and ethical advertising are all key components of a reputable med spa brand. When combined with excellent care and a compliant business structure, these qualities position your med spa for lasting success in California’s highly competitive market. Integrating Technology and Marketing for Growth For nurse-led or physician-supervised med spas, leveraging digital tools improves client experience and ensures smoother operations, regulatory compliance, and stronger brand visibility. By adopting the right technology and implementing effective marketing strategies, med spa owners can build trust, attract new patients, and retain loyal clients. Leveraging Technology for Operations Technology is very important for making everyday tasks at med spas easier. Advanced scheduling and electronic health record (EHR) systems help keep patient records accurate, follow treatment plans, and meet HIPAA and California Medical Board rules. Also, digital consent forms and secure telehealth platforms can make it easier to take in new clients and follow up with them while keeping their information private. Inventory management software helps keep track of medical supplies to Inventory management software helps track medical supplies, ensuring compliance with occupational safety and health requirements. Customer relationship management (CRM) systems also allow med spa owners to monitor client satisfaction, automate appointment reminders, and track performance metrics. By embracing tools that enhance both patient safety and administrative efficiency, med spas can focus more on providing high-quality services. Effective Marketing Strategies A strong marketing plan is essential to position your med spa as a trusted provider of medical aesthetic services. Begin by creating a professional website that clearly communicates your med spa’s credentials, medical director oversight, and range of non-invasive cosmetic procedures. Implement search engine optimization (SEO) strategies using keywords like “California med spa,” “licensed medical professionals,” and “nurse-run med spa” to attract organic traffic. Social media platforms like Instagram, Facebook, and TikTok are ideal for showcasing before-and-after results (with patient consent), educating clients on safe treatments, and highlighting the expertise of your medical professionals. Paid advertising and local partnerships can further increase visibility, while loyalty programs encourage repeat visits. Email marketing can nurture relationships with existing clients by promoting seasonal offers or new aesthetic treatments, while client feedback systems can help continuously improve services. By integrating smart technology with consistent, compliant marketing strategies, nurse-led med spas can achieve sustainable growth and a loyal client base. Ready to Open Your Med Spa? If you’ve ever asked yourself, “Can a nurse open a med spa in California?” The answer lies in understanding the state’s complex healthcare and business laws and partnering with the right legal team. With the proper licensing, medical director collaboration, and compliance framework, nurses can play a leading role in creating safe, profitable, and legally compliant med spas. FAQ Opening a med spa in California involves navigating a complex web of healthcare, business, and licensing regulations, especially for nurses. Below are answers to some of the most frequently asked questions about nurse-led med spas in California: What Are The Requirements For a Nurse To Open a Med Spa in California? Under California law, only licensed physicians can own or control a medical spa that offers medical treatments. However, nurses can still play a major role by partnering with a licensed physician or forming a Management Services Organization (MSO) that handles non-medical operations like staffing, marketing, and administration. To remain compliant, a nurse must ensure that all medical procedures are performed under physician supervision and that the med spa follows California Medical Board and Board of Registered Nursing regulations. Can a Registered Nurse Perform Cosmetic Procedures in a Med Spa in California? Yes, but only under the supervision of a licensed physician or nurse practitioner with standardized procedures in place. Registered nurses (RNs) can perform noninvasive cosmetic treatments such as laser hair removal, Botox injections, and dermal fillers, provided they have proper training and follow established protocols. They cannot independently diagnose, prescribe, or initiate treatment plans without appropriate supervision as defined by California law. Can a Nurse Practitioner Open a Med Spa in California? A nurse practitioner (NP) has more flexibility due to their advanced practice authority, but still cannot independently own a med spa unless they collaborate with or are supervised by a licensed physician. California’s corporate practice of medicine doctrine prohibits non-physicians, including NPs, from owning medical practices that provide medical services. However, NPs can form an MSO to manage the business side of the spa while ensuring a compliant relationship with a physician medical director who oversees all clinical services. What Licenses and Permits Are Required to Open a Med Spa in California? To open a compliant med spa, you’ll need a valid medical license (for physicians) or a collaborative agreement (for nurse practitioners and physician assistants). Additionally, the business must be properly registered as a Professional Corporation (PC) or MSO, depending on its structure. Other requirements include local business licenses, health department permits, occupational safety compliance, and HIPAA-compliant systems for patient data protection. Ensuring each of these elements is in place protects both your practice and your patients.
November 3, 2025
Healthcare
How to Create a Durable Power of Attorney for Healthcare
A durable power of attorney for healthcare is an important legal document that allows you to appoint someone you trust to make medical decisions on your behalf if you become unable to do so. It ensures that your healthcare wishes are respected even when you can’t communicate them yourself. Without this document, doctors or family members may make important medical decisions without fully understanding your preferences. In this post, we’ll cover what a durable power of attorney for healthcare is, why it’s important, and the key steps to creating one correctly. You’ll also learn about choosing the right healthcare agent, ensuring your document meets state laws, and how to update it as your circumstances change. What Is a Durable Power of Attorney for Healthcare? A durable power of attorney for healthcare is a legal document that authorizes another person, called a health care agent or attorney in fact, to make health care decisions for you when you are unable to act on your own behalf. This document remains in effect even if you become incapacitated or lose the ability to make medical decisions due to illness, injury, or age. The agent you appoint should be someone you trust to follow your wishes, communicate effectively with doctors, and ensure you receive the type of medical treatment and care you prefer. The main difference between a regular power of attorney and a durable power of attorney for healthcare is that a regular POA becomes invalid if you become incapacitated. On the other hand, a durable power continues to give your agent the authority to act on your behalf. There are also durable powers that cover financial affairs or other matters, but a durable power of attorney for healthcare specifically deals with your healthcare needs and medical treatment decisions. For example, if an individual is in an emergency, the end stages of life, or undergoing complex medical treatment, they may not be of sound mind or physically able to decide what kind of care they want. Without a health care directive or durable power of attorney, loved ones may face the difficult task of guessing your wishes or disagreeing about your treatment. According to the National Institute on Aging, having a durable power of attorney for healthcare increases the likelihood that your medical wishes are honored and provides reassurance to family members that they are making the right decisions for you. Why You Need a Durable Healthcare POA A durable power of attorney for healthcare is vital to ensure your medical decisions are made according to your wishes, even when you can’t communicate them. It prevents family conflicts or court interventions by giving clear authority to your chosen agent or health care proxy. This legal document also provides peace of mind for you and your loved ones, knowing that someone you trust is responsible for your care and medical treatment. Without a durable power of attorney, important health care decisions such as whether to continue life support, authorize surgeries, or decide on end-of-life care may be left to doctors or the court. Real-life cases have shown that when people fail to create and sign such documents, their families often struggle with uncertainty, guilt, or disagreements about what kind of care should be provided. By putting your durable power of attorney for healthcare in place, you ensure your agent can act immediately in the event of an emergency, manage your medical and financial affairs, and follow your clear instructions. If you need help understanding the forms, state requirements, or how to fill out the documents correctly, it’s wise to discuss your situation with an experienced lawyer who specializes in health care and legal matters related to durable powers. How Does a Durable POA for Healthcare Work? A durable power of attorney for healthcare is a key part of advance care planning, which involves preparing for future healthcare needs in case of serious illness, injury, or loss of cognitive function. Simply discussing your preferences with loved ones or guardians is not enough, as formal documents are required to ensure your doctors and family members clearly understand and follow your medical wishes. Your health care agent has the authority to: Make medical decisions and give or withhold consent for procedures and treatments. Access your medical records and discuss your care with your doctors. Decide on hospital transfers, long-term care, or hospice arrangements. Carry out your end-of-life care preferences as stated in your durable power of attorney or living will. The agent’s authority only applies when you can’t make your own decisions, like after an accident, during a serious illness, or if you’re unconscious. While your agent has broad powers, there are important limitations. These limitations include: They cannot override your explicitly stated wishes in the document. They cannot make financial or estate-related decisions unless you also have a durable power of attorney for financial affairs. Their authority ends upon your death, at which point your testament or executor takes charge of financial or other matters. A durable power of attorney for healthcare works alongside a living will, another type of advance directive that details your specific preferences for medical care in emergencies. Together, these documents provide a comprehensive plan for your care, offering guidance and peace of mind to both your loved ones and your health care providers. How to Create a Durable Power of Attorney for Healthcare Decisions Working with an experienced lawyer can help you ensure that the document meets your state’s legal requirements, clearly outlines your instructions, and provides peace of mind to your loved ones and doctors. Here’s a step-by-step guide on what to do: 1. Choose Your Healthcare Agent Pick a trusted person who will act in your best interests and make medical decisions according to your wishes. Consider qualities such as reliability, excellent communication skills, and an understanding of your values and beliefs. You may also appoint alternate agents in case your first choice becomes unavailable or unable to serve. 2. Decide on the Scope of Authority Determine what powers your health care agent will have, such as consenting to surgery, choosing medical treatments, managing end-of-life care, or making decisions about organ donation. Specify any limits or restrictions, and include clear instructions about your preferences for life support, medications, or other health care interventions. 3. Complete the Legal Form Obtain your state-specific durable power of attorney for healthcare form. It is best to keep in mind that requirements vary depending on where you live. Fill in your personal information, along with the details of your agent(s). Be sure to state that the authority is durable, meaning it remains in effect even if you become incapacitated or lose the ability to make decisions. 4. Sign the Document Properly Most states require you to sign the document in front of witnesses, while some require notarization. Review your state’s laws to ensure you meet all legal standards. Make sure all signatures are valid and correctly dated to prevent potential challenges later on. 5. Communicate Your Decisions After signing, have an open discussion with your health care agent about your wishes. Explain your medical preferences, what kind of treatment you do or do not want, and how you define quality of life. Also, inform family members about your decision to avoid confusion, disagreement, or conflict during critical moments. 6. Distribute Copies Provide copies of your durable power of attorney for healthcare to your agent(s), primary doctor, and key family members. Hospitals and care providers should also have access to a copy. Keep one in a safe but accessible location for emergencies, and make sure your agent knows where to find it. 7. Review and Update Regularly Review your DPOA-HC periodically or after major life events such as marriage, divorce, or a serious health diagnosis. Update the document if your preferences or agents change, and follow the proper legal procedures for revocation or amendment. Keeping your documents current ensures that your wishes continue to reflect your values and circumstances. Durable Power of Attorney for Healthcare vs. Other Healthcare Documents A durable power of attorney for healthcare (DPOA-HC) is just one part of a complete plan for managing your medical care and ensuring your wishes are followed if you become unable to make decisions for yourself. However, it’s important to understand how this legal document differs from other advance directives, such as a living will, a healthcare proxy, and HIPAA authorization forms, and how all of them can work together to protect your rights. A living will outlines your preferences for medical treatment, particularly regarding life-sustaining procedures such as CPR, ventilators, artificial nutrition, or hydration. It tells your doctors and loved ones exactly what kind of care you do or do not want if you are in a terminal condition or permanently unconscious. A durable power of attorney for healthcare, on the other hand, goes a step further by allowing you to appoint a trusted person (your healthcare agent or attorney) to make medical decisions on your behalf in situations not specifically addressed in your living will. While the living will gives instructions, the healthcare proxy grants someone the authority to act and interpret your wishes as circumstances change. A HIPAA authorization or medical release form is another important document that complements your durable power of attorney for healthcare. It allows your agent, family members, or other designated individuals to access your medical records and communicate with your health care providers. Without it, your doctors and hospitals may be restricted by privacy laws from sharing vital information that could influence your medical decisions. Together, these documents form a powerful framework for advance care planning, ensuring that your health care providers have the guidance and legal permission they need to follow your wishes accurately. When combined, a living will, a durable power of attorney for healthcare, and a HIPAA authorization provide clarity and protection for both you and your loved ones. The living will expresses your medical care preferences, the DPOA-HC designates someone to make decisions on your behalf, and the HIPAA authorization ensures that your agent can access the necessary information to make informed choices. Having all three documents in place helps prevent confusion, delays, and conflicts during stressful medical situations. Best Practices for Medical Power of Attorney To make sure your durable power of attorney for healthcare remains effective and valid, follow these best practices: Review Your DPOA-HC Periodically: Revisit your documents every few years or after major life changes such as marriage, divorce, relocation, or a serious illness. Update your agent or instructions as needed. Keep Copies Accessible for Medical Providers: Provide your primary doctor, hospital, and agent with copies. Store one at home in a clearly marked folder and consider keeping a digital copy accessible in emergencies. Discuss Decisions Openly with Family Members: Talk about your values, health care preferences, and treatment goals with your loved ones to minimize confusion and prevent conflict. Choose an Alternate Agent: Designate a backup health care proxy in case your first choice becomes unable or unavailable to serve. Ensure Your Agent Understands Their Role: Your agent should know your medical wishes, understand your living will, and be prepared to communicate with your health care providers confidently. Work With a Lawyer: Consult an experienced healthcare attorney to make sure your durable power of attorney and other documents meet all state-specific legal requirements and are properly executed. Stay in Control of Your Healthcare Future Having a durable power of attorney for healthcare ensures that your medical wishes are honored even if you’re unable to speak for yourself. It’s a vital safeguard that gives you control, peace of mind, and confidence that the right person will make important decisions on your behalf. Planning now helps prevent confusion, stress, and family conflict later on. FAQ Below are some answers to help you make informed decisions about your healthcare planning: What Is a Durable Power of Attorney in Medical Terms? A durable power of attorney for healthcare is a legal document that allows you to appoint someone to make medical decisions on your behalf if you’re unable to do so. The “durable” part means it remains effective even if you become incapacitated. Where to Get Medical Power of Attorney Forms? You can obtain medical power of attorney forms from your state’s health department website, legal aid organizations, or a licensed attorney. Working with a healthcare attorney ensures the document meets state-specific legal requirements. What Is the Difference Between a POA and a Healthcare POA? A general power of attorney covers financial or legal matters, while a healthcare POA specifically deals with medical decisions. The healthcare POA activates when you’re unable to make healthcare decisions yourself. Can a Doctor Be a Medical POA? In most cases, a doctor cannot serve as your medical power of attorney unless they are a close family member. This prevents conflicts of interest and ensures unbiased decision-making. What Are the Disadvantages of a Durable Power of Attorney? One potential disadvantage is the risk of appointing someone who may not act in your best interest. Additionally, unclear or incomplete instructions can lead to disputes among family members or medical providers. How Much Does It Cost to Have a Durable Power of Attorney? Costs vary by state and legal assistance, typically ranging from $100 to $500 when prepared by an attorney. Free or low-cost forms are available online, but legal guidance ensures accuracy and validity. How Does a Durable Power of Attorney for Health Care Differ From a Living Will? A durable power of attorney for healthcare names a person to make medical decisions for you, while a living will outlines your specific treatment preferences. Together, they provide a complete plan for your healthcare wishes.
October 25, 2025
Healthcare
How to Achieve Medical Laboratory Compliance Efficiently
Laboratory compliance is foundational to safe, legal, and credible medical testing operations. Whether you run a diagnostic lab, clinical research facility, or pathology service, failure to meet regulatory standards can result in fines, loss of licensure, or reputational ruin. But achieving medical laboratory compliance efficiently is possible when you align policies, systems, and legal strategy. In this post, we’ll break down what laboratory compliance really means, the key laws and standards you must obey, and practical steps to streamline your journey. What Is Laboratory Compliance? Laboratory compliance refers to the process of ensuring that a clinical laboratory or testing facility follows all applicable regulations, industry guidelines, and compliance requirements governing safe and reliable laboratory operations. It’s the foundation of trust, accuracy, and safety in healthcare and research. Through strong lab compliance, organizations demonstrate their ability to comply with regulations set by regulatory agencies such as the FDA and other US government bodies that oversee testing, reporting, and data integrity. A robust compliance program also integrates technology such as a laboratory information management system (LIMS) to streamline lab processes, monitor activities, and ensure records are properly maintained. The use of LIMS helps laboratories achieve compliance more efficiently by automating workflows, tracking samples, managing equipment maintenance and calibration, and generating the necessary evidence for laboratory inspection. This ensures that every result can be traced back to its source, maintaining data integrity and accountability. It’s important to distinguish between compliance, quality control, and accreditation, even though they work hand in hand. Compliance focuses on meeting regulatory compliance and legal standards. Quality control ensures test results are accurate, consistent, and reliable through systematic checks and testing practices. Accreditation, on the other hand, involves independent validation by recognized organizations that confirm the lab’s adherence to industry standards and guidelines. Together, these elements allow lab managers, lab employees, and administrators to build effective, compliant laboratory operations that can withstand both internal review and external oversight. Why Laboratory Compliance Is Crucial for Medical and Clinical Labs Adhering to laboratory compliance is essential for maintaining trust, safety, and operational excellence. Every clinical laboratory has to follow the rules set by regulatory agencies to protect patients, employees, and data. By developing a structured compliance program, laboratories can identify risks, establish controls, and take preventive action before compliance issues arise. The procedure includes everything from equipment calibration and staff training to documentation and audit trails that provide evidence of compliance. Effective lab compliance protects both staff and patients by reducing the risk of accidents involving toxic chemicals, preventing physical damage, and ensuring proper handling of biological materials. Following strict standard operating procedures and maintaining a culture of safety ensures that laboratories remain compliant while promoting accountability among lab employees. It also allows lab managers to clearly define responsibilities, implement processes, and monitor operations to prevent errors that could lead to injury or regulatory penalties. Beyond safety, laboratory compliance is vital for preserving data integrity and research credibility. In fields like pharmaceutical production and diagnostic testing, even the smallest breach of data accuracy can have major consequences. Quality control processes, internal audits, and external audits ensure that lab data remains trustworthy, verifiable, and ready for inspection. The use of laboratory information management systems supports these procedures by maintaining organized records, creating digital audit trails, and minimizing human error. Such transparency not only meets regulatory compliance standards but also strengthens confidence in a lab’s results and reputation. When non-compliance occurs, the consequences can be devastating. A laboratory that fails to comply with established regulations risks severe regulatory issues, financial penalties, license suspension, and even shutdown. In worst-case scenarios, inaccurate data may lead to patient harm, contamination, or widespread physical damage. The long-term effects of non-compliance can destroy years of credibility, making recovery difficult. Maintaining a proactive compliance program, with regular audits, training, and continuous monitoring, ensures that a lab operates ethically and meets every compliance requirement efficiently and reliably. Key Regulatory Bodies and Standards In the United States, several regulatory agencies oversee different aspects of lab operations, ensuring that testing, reporting, and safety standards are met consistently. The Food and Drug Administration (FDA) regulates laboratories involved in pharmaceutical production, diagnostics, and medical testing to ensure that all lab data is accurate, reliable, and backed by sound quality control. The Clinical Laboratory Improvement Amendments (CLIA) set federal compliance requirements for testing performed on human samples, focusing on quality assurance, personnel qualifications, and equipment calibration. Meanwhile, the Occupational Safety and Health Administration (OSHA) establishes standards to protect lab employees from exposure to toxic chemicals, biological hazards, and other workplace risks, while the Environmental Protection Agency (EPA) enforces environmental regulations that govern waste disposal, emissions, and contamination control during laboratory operations. Beyond the U.S., international bodies such as the International Organization for Standardization (ISO) provide global frameworks, with ISO 17025 serving as the gold standard for laboratories seeking accreditation in testing and calibration. The difference between national and international compliance standards lies mainly in scope and recognition. National regulations like CLIA or FDA requirements are mandatory within the United States and enforced by government authorities. They define the minimum compliance requirements a laboratory must meet to remain legally operational. International standards, such as ISO 17025 or ISO 15189, are globally recognized and voluntary but often essential for laboratories that collaborate across borders or wish to demonstrate excellence beyond local laws. Many lab managers choose to align their compliance programs with both national and international standards to ensure competitiveness, data integrity, and credibility in the global industry. Meeting these combined standards involves maintaining thorough documentation, performing regular internal audits and external audits, implementing standard operating procedures (SOPs), and continuously training lab employees to ensure full regulatory compliance. By aligning with these key agencies and standards, laboratories can achieve compliance, prevent regulatory issues, and sustain the highest level of testing accuracy and reliability. Good Laboratory Practice Compliance Good Laboratory Practice (GLP) compliance is another critical part of maintaining reliable and ethical lab operations. GLP refers to a set of principles and guidelines that govern the planning, performance, monitoring, recording, and reporting of non-clinical laboratory studies. Established originally by the FDA and later adopted internationally through the Organisation for Economic Co-operation and Development, GLP ensures that laboratories conducting safety and efficacy testing produce accurate data that regulatory authorities can trust. Unlike general laboratory compliance, which focuses on meeting all regulatory compliance obligations, GLP compliance zeroes in on the scientific integrity and traceability of research. To ensure the verification of every experiment, result, and conclusion, it necessitates detailed documentation requirements, well-defined standard operating procedures, and robust audit trails. Following GLP standards also means maintaining strict equipment maintenance and equipment calibration schedules, ensuring staff training, and implementing effective quality control processes to eliminate errors. The benefits of following Good Laboratory Practice are far-reaching. Laboratories that adopt GLP principles enhance the credibility and reproducibility of their research, reduce the likelihood of compliance issues, and minimize the risk of non-compliance findings during laboratory inspection. By adhering to GLP, lab managers and lab employees can demonstrate that their data integrity, quality assurance, and processes meet internationally accepted expectations. This not only helps regulatory bodies like the FDA and EPA, but it also strengthens relationships with clients, pharmaceutical companies, and international partners who depend on accurate data and ethical testing methods. When comparing GLP to general laboratory compliance, the distinction is in focus and purpose. General lab compliance ensures that a laboratory meets legal regulations, safety requirements, and operational standards for day-to-day lab processes and audits. GLP compliance, however, specifically governs how research data is produced, validated, and stored, providing scientific credibility that complements a broader compliance program. Together, they create a comprehensive framework that ensures both regulatory compliance and scientific integrity, enabling laboratories to operate safely, ethically, and efficiently in a competitive, high-stakes environment. Common Laboratory Compliance Requirements Whether managing a clinical laboratory, research facility, or pharmaceutical production site, lab managers must implement standard operating procedures (SOPs), maintain accurate documentation, and conduct regular internal audits to achieve compliance. Important laboratory compliance requirements include: Safety and Environmental Regulations Compliance efforts start with ensuring laboratory safety. Laboratories must properly handle toxic chemicals, hazardous materials, and waste to prevent contamination and harm to lab employees. Standard operating procedures should define waste disposal protocols, spill response measures, and emergency evacuation plans. Staff training is also critical, as every employee must understand how to conduct procedures safely and comply with environmental protection regulations set by the US government, OSHA, and the EPA. Regular laboratory inspections and audits verify that safety measures, documentation requirements, and maintenance practices meet established compliance standards. Proper implementation protects staff and the environment and enhances the reliability of laboratory operations. Equipment and Instrumentation Compliance To achieve compliance, laboratories must ensure that all instruments are properly calibrated, validated, and maintained. Equipment maintenance and calibration logs are key compliance requirements that regulatory agencies like the FDA and ISO rely on for verification. Each instrument used in testing must undergo validation before use, and records must be accurately maintained to demonstrate traceability. A structured compliance program helps lab managers monitor instrument performance, prevent errors, and support data accuracy. Proper documentation and audit trails offer clear evidence of adherence to regulations, ensuring the accuracy and reliability of laboratory data and minimizing compliance issues during external audits. Personnel and Training Compliance Lab compliance heavily depends on qualified, well-trained personnel. Every staff member must meet certification and qualification requirements relevant to their responsibilities. Regular staff training ensures that lab employees remain updated on regulations, quality assurance protocols, and best practices. Documenting training sessions and certifications is part of the compliance program and serves as proof of adherence during audits or inspections. Lab managers must also establish clear SOPs for personnel conduct, assign responsibilities, and monitor performance to maintain compliance consistency. Continuous training strengthens laboratory operations and reduces risk by reinforcing safety practices, data reliability, and procedural accuracy across departments. Data Management and Documentation Maintaining accurate laboratory data and proper documentation is at the heart of laboratory compliance. Laboratories must keep complete and accurate records of tests, samples, and processes, whether in electronic or paper form. A compliant laboratory information management system (LIMS) ensures data integrity by managing audit trails, access permissions, and documentation requirements. Regulatory agencies often review record retention policies, documentation accuracy, and evidence of data monitoring to ensure laboratories meet compliance requirements. Proper data management supports quality control and internal and external audits and provides reliable evidence during regulatory inspections. Ultimately, effective documentation practices protect laboratories from non-compliance risks and preserve the credibility of lab results in the scientific and medical community. How to Ensure Lab Compliance Start by conducting regular compliance audits or self-assessments to identify gaps, risks, and areas of non-compliance. Internal audits help verify that laboratory operations, such as equipment maintenance, calibration, data recording, and sample testing, adhere to established standards. These evaluations also furnish proof of compliance for external audits and regulatory inspections, guaranteeing your lab’s constant readiness. Developing comprehensive standard operating procedures (SOPs) is equally important. SOPs outline consistent steps for everything from sample handling to waste management, enabling lab managers and employees to conduct processes accurately and safely. You should regularly review and update SOPs to keep your lab processes in line with current compliance requirements and best practices. Training your team is another critical part of achieving compliance. Every lab employee must receive onboarding and ongoing staff training to understand safety measures, documentation requirements, and data integrity standards. Continuous education helps prevent errors, supports quality control processes, and reinforces a culture of accountability across all laboratory operations. To streamline these compliance efforts, laboratories should implement a compliance management system or laboratory information management system (LIMS). These digital tools simplify tracking of SOPs, audit results, training records, and documentation updates. They also generate automatic audit trails, monitor corrective actions, and maintain accurate laboratory data, helping labs stay organized, efficient, and inspection-ready. Finally, navigating regulatory compliance can be overwhelming without expert legal guidance. Partnering with an experienced healthcare attorney can help you interpret regulations set by multiple agencies, establish preventive action plans, and respond effectively to compliance issues. Our experienced legal team at Cohen Healthcare Law Group provides trusted counsel for laboratories seeking to maintain compliance, avoid costly penalties, and strengthen their overall operations. Contact Cohen Healthcare Law Group today to ensure your lab meets every compliance requirement confidently and efficiently. Ready to Ensure Your Lab Meets All Compliance Standards? Staying on top of laboratory compliance is about protecting your staff, patients, and reputation. By conducting regular internal audits, maintaining clear standard operating procedures (SOPs), investing in continuous staff training, and using a reliable laboratory information management system (LIMS), your lab can operate efficiently while meeting every regulatory compliance requirement. Proactive compliance helps prevent costly fines, equipment downtime, and legal complications, all while strengthening data integrity and workplace safety. FAQ Below are answers to some frequently asked questions to help lab managers, compliance officers, and laboratory employees stay informed and compliant with federal and industry guidelines: What Does CLIA Compliance Mean? CLIA compliance refers to meeting the requirements set by the Clinical Laboratory Improvement Amendments (CLIA), which regulate all clinical laboratory testing performed on humans in the U.S. It ensures that laboratories produce accurate, reliable, and timely test results, maintaining high standards of quality control, data integrity, and regulatory compliance. How Much Does a CLIA Certification Cost? The cost of a CLIA certificate depends on the type of testing your clinical laboratory performs. Fees typically range from a few hundred to several thousand dollars, based on the complexity of the tests. Laboratories must also pay renewal fees every two years to maintain active certification and continue to achieve compliance with federal standards. What Are the Three Types of CLIA Certificates? CLIA regulations recognize three main certificates: Certificate of Waiver—for simple tests with a low risk of error. Certificate for Provider-Performed Microscopy (PPM)—for moderately complex microscopy tests. Certificate of Compliance or Accreditation—for complex testing requiring strict quality assurance, standard operating procedures, and regular inspections by regulatory agencies. What Are The Requirements For Lab Safety? Laboratory safety requirements include proper handling of hazardous and toxic chemicals, using personal protective equipment (PPE), maintaining equipment calibration, and following waste disposal protocols. Labs must also establish emergency procedures, conduct staff training, and ensure regular internal audits to prevent accidents and compliance issues. What Does PEL Stand For? PEL stands for Permissible Exposure Limit, a safety standard set by OSHA that defines the maximum amount of a substance or chemical a worker can be exposed to during a workday. Monitoring and controlling exposure levels are essential parts of laboratory risk management and regulatory compliance. Who Is Responsible for Lab Safety? Lab managers and supervisors hold primary responsibility for ensuring lab safety and compliance with all regulations set by the US government and relevant regulatory agencies. However, every lab employee plays a role by following SOPs, reporting risks, and adhering to compliance requirements to maintain a safe and efficient work environment.
October 20, 2025
Healthcare
How to Use AI in Healthcare Compliance?
AI in healthcare compliance is transforming how healthcare organizations maintain regulatory standards, reduce risks, and ensure patient safety. By leveraging technologies like machine learning, predictive analytics, and natural language processing, healthcare providers can automate compliance checks, detect potential violations early, and streamline reporting processes. From monitoring billing accuracy to identifying data breaches before they escalate, AI helps compliance teams stay proactive rather than reactive. It also assists in navigating complex laws such as HIPAA and FDA regulations, which often change and require constant vigilance. In this post, we’ll cover what AI in healthcare compliance means and examples of how it’s used. We will also discuss its benefits, challenges, and best practices for implementing AI responsibly. What Is AI in Healthcare Compliance? AI in healthcare compliance refers to the use of artificial intelligence (AI) technologies such as machine learning, natural language processing, and robotic process automation to help healthcare organizations monitor, manage, and maintain regulatory compliance. These AI systems can process vast amounts of healthcare data and medical records to identify patterns, detect anomalies, and flag potential compliance risks faster than traditional methods. In the past, compliance efforts relied heavily on manual reviews and human oversight, which made it difficult to keep up with the evolving regulatory landscape. Traditional compliance methods often led to human error, slower audits, and delayed responses to regulatory challenges. With AI in healthcare, however, organizations can ensure compliance in real time by using predictive analytics, AI algorithms, and generative AI tools that analyze data, assess risks, and provide valuable insights to healthcare professionals and medical practitioners. These AI applications support compliance programs and enhance patient safety, improve data security, and ensure data privacy across healthcare systems. By integrating AI models into existing systems, healthcare providers can maintain compliance with relevant regulations such as HIPAA and the False Claims Act while improving patient outcomes, healthcare delivery, and overall risk management in the healthcare industry. Why Should Healthcare Organizations Use AI for Compliance? Healthcare organizations are increasingly turning to AI in healthcare compliance because it offers unmatched efficiency, accuracy, and adaptability in today’s fast-changing regulatory landscape. By automating repetitive and time-consuming compliance tasks, AI tools reduce manual labor and free up healthcare professionals to focus on improving patient care and patient safety. Tasks that once took hours of human review can now be completed in minutes using AI algorithms and predictive analytics. This increased efficiency saves time and ensures more consistent adherence to regulatory requirements. Another important benefit is the improved accuracy that AI brings to compliance efforts. Human mistakes are a common source of compliance risks and regulatory issues, especially when handling large amounts of healthcare and medical data. AI systems can continuously analyze data, spotting patterns or irregularities that might suggest possible violations of laws like HIPAA or the False Claims Act. By identifying these problems early, organizations can avoid expensive fines, keep data secure, and enhance risk management throughout their operations. AI also gives immediate insights and quicker decision-making that traditional compliance methods can’t match. Using machine learning and natural language processing, AI can quickly review documents, evaluate compliance performance, and identify new threats or inconsistencies. This helps healthcare providers and medical professionals make proactive choices and tackle compliance issues before they become bigger problems. Furthermore, AI implementation supports scalability, which is crucial for large healthcare organizations and life sciences companies managing vast amounts of patient data and complex workflows. As the volume of healthcare information grows, AI models can adapt and evolve, maintaining compliance across multiple facilities and systems. With AI applications seamlessly integrated into existing systems, organizations can ensure continuous compliance, protect data privacy, and improve overall healthcare delivery. How Does AI Help Healthcare Providers Stay Compliant? AI plays a crucial role in helping healthcare providers maintain regulatory compliance, manage risk assessment, and ensure patient safety in an increasingly complex healthcare industry. These AI tools reduce human error and provide valuable insights that help healthcare organizations adapt quickly to the evolving regulatory landscape. Data Security and Privacy Compliance One of the most important ways AI in healthcare compliance supports providers is through enhanced data security and privacy compliance. AI continuously monitors healthcare systems for potential breaches, ensuring adherence to HIPAA and other regulatory requirements that protect patient data. By analyzing network activity and health data in real time, AI algorithms can detect anomalies or unauthorized access attempts that might indicate security threats. This proactive detection allows healthcare organizations to respond immediately, reducing the likelihood of data breaches and ensuring patient information remains safe. AI also helps manage data privacy concerns by encrypting sensitive records and ensuring healthcare professionals access only the information necessary for patient care. Regulatory Reporting and Auditing AI also transforms regulatory reporting and auditing by automating tasks that were once manual and error-prone. Through AI applications, healthcare providers can automatically compile and submit reports to regulatory bodies like the Centers for Medicare & Medicaid Services (CMS), the FDA, and state agencies. This automation ensures timely, accurate submissions while minimizing the administrative burden on staff. AI in healthcare compliance helps organizations check their work in real-time, making it easier to spot mistakes, confirm they are following the rules, and fix errors before they lead to expensive problems. This continuous monitoring strengthens regulatory compliance and ensures healthcare facilities remain audit-ready at all times. Billing and Coding Accuracy Accurate billing and coding are critical for both financial stability and regulatory compliance. AI-assisted claims verification tools check medical data and clinical documents to make sure that billing codes match the services given, which helps cut down on fraud, waste, and abuse in healthcare payments. These AI models can flag suspicious claims, detect duplicate submissions, and prevent unintentional errors that could lead to False Claims Act violations. For healthcare providers, the result means fewer denied claims, reduced audit risks, and stronger financial transparency. By automating these processes, AI systems help organizations maintain compliance while improving the efficiency of their revenue cycle management. Risk Assessment and Predictive Compliance One of the most powerful aspects of AI in healthcare compliance is its ability to predict and prevent compliance risks before they escalate. Using predictive analytics, AI technologies look at healthcare data patterns to find possible weaknesses like coding errors, missing documents, or strange staff actions that could lead to future compliance problems. AI dashboards provide compliance officers with real-time insights and visualizations that support proactive management and risk mitigation. This data-driven approach enables healthcare organizations to take corrective action early, strengthen compliance programs, and maintain continuous alignment with regulatory standards. How to Use Artificial Intelligence in Healthcare Compliance? Using Artificial Intelligence (AI) in healthcare compliance helps organizations maintain regulatory standards, strengthen data security, and reduce compliance risks across clinical, financial, and administrative operations. Implementing AI effectively, however, requires a structured and legally sound approach that balances automation with human oversight and expert legal guidance. Here’s a step-by-step look at how to use AI in healthcare compliance efficiently and responsibly: Identify Compliance Needs The first step in using AI for healthcare compliance is to identify where your greatest risks lie. Map out areas where compliance risks are highest, such as billing and coding accuracy, HIPAA data protection, and regulatory reporting. Then, determine which tasks are most time-consuming or prone to human error, like manual audits, claim reviews, or data entry. By pinpointing these weak spots, you can prioritize AI implementation in areas where it adds the most value, helping your organization maintain compliance while improving efficiency and accuracy. Choose the Right AI Tools Selecting the right AI technologies is critical to achieving compliance success. Evaluate AI software designed specifically for the healthcare sector, focusing on tools that include built-in regulatory updates for HIPAA, CMS, FDA, and other relevant regulations. Look for AI systems that integrate seamlessly with your existing electronic health record (EHR) platforms, practice management systems, and data storage solutions. The right AI applications should enhance your ability to monitor patient data, support risk assessment, and streamline regulatory compliance across all operations. Implement AI for Data Monitoring and Security Data privacy and security are at the core of AI in healthcare compliance. Use AI algorithms to detect anomalies in healthcare data, such as irregular access patterns or unauthorized use of patient records. AI systems can automate real-time monitoring for suspicious activity and trigger alerts for potential data breaches or compliance violations. With advanced machine learning models, healthcare organizations can ensure continuous data protection, safeguard patient information, and meet all data security requirements under HIPAA and other regulatory frameworks. Automate Reporting and Audits AI can significantly improve how healthcare organizations handle regulatory reporting and audits. By automating the generation of compliance reports for agencies like CMS, FDA, and state boards, AI tools eliminate repetitive administrative work and reduce errors. They can also cross-check billing and coding accuracy, flagging inconsistencies that might indicate fraud or misreporting. During audits, AI-generated documentation ensures transparency and preparedness, allowing healthcare professionals to respond quickly and confidently to regulatory inquiries. Train Staff and Maintain Human Oversight While AI can enhance compliance efforts, it’s essential to keep humans in the loop. Train employees to understand the capabilities and limitations of your AI systems, including how to interpret alerts and verify AI-generated recommendations. Furthermore, establish protocols for human review of critical compliance decisions to prevent overreliance on automation. Healthcare professionals and compliance officers must remain accountable, ensuring ethical use of AI while maintaining compliance with regulatory requirements and protecting patient outcomes. Continuously Monitor and Improve AI Performance Once implemented, AI in healthcare compliance must be continuously evaluated. Regularly assess the accuracy, reliability, and effectiveness of your AI models and algorithms. As healthcare laws and regulatory challenges evolve, update your systems to reflect new requirements and integrate feedback from staff using the tools daily. Ongoing improvement ensures your AI capabilities stay aligned with best practices in risk management, data privacy, and regulatory compliance. Collaborate With Healthcare Lawyers It is very important to involve experienced healthcare lawyers throughout your AI journey. Before implementing AI-driven compliance systems, consult legal professionals who specialize in healthcare law to ensure your processes align with federal, state, and local regulations. Offit Kurman can help you interpret AI-generated compliance reports, manage potential liability risks, and verify that your AI implementation meets all regulatory standards. Our legal experts provide the guidance necessary to balance innovation with accountability, protecting both your organization and your patients. Understanding the Legal Landscape: The OBBA AI Moratorium and State Regulation The One Big Beautiful Bill Act (OBBA) has recently drawn attention for its proposed but ultimately excluded provision involving artificial intelligence regulation in the United States. As part of the OBBA, Congress considered a 10-year moratorium that would have restricted states from passing or enforcing their laws limiting or regulating the use of artificial intelligence (AI). This proposal covered all AI applications, including AI in medical research, clinical decision support, and broader healthcare practices. According to the National Law Review, the AI moratorium narrowly passed the U.S. House of Representatives with a 215–214 vote. But the Senate rejected the bill, so it was not included in the final version signed into law. While the OBBA itself serves primarily as a budget reconciliation bill, the proposed moratorium raised significant debate across the healthcare sector, as it would have prevented states from enacting or enforcing laws designed to regulate AI use and automated decision systems for a full decade. Under the House version of the OBBA, the moratorium would have paused the enforcement of any state or local regulations “limiting, restricting, or otherwise regulating” AI models, AI systems, or automated decision systems. This would have directly impacted healthcare providers, payers (both governmental and private), and other healthcare organizations integrating AI into their operations. While the medical profession continues to explore how AI technologies can support medical data analysis, predictive analytics, and patient outcomes, there remain ongoing concerns about data privacy, ethical implications, and the safety of these emerging technologies. The OBBA proposal also offered a formal definition of artificial intelligence as a “machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations, or decisions influencing real or virtual environments.” Similarly, it defined automated decision systems as “any computational process derived from machine learning, statistical modeling, data analytics, or AI that issues a simplified output (such as a score, classification, or recommendation) to materially influence or replace human decision making.” While these definitions provide a clear framework for what AI encompasses under federal consideration, the AI moratorium proposal itself did not make it into the final law. This means that, for now, states retain the authority to pass and enforce their own AI regulations, including those that affect healthcare compliance, medical research, and AI-driven patient care systems. What Laws Would The Passage of the OBBA Moratorium Affect? According to the National Law Review, some AI laws that could not be enforced during the moratorium period include existing laws in California, Colorado, Utah, and Massachusetts affecting AI. These state laws include the following: California AB 3030 (with limited exceptions) requires that medical providers who use AI provide disclaimers when “generative AI is used to communicate clinical information to patients.” The law mandates that patients be informed about how to reach a human healthcare professional. California SB 1120 requires that healthcare insurers cannot deny coverage based on AI alone. Instead, there must be sufficient human involvement. The Colorado Artificial Intelligence Act “regulates developers and deployers of AI systems, particularly those considered ‘high risk.’” The Utah Artificial Intelligence Policy Act requires that healthcare professionals (and other regulated professions) inform their patients at the start of any communication if the patient is interacting with generative AI. Exceptions to the OBBA AI Moratorium The OBBA does include specific exceptions. This means the following types of state IA regulations would still be enforceable: Primary Purpose and Effect Exception: The OBBA moratorium proposal would have essentially supported state AI laws that effectively encourage the use of AI or automated decision systems. This would happen if the law removed legal impediments to the use of AI and automated decision systems, facilitated their deployment, or consolidated administrative procedures. No Design, Performance, and Data-Handling Imposition Exception: The OBBA moratorium would have exempted state laws or regulations that avoided imposing substantive design, performance, data-handling, documentation, civil liability, taxation, fees, or similar requirements on AI or automated decision systems, unless federal laws imposed these conditions or the conditions were “generally applicable to other models and systems that perform similar functions.” Reasonable and Cost-Based Fees are an Exception: The OBBA moratorium would exempt state laws or regulations that impose “fees or bonds that are reasonable and cost-based’ and imposed equally on other AI models, AI systems, and automated decision systems that perform comparable functions.” The National Law Review states that OBBA would generally only apply to state laws that treat AI and automated decision systems differently from other computer systems. For example, laws regarding patient privacy, discrimination, and consumer protection would still be enforceable. Privacy Concerns With AI in Healthcare As AI in healthcare compliance continues to grow, one of the most pressing challenges facing the healthcare industry is how to balance innovation with patient privacy. The integration of AI systems, machine learning, and predictive analytics into healthcare delivery has transformed how healthcare providers manage medical data, make clinical decisions, and improve patient outcomes. However, this transformation also introduces significant privacy concerns, especially when AI algorithms process vast amounts of healthcare data that include sensitive and personally identifiable information. Without proper oversight, AI technologies can expose healthcare organizations to data breaches, compliance risks, and violations of regulatory requirements such as HIPAA and GDPR. Some of these concerns include: Patient Data Breaches: One of the most significant privacy threats involves unauthorized access to sensitive patient data. Hacks, misconfigurations, or inadequate security can turn AI systems into a gateway for large-scale data breaches. This puts healthcare providers at risk of violating HIPAA regulations, facing severe penalties, and damaging patient trust. Data Storage and Security: AI-driven platforms often rely on cloud-based data storage, which raises questions about how securely healthcare data is stored and transmitted. Weak encryption, improper data management, or insufficient vendor controls can expose patient information to security risks. Healthcare organizations must ensure their AI applications meet the highest data security standards and include end-to-end encryption, authentication, and access control measures. HIPAA and Regulatory Compliance: Ensuring that AI tools comply with HIPAA, GDPR, and other local healthcare privacy laws is critical. AI implementation must include safeguards to ensure data privacy, proper consent collection, and restricted access to sensitive records. Violations of these regulations can result in costly fines and loss of accreditation for healthcare professionals and institutions. Data Sharing and Third Parties: Many AI systems share medical data with third-party vendors or analytics platforms to enhance model training or performance. However, this introduces potential privacy risks, as each external connection increases the chance of data misuse or unauthorized access. Healthcare organizations must carefully vet vendors, implement data-sharing agreements, and maintain audit trails to ensure compliance and accountability. Anonymization Challenges: Even when patient data is anonymized for AI training, complete de-identification can be difficult. Advanced AI algorithms can sometimes re-identify individuals by cross-referencing datasets, undermining privacy protections. This poses unique challenges for AI developers and compliance officers who must balance data utility with patient confidentiality. Patient Consent and Transparency: Ethical concerns also arise when patients are unaware that their health data is being processed by AI systems. Lack of transparency can lead to distrust and potential legal violations. Healthcare providers must obtain patient consent clearly and ensure individuals understand the use, storage, and protection of their data. Algorithmic Bias and Data Misuse: Improper or biased use of medical data can result in AI algorithms producing discriminatory outcomes, particularly for underrepresented populations. In addition to being unethical, such misuse can violate regulatory requirements and harm patient safety. Proper training, data selection, and regular AI audits are essential to prevent bias and data misuse. Audit and Accountability Gaps: A major challenge in AI in healthcare compliance is the lack of transparency in how AI systems process and use sensitive health information. Many AI models operate as “black boxes,” making it difficult to track decisions or data flows. This lack of accountability can expose healthcare organizations to regulatory scrutiny and weaken compliance efforts. Implementing robust audit mechanisms helps ensure proper oversight and maintains public trust in AI-powered healthcare systems. Need Legal Guidance for AI-Driven Compliance? Artificial intelligence is reshaping how healthcare organizations handle compliance, from automating data monitoring and audit reporting to enhancing billing accuracy and predictive risk assessment. While AI can speed up things, provide immediate information, and lower mistakes, it also raises complicated legal, privacy, and ethical issues, especially when dealing with sensitive patient data or using AI tools for clinical decision support. FAQ Artificial intelligence (AI) is transforming healthcare compliance, but many providers still have questions about its use, safety, and legal boundaries. Below are answers to some of the most common questions about AI in healthcare compliance: How Does AI Help Healthcare Providers Stay Compliant? AI helps healthcare providers stay compliant by automating data monitoring, detecting anomalies, and ensuring accurate billing and coding. It also simplifies regulatory reporting and provides real-time insights to prevent compliance breaches. How Is AI Regulated in Healthcare? AI in healthcare is regulated by federal agencies such as the FDA, CMS, and OCR, along with state-specific laws governing data use and patient privacy. These regulations ensure that AI tools meet safety, accuracy, and ethical standards before deployment. Is Using AI HIPAA Compliant? AI can be HIPAA compliant when properly configured to protect patient data and maintain confidentiality. Healthcare organizations must ensure their AI vendors follow HIPAA’s privacy and security rules for all stored and transmitted health information. Who Guidelines on AI in Healthcare? The World Health Organization (WHO) emphasizes that AI in healthcare must be transparent, ethical, and inclusive. Its guidelines focus on patient safety, accountability, data privacy, and preventing bias in AI-driven medical decisions. Can AI Replace Human Compliance Officers? No, AI cannot replace human compliance officers. It serves as a support tool to enhance their effectiveness. Human oversight remains essential to interpret AI outputs, make ethical decisions, and ensure compliance with nuanced regulations. What Are the Risks of Using AI in Compliance? The risks include potential data breaches, algorithmic bias, and over-reliance on automated decision-making. Without proper oversight, AI errors could lead to regulatory violations or harm to patient trust and safety.
October 13, 2025
Healthcare
How to Keep Your Medical Office Compliance Checklist
Keeping your medical office compliant with ever-changing healthcare regulations can be challenging, but it’s essential to avoid costly penalties and protect your practice’s reputation. To stay organized, it’s important to keep your medical office compliance checklist up to date and aligned with federal and state requirements. This includes tracking HIPAA privacy standards, adhering to OSHA workplace safety rules, ensuring billing accuracy, following patient consent protocols, and maintaining staff training records. In this post, we’ll outline practical steps to help you manage your compliance checklist effectively. You will also learn common pitfalls to avoid and how to adapt to new healthcare laws as they evolve. Why Should I Keep a Medical Office Compliance Checklist? Keeping your medical office compliance checklist is your first line of defense against costly agency audits, penalties, and reputational damage. In the healthcare industry, regulators expect healthcare organizations and professionals to maintain full OSHA compliance, from workplace safety standards to the proper use of personal protective equipment. A current compliance checklist ensures your medical office meets key OSHA standards such as the bloodborne pathogens standard, the hazard communication standard, and the emergency action plan. These are all designed to protect employees from exposure to hazardous chemicals, radiation areas, and other recognized hazards. When you keep your medical office compliance checklist updated, you have proof of compliance. This proof is readily available when regulators review your practice. It also helps you anticipate and resolve small issues like outdated written exposure control plans or missing business associate agreements before they escalate into major violations. Reviewing OSHA booklets, OSHA fact sheets, and your written hazard communication program regularly ensures you’re following proper work practices, engineering controls, and employee training requirements to protect workers from serious physical harm. The worst-case scenario for neglecting OSHA compliance and healthcare regulatory requirements can be devastating. Not protecting employees or patients from health dangers like bloodborne pathogens, ethylene oxide exposure, or electrical risks could lead to heavy fines, being forced to close down, or even lawsuits. Noncompliance with the Occupational Safety and Health Act or the healthcare privacy laws can also lead to suspension of your medical license and irreversible reputational damage. Key Areas of Medical Practice Compliance Plan When you keep your medical office compliance checklist current, you strengthen your organization’s ability to meet OSHA guidelines, HIPAA requirements, and other healthcare compliance standards under the Health Act. From workplace safety to data protection, the following key areas form the foundation of an effective compliance strategy for healthcare professionals: Patient Privacy and HIPAA Compliance Protecting patient privacy is at the heart of healthcare compliance. Medical offices must implement policies for proper patient record handling and ensure secure storage and encryption of electronic health records (EHRs). Staff should receive practical training on HIPAA policies, business associate agreements, and medical records management to avoid breaches. Annual HIPAA risk assessments are part of regulatory requirements, ensuring all procedures meet federal privacy standards. A solid HIPAA program prevents violations and protects patients’ trust in your healthcare organization. OSHA Guidelines Following OSHA compliance measures is critical for maintaining workplace safety and preventing serious physical harm. Every medical office should adopt a detailed OSHA compliance checklist that includes a fire prevention plan, an emergency action plan, and a written hazard communication program. Healthcare professionals must receive bloodborne pathogens training and follow universal precautions as outlined in OSHA’s Bloodborne Pathogens Standard to prevent exposure to hazardous chemicals and health hazards. Offices should provide personal protective equipment (PPE) and wear personal radiation monitors in radiation areas, ensuring compliance with the ionizing radiation standard. Regular workplace medical inspections, reviews of safety protocols, and workplace safety audits are necessary to identify recognized hazards and reduce significant risk. The plan should also cover fire safety standards, electrical systems safety, and proper disposal of sharps and biohazard materials. Reviewing OSHA publications and developing your own plan according to additional OSHA standards and general industry standards ensures your medical office meets every applicable OSHA requirement. Billing and Coding Compliance Accurate documentation and ethical billing practices are essential for healthcare organizations. Implementing a compliance checklist for billing and coding ensures that your team maintains accurate medical coding and documentation, adheres to fraud prevention measures, and conducts regular audits of billing practices. Training staff on the latest coding updates and healthcare regulations minimizes the risk of claim denials or regulatory penalties. Compliance in this area reflects a commitment to integrity and transparency in patient care and reimbursement processes. Employee Training & HR Compliance Effective compliance begins with a well-trained workforce. Healthcare professionals must receive mandatory training covering HIPAA, OSHA, sexual harassment, cultural sensitivity, and workplace safety. All staff should understand employee protection laws, the use of personal protective equipment, and employee exposure controls. Maintaining updated certifications, licenses, and an employee handbook with clear policies ensures compliance with regulatory requirements. Proper onboarding and termination procedures, as well as clear communication of employee training requirements, reinforce your medical office’s commitment to safety and ethics. Licensing and Credentialing Every medical office must verify and track valid medical licenses for all providers, DEA registrations, and credentialing with insurance companies. A structured system for renewal reminders and license tracking prevents lapses that could jeopardize compliance. Healthcare organizations should also review their plan and sample programs to confirm that each licensed provider meets applicable standards and fulfills state and federal credentialing requirements. Infection Control & Patient Safety A comprehensive compliance plan prioritizes infection prevention. This includes strict sterilization and cleaning protocols, proper PPE availability and usage, and vaccination policies for staff. Following OSHA’s bloodborne pathogens standard and maintaining a written exposure control plan protects both staff and patients from potentially exposed risks. Furthermore, implementing an incident reporting system, first aid personnel training, and universal precautions helps reduce significant risks in clinical environments. Facilities should also clearly display and follow all hazard communication procedures, designate restricted areas, and post caution signs. Data Security and Technology Data security is another critical part of your medical office compliance checklist. Ensuring EHR system compliance and robust cybersecurity protocols, such as password management, firewalls, and data backups, protects patient information from breaches. Staff should be trained to identify phishing attempts and respond to data breaches quickly. Conducting regular IT audits and reviewing plan requirements for data protection ensures compliance with privacy and healthcare technology standards. Healthcare Laws Every Medical Practice Must Follow From billing and patient data protection to physician self-referrals and kickback prohibitions, every medical office is required to follow these essential healthcare laws to ensure ethical and legal operations: The False Claims Act The False Claims Act prohibits submitting false or fraudulent claims for payment to federal healthcare programs such as Medicare and Medicaid. This includes billing for services not rendered, misrepresenting medical records, or inflating charges. Violations can result in severe civil penalties, treble damages, exclusion from federal programs, and potential criminal prosecution. To maintain healthcare compliance, every medical office should include regular audits in its compliance checklist to prevent billing errors and fraudulent activity. Stark Law The Stark Law governs physician self-referrals, preventing doctors from referring patients to entities with which they or their immediate family members have a financial relationship, unless a specific exception applies. Common exceptions include compliant arrangements under Management Services Organizations (MSOs), in-office ancillary services, and certain fair-market lease agreements. Violating the Stark Law can result in civil penalties, repayment of claims, and exclusion from federal programs, making it essential to review all ownership structures within your healthcare organization thoroughly. The Anti-Kickback Statute (AKS) The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving any form of remuneration to induce or reward referrals for services covered by federal healthcare programs. This includes cash, gifts, free rent, or bonuses tied to patient volume. Violations of AKS can lead to both civil and criminal penalties, including fines, imprisonment, and exclusion from federal healthcare programs. Every medical office should implement strict internal policies and a compliance checklist to detect and prevent improper financial arrangements or incentive programs. HIPAA (Health Insurance Portability and Accountability Act) HIPAA establishes national standards for protecting patient health information. Medical offices must ensure secure storage and transmission of medical records, proper staff training on privacy policies, and clear patient consent procedures. Healthcare professionals should provide patients with privacy notices outlining how their information is used and shared. Compliance with HIPAA protects patients from unauthorized disclosure and helps healthcare organizations avoid steep civil monetary penalties and reputational damage. Civil Monetary Penalties (CMP) Law The Civil Monetary Penalties Law authorizes the Department of Health and Human Services Office of Inspector General (HHS OIG) to impose fines on individuals and entities that commit certain healthcare violations. These include false claims, illegal kickbacks, and patient inducement schemes. CMP violations can result in substantial fines, exclusion from federal healthcare programs, and personal liability for healthcare providers. Reviewing your compliance checklist regularly helps detect potential red flags before they escalate. Additional Federal and State Regulations to Track in Your Checklist Beyond federal statutes, healthcare organizations must comply with state-specific laws and practice-related regulations. Telemedicine rules vary by state and often require proper licensure for both in-state and out-of-state services. Compliance with FDA and FTC guidelines ensures proper advertising and handling of drugs, devices, and medical equipment. Practices should also monitor state self-referral and False Claims acts, corporate practice of medicine laws, and consumer privacy protections. For medical spas, nursing practices, and MSOs, maintaining compliance with practice-specific regulations is essential. Additionally, every healthcare organization must comply with the No Surprises Act, which requires providing patients with good-faith cost estimates, and the scope of practice laws that govern clinical supervision. Proper storage and handling of medical equipment are also critical to workplace safety, aligning with OSHA compliance and healthcare regulatory requirements. How to Ensure Your Medical Practice Stays Compliant Running a medical office means more than delivering quality patient care and maintaining strict adherence to healthcare compliance and regulatory requirements. From HIPAA and OSHA standards to billing, licensing, and patient safety rules, every aspect of your practice must operate within legal boundaries. Keeping your medical office compliance checklist updated helps prevent penalties, protect employees, and demonstrate your organization’s commitment to ethical operations. Implementing the right systems, oversight, and legal support can make the difference between smooth compliance and costly violations. Here are other steps to take: Appoint a Compliance Officer or Committee: Designate a compliance officer or committee responsible for overseeing all compliance activities, including policy development, employee training, and internal audits. This ensures consistent enforcement of healthcare compliance standards across your organization. Hire a Healthcare Lawyer: Work with an experienced healthcare attorney to interpret complex healthcare regulations, review your legal documents, and guide you through laws such as HIPAA, the Stark Law, and the Anti-Kickback Statute. Develop Written Compliance Policies: Create a detailed compliance plan that covers billing practices, patient privacy, workplace safety, and staff responsibilities. Include OSHA compliance elements such as the bloodborne pathogens standard, hazard communication standard, and fire prevention plan to reduce health hazards and protect employees. Conduct Internal Audits and Risk Assessments: Perform regular audits to detect and correct compliance issues early. These reviews help identify risks in billing, documentation, or workplace safety. The assessments ensure your medical office meets all OSHA and healthcare regulatory requirements. Use Technology and Compliance Software: Implement compliance tracking software to monitor renewals, certifications, and reporting deadlines. Automated tools make it easier to keep your medical office compliance checklist up to date and aligned with new healthcare laws. Encourage Open Communication: Build a transparent reporting culture where employees can raise compliance concerns, safety hazards, or ethical issues without fear of retaliation. This promotes accountability and proactive problem-solving. Document Corrective Actions: Maintain thorough documentation of identified issues and the corrective steps taken. This record demonstrates your good faith efforts to comply with the Health Act, OSHA standards, and healthcare industry regulations. How to Keep Your Medical Office Compliance Checklist Updated Healthcare compliance is an ongoing process that requires active monitoring and continuous improvement. Updating your compliance checklist ensures your medical office adapts to new regulations, evolving OSHA standards, and changes in healthcare law. A structured system for updates helps minimize significant risk and keeps your organization inspection-ready at all times. Here’s what you should do: Assign Compliance Responsibility: Clearly assign responsibility to a compliance officer or manager who will track regulatory updates, OSHA requirements, and healthcare law changes. This person ensures the checklist remains accurate and complete. Schedule Quarterly or Annual Reviews: Regularly review your compliance checklist—at least quarterly or annually—to confirm all written exposure control plans, emergency action plans, and hazard communication programs meet the latest OSHA and healthcare requirements. Use Compliance Software and Automated Reminders: Utilize compliance software with automated alerts for deadlines, renewals, and employee training updates. This technology helps you stay ahead of OSHA guidelines, workplace safety requirements, and employee protection standards. Work with Experienced Healthcare Compliance Lawyers: Collaborate with legal experts to review your compliance policies and ensure your checklist meets every applicable standard under federal and state law. Their team can help your healthcare organization interpret complex OSHA publications, implement corrective measures, and maintain a legally sound compliance plan. Avoid Compliance Issues and Safeguard Your Practice Staying compliant is non-negotiable in the healthcare industry. Keeping your medical office compliance checklist updated protects your practice from regulatory risks, financial penalties, and potential legal action. A proactive compliance program not only helps you meet OSHA, HIPAA, and healthcare law requirements but also safeguards your reputation, ensuring patients and regulators trust your organization’s integrity. By taking preventive measures such as regular audits, legal reviews, and employee training, you can avoid costly mistakes before they escalate. Staying compliant saves time, money, and stress while allowing your team to focus on what matters most: delivering quality patient care in a safe, ethical environment. FAQ Below are answers to common questions about keeping your healthcare organization compliant with OSHA, HIPAA, and other healthcare laws: Who Is Responsible for Ensuring a Healthcare Organization’s Compliance? A designated compliance officer or committee is typically responsible for overseeing healthcare compliance, ensuring all employees follow policies and regulatory requirements. What Are the Five OSHA Guidelines for Medical Offices? The five key OSHA guidelines include maintaining a written hazard communication program, implementing a bloodborne pathogens standard, ensuring proper use of personal protective equipment, establishing an emergency action plan, and conducting regular workplace safety audits. What Should Be Included in a Safety Plan for a Medical Office? A proper safety plan includes emergency response procedures, infection control protocols, and clear instructions for handling hazardous materials. It should also address training, reporting systems, and routine safety inspections to ensure a secure workplace. How Can Medical Office Managers Ensure Compliance With Healthcare Regulations? Managers can ensure compliance by updating their medical office compliance checklist, conducting audits, and holding regular staff training sessions. They should also collaborate with healthcare attorneys to stay ahead of evolving federal and state regulations. What Is a Medical Office Compliance Program? A compliance program outlines internal policies and training designed to prevent violations of healthcare laws and protect patients. It demonstrates the practice’s commitment to ethical conduct and regulatory responsibility. Who Is Responsible for Compliance in a Medical Office? Compliance is a shared duty between the compliance officer, management, and healthcare providers. Each team member must follow established procedures to ensure the office meets all legal and ethical standards. Do Medical Practices Need a Lawyer for Compliance? Yes, medical practices need lawyers for compliance. A healthcare compliance lawyer helps medical practices navigate complex regulations, draft compliant policies, and avoid legal pitfalls.
October 8, 2025
Healthcare
What Is a Healthcare Defense Attorney?
A healthcare defense attorney is a legal professional who represents healthcare providers, organizations, and businesses when they face investigations, regulatory actions, or lawsuits. These attorneys have deep knowledge of healthcare laws, including HIPAA, fraud and abuse laws, licensing regulations, and compliance standards. This post explains who a healthcare defense attorney is and what they do. It also lets you know why their role is critical for protecting healthcare providers and businesses. What Is a Healthcare Defense Attorney? A healthcare defense attorney is a legal professional who provides legal services to healthcare providers, medical professionals, and healthcare entities facing lawsuits, government investigations, or regulatory challenges. Unlike a medical malpractice attorney, who focuses primarily on defending medical practitioners against negligence claims, healthcare defense attorneys handle a broader scope of healthcare law issues affecting the healthcare industry. They represent healthcare clients such as hospitals, physician groups, surgical centers, home health agencies, pharmaceutical companies, and other healthcare providers. Their role often involves protecting healthcare businesses and medical practices from federal government scrutiny, private insurance companies, or state Medicaid fraud control units under statutes like the False Claims Act, Stark Law, and the Anti-Kickback Statute. By offering extensive experience in healthcare litigation, compliance, and fraud and abuse cases, these attorneys help ensure healthcare professionals can continue to provide healthcare services while staying aligned with federal statutes and state laws, and regulations. What Types of Cases Do Healthcare Defense Attorneys Handle? Healthcare defense attorneys handle a wide range of legal challenges across the healthcare sector. Their work extends beyond malpractice claims to include fraud, compliance, and institutional defense, making them vital partners for healthcare businesses and professionals seeking protection from legal and financial risk. Some of the most common types of cases include: Medical malpractice defense: Representing medical providers and other healthcare professionals accused of negligence or medical errors. Professional licensing defense: Protecting the medical license of doctors, registered nurses, pharmacists, and other healthcare practitioners facing disciplinary action. Healthcare fraud allegations: Defending against Medicare fraud, Medicaid services fraud, false claims, and billing issues tied to government healthcare programs and private insurance companies. HIPAA violations: Handling claims related to improper patient data handling, privacy breaches, and compliance with healthcare law. Employment-related disputes: Representing healthcare facilities and health systems in cases of wrongful termination, discrimination, or harassment within the healthcare sector. Regulatory compliance issues: Advising healthcare clients on laws and regulations, including Stark Law, the Anti-Kickback Statute, and other federal statutes, while defending against compliance violations. Hospital or clinic liability claims: Providing legal strategy for healthcare entities, pharmaceutical companies, medical device manufacturers, and clinically integrated networks in institutional defense cases. When to Hire Healthcare Fraud Defense Attorneys? You should hire healthcare fraud defense attorneys immediately after receiving notice of a healthcare fraud investigation from federal agencies, state regulators, or private insurers. If accused of Medicare fraud, Medicaid fraud, or other False Claims Act investigations, an early legal strategy is critical to avoid severe penalties or federal crime charges. Healthcare attorneys help medical providers, physician groups, and other healthcare professionals respond properly to government investigations, civil investigative demands, or inquiries from Medicaid fraud control units. When a medical practice or healthcare business is at risk of losing its medical license, being excluded from government healthcare programs, or facing federal courts, defense attorneys step in to protect your healthcare practice. They also assist healthcare clients in preparing documentation, correcting billing discrepancies, and ensuring compliance with healthcare laws and regulations. Who Needs a Healthcare Defense Attorney? Healthcare defense attorneys serve a wide range of clients within the healthcare industry. They are essential for healthcare providers such as physicians, surgeons, nurses, pharmacists, and therapists who may face malpractice claims, disciplinary actions, or fraud allegations. Medical institutions, including hospitals, nursing homes, and clinics, also rely on defense attorneys when dealing with compliance issues, patient claims, or institutional liability cases. In addition, administrators and executives often seek legal services when confronted with billing disputes, regulatory compliance investigations, or government healthcare program audits. Why You Need a Healthcare Defense Lawyer Hiring a healthcare defense lawyer provides critical protection for both individuals and institutions in the healthcare sector. These attorneys help safeguard your professional license, ensuring you can continue to practice and serve patients. Furthermore, they work to protect your reputation, which is vital for maintaining trust with both peers and the public. Since healthcare laws and regulations, such as the False Claims Act, Stark Law, and Anti-Kickback Statute, are complex and ever-changing, attorneys provide expert guidance to help you navigate compliance requirements effectively. They also reduce financial risk by minimizing exposure to lawsuits, civil monetary penalties, and government investigations. With a strong healthcare litigation team, they focus on strategic case preparation, from the early stages of investigation through potential courtroom defense. Typically, each case is supported with personalized defense strategies, tailored to your specialty, practice, or healthcare facility. Ultimately, having a skilled attorney offers peace of mind, allowing you to focus on providing quality healthcare services while knowing your legal matters are in capable hands. How Do I Find the Best Attorney for Healthcare Defense? To get the best attorney for your healthcare defense, look for specialization in healthcare law rather than general practice. Experienced healthcare attorneys understand the False Claims Act, Stark Law, Anti-Kickback Statute, and other complex laws and regulations that govern the healthcare industry. Beyond specialization, it is important to review their professional credentials, including bar association standing and disciplinary history, as this reflects both credibility and trustworthiness. A strong track record in handling healthcare fraud cases, Medicare fraud, Medicaid services disputes, and healthcare compliance issues is also a key indicator of their ability to defend medical providers and healthcare businesses effectively. In addition, the attorney’s communication style matters. Healthcare clients need defense attorneys who respond quickly, explain legal services, and keep them informed throughout government investigations. Cost should also be evaluated carefully. Comparing hourly rates versus flat fees helps healthcare professionals and medical practices understand what they are paying for and whether the law firm offers real value. Referrals from colleagues, physician groups, or healthcare facilities can also point you toward trustworthy attorneys specializing in healthcare fraud defense with proven results. Finally, scheduling consultations with multiple attorneys allows you to discuss your healthcare practice, medical license concerns, or healthcare fraud investigation directly, ensuring you find a legal team that truly understands the challenges of the healthcare industry. What Questions Should I Ask Before Hiring an Attorney? When choosing a healthcare fraud defense attorney, it’s important to ask targeted questions that highlight their expertise in defending healthcare professionals and other healthcare providers. Some essential questions include: Experience with healthcare law: Do they regularly defend against healthcare fraud cases, False Claims Act investigations, or government investigations by federal agencies or state Medicaid fraud control units? Track record of similar cases: Have they successfully represented medical providers, health systems, or pharmaceutical companies in Medicare fraud, Medicaid services disputes, or civil investigative demand responses? Communication style and availability: Will they be accessible to answer questions quickly and guide your healthcare practice through federal statutes, government healthcare programs, and regulatory compliance issues? Qualities to Look for in a Healthcare Defense Attorney The best healthcare fraud attorneys offer more than just legal knowledge. They bring strategy, experience, and industry insight. You should look for someone with experience in healthcare law and malpractice defense, especially defending medical practices, home health agencies, surgical centers, pharmaceutical manufacturers, or clinically integrated networks. A strong attorney should have familiarity with state-specific medical regulations, federal statutes, and the expectations of federal prosecutors, the attorney’s office, and the federal bureau handling healthcare fraud investigations. They should also demonstrate strong negotiation and litigation skills, helping healthcare providers avoid civil monetary penalties, federal crime charges, or lengthy prison sentences in cases involving fraud and abuse, billing errors, or criminal intent. Finally, seek a law firm with a proven track record in healthcare litigation, from representing registered nurses and medical professionals before licensing boards to defending healthcare facilities and health systems in federal courts. How Much Does a Healthcare Defense Attorney Cost? The cost of hiring a healthcare defense attorney can vary widely depending on several factors, including the complexity of the case, the attorney’s level of experience in healthcare law, and the type of healthcare clients they represent. Cases involving healthcare fraud investigations, False Claims Act allegations, or federal government inquiries often require more time and resources than a straightforward medical malpractice defense, which directly impacts fees. Many defense attorneys charge using hourly billing, which means healthcare providers and medical professionals pay for the actual time spent preparing legal strategy, responding to civil investigative demands, or representing them before federal agencies and courts. On the other hand, some law firms may offer flat-rate billing for specific legal services, such as regulatory compliance reviews, licensing defense, or responding to initial government investigations. Flat rates can help healthcare businesses and medical practices manage legal expenses more predictably. In terms of cost, healthcare fraud defense attorneys may charge anywhere from $250 to $800 per hour, depending on their expertise and the law firm’s reputation. Complex federal healthcare fraud cases, Medicare or Medicaid fraud defense, or litigation involving pharmaceutical companies, surgical centers, or healthcare facilities may fall at the higher end of the range. Need Strong Legal Defense for Your Healthcare Career? The healthcare industry is complex, and the risks for healthcare providers, medical professionals, and healthcare businesses are higher than ever. From healthcare fraud investigations and False Claims Act allegations to malpractice lawsuits and regulatory compliance disputes, the stakes can threaten your license, your finances, and your reputation. This is why having an experienced healthcare defense attorney on your side is a necessity. Early legal help from a skilled healthcare litigation team can make all the difference, ensuring that you respond effectively to government investigations, protect your medical practice, and continue serving patients with confidence. Frequently Asked Questions A healthcare defense attorney provides the legal services and guidance that healthcare providers, medical professionals, and healthcare businesses need to protect their licenses, finances, and reputations. Below are answers to some of the most common questions healthcare clients ask: When Should I Call a Healthcare Defense Attorney? You should contact a healthcare defense attorney as soon as you receive notice of a government investigation, civil investigative demand, or potential malpractice or licensing issue. Early action is key to building a strong legal strategy. Can They Help if I’m Under Investigation but Haven’t Been Charged? Yes, healthcare fraud defense attorneys can guide you through government investigations by federal agencies, Medicaid fraud control units, or private insurance companies before charges are filed, often preventing escalation. What Is a Medical Defense Attorney? A medical defense attorney is a type of healthcare attorney who focuses on defending medical providers, healthcare entities, and other healthcare professionals in malpractice, fraud, compliance, and licensing cases. Do Healthcare Defense Attorneys Handle Healthcare Fraud Cases? Absolutely. They defend healthcare clients against Medicare fraud, Medicaid services fraud, False Claims Act investigations, billing errors, and allegations of fraud and abuse in government healthcare programs. Can You Defend Me in Both Malpractice and Licensing Cases? Yes, we can. Our defense attorneys with extensive experience in healthcare law often handle both malpractice defense and professional licensing defense, protecting your medical license and your medical practice at the same time. What Should I Do if I Receive a Regulatory Notice? Do not respond on your own. Contact a healthcare defense attorney immediately, as your response could impact the outcome of healthcare compliance reviews, government investigations, or potential federal crime allegations.
September 8, 2025
Healthcare
Can You Take Patient Records When Leaving a Medical Practice?
No, you generally cannot take original patient records with you when leaving a medical practice. Patient records are considered the property of the practice or healthcare organization, not the individual physician. However, under HIPAA, you may request copies or access to relevant information for continuity of care, provided you follow proper legal and ethical procedures. This post will cover HIPAA rules on transferring or copying records when a provider leaves. It will also let you know best practices for maintaining continuity of care without violating HIPAA. Who Owns Patient Records? Ownership of patient records is a complex issue that depends on the laws of the jurisdiction, as well as the agreements between healthcare providers and their organizations. In the United States, the general rule is that the medical practice or healthcare facility owns the physical or electronic patient records, not the individual physician. Even if a physician has treated a patient for years, the records typically remain the property of the practice, hospital, or clinic where the care was delivered. Patients, however, do not “own” the records themselves, but they do have a legal right to access and obtain copies of their health information. Under HIPAA (Health Insurance Portability and Accountability Act) in the U.S., patients must be granted access to their records upon request, within specific timelines. HIPAA is primarily concerned with protecting the privacy and security of protected health information (PHI), rather than dictating record ownership. Outside the U.S., different laws apply. For instance, in the European Union, the GDPR (General Data Protection Regulation) governs how patient data is collected, stored, and used. While healthcare providers still maintain control over the records, GDPR emphasizes the patient’s rights to access, correct, and request deletion of their personal health data in certain circumstances. Similarly, many countries have their own healthcare privacy and data protection regulations that define ownership, access rights, and provider responsibilities. Am I Legally Allowed to Take Records When Leaving a Practice? When a physician is departing a medical practice, one of the most common questions is whether they can take patient records with them. In nearly all circumstances, patient medical records belong to the medical practice or healthcare entity, not the individual physician. This principle applies whether records are maintained in electronic or paper form. While a departing physician may be able to obtain copies under certain conditions, they cannot remove or transfer such medical records without following strict state and federal laws. The Health Insurance Portability and Accountability Act (HIPAA) is the key federal law governing the confidentiality and transfer of health information. It requires that health care providers and covered entities maintain control over the designated record set and protect medical record confidentiality. In addition to HIPAA, state law often governs how records are retained, how patients are notified, and the time frame for medical record retention. Violating these rules can result in disciplinary action, fines, or loss of a medical license. Physicians and staff cannot generally take copies of patient records for their own personal reference or to use in a new practice. Any access to healthcare provider records must serve a legitimate purpose, such as continuing care or compliance with legal obligations. If a departing physician needs to access patient information, they must comply with both state and federal requirements, as well as any restrictions in their employment contract or group practice agreement. There are limited circumstances where a physician may be allowed to obtain copies of records, but such access is often on a case-by-case basis and requires patient consent or authorization. Even then, the healthcare provider must ensure that proper documentation is maintained to demonstrate compliance with the HIPAA Privacy Rule and applicable state law. Taking patients’ medical records without permission can lead to severe consequences. It can result in civil penalties, loss of the right to practice medicine, and reputational harm for both the individual and the physician practice. In addition, the federal government and state regulatory agencies may impose fines for improper handling of health information technology or electronic formats of records. Most employment contracts and practice agreements also have clauses addressing ownership and handling of records. Violating these terms could lead to lawsuits, loss of privileges within a physician group, and other legal obligations. A departing physician must be extremely cautious to avoid jeopardizing their career when transitioning to a new provider or new practice. What Does HIPAA or State Law Say About Patient Record Transfers? Under HIPAA, patient records must remain with the original covered entity or healthcare provider, but patients themselves have the right to request easy access to their information within a reasonable period. Patients may request that their records be transferred to a new provider for continuing care, and the original practice is obligated to comply within the set period defined by law. State and federal laws may vary on how records are handled, especially regarding medical record retention. For example, most states require that records be retained for a certain number of years, even if the physician is no longer practicing at that location. Some states require the practice to notify patients and provide a forwarding address if a physician leaves, ensuring patients can still request copies and maintain access to their health information. Can You Make Copies of Patient Records for Personal Use? Making copies of patient records for purely personal use is not permitted. A physician cannot simply download or photocopy records for their files, regardless of whether those records are in paper form or electronic formats. The difference between records for personal use and official practice records is crucial. Only the latter are recognized as legally valid and must remain with the practice or hospital that maintains them. Copies may be made if the patient or their personal representative signs a proper authorization, allowing their information to be shared with a new practice or new provider. In such circumstances, the physician must document consent and maintain proof of authorization in compliance with the HIPAA Privacy Rule and any other law that applies. This ensures that both the patient’s right to access is honored and that the healthcare provider remains in full compliance with the Portability and Accountability Act and relevant state law. What Are Your Ethical Duties With Patient Records? Physicians and healthcare providers have a fundamental ethical duty to maintain patient confidentiality at all times. This obligation extends beyond the requirements of state and federal laws like HIPAA and reflects the trust patients place in their providers. Whether records are kept in electronic or paper form, safeguarding the privacy of health information is central to the physician–patient relationship. Another key duty is ensuring continuity of care when a physician leaves a medical practice or joins a new provider. Patients must not be left without access to their records or a way to continue treatment. This means that records should be transferred in compliance with the HIPAA Privacy Rule, with proper authorization and within the legally mandated period, so that patient care is not disrupted. Physicians must also avoid conflicts of interest or any misuse of patient medical records. Records cannot be taken for competitive purposes, used for marketing, or retained for personal gain. Instead, they must be managed with integrity, respecting medical record confidentiality and the patient’s rights. At all times, the physician has an ethical obligation to act in the patient’s best interest when handling such medical records. This includes providing access when requested, cooperating with personal representatives, and respecting the patient’s autonomy over their health information. Finally, ethical practice requires strict adherence to professional guidelines on record management. Organizations such as the American Medical Association (AMA) and specialty boards emphasize that physicians must comply with legal obligations while upholding professional standards. This means following proper procedures for medical record retention, transfer, and patient notification, ensuring compliance not only with the portability and accountability act but also with the broader principles of medical ethics. How Can You Transition Patient Medical Records Safely? When a physician leaves a medical practice, one of the most important responsibilities is ensuring that patients’ medical records are transferred safely and in compliance with both state and federal laws. This process must protect medical record confidentiality, honor patient rights, and ensure continuity of care. By taking the proper steps, a departing physician can transition patients’ records smoothly without risking HIPAA violations or patient trust. Here’s what to do: Notify the Practice and Patients: The first step is to inform your current employer and patients about your departure. Practices are often required to provide notice to active patients, along with instructions on how they can access or transfer their records. Transparency helps patients feel secure that their care will continue uninterrupted. Obtain Written Consent: Patients must provide written authorization before their patient records can be transferred to a new provider. This ensures compliance with the HIPAA Privacy Rule, which requires proper documentation before any health information can be shared. Secure the Records: Whether in electronic or paper form, all health information technology transfers must be handled with strict security. Encrypted digital transfers and locked physical methods help prevent breaches and maintain accountability under the Health Insurance Portability and Accountability Act. Create a Record Inventory: A complete inventory of the records being transferred should be prepared. This log ensures that no files are lost in the process and demonstrates compliance with both federal laws and state requirements for medical record retention. Coordinate with Receiving Provider: Communication with the new practice or receiving provider is essential. Physicians must confirm that the receiving office has secure systems in place to accept and store the records in accordance with applicable laws. Retain Copies if Allowed: In some circumstances, physicians may retain copies of certain healthcare provider records, but only if explicitly permitted by law or their employment contract. This is typically limited to supporting continuing care or meeting other legal obligations. Document the Process: Every step of the transfer, from patient notifications and consents to the actual transfer actions, should be documented. This documentation protects both the physician’s practice and the departing physician against future disputes. Follow State and Federal Regulations: Finally, compliance with the Portability and Accountability Act and relevant state and federal laws is non-negotiable. Each jurisdiction may impose different timelines and requirements, so it is crucial to follow both HIPAA and any local regulations to ensure a legally sound transfer. What Are the Legal Risks of Taking Patient Records? One major risk is being accused of theft or misappropriation of records. Even if the intention is to continue caring for active patients in a new practice, the unauthorized removal of records violates medical record confidentiality and can result in disciplinary action. A physician who takes records without authorization may also be charged with breaching federal laws such as the Health Insurance Portability and Accountability Act (also referred to as the Portability and Accountability Act). HIPAA requires that covered entities and health care providers maintain a designated record set securely, whether in electronic or paper form, and protect all health information. Another risk involves penalties for HIPAA Privacy Rule violations. Improper handling of records in electronic formats, paper form, or any other method can result in large fines from the federal government, along with potential restrictions on the ability to continue practicing medicine. In addition, state law may impose stricter rules regarding medical record retention and patient access. Failing to notify patients and provide a forwarding address when leaving a practice may result in further liability. Civil lawsuits are another potential consequence. Patients have the right to request copies of their records and expect easy access within a reasonable period. If a physician removes records without consent, patients may sue for damages arising from lack of access, interruption of treatment, or breach of privacy. Similarly, if an employment contract or group practice agreement violates contractual obligations, the original physician group or hospital may file claims. How Healthcare Lawyers Can Help You Avoid Legal Issues Given the complex intersection of state and federal requirements, any departing physician needs to consult a qualified healthcare attorney before attempting to move patient medical records. A lawyer can review the specific rules that apply in your jurisdiction, explain how the Accountability Act and other laws apply, and ensure compliance with both HIPAA and state law for retaining records. Legal advice is also critical to protect against HIPAA Privacy Rule violations or disputes with a former physician’s practice. For example, an attorney can advise whether it is legally permissible to obtain copies for continuing care, how to obtain authorization from a personal representative, or how to document patient consent when transferring records to a new practice or provider. Lawyers also help explain when certain rules apply, like situations where state or federal laws create two types of records: those that must stay with the practice and those that can be shared if the patient agrees. By consulting with experienced healthcare counsel, such as our team at Cohen Healthcare Law Group, physicians and healthcare providers gain confidence that they will comply with all applicable rules, avoid conflicts with patients or former employers, and transition into their new practice without unnecessary risk. With over 25 years of experience, Cohen Healthcare Law Group helps physicians navigate issues of medical record confidentiality, retention, and lawful patient transfers, ensuring they can continue to provide high-quality patient care while honoring their legal obligations. Need Help With Patient Records? Consult a Healthcare Lawyer When leaving a medical practice, ensuring that patient records are managed properly is both a legal and ethical responsibility. Physicians, staff, and patients all have rights and obligations under state and federal laws, including the Health Insurance Portability and Accountability Act (HIPAA). In summary, records belong to the practice, and patients have the right to request copies and easy access to their information, and providers must comply with strict rules regarding medical record confidentiality and medical record retention. Mishandling such medical records, whether in electronic or paper form, can result in serious legal risks for a departing physician or any healthcare provider. To transition safely, it is essential to follow the HIPAA Privacy Rule, honor patient consent requirements, and consult a knowledgeable healthcare attorney. FAQ Below are some answers based on state and federal laws, the HIPAA Privacy Rule, and professional standards of medical record confidentiality: What Happens to Patients’ Files When a Practice Is Closing? When a practice closes, the physicians must arrange for secure retention of medical records and notify patients about how to obtain copies or transfer their records to a new provider. Laws vary by state, but records are typically kept for a set period defined by federal laws and state law. Can a Doctor Take Patient Records When Leaving a Practice? A doctor cannot take original patient medical records when leaving a medical practice, since those records belong to the practice or facility. They may only obtain copies under certain conditions with proper patient consent and legal authorization. Do Patients Have the Right to Copies of Their Records? Yes, under HIPAA and most state laws, patients have the right to request copies of their medical records in either electronic or paper form within a reasonable period. Practices must provide access but may charge a small administrative fee. What Happens if Records Are Taken Without Permission? Taking such medical records without authorization can lead to accusations of theft, HIPAA violations, civil lawsuits, and disciplinary action against the healthcare provider. It also breaches both federal laws and professional ethical duties regarding medical record confidentiality. How Long Does the Process of Taking Patient Records When Leaving a Medical Practice Usually Take? Transferring patient records to a new practice usually takes a few days to several weeks, depending on the number of records, format, and state and federal requirements. HIPAA requires easy access within a specific timeframe, typically 30 days. What Costs Are Involved in Transferring Patient Records When Leaving a Medical Practice? Costs vary by state, but health care providers may charge reasonable fees for copying, mailing, or preparing electronic formats of health information. These costs are usually passed to the patient requesting the transfer, not the departing physician.
August 26, 2025
Healthcare
What Are the OTC Drug Label Requirements?
Over-the-counter (OTC) drugs are medications available without a prescription, intended to treat common health issues such as headaches, allergies, cold symptoms, or digestive discomfort. Under FDA regulations, OTC drug labels must follow a standardized drug facts format that includes active ingredients, purposes, directions, and more. In this article, we’re going to break down the importance of proper labeling for OTC drugs and walk you through the FDA’s specific OTC drug label requirements. What Are OTC Drug Label Requirements? OTC drug label requirements refer to the specific format and content standards that all over-the-counter (OTC) drug products must follow before being marketed to the public. These requirements ensure that the immediate container label, outer packaging, and any accompanying information provide consumers with clear, accurate, and complete details about the drug product’s purpose, uses, dosage, warnings, and ingredients. The applicable OTC drug monograph for each nonprescription drug product sets out what information must appear and in what form. In the United States, the primary regulatory body responsible for overseeing OTC drug regulations is the U.S. Food and Drug Administration (FDA). The FDA enforces labeling provisions under the Federal Food, Drug, and Cosmetic Act (FD&C Act), which apply to all nonprescription drug products, topical drug products, and other OTC medicines. Proper labeling is crucial for consumer safety because it communicates dosage warnings, separate allergy warnings, stomach bleeding warnings, sore throat warnings, and liver warnings, as well as other health risks that could necessitate immediate discontinuation of the drug. It is also essential for legal compliance, since products that do not meet OTC labeling format and content requirements may be considered misbranded and subject to enforcement action. In summary, OTC drug labels must follow strict FDA rules on format, ingredients, warnings, and claims. A healthcare lawyer helps ensure compliance, advises on whether your product fits under an FDA monograph or needs special approval, and reviews marketing to avoid FTC violations. If the FDA challenges your labeling or advertising, a lawyer like those at Cohen Healthcare Law can guide your response, reduce risk, and keep your product legally on the market. FDA Regulations on OTC Drug Labeling The FDA uses the OTC drug monograph system to establish standardized requirements for drug product labeling without needing an approved drug application. Each relevant OTC drug monograph details the active ingredient, labeling requirements, proper dosage, and necessary warnings, including specific alerts such as warnings for asthma or for pregnant users based on their trimester. The FDA requires a mandatory drug facts labeling format for all OTC medicines. This includes distinct headings, horizontal barlines, and consistent horizontal line spacing between sections. Certain warnings, such as a liver warning or asthma alert warning, must appear in a box and in red letters to ensure visibility. Labeling must also follow the standardized format and content requirements, which include how the drug facts labeling appears on the package, the subsequent panel immediately following the first, and the proper placement of additional bulleted statements appearing under the appropriate heading. Under the FD&C Act, drug product labeling must also meet packaging techniques intended to protect the drug from undergoing chemical change and to ensure that the dosage unit stated remains accurate. The FDA distinguishes between OTC and prescription drug labeling requirements. Prescription drug labels are tailored for healthcare professionals, whereas OTC medicine labels are designed for direct consumer use with complete instructions for safe self-administration. What Information Is Required on an OTC Drug Label? One of the requirements of an OTC drug label is the drug facts panel. This panel should include: Active ingredients—The common or usual name and the appropriate dosage unit for each. Purpose of the drug—The principal intended actions, such as pain relief, cough suppression, or fever reduction. Uses—Conditions or symptoms the drug product is marketed to treat. Warnings—This includes allergy alerts, separate allergy warnings, stomach bleeding warnings, sore throat warnings, dosage warnings, and any statement that would necessitate immediate discontinuation of the product. Special provisions may include an asthma alert warning set or a complete additional bulleted statement for conditions like liver damage risk. Directions for use—The dosage directions for each age group should be stated in discrete dosage units and in the same line as other dosing instructions. Other information – Storage instructions, inactive ingredients, and any toll-free number to report complaints. There should also be a product identity, which must be clear on the principal display panel. It should include the name of the drug, the net quantity of contents, and any statement required by the applicable OTC drug monograph or proposed labeling provisions. Additionally, there should be the manufacturer’s information. This must list the name and address of the manufacturer, packer, or distributor, either on the principal display panel or on such an exterior container as the immediate container label. Can OTC Drug Label Requirements Vary by Country? Yes, OTC drug regulations and labeling provisions vary significantly across countries. While the U.S. FDA has strict rules for how drug facts should be labeled, other countries might have different requirements, like needing extra warnings about sexually transmitted diseases or disclaimers for spermicide products. Some regions may require the same line formatting rules as the U.S., while others allow more than one statement or more than one panel for drug facts content. These differences create challenges for international distribution because a drug product marketed in one country may need changes to meet another country’s format and content requirements. For example, certain allergy alert or dosage warning statements that are optional in one country might be mandatory in another. Manufacturers distributing OTC medicines globally must study each applicable OTC drug monograph, adjust packaging techniques intended for different markets, and ensure that both the immediate container label and the subsequent horizontal line layouts comply with each jurisdiction’s rules. Strategic compliance planning and consultation with regulatory experts can help ensure smooth market entry without costly relabeling or product holds. What Are the Consequences of Not Following OTC Drug Label Requirements? Failure to comply with OTC drug label requirements can trigger serious legal and financial repercussions for any company marketing an over-the-counter (OTC) drug. Under the Federal Food, Drug, and Cosmetic Act, an OTC drug product that fails to meet the applicable OTC drug monograph or that does not display required information in the mandated OTC labeling format may be considered “misbranded.” This can result in product recalls, seizure of goods, injunctions, or civil penalties. Beyond fines and legal sanctions, companies risk losing consumer trust and damaging brand reputation. OTC medicine labels are designed to help consumers safely use nonprescription drug products without medical supervision, and if a label’s drug facts, dosage warning, or dosage directions are inaccurate, it could lead to adverse events, hospitalizations, or even fatalities. For example, a drug product marketed without the appropriate dosage unit or with incomplete additional bulleted statements appearing under the appropriate heading could necessitate immediately discontinuing use and generate public backlash. How to Ensure Compliance with OTC Drug Label Requirements Compliance begins with strong internal review and quality control processes. Every OTC drug product, whether a topical drug product or oral medication, must be checked against the applicable OTC drug monograph and other OTC drug regulations to ensure all mandatory statements are present. This includes verifying that the drug facts labeling appears in the proper order, using horizontal barlines and the same horizontal line spacing, and that the subsequent panel immediately follows the first panel with no omissions. Working with regulatory consultants or legal experts who specialize in OTC drug regulations can help companies navigate complex labeling provisions and packaging techniques intended to prevent the drug from undergoing chemical change. Periodic updates and audits are also essential, especially when format and content requirements change or when a modified form intended for a specific market must be adopted. Global distribution may require more than one panel or more than one statement to satisfy labeling provisions in other jurisdictions. Furthermore, the use of specialized labeling software and tools can ensure that every immediate container label and outside container meets FDA standards. This includes properly displaying the common or usual name, net quantity, inactive ingredients, and a toll-free number for reporting complaints. Software can assist in applying the correct format without errors when an approved drug application necessitates a different layout. Finally, hiring a healthcare lawyer is important. Your healthcare lawyer guides you through every stage of compliance, from reviewing your proposed labeling to helping you respond to FDA inquiries. They ensure your drug product labeling stays fully compliant and your brand remains protected. How Do OTC Drug Label Requirements Differ from Prescription Drug Labels? While both OTC drug label requirements and prescription drug labeling are regulated under the Federal Food, Drug, and Cosmetic Act, their regulatory standards differ in important ways. Over-the-counter (OTC) drug products are governed by the applicable OTC drug monograph or, in some cases, by an approved drug application. These regulations mandate the standardized Drug Facts labeling format, which dictates how the drug facts labeling appears, the placement of horizontal barlines, the same horizontal line spacing between sections, and the use of boxed statements. Prescription drug labels, on the other hand, are not formatted with the same consumer-friendly drug facts panel. Instead, they follow a detailed package insert format intended primarily for healthcare professionals. This means that the principal intended actions, dosage directions, stated dosage units, and potential interactions are explained in medical language, often requiring prior diagnosis and professional interpretation. In prescription labeling, the healthcare provider serves as the intermediary, interpreting the drug product labeling and instructing patients on safe use, whereas OTC medicines must provide all necessary directions directly to the consumer. OTC labeling requirements also focus heavily on immediate consumer comprehension, with the principal display panel, net quantity, active ingredient, inactive ingredients, and toll-free number for complaints clearly visible on the immediate container label and outside the container. Prescription labels rely more on pharmacist counseling, making consumer accessibility and the level of detail presented in OTC medicine labels a distinct regulatory and design challenge. How OTC Drug Label Requirements Affect Consumers and Manufacturers For consumers, well-designed OTC medicine labels deliver clear and accurate information needed to use nonprescription drug products safely without a doctor’s supervision. Compliance with the applicable OTC drug monograph ensures that dosage warnings, appropriate dosage units, and other required statements are present. This improves safety by alerting users to conditions that would necessitate immediate discontinuation of use, such as severe allergic reactions or adverse effects tied to liver damage, as communicated through a separate allergy warning or liver warning. For manufacturers, OTC drug regulations carry both legal and financial implications. Failing to follow the OTC labeling format, omitting required statements, or using an improperly modified form intended for a specific market can render a drug product marketed in violation of FDA labeling provisions. This could trigger recalls, fines, or even prevent the product from entering new markets, particularly where more than one statement or more than one panel is required under other OTC drug regulations abroad. Packaging techniques intended to preserve stability and prevent the product from undergoing chemical change are also closely scrutinized. From a marketing perspective, OTC drug label requirements influence how brands design their principal display panel and overall packaging. The format and content requirements dictate the exact placement of the active ingredient, principal intended actions, and net quantity, while maintaining compliance with spacing rules like the subsequent horizontal line or horizontal barline immediately preceding each section. Where Can I Find an OTC Label Template? Finding a reliable OTC label template is essential for creating compliant over-the-counter (OTC) drug product packaging that meets FDA format and content requirements. The U.S. Food and Drug Administration provides sample label illustrations and guidance documents showing how drug facts labeling appears. This includes the proper OTC labeling format, a horizontal barline immediately preceding each section, the same horizontal line spacing, and the placement of mandatory warnings like the asthma alert, sore throat warning, stomach bleeding warning, liver warning, and separate allergy warning. These resources, along with the applicable OTC drug monograph, help manufacturers design labels that include the active ingredient, the appropriate dosage unit, the stated dosage unit, the principal intended actions, the dosage warning, and all additional bulleted statements appearing under the appropriate heading. For companies seeking efficiency, several regulatory compliance vendors and labeling software platforms offer downloadable OTC medicine labels in editable formats. These templates can be customized to match the principal display panel size, net quantity, immediate container label specifications, and other OTC drug regulations. Customization is important because each nonprescription drug product is likely to have unique requirements under its OTC drug monograph. They might include special packaging methods to keep the drug stable, multiple panels for different languages, or a different design for specific topical or spermicide products. In addition, working with a healthcare lawyer or regulatory consultant ensures that your customized label follows the correct format and content requirements, bears the labeling means as required, and includes every mandated element, from the toll-free number to report complaints to the inactive ingredients listing. At Cohen Healthcare Law Group, we can help review your proposed labeling to ensure compliance before your drug product is marketed, avoiding costly redesigns or enforcement action. Want to Ensure OTC Drug Label Compliance? OTC drug label requirements are set by the FDA to ensure that over-the-counter (OTC) drug products give consumers the information they need to use them safely and effectively. Proper OTC medicine labels must clearly show the main uses, amount of product, inactive ingredients, and a toll-free number on both the main container and any outer packaging. Compliance with these requirements protects public safety, prevents misuse, and shields manufacturers from legal and financial risks. FAQ When it comes to over-the-counter (OTC) drug labeling, the rules are strict to ensure consumer safety. Below are answers to some of the most common questions about OTC drug labeling compliance: What Are the FDA Requirements for OTC Drugs? The FDA requires OTC drug products to follow the applicable OTC drug monograph or obtain an approved drug application. The drug facts label must be presented in a standardized format and include specific content, such as the active ingredient, dosage unit, uses, warnings, and directions. Labels must also meet format and content requirements under the Federal Food, Drug, and Cosmetic Act. Can OTC Drug Labels Be Changed Without FDA Approval? If the change is consistent with the applicable OTC drug monograph and maintains compliance with all OTC drug regulations, FDA pre-approval is generally not required. However, changes that alter active ingredients, principal intended actions, or safety warnings may necessitate additional review. How Often Do OTC Drug Labels Need to Be Reviewed? Manufacturers should review OTC medicine labels periodically to ensure they meet current FDA labeling provisions and reflect any updates to the OTC drug monograph. Reviews are also essential when new safety data emerges or when packaging techniques are intended for stability changes. What Penalties Exist for Non-compliance With Labeling Requirements? Non-compliance can lead to product recalls, fines, injunctions, or seizure of goods, and in severe cases, legal action for misbranding under the FD&C Act. These penalties can damage both consumer trust and brand reputation. Are There Specific Font Size and Style Requirements for OTC Drug Labels? Yes, the FDA’s OTC labeling format rules specify minimum font sizes, easy-to-read type styles, and spacing, along with horizontal barlines and the same horizontal line separation between sections. Certain warnings, like a liver warning or asthma alert warning set, may also require a box and red letters for emphasis. What Are the Three Criteria That Must Be Met by an OTC Drug? An OTC drug must be safe and effective for self-use without medical supervision, have labeling that provides clear drug facts and dosage directions, and contain active ingredients recognized as safe and effective under the applicable OTC drug monograph.
August 23, 2025
Healthcare
Health Care Proxy vs Durable Power of Attorney
A health care proxy, also called a medical power of attorney, is a legal document that allows you to appoint someone as your “health care agent.” This agent makes medical decisions for you if you become incapacitated or unable to speak for yourself. On the other hand, a Durable Power of Attorney (DPOA) allows you to authorize another person as your “agent” or “attorney-in-fact.” This person is to make financial and legal decisions on your behalf. The “durable” part means this power continues even if you become mentally or physically incapacitated. This article will explain the key differences between a health care proxy and a durable power of attorney. It will also discuss when you might need both. What Is a Health Care Proxy? A health care proxy is a legal document that authorizes a trusted person to make medical decisions on your behalf if you’re unable to do so. It could be a family member, close friend, or another individual you choose. This situation typically arises when you’re incapacitated, such as after a serious accident, during surgery, or in end-of-life care situations. Health care proxies are vital tools in ensuring that your healthcare decisions are respected, especially if you cannot communicate your wishes to a doctor or medical provider. The person appointed under a health care proxy, known as your health care agent, will have the authority to make specific healthcare decisions, such as choosing treatments, consenting to or refusing surgeries, and determining whether to continue life-sustaining treatment like life support. The agent is expected to act based on the principal’s wishes or previously provided specific instructions. Often, they may consult a living will or advance directive to guide their decisions. It’s important to note that this authority is generally limited to health care decisions and does not extend to financial or legal matters. Each state may have different legal requirements for establishing a valid health care proxy, but in most cases, the document must be signed in the presence of witnesses or a notary. What Is a Durable Power of Attorney? A durable power of attorney is a legal document that allows a person (called the “principal”) to appoint another individual (the “agent” or “attorney-in-fact”) to handle a broad range of financial, legal, and in some cases health-related matters on their behalf. This legal document remains valid even if the principal becomes incapacitated, which is why the term “durable” is used. In contrast to a general power of attorney, a durable version is specifically designed to remain in effect during times when the individual is unable to make their own decisions. Depending on how it’s drafted, a durable power of attorney can take effect immediately upon signing, or it can be a springing power, which activates only under certain circumstances, such as a medical diagnosis of incapacity. The scope of authority granted under this document can be extensive. If explicitly included, it can encompass managing investments, signing checks, contracts, handling tax matters, and even making healthcare decisions. This document plays a vital role in an estate plan, as it ensures that someone can act in your best interest if you’re unable to manage your affairs. Durable Power of Attorney vs Health Care Proxy When planning for unexpected life events, understanding the key differences between a health care proxy and a durable power of attorney is essential. Both are legally binding documents that authorize someone else to make decisions on your behalf, but they serve very different functions. While one focuses on medical care and healthcare decisions, the other addresses financial responsibilities, signing contracts, and managing legal affairs. Together, they form a vital part of an effective estate plan and ensure your principal’s wishes are respected in various circumstances, especially when you are unable to communicate or make your own decisions. Type of Decisions They Cover A health care proxy gives your chosen health care agent the authority to make medical decisions for you, but only if you become permanently incapacitated or unable to make those decisions yourself. These health care decisions may include choices about treatment, surgery, medication, or whether to continue life-sustaining treatments, such as life support. The agent is expected to act in accordance with your healthcare decisions, often informed by a living will or other advance directive that expresses your wishes clearly. In contrast, a durable power of attorney is a legal document that gives your attorney-in-fact or agent broad authority to handle financial decisions, legal responsibilities, and sometimes even healthcare needs, if explicitly granted. This authority may cover everything from managing investments to signing checks to even selling property to dealing with taxes and insurance. While the healthcare power is usually separated into a care proxy, some states allow a durable power of attorney to include both healthcare power and financial authority, depending on how the document is drafted. When They Apply Another major difference between a care proxy and a durable power of attorney lies in when these legal documents take effect. A healthcare proxy only becomes valid under certain circumstances, typically when a doctor confirms that the person is unable to make their own decisions regarding medical care. This often occurs in the context of a serious illness or injury or at the end of life, when clear healthcare decisions must be made, but the patient can no longer communicate. On the other hand, a durable power of attorney can be structured in different ways. It may be active immediately upon signing, or it can include a springing power clause that activates only if the person becomes incapacitated. This flexibility makes it a powerful tool in a variety of situations, particularly when planning for aging, chronic illness, or potential cognitive decline. It ensures someone you trust has the legal authority to act on your behalf without delay. Legal Requirements and Forms Both a health care proxy and a durable power of attorney are considered critical legal documents, but their execution varies by state. Each state has its own state-specific forms and requirements around witnessing or notarization, which means it’s essential to work with a legal professional who fully understands local laws. Some states even allow you to combine both powers into one unified medical power of attorney, which can streamline your documentation while ensuring your wishes are honored in all areas. When choosing a person to act on your behalf, it’s important to select someone who understands your values and is willing to follow your specific instructions. Some individuals may have strong feelings about end-of-life care or want to give limited power to the agent, depending on the situation. You can also appoint the same person to act as both your health care agent and financial agent under a durable power of attorney, or choose different people for each role if that better aligns with your needs and comfort level. Comparison Table: Health Care Proxy vs Durable Power of Attorney Feature / Aspect Health Care Proxy Durable Power of Attorney Primary Purpose Makes medical decisions for you Handles financial, legal, and sometimes medical matters Scope of Authority Healthcare decisions only Broad — finances, property, legal, and possibly medical When It Takes Effect Usually, only upon incapacity for medical decisions Can be immediate or upon incapacity Duration Ends when you regain capacity or upon death Remains valid until revoked or upon death Legal Requirements Typically requires witnesses Usually requires notarization Common Alternate Names Medical Power of Attorney, Health Care Agent Financial Power of Attorney Chosen Agent’s Role Advocate for your medical preferences Manage finances, pay bills, sign contracts, and handle property Who Needs It Anyone who wants a trusted person to make medical decisions if incapacitated Anyone who wants a trusted person to handle finances/legal matters Risk of Not Having It Doctors may have to make decisions without knowing your wishes Bills may go unpaid, assets unmanaged, and legal matters stalled Should You Get Both a Proxy and POA? When it comes to protecting your future, the smartest choice is often to establish both a health care proxy and a durable power of attorney. These two legal documents serve different functions, ensuring full coverage of medical decisions and financial responsibilities If you only have a health care proxy in place, you may find that no one has the authority to pay your bills, manage your assets, or handle urgent financial matters while you’re incapacitated. Likewise, if you only have a durable power of attorney, your agent may be powerless to make critical healthcare decisions in a hospital setting, especially if the document does not include specific healthcare power. In high-stakes medical situations, these gaps can lead to confusion, legal delays, and added stress for your family members. That’s why most legal professionals recommend having both documents as part of your estate plan, ensuring that your principal’s wishes are followed in all circumstances. How to Choose the Right Healthcare Lawyer Choosing the right legal professional to help you draft your health care proxy and durable power of attorney is essential. Not all attorneys have experience with healthcare law, and a mistake in your documentation could create problems during emergencies. Look for an attorney who: Specializes in healthcare law, estate planning, and legal documents related to healthcare decisions and financial planning. Has specific experience preparing both health care proxies and durable powers of attorney, as these documents must work together without conflict. Understands your state’s specific requirements for witnesses, notarization, and the scope of authority granted under each document. Takes time to understand your unique medical, financial, and personal wishes and helps you create clear, specific instructions. Can explain the key differences between different types of power of attorney and guide you in selecting the right person appointed to act on your behalf. A qualified healthcare lawyer will make sure your documents are clear, legally valid, and aligned with your principal’s wishes. Most importantly, they will ensure your plans remain enforceable in various situations, including medical emergencies, cognitive decline, or permanent incapacity. How to Create a Health Care Proxy and Durable Power of Attorney The first step is to choose the right agent for each role. This can be a family member, close friend, or trusted person who understands your values and will respect your wishes. You may select the same person for both your care proxy and durable power of attorney, or you may appoint different people depending on the different powers each role requires. It’s important to select someone who is capable of making tough decisions and who can handle medical care or financial decisions during emergencies or under stress. Next, you’ll need to complete the proper state-specific forms for both documents. These forms typically outline the scope of authority, any specific instructions, and the circumstances under which the documents take effect. For example, your healthcare proxy may only become active if you are declared permanently incapacitated by a doctor, while your durable power of attorney could be active immediately or upon a triggering event (a springing power). Be sure to consult a legal professional who understands the legal responsibilities associated with each document and who can ensure compliance with your state’s requirements. Many states require that these documents be notarized or witnessed by one or more adults who are not agents. These requirements help protect against fraud and ensure that the principal’s wishes are clearly documented. A mistake in the witnessing or notarization process could render the document invalid, which is why it’s important to fully understand what your state law mandates. Once the documents are completed and signed correctly, they should be stored in a safe but accessible location. Provide copies to your appointed health care agent, your attorney-in-fact, your primary doctor, and perhaps a family member or legal advisor. You should also keep a copy of your estate plan. In some cases, it may be wise to register your healthcare proxy with your state or healthcare provider, particularly if your healthcare decisions are complex or involve end-of-life care. Need a Lawyer for Your Proxy and POA? When you’re incapacitated, a health care proxy enables a trusted individual to make medical decisions on your behalf, while a durable power of attorney grants someone the authority to manage financial and legal matters. Occasionally, they even make certain healthcare decisions if specifically stated in the document. These are two completely unique powers, and together, they provide full coverage for your medical care, end-of-life care, and financial responsibilities in a variety of situations. Creating these legal documents now ensures that your own decisions and the principal’s wishes are honored no matter what the future holds. Keep in mind that relying on verbal agreements or outdated forms can lead to delays, confusion, or legal battles at a time when clarity matters most. FAQ Understanding the difference between a healthcare proxy and a durable power of attorney can be confusing, especially when it comes to how they function in real-life medical and legal situations. Here are some answers to the most common questions to help you make informed decisions: Does a Power of Attorney Override a Healthcare Proxy? No, a durable power of attorney does not override a health care proxy; they cover different areas. The proxy controls medical decisions, while the POA handles financial and legal matters, unless healthcare powers are explicitly included. Is a Durable Power of Attorney the Same as a Healthcare Proxy? No, they are two different legal documents. A durable power of attorney manages financial decisions, while a healthcare proxy is limited to medical care and healthcare decisions if you’re incapacitated. What Are the Disadvantages of a Healthcare Power of Attorney? One potential drawback is that it only takes effect when you’re deemed unable to make your own healthcare decisions, which can cause delays. Furthermore, without clear, specific instructions, your health care agent may face difficult choices without knowing your exact wishes.
August 19, 2025
Healthcare
Can Medical Offices Go Corporate?
Yes, medical offices can go corporate in certain circumstances, depending on state laws. This typically means shifting from a physician-owned, independent practice to a business structure owned or managed by a corporation, often involving outside investors, healthcare management companies, or larger healthcare networks. This post explains what going corporate means for medical offices and the laws on corporate practice of medicine. It will also let you know the legal issues that may arise when medical offices go corporate. What Does Going Corporate Mean for Medical Offices? When a medical office “goes corporate,” it transitions from being owned and operated by individual physicians to being part of a larger corporate healthcare entity. These entities can include for-profit corporations, private equity-backed groups, or healthcare management companies that oversee operations, business strategy, and sometimes even staffing and clinical workflows. Typically, solo/independent practices are physician-owned, with full control over patient care decisions, operations, and business management. These practices often focus on personalized patient relationships and local community service. On the other hand, corporate-owned practices are managed by business executives or management firms, often with a focus on efficiency, scalability, and standardized protocols. While physicians may still lead clinical care, business decisions are typically influenced or directed by non-physician executives. Examples of corporate medical office models include: Large Healthcare Networks: Hospital systems or integrated healthcare organizations that own multiple clinics and employ physicians. Private Equity Firms or Investment-Backed Groups: Entities that acquire practices to streamline operations and improve profitability. Medical Management Companies (MSOs): Provide administrative, billing, marketing, and compliance services while physicians retain clinical control. Franchise Healthcare Models: Corporate branding and operational systems applied across multiple physician-owned locations. What Legal Issues Arise When Medical Offices Go Corporate? When medical offices go corporate, they must navigate complex legal issues that impact how they operate, deliver patient care, and remain compliant with federal law and state regulations. Some of these legal challenges include: Healthcare Compliance Laws Medical Offices Must Follow Corporate medical offices must comply with key healthcare laws, including the Stark Law, the Anti-Kickback Statute, and HIPAA. These laws regulate physician self-referrals, prohibit certain financial arrangements that could influence medical care, and safeguard patient privacy. The federal government, including agencies like the Federal Trade Commission, closely monitors corporate entities in healthcare to prevent anti-competitive practices and protect patients from harm. Compliance challenges are heightened when private equity firms, private insurers, or large health care providers get involved, as these organizations often operate across multiple states and must meet varying legal standards. Corporate medical offices can maintain compliance and optimize business operations by collaborating with experienced healthcare attorneys. Physician Ownership and Corporate Practice Restrictions In many states, corporate practice of medicine laws restrict non-physicians from owning or controlling physician practices. These rules aim to safeguard patient care from business interests and maintain the professional independence of doctors. However, there are exceptions, especially when hospital systems or primary care networks employ physicians. State-specific regulations vary significantly, and in some cases, corporate entities use management service organizations to handle non-clinical business functions while physicians retain control over medical care. Healthcare lawyers play a key role in navigating these ownership restrictions, helping physicians decide whether to sell, merge, or partner with private companies while staying compliant. Licensing and Accreditation Requirements Corporate ownership of physician offices can impact licensing and accreditation, especially when transitioning from a solo or small group practice to a corporate healthcare structure. Health care providers must ensure that all physicians employed remain properly licensed, that accreditations are maintained, and that clinical standards do not drop during the consolidation process. This is particularly important for primary care practices and specialty groups joining larger health systems or hospital networks. A healthcare attorney can guide corporate medical offices through the legal steps required to maintain their certifications and comply with both state and federal regulations during ownership changes. Patient Privacy and Data Security Under corporate ownership, patient privacy and HIPAA compliance remain paramount. Larger corporations, hospital systems, and private insurers often rely more on centralized electronic medical record systems and shared databases While these systems can improve efficiency and outcomes, they also pose risks of data breaches and misuse of sensitive information. Corporate entities must ensure strong cybersecurity measures, proper employee training, and legal safeguards to protect patients’ personal and medical information. Failure to do so can lead to federal government enforcement actions, fines, and damage to the provider’s reputation. Contractual Obligations and Legal Agreements When medical offices go corporate, the web of contractual obligations expands significantly. Physicians employed under corporate structures often enter into detailed employment agreements, while corporate entities engage in complex management contracts, vendor arrangements, and partnerships with health insurers. Careful negotiation is necessary to ensure fairness, safeguard the physicians’ work-life balance, and align with the corporate entity’s goals without compromising patient care. Healthcare attorneys help structure these contracts so that they comply with law, meet business objectives, and support long-term practice stability. Is Going Corporate Right for Your Medical Office? For physician practices and primary care practices across the country, the question of whether to go corporate has become more pressing over the years. Hospital consolidation, vertical consolidation, and increased involvement from private equity firms, private insurers, and large health systems have changed how healthcare providers operate. The American Medical Association, the Physicians Advocacy Institute, and federal government regulators, including the Federal Trade Commission, have all taken note of the rapid pace of change in medicine. With higher payment rates from Medicare and Medicaid, potential financial incentives from health insurers, and increased access to advanced infrastructure, many physician offices are weighing the benefits and risks of joining corporate entities. Let’s weigh the advantages and disadvantages of going corporate: Advantages of Going Corporate for Medical Offices One of the most appealing aspects of joining corporate entities is the improved financial stability and access to capital that can come from working with hospital systems, private equity, or health care providers with strong business backing. Corporate structures also often allow practices to streamline administrative tasks, reduce overhead, and focus more time on direct patient care. By consolidating resources, physicians employed under these models can enjoy enhanced negotiation power with insurers and suppliers, leading to better contract terms and potentially higher payment rates for services. Larger corporate healthcare providers also tend to offer more opportunities for career growth and professional development for doctors, nurses, and employees, while supporting access to advanced technology and infrastructure that might be cost-prohibitive for solo practitioners. In many cases, consolidation further leads to expanded service offerings and improved access for patients, particularly when corporations invest in expanding primary care networks and specialty services. Potential Disadvantages and Challenges Despite the advantages, going corporate is not without its risks. Physicians often face a loss of autonomy when corporate entities or hospital systems take over, as decision-making processes may shift from doctors to business executives. In some cases, there can be conflicts between corporate goals and patient care priorities, especially when the focus on cost reduction or revenue growth overshadows medical care outcomes. Changes in workplace culture, shifts in management style, and new reporting structures can affect the satisfaction of physicians, nurses, and other healthcare providers. There is also the risk that profits may be prioritized over patient outcomes, creating potential tensions between what is best for patients and what benefits the business financially. Patient perception and trust may also shift when independent physician practices are acquired by larger corporations, especially if patients feel they are receiving less personalized care. How Medical Offices Can Transition to Corporate Ownership While the decision to go corporate can bring improved financial incentives, higher payment rates from Medicare and Medicaid, and increased resources from health insurers and corporations, it also requires careful planning to remain compliant with federal law, state regulations, and industry standards. The transition process is under close watch by the federal government, as well as by the American Medical Association and the Physicians Advocacy Institute. The right legal strategy can help doctors, hospitals, and other health care providers complete the move while maintaining patient care quality, work-life balance for physicians employed, and long-term business stability. Step 1: Legal Assessment and Compliance Review The first step in any corporate transition is a thorough legal review by healthcare attorneys experienced in the corporate practice of medicine. This involves analyzing the relevant state laws, reviewing corporate practice restrictions, and ensuring compliance with regulations that govern health care providers, insurers, and companies involved in the transaction. Attorneys also evaluate whether the proposed structure aligns with both federal and state rules, including privacy laws like HIPAA, and whether the transaction may trigger additional scrutiny from regulators at the federal level or within the state department of health. This stage sets the legal foundation for a smooth transition without risking costly penalties or loss of accreditation. Step 2: Selecting Business Structure & Legal Partnership Once the feasibility is established, the next focus is selecting the right corporate entity, whether a professional corporation, LLC, or another structure, based on state requirements and business goals. Healthcare attorneys guide physician offices through the process, ensuring the structure supports compliance, patient access, and quality of medical care. Legal counsel will draft and review critical contracts, including employment agreements for doctors, shareholder agreements for partners, and payer contracts with health insurers. They also ensure that licensing, accreditation, and privacy laws are met while negotiating terms that safeguard physician autonomy and patient outcomes. Step 3: Contract Drafting, Negotiation, and Regulatory Filings With the corporate entity chosen, the process moves to finalizing agreements and preparing necessary filings for approval by medical boards and other relevant agencies. This includes coordinating the transfer or update of medical licenses and certifications, ensuring that practice operations remain uninterrupted. Regulatory filings must be complete and accurate to avoid delays, especially when federal government oversight or state-level review is required. During this phase, attorneys work closely with all parties, such as doctors, insurers, and corporate buyers, to confirm that every term protects the interests of both providers and patients. Step 4: Compliance Program Implementation and Staff Training After the structural and contractual work is completed, a compliance program must be developed to guide ongoing operations. This includes corporate governance policies, billing compliance standards, and protocols for data security and HIPAA compliance. Attorneys and compliance specialists provide training for all employees, from administrative staff to physicians employed, so that everyone understands regulatory obligations and corporate procedures. This is particularly important when corporate ownership spans multiple hospitals or health systems, where standardization ensures consistent patient outcomes and prevents costly mistakes. Step 5: Closing the Transaction and Ongoing Legal Support The final stage involves executing acquisition or merger agreements, completing financial transfers, and officially transitioning ownership to the corporate entity. Even after the transaction is complete, ongoing legal support is essential for handling audits and disputes and adapting to new regulations at both the state and federal levels. This is especially true in a health care environment where consolidation leads to constant changes in market dynamics, spending priorities, and payment structures. With proper legal oversight, physician practices can create a sustainable corporate model that supports patient care, aligns with regulators’ expectations, and offers long-term benefits for providers, employees, and patients alike. Why Medical Offices Need Healthcare Lawyers to Go Corporate The American Medical Association, Physicians Advocacy Institute, and federal government agencies, including the Federal Trade Commission, have raised concerns about how corporate entities impact patient care, medical costs, and physician work-life balance. With so much regulatory oversight at both the federal and state levels, healthcare lawyers play a critical role in guiding doctors, hospitals, and other providers through the process in a way that safeguards compliance, financial stability, and quality of medical care. A skilled healthcare attorney helps mitigate legal risks by identifying potential compliance pitfalls early and providing proactive counsel tailored to the practice’s needs. This is particularly important when dealing with complex corporate structuring, hospital system partnerships, and regulatory filings involving Medicare, Medicaid, and health insurers. Additionally, attorneys oversee the careful review process to make sure the transition follows federal law, avoids unwanted attention from regulators, and stops expensive lawsuits or fines. They also work to secure smooth contract negotiations, covering everything from employment agreements for physicians employed to payer contracts with health insurance, and service agreements with vendors. Furthermore, attorneys provide strategic advice on dispute resolution, handle compliance audits, and offer ongoing legal support long after the transaction is complete. Want to Ensure Compliance When Going Corporate? Going corporate can be a strategic move for physician practices, primary care practices, and specialty physician offices seeking improved financial stability, access to capital, advanced technology, and streamlined operations. While this transition can bring higher payment rates from Medicare and Medicaid, stronger negotiation power with insurers, and opportunities for career growth, it also comes with significant legal, regulatory, and cultural challenges. Whether medical offices should or can go corporate depends on state-specific corporate practice of medicine laws, federal law, and the unique priorities of the physicians and healthcare providers involved. The decision requires weighing the benefits of joining hospital systems or corporate healthcare providers against potential drawbacks like loss of autonomy, changes in workplace culture, and patient trust concerns. To protect both patient care and long-term business viability, the transition must be handled with precision, compliance, and a clear legal strategy. Frequently Asked Questions The decision to take a medical office corporate raises many questions for physicians, patients, and healthcare providers. Here are answers to some of the most common concerns: Can All Types of Medical Offices Go Corporate? Not all medical offices can go corporate, as state-specific corporate practice of medicine laws may restrict non-physician ownership or control. The rules vary widely, so legal guidance is essential before making the transition. How Does Going Corporate Affect Patient Care? Going corporate can bring better access to technology, resources, and services but may also introduce standardized protocols that impact personalized treatment. The effect depends on how the corporate entity balances efficiency with patient-focused care. Will Doctors Lose Their Independence? In many corporate healthcare models, physicians have less control over business decisions, though they may still retain authority over medical care. The degree of independence depends on contract terms and the corporate structure chosen. Which States Allow Corporate Practice of Medicine? Some states, like Florida and New York, permit corporate ownership of medical practices with certain safeguards, while others prohibit it entirely. Each state’s laws are unique, making compliance checks critical before moving forward.
August 14, 2025
Healthcare
FDA and FTC Legal Boundaries for Cosmetics
The FDA regulates the safety and labeling of cosmetics under the Federal Food, Drug, and Cosmetic Act (FDCA). It ensures products are not adulterated or misbranded and monitors whether certain claims transform a cosmetic into a “drug” under the law. On the other hand, the FTC oversees advertising practices, ensuring that cosmetic marketing is truthful, not misleading, and backed by reliable evidence. The FTC can take enforcement action against deceptive or unfair business practices in cosmetic advertising. This post covers why cosmetics companies must understand FDA and FTC roles. It also lets you know how to protect your brand from regulatory action. What is the FDA’s Role in Cosmetics Regulation? The U.S. Food and Drug Administration (FDA) plays an important role in overseeing the safety and labeling of cosmetic products sold in the United States. Under the Federal Food, Drug, and Cosmetic Act (FDCA), the FDA is responsible for ensuring that cosmetics are not adulterated or misbranded and that consumers are not misled by false or deceptive labeling. However, unlike drugs or certain medical devices, cosmetics do not require FDA pre-approval before they reach the market. This places a greater responsibility on manufacturers and distributors to ensure product compliance. Cosmetics, as defined by the FDA, are products intended to be applied to the human body for cleansing, beautifying, promoting attractiveness, or altering the appearance. This includes items like makeup, skin moisturizers, shampoos, deodorants, perfumes, and certain skin treatments. It’s important to note that if a product is marketed with claims that it treats or prevents disease or affects the structure or function of the body, it may be classified as a drug, even if it’s also a cosmetic. For example, a lotion marketed to moisturize the skin is a cosmetic, but one that claims to treat eczema would be regulated as a drug. Under FDA regulations, cosmetics must meet specific standards to be legally marketed. They must be safe for use under labeled or customary conditions, and their labeling must be truthful and not misleading. Cosmetic labels are required to include the name and address of the manufacturer or distributor, an accurate statement of the quantity of contents, and a complete listing of ingredients in descending order of predominance. The FDA also monitors for prohibited ingredients and contaminants that could pose a risk to consumer health. The FDA’s role is reactive rather than proactive. It typically steps in after products are already on the market if there are reports of adverse events, labeling violations, or safety concerns. One of the most significant distinctions in FDA law is the difference between cosmetics and drugs. Drugs are subject to much stricter regulations, including premarket approval, clinical trials, and adherence to Good Manufacturing Practices (GMP). A cosmetic becomes a drug if it makes claims to affect the structure or function of the body or to treat or prevent disease. What are FDA Legal Boundaries for Cosmetics? Cosmetics are products intended to be applied to the human body for cleansing, beautifying, promoting attractiveness, or altering appearance. These include personal care products such as skin moisturizers, fingernail polishes, perfumes, shampoos, and makeup. Under the Food, Drug, and Cosmetic Act (FD&C Act), the FDA classifies these products based on their intended use. If a product claims to affect the structure or function of the human body such as “treating acne,” “stimulating collagen production,” or “removing wrinkles”, it may be reclassified as a drug or even a medical device. Therefore, it is subject to far stricter regulations and requires FDA premarket approval. Cosmetic companies must stay within clear legal boundaries to avoid crossing into drug claims. While cosmetic products do not require FDA premarket approval, the FDA has authority over several aspects of cosmetic regulation. These include ensuring that products are not adulterated, meaning they contain harmful or contaminated substances, and that they are not misbranded, meaning their labeling is false, misleading, or lacking required information. The FDA does not evaluate the efficacy of cosmetics, unlike drugs, but it will take enforcement action if advertising claims are deceptive or if products are deceptively packaged. When cosmetic manufacturers make implied claims that a product has therapeutic benefits without proper substantiation, they risk violating both FDA and FTC legal boundaries. FDA Regulations for Cosmetic Ingredients and Safety Cosmetic manufacturers are responsible for ensuring that ingredients used in their products are safe for their intended use. Although there is no mandatory premarket approval for most cosmetic ingredients, color additives are an exception and must receive specific FDA approval before they can be used in cosmetic formulations. The FDA has banned or restricted certain harmful substances in cosmetics, such as mercury compounds and chlorofluorocarbons, to protect consumers from dangerous products. To comply with FDA law, cosmetic firms must implement internal quality control systems and conduct necessary safety testing. The agency does not require companies to submit clinical studies or other scientific data before marketing a product, but it does expect that adequate substantiation of safety exists behind the scenes. Any product found to be contaminated with harmful bacteria, improperly formulated, or otherwise unsafe may be considered adulterated under the FD&C Act, which could trigger regulatory action and even product recall. Cosmetic companies should also consider potential issues related to microbial contamination, especially in products like eye creams and hair dyes that may come into contact with sensitive areas of the body. FDA Requirements for Cosmetic Labeling and Claims The FDA enforces strict labeling requirements to inform consumers and prevent misleading or deceptive advertising claims. Cosmetic labels must include the product’s identity, the name and address of the manufacturer or distributor, the net quantity of contents, and a full list of ingredients in descending order of predominance. Usage instructions and required warnings must also be clearly visible and easy for consumers to understand. Products that are deceptively packaged or contain false or unsubstantiated claims may be considered misbranded. While cosmetics may make certain claims such as “moisturizes dry skin” or “adds shine to hair,” they must avoid language that implies a medical or therapeutic benefit unless the product has undergone drug-level scrutiny. For example, terms like “hypoallergenic” or “natural” may not have a standard FDA definition but should still be adequately substantiated to avoid potential FTC and FDA enforcement. Similarly, claims involving “anti-aging” or “reversing skin damage” must be carefully crafted to remain within the boundaries of cosmetic law. The FDA, in collaboration with the Federal Trade Commission, may pursue enforcement action against cosmetic manufacturers or distributors making deceptive or inadequately substantiated claims. FDA Adverse Event Reporting and Safety Monitoring Although reporting adverse events is not mandatory for cosmetic products, it is strongly encouraged under FDA guidelines. Serious adverse events, including those resulting in hospitalization, significant disability, or death, can be reported through the FDA’s Voluntary Cosmetic Registration Program (VCRP) or MedWatch system. These reports help the FDA monitor the safety of cosmetics on the market and take swift action when dangerous products emerge. Cosmetic manufacturers and distributors should develop internal systems to track and investigate consumer complaints. These systems can help identify trends in product safety issues and inform the need for corrective action, including product reformulation or voluntary recall. Adverse event data also helps the FDA evaluate whether certain products, ingredients, or packaging methods pose a risk to public health. Maintaining transparency with the FDA by reporting safety incidents not only demonstrates good faith but can also reduce the risk of severe enforcement action later on. FDA Enforcement Actions and Penalties for Non-Compliance If a cosmetic product is found to violate FDA regulations, the agency may initiate a range of enforcement actions. These include issuing warning letters, seizing products, seeking injunctions, or even pursuing criminal prosecution in extreme cases. While most FDA enforcement actions begin with informal discussions or warning letters, failure to take prompt corrective action can escalate the situation quickly. In some cases, the FDA may mandate or recommend a recall. Although most cosmetic recalls are initiated voluntarily by the manufacturer, the FDA has the authority to intervene if public safety is at risk. Legal issues associated with non-compliance can lead to product bans, reputational harm, or long-term scrutiny from regulators. FDA Guidelines for Cosmetic Product Recalls The FDA recommends that companies initiate a voluntary recall when they discover a product to be unsafe, mislabeled, or adulterated. Having a recall plan in place allows cosmetic manufacturers to respond quickly, communicate effectively with distributors, retailers, and consumers, and minimize harm. Recalls must be documented thoroughly and executed transparently to meet FDA expectations. The FDA may choose to monitor the recall process and evaluate its effectiveness. Public notices may be required to ensure that all affected consumers are informed. Proper record-keeping and traceability systems help cosmetic firms demonstrate compliance in the event of future inspections or audits. A prompt and transparent recall reduces legal risk and shows consumers that the brand prioritizes their safety. What is the FTC’s Role in Cosmetics Marketing and Advertising? The Federal Trade Commission (FTC) plays a central role in regulating advertising and marketing claims made by cosmetic companies in the United States. While the Food and Drug Administration (FDA) focuses on product safety, labeling, and classification, the FTC is the government agency responsible for ensuring that all advertising claims related to cosmetic products are truthful, not misleading, and adequately substantiated. The FTC’s jurisdiction covers everything from print and digital advertising to social media marketing, influencer endorsements, and product packaging that includes promotional language. The cosmetics industry must carefully observe both the FDA and FTC legal boundaries to prevent regulatory action and legal issues. Deceptive or misleading advertising is defined by the FTC as any marketing practice that misrepresents a product or omits important information in a way that is likely to mislead reasonable consumers. This includes both express claims and implied claims. For example, a claim that a skin moisturizer “eliminates wrinkles overnight” must be supported by solid scientific evidence; otherwise, the advertising is considered deceptive. The FTC also scrutinizes terms like “hypoallergenic,” “natural,” “organic,” or “dermatologist-recommended,” especially when such claims are used to suggest that a product is safer or more effective than it truly is. Without adequate substantiation, such claims can result in FTC enforcement action. Substantiation is a key requirement under FTC law. Cosmetic firms must be able to provide competent and reliable evidence to support any marketing claims, including clinical studies, consumer perception data, or other scientific backing. Claims made about consumer products, such as hair dyes or permanent waves, must not only reflect the intended use of the product but also align with consumer expectations based on the language used. The FTC emphasizes that advertising must inform consumers without misleading them, which means all claims must be truthful and not exaggerated. What Are the FTC Legal Boundaries for Cosmetics Marketing? Cosmetic companies must adhere to strict FTC guidelines that govern how products are marketed to consumers. Claims must be truthful, not misleading, and backed by evidence. Even statements that seem harmless, like “improves skin tone” or “revitalizes tired eyes,” can be considered deceptive if the advertiser cannot provide adequate substantiation. Implied claims, such as the suggestion that a product is “FDA approved” when it is not, are also prohibited. In fact, the use of government symbols, false certifications, or deceptive imagery that implies regulatory endorsement can result in swift enforcement action by the FTC. Endorsements and testimonials are another area of focus under FTC authority. When a cosmetic firm uses influencers, celebrities, or customer testimonials to promote their products, the FTC requires that any material connection between the endorser and the company be disclosed. This includes sponsored content, gifted products, paid partnerships, and affiliate links. If a social media influencer is compensated to promote a skin moisturizer or hair color, they must clearly state that the post is sponsored or that they received compensation. Failure to disclose these relationships can result in regulatory penalties for both the influencer and the brand. The FTC also requires that disclosures in advertising be “clear and conspicuous.” This means that disclaimers or qualifying information must be easy for consumers to see and understand, not hidden in fine print or buried at the bottom of a page. For example, if a cosmetic product has limited benefits that apply only under certain conditions, this must be stated clearly in the advertisement. The FTC monitors advertising claims through consumer complaints, marketplace surveillance, and collaboration with other agencies like the FDA. Companies that ignore these guidelines risk facing enforcement actions that could include fines, cease-and-desist orders, and public corrective advertising. Violating FTC advertising rules can lead to significant legal and financial consequences. Penalties may range from civil fines to injunctive relief, and in some cases, companies may be required to refund consumers or undergo long-term compliance monitoring. For small businesses and growing cosmetic firms, these penalties can be devastating. The FTC’s involvement in the cosmetics industry ensures that consumers are protected from dangerous products, misleading marketing, and deceptive advertising. It also holds cosmetic manufacturers accountable for maintaining ethical marketing practices and adequately substantiating every claim they make. How Do FDA and FTC Regulations for Cosmetics Differ? The FDA and the FTC are two government agencies that regulate cosmetic products, but their responsibilities are distinct and complementary. The FDA (Food and Drug Administration) focuses primarily on product safety, labeling accuracy, and ensuring that cosmetics are not adulterated or misbranded under the Federal Food, Drug, and Cosmetic Act (FD&C Act). Its role centers around how products are formulated, labeled, and packaged, and whether they comply with safety standards, particularly regarding color additives, banned substances, and proper disclosure of ingredients. In contrast, the FTC (Federal Trade Commission) regulates the advertising and marketing claims made by cosmetic companies under its authority to prevent deceptive or misleading business practices. The FTC’s jurisdiction extends to all forms of advertising, including digital content, influencer partnerships, endorsements, product packaging, and traditional media. The agency ensures that cosmetic firms do not make false, unsubstantiated, or exaggerated claims about product performance, such as suggesting a cosmetic can cure, treat, or prevent a medical condition. These different approaches significantly impact how cosmetic businesses operate. While the FDA might inspect a product for microbial contamination, inadequate labeling, or banned ingredients, the FTC will scrutinize whether the product’s marketing is backed by adequate substantiation, particularly when it includes terms like “natural,” “clinically proven,” or “hypoallergenic.” For example, a brand selling skin moisturizers might pass an FDA inspection for safety but still face FTC enforcement if its ad falsely claims that the product reverses aging without credible clinical evidence. Despite their different focus areas, FDA and FTC legal boundaries often intersect, especially when cosmetic claims stray into drug territory. If a company markets a cosmetic with language like “treats acne” or “heals eczema,” the FDA may classify that product as a drug, subjecting it to far more stringent regulations, including premarket approval. At the same time, the FTC could step in if those claims lack scientific backing, even if they fall short of FDA-defined drug claims. In such cases, both agencies may pursue regulatory action, making it critical for businesses to stay alert to overlapping rules. To remain compliant, cosmetic firms should build strong internal systems to ensure their product formulations, labels, packaging, and advertising meet the expectations of both agencies. Working with regulatory experts who understand the nuanced requirements of the FDA and FTC, like the experts at Cohen Healthcare Law Group, can help avoid costly missteps. What Are the Legal Risks of Violating FDA and FTC Rules? Violating FDA and FTC regulations poses serious legal risks for cosmetic companies. The FDA may issue warning letters to companies whose products are considered misbranded or adulterated, demanding immediate corrective action. In more serious cases, the FDA can escalate enforcement through product seizures, injunctions, import bans, or even criminal prosecution, especially when companies continue to market dangerous products or ignore FDA orders. Meanwhile, the FTC can impose civil penalties, cease-and-desist orders, and require companies to issue corrective advertising when marketing claims are found to be deceptive or misleading. These actions often come with costly fines and force businesses to halt sales until compliance is achieved. For example, if a firm advertises a hair dye as “clinically proven to regrow hair” without substantiating the claim, the FTC can step in to stop the ad campaign and demand refunds to consumers. Beyond regulatory fines, companies may be forced into expensive product recalls, especially if labeling errors or false claims affect large volumes of product already in circulation. A recall can erode consumer trust, lead to negative media attention, and damage a brand’s long-term reputation. Even worse, legal actions from these agencies can lead to lengthy investigations, mounting legal fees, and lost revenue from paused operations or delisted products. Non-compliance doesn’t only affect large brands. Small businesses in the cosmetics industry are equally at risk and may be less prepared to absorb the financial fallout of enforcement actions. This makes proactive compliance a key business strategy, ensuring that every product launched is legally sound from formulation to final advertisement. How Can Businesses Ensure Compliance with FDA and FTC Regulations? To stay compliant, cosmetic companies must first ensure they understand and follow all applicable FDA and FTC requirements. This includes knowing the difference between a cosmetic and a drug under FDA law, using only FDA-approved color additives, and avoiding ingredients known to be banned or restricted. Labels must clearly identify the product, include the required information, and avoid misleading claims that could make a product appear FDA approved when it is not. Businesses must also align their marketing strategies with FTC standards, which require that all advertising claims be truthful, non-deceptive, and adequately substantiated. Before using terms like “organic,” “non-toxic,” or “clinically tested,” companies should gather and document credible evidence, such as lab testing, clinical studies, or expert evaluations. Testimonials and influencer partnerships must follow FTC rules for disclosure, particularly when financial or material relationships are involved. One of the most effective ways to ensure compliance is to work closely with experienced healthcare or regulatory attorneys. Legal professionals can review claims, labeling, website content, and promotional campaigns for red flags, helping businesses adjust messaging before a regulator intervenes. In addition, companies should keep detailed documentation of ingredient sourcing, safety testing, and marketing claim substantiation so they are prepared in the event of an audit, product recall, or regulatory complaint. By creating an internal compliance process that covers both product safety and advertising practices, cosmetic manufacturers can operate confidently within the legal boundaries set by both the FDA and FTC. The stakes are high, but with the right systems in place, businesses can protect their brand, avoid costly penalties, and earn consumer trust in an increasingly competitive market. Want to Stay Compliant with FDA & FTC Rules? For the cosmetics industry, compliance with FDA and FTC regulations is essential. The FDA ensures that your cosmetic products are safe, properly labeled, and not adulterated or misbranded. Meanwhile, the FTC holds you accountable for truthful, non-deceptive advertising and marketing practices. Failing to comply with either agency’s standards can result in serious consequences, including product recalls, warning letters, financial penalties, lawsuits, and long-term damage to your brand reputation. That’s why it’s important to stay informed, proactive, and legally prepared as you grow your cosmetic business. FAQs Here are answers to common questions about cosmetic regulations in the U.S. When Can the FDA Take Legal Action Against a Cosmetic on the Market? The FDA can take legal action if a cosmetic is adulterated (unsafe or contaminated) or misbranded (improperly labeled or misleading). This includes actions like warning letters, seizures, injunctions, and even criminal prosecution. What Are the Two Most Important Laws Pertaining to Cosmetic Sales in the US? The primary laws are the Federal Food, Drug, and Cosmetic Act (FDCA) and the Fair Packaging and Labeling Act (FPLA). These govern product safety, labeling, and truthful marketing. Can You Sell Cosmetics Without FDA Approval? Yes, cosmetics do not require FDA premarket approval before being sold, except for color additives, which must be FDA-approved for their intended use. What Claims Can Cosmetics Companies Legally Make? Cosmetic companies can make claims related to enhancing appearance (like moisturizing or smoothing) but cannot claim to treat or prevent diseases or affect the structure or function of the body without being classified as a drug.
August 11, 2025
Healthcare
What Are FDA Warning Letters and How Do They Impact You?
FDA Warning Letters are formal notifications issued by the U.S. Food and Drug Administration (FDA), to individuals or businesses that have violated FDA regulations. These letters typically identify specific violations such as misbranding, marketing unapproved products, improper manufacturing practices, or deceptive claims, and provide the recipient a limited time to respond and correct the issue. In this post, we’ll break down what FDA warning letters are and why they matter. We will also let you know common reasons companies receive FDA letters and how best to respond to them. What is an FDA Warning Letter? An FDA Warning Letter is an official notification sent by the U.S. Food and Drug Administration to firms or individuals found to be in significant violation of federal law. These letters are considered the agency’s principal means of advisory correspondence, used when FDA investigators determine that a company has violated the Federal Food, Drug, and Cosmetic Act (FD&C Act) or related implementing regulations. The purpose of the letter is to inform the recipient of the violations in sufficient detail and to request prompt corrective action to bring the business into compliance. FDA warning letters are different from other types of FDA communications. These include recalls, inspections, and form citations, such as Form 483. Unlike recalls, which are typically voluntary actions initiated by companies to remove potentially harmful products, a warning letter is a regulatory action meant to prompt compliance before more severe steps. These could include legal action, seizures, or injunctions. Unlike routine inspections or follow-up communications, a warning letter reflects the FDA’s belief that the violation is of regulatory significance and has not been adequately corrected. The legal implications of receiving an FDA warning letter are serious. Although the letter itself is not a final agency action and does not immediately trigger penalties, it clearly states that failure to promptly correct the violations could lead to further enforcement action. These actions may include denying the approval of new products, import detentions, or even prosecution in certain situations. Firms are typically given 15 business days to submit a written response detailing the steps they have taken or will take to correct the violations, and the FDA may issue a close-out letter only after determining that the corrective action has been completed to its satisfaction. Common Reasons for FDA Warning Letters FDA warning letters are issued across many sectors of the regulated industry, including food, dietary supplements, cosmetics, pharmaceuticals, and medical devices. One of the most common reasons for a warning letter is manufacturing violations, particularly a failure to comply with Good Manufacturing Practices (GMP). These lapses may include poor recordkeeping, inadequate sanitation, or faulty equipment maintenance, all of which pose a risk to public health and violate established regulations. Another widespread issue involves labeling and advertising violations. Companies may make unauthorized claims about their products, such as suggesting they can treat or cure diseases. Thus, the regulatory status of a food or cosmetic product can shift to that of an unapproved drug. Marketing a product as something it is not, or failing to include required information on a label, can result in a finding that the firm is violating federal law. The FDA also issues warning letters in response to failures in safety protocols, such as inadequate procedures during clinical trials or improper handling of adverse event reports. These types of violations jeopardize patient safety and show disregard for regulatory requirements. Data integrity issues have also become a growing concern. Firms must ensure that all data submitted to the FDA is complete, accurate, and verifiable. Any effort to falsify, obscure, or omit critical information, especially regarding product testing or quality control, will trigger swift FDA scrutiny. Lastly, unauthorized marketing of products, such as selling unapproved drugs, misbranded supplements, or promoting uses not cleared by the FDA, is a significant red flag. The FDA considers such activities a violation of law and will issue a warning letter if the agency believes that such marketing puts consumers at risk or misleads the public. How the FDA Issues Warning Letters The process begins with an FDA inspection or investigation of a firm’s facilities, website, products, or promotional materials. These inspections may be routine, triggered by consumer complaints, or follow-ups to previous violations. During an inspection, FDA investigators collect evidence and document potential violations. If they find issues of regulatory significance, they typically issue a Form 483 listing their observations. After the inspection, the FDA carefully reviews the findings to determine whether a warning letter is warranted. The decision depends on several criteria, including the risk posed to consumers, whether the violations have been previously addressed, and if the company has voluntarily complied in the past. If the agency believes that the violations remain unresolved or serious enough to require a formal response, it will issue a warning letter. The warning letter is typically sent by overnight delivery to the highest known official at the company. The timeline from inspection to issuance of a warning letter can vary, but, generally, it occurs within a few weeks to months after the inspection, depending on the complexity of the issues and the FDA’s internal review process. Once the letter is received, the firm must submit a written response, typically within 15 business days, explaining how it will promptly resolve the issues discussed. The agency may initiate subsequent interaction, including regulatory or enforcement action, if the firm fails to respond adequately. FDA Warning Letters are publicly posted on the FDA’s website, making them visible not only to consumers and the media but also to other regulatory bodies and potential business partners. The consequences of receiving a letter can ripple across the business, affecting everything from partnerships to product launches. What Happens If You Ignore an FDA Warning Letter? Ignoring an FDA warning letter is one of the most dangerous missteps a company can make. While the letter itself is not an immediate enforcement action, it is a critical regulatory warning and a clear signal that the agency has identified violations of federal law and expects prompt corrective action. When a firm chooses not to respond or fails to make adequate corrections, the situation can escalate quickly and severely. In the worst-case scenario, the FDA may pursue legal action against the company. This could include civil or criminal penalties, including injunctions that shut down operations or seizures of products that are considered misbranded, adulterated, or otherwise noncompliant. The agency can also impose significant fines, pursue prosecutions, and even refer the case to the Department of Justice. Another major consequence of ignoring an FDA warning letter is the potential loss of business licenses, certifications, or approvals. For companies operating in highly regulated areas like clinical trials, medical devices, or drug manufacturing, failure to comply can lead to the revocation of regulatory status and product approvals. This means affected firms can no longer legally market or sell their products in the United States, cutting off vital revenue streams and destroying entire business models. Beyond regulatory and legal consequences, the impact on consumer trust and brand reputation can be devastating. FDA warning letters are made public, and once news of noncompliance spreads, consumers often lose confidence in the brand. Competitors may capitalize on the fallout, media outlets may amplify the controversy, and partnerships or investor relationships may begin to deteriorate. What to Do Immediately After Receiving an FDA Warning Letter Receiving an FDA Warning Letter can be alarming, but the most important thing to remember is that it’s not the end. Instead, interpret it as a warning that the FDA suspects your firm of breaking federal law, and they anticipate prompt corrective action. Here is what you should do: Read the Letter Carefully: Every FDA warning letter includes sufficient detail about the violations observed. The letter provides references to the violated laws, regulations, or guidance documents. Take note of specific claims, products, or practices the FDA has flagged, and pay close attention to the date of issuance and the deadline by which a written response must be submitted. Consult Internal Teams: Notify your quality assurance, regulatory, and legal departments. These teams will need to determine the scope of the issues discussed and begin gathering any records, reports, or data that could serve as evidence in addressing the FDA’s concerns. This is especially critical in industries like food, clinical trials, and drug manufacturing, where regulated industry standards are strict and noncompliance can result in legal action or enforcement action. Consult a Healthcare Lawyer: While your internal staff can help interpret the letter and collect internal documentation, a qualified FDA attorney understands the nuances of regulatory significance, can anticipate how the agency may react to your response, and can help you avoid missteps that might escalate into injunctions, product seizures, or other actions. A lawyer such as the attorneys at Cohen Healthcare Law Group will also help you draft a legally sound and strategic written response that aligns with FDA expectations and shows your willingness to voluntarily comply. Assess the Severity: Are the violations procedural or labeling-related, or do they involve unapproved drugs, data integrity, or unsafe practices? The risk level associated with the violations will influence how quickly and extensively you must act. In certain situations, the findings may relate to prior violations or indicate patterns that the FDA considers serious enough to warrant close scrutiny and subsequent interaction. Gather Relevant Documentation: Such documentation may include manufacturing logs, labeling files, marketing content, safety reports, or correspondence related to clinical trials or product approvals. The goal is to show that either the issue has been adequately corrected or that you have a clear plan to bring operations into full compliance. Develop a Response Plan: This plan should outline each corrective action you will take to resolve the issues discussed in the letter. The plan should also assign accountability within your team and include target dates for implementation. The FDA expects firms to go beyond general promises and demonstrate concrete actions supported by documentation. Prepare a Formal Written Response: This letter must be clear, factual, and free of emotional or defensive language. Reference the specific violations the FDA has cited and explain how your firm is addressing each one. Provide evidence where possible. The tone should convey that your company takes the warning seriously and is committed to promptly correcting any deficiencies. Implement Corrective Actions Promptly: The FDA expects action, not just intention. Delays in taking action, or failure to act at all, could lead to other actions like re-inspections, further letters, or escalated regulatory enforcement. If your response is accepted and the agency is satisfied with your efforts, you may eventually receive a close-out letter, confirming the matter has been resolved. Keep Open Communication with the FDA: If the agency requests additional information or clarification, respond quickly and with professionalism. Your willingness to cooperate can influence how the FDA handles future interactions and inspections. Continuously monitor compliance: Many firms tend to view a warning letter as an isolated incident rather than a systemic problem. Create internal audit systems, train your staff, and regularly review your adherence to regulations to avoid future violations. A solid compliance culture is the best defense against repeat offenses and the regulatory fallout that can follow. How to Stay Compliant and Prevent FDA Warning Letters? The best way to avoid receiving an FDA warning letter is by proactively building a culture of compliance. The FDA expects companies to not only correct violations after they occur but also to take preventative steps that ensure their operations, documentation, and products meet the requirements of federal law from the start. One of the most effective ways to do this is by implementing a robust Quality Management System (QMS). A well-structured QMS serves as a framework for ensuring product safety, consistency, and regulatory alignment, making it far less likely that FDA investigators will uncover violations during inspections. In addition to implementing a QMS, conducting regular internal audits and inspections is essential. These internal reviews help firms detect potential issues before the FDA does, offering the opportunity to resolve problems proactively and promptly correct any gaps in processes. Internal audits also provide valuable documentation that can serve as evidence of your commitment to voluntarily comply with all applicable laws and regulations. Routine audits also prepare your team for actual FDA inspections, reducing the chance of surprises that may lead to a warning letter. Employee training and documentation are equally important. Most violations cited in FDA warning letters involve human error, poor practices, or incomplete records. Every team member must be well-versed in FDA requirements, including the cosmetic act, clinical trial regulations, labeling rules, and other implementing regulations. Consistent training and written instructions ensure that employees are aware of their responsibilities, know how to conduct themselves during inspections, and can follow through with proper documentation practices. This type of preparation goes a long way in minimizing regulatory significance when errors do occur. Finally, staying compliant means staying updated with FDA regulations and guidance. The FDA frequently releases new advisory statements, clarifications, and updates that affect how companies must operate. Changes in how unapproved drugs, food products, or supplements are regulated can shift a product’s regulatory status overnight. Businesses that fail to track these updates may unintentionally find themselves in violation, leading to letters, follow-up inspections, or even enforcement actions. Therefore, designate a compliance officer or legal advisor to monitor changes in FDA policy and ensure your systems and products are always in alignment with current regulations. Received an FDA Warning Letter? Ensure Your Compliance FDA warning letters are clear signs that the FDA believes your company has violated federal law and that immediate, prompt corrective action is necessary. These letters often follow inspections or investigations and detail violations related to manufacturing practices, labeling, marketing of unapproved products, or failure to meet safety and documentation standards. While the letter itself doesn’t impose penalties, ignoring it can lead to severe consequences, including legal action, product seizures, injunctions, and lasting damage to your company’s regulatory status and reputation. The right response to an FDA warning letter involves reviewing the letter in full, gathering the necessary documentation, developing a corrective strategy, and submitting a timely and detailed written response. Just as important is preventing future issues by investing in a strong quality management system, conducting internal audits, providing ongoing employee training, and staying current with evolving FDA regulations and guidance. FAQs Below are answers to some of the most common questions businesses ask after receiving an FDA warning letter: How to Respond to an FDA Warning Letter? You must submit a formal written response within 15 business days, clearly addressing each cited violation and outlining specific corrective actions. The FDA expects both a detailed plan and evidence of implementation. What Is the Difference Between a 483 and a Warning Letter? An FDA 483 is an inspectional observation issued at the end of an inspection, while a warning letter is a more serious follow-up indicating that the FDA believes violations have regulatory significance and must be promptly corrected. Are FDA 483 Letters Public? FDA 483s are not automatically made public, but they can be accessed through Freedom of Information Act (FOIA) requests or published voluntarily in some cases. Are Responses to FDA Warning Letters Public? Yes, responses to FDA warning letters may be posted on the FDA’s website or released through FOIA requests, especially if the case is closed with a “close-out letter.”
August 8, 2025
Healthcare
AKS Safe Harbors
When it comes to healthcare law, few regulations are as critical and as complex as the Anti-Kickback Statute (AKS). This federal law prohibits the exchange of anything of value to induce or reward referrals of business to federal healthcare programs. In other words, if a healthcare provider offers or accepts any kind of kickback for patient referrals, they could face steep fines or even jail time. But here’s where it gets interesting: AKS Safe Harbors. AKS Safe Harbors are specific exceptions built into the law that protect certain payment and business practices from being treated as illegal kickbacks. These provisions offer legal clarity and protection for healthcare providers, practitioners, and organizations operating within complex business arrangements such as joint ventures, referral networks, or equipment leasing. In this article, we will cover the Anti-Kickback Statute (AKS). We will also share how safe harbors work and their role in healthcare companies. What Is the Anti-Kickback Statute (AKS)? The Anti-Kickback Statute (AKS) is a part of federal law aimed at preventing corruption and ensuring integrity in the American healthcare system. Enacted as part of the Social Security Act, the federal Anti-Kickback Statute prohibits anyone from knowingly and willfully offering, paying, soliciting, or receiving anything of value, such as cash payments, gifts, discounts, or services in exchange for referrals of items or services that are reimbursable under federal healthcare programs like Medicare or Medicaid. This law applies to a wide range of business arrangements. They include management services contracts, investment interests, and referral agreements, and their reach extends to both individuals and entities involved in the delivery of care or billing to federal programs. The primary goal of the AKS is to prevent fraud and abuse in healthcare by eliminating improper financial incentives that could distort clinical decision-making. When a provider receives compensation based on the volume or value of referrals, patient care decisions may be influenced by personal financial interests rather than by what is commercially reasonable or medically necessary. For example, if a healthcare provider refers patients to a durable medical equipment supplier in exchange for a percentage of the entity’s gross revenue related to those referrals, that would be considered an illegal kickback. Similarly, a management contract that pays above fair market value and is designed to generate business by rewarding volume of referrals may potentially implicate the Anti-Kickback Statute. Furthermore, violations of the federal Anti-Kickback Statute are taken extremely seriously. They can lead to criminal penalties such as hefty fines, exclusion from federal healthcare programs, and even imprisonment. In many cases, violations also trigger liability under the False Claims Act, especially when false billing is involved. Whether the payment is direct or indirect, whether it flows through a referral service, group purchasing organization, or agency agreement, if the intent is to influence or reward referrals for items or services covered by Medicare, Medicaid, or other human services programs, it’s a violation of federal law. What Are AKS Safe Harbors? AKS Safe Harbors are specific exceptions written into the Anti-Kickback Statute that permit certain business practices and payment arrangements to exist without being considered violations of federal law. While the federal Anti-Kickback Statute broadly prohibits offering or receiving anything of value in exchange for referrals related to federal healthcare programs, these safe harbor regulations serve as a legal shield for transactions that meet tightly defined criteria. Safe harbor protection under the Anti-Kickback Statute means that if a financial relationship falls squarely within a designated safe harbor, the parties involved are not subject to criminal law penalties under AKS. In other words, safe harbors are designed to remove legal uncertainty and reduce the risk of being prosecuted for legitimate business arrangements that serve genuine healthcare purposes. For instance, group purchasing organizations may offer services that could otherwise potentially implicate the Anti-Kickback Statute. But through an applicable safe harbor, these organizations can operate legally so long as they accurately report their relationships and apply the same methodology in assessing fees that are collected equally. For healthcare providers, pharmaceutical manufacturers, equipment suppliers, and payers participating in federal healthcare programs, safe harbors are essential tools for maintaining compliance. They help ensure that capital investments, pre-operational services rendered, management contracts, and referral agreements are not structured in a way that influences referrals or violates federal anti-kickback laws. Without these protections, even well-meaning contracts could expose healthcare practices to liability under both the Anti-Kickback Statute and the False Claims Act. Safe harbors offer reassurance that business practices such as cash payments, loan funds, and routine reduction in charges are defensible under the law if structured properly. The responsibility for developing and issuing safe harbor regulations lies with the Office of Inspector General (OIG) within the Department of Health and Human Services (HHS). Under the authority granted by the Social Security Act, the HHS OIG publishes and updates safe harbors to reflect the evolving nature of healthcare business models. These regulations aim to balance the enforcement of anti-kickback laws with the practical realities of delivering care. When the HHS OIG identifies a referral service or agency agreement that could promote care without encouraging abuse, it may develop a safe harbor that protects such arrangements under federal law, assuming the structure includes elements like fair market pricing, a written record certifying the arrangement, and disclosure maintained. Why AKS Safe Harbors Matter for Healthcare Providers For those operating in the healthcare industry, anti-kickback safe harbors offer a way to confidently engage in legitimate transactions without fear of regulatory enforcement. One of the most valuable aspects of safe harbor protection is the ability to align payment practices with regulatory expectations. When a healthcare practice designs its contracts to reflect fair market value, avoids tying compensation to the entity’s gross revenue related to referrals, and ensures that services are actually performed and documented, the arrangement can be protected. This helps avoid conflicts where payment for items or services could be interpreted as an incentive to generate business rather than serve the patient’s best interest. For example, a bona fide employment relationship that includes proper documentation and complies with safe harbor criteria may include performance-based pay so long as it’s not designed to influence referrals. Healthcare organizations increasingly embed safe harbor principles into their compliance programs to preemptively address risk. By applying commercially reasonable standards, maintaining detailed records, and ensuring that all arrangements are structured using arm’s length transactions, entities can proactively guard against violations From loan funds to equipment leases, safe harbor criteria can be integrated into internal protocols so that referral services and management contracts align with federal expectations. As federal healthcare programs continue to evolve, the role of safe harbors in healthcare contracting becomes even more critical. Recent Updates and New AKS Safe Harbors The most significant recent changes to AKS safe harbor regulations came in the form of the 2020 Final Rule issued by the HHS OIG. This update introduced several new and modified safe harbors to better align with modern healthcare business models, particularly in the areas of value-based care and technology. New safe harbors now protect value-based arrangements that promote outcomes rather than volume, so long as the payment terms are assessed equally and not linked to unnecessary services. This shift allows particular participants in a value-based enterprise to collaborate more freely under federal healthcare programs without potentially implicating the Anti-Kickback Statute. Additionally, the 2020 changes included a new safe harbor for cybersecurity donations, enabling healthcare providers to receive certain software and technology from other stakeholders, like payers or suppliers, without the exchange being seen as an unlawful cash payment. These updates reflect a broader recognition that payment practices must evolve with the digital transformation of healthcare, especially when services covered by Medicare and Medicaid are increasingly tied to integrated technology systems and reimbursement methodology. What Are the Main Types of AKS Safe Harbors? Under the Anti-Kickback Statute (AKS), certain business arrangements are protected from prosecution when they meet the specific requirements of designated safe harbor regulations. These provisions were created to distinguish legitimate commercial relationships from those that could potentially implicate illegal inducements under federal law. Below are the main types of AKS safe harbors frequently used by healthcare providers, suppliers, and entities serving federal healthcare programs. Investment Interests: The investment interests safe harbor is designed to protect returns earned from capital investments in healthcare ventures such as physician-owned surgery centers, laboratories, or imaging facilities. For this safe harbor to apply, the return on investment must not be tied to the previous or expected volume or value of referrals from any person referred or referred person. This means a passive investor cannot be rewarded based on how many patients they direct to the facility. In order to qualify, the investment interest must be offered on terms that are consistent with fair market value, and all returns must be assessed equally among all investors, including other passive investors. Furthermore, there should be a written record certifying the terms of the investment and a clear disclosure maintained to show compliance with federal healthcare program requirements. Personal Services and Management Contracts: This safe harbor applies to management services contracts, consulting agreements, and equipment personal services arrangements. To qualify, the agreement must be in writing, specify all services to be provided, and establish a fixed compensation amount that reflects fair market value. Importantly, the compensation cannot vary with the volume or value of items or services referred. These arrangements must also serve a legitimate business need that is not primarily focused on generating referrals or the entity’s gross revenue related to referrals. By adhering to these conditions, healthcare practices and vendors can enter agency agreements or other business practices without risking violation of anti-kickback laws. Space and Equipment Rental: The space and equipment rental safe harbor protects business arrangements involving the rental of office space or medical equipment. To qualify, the lease must be in writing, signed by the parties, and set at a fair market value that does not reflect the volume or value of referrals. The lease must also include terms such as exclusive use for the agreed period, a defined aggregate rental charge, and a duration of at least one year. Whether it’s a durable medical equipment rental or space leasing between entities, the goal of this safe harbor is to ensure all terms are structured as an arm’s-length transaction and not designed to influence referrals from the lessee to the lessor. Electronic Health Records (EHR) Arrangements: As the healthcare industry moves toward interoperability and digital transformation, the EHR safe harbor was developed to encourage providers to adopt and share electronic health records systems. This safe harbor protects arrangements where entities donate EHR software and services to other providers, so long as specific conditions are met. These include ensuring the donation promotes interoperability, meets commercially reasonable needs, and adheres to contribution limits set by the HHS OIG. There must be no cash payment required by the recipient beyond a permissible percentage, and the written agreement must clearly state that the donation is not tied to referral services or services covered under federal healthcare programs. Warranties and Discounts: Warranties and discounts offered to healthcare providers are also protected under AKS safe harbors, provided they are properly documented and fully disclosed. The warranty safe harbor requires that the manufacturer or seller offer a tangible product or outcome guarantee, with all terms clearly stated in writing. Similarly, under the discount safe harbor, any price reduction must be reflected on the invoice, claim, or reimbursement methodology submitted to a federal healthcare program, and any routine reduction in price must be based on fair market value rather than being used to generate business. These safeguards prevent payment practices that may seem like incentives for referrals or preferential treatment. Group Purchasing Organizations (GPOs): The GPO safe harbor offers protection for group purchasing organizations that negotiate prices for healthcare products and services on behalf of multiple providers. To qualify for this safe harbor, GPOs must disclose any administrative fees they receive from vendors and ensure those fees are structured in a way that does not encourage cross-referral agreements or preferential selection of one supplier over another. The GPO must maintain a written record certifying fee structures and make them available to the providers and facilities they represent. The transparency and commercial reasonableness of the arrangement are critical, especially in large-scale purchasing where pricing can affect federal healthcare programs. How to Qualify for AKS Safe Harbor Protection To qualify for AKS safe harbor protection, a healthcare entity or provider must strictly adhere to the detailed criteria outlined in the safe harbor regulations issued under the federal Anti-Kickback Statute. These regulatory exceptions were created to shield legitimate business arrangements from legal prosecution, provided they meet every required element of the applicable safe harbor. One of the most critical components of qualifying for a safe harbor is ensuring that the agreement is a true arm’s-length transaction, documented in a written record certifying the nature of the arrangement, compensation, and services provided. This is especially important in scenarios involving capital investment, group purchasing organizations, or pre-operational services rendered, where improper structuring can lead to violations of federal law. To receive safe harbor protection, parties must also ensure that compensation is assessed equally, that payment practices are transparent, and that disclosure is maintained throughout the agreement’s term. If a healthcare practice or pharmaceutical manufacturer is offering or accepting any cash payment or loan funds, it must be proven that the transaction was not designed to generate business or influence referrals. Strict adherence to these standards is non-negotiable. Any deviation can void safe harbor eligibility. Common healthcare compliance mistakes, like informal contracts, missing documentation, or misunderstanding the difference between passive investors and active participants, often lead to a loss of protection under the anti-kickback safe harbors. The OIG views even well-intentioned errors with skepticism, especially in arrangements involving durable medical equipment, referral services, or agency agreements. What Happens If You Don’t Comply With AKS Safe Harbors? When a business arrangement fails to meet the standards of the AKS safe harbor regulations, the entire transaction becomes vulnerable to legal scrutiny under the federal anti-kickback statute. Without safe harbor protection, the Anti-Kickback Statute applies in full force, exposing healthcare providers, vendors, or any person seeking or offering referrals to significant legal and financial consequences. Violations can trigger investigations from the Department of Justice (DOJ) and the Office of Inspector General (OIG), and may lead to criminal charges, civil penalties under the False Claims Act, exclusion from Medicare and Medicaid programs, and damage to the provider’s reputation and licensure. Enforcement actions often focus on relationships that appear to be structured to influence referrals or where payment practices correlate with items or services covered by federal healthcare programs. For instance, if a management contract with a referral service imposes conditions that link payments to the volume of referrals, or a space lease charges above fair market value and lacks a written record certifying the terms, regulators may view the deal as a disguised kickback. Similarly, where capital investment returns are tied to referrals from a referred person, or a referral service makes payments based on services covered by Medicare, such arrangements potentially implicate AKS violations. The worst-case scenario for failing to comply with AKS safe harbors involves criminal prosecution, where a conviction can result in up to ten years in federal prison per violation, hundreds of thousands in fines, exclusion from federal healthcare programs, and permanent damage to a healthcare practice’s ability to operate. In some cases, organizations must repay millions in improper reimbursements, and individuals lose professional licenses or board certifications. How Can Healthcare Providers Ensure AKS Compliance? One of the most effective strategies is conducting regular training for all staff on AKS rules, safe harbor regulations, and the consequences of non-compliance. Staff should clearly understand how the federal Anti-Kickback Statute applies to financial relationships, referral services, and other business practices involving federal healthcare programs. Education ensures everyone within the organization can recognize red flags like payment practices that could influence referrals or disguise improper incentives. In addition to training, providers should implement clear, written policies that govern their financial relationships and referrals. These policies must define how personal services, management contracts, and capital investments are structured in accordance with applicable safe harbor conditions. For example, a management services contract or a space and equipment rental agreement must meet specific criteria such as fair market value, a legitimate need for the services covered, and terms set in advance. These written policies help create a culture of compliance and transparency, reducing the risk of practices that could violate the Social Security Act or federal law. Healthcare organizations must also standardize contracts to meet safe harbor protection requirements. Contracts involving personal services, equipment rental, or even investment interests must reflect an arm’s-length transaction and be structured in a way that avoids tying compensation to previous or expected volume of referrals. Safe harbor regulations often demand fixed compensation, written agreements, and commercially reasonable terms to prevent abuses that could influence referrals or implicate the Anti-Kickback Statute. Thorough documentation is essential. Providers should maintain a written record certifying all business arrangements, management contracts, and referral agreements. This includes accurately reporting aggregate rental charges, reimbursement methodology, and other details that could affect the fair market assessment of services. Regular audits should be performed to assess compliance, identify risky patterns, and correct violations before they lead to federal investigations or False Claims Act allegations. These internal checks are especially important for entities serving federal healthcare programs such as Medicare and Medicaid. Another vital step is consulting healthcare legal experts. Before finalizing any agreement, providers should seek legal counsel to ensure the arrangement complies with AKS and safe harbor laws. Legal professionals help clarify the difference between a compliant business arrangement and one that could be interpreted as a kickback. This is especially important when dealing with complex structures like group purchasing organizations, referral service contracts, or loans and capital investments that could potentially implicate AKS violations. Finally, providers must stay vigilant by monitoring changes to AKS regulations. The U.S. Department of Health and Human Services (HHS), through the Office of Inspector General (OIG), periodically updates safe harbor rules to reflect evolving healthcare models. Updating your compliance program to reflect these changes is key to ensuring ongoing protection under the safe harbor framework. Need Legal Support for AKS Compliance? It is important to understand the Anti-Kickback Statute (AKS) and its safe harbors to protect your healthcare practice from costly investigations, civil penalties, and even criminal charges. By grasping the nuances of AKS safe harbors, healthcare providers can structure financial relationships and referral practices in a way that aligns with federal law and minimizes risk. Proactive compliance is the key to avoiding regulatory pitfalls. FAQ Below are answers to some of the most frequently asked questions, designed to help healthcare providers, organizations, and stakeholders stay informed and protected. How Do Federal Healthcare Programs Influence AKS Regulations? Federal healthcare programs like Medicare and Medicaid are directly protected by the Anti-Kickback Statute, which prohibits offering or receiving anything of value to influence patient referrals under these programs. The goal is to ensure decisions are made in the best interest of patients, not financial gain. What Is the Difference Between AKS and Stark Law? The AKS is a criminal law that applies to any form of remuneration to induce referrals, while Stark Law is a civil statute that specifically addresses physician self-referrals for designated health services. Unlike AKS, the Stark Law does not require proof of intent. Can Safe Harbors Protect All Kinds of Payments? No, safe harbors only protect specific types of payment arrangements that meet strict criteria under the law. Any payment that falls outside these conditions may still violate the AKS. How Often Do Safe Harbor Regulations Change? Safe harbor regulations can be updated as healthcare laws evolve, especially in response to industry trends or new federal priorities. Providers must monitor changes to ensure ongoing compliance. Who Enforces the AKS? The Office of Inspector General (OIG) and the U.S. Department of Justice (DOJ) are primarily responsible for enforcing the AKS. Violations can lead to fines, exclusion from federal programs, and even criminal charges.
July 25, 2025
Healthcare
Can an RN Start an IV Hydration Business?
IV hydration therapy has exploded in popularity in recent years. In fact, the global IV hydration therapy market was valued at around $2.32 billion in 2022 and is projected to expand to approximately $4.23 billion by 2030, growing at a compound annual growth rate (CAGR) of 8–8.0%, according to Grand View Research. As demand grows, so does interest from healthcare professionals, especially registered nurses (RNs) who are uniquely positioned to deliver these services safely and effectively. While RNs are well-equipped to safely and effectively administer these treatments, starting an IV hydration business comes with important legal considerations. In many states, RNs cannot independently own or operate a medical practice unless they do so through a legally compliant structure such as a Management Services Organization (MSO) partnered with a licensed physician. This post will clearly let you know the various groups of people who can open an IV hydration business. It will also outline steps on starting a mobile IV therapy business. Who Can Open an IV Hydration Business? Because IV therapy involves administering fluids and nutrients directly into the bloodstream, it falls under strict healthcare regulations. Opening an IV hydration business depends heavily on your credentials and state-specific regulations. Below is an overview of the role various healthcare professionals can play in owning an IV hydration business: Physicians (MDs or DOs): Licensed physicians, such as medical doctors (MDs) or doctors of osteopathic medicine (DOs), can fully own and operate an IV hydration clinic. They are authorized to diagnose patients, prescribe IV fluids, and oversee treatment plans, making them the most straightforward candidates to start an IV hydration therapy business. Physicians can also supervise other licensed healthcare providers, including nurse practitioners, registered nurses, and physician assistants, ensuring that all IV therapy services meet legal and ethical standards. Nurse Practitioners (NPs): In many states, nurse practitioners with full practice authority can independently open and operate an IV hydration business. These advanced practice providers can perform medical evaluations, prescribe treatments, and administer IV therapies. However, in states with restricted practice, NPs may still need to collaborate with or be supervised by a licensed physician or medical director. Despite these limitations, NPs are often well-positioned to run a successful IV therapy practice focused on health promotion and patient wellness. Registered Nurses (RNs): While registered nurses play a critical role in administering IV hydration therapy, they cannot independently diagnose conditions or prescribe treatments. However, RNs can still start an IV hydration business by operating through a Management Services Organization (MSO) model. In this structure, the RN runs the non-clinical side of the business, such as marketing, billing, and staffing, while partnering with a licensed physician who oversees the medical aspects. This approach allows RNs to legally and ethically participate in the growing hydration therapy industry while maintaining compliance with corporate practice of medicine (CPOM) laws. Physician Assistants (PAs): Physician assistants are licensed healthcare providers who can administer IV therapies and conduct patient assessments under a supervisory or collaborative agreement with a physician. Although they cannot typically own the medical portion of a hydration business outright, PAs can play a significant clinical role in these settings. With proper oversight, PAs can help ensure safe treatment delivery, monitor vital signs, and educate patients about the benefits and risks of IV hydration. Non-Medical Entrepreneurs: Individuals without a medical license, such as wellness coaches, business owners, or investors, generally cannot own the clinical side of an IV therapy practice due to CPOM laws. However, they can still participate in the industry by forming a Management Services Organization (MSO). In this model, the entrepreneur handles all non-clinical operations, including business planning, marketing strategies, and administration, while contracting with a licensed medical provider to manage the treatment side. This setup ensures regulatory compliance while allowing entrepreneurs to tap into the growing demand for IV hydration services. Can an RN Start an IV Hydration Business? Yes, a registered nurse (RN) can start an IV hydration business, but it requires careful planning, the right legal structure, and collaboration with a licensed physician. While RNs are highly trained to administer IV therapies, they are not legally allowed to diagnose or prescribe treatment independently in most states. However, by working within a Management Services Organization (MSO) model and partnering with a licensed healthcare provider, such as a physician or nurse practitioner, RNs can legally own an IV hydration business that complies with state and federal healthcare laws. This allows the RN to manage the non-clinical side of the business, like marketing, scheduling, and staffing, while the licensed physician oversees the clinical aspects. The IV hydration therapy industry has experienced explosive growth in recent years. From celebrities and athletes to busy professionals and wellness seekers, more people are turning to IV therapy for fast relief from fatigue, dehydration, immune deficiencies, and nutrient imbalances. This growing interest has created a high-demand market for IV hydration clinics, mobile IV therapy services, and wellness lounges. For RNs looking to leverage their clinical skills, this represents a promising opportunity to build a successful business that promotes overall health and health promotion in their community. Registered nurses bring a unique advantage to the hydration business because they are already trained to assess vital signs, monitor patient responses, prevent electrolyte imbalances, and maintain sterile technique when inserting IV lines. These essential competencies help ensure patient safety and support high standards of care. With the right business plan, understanding of their target market, and commitment to ethical standards, RNs can position themselves as trustworthy providers in a fast-growing IV therapy business landscape. When supported by the proper licensed provider and structured in accordance with state laws, RNs can turn their medical expertise into a thriving, compliant IV hydration practice. What Are the Legal Requirements for an RN to Start an IV Hydration Business? The legal requirements for a registered nurse to start an IV hydration business vary significantly depending on the state. Because RNs cannot independently perform medical evaluations, prescribe IV fluids, or make treatment decisions, they must partner with a licensed physician or nurse practitioner who can fulfill those responsibilities. In many cases, the most compliant way for an RN to participate in this type of venture is by establishing an MSO. This structure helps comply with Corporate Practice of Medicine (CPOM) laws that exist in many states and prevent non-physicians from owning medical practices. To legally operate an IV therapy practice, RNs must also ensure they meet all state-specific regulations and obtain the necessary licenses for their business. This includes registering the business, maintaining up-to-date nursing credentials, and having protocols in place for informed consent, emergency response, and infection control. Some states may require additional certifications or direct oversight from a supervising physician, while others may mandate written agreements that clearly define each provider’s scope of work. It’s also essential to understand how licensed practical nurses, medical assistants, and physician assistants may or may not be involved, depending on your staffing model and state laws. Ensuring compliance with healthcare laws is critical not just for maintaining your nursing license but also for avoiding civil and criminal liability. RNs must be aware of risks related to liability, patient privacy, advertising, and the administration of infusion pumps and nutrients directly into the bloodstream. How to Start a Mobile IV Therapy Business? Launching a mobile IV therapy business is a promising opportunity in today’s booming health and wellness space. However, because IV therapy involves administering fluids and nutrients directly into the bloodstream, starting a compliant and legally sound IV hydration business requires a deep understanding of healthcare law, licensing, and state-specific regulations. Here’s a step-by-step breakdown of how to start your business the right way: 1. Make Sure You’re Legally Allowed to Start the Business Before you invest in equipment or marketing, you need to verify whether you’re legally permitted to start an IV hydration business in your state. State laws vary significantly, especially when it comes to the scope of practice for RNs, licensed practical nurses, physician assistants, and nurse practitioners. In most states, registered nurses cannot operate an IV therapy practice independently and must work under a licensed physician or medical director. In addition, determine whether your state follows the Corporate Practice of Medicine (CPOM) doctrine. CPOM laws restrict non-physicians from owning medical practices, meaning an RN or non-medical entrepreneur cannot legally own an IV hydration clinic that provides direct medical treatment. However, you can still participate by setting up a Management Services Organization (MSO) that handles non-clinical operations while contracting with a licensed provider to oversee the medical aspects. This structure ensures compliance while allowing you to build a thriving hydration business. 2. Hire a Healthcare Attorney Working with a healthcare attorney is essential to avoid costly missteps and ensure compliance with all legal requirements. A qualified attorney who understands medical businesses will guide you through state-specific regulations, informed consent policies, and HIPAA rules. They’ll help you choose the correct structure, such as an LLC, PLLC, or PC, and draft all necessary contracts with your medical director, clients, and team members. Especially in CPOM states, an attorney is key to building a compliant relationship between your MSO and the licensed healthcare provider. They will also address liability risks, protect your license, and ensure your business adheres to the highest ethical standards in patient care. 3. Form a Legal Business Entity Once you’ve confirmed your legal ability to operate, you need to form your business entity. Depending on your license and state, you may form a Limited Liability Company (LLC), Professional LLC (PLLC), or Professional Corporation (PC). If you’re not a licensed physician, forming a separate MSO can allow you to run the business side while a medical director handles clinical care. Register your business with the state, apply for an EIN (Employer Identification Number), and obtain all necessary licenses and permits. This includes health permits, mobile unit licenses, and possibly pharmacy or infusion-related certifications, depending on your state laws. 4. Secure a Medical Director (if required) In most cases, RNs, medical assistants, and non-physician owners must partner with a medical director to legally operate an IV hydration practice. The medical director is typically a licensed physician (MD or DO) who oversees clinical protocols, signs off on standing orders, and ensures patient safety. They are responsible for approving IV fluids, supplements, and treatment formulas. This collaboration should be clearly defined in a formal written agreement, outlining the scope of oversight, supervision expectations, and medical liability responsibilities. A solid partnership here ensures smooth operations and protects both the business and the healthcare providers. 5. Get the Right Insurance and Certifications To operate a safe and compliant IV therapy business, you’ll need multiple layers of protection. Malpractice insurance is essential for all licensed providers, including RNs and NPs. In addition, general liability coverage and workers’ compensation are needed if you have employees or contractors. Ensure all providers are certified in IV therapy, CPR, and emergency response protocols. Some states or local boards may also require specialized IV infusion training before a provider is allowed to administer IV therapies. Certification not only supports patient safety but also adds credibility to your brand. 6. Set Up Mobile Operations & Compliant Systems Your mobile setup must be both practical and compliant. Purchase or retrofit a vehicle equipped with temperature-controlled storage for IV fluids, medical-grade supplies, and infusion pumps. It’s important to have emergency equipment on board in case of adverse reactions or complications. We also recommend using HIPAA-compliant software for booking, documentation, and patient communication. You should further prepare consent forms and develop standardized protocols for intake, medical evaluation, and adverse events. Then, establish clear systems to monitor vital signs, prevent electrolyte imbalances, and ensure your practice maintains high standards of care and regulatory compliance. 7. Launch Your Brand and Start Marketing Now it’s time to position your IV hydration services in the market. Build a strong brand that reflects professionalism, health, and trust. Create a mobile-friendly website, register your business with Google, and optimize for local SEO so potential clients can find you when searching for hydration therapy nearby. Your marketing strategies should include social media outreach, online reviews, referral programs, and wellness partnerships. Highlight your team’s credentials as licensed healthcare professionals, your commitment to patient safety, and the convenience of your mobile services. Importantly, define your target market clearly and tailor your messaging accordingly. How to Stay Legally Compliant in Your IV Hydration Business First and foremost, maintain a valid agreement with a licensed physician serving as your medical director. This relationship is particularly critical for registered nurses, licensed practical nurses, and other non-physician providers, who are typically not authorized to perform medical evaluations or prescribe IV fluids independently. Your agreement should be clearly written, regularly updated, and structured to comply with the Corporate Practice of Medicine (CPOM) laws in your state. It’s also vital to follow your professional scope of practice. For example, RNs can administer IV therapies, monitor vital signs, and assess responses, but cannot diagnose or independently create treatment plans. Physician assistants and nurse practitioners may have more flexibility depending on the state, but all healthcare providers must operate within their legal limits. Exceeding your scope can result in serious liability risks and disciplinary action from state licensing boards. In addition, make sure all business and medical licenses remain current and valid. Your IV therapy practice must be properly registered with the state, and you must hold the necessary licenses for providing medical services, operating a mobile unit (if applicable), and handling medical waste. Failing to renew these credentials or operating without proper approval can threaten the legal standing of your hydration business. You must also use legally compliant informed consent forms. These documents help patients understand the risks and benefits of hydration therapy, especially when nutrients are delivered directly into the bloodstream. Consent forms should be written in plain language, signed before treatment, and securely stored in a HIPAA-compliant system. Clear documentation is not only a legal requirement, but also builds trust and reinforces your commitment to health promotion and transparency. To meet safety standards, comply with OSHA and infection control guidelines. This includes proper handling of sharps, maintaining clean infusion areas, and using FDA-approved infusion pumps. Whether you’re running a clinic or a mobile IV therapy business, emergency protocols must be in place to address adverse reactions, allergic responses, or electrolyte imbalances during treatment. Finally, one of the smartest steps you can take is hiring a skilled and experienced healthcare attorney. An attorney familiar with state-specific regulations, CPOM laws, and IV hydration therapy can help you navigate business formation, contracts, compliance audits, and regulatory changes. Legal guidance is especially important when structuring your business through a Management Services Organization (MSO) or drafting agreements with your supervising physician or medical director. How to Market an IV Hydration Business as an RN? Marketing your IV hydration business effectively as a registered nurse (RN) begins with identifying your target market. Are you serving busy professionals looking for an energy boost, athletes in need of rapid recovery, travelers dealing with jet lag, or people seeking immune support? Once you define your audience, you can tailor your messaging and choose the most effective marketing strategies to reach them. One of our general business advice is to start by building a strong brand that communicates professionalism, safety, and wellness. Create a mobile-optimized website that explains your services, highlights your credentials as a licensed healthcare provider, and makes it easy for patients to schedule treatments. Claim and optimize your Google Business Profile to improve local visibility and encourage clients to leave reviews. This builds trust and improves your ranking in local search results, crucial for a location-based IV therapy business. Social media is also a powerful tool for promoting IV hydration therapy. Platforms like Instagram, Facebook, and TikTok allow you to showcase client experiences (with consent), explain the benefits of IV fluids, and share educational content about health promotion, patient safety, and nutrient therapy. Paid advertising on social media and Google Ads can drive targeted traffic to your site, while email marketing helps you stay connected with existing clients and promote specials or wellness packages. Networking with gyms, wellness spas, event planners, and corporate offices can also open up new referral streams. As an RN, you can build credibility by educating the community on hydration therapy, hosting wellness events, or offering mobile pop-up services for weddings, marathons, or festivals. How Profitable Is an IV Hydration Business for an RN? An IV hydration business can be highly profitable for a registered nurse, especially when set up properly and marketed to the right audience. Revenue typically comes from individual IV therapy sessions, with each appointment ranging from $100 to $300, depending on the formula, location, and additional services provided. Common treatments include vitamin C boosts, NAD+ infusions, hangover recovery drips, and immune support cocktails, each offering varying margins depending on supply costs and staff involvement. Beyond single treatments, you can increase profitability by offering membership programs, bundle packages, group services for events, and corporate wellness programs. As a mobile IV provider, you may charge additional travel or concierge fees, increasing your per-visit revenue while keeping overhead lower than a brick-and-mortar IV hydration clinic. Profitability depends on several key factors. These include your business model (mobile vs. stationary), operating in compliance with state-specific regulations, and partnering with a qualified medical director if you’re not a prescribing provider. Your ability to manage liability risks, control supply costs, and maintain necessary licenses also plays a big role in net income. Marketing, pricing, and quality of care will ultimately influence your ability to build a loyal client base and grow your business. Need a Lawyer for Your IV Therapy Business? Starting and running an IV hydration business comes with exciting opportunities, but also complex legal responsibilities. From navigating state-specific regulations and scope of practice laws to structuring your business under Corporate Practice of Medicine (CPOM) rules, the legal landscape can be overwhelming. FAQs Starting an IV hydration business as a registered nurse or healthcare provider comes with both exciting opportunities and important responsibilities. Below are quick answers to some of the most common questions new and aspiring business owners have: What Staffing Requirements Are Needed to Start an IV Hydration Business? You’ll typically need a licensed medical director, trained IV-certified staff such as RNs, and administrative support for scheduling and billing. Depending on your business model, you may also require a supervising physician or nurse practitioner based on state-specific regulations. How Should I Manage the Day-To-Day Operations of an IV Hydration Business? Use HIPAA-compliant software to manage bookings, documentation, and patient communication, and maintain protocols for informed consent, inventory, and emergency response. Staying organized with clear business operations helps ensure both regulatory compliance and customer satisfaction. Who Can Administer IV Therapy? Registered nurses, nurse practitioners, physician assistants, and other licensed healthcare professionals with proper IV certification can legally administer IV therapy, depending on state laws. Medical assistants and licensed practical nurses may also assist under supervision in some jurisdictions. What Are the Common Challenges Faced by RNs in Starting an IV Hydration Business? RNs often face restrictions due to scope of practice laws and CPOM regulations, requiring collaboration with a licensed physician or formation of an MSO. Navigating legal setup, securing a medical director, and marketing can also be challenging without proper support. How to Finance Equipment and Supplies for an IV Hydration Business? You can use small business loans, healthcare-specific financing programs, or personal capital to purchase infusion pumps, IV fluids, emergency kits, and mobile equipment. Leasing options are also available for high-cost items to reduce upfront expenses. How to Staff and Manage Medical Direction for an IV Hydration Business? Work with a qualified medical director who reviews protocols, signs standing orders, and provides oversight in compliance with state law. Use a written agreement to define responsibilities, compensation, and communication procedures clearly.
July 22, 2025
Healthcare
Are Kickbacks Illegal?
Kickbacks are improper payments or compensation made in exchange for preferential treatment, services, or referrals. They are illegal in many industries, especially in regulated sectors like healthcare, government contracting, real estate, and corporate procurement. These arrangements are often disguised as consulting fees, referral bonuses, or profit-sharing. In the U.S., laws such as the federal Anti-Kickback Statute and the Stark Law specifically prohibit kickbacks in exchange for patient referrals or services covered by federal healthcare programs. Violating these laws can lead to criminal charges, massive fines, exclusion from Medicare/Medicaid, and even prison time. This blog will cover what counts as a kickback and key laws that prohibit kickbacks in the healthcare sector. It will also let you know how kickbacks are detected and prosecuted. What Are Kickbacks in Healthcare? Kickbacks in healthcare refer to illegal payments or incentives offered to healthcare providers, such as physicians or medical facilities, in exchange for patient referrals, the prescribing of certain medications, ordering unnecessary tests, or steering business to specific service providers. These improper compensation arrangements are not only unethical but also violate federal law, particularly when they involve federal healthcare programs like Medicare or Medicaid. In the healthcare industry, kickback schemes can take many forms. A common example includes financial incentives given to physicians for referring Medicare or Medicaid patients to specific specialists, laboratories, or medical services. Pharmaceutical companies or medical device manufacturers may also offer gifts, cash payments, or perks to influence a doctor’s prescribing habits, while medical testing facilities might provide commissions to healthcare providers for each test ordered, regardless of medical necessity. Even something like a contractor giving money to a government official to secure a contract for managing infrastructure projects or operating in a federal correctional facility may fall under broader kickback concerns, especially in government healthcare systems. Such corrupt practices are distinct from legitimate payments like referral fees or finder’s fees that are properly structured and disclosed under the law. For instance, licensed real estate professionals often engage in real estate transactions where referral fees are legally permissible under certain conditions. However, in federally regulated contexts, such as those involving federally related mortgage loans or healthcare services, real estate kickbacks or medical service kickbacks are strictly prohibited under laws like the Anti-Kickback Statute and the Stark Law. The Anti-Kickback Statute specifically makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce referrals of items or services reimbursable by federal programs. Similarly, the False Claims Act allows the government to bring civil and criminal penalties against parties involved in healthcare fraud or false claims submitted to government healthcare programs. Are Kickbacks Illegal Under U.S. Law? Yes, kickbacks are illegal under federal and state law, particularly when they involve government programs, federal healthcare programs, or public officials. These illegal payments are considered a form of corrupt practice, often used to secure preferential treatment, influence patient referrals, or obtain contracts through improper means. The law doesn’t just prohibit receiving kickbacks. It also makes offering, paying, or soliciting a kickback a criminal offense. Additionally, several laws address kickbacks. For example, the Federal Anti-Kickback Statute (AKS) targets misconduct within the healthcare industry, especially those involving Medicare, Medicaid, and other federal healthcare programs. Internationally, the Foreign Corrupt Practices Act (FCPA) targets U.S. individuals or companies that offer improper compensation to foreign government officials. At the state level, bribery and corruption laws further prohibit financial arrangements that distort fair decision-making in both the public and private sectors. In all these contexts, even something as seemingly minor as a closing cost credit or finder’s fee could be deemed unlawful depending on intent and disclosure. The Federal Anti-Kickback Statute (AKS): Overview and Scope The Anti-Kickback Statute (AKS) is the primary federal law that criminalizes kickbacks in the healthcare industry. It applies to a broad range of parties involved in delivering or supporting medical services, including physicians, hospitals, labs, healthcare suppliers, pharmaceutical manufacturers, and other healthcare providers. The law prohibits any person or entity from knowingly and willfully offering, paying, soliciting, or receiving remuneration. This includes anything of value in exchange for referring Medicare or Medicaid patients or generating business reimbursable by federal healthcare programs. Key terms within the statute include “knowingly and willfully,” which refers to the intent to break the law, and “remuneration,” which covers a wide range of financial incentives, such as cash payments, gifts, or free equipment. The scope of the law is intentionally broad to prevent healthcare fraud and protect the integrity of government programs. Violations of the AKS often trigger additional liability under the False Claims Act, especially when providers submit claims connected to illegal kickbacks. Common Kickback Schemes in the Healthcare Industry A frequent tactic is using referral fee arrangements that are not properly disclosed or justified by legitimate business needs. Overpayments masked as consulting fees, sham employment or independent contractor agreements, and free or discounted medical equipment offered to increase patient volume are all examples of how non-compliant individuals attempt to gain a financial advantage through improper compensation. Furthermore, pharmaceutical companies may offer rebates, speaking engagements, or luxury travel to influence prescribing behavior, crossing the line from legitimate payments to illegal kickbacks. Likewise, government officials or procurement officers who accept payments in exchange for awarding contracts to managing contractors are engaging in government corruption, especially when tied to federal correctional facilities, human services, or other government contracting roles. What Are the Risks and Penalties for Kickbacks in Healthcare? Kickbacks are illegal under both federal and state law, and the consequences for engaging in kickback schemes in the healthcare industry can be severe. Violations of the Anti-Kickback Statute (AKS), the False Claims Act, and related regulations are treated as serious offenses that threaten the integrity of federal healthcare programs like Medicare and Medicaid. Criminal penalties for receiving or offering illegal payments tied to patient referrals, improper compensation, or contracts in government programs may include substantial fines and imprisonment. Courts often impose cash payments as restitution and, in more egregious cases, long prison terms, especially when foreign government officials or government employees responsible for procurement are involved. A contractor trying to secure an infrastructure project at a federal correctional facility, for example, may face indictment if a kickback definition is met under federal statutes. Civil penalties often include exclusion from federal healthcare programs, monetary damages, and up to treble damages under the False Claims Act. This applies when false claims arise from illegal kickbacks or referral fee arrangements. Providers may also be forced to pay restitution, even if the payments were initially disguised as finder’s fees, legitimate payments, or consulting agreements. Professionally, the consequences can be career-ending. Doctors, pharmacists, or other licensed real estate professionals or healthcare professionals who are found accepting kickbacks may face license suspension or revocation. Regulatory boards and oversight bodies work in tandem with agencies like the DOJ, FBI, and HHS OIG to penalize those involved in healthcare fraud and corrupt practices. How Are Kickbacks Detected and Prosecuted? Kickback schemes are often uncovered through whistleblower reports, which play a major role in the enforcement of the False Claims Act. Insiders may file qui tam lawsuits exposing illegal exchanges or financial incentives that violate federal statutes. These reports often initiate full-scale government investigations into healthcare providers, real estate professionals, or managing contractors. Detection also comes through internal audits and compliance programs within organizations. Hospitals, clinics, and large real estate industry firms are increasingly investing in compliance departments to monitor referral patterns, consulting agreements, and closing cost credit arrangements to ensure that nothing violates the Anti-Kickback Statute or state laws. Even something minor like an undisclosed gift between title companies and licensed real estate professionals can signal a larger problem when viewed in the context of federal program oversight. Government agencies, including the Department of Justice (DOJ), Office of Inspector General (HHS OIG), and the Federal Bureau of Investigation (FBI), are tasked with investigating and prosecuting violations. These agencies collaborate with state-level regulators to build cases that often span multiple years and involve complex financial audits and investigations. Violations tied to real estate transactions, referring Medicare patients, or providing certain medical services under false pretenses often result in combined federal and state action. What to Do If You Suspect a Kickback Violation If you suspect you may be involved in or have been accused of a kickback violation, it’s essential to act quickly and carefully. First, contact an experienced healthcare attorney immediately. Do not try to navigate the situation on your own, and avoid speaking to investigators, coworkers, or the media before getting legal advice. Illegal payments, referral fee arrangements, and improper compensation structures can often appear legitimate on the surface, but a legal expert can help determine whether your actions may violate the Anti-Kickback Statute, the False Claims Act, or other laws related to federal healthcare programs and government programs. You should also preserve all documents and communications related to the issue. This includes contracts, emails, payment records, and any internal compliance audits. Destroying or hiding evidence could escalate the situation, leading to obstruction charges or further legal scrutiny from enforcement agencies such as the DOJ, HHS OIG, or FBI. Furthermore, cooperate with your attorney fully and follow their advice throughout the process. Your attorney can also help you evaluate whether the issue stems from a misunderstanding, a compliance gap, or an intentional illegal exchange. Even if you were not directly involved in offering or accepting kickbacks, being part of the parties involved in a scheme can expose you to liability. Legal counsel can also prepare you to respond appropriately to government officials, investigators, or procurement officers. Lastly, take this situation as a cue to review and strengthen your compliance programs. Many professionals face scrutiny not out of malice, but due to common compliance mistakes or a lack of clarity around legitimate payments versus improper compensation. Revisit your relationships with service providers, managing contractors, and other vendors, and ensure all finder’s fees, referral arrangements, and financial incentives are structured to avoid triggering kickback charges or violating the Stark Law or real estate settlement procedures. How to Avoid Kickback Liability in Healthcare Healthcare providers and organizations must take proactive steps to prevent kickback violations and ensure compliance with federal and state laws, such as the Anti-Kickback Statute, Stark Law, and the False Claims Act. Here are key strategies to avoid liability and protect your practice from costly penalties: Implement a comprehensive compliance program focused on anti-kickback laws and regulations applicable to healthcare providers, service arrangements, and federal healthcare programs. Educate and train all staff regularly on how to recognize and avoid involvement in kickback schemes or illegal payments, including those disguised as referral fees, consulting arrangements, or other improper compensation. Structure all financial arrangements and contracts to reflect fair market value and meet bona fide services standards, avoiding any agreements that could be construed as offering or receiving kickbacks. Use OIG safe harbor provisions as a framework to develop compliant business practices and take advantage of exemptions for certain types of lawful transactions. Maintain detailed and transparent documentation for all referrals, payments, vendor agreements, and business partnerships to demonstrate good faith and lawful intent. Conduct regular internal audits and risk assessments to detect red flags early and address areas where your organization may be vulnerable to allegations of illegal kickbacks or healthcare fraud. Avoid offering or accepting gifts, incentives, or payments that could be perceived as an inducement for patient referrals or business in government programs. Consult healthcare attorneys before entering any new business relationship or compensation arrangement that may implicate federal programs, especially if you’re referring Medicare or Medicaid patients. Establish clear policies and procedures for interacting with vendors, pharmaceutical companies, brokers, and title companies to prevent unintentional violations, especially in real estate-related transactions tied to healthcare. Foster a culture of compliance and ethical conduct across all departments, encouraging employees to report questionable practices and promoting adherence to anti-kickback laws and honest services. Need Help With Kickback Compliance? Kickbacks are illegal under both federal and state law and carry serious consequences, including criminal charges, civil penalties, exclusion from federal healthcare programs, and loss of professional licensure. Whether you’re a healthcare provider, business owner, or organization leader, even the perception of improper compensation, illegal payments, or participation in kickback schemes can expose you to significant legal and financial risk. That’s why it’s essential to prioritize ethics, transparency, and full legal compliance in every aspect of your business dealings. Properly structured relationships, informed decision-making, and a strong compliance culture can protect you, your patients, and your practice from costly enforcement actions and reputational damage. FAQs Below are quick answers to common questions that clarify what constitutes a kickback, how it’s different from other forms of payment, and what the consequences might be: Are All Kickbacks Considered Bribery? Not all kickbacks are legally defined as bribery, but they often involve similar elements, such as offering something of value to influence decisions. In many cases, kickbacks are treated as a specific type of bribery under healthcare and anti-corruption laws. Can You Go to Jail for Receiving a Kickback? Yes, receiving a kickback can lead to criminal charges and imprisonment, especially if it involves federal healthcare programs or government contracts. What’s the Difference Between a Bonus and a Kickback? A bonus is typically a lawful reward for performance, while a kickback is an illegal payment made to influence decisions or referrals, often in violation of federal or state laws. What Is Considered an Illegal Kickback? An illegal kickback is any payment, gift, or incentive given or received with the intent to influence referrals or business involving federal programs or government-funded services. Is It Illegal to Pay Kickbacks? Yes, offering or paying a kickback is illegal under laws such as the Anti-Kickback Statute and can result in serious civil and criminal penalties. What Are the Consequences of a Kickback? Consequences include fines, imprisonment, exclusion from federal healthcare programs, loss of licensure, and reputational damage. What Is the Difference Between Bribery and Kickbacks? Bribery typically refers to offering value to influence an official decision, while kickbacks are often disguised as legitimate payments but are intended to induce referrals or contracts. What Are Examples of Kickbacks? Examples include paying a doctor for patient referrals, offering free medical equipment in exchange for orders, or giving cash incentives to influence prescription choices.
July 21, 2025
Healthcare
Does Stark Law Apply to Medicaid Patients?
The Stark Law, also known as the Physician Self-Referral Law, is a federal statute that prohibits physicians from referring patients for certain designated health services (DHS) payable by Medicare to an entity with which the physician or an immediate family member has a financial relationship, unless an exception applies. The law is designed to prevent conflicts of interest, overutilization of healthcare services, and unnecessary costs to federal healthcare programs. Generally, the Stark Law specifically applies to services billed to Medicare, not Medicaid. However, providers should note that other federal and state regulations, such as the federal Anti-Kickback Statute and state-level Medicaid fraud laws, can still apply to Medicaid patient referrals and financial relationships. In many states, similar self-referral laws mirror Stark provisions and do cover Medicaid. In this blog, you will get a clear explanation of the Stark Law and its intent. Furthermore, you will learn who the Stark Law applies to and how healthcare providers can stay compliant. What Is the Stark Law? Formally known as the Physician Self-Referral Law, the Stark Law is a federal statute under the Social Security Act that prohibits physicians from referring patients to receive certain designated health services (DHS) payable by Medicare from entities with which the physician or their immediate family member has a financial relationship, unless an exception applies. This law is commonly referred to as Stark I and Stark II, depending on the version and its scope of application. The Stark Law is a strict liability statute, meaning a physician can be held liable even without specific intent to violate the law. The purpose of the Stark Law is to protect federal programs and patients by preventing conflicts of interest, fraud, and unnecessary or excessive services in Medicare referrals. It is designed to stop physicians from making referral arrangements that are motivated by financial incentives rather than patient care needs. Key restrictions of the Stark Law involve compensation arrangements, ownership interests, and referring physicians who may stand to gain from the healthcare services they recommend. These laws cover DHS, such as clinical laboratory services, outpatient hospital services, home health services, durable medical equipment, occupational therapy services, physical therapy services, radiation therapy services, imaging services, prosthetic devices, parenteral and enteral nutrients, and outpatient prescription drugs. Any compensation agreement involved must meet certain criteria, including being commercially reasonable, reflecting fair market value, and avoiding payment based on the volume or value of referrals. Additionally, failure to comply with the Stark Law can result in severe penalties, including liability under the False Claims Act, exclusion from Medicare and Medicaid programs, and repayment of all Medicare funds received under the tainted referrals. These violations are taken seriously, even in cases of temporary noncompliance. Healthcare providers are expected to maintain contemporaneous documents and contracts proving adherence to the Stark Law exceptions. Who Does the Stark Law Traditionally Apply To? The Stark Law traditionally applies to healthcare providers operating within the Medicare and Medicare Advantage programs. It is designed to govern how physicians refer patients for certain designated health services reimbursable by Medicare, not Medicaid. This means that Medicaid services are generally not subject to the Stark Law restrictions. However, that does not mean referrals within the Medicaid program are unregulated. In fact, state-level Medicaid fraud laws, as well as the federal Anti-Kickback Statute, may still apply and carry similar restrictions regarding improper financial arrangements and referring physicians. Under the Stark Law, covered entities include hospitals, home health agencies, clinical laboratories, imaging centers, and suppliers of durable medical equipment and prosthetic devices. The types of services most commonly subject to Stark restrictions are those defined by the Centers for Medicare & Medicaid Services (CMS) as DHS. These include physical therapy, occupational therapy, radiation therapy, clinical laboratory services, outpatient hospital services, and certain other imaging services. Does Stark Law Apply to Medicaid Patients? According to statutory language and regulatory guidance, the Stark Law applies exclusively to Medicare, not Medicaid. Therefore, referrals for Medicaid patients are generally excluded from the Stark Law enforcement, even when they involve designated health services such as clinical laboratory services, outpatient hospital services, durable medical equipment, home health services, occupational therapy services, physical therapy services, radiation therapy services, and outpatient prescription drugs. The rationale behind this exclusion lies in how Medicare reimbursement and claims are processed under federal oversight, while Medicaid services are largely administered by individual states with varying rules. That said, certain state Medicaid programs have adopted laws or regulations that mirror the Stark Law or integrate Stark-like provisions into their own Medicaid fraud enforcement efforts. While the federal Stark Law itself does not apply to Medicaid, these state-level statutes may impose similar limitations on referring physicians and financial arrangements involving healthcare providers who serve Medicaid patients. Additionally, states operating under Medicaid waivers or managed care models may introduce further nuances or enforcement mechanisms that align with general market value and fair market value requirements. Related Laws That May Affect Medicaid Referrals Even though the Stark Law does not apply directly to the Medicaid program, other federal and state laws can impose strict oversight on financial relationships and referral arrangements involving Medicaid services. They include: Federal Anti-Kickback Statute (AKS): Unlike the Stark Law, the Anti-Kickback Statute applies to both Medicare and Medicaid. It is broader in scope and criminal in nature, making it illegal to offer, solicit, or receive any form of remuneration in exchange for referrals involving federal healthcare programs. Violations of AKS can lead to criminal penalties, false claims, exclusion from federal programs, and civil monetary fines. State Medicaid Fraud Laws: Some states have adopted statutes that expand on federal prohibitions, applying rules that restrict physician self-referral for Medicaid even if the Stark Law wouldn’t normally apply. For example, some states closely monitor compensation arrangements, free rent or office space, or referral arrangements that are not commercially reasonable or that exceed fair market compensation. In such states, healthcare services tied to financial incentives, even if aimed at Medicaid patients, may be flagged for improper conduct. These statutes also work in conjunction with False Claims Act provisions when providers submit Medicaid claims tainted by improper referrals. What Are the Penalties for Violating the Anti-kickback Rules With Medicaid? Violating the Anti-Kickback Statute (AKS) in connection with Medicaid services can result in severe legal and financial consequences for healthcare providers. These penalties are far-reaching and can affect the future viability of a healthcare practice or organization. Typically, civil penalties for Anti-Kickback violations can include fines of up to $50,000 per violation, along with treble damages. This means triple the amount of any remuneration involved in the improper referral. This includes cash, gifts, inflated lease agreements, and anything of value that may improperly influence a referring physician. In addition to civil penalties, there are criminal penalties for willful violations of the AKS. These include criminal fines and up to 10 years of imprisonment per violation. Furthermore, individuals and entities found guilty can face exclusion from participation in federal healthcare programs, including Medicare and Medicaid. This exclusion can be devastating for practices that rely on federal reimbursements to stay operational. Improper referrals that result in the submission of false or fraudulent claims to Medicaid may also trigger liability under the False Claims Act. This statute allows for significant financial recovery by the government and whistleblowers, including penalties for each false claim submitted. Violating the Anti-Kickback Statute also exposes providers to reputational damage and a loss of trust among patients, payers, and referral partners. Additionally, violations significantly increase the risk of audits and investigations by state Medicaid Fraud Control Units, the Office of Inspector General (OIG), and other federal authorities. Providers found in violation are often required to repay all Medicaid funds received through improper referral arrangements, adding an additional financial burden. To avoid these costly and common healthcare compliance mistakes, healthcare providers must ensure that all financial relationships, compensation agreements, and referral arrangements are compliant with AKS and state-level laws. Even unintentional missteps can result in penalties due to the broad nature of the law. How Can Healthcare Providers Stay Compliant With Medicaid? To stay compliant with Medicaid services regulations, providers should implement clear referral policies that are specifically tailored to Medicaid patients, ensuring that all referral arrangements are ethical and free from inducements. This is especially important when making referrals for services that are commonly referred to and susceptible to scrutiny under federal programs. Maintaining thorough documentation for every financial or referral agreement is another essential compliance measure. These documents should outline the general market value, terms of the compensation agreement, and any relevant exceptions of the Stark Law, even if Stark doesn’t directly apply. These records become crucial in defending against allegations of false claims, particularly if improper referrals lead to the submission of claims that could violate the False Claims Act. Healthcare providers must also regularly train staff on Medicaid compliance requirements, including how the physician self-referral law differs from Medicaid regulations. Because state Medicaid laws often vary, organizations should closely monitor final rules, waivers, and updates that may impact what is considered compliant within their specific state Medicaid program. In some cases, separating Medicare reimbursement processes from Medicaid billing and referrals may help reduce confusion and the risk of a Stark Law violation or AKS issue. Conducting periodic audits is another critical strategy. These audits should evaluate all financial arrangements, value-based arrangements, and any incentives offered that could be interpreted as patient abuse or fraud. Identifying and correcting temporary noncompliance early can prevent larger issues down the line. Most importantly, healthcare providers should consult with experienced healthcare attorneys who understand the complexities of Medicaid fraud, self-referral, and the intersection of Stark II, AKS, and state laws. Legal counsel can help providers design compliant practices, document referral arrangements, and respond appropriately to investigations or audits. Need Expert Legal Guidance on Stark Law Compliance? While the Stark Law does not apply to Medicaid patients, that doesn’t mean providers are free from regulatory oversight when it comes to Medicaid referrals. Instead, healthcare providers must stay vigilant and compliant with other applicable laws, including the federal Anti-Kickback Statute, False Claims Act, and state Medicaid fraud laws that often mirror or expand upon Stark’s intent. FAQ Below are answers to common questions about Medicaid referrals and the laws that govern them: Does The Stark Law Apply to Medicaid Managed Care? No, the Stark Law applies only to Medicare and does not cover Medicaid managed care. However, other laws like the Anti-Kickback Statute may still apply. Can Medicaid Referrals Ever Be Subject to The Stark Law Restrictions? Generally, the Stark Law does not apply to Medicaid referrals. But if the referral also involves Medicare services, Stark restrictions may come into play. What Laws Protect Medicaid Patients From Improper Referrals? The Anti-Kickback Statute and various state Medicaid fraud laws protect Medicaid patients by prohibiting referrals made in exchange for financial incentives. How Do State Laws Impact Medicaid Referrals Differently? State laws vary but may impose Stark-like restrictions or additional requirements that apply specifically to Medicaid services and providers within the state.
July 17, 2025
Healthcare
Doctor Not Paying Rent for Surgery
A doctor not paying rent for a surgery space, equipment, or medical suite leads to consequences that extend beyond a typical lease default. In addition to potential eviction or legal action, the situation can raise serious regulatory and compliance risks. This happens if the lease wasn’t properly structured under laws like the Anti-Kickback Statute (AKS), Stark Law, or corporate practice of medicine (CPOM) restrictions In healthcare, rent can be interpreted as a form of compensation or referral incentive if not properly documented. For landlords, clinics, MSOs (Management Services Organizations), and medical facility owners, a doctor’s failure to pay rent might raise red flags about how the lease was structured in the first place. If the agreement isn’t legally compliant, even well-meaning parties can face fines, investigations, or enforcement actions. This blog explores what happens when a doctor fails to pay rent for surgery space and why it’s more than just a landlord-tenant issue. It also highlights the legal and compliance risks involved, especially under healthcare laws like the Anti-Kickback Statute, Stark Law, and corporate practice of medicine rules. What Are the Rent Payment Obligations for Doctors? Typically, doctors who rent surgery space or use specialized equipment within a medical office facility are bound by legally enforceable lease agreements. These contracts outline key rent payment obligations and often include provisions that account for the unique nature of medical practice, such as access to imaging centers, operating rooms, or radiology departments. A typical medical office lease agreement will specify the amount of rent, payment schedules (often monthly or quarterly), responsibilities for repairs and maintenance of equipment, and who is liable for shared services like janitorial staff, HVAC systems, or medical waste disposal. For surgery centers in particular, lease agreements usually contain more detailed provisions due to the higher cost and sensitivity of the premises. These may include specialized rental terms, responsibilities related to the delivery of surgical services, clauses for early termination, and how space is shared among physicians, specialists, or hospital departments. In many cases, doctors are also responsible for a portion of the common area fees or building systems required to keep the facility operational and suitable for patient care. Failure to meet these rent obligations can disrupt not only the landlord-tenant relationship but also the operations of other tenants in the facility. For example, when a physician stops paying rent or attempts to walk away from the agreement early, it can create legal and logistical challenges for landlords, patients, employees, and other practices connected to the space. In some circumstances, the landlord may refuse to allow continued use of the premises or may begin the process of finding a new tenant, which raises more questions about who is responsible for rent payments during the transition. What Are the Consequences of a Doctor Not Paying Rent for Surgery? The most immediate consequence is a breach of the lease agreement, which may lead the landlord to file a lawsuit for unpaid rent, early termination penalties, or damages related to loss of use. Depending on the provisions in the agreement, the clinic, imaging center, or hospital facility may also be entitled to recover costs associated with finding a new tenant or maintaining the premises during the vacancy. From a business standpoint, non-payment can disrupt clinic operations, especially if other tenants or departments share the facility. Patients may lose access to vital services, employees might face instability, and the entire health ecosystem within the building could suffer. Physicians who default on lease payments also risk damaging their reputation among other professionals, hospital systems, and even patients. This potentially reduces future referrals or collaboration opportunities with specialists and contractors in their field. In the worst-case scenario, the physician may lose access to critical equipment, be evicted, face a lawsuit that affects their credit or licensure status, and encounter difficulty securing rental space in another facility. Additionally, if improper arrangements around rent and services are flagged, there could be legal exposure under healthcare law, particularly regarding the Anti-Kickback Statute or fee-splitting violations. These consequences may extend to the MSO or business entity that employs or contracts with the physician, especially if the rental arrangement lacked proper legal review. Can a Doctor Be Evicted for Not Paying Rent for Surgery? Yes, a doctor can be legally evicted for not paying rent for surgery space, provided that the landlord follows the correct process under the lease agreement and applicable landlord-tenant law. Eviction in the healthcare industry is not taken lightly due to the sensitive nature of the services involved and the specialized needs of the premises. However, if rent goes unpaid and the facility owner decides the relationship cannot continue, they have the legal grounds to begin the eviction process. The eviction process usually begins with a formal notice of non-payment, followed by a demand for payment within a set period. If the doctor fails to pay or negotiate new terms, the landlord may then file an unlawful detainer action in court. After receiving a judgment, the landlord can request that law enforcement remove the tenant from the premises. During this process, the physician may be denied access to equipment, patient records, and office systems, which can further disrupt clinic operations and negatively impact health services. How to Stay Compliant With Surgery Space Lease Agreements To stay compliant, begin by aligning your lease terms with federal statutes, such as the AKS and the Stark Law. This means ensuring rent payments are not based on the volume or value of referrals, and that any compensation or service exchange does not appear to be a disguised incentive. Fee-splitting is particularly risky and may be deemed illegal if not structured properly. It’s equally important to document all lease communications, payment issues, or proposed changes in writing. Avoid making side arrangements outside of the official lease, and maintain records of all rent invoices, delivery of services, and any disputes that arise. If a physician becomes unable to afford rent or requests early termination, that conversation should be handled formally with clarity around liability, suitable replacement terms, and responsibilities during the transition period. Furthermore, a lease review should not be a one-time task. Build it into your broader compliance plan and revisit the agreement regularly, especially as your business, tenants, or services evolve. Finally, always consult a qualified healthcare attorney before signing or breaking any lease connected to surgery space, imaging centers, or other regulated medical facilities. With the right legal guidance, you can protect your business, avoid costly regulatory action, and maintain healthy relationships with tenants, patients, and other healthcare providers. What to Do If You’re Struggling to Pay Surgery Rent If you’re a doctor or healthcare entity struggling to pay rent for a surgery center, imaging center, or shared clinic space, the first step is to notify your landlord in writing. This is not only a professional courtesy, but also to protect yourself legally under the lease agreement. You should also avoid making unilateral decisions such as subleasing to other tenants without consent or reducing rent payments without formal negotiation, as these actions can violate contract provisions and trigger liability. In many cases, financial strain may be temporary and negotiable, but landlords are less likely to cooperate if they’re blindsided. Legal consultation can help you determine if your current lease allows for flexibility in payment terms, early termination, or replacement with a new tenant. But attempting to modify or exit the agreement without understanding its legal structure can expose you to fees, lawsuits, or even impact your connection to hospital departments and referral partners. Renegotiating your rental terms is possible, but it must be done with healthcare-specific legal oversight. These leases often involve shared use of equipment, employ multiple contractors, and touch on specialized services, which makes compliance with healthcare law a critical factor. By seeking proper legal advice, you’ll be better positioned to negotiate a fair and lawful arrangement that helps your practice stay open and your relationships with patients and employees intact. How a Healthcare Lawyer Can Help Protect Your Practice A healthcare lawyer can review your lease to ensure it aligns with state and federal law, particularly with respect to rent provisions that could violate the Anti-Kickback Statute, fee-splitting prohibitions, or the corporate practice of medicine doctrine. This is especially important when the space involves shared clinic access, radiology departments, hospital premises, or specialized delivery systems. If you’re already in breach of your lease terms or the landlord refuses to renegotiate, a qualified attorney can help you file a legal response, defend your rights, or explore early termination options that minimize liability. Legal professionals also assist in structuring rent arrangements that reflect fair market value and don’t inadvertently tie payments to the volume or value of referrals, which is a common compliance misstep in medical business agreements. Ready to Protect Your Medical Practice? Lease agreements in the healthcare industry are legally binding arrangements that carry significant regulatory and financial consequences. By fully understanding your lease terms, negotiating in good faith, and maintaining open, written communication with landlords or facility owners, you can prevent disputes and preserve the integrity of your practice. FAQs Rent disputes involving surgery space can raise complex legal and compliance issues for doctors, especially when medical practice laws intersect with standard lease terms. Below are some quick answers to common questions healthcare providers face when dealing with lease challenges. Can I Be Sued for Not Paying Rent on a Surgical Suite? Yes, if you breach your lease agreement, your landlord can sue for unpaid rent, damages, or early termination fees. Will Non-payment Affect My Medical License? While non-payment alone may not directly affect your license, related legal issues or regulatory violations (like improper arrangements) could draw scrutiny from licensing boards. What Happens if I Try to Sublease the Space to Another Provider? Subleasing without landlord approval or proper legal structure may violate your lease terms and trigger liability or compliance issues under healthcare law. Is a Verbal Lease Agreement Legally Valid? In some jurisdictions, verbal agreements may be recognized, but they are risky and hard to enforce, especially for complex arrangements like surgical or imaging center rentals. How Do I Know if My Lease Violates the Stark or AKS Laws? If your rent is tied to referrals or not based on fair market value, it may violate the Stark Law or the Anti-Kickback Statute. A healthcare attorney should review your lease for compliance. How Can Doctors Resolve Disputes With Landlords Over Rent for Their Surgery Space? Start by reviewing the lease terms, documenting the issue in writing, and seeking legal counsel to negotiate or mediate a resolution. Are There Any Options for Doctors to Renegotiate Their Rent Payment Terms for Their Surgery Space? Yes, rent terms can often be renegotiated. But it should be done through formal legal channels to protect both parties and maintain regulatory compliance.
July 14, 2025
Healthcare
How to Transfer Medical Records Between Doctors Safely
When a medical clinic is sold or merges with another practice, one of the most critical and legally sensitive tasks is transferring patient medical records. These records contain protected health information (PHI) and must be handled with strict compliance with HIPAA and state privacy laws. The process of transferring patient medical records requires a structured protocol, typically involving data encryption, secure health IT systems, written patient notifications, and signed authorizations where necessary. If clinics fail to meet legal and ethical standards, the consequences can be severe, ranging from patient care disruptions to lawsuits, regulatory penalties, and loss of licensure. This post will cover your legal obligations when transferring medical records. It will also let you know who can and how to transfer medical documents. When Are Clinics Required to Transfer Medical Records? Clinics are required to transfer medical records in several key situations where continuity of care or legal compliance is at stake. One of the most common scenarios is during a merger, acquisition, or sale of a medical practice. In these cases, patient records must be securely handed over to the new provider to maintain care and comply with HIPAA requirements. Similarly, when a physician retires, relocates, or otherwise leaves the practice and another doctor assumes responsibility for patient care, the medical records must be transferred appropriately. Transfers are also necessary in cases of medical group restructuring, hospital consolidation, or the dissolution of a practice, where patient care responsibilities shift between providers or entities. In each of these cases, the transfer process must be handled with strict attention to legal and ethical standards to protect both the patients and the healthcare providers involved. What Happens if Your Clinic Mishandles Medical Record Transfers? Mishandling the transfer of medical records can have serious legal, financial, and reputational consequences. One of the most immediate risks is violating the Health Insurance Portability and Accountability Act (HIPAA), which strictly regulates how protected health information (PHI) must be managed and transferred. Non-compliance can lead to investigations, enforcement actions, and steep civil penalties, even if the violation was unintentional. Beyond regulatory consequences, clinics may also face lawsuits from patients if their data is mishandled or privacy is breached during the transition. These claims can be costly and damaging to your practice’s credibility. In some cases, mishandling medical records can also result in a loss of trust from patients and peers, reputational harm in your community, and increased scrutiny from medical boards and regulatory agencies. In addition to legal penalties, your clinic could lose critical payer relationships, including Medicare or private insurance contracts, if your compliance failures are deemed substantial. For practices undergoing a merger or sale, this could jeopardize the entire transaction. The best way to avoid these outcomes is to work with experienced healthcare attorneys who understand the legal nuances of record transfers and HIPAA compliance. What Are Your Legal Obligations When Transferring Medical Records? Transferring medical records between doctors or healthcare organizations isn’t as simple as forwarding files to a new provider. It’s a legally sensitive process governed by federal law, state regulations, and professional standards, all designed to protect patient rights and ensure the secure handling of private health information. Whether the records are in paper form or part of an electronic health record (EHR) system, the process must follow specific rules under the Health Insurance Portability and Accountability Act (HIPAA) and other relevant laws. Healthcare providers also have a duty to ensure that any transfer of medical history or health records is done securely, only for lawful purposes, and with proper authorization or implied consent in the context of continuity of care. Failing to meet these obligations can lead to serious compliance violations and loss of patient trust. HIPAA Requirements HIPAA, or the Health Insurance Portability and Accountability Act, is the cornerstone of privacy and security compliance when transferring personal health information (PHI) between covered entities. Under the HIPAA Privacy Rule, healthcare providers must protect patient information during every step of the transfer process, whether the request comes from the patient, a personal representative, or another doctor’s office taking over care. The HIPAA Privacy Rule includes the “minimum necessary” standard, which requires healthcare providers to disclose only the minimum amount of patient information needed to accomplish the intended purpose. For example, if a patient is referred to a new doctor, only the relevant portions of their health records should be transferred, not their entire medical history, unless required for treatment. When transferring electronic health records, providers must maintain an audit trail. This involves logging who accessed or transmitted the patient’s data, when it occurred, and for what purpose. These logs are crucial for compliance and can serve as documentation if the provider is ever audited or must respond to a records request. In most cases, transferring medical records for the purpose of treatment does not require formal written authorization. HIPAA allows an implied consent exception for continuity of care between providers. However, if the request is coming from an insurance company, lawyer, or non-treatment-related third party, a signed release form or written patient authorization is required. State Laws In addition to federal HIPAA requirements, state laws also govern the transfer of medical records, and these can vary significantly. Some states impose stricter privacy protections, extended retention periods, or more detailed records release protocols. For example, California and Texas have additional privacy requirements that go beyond the federal law, including notification duties and limits on the use of sensitive health data. Healthcare organizations must understand both HIPAA and their specific state’s medical privacy regulations to remain compliant. State medical boards and laws often determine how long medical records must be kept before they can be destroyed. In many states, healthcare providers must retain records for at least 7–10 years. When a patient or new provider submits a records request, there must be a clear process for verifying identity, collecting proper forms, and responding within mandated timeframes, typically within 30 days under HIPAA. Other Regulations (Where Applicable) Other laws may apply depending on the nature of the data and the method of transfer. For example, the HITECH Act (Health Information Technology for Economic and Clinical Health Act) expands HIPAA’s scope for electronic health records, including breach notification requirements and enhanced patient rights to access their data. Additionally, state medical boards may have specific rules about how and when providers must notify patients or transfer information in the case of practice closure or provider retirement. Do You Have to Notify Patients About Record Transfers? Yes, healthcare providers have a legal and ethical obligation to notify patients when their medical records are being transferred to another doctor or healthcare organization, especially in situations involving a practice sale, merger, closure, or provider retirement. Under the HIPAA Privacy Rule, while patient authorization is not always required for transfers made for treatment purposes, patients must still be informed when there is a change in the custodianship of their health records. Notification ensures patients are aware of who now has access to their private health information, how it will be used, and what rights they have regarding that information. It also supports the broader principle of patient autonomy and transparency in healthcare. Clinics should notify patients as early as possible, ideally at least 30 days in advance of the transition. Accepted methods of communication may include mailed letters to the patient’s last known address, secure patient portal messages, emails (if consented to), and notices posted in the clinic or on its website. The patient notice should clearly explain that the clinic is undergoing a change (such as new ownership or the doctor’s retirement), who will be responsible for maintaining the patient’s medical records moving forward, how records will be handled (e.g., stored, transferred, or archived), and how patients can request copies or transfer their records to a provider of their choice. The notice should also include a mailing address or contact information for submitting a records request, along with deadlines or instructions for any follow-up. Failing to notify patients properly can lead to legal and regulatory consequences, including HIPAA violations, patient complaints, loss of goodwill, and in some states, disciplinary actions from medical boards. In the event of a dispute, poor or absent communication about records transfers could also expose a practice to liability for abandonment or privacy violations. What Is The Process of Transferring Medical Documentation? Whether transferring paper records or electronic health records (EHRs), the process begins with a formal records request, either from the patient, a new provider, or another covered entity. The healthcare provider or administrative team must verify the identity of the requesting party, review any required release forms, and document the request. For transfers initiated due to a change in care, such as a new doctor taking over treatment, HIPAA allows the disclosure of private health information (PHI) without separate authorization under the treatment exception. The step-by-step process typically includes: Verifying the patient’s identity or authorization via a valid release form. Identifying the receiving doctor’s office or healthcare provider. Preparing the medical history or health records for transfer, limiting data to the minimum necessary unless required for ongoing treatment. Logging the date, content, and method of the transfer for compliance tracking. Delivering the records securely, either through physical mailing address using certified mail or electronically through an encrypted EHR system. The role of EHR systems is critical in modern record transfers. These platforms streamline access, improve data security, and ensure that healthcare providers can deliver continuity of care efficiently. However, even when using an EHR, practices must have the proper Business Associate Agreements (BAAs) in place with any third-party vendors who handle PHI. These agreements are required under federal law and confirm that the business associate will safeguard the data in compliance with HIPAA. Without a valid BAA, any involvement of outside vendors in storing, accessing, or transferring health records could be considered a HIPAA violation, putting your clinic at serious legal risk. Who Can Transfer Medical Documentation? Only certain individuals are authorized to initiate the transfer of medical documentation. This typically includes the healthcare provider, designated administrative personnel, or a properly appointed personal representative acting on behalf of the patient. The process must always protect the patient’s health information and honor their rights under the HIPAA Privacy Rule and the Portability and Accountability Act. Why Hiring a Healthcare Attorney Is Essential Given the complexity of transferring medical records, the involvement of federal law, state-specific privacy rules, and the use of electronic health systems, hiring a knowledgeable healthcare attorney is essential. An experienced lawyer can help you interpret the HIPAA Privacy Rule, manage compliance across jurisdictions, and prevent violations that could result in fines, lawsuits, or loss of your insurance contracts. One of the attorney’s primary roles is to create or review Business Associate Agreements, ensuring that any third-party vendors, cloud-based services, or software platforms used in the transfer process are fully compliant with federal and state law. They can also assist with drafting patient notices, helping you inform individuals about how their patient information is being used and where it’s going. During mergers, acquisitions, or provider transitions, an attorney ensures all aspects of the transfer of medical records are addressed, including due diligence on data handling, reviewing forms, clarifying access rights, and preventing liability exposure. They also help clinics maintain the necessary documentation to defend their practices during audits or inquiries from state boards or federal regulators. Need Help Ensuring HIPAA-Compliant Record Transfers? Transferring medical records between doctors, practices, or healthcare organizations is a legal obligation that directly impacts patient care, privacy, and your clinic’s reputation. From complying with the HIPAA Privacy Rule and the HITECH Act to meeting state-specific regulations and maintaining secure audit trails, every step of the process must be handled with precision. Improper handling of medical documentation can result in costly HIPAA violations, lawsuits, regulatory penalties, and loss of trust from patients and payers. That’s why it’s essential for clinic owners, physicians, and healthcare systems to work with experienced legal counsel when planning or executing any medical record transfer. Whether you’re facing a clinic sale, a provider departure, or a group restructuring, the right legal partner can help you stay compliant, reduce risk, and protect your practice. FAQs Do Clinics Need Patient Consent to Transfer Medical Records? In most cases, patient consent is not required when records are transferred for treatment purposes, such as continuity of care. However, if the transfer is for other reasons, like insurance or legal requests, written patient authorization is typically required under HIPAA. How Should Medical Records Be Transferred Securely? Medical records should be transferred using encrypted electronic health record (EHR) systems or secure mail with proper tracking. Unencrypted email or unsecured methods violate HIPAA regulations and put patient data at risk. How Long Do Clinics Have to Retain Patient Records After a Sale? Retention periods vary by state, but most require clinics to keep patient records for at least 7 to 10 years after the last date of service. Pediatric records may need to be kept longer, depending on state law. Can Medical Records Be Transferred Without the Patient’s Knowledge? Yes, if the transfer is for treatment purposes, HIPAA permits it without explicit patient notification. However, patients should still be informed of changes in care or record custodianship as a best practice. Can You Transfer Medical Records to a New Doctor? Yes, patients have the right to request that their medical records be sent to a new provider. Clinics must comply with this request within a reasonable time frame, typically 30 days under HIPAA. How Can I Transfer Medical Records to a New Doctor? Submit a written records request or release form to your current provider, including the name and contact information of the new doctor. The current provider will then send the necessary records securely. Who Has Ownership of Health Care Records? Healthcare providers or facilities legally own the physical or electronic medical records. However, patients have the right to access, review, and obtain copies of their personal health information under HIPAA.
July 10, 2025
Healthcare
Examples of Pharmacy HIPAA Violations
The Health Insurance Portability and Accountability Act (HIPAA) is a federal law enacted in 1996 to protect patients’ private health information (PHI). HIPAA establishes rules around how healthcare providers, including pharmacies, store, use, and share sensitive health data. Due to their direct access to sensitive data, pharmacies are especially vulnerable to HIPAA violations and enforcement actions. Common examples of pharmacy HIPAA violations include improper disclosure of PHI, failure to secure electronic records, and inadequate staff training. This blog will give a quick overview of HIPAA and its role in healthcare and how it applies to pharmacies. It will then share common examples of pharmacy HIPAA violations. What Is HIPAA? The Health Insurance Portability and Accountability Act (HIPAA) is a federal law enacted in 1996 to protect individuals’ health information and ensure patient privacy. Overseen by the U.S. Department of Health and Human Services (HHS) and enforced by the Office for Civil Rights (OCR), HIPAA established national standards for safeguarding Protected Health Information (PHI) across the healthcare system. Two key HIPAA rules are especially relevant to pharmacies: The HIPAA Privacy Rule: This rule regulates how covered entities, such as pharmacies, healthcare providers, health plans, and healthcare clearinghouses, may use and disclose a patient’s protected health information. It ensures that only the minimum amount of information necessary is shared, and that patients are aware of and can control how their health records are used. The HIPAA Security Rule: This rule requires pharmacies to implement security measures to protect electronic PHI (ePHI) from unauthorized access, loss, or tampering. This includes technical, physical, and administrative safeguards for medical records and prescriptions. Because pharmacies regularly handle health information, maintain prescription bottles, and process data for insurance companies, maintaining HIPAA compliance is important. Violating HIPAA can lead to civil penalties, corrective action plans, and even court orders. Does HIPAA Apply to Pharmacies? Yes, HIPAA applies to all pharmacies. As covered entities, both large chain businesses (like CVS Pharmacy and Walgreens) and small pharmacies must comply with HIPAA requirements. They are responsible for safeguarding every patient’s PHI, whether in paper or electronic form. Pharmacy staff, including pharmacists and technicians, must follow internal monitoring, procedures, and policies to ensure they do not disclose PHI without patient authorization or a valid court order. HIPAA governs how pharmacies collect patient information, share health insurance details with insurers, and store psychotherapy notes and medical records. They also govern processing and labelling prescriptions to protect privacy. What Happens When a Pharmacy Violates HIPAA? When a pharmacy violates the Health Insurance Portability and Accountability Act (HIPAA), the consequences can be severe, both legally and financially. Legal and financial penalties for HIPAA violations in pharmacies vary depending on the nature and severity of the breach. Civil penalties can range from $100 to $50,000 per violation, with annual maximums reaching up to $1.5 million for each category of violation. In some cases, especially those involving willful neglect or intentional misconduct, criminal charges may also apply. Pharmacies found in violation may be required to undergo a corrective action plan (CAP), which typically involves overhauling internal policies, retraining staff members, and committing to ongoing compliance monitoring. HIPAA violations don’t just bring fines; they also erode patient trust and tarnish the pharmacy’s reputation. Patients rely on healthcare providers, including pharmacies, to keep their health records and personal information confidential. When a violation occurs, such as an employee accessing medical records without patient authorization or improperly disposing of prescription bottles with visible labels, it can severely undermine confidence in the pharmacy’s ability to protect patient privacy. Even a single breach may lead to public backlash, negative media coverage, and loss of customer loyalty. Real-world examples underscore how seriously HIPAA enforcement is taken. CVS Pharmacy, for instance, paid a $2.25 million settlement after it was discovered that several of its locations improperly disposed of pill bottles and patient information in unsecured trash bins. The long-term risks of ignoring HIPAA compliance extend far beyond initial fines. Pharmacies that do not take HIPAA requirements seriously may face the revocation of their operating licenses, the loss of contracts with health plans and insurance companies, and increased vulnerability to lawsuits. Regulatory scrutiny can also intensify, leading to frequent audits and mandatory internal monitoring. Over time, failure to enforce privacy rule requirements, train staff, and implement proper security measures can compromise a pharmacy’s ability to operate effectively and legally. To avoid these risks, pharmacies must treat HIPAA compliance as a non-negotiable part of their business operations. Every member of the pharmacy staff, from technicians to pharmacists, plays a role in protecting patient information. If your pharmacy is uncertain about its compliance status or has experienced a potential violation, now is the time to act. 7 Examples of Pharmacy HIPAA Violations Below are seven common examples of how pharmacy staff can violate HIPAA and put both patients and the pharmacy at risk: Unauthorized Access to Patient Information One of the most frequent HIPAA violations in pharmacies involves employees accessing health records without a valid reason. Under the HIPAA Privacy Rule, only authorized personnel with a legitimate work purpose may view or handle a patient’s protected health information. However, violations occur when staff members access medical records out of curiosity, such as looking up a family member’s or celebrity’s prescriptions, as seen in the Britney Spears case. These actions violate not only HIPAA rules but also patients’ rights and privacy. Improper Disposal of Patient Records Improperly discarding prescription bottles, patient records, or printed health information can lead to serious compliance issues. HIPAA requires that health care providers, including pharmacies, implement secure procedures for destroying PHI. Throwing away prescription labels or documents without shredding or placing them in unlocked trash bins, as seen in the high-profile CVS Pharmacy settlement, can expose sensitive data. Such incidents often result in OCR investigations, corrective action plans, and fines for failing to make reasonable efforts to protect patient information. Sharing Patient Information Without Consent Discussing PHI in public areas where others can overhear, or disclosing it to unauthorized individuals, constitutes an impermissible disclosure under the privacy rule. For example, talking about a patient’s medications at the counter loud enough for others to hear violates their confidentiality. Additionally, sharing PHI with an insurance company, family member, or other third party without proper patient authorization breaches HIPAA requirements. These incidents often trigger complaints to the human services office or direct OCR investigation. Failure to Secure Electronic Records HIPAA’s Security Rule requires covered entities to adopt technical security measures to safeguard electronic health information (ePHI). Unfortunately, many pharmacies, especially small pharmacies, fall short by failing to secure their computer systems. Leaving terminals unlocked, using weak passwords, or not implementing proper internal monitoring exposes patient data to theft or unauthorized access. Inadequate protection of electronic PHI is one of the most common potential violations pharmacies face. Misuse of Fax or Email for Sending PHI Transmitting health information by fax or email without proper safeguards is another frequent cause of violating HIPAA. For example, sending PHI to the wrong recipient, such as the incorrect fax number or email address, or failing to use encryption, are clear HIPAA violations. Despite being common tools for health care providers, fax and email systems must follow HIPAA standards to prevent breaches of health information (PHI) and reduce the risk of impermissible disclosure. Lack of Proper Staff Training HIPAA requires that pharmacy staff receive ongoing training about privacy and security obligations. However, a lack of proper education results in employees unknowingly mishandling PHI, failing to follow procedures, or breaching patient privacy. When staff don’t fully understand their role in HIPAA compliance, they may accidentally disclose PHI or fail to implement necessary policies and procedures, leaving the pharmacy vulnerable to audits and penalties. Inadequate Physical Security Measures Failing to physically secure areas where patient information is stored, like leaving unlocked filing cabinets, unattended prescription bags, or exposing records to unauthorized personnel, can result in civil rights violations under HIPAA. These HIPAA privacy rule breaches are especially dangerous in high-traffic areas such as the health center, department office, or pharmacy consultation counters. Proper compliance requires pharmacies to implement safeguards that protect health records from both physical and digital threats. How to Stay Compliant With Pharmacy HIPAA Regulations Staying compliant with HIPAA regulations is essential for any pharmacy that handles protected health information (PHI). To maintain HIPAA compliance, pharmacies must implement clear and consistent policies and procedures that align with both the HIPAA Privacy Rule and Security Rule. Best practices include assigning a designated HIPAA compliance officer, conducting regular risk assessments, and establishing protocols for secure data handling. Regular self-audits, proper documentation, and active monitoring are key to identifying weaknesses before they result in civil penalties or an OCR investigation. Start by identifying all areas where patient information is handled. From there, create and enforce written privacy policies that limit PHI access to authorized staff members only. Pharmacies should also develop breach notification procedures, require patient authorization when needed, and comply with state laws in addition to federal rules. Establishing secure disposal methods for medical records, maintaining minimum necessary use policies, and monitoring for potential impermissible disclosures are also critical. Typically, a pharmacy’s ability to protect patient privacy depends heavily on its employees. Every team member, from pharmacists to technicians, must receive comprehensive HIPAA training upon hiring and at regular intervals thereafter. This training should cover how to properly access health records, secure PHI, and avoid actions that could violate HIPAA, such as discussing prescriptions in public areas or accessing psychotherapy notes without cause. Additionally, implement security measures such as locked cabinets, password-protected computers, and monitored access to sensitive files. Educating staff not only reduces risk but also strengthens your pharmacy’s overall compliance posture Furthermore, modern pharmacies rely on technology to manage patient records, process prescriptions, and communicate with healthcare providers and insurance companies. While convenient, this digital landscape presents new risks if not properly managed. To stay compliant, ensure that all electronic systems handling PHI are encrypted, password-protected, and backed by access controls. Use secure portals for transmitting PHI, never send sensitive data via unencrypted email, and verify fax numbers before transmission. Regular updates, anti-virus protections, and secure networks are vital for defending against unauthorized access or breaches. Given the complexity of HIPAA rules, working with a healthcare attorney who understands the accountability act, federal regulations, and real-world enforcement is a smart move for any pharmacy. An experienced HIPAA attorney can help implement compliant procedures, guide staff training, and represent your interests if an OCR investigation or enforcement action occurs. They can also interpret regulatory updates, address potential violations, and advise on handling court orders, patient complaints, or compliance audits. With legal guidance, your pharmacy can go beyond just meeting minimum standards – it can operate with confidence. What to Do if Your Pharmacy Is Not HIPAA Compliant The first step is to identify the source and scope of the compliance issue. Whether it involves patient records, mishandled prescription bottles, unsecured electronic PHI, or untrained pharmacy staff, act quickly to contain the situation. You should immediately cease any activity that could further compromise patient privacy and secure any data that may have been at risk. Conduct a preliminary internal review and document everything. This shows the Office for Civil Rights (OCR) that you’re taking the issue seriously and making reasonable efforts to correct it. Once a HIPAA violation is identified, you must assess whether it qualifies as a reportable breach under the HIPAA Breach Notification Rule. If it does, you are required to notify affected individuals, the Department of Health and Human Services (HHS), and in some cases, the media. It’s important to notify individuals promptly within 60 days of discovering the breach, and to provide clear information about what occurred, what data was affected, and what steps the pharmacy is taking in response. Failure to follow these steps can lead to an enforcement action and a mandatory corrective action plan. Bringing your pharmacy back into compliance means implementing both short-term fixes and long-term system improvements. This includes updating your policies and procedures, strengthening security measures (physical and digital), and improving how PHI is accessed, stored, and shared. Your pharmacy may also need to consult with a healthcare attorney to navigate the process and respond to government inquiries. If your pharmacy has experienced a breach, you must follow federal guidelines for reporting. For minor incidents involving fewer than 500 individuals, you can submit an annual report to HHS through the OCR Breach Portal. For breaches affecting 500 or more individuals, you must report the incident within 60 days of discovery and notify local media outlets as required by law. In both cases, maintaining detailed records of how the breach was handled and the corrective actions taken is essential. Transparency and cooperation during this process will help demonstrate your pharmacy’s commitment to HIPAA compliance and may mitigate the risk of heavier civil penalties. In some cases, patients, staff members, or other concerned individuals may wish to file a complaint about a potential violation. Complaints can be submitted directly to the Department of Health and Human Services’ Office for Civil Rights via the HHS website. Pharmacies should take every complaint seriously, even if it seems minor, and respond appropriately. A complaint can trigger an OCR investigation, which may uncover other compliance issues. Being proactive about resolving complaints internally, conducting a thorough review, and maintaining compliance documentation can help prevent escalation. Want to Avoid HIPAA Violations and Stay Compliant? As covered entities, pharmacies are on the front lines of handling sensitive health information, and even a small oversight can lead to costly violations, legal penalties, and damage to your reputation. Now more than ever, pharmacies must remain vigilant. From securing patient records to training staff and properly handling prescriptions, every action matters. Patients, too, should feel empowered to ask questions and understand how their protected health information (PHI) is being used and protected. If you’re unsure whether your pharmacy is truly HIPAA compliant or you’ve recently experienced a potential violation, it’s time to take proactive steps with the right legal support. FAQ About Pharmacy HIPAA Violations Below are common questions and clear answers about how HIPAA applies in pharmacy settings: Are Pharmacies Covered Entities Under HIPAA? Yes, pharmacies are considered covered entities under HIPAA and must follow all privacy and security rules to protect patient information. They are legally required to handle PHI in compliance with federal regulations. What Are Common HIPAA Violations in Pharmacies? Common violations include unauthorized access to patient records, improper disposal of prescription bottles, unsecured electronic systems, and sharing patient information without consent. These actions can result in civil penalties and OCR investigations. How Can Patients Protect Their Privacy at the Pharmacy? Patients should avoid discussing sensitive medical information aloud and ask how their health information is stored and shared. They can also request a copy of the pharmacy’s HIPAA privacy practices. Can Pharmacy Employees Access Any Patient Information? No, pharmacy employees can only access PHI when necessary for their job duties. Accessing information out of curiosity, such as looking up a friend or celebrity, is a HIPAA violation. What Should I Do if I Suspect My Pharmacy Violated HIPAA? You can report the incident to the Office for Civil Rights (OCR) at the Department of Health and Human Services (HHS). Filing a complaint can lead to an official investigation and corrective actions. How Often Should Pharmacies Conduct HIPAA Training? HIPAA training should be conducted upon hire and regularly thereafter, typically once a year. Ongoing education ensures staff members understand evolving HIPAA rules and how to avoid violations. Are Electronic Prescriptions Covered Under HIPAA? Yes, electronic prescriptions are considered electronic PHI (ePHI) and are fully protected under the HIPAA Security Rule. Pharmacies must use secure systems and encryption to protect this data.
July 8, 2025
Healthcare
Can I Open a Clinic Without Being a Doctor?
Many assume only licensed physicians can own and operate a healthcare clinic. While this may hold true in some cases, particularly when medical diagnosis and treatment are involved, there are corporate structures and legal strategies that allow non-physicians to own or co-own a clinic, if they do it the right way. This is where compliance with corporate practice of medicine (CPOM) laws, HIPAA rules, and state-specific healthcare regulations becomes important. You must not be a doctor to open a clinic. However, there’s a complex legal framework involved, and failing to follow the rules can lead to serious consequences like fines, license revocation, or even criminal charges. This blog will help you know the types of clinics you can open without a medical license. It will also break down the steps involved in opening a clinic without being a doctor in California. Who Can Open a Clinic in California? Under California law, not just anyone can open a medical clinic. Only certain individuals and entities are legally allowed to own or operate a clinic, especially when the services offered involve direct medical care or clinical decisions. Licensed medical professionals such as MDs, DOs, chiropractors, and dentists are authorized to own and operate a medical practice, as they have the required medical training and are regulated by professional boards. However, non-physicians can also participate in the healthcare industry by owning or investing in clinics as long as they do not violate California’s corporate practice of medicine. This typically means they must avoid directly providing or supervising medical services and instead focus on the business aspects of running a clinic, such as management services, human resources, billing services, and marketing. Business people and corporate entities can legally operate clinics through compliant legal structures that respect the division between clinical expertise and business operations. These include models like Management Services Organizations (MSOs), where non-doctors manage administrative functions but leave all clinical operations and medical decisions to licensed healthcare providers. To legally open a clinic in California, it’s not just a matter of setting up an office and hiring staff. It requires full compliance with state laws, especially California Business & Professions Code §2400, which governs the corporate practice of medicine. The law is designed to ensure that only licensed professionals make decisions about patient care, safeguarding the integrity of medical services. This separation of roles is fundamental to maintaining quality healthcare and legal compliance across the state. What Happens if You Break California Healthcare Laws? Failing to comply with California’s healthcare laws can have devastating consequences, as the state takes violations of the corporate practice of medicine very seriously. If you open or operate a clinic illegally, especially without being a licensed medical professional or without ensuring compliance, you could face steep fines and civil penalties from state regulators like the Medical Board of California. These fines may reach thousands or even hundreds of thousands of dollars, depending on the severity of the offense. Beyond financial penalties, the state may shut down your clinic entirely or revoke any associated licenses, even if the only issue is with the clinic’s ownership structure, which alone can render the entire operation unlawful. In some cases, individuals may face criminal charges for the unauthorized practice of medicine, which can be charged as a misdemeanor or felony under Business & Professions Code §2052. The financial risks are also immense. If your clinic is shut down, you could lose all your investment, such as your leased office space, your staff, your equipment, your branding, and everything you’ve built. Physicians who lend their names to non-compliant clinics risk disciplinary action from their licensing board, which could result in license suspension or permanent revocation. Insurance companies may also refuse to cover malpractice claims or defend you in court if your clinic was not legally structured. This could leave you open to civil lawsuits from patients or employees who claim harm due to improper oversight or an illegal operation. A violation can also lead to a permanent ban from owning or investing in another healthcare business and could trigger serious investigations from state and federal agencies, including the Department of Justice, the Department of Consumer Affairs, or even the FBI, especially if fraud is suspected. Can a Non-Physician Own a Medical Practice in California? No, a non-physician cannot legally own a medical practice in California if that ownership involves exercising control over clinical decisions or providing medical services. Under California’s Business & Professions Code §2400, the state enforces a strict ban on the corporate practice of medicine. Therefore, only licensed medical professionals such as medical doctors (MDs), doctors of osteopathy (DOs), and other regulated healthcare providers can legally own medical practices and directly provide medical services. This law protects the quality of patient care by ensuring that clinical expertise and medical decisions remain under the control of those with proper medical training and licenses. However, non-physicians are not entirely excluded from the healthcare industry. With the right legal structure, such as a Management Services Organization (MSO), a non-doctor can participate in the business aspects of a clinic without violating the law. In this arrangement, the non-physician may own and operate a management entity that provides billing services, human resources, medical equipment procurement, and general administrative support to a physician-owned Professional Medical Corporation (PMC). The key is to ensure that the non-physician has no control over patient care, clinical operations, or any medical decisions. What Types of Clinics Can You Open Without a Medical License? If you’re not a licensed doctor but want to enter the healthcare industry, there are still several types of clinics and health-focused businesses you can legally open, especially those that do not involve the practice of medicine. For example, non-physicians can fully own and operate non-medical clinics, such as wellness centers offering services like yoga, massage therapy, nutrition coaching, and fitness programs. These services do not require a medical license and fall outside the purview of the corporate practice of medicine laws. Similarly, mental health services provided by licensed therapists such as psychologists or licensed clinical social workers can be offered through a legally compliant structure, provided the clinical side is managed by the appropriate licensed providers. Non-doctors can also run cosmetic clinics staffed with licensed estheticians, although the services offered must be within a limited, non-medical scope. For more medically inclined ventures, non-doctors can open clinics that provide medical services, but only if they follow legal guidelines that maintain clinical oversight. Examples include Botox and filler clinics, which must have a supervising medical doctor or nurse practitioner, and urgent care or family medicine clinics, which must be structured through an MSO model and properly staffed with licensed medical professionals. In all cases, the non-physician must not interfere with the clinical side of the practice or attempt to provide medical services without proper licensure. What You Can and Can’t Offer Without a License If you’re not a licensed healthcare provider, you’re still allowed to offer a wide range of services related to the business and operational support of a clinic. You can manage booking systems, office staff, marketing, financial management, and other in-house services that support the delivery of healthcare services. You can own the building, manage the brand, and even collect fair market management fees from your partnership with a licensed provider. However, you cannot engage in any aspect of practicing medicine. This includes offering diagnoses, treatment plans, prescribing medications, or performing any form of surgical or invasive procedures. Even suggesting certain treatments or implying medical expertise without the proper license can be seen as violating state laws. These restrictions are enforced by the Medical Board of California and apply equally to all healthcare providers, whether you run a med spa, new clinic, or are simply a business person trying to get involved in the healthcare space. In addition to California’s laws, federal regulations, including those from the FDA and the Health Insurance Portability and Accountability Act (HIPAA), also apply. If your clinic handles protected health information, you must comply with privacy and security regulations under the Health Insurance Portability and Accountability Act (HIPAA), even if you’re not directly involved in patient care. What Do You Need to Open a Clinic in California? Starting a new clinic in California involves more than just leasing a space and hiring staff. You must carefully follow state laws and set up the right legal structure to avoid violating California’s corporate practice of medicine rules. Your goal should be to build a successful medical practice that delivers quality healthcare while ensuring full compliance with regulatory standards. The steps outlined below are essential for both medical professionals and business people aiming to operate healthcare services legally in California. Entity Formation To open a clinic legally in California, the first step is to choose the correct legal structure. If you’re a licensed medical professional, you can form a Professional Medical Corporation (PMC) to directly own your medical practice and provide medical services. If you’re a non-physician, you cannot practice medicine or interfere in clinical decisions, but you can operate through a Management Services Organization (MSO). The MSO model allows you to manage the business aspects of the clinic, such as billing services, human resources, financial management, and medical equipment procurement, while a licensed provider retains full control over the clinical side of the operation. Depending on your structure and goals, you may register your business as an LLC, S corp, or traditional corporation, but the setup must be done in compliance with California’s healthcare law. Licenses & Permits Every clinic in California must obtain the proper licenses and permits to operate. At a minimum, you’ll need a California business license and may need to file a Fictitious Business Name if the clinic operates under a name different from the legal entity. If you’re a medical doctor or another licensed provider, you may also need approvals or registration through the Medical Board of California. Beyond licensing, your physical location must pass zoning, fire, and building inspections to ensure it meets all health and safety requirements. These steps are essential whether you’re opening a med spa, urgent care, or federally qualified health center serving Medicaid patients. Staff & Supervision Whether your clinic offers mental health, medical care, or wellness services, it is important to hire only licensed medical professionals for roles that require clinical expertise. For non-physicians who want to operate medical practices, it is required by law to designate a medical director to oversee all patient care and clinical operations. This ensures that all medical decisions are made by properly credentialed individuals and not influenced by the business aspects of the clinic. All licenses and credentials should be verified with the relevant state boards to maintain compliance and uphold patient safety. Insurance Requirements To protect your clinic and meet healthcare compliance standards, securing appropriate insurance coverage is essential. Every clinic should have general liability insurance, and those offering medical services must carry malpractice insurance to cover potential patient claims. If you employ staff, workers’ compensation insurance is also required by California law. Clinics that manage digital health records must ensure that their cybersecurity insurance is HIPAA-compliant, in line with the Health Insurance Portability and Accountability Act (HIPAA). Following these insurance requirements not only protects your medical providers, staff, and patients, but also helps in ensuring compliance with state and federal laws. How to Open a Clinic Without Being a Doctor in California Opening a clinic as a non-doctor in California is possible, but only if you follow the same rules that apply to all legally compliant medical practices. Due to California’s strict corporate practice of medicine doctrine, non-physicians must take special care to avoid practicing medicine unlawfully. Below is a step-by-step guide to help business people and entrepreneurs enter the healthcare industry safely and successfully: Define Your Clinic Type and Services: Decide whether your clinic will offer medical services (such as Botox, family medicine, or urgent care) or non-medical services like nutrition coaching, massage therapy, or yoga. This decision determines your clinic’s legal structure, licensing, and supervision requirements. Offering healthcare services without a license can lead to serious penalties, so it’s not just a matter of choosing what’s popular. But your scope must align with what licensed medical professionals are legally allowed to provide. Structure the Business Legally: As a non-physician, you cannot own a medical practice directly. Instead, form a Management Services Organization (MSO) to handle the business aspects of the clinic, such as billing services, human resources, and financial management. Partner with a licensed Professional Medical Corporation (PMC) that provides the clinical expertise. Working with a healthcare law firm is essential to avoid violating California state laws and the corporate practice of medicine ban. Hire Licensed Medical Professionals: To provide medical services, your clinic must employ or contract with licensed healthcare providers, including physicians, nurse practitioners, and other medical staff. You’ll also need a medical director to oversee all clinical operations, ensuring that medical decisions are made by those with proper medical training and licensing. Verifying credentials through the Medical Board or relevant state authority is mandatory for ensuring compliance and protecting your patients. Secure Premises and Licenses: Choose a physical location that meets zoning requirements and complies with building and fire safety regulations. You’ll also need to obtain a California business license, any required clinic permits, and a Fictitious Business Name filing if applicable. All in-house services must be conducted in a properly approved space to avoid interruptions from city or state inspections. Ensure Compliance Systems Are in Place: Implement systems that meet HIPAA and Health Insurance Portability and Accountability Act requirements, especially if you’re handling protected health information. Furthermore, draft legally sound contracts, including the MSO service agreement, and ensure your legal structure clearly separates the clinical side from the business side. It’s also wise to prepare for possible audits from regulators or insurance companies. This is where ensuring compliance becomes critical to maintaining a successful medical practice. Launch With Legally-Compliant Marketing: When promoting your new clinic, stay cautious with advertising. Avoid making medical claims or promoting medical care services unless reviewed and approved by your medical director or attorney. All messaging should be aligned with what your licensed professionals are authorized to provide. Misleading promotions can result in investigations, civil penalties, or complaints to the Medical Board. Need Compliance Help Before Opening a Clinic? Non-doctors can open clinics in California, but only if they follow strict legal and regulatory guidelines. The key is setting up the right legal structure, such as a Management Services Organization (MSO), and ensuring that all clinical operations remain under the control of licensed medical professionals. Without this, you risk violating California’s corporate practice of medicine laws, and it could lead to serious legal, financial, and reputational consequences. You need experienced legal support to navigate complex healthcare laws, draft solid contracts, and ensure your business model doesn’t cross into unauthorized medical practice. Partnering with the right medical professionals and legal advisors ensures your clinic operates both legally and ethically from day one. FAQ Section Can I Hire Doctors and Nurses if I’m Not a Doctor? Yes, you can hire licensed doctors and nurses through a legally structured Management Services Organization (MSO), but they must retain full control over clinical decisions and patient care. Can a Non-Physician Own a Medical Practice? In California, non-physicians cannot directly own a medical practice that delivers medical care, but they can operate the non-clinical side through an MSO while partnering with a licensed provider. Can a Medical Practice Be an LLC? A medical practice itself cannot be an LLC in California unless it is a Professional Medical Corporation. However, an MSO providing non-clinical support services can be structured as an LLC. What Qualifications Do I Need to Open a Clinic? You don’t need a medical degree to open a clinic. But you must have the proper business licenses, entity formation, and legal oversight from licensed medical professionals if you offer medical services. Can I Open a Botox or Medspa Clinic Without a Medical Degree? Yes, but only if you partner with a licensed medical director who supervises all treatments and ensures compliance with California healthcare law and scope-of-practice rules. How Do I Protect Myself Legally as a Non-Doctor Owner? Use a compliant MSO structure, separate business and clinical operations, have clear service agreements, and work closely with a healthcare attorney to avoid violating the corporate practice of medicine ban.
June 26, 2025
Healthcare
MSO Rules for Med Spas
Med spas are booming across the U.S., blending aesthetic beauty treatments with medical-grade services like Botox, fillers, and laser therapy. With demand soaring, many entrepreneurs and non-physicians are eager to enter the market. However, state laws often prohibit non-doctors from owning or directly operating medical practices. That’s where Management Services Organizations (MSOs) come in. An MSO is a separate business entity that handles non-clinical operations such as staffing, marketing, billing, and office management, while the medical side must remain fully under the control of a licensed healthcare professional. This post explains what an MSO is and how it operates. It also highlights the core rules MSOs must follow, and points you to trusted legal experts who can help you set up or scale your med spa the right way. What Is an MSO in Healthcare? A Management Services Organization, or MSO, is a separate business entity that provides non-clinical management services to healthcare practices. The MSO does not participate in medical procedures or clinical practice, nor does it make medical decisions. Instead, it operates on the business side of a healthcare venture, enabling licensed physicians, nurse practitioners, and physician assistants to focus on patient care. In both general healthcare and aesthetic medicine, MSOs serve a critical function by allowing medical professionals to delegate administrative and operational duties. For medical spa practices, in particular, this separation is essential due to strict state laws that regulate who may own or operate a medical practice. MSOs help align with these healthcare laws by separating medical services from business management, ensuring that healthcare providers remain compliant while benefiting from improved operational efficiency. Why Med Spas Use MSOs The rise of medical aesthetics and the popularity of medical spas have led to increased interest from entrepreneurs, investors, and professionals without a medical background. However, in many states, corporate practice of medicine laws prohibit non-physicians from owning or controlling a medical practice. This legal restriction exists to prevent unfair business practices and to ensure that only qualified healthcare providers make decisions related to patient care, informed consent practices, and medical treatments. To navigate these legal barriers, med spas often adopt the MSO model. In this setup, the clinical side of the med spa must be owned and controlled by a licensed physician or medical doctor, while the MSO, usually owned by a non-physician, handles all non-medical management services. This includes everything from branding, marketing, support services, and financial management to handling malpractice insurance, medical equipment, and laws governing marketing and medical devices. This arrangement provides regulatory compliance and gives non-physician stakeholders a legal pathway to operate medical spas. For many, the MSO structure offers increased branding/licensing flexibility, better control of financial health, and the ability to build a profitable healthcare business without violating corporate practice restrictions. What Is the Difference Between an MSA and an MSO? An MSO is the legal entity that offers non-clinical services, while an MSA, or Management Services Agreement, is the legal contract that defines the relationship between the MSO and the professional entity or medical practice. The MSA outlines which management services the MSO will provide, the scope of its business operations, and how the management fees will be structured. It is crucial that this agreement respects fair market value principles to avoid issues with fee-splitting or violations of state laws. For example, MSOs cannot be paid a percentage of revenue from medical services in jurisdictions that strictly enforce the corporate practice of medicine. Instead, payments must reflect fair market compensation for the specific services rendered, whether that’s handling financial management, providing office space, or overseeing administrative functions like patient referrals or good-faith exams. The MSA is what legally binds the healthcare providers and the MSO together, clearly separating the medical interests of the licensed professionals from the business interests of the MSO. This clear division supports regulatory compliance, protects against liability, and ensures that medical board expectations are met. What Activities Can the MSO Perform for My Medical Spa? A Management Services Organization (MSO) plays a vital role in supporting the business operations of a medical spa, especially in states that enforce corporate practice of medicine (CPOM) laws. While the medical practice remains under the control of licensed physicians, the MSO is responsible for a wide range of non-clinical services that keep the spa running smoothly and efficiently. These include: Administrative support: The MSO can manage daily operations, coordinate staff, and ensure compliance with healthcare regulations. Payroll and human resources: It may handle staff payroll, hiring, onboarding, and benefits administration for non-clinical employees. Marketing and advertising: The MSO can promote the med spa’s brand, develop marketing campaigns, and manage digital and print advertising, while avoiding any claims of medical outcomes without physician approval. Office space and equipment leasing: It can lease and maintain office space and arrange for medical and non-medical equipment used in the facility. Scheduling and front desk operations: The MSO can oversee appointment booking, receptionist tasks, and client intake processes. Billing and collections (non-clinical): It may manage payment collections for cosmetic or elective services that do not involve third-party insurance billing. Vendor and supply management: The MSO can handle relationships with product vendors and ensure adequate inventory of medical and spa supplies. IT support and software systems: It can maintain practice management software, electronic health records systems, and other IT infrastructure. Financial reporting and bookkeeping: The MSO may oversee accounting, generate financial statements, and track revenue and expenses for the business. Staff training (non-medical): It can organize training programs for front office staff, receptionists, and management personnel in areas like customer service and HIPAA compliance. What the MSO Cannot Do? While the MSO is instrumental in managing the business side of a medical aesthetics practice, it must strictly avoid any involvement in clinical practice or medical services. Under CPOM laws, here are some things the MSO cannot do: Provide or supervise medical treatments: The MSO cannot administer injectables, perform laser therapy, or oversee any clinical care. Employ or control medical professionals: Physicians, nurse practitioners, physician assistants, and registered nurses must be hired and supervised by the medical entity, not the MSO. Make medical decisions or set clinical protocols: Only licensed clinicians may create treatment plans, determine clinical procedures, or alter care protocols. Diagnose, treat, or prescribe: The MSO cannot be involved in any form of diagnosis or prescription, which are strictly medical functions. Influence patient care or outcomes: Business personnel must not influence clinical outcomes, patient decisions, or the type of treatment provided. Share in medical revenue tied to procedures: The MSO cannot receive compensation based on a percentage of medical income, as this may violate fee-splitting laws. Advertise services as “medical” without physician oversight: All marketing related to medical treatments must be reviewed or overseen by a licensed medical provider. Determine pricing for clinical services: Only the physician-owned medical entity can set prices for Botox, fillers, or other regulated medical procedures. Own the medical entity (in states with CPOM laws): The MSO may not have an ownership interest in the professional corporation or PLLC that delivers medical care. Represent the practice as a healthcare provider: The MSO should never present itself as the source of medical care. All medical services must be clearly attributed to the physician-owned entity. Core MSO Rules Med Spas Must Follow MSOs allow non-physicians to provide certain important business management and support services to a professional entity that delivers medical services, such as Botox, dermal fillers, and laser procedures. However, to remain compliant with healthcare regulations, it’s essential that both the MSO and the medical practice follow specific rules that govern their relationship, especially when it comes to dividing medical interests from business operations. They include: Separation of Clinical and Management Services One of the most important rules for operating under an MSO model is the strict separation of clinical and management services. Only licensed physicians, nurse practitioners, and physician assistants are allowed to engage in the clinical practice of medicine. The medical doctor or medical director must retain full control over medical decisions, including informed consent practices, treatment planning, good faith exams, and supervision of medical procedures. The physician is also responsible for staffing clinical personnel, developing clinical protocols, and ensuring patient safety and ethical standards in patient care. On the other hand, the MSO is permitted to handle non-clinical business operations. This includes marketing, administrative functions, financial management, office space leasing, human resources, and managing payroll for non-medical staff. The MSO may also implement practice management software, oversee medical equipment logistics, provide IT support, and manage vendor relationships. These duties help improve operational efficiency while keeping the MSO away from any direct involvement in medical treatments or medical decisions. Compliance With Corporate Practice of Medicine (CPOM) Laws Every MSO arrangement must comply with corporate practice of medicine restrictions, which are designed to prevent non-physicians from owning or controlling medical practices. These state laws ensure that only healthcare providers with the appropriate medical background make clinical decisions and supervise medical professionals. CPOM regulations are especially relevant in medical spas, where the line between cosmetic services and regulated healthcare services can blur. Some states, such as California and Texas, have detailed CPOM laws and allow MSO models under strict guidelines. Others prohibit any kind of ownership or control of a medical entity by a non-physician, making it critical to structure the business using a separate business entity for the MSO. Understanding and following state-specific laws is essential to avoid unfair business practices, loss of license, fines, or investigations by the medical board. Ultimately, the MSO must never represent itself as a healthcare provider or interfere in clinical practice. Fee Structuring Must Avoid “Fee Splitting” Another key area of concern in MSO arrangements is fee structuring, particularly in avoiding what is known as fee splitting. Fee splitting occurs when a non-physician entity receives a share of the medical practice’s revenue in exchange for referrals or general business services. This is illegal in many states because it can influence medical judgment and violate healthcare laws. To maintain regulatory compliance, MSOs must be paid based on fair market value for the key services they provide. Acceptable arrangements often include a fixed management fee or reimbursement based on actual costs and labor. This protects both the MSO and the medical entity from liability and ensures the relationship is built on ethical business practices. Management services agreements should clearly define the services rendered, the scope of the relationship, and the basis for management fees, all while complying with healthcare venture laws and avoiding any tie to clinical performance or volume. Licensing and Credentialing Only licensed physicians may provide medical services at a medical spa, and those medical providers must be credentialed and authorized under state laws. This includes all clinical staff involved in medical aesthetics, such as registered nurses, physician assistants, and nurse practitioners. The MSO cannot employ or supervise these providers nor can it play any role in decisions related to medical coding, diagnoses, or medical treatments. If a non-physician crosses into the territory of providing or directing medical services, it may be considered unlicensed practice of medicine. This is a serious violation that could lead to fines, criminal penalties, or the shutdown of the entire operation. Therefore, all medical spa owners and MSO operators must clearly define the boundary between the business side and clinical side. This ensures that healthcare providers handle the medical services and the MSO remains focused solely on support services. How Do MSO Rules Vary by State? MSO rules for medical spas can vary significantly depending on the state laws governing the corporate practice of medicine (CPOM). States like California, Texas, and New York are known for having some of the strictest CPOM restrictions, making it illegal for non-physicians to own or control any part of a medical practice that provides medical services. In these jurisdictions, only licensed physicians or properly structured professional entities may own or direct the clinical practice. This includes medical decisions, patient care, medical treatments, and supervision of medical professionals like registered nurses, physician assistants, and nurse practitioners. Because of these strict regulations, the Management Services Organization (MSO) model in states like California must be carefully tailored to ensure that the MSO operates strictly on the business side of the practice. The MSO may provide management services such as marketing, office space leasing, human resources, financial management, and IT support, but it must avoid any involvement in clinical practice, including medical coding, setting medical protocols, or determining pricing for medical procedures. Contracts like a Management Services Agreement (MSA) must reflect fair market value for services rendered and avoid any arrangements that could be interpreted as fee splitting. In contrast, some states are more flexible with CPOM laws and allow greater collaboration between non-physician investors and medical entities, though even in these states, medical decisions must remain under the control of a licensed medical doctor or medical director. For example, in states with relaxed CPOM enforcement, limited liability companies may be used creatively to structure healthcare ventures, but care must still be taken to maintain proper separation between medical services and business operations. Because state-specific regulations and interpretations of CPOM laws can differ greatly, it’s best to consult with local legal counsel experienced in healthcare law, particularly in medical spa compliance and regulatory guidance. A qualified attorney can help structure your MSO and professional entity properly, ensure that your practice management software, marketing strategy, and management fees are compliant, and protect your business from regulatory violations, malpractice insurance issues, and medical board investigations. How Can You Keep Your Med Spa MSO Compliant? To ensure your medical spa and Management Services Organization (MSO) remain compliant, it is important to build a structure that respects the boundaries between medical services and business operations. First and foremost, always consult with experienced healthcare attorneys who understand the intricacies of state laws, CPOM regulations, and medical spa practices. Legal guidance at the outset of your healthcare venture can help you avoid costly mistakes and regulatory violations. It is also important to clearly define and separate the two legal entities: the professional entity that delivers medical treatments, and the MSO that handles the administrative functions. The medical entity must be owned and controlled only by licensed physicians or otherwise qualified medical professionals, while the MSO should be a separate business entity that provides management services like marketing, office space, financial management, and practice management software. These roles should be outlined in a carefully drafted Management Services Agreement (MSA) that reflects fair market value and avoids illegal fee-splitting arrangements. Financial independence is another cornerstone of compliance. Your MSO should not receive revenue tied to medical procedures or patient care, and all payments must be structured as fixed or cost-based management fees to ensure regulatory compliance. Finally, schedule regular legal compliance audits to review your business structure, operations, and contracts. These checks can help catch issues before they escalate into violations involving the medical board, malpractice insurance risks, or allegations of unfair business practices. When Should You Hire a Lawyer for Your Med Spa MSO? A healthcare attorney should be part of your team early on, not just when trouble hits. Here are key moments when legal guidance is essential: When starting a new med spa: Before launching your healthcare venture, legal advice is critical for setting up compliant ownership structures and avoiding violations of corporate practice laws. When forming or reviewing an MSO agreement: A healthcare attorney can draft or review your Management Services Agreement (MSA) to ensure that roles, payments, and responsibilities between the MSO and medical practice are clearly and legally defined. During state investigations or audits: If your medical spa is facing scrutiny from the medical board, health department, or other regulatory agencies, you’ll need legal representation to protect your license and operations. If you’re unsure who should “own” what part of the business: Ownership and control must be carefully split between the clinical practice and the MSO. A lawyer can help ensure that only licensed physicians are making medical decisions, while non-physicians stay on the business side of things. Common Legal Mistakes With MSOs in Med Spas Below are common legal mistakes you should avoid with MSOs in med spas: Co-mingling clinical and non-clinical finances: One of the most frequent compliance errors occurs when the medical practice and Management Services Organization (MSO) fail to maintain separate financial accounts. This can blur the line between medical services and business operations, creating exposure to violations of corporate practice of medicine (CPOM) laws and risking sanctions by the medical board or other regulatory bodies. Letting the MSO influence medical decisions: Under no circumstances should an MSO control or direct patient care, clinical protocols, or medical decisions. Only licensed physicians, nurse practitioners, or physician assistants working under proper supervision can provide medical treatments. If the MSO crosses this line even unintentionally, it can result in claims of practicing medicine without a license. Poorly drafted MSO agreements: A weak or vague Management Services Agreement (MSA) can lead to confusion over responsibilities, improper delegation of authority, and violations of healthcare laws. Your MSA must clearly outline the MSO’s role in areas like marketing, office space, human resources, and practice management software, while making it clear that the medical professionals retain control over all aspects of the clinical practice. Revenue-based compensation that risks fee-splitting violations: Tying MSO compensation to a percentage of the medical spa’s income from medical procedures is a major red flag. This is often considered illegal fee splitting, especially in states with strict CPOM rules like California, Texas, and New York. Instead, MSOs should be compensated through fair market value or fixed management fees based on specific key services provided. Don’t Risk Legal Trouble – Set Up Your MSO the Right Way Setting up a Management Services Organization (MSO) for your medical spa can be a powerful way to grow and streamline your business, but only if done correctly. Without clear legal boundaries between medical services and management services, you risk violating corporate practice of medicine (CPOM) laws, exposing yourself to regulatory investigations, medical board scrutiny, and potential loss of licensure or revenue. When properly structured, an MSO allows non-physicians to participate in the business side of the med spa, handling everything from financial management to office space, human resources, and marketing. This ensures that licensed physicians and other medical professionals retain full control over patient care, medical procedures, and clinical decisions. With a well-drafted Management Services Agreement (MSA), a compliant legal entity structure, and ongoing legal oversight, an MSO becomes a smart, strategic tool rather than a legal liability. FAQs About MSOs and Med Spas Who Can Own a Medical Spa? Only licensed physicians or approved healthcare providers can legally own the medical side of a med spa in states with corporate practice of medicine (CPOM) laws. Non-physicians can own an MSO that manages non-clinical business operations. Can a Non-Doctor Own a Med Spa? Non-doctors cannot own clinical practices, but they can legally own and operate MSOs that provide management services to medical entities as long as they do not influence medical decisions. What Are the Benefits of an MSO? An MSO allows licensed physicians to focus on patient care, while the MSO handles administrative functions like marketing, payroll, and office operations. It also enables non-physician investors to legally profit from a med spa without violating healthcare laws, while improving operational efficiency and scalability. Can I Make Money From a Med Spa if I’m Not a Physician? Yes, non-physicians can earn income through fixed or fair market value management fees via an MSO, but cannot receive a percentage of revenue tied directly to medical procedures. Do Med Spas Need an MSO? Med spas may not legally require an MSO, but in states with corporate practice of medicine (CPOM) laws, it’s often the only compliant way for non-physicians to participate in ownership and management. An MSO ensures the business side is separated from the clinical practice, protecting both parties from legal risks. What Happens if I Violate MSO Rules? Violating MSO rules can result in regulatory investigations, medical board sanctions, civil penalties, or even criminal charges for unauthorized practice of medicine or fee splitting. How Much Control Can an MSO Have? An MSO can control administrative functions like marketing, staffing (non-clinical), financial management, and office operations, but cannot direct patient care, hire medical professionals, or set clinical protocols.
June 24, 2025
Healthcare
Durable Medical Equipment Compliance
Durable Medical Equipment (DME) refers to medically necessary devices intended for repeated use, often prescribed by physicians and reimbursed by Medicare, Medicaid, or private insurers. Because DME plays a direct role in patient treatment, and often involves federal reimbursement, the industry is tightly regulated. The DME industry is governed by a complex web of federal and state regulations, and failing to comply isn’t just a bureaucratic misstep. This is because failing to comply can lead to shutting your business down entirely. From FDA oversight to CMS supplier standards, billing compliance, and fraud laws, every stage of your product’s lifecycle is under scrutiny. This blog will break down what counts as Durable Medical Equipment (DME) and why legal and regulatory compliance is critical for every DME company. We will also share the key compliance areas you need to know. What Is Durable Medical Equipment (DME)? Durable Medical Equipment (DME) refers to medical devices designed for long-term use, prescribed by a licensed healthcare provider to aid in a patient’s daily activities or treatment plan. DME must meet some specific criteria, such as being durable, used for a medical purpose, not typically useful to someone who isn’t sick or injured, and appropriate for home use. Common examples of DME include wheelchairs and mobility scooters, hospital beds and home care beds, oxygen tanks and concentrators, CPAP machines for sleep apnea, nebulizers, suction pumps, and infusion devices. Walkers, canes, crutches, commode chairs, and patient lifts are also examples of DME. While prosthetics, orthotics, and medical supplies are also critical in healthcare, they are distinct from DME. Generally, prosthetics replace missing body parts, orthotics like braces or shoe inserts provide structural support, while supplies include disposable items like wound dressings or diabetic test strips. In contrast, DME is categorized separately due to its durability and long-term use in patient care. DME is often used by patients with chronic illnesses, mobility impairments, or those recovering from surgery. This includes seniors, individuals with disabilities, and people managing respiratory or neurological conditions at home. Because DME directly affects patient safety, quality of care, and medical outcomes, compliance is not just a regulatory box to check, but a moral and legal obligation. Equipment that is defective, improperly labeled, or sold without proper clearance can put patients at serious risk and expose manufacturers and sellers to devastating legal consequences. Who Can Create and Sell Medical Equipment Manufacturing and distributing medical equipment in the U.S. is heavily regulated by the FDA and other federal and state agencies. To ensure patient safety and maintain public trust, only qualified entities are permitted to make and sell DME. They include: Licensed Manufacturers: Only companies or individuals with appropriate licensing from regulatory agencies, such as the FDA, are authorized to manufacture medical equipment. These manufacturers must comply with rigorous safety, labeling, and production standards. Regulatory Approval: Before a medical device can be sold or distributed, it must go through the FDA medical device classification system (Class I, II, or III) and may require premarket notification (510(k)) or premarket approval (PMA) depending on the risk level. Quality Standards Compliance: DME manufacturers must comply with the FDA’s Quality System Regulation (QSR), which outlines processes for design control, production, process validation, complaint handling, and more. Many companies also adopt international standards like ISO 13485 to reinforce quality assurance. Distributors and Suppliers: Distributors must have valid business licenses and ensure that all medical devices they sell are FDA-compliant and properly labeled. They are responsible for tracking, reporting adverse events, and ensuring storage conditions meet safety requirements. Healthcare Providers and Pharmacies: In certain cases, licensed healthcare providers and pharmacies may sell or dispense DME directly to patients. However, they must still comply with state and federal laws, including billing regulations if products are reimbursed by Medicare or Medicaid. Registration Requirements: All manufacturers, repackagers, relabelers, and sellers must register their establishments with the FDA and list the devices they market. This ensures traceability and accountability throughout the device lifecycle. Importers and Exporters: Medical device companies that import or export DME must navigate both U.S. regulations and international compliance standards. This includes documentation, labeling, and proper declarations at customs. Compliance with State Laws: In addition to federal laws, each U.S. state may have its own licensing requirements and DME supplier regulations. Some states require Board of Pharmacy permits or separate registration processes for DME businesses. Prohibited Sellers: It is illegal for unauthorized individuals or unlicensed companies to manufacture or sell medical equipment. Doing so can result in FDA enforcement actions, civil penalties, criminal charges, and business closure. What Happens If You Don’t Comply With DME Regulations? Operating a durable medical equipment (DME) business without full compliance is both risky and catastrophic. From financial penalties to loss of your ability to bill Medicare and Medicaid, the consequences of non-compliance with federal regulations can destroy a business and damage your reputation beyond repair. As a durable medical equipment provider, your compliance obligations span multiple layers, including FDA rules, CMS reimbursement guidelines, and state licensing requirements. Failing to meet these standards can quickly trigger investigations by the Office of Inspector General, audits by federal healthcare programs, and even civil and criminal penalties. If your DME company submits reimbursement claims for products that lack medical necessity, or if you operate without a proper DME license, you risk being removed from federal healthcare benefit programs altogether. Losing the ability to bill Medicaid services or Medicare beneficiaries can immediately stop revenue flow, placing your entire operation in jeopardy. Worse still, improper billing, lead generation arrangements, or marketing practices that violate the Anti-Kickback Statute or Stark Law can result in lawsuits, criminal penalties, and publicized disciplinary actions that permanently stain your brand. The risks go beyond just financial loss. Distributing faulty or non-compliant medical equipment, such as hospital beds, portable oxygen equipment, or other devices intended for long-term patient use, can lead to patient harm. When a durable medical device fails or is improperly authorized, the patient pays the price. Why Compliance Matters in Durable Medical Equipment Your DME business must adhere to a maze of compliance requirements, including FDA rules for medical devices, CMS billing policies, and state law mandates on licensure and disclosures. Navigating these rules often requires conducting internal monitoring, implementing written policies, and ensuring HIPAA compliance to safeguard protected health information. For companies engaging in marketing, especially with a lead generation company, obtaining disclosure and written authorization is essential to avoid improper payments and associated penalties. The financial implications of noncompliance are massive. Denied claims, regulatory fines, costly penalties, and interrupted revenue cycles can leave even well-established DME companies scrambling. Developing corrective action, responding promptly to government inquiries, and working with a knowledgeable compliance officer or compliance team are essential steps to reduce risk. In many cases, forming a compliance committee and conducting effective training for staff can provide early warning signs before problems escalate. However, these are intricate steps, best handled under the guidance of experienced legal counsel. With years of experience helping DME suppliers, medical practices, and DME retailers build legally sound operations, our team helps providers obtain accreditation, manage licensing needs, and stay compliant with both federal law and state regulations. Whether you’re dealing with marketing materials, complex financial relationships, or need help understanding how to bill Medicare on a case-by-case basis, we can help you design effective compliance measures from day one. Compliance is also a matter of ethics and patient trust. The patients using your oxygen equipment, mobility devices, and other DME rely on providers who operate transparently, legally, and with care. When your organization implements strong compliance systems, you show that patient safety is not an afterthought. That integrity goes a long way in building your reputation among healthcare partners, referral sources, and regulators. Regulatory Framework for Durable Medical Equipment Compliance Understanding the regulatory framework for durable medical equipment compliance is critical for every DME business operating in the healthcare industry. Failure to adhere to your compliance obligations can result in civil and criminal penalties, denied reimbursement claims, and significant disruptions to business operations. That’s why successful DME companies must build a strong compliance team, implement written policies, and stay vigilant through conducting internal monitoring and continuous education. Which Regulatory Bodies Oversee Durable Medical Equipment? Multiple government agencies and recognized organizations oversee the regulatory compliance of medical equipment in the United States. There is The Centers for Medicare & Medicaid Services (CMS) that plays a central role in defining how DME is billed, what documentation supports medical necessity, and what standards DME suppliers must meet to maintain billing privileges under federal healthcare benefit programs. Losing access to CMS programs can be devastating for DME retailers, especially those relying heavily on Medicare beneficiaries for revenue. Then there is the Food and Drug Administration (FDA) that governs the safety, labeling, and classification of medical devices, including durable medical products. Depending on the type of equipment, manufacturers must meet the FDA’s quality system standards and may require premarket notification or approval. Operating without proper FDA clearance or failing to meet quality standards can subject your organization to criminal penalties and product recalls. Similarly, the Office of Inspector General (OIG) monitors for fraud, waste, and abuse across federal healthcare programs. DME providers that engage in improper billing, improper payments, or questionable lead generation arrangements may be investigated and penalized under well publicized disciplinary guidelines. OIG also issues advisory opinions and provides compliance education to reduce risk. Furthermore, accrediting organizations like The Joint Commission and other agencies approved by CMS offer formal accreditation for DME suppliers. Achieving this accreditation not only fulfills certain regulatory requirements but also enhances your business’s credibility. To obtain accreditation, a DME company must demonstrate effective compliance measures, such as a functioning compliance committee, effective training programs, and clear protocols for addressing compliance challenges. What Are the Key Laws and Regulations for Durable Medical Equipment Compliance? Several laws and regulatory codes directly impact how DME suppliers operate. The Medicare Conditions of Participation (CoPs) set forth the basic rules that must be met for participation in Medicaid services and Medicare. These conditions affect everything from clinical documentation and prior authorization to how DME is dispensed and billed. Adherence to CoPs is critical for maintaining eligibility under federal healthcare benefit programs. Likewise, the 21 CFR (Code of Federal Regulations), particularly Title 21, outlines the FDA’s standards for medical devices and the required manufacturing, labeling, and post-market surveillance processes. Failing to meet these federal regulations can lead to product seizures, warning letters, and even the shutdown of operations. Another essential law is the Health Insurance Portability and Accountability Act (HIPAA). DME companies must maintain HIPAA compliance when handling protected health information (PHI). Furthermore, the federal anti-kickback statutes and the Stark Law impose strict rules on financial relationships between medical practices, DME businesses, and referral sources. How to Stay Compliant With Durable Medical Equipment Regulations Staying compliant with durable medical equipment regulations is not just about avoiding penalties, but also about protecting your patients, your business, and your standing within the healthcare system. Below are helpful tips: Understand and Follow Regulations Effective DME compliance begins with understanding the complex network of federal regulations and state laws that affect your medical equipment operations. Every durable medical equipment DME company must be proactive in keeping up with changing compliance requirements. Key agencies like the FDA, CMS, and state departments of health set the rules that govern DME suppliers. These federal and state entities define how to handle medical necessity, prior authorization, and equipment classifications under various federal healthcare programs. Ignorance is not an excuse when you’re facing civil and criminal penalties. Maintain Licensing and Accurate Documentation All DME businesses must hold the proper licenses, including a valid DME license, and in some cases, a pharmacy license. In addition to obtaining licensing, companies are responsible for maintaining detailed records related to equipment orders, patient usage, and delivery confirmations. These documents serve as your defense against allegations of non-compliance, improper payments, or reimbursement claim fraud. Keeping these records organized and regularly reviewed should be a key responsibility for your compliance officer or compliance team. Implement Effective Billing and Coding Practices Accurate billing is essential to maintaining your status as a trusted provider under federal healthcare benefit programs. Using the correct HCPCS codes for every product reduces the risk of claim denials, audits, or accusations of fraud. DME companies must monitor each submission for compliance with CMS billing guidelines, especially when billing Medicare or Medicaid services. This is a vital step in reducing compliance issues and avoiding costly penalties or sanctions under the Anti-Kickback Statute and Stark Law. Train Your Team Continuously Ongoing education is a cornerstone of any effective compliance strategy. Your staff must receive effective training tailored to your medical practice, product lines, and the expectations of federal law. As laws shift, policies must be updated, and employees must be alerted promptly. Conducting effective training sessions also supports HIPAA compliance, proper documentation of written authorization requirements, and awareness of protected health information policies. A knowledgeable team minimizes human error and strengthens your compliance committee’s overall efforts. Conduct Routine Compliance Audits One of the most important compliance measures for any DME retailer or supplier is regularly conducting internal monitoring and audits. These checks help uncover areas of risk and ensure your documentation, coding, and processes align with industry standards. They also give your team the opportunity to respond promptly, fix errors, and develop corrective action plans before they turn into reportable violations. Consult Healthcare Lawyers for Legal Guidance Even the most experienced DME suppliers face complex situations that require legal interpretation. A specialized attorney like Cohen Healthcare Law helps clients interpret federal regulations, and manage enforcing standards when the stakes are high. Having access to legal counsel ensures you’re fully prepared for inspections, audits, or complaints from other agencies like the Office of Inspector General. The Future of Durable Medical Equipment Compliance One of the most impactful changes is the rise of automated documentation management systems. These digital platforms reduce the risk of non-compliance by securely managing patient care records and equipment logs, ensuring traceability from order to delivery. With integrated tools that track every aspect of device use, DME suppliers can maintain accurate documentation for reimbursement claims and prior authorization requests, which are essential for billing federal healthcare programs. Equally important is the use of compliance tracking software, which helps DME businesses monitor critical deadlines for license renewals, accreditation reviews, and internal audits. These systems reduce administrative burden while minimizing the chances of falling out of compliance with federal law, state regulations, or the rules set by agencies like CMS, the FDA, and the Office of Inspector General. Advanced electronic billing and coding systems are also revolutionizing how DME businesses manage HCPCS codes, reducing the frequency of errors that lead to costly penalties, claim denials, or civil and criminal penalties. These tools are often equipped with built-in checks that validate the medical necessity of items billed to Medicare beneficiaries or Medicaid services, making them indispensable for maintaining a clean billing record. For companies managing large inventories of medical devices, inventory management tools offer the ability to track product lifecycles, recall notices, maintenance schedules, and patient assignments. These systems help ensure that durable medical equipment is not only functional but also meets quality standards. This is critical for patient safety and for avoiding potential compliance issues under both federal regulations and state law. On the training side, e-learning platforms now provide DME teams with continuous access to policy updates and effective training modules tailored to their compliance challenges. Whether educating staff on the Anti-Kickback Statute, Stark Law, or HIPAA compliance, these tools support conducting effective training without disrupting daily operations. They also help compliance officers and compliance committees reinforce internal policies and prepare staff to respond promptly to compliance risks. As more DME businesses adopt data analytics and reporting tools, they’re gaining new insights into emerging compliance risks. By analyzing usage trends, billing patterns, and audit histories, DME providers can identify vulnerabilities and develop corrective action plans proactively. This kind of internal monitoring is crucial not only for meeting current compliance requirements but also for planning long-term strategies and aligning with well-publicized disciplinary guidelines. Finally, secure communication tools are enhancing collaboration among staff, legal counsel, and external partners. These platforms protect protected health information (PHI) while ensuring that important compliance conversations are documented and conducted legally. Is Your DME Business Fully Compliant and Protected? If you operate in the durable medical equipment (DME) industry, compliance isn’t just an operational task. It is a legal, financial, and ethical responsibility. With oversight from the FDA, CMS, and the Office of Inspector General, the pressure to meet strict regulatory compliance standards has never been higher. Implementing best practices such as conducting internal monitoring, maintaining accurate billing through HCPCS coding, staying up to date on state and federal law, and ensuring effective training across your team is essential. They protect your DME business from compliance issues, audits, and costly penalties. FAQ What Does Durable Medical Equipment Compliance Mean for Suppliers? DME compliance means that suppliers must follow all federal, state, and agency regulations related to licensing, billing, documentation, and patient safety. It ensures the business can legally operate, bill Medicare or Medicaid, and avoid legal or financial penalties. How Often Should DME Compliance Audits Be Performed? Internal audits should be conducted at least annually, though high-risk or fast-growing DME businesses may need quarterly reviews. Regular auditing helps catch issues early and ensures ongoing alignment with regulatory requirements. What Are the Most Common DME Billing Errors? The most frequent errors include using incorrect HCPCS codes, missing documentation of medical necessity, and submitting claims without required prior authorizations. These mistakes can lead to denied claims or trigger government audits. What Documentation Is Required for DME Compliance? Suppliers must keep accurate records of prescriptions, delivery confirmations, medical necessity justifications, prior authorizations, and billing submissions. Proper documentation protects against audits, denials, and fraud allegations. How Often Should DME Providers Update Their Compliance Training? Compliance training should be updated annually or whenever there are changes in federal or state regulations. Frequent updates ensure staff remain informed and help prevent unintentional violations. Do I Need a Healthcare Lawyer for DME Compliance? Yes, you need a healthcare lawyer for DME compliance. Navigating DME compliance involves complex legal standards and evolving regulations that require expert interpretation. A healthcare lawyer helps mitigate risk, prepare for audits, and build a compliant, scalable business model.
June 19, 2025
Healthcare
Clinical Trial Compliance Key FDA Regulations for Research Organizations
The intricate web of clinical trial regulations is meant to safeguard study subjects, assure the ethical conduct of research, and ensure the integrity of the scientific results. Any organization that undertakes the responsibility of conducting clinical studies must comply with the rules and regulations set down by three primary authorities: the Food and Drug Administration (FDA), the Department of Health and Human Services (HHS), and Institutional Review Boards (IRBs). Violating their mandates can have serious repercussions, yielding everything from delay to legal action to outright trial rejection. This article gives an overview of the important regulatory areas that research organizations must be aware of, such as the Food and Drug Administration’s 21 Code of Federal Regulations Parts 50 and 56, obligations involving informed consent and institutional review boards, and standards for good clinical practice. It also covers some recent enforcement trends. Understanding FDA Regulations: 21 CFR Part 50 and 21 CFR Part 56 Core requirements for clinical research, as specified by the FDA, are contained in two major regulations. The first is 21 CFR Part 50, which deals with informed consent. The second is 21 CFR Part 56, which governs Institutional Review Boards. In order to start, clinical trials must secure informed consent from every participant and obtain IRB approval. The trials themselves, of course, must adhere to GCP to meet basic regulatory expectations, especially from the FDA. Even with clear regulations, research organizations still encounter frequent issues such as these: Informed consent is not properly obtained. Oversight by the IRB is neglected. Reporting of adverse events or protocol deviations is shoddy. Informed Consent: A Cornerstone of Ethical Research It is not only a legal necessity, but also a basic ethical requirement to obtain valid informed consent. It is essential that participants understand exactly what they are getting into when they sign up to be part of a research study. That understanding requires parents when minors are involved, and serious discussions when the potential participants have limited capacities. Even then consent can have a shaky foundation when the study design is complex, or the risk is high. For informed consent to be legally robust, plain language must be used; participants must be provided with enough time to ask questions; and a written, signed copy of the consent form must be given to the participant. See detailed guidance from the FDA. Related HHS regulations can be found here. IRB Oversight: Protecting Participants and Upholding Integrity The critical role of protecting research subjects falls to Institutional Review Boards. IRBs review research protocols and grant the necessary approvals so that work can proceed. They do this, of course, with the intent of limiting and minimizing risks to research subjects. It is the responsibility of these boards, also, to ensure that consent is truly informed and that the subjects understand what they are agreeing to. And finally, these boards have a responsibility to monitor the kinds of events that might be considered adverse. Researchers must submit detailed protocols, keep accurate records of all IRB communications and approvals, and report any changes or adverse events quickly to steer clear of IRB compliance problems. A handy resource is the FDA’s FAQ guide on IRB regulations. Good Clinical Practice: Building the Foundation for Quality Research GCP is an internationally accepted standard for the protection of research subjects and the reliability of research data. The principles of GCP underscore the necessity of using qualified investigators, ensuring sponsor accountability, and maintaining accurate and complete records. You can improve adherence to GCP by conducting internal audits, training all research staff in GCP requirements, and using electronic systems to manage trial data and enable real-time oversight. For a more thorough investigation of the GCP resources available from the FDA, visit this site. FDA Enforcement: What Happens When Compliance Breaks Down The Food and Drug Administration takes noncompliance seriously, conducting routine inspections of clinical research sites. Frequent violations that the FDA finds include the following: Unreported adverse events Missing or incomplete informed consent forms Research conducted without IRB approval The risk of penalties from the FDA can be substantially reduced by organizations that do three things: they train their personnel, they keep records that are adequate to show compliance with the many requirements that apply to them, and they report all unexpected adverse events to the FDA. Here are some things to think about—as well as some real-world examples—when it comes to your organization’s training and recordkeeping efforts. Real FDA enforcement actions serve as powerful motivation. Ensuring Compliance in Every Trial Ensuring compliance takes an active, not a passive, approach. It means obtaining IRB approval prior to study launch, gaining informed consent from all participants, and adhering to GCP. It also means keeping good, readable records that allow necessary information to flow easily to the right people. A qualified healthcare attorney can help ensure compliance and prepare you for the inevitable audit or regulatory review. It’s critical to navigate the legal and regulatory landscape of clinical trial research for the success of the trials and the safety of the participants. Contact us today to make sure your clinical trial is in total compliance with all relevant regulations.
June 8, 2025
Healthcare
Mobile Health Apps Legal Compliance Essentials for FDA and FTC Standards
Apps that provide services such as telemedicine, fitness tracking, remote monitoring, and medication reminders are rapidly expanding within the burgeoning mobile health (mHealth) industry. But with this growth comes an increase in regulatory scrutiny. Developers, healthcare providers, and startups in this space need to be on guard because the law is looking much more closely at the nascent mHealth industry. And a lot of the apps we’re developing are now being classified as medical devices, with some of us on the borderline of telemedicine. This manual will take you through the basic legal factors involved in mobile health apps. It will help you figure out if your app is regulated by the FDA, how to manage patient data in a way that meets the requirements of HIPAA, and how to ensure that your app’s advertising practices are in line with FTC guidelines. You will also learn about state laws—in particular, telehealth and privacy laws—that may impact the operation of your app. 1. Determining If Your App Needs FDA Approval When a mobile health app meets the definition of a medical device according to 21 CFR 801, the FDA gets involved. If your app is intended to diagnose, treat, or prevent a disease or health condition, it likely comes under FDA oversight. Apps that are concerned only with general wellness or non-medical functions are usually not directed by the FDA. For instance, an application that measures blood pressure and works together with a medical device or one that employs AI to evaluate skin conditions might be classified as a medical device and need to meet FDA requirements. However, step counting apps or those promoting meditation generally do not require such measures. The complete guidance from the FDA can be reviewed. To avoid FDA regulation, think about these strategies: State clearly that your app is not intended to diagnose or treat any medical conditions. Ensure that any connected devices are already FDA-approved. Don’t use promotional language that suggests your app can prevent, diagnose, or treat disease. 2. Complying with HIPAA When Handling Patient Data If your app gathers, holds, or communicates protected health information (PHI), compliance with the Health Insurance Portability and Accountability Act (HIPAA) is a must. This is especially true if your app works with electronic health records (EHRs), collects medical histories or test results, or corresponds with healthcare providers in its user communications. Determine whether your application qualifies as a HIPAA-covered entity. To satisfy HIPAA mandates, you must encrypt stored data and data in transit. When you’re using cloud platforms, choose from those that are HIPAA-compliant—the Amazon Web Services (AWS) platform is well-known for this, as is the Google Cloud Healthcare API. Always get consent from users before you collect or share their health data. And for good measure, implement multi-factor authentication to ensure that only authorized users can access your systems. Learn more about how the Security Rule of HIPAA applies to mobile health applications. 3. Staying Compliant with FTC Marketing Rules When you assert that your app has capabilities that can affect the health of its users, you must be certain that those assertions are accurate, and supported by solid evidence. The Federal Trade Commission keeps a close eye on the marketing of health-related matters and does not shrink from taking action against misleading or overstated assertions. Common pitfalls consist of not stating clearly the actual effectiveness of the app (e.g., saying it cures insomnia), using testimonials and not having scientific backing to use them, and not disclosing connections between the app developers and the influencers or endorsers of the app. View the complete guidance issued by the FTC on the marketing of health products. An instance that is very well known is the FTC’s case against Lumosity in 2015. The company ended up having to pay $2 million because it had made dubious claims that its brain training games could stave off cognitive decline. For details, see this page. To prevent this type of enforcement, ensure that you support health claims with rigorous scientific research; include disclaimers when necessary, and always disclose any financial or promotional relationships. 4. State Privacy Laws and Their Impact on Health Apps Your app may still have obligations under state privacy laws even if HIPAA doesn’t apply to it. Laws protecting consumer data and imposing requirements on businesses collecting personal health information have been enacted in several states. For instance, the Consumer Privacy Act (CCPA) of California underscores the need for transparency and grants users the authority to refuse permission for the collection of their data. New York’s SHIELD Act mandates that companies implement sensible security practices to protect the information of their customers. Illinois’ Biometric Information Privacy Act (BIPA) regulates the gathering of biometric data, such as fingerprints and facial recognition. For your app to remain compliant, it should have a prominent and plain privacy policy, should give users an option to not share data, and should make sure that all biometric data are encrypted and collected only after the user has consented. To see privacy laws in various U.S. states, check this page. 5. Practical Steps for Legal Compliance Assess your app and its functions for FDA oversight. If what you’re doing is in any way similar to what an FDA-regulated company would do, then most likely you must comply with FDA regulations. The same logic applies to HIPAA (It’s All About Compliance, 2021). Your app, if it handles protected health information in a manner similar to what a healthcare entity would do, must comply with HIPAA. Noncompliance can be very costly. The Federal Trade Commission (FTC) regulates truth in advertising on a federal level. Your marketing efforts must be FTC-compliant. See a list of recent enforcement actions taken by the FTC and FDA against mobile health apps. Health mobile apps are in a highly regulated area, and not completing them can lead to serious legal problems—for instance, regulatory fines, consumers suing the company, or even removal of the app from the app stores. If you need help figuring out interaction with the FDA, HIPAA, FTC, or your state compliance for your health tech product, our legal team at Cohen Healthcare Law Group is here to help.
May 22, 2025
Healthcare
Recent Dietary Supplement FDA Alerts and Warning Letters
The FDA has the authority to regulate dietary supplements pursuant to the federal Food, Drug, and Cosmetic Act and other laws. FDA provides guidance documents to help the developers of dietary supplements understand their compliance requirements. These guidance documents include the following: Current Good Manufacturing Practice (CGMP) New Dietary Ingredients Warning Letters & Safety Information Labeling and Claims Adverse Events Reporting and Recordkeeping General Compliance and Inspection Information for Industry Special Issues/Miscellaneous Items Archived Items of Interest We’ve discussed some of the key compliance requirements for dietary supplements previously. We also have a video presentation on the compliance requirements for dietary supplements. In this article, we discuss a few additional compliance issues. Navigating FDA and Healthcare Laws for Dietary Supplements: Compliance Made Clear Learn essential FDA and healthcare compliance requirements for dietary supplements, including labeling, marketing claims, and manufacturing practices. Insights from Cohen Healthcare Law Group. Dietary Supplement Compliance: Labeling, Marketing, and Manufacturing Strategies for Success In this video, Michael discusses the importance of making assertive yet compliant claims, adhering to good manufacturing practices, and ensuring ingredient safety to avoid FDA warnings. FDA oversight of dietary supplements The FDA coordinates its oversight of dietary supplements with the Human Foods Program’s Office of Food Chemical Safety, Dietary Supplements, and Innovation. FDA regulates the dietary ingredients for dietary supplements and the finished dietary supplement products. FDA’s oversight of dietary supplements differs from its oversight of “conventional” foods and drug products. Based on the Dietary Supplement Health and Education Act of 1994 (DSHEA), the makers and distributors of dietary supplements are not permitted to market products that are “adulterated or misbranded.” The burden is on the manufacturers and distributors to evaluate the safety of their products and the labeling of their products before manufacturers and distributors can market their products. Dietary supplements must comply with all the requirements of the Federal Food, Drug, and Cosmetic Act as amended by DSHEA and FDA regulations. If a dietary supplement is adulterated or misbranded after the supplement reaches the market, FDA can take appropriate actions. Dietary supplement alerts by the FDA FDA publishes press releases about recalls of dietary supplements that may risk the health of consumers though not all press releases have recalls. FDA also issues warning letters to companies to inform companies about FDA violations and alert companies about what corrective actions the businesses must take. In 2024, FDA issued the following notices: Update on FDA launches new directory of ingredients used in products marketed as dietary supplements. On February 21, 2025, FDA updated FDA’s Ingredient Directory, including renaming the web page to be Information on Select Dietary Supplement Ingredients and Other Substances. The changes are in response to feedback from stakeholders. The new directory includes new categories to “classify the type of FDA action or communication for each listed ingredient; recording the date each listed ingredient was added to the directory; and streamlining the introductory text on the page.” FDA issues draft guidance on new dietary ingredient notification master files for dietary supplements. On April 3, 2024, FDA announced the availability of a draft guidance for the dietary supplement industry titled “New Dietary Ingredient Notification Master Files for Dietary Supplements.” This guidance document is in response to requests from the dietary supplement industry for “recommendations about Master Files for new dietary ingredient notifications (NDINs).” NDINs can help “facilitate the submission of NDI-related identity, manufacturing, and/or safety information to the FDA for use in evaluating a potential future NDIN.” “The recommendations in this draft guidance expand upon and replace the recommendations related to Master Files in the FDA’s revised draft guidance, “Dietary Supplements: New Dietary Ingredient Notifications and Related Issues.” Ingredient directory FDA has an ingredient directory to help manufacturers, sellers, and consumers keep current about the ingredients and other substances found in products labeled as dietary supplements. The directory links to FDA’s actions and communications which include the “evaluation of health claims, safety communications, and compliance and enforcement actions.” The directory comes with this FDA caveat: “As a reminder, FDA does not approve dietary supplements for safety and effectiveness. This directory is not intended to be a comprehensive list of all ingredients used in dietary supplements and may not include all actions the agency has taken with respect to a particular ingredient.” A sample ingredient in the directory includes the following: Agency actions/statements.21 CFR 101.72 Health claims: calcium, vitamin D, and osteoporosis Qualified Health Claims: Letter Regarding Calcium and Colon/Rectal, Breast, and Prostate Cancers and Recurrent Colon Polyps (October 2005) 1. Ingredient is the subject of an authorized health claim or qualified health claim. Entry date. April, 2023. Dapoxetine (also called Dapoxetinum)Agency actions/statements.Shoreside Enterprises, Inc. Warning Letter (December 2014) Category 4. Ingredient is excluded from the dietary supplement definition under section 201(ff)(3) of the FD&C Act Entry date. April, 2023. The list of categories includes the following: “Ingredient is the subject of an authorized health claim or qualified health claim Ingredient is the subject of a safety communication Ingredient is not a “dietary ingredient” under section 201(ff)(1) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) Ingredient is excluded from the dietary supplement definition under section 201(ff)(3) of the FD&C Act Dietary ingredient has not met the safety standard in section 402(f)(1)(A) of the FD&C Act New dietary ingredient has not met the safety standard in section 402(f)(1)(B) of the FD&C Act New dietary ingredient requiring a premarket safety notification under section 413(a)(2) of the FD&C Act but for which no notification has been submitted.” Additional FDA guidelines for dietary supplements Additional guidelines for dietary supplements include the following: Information for Industry on Dietary Supplements. “Resources and links for submissions for new dietary ingredient notifications and structure/function claim notifications, applications, guidance, regulations, and other items of interest to industry members.” New Dietary Ingredient Notification Process.” Background information for industry, instructions for submitting premarket notifications, and links to relevant guidance and Federal Register documents.” Notifications for Structure/Function and Related Claims in Dietary Supplement Labeling “Background information for industry, instructions for submitting notifications, and links to relevant guidance and Federal Register documents.” Information for Consumers on Using Dietary Supplements FDA warning letters for dietary supplements A few of the more recent warning letters to makers of dietary supplements by the Food and Drug Administration include the following: A warning letter was issued on March 4, 2025, to C & A Naturistics by the Center for Drug Evaluation and Research (CDER) for an unapproved drug/misbranded. The letter states that their dietary supplement is actually a drug. A warning letter was issued to Pivo IV Inc. on March 6, 2025, by CDER for an unapproved drug/misbranded. The letter states that their dietary supplement is actually a drug. A warning letter was issued to IsoThrive Inc. on February 4, 2024, by CDER about objectionable conditions at the facility observed by an FDA clinical investigator. A warning letter was issued to Western Innovations, Inc. on 11/13/24 by Human Foods Program about adulterated dietary supplement violations, including Current Good Manufacturing Practice (CGMP) violations. The Food and Drug Administration has the authority to regulate dietary supplements and their ingredients. FDA provides numerous guidance documents to help manufacturers, medical practitioners, and consumers. When manufacturers fail to comply with the FDA regulations, FDA has the authority to enforce its regulations through warning letters and other actions.
May 18, 2025
Healthcare
Risk Management and Compliance for Direct-to-Consumer Genetic Testing Companies
The DTC genetic testing industry has experienced rapid growth and now finds itself in a climate of intensified scrutiny from federal and state regulators. Numerous companies that offer DNA-based health insights, ancestry results, or genetic predisposition information are feeling the heat and being forced to ensure that their operations are in line with an increasingly fragmented federal and state regulatory scheme. It is no easy task. These companies risk enforcement actions from the FDA, penalties for lapses in data privacy, and legal exposure for making false or misleading marketing claims. This guide covers the critical legal aspects that DTC genetic testing companies must deal with, such as the following: FDA regulations concerning genetic testing; HIPAA and state privacy laws that concern you and your customers; FTC standards for marketing your product; and regulatory pitfalls that DTC companies commonly fall into. DA Regulations for Genetic Testing: Is Your Product a Medical Device? One of the first inquiries about compliance for DTC genetic testing firms to consider is whether their offering is subject to FDA oversight, specifically, whether it is a medical device. Health-related tests—those that might indicate a person’s likelihood of coming down with a specific disease, for example—usually have some federal scrutiny. That can be as light as a product being “cleared” by the FDA through a rather straightforward process for low-risk devices. Genetic tests typically can be divided into three main categories. Medical device tests, which are regulated by the FDA, comprise those that detect genetic markers linked to some disease risk, including the chance of getting certain cancers. In contrast are the general wellness tests that report, among other things, ancestry information. These tests are not regulated by the FDA. A third, mixed bag category includes the Laboratory-Developed Tests., which are used in the somewhat mysterious manner the title suggests. Companies can refer to the FDA’s guidance on direct-to-consumer (DTC) genetic testing to understand how the agency differentiates between medical and nonmedical devices. This guidance can be found online here. It’s important to note the 2013 FDA action against 23andMe. In this case, the FDA barred the company from marketing genetic health reports because of concerns over the unsubstantiated claims that the health reports made a person’s genetic makeup could impact their health. The company subsequently worked with the FDA to obtain market approval for some of its reports. You can find the FDA’s warning letter here. HIPAA and State Privacy Laws Governing Genetic Data Though numerous DTC genetic testing firms aren’t governed by HIPAA because they don’t qualify as covered entities, they’re still bound to comply with the stringent privacy laws that states have put in place. And in an ever-growing number of states, those laws include specific provisions that deal with the collection and use of genetic data—by both the entities that do the collecting and by the law enforcement agencies that might come a-callin’ after the fact. A principal piece of federal legislation is the Genetic Information Nondiscrimination Act (GINA). It bars the use of genetic information in making decisions about health insurance, or employment. For more information about GINA, please see: https://www.eeoc.gov/statutes/genetic-information-nondiscrimination-act-2008. California has established the Genetic Information Privacy Act (GIPA), which mandates that before any genetic information can be shared, companies must first obtain explicit written consent. To read the full text of this piece of legislation, go to Senate Bill No. 41, Chapter 596. Other states, like Vermont and New York, have enacted similar laws requiring detailed disclosures and consent before any testing can occur. To safeguard genetic information, firms must unfailingly secure elucidated consent from individuals before gathering any biosamples, employ robust encryption methods for the storage and transfer of delicate data, and follow the path of least resistance by ensuring robust transparency through privacy policies that the average layperson can decipher. A good place to view state-specific genetic privacy laws is the website of the International Association of Privacy Professionals. FTC Advertising Guidelines: Avoiding Misleading Genetic Test Claims The FTC closely watches the marketing of DTC genetic testing companies. They want to be sure consumers aren’t being sold a bill of goods. Genetic tests that purport to tell you something useful about your health are supposed to have rigorous and reliable science behind them. Claims of this nature must be backed by solid handfuls of even better science if a company making them want to be on the right side of the law. To remain compliant, companies need to ensure that all health outcome advertising claims are backed by credible data. Customer testimonials that imply unrealistic, too-good-to-be-true results must be avoided. And whenever a genetic test is used, the limitations of that test must be fully and plainly disclosed. In 2021, the FTC enforcement case against a DTC genomic testing company resulted in the company’s discontinuation of promotional practices that involved making dubious DTC genomic health risk claims. State Licensing Requirements for DNA Testing Laboratories An additional layer of compliance requires that the lab performing the genetic testing be licensed and certified to operate under both state and federal laws. Most laboratories must be certified under the Clinical Laboratory Improvement Amendments (CLIA), and numerous states—most notably California and New York—have laboratory licensing requirements that exceed those of CLIA. DTC genetic testing companies should either partner with laboratories certified under the Clinical Laboratory Improvement Amendments (CLIA) or obtain the necessary licenses if they operate their own laboratory. For medical device-type tests, it is likely that some level of physician oversight is also required. Even for non-medical tests such as those for ancestry or lifestyle, companies should very clearly state that the results are not to be used for making medical decisions. You can find the federal CLIA requirements online. Information regarding state-specific lab licensing—like that which is needed in New York—is located here. Best Practices to Avoid FDA, FTC, and Privacy Law Violations To limit legal liability, companies that offer direct-to-consumer genetic tests should first ascertain whether the tests are legally classified as medical devices and thus governed by the FDA. If so, the next step is to obtain the necessary clearances and/or approvals before commencing on any marketing efforts. Compliance with both federal and state privacy laws is very much in order, especially when the company in question is working with genetic information that is obviously very sensitive. These practices would seem to eliminate any potential for very likely troublesome FTC actions. In conclusion, businesses ought to get into the practice of examining and refreshing their privacy policies to keep pace with the new laws being enacted and the old ones undergoing reinterpretation. For instance, last July, the Federal Trade Commission and the Food and Drug Administration, both of which have significant authority to regulate the health marketplace, took a serious look at some of the emerging practices they feel are potentially harmful to consumers. Conclusion & Call to Action To work in the DTC genetic testing area requires careful advance planning in the law and active, ongoing compliance. This is a closely watched sector, with the FDA, FTC, and various state agencies taking a close interest. And with all that interest, you can be sure that violations are not going to be looked upon kindly—and they could prove quite costly. If you need help with matters like those we’ve listed here, you might want to give the Cohen Healthcare Law Group a call.
May 15, 2025
Healthcare
Legal and Compliance Strategies for Health Coaching Businesses
The health coaching industry is expanding. At this time, it is essential for coaches and wellness entrepreneurs to be aware of the legal landscape. The industry is expanding so quickly that in some states, laws governing health coaching don’t even exist yet. Because the laws are lagging, there’s no clear path to follow, and you know what that leads to—confusion. And operating under a cloud of confusion puts your business at risk. It opens you up to the possibility of being sued and even having to declare bankruptcy. Without a clear direction, this is where a lot of wellness entrepreneurs seem to be headed. This guide covers several of the major compliance problems that health coaches, wellness startups, and coaching platforms seem to have a hard time grasping. Some of the most important ones are outlined here. They are important because ignoring them could lead to serious legal and financial trouble. They are also important because they affect a lot of people, and dumb compliance problems can make you look untrustworthy or lead to the kind of appearance that makes you seem untrustworthy. Do Health Coaches Need a License? Understanding State Laws In the majority of states, you don’t need a license to work as a health coach. But depending on the kind of services you offer, especially if they are of a certain kind, you could be violating state laws that require professionals to be licensed. For instance, if you are offering detailed nutrition plans (more than just broad dietary guidelines) or any kind of medical advice, you could be interpreted as practicing without a license. Several states—including Florida and North Carolina—confine the provision of dietary counsel to licensed dietitians. The same applies to services that resemble psychotherapy; offering those could trigger mental health licensing rules. If you’re giving advice that could be considered medical—like diagnosing or treating health conditions—you could confront claims of practicing medicine without a license. Avoiding the Corporate Practice of Medicine (CPOM) Health coaching businesses that necessitate a partnership with a licensed professional must be particularly careful regarding the corporate practice of medicine. Why? Because in many states, entities providing medical services must be owned by a physician. If your business model requires the presence of a licensed practitioner, a careful structure is critical—because the alternative could put you in the path of regulatory enforcement. To investigate the functionality of CPOM and the nature of business structures that are compliant, see this page. Typical legal structures include the formation of a Management Services Organization (MSO) that oversees administrative functions while the licensed provider has clinical control. Another structure is to operate as a strictly wellness or life-coaching service, avoiding all regulated health services. Some businesses contract with licensed providers instead of hiring them directly. Marketing Health Coaching Services: FTC Rules and Red Flags Also, federal laws govern health coaching. The Federal Trade Commission has rules about advertising, and health coaches must follow those rules. The FTC requires that all marketing be truthful and not misleading. This means you can’t promise clients guaranteed results or make unsubstantiated health claims. See the complete guidance on health-related advertising from the FTC. You can state, “This program promotes wellness through lifestyle strategies,” but you must avoid saying things like, “This program cures diabetes naturally.” When it comes to making health claims of any sort, you best have them lined with credible scientific evidence. Using disclaimers such as “Results vary” or “Not intended as medical advice” can also help you keep legal risk to a minimum. Be especially careful with testimonials; they should not exaggerate or imply that the program can bring about any more than what it is expected to do. HIPAA Compliance and Client Health Information You might be subject to HIPAA regulations if your business collects or stores any sort of client health information. If you’re a small business, especially, don’t make the assumption that just because you’re not a health insurance company or a hospital, you don’t count. You might. Verify your HIPAA standing. If your business is regulated by HIPAA, you must use secure communication tools, such as encrypted video conferencing platforms, to talk with clients about anything but the least sensitive health information. You should collect only the information you need to do business—make it a habit to always ask for the client’s informed consent first—and you should almost never store any sensitive health information. More comprehensive security counsel can be obtained from this page. Protecting Your Business Through Legal Best Practices To protect your business from legal risk, always make it clear what your role is with proper disclaimers. A typical one is: “This program provides general wellness advice and is not a replacement for your doctor’s orders or prescriptions.” It is also prudent to obtain professional liability insurance, which can assist you if disagreements with clients occur. And prior to launching your services, think about collaborating with a healthcare attorney to verify that your contracts and business model comply with applicable laws. Operating a health coaching business entails meeting various compliance mandates. This can be a bit of a balancing act at times because health coaches are not legally licensed as health professionals. Fortunately, the following section clarifies the main compliance challenges health coaches are likely to face, including the following: Licensing and Advertising Issues Data Privacy and Security Concerns
May 8, 2025
Healthcare
Advertising Compliance for Medical Devices: FTC and FDA Requirements
The Food and Drug Administration (FDA) and the Federal Trade Commission (FTC) finely regulate the promotion compliance of medical devices—both in terms of the claims made and in the manner of their making. The upshot is that promotional claims about medical devices, including advertising, must be truthful and not misleading. To achieve this, the FDA and the FTC have established a series of very clear guidelines, and they have also set forth some basic, mostly “common sense” rules that any entity promoting a medical device would be wise to follow. This document is your essential guide to, and entryway into, the world of promotional compliance for medical devices. Understanding FDA Regulations for Medical Device Labeling and Promotional Claims: The Food and Drug Administration supervises the medical device promotional world, ensuring that claims made therein are truthful and based on solid evidence. They cover a lot of ground. The world of medical devices is not a small one, with hundreds of thousands of individual items that need to be carefully and clearly labeled. “Labeling” is a gigantic umbrella that covers any and all materials used to explain or promote the device. That means everything from brochures to website content to instructions. For a look at their comprehensive requirement list, hit up their webpage. Scientific evidence must back medical claims. If a device manufacturer claims that the device can diagnose or treat a condition, there must be clinical data to back this up. Promoting a device for unapproved or off-label use is prohibited and can lead to enforcement actions. For example, a developer encountered FDA fines for offering unsupported therapeutic representations about a wearable device. Once the firm fixed its labeling to drop these representations, it was able to get back on track and avoid further action. Find additional information about device labeling from the FDA at https://www.fda.gov/medical-devices/overview-device-regulation/device-labeling. Adhering to FTC Truth-in-Advertising Standards for Medical Devices: Ensuring the truth in advertising is the main mission of the FTC, especially when it comes to advertising for medical devices. The statements made in the promotional purview must be clear, and more importantly, they must be substantiated. This means that when a device is being promoted, the claims that are made cannot be misleading or exaggerated in any way. Furthermore, there can be no deceptive language, and absolutely no omissions that might lead the consumer to think something different than what’s actually true. Claims related to health necessitate a great deal of proof—usually clinical trials or large-scale scientific studies. When it comes to using a person to represent a product (i.e., endorsements), the FTC requires that what is said be an accurate representation of the typical user’s experience. Also, if a person is being used to represent a product, and that person is being paid, the audience must be told so. A medical device company learned this lesson the hard way not too long ago. Visit https://www.ftc.gov/business-guidance/resources/advertising-faqs-guide-small-business for additional details. Navigating Social Media and Digital Advertising Compliance: When it comes to using digital platforms and social media to promote medical devices, there are defined compliance risks to consider. The FDA and FTC both have a hand in the regulation of these devices, but the FTC claims primary authority over the type of promotional speech (and the speakers) used in these venues. Mandatory disclosures that go along with related claims should not be hard to find. They should be right there in plain view. To see what the FTC requires, rule-wise, you should look up their endorsement guides. The same standards of truth and substantiation that apply to traditional advertising should also apply to social media posts. When influencers and affiliates promote medical devices on social media, they must ensure that their endorsements are in line with Federal Trade Commission (FTC) guidelines. This was not always the case, as evidenced by a recent revision of fitness device company social media influencer partnerships. The company in question now mandates that its partners include a clear and unmistakable disclosure of the kind of relationship they have with the company (in this case, that they are paid to promote the company’s devices). Detailed FTC disclosure requirements can be found at https://www.ftc.gov/business-guidance/resources/ftcs-endorsement-guides. Conducting Regular Compliance Audits and Staff Training: Regular audits of marketing materials and thorough training of marketing personnel are critical to ensure compliance with the FDA and FTC. Promotions of all kinds must meet the standards set by these two agencies. Audits should encompass all promotional content, including digital media and printed materials—to guarantee compliance. Regular training in labeling rules, claim substantiation, and the standards of honesty in advertising should be received by the marketing teams. When audits find compliance issues, companies must take immediate and corrective actions. A medical device manufacturer has successfully implemented an advertising audit and progressed to a level of compliance in their external communication. They are a case study in being better safe than sorry when it comes to the truth in advertising. Guidance on this topic can be found on the Federal Trade Commission’s website. Common Legal Risks and Penalties for Non-Compliance: The FDA and FTC mandate how advertising should be done in the supplement industry, and they make it very clear which ways are not acceptable. They require actual science to back up what is said in an advertisement. They do this to ensure that consumers are not being misled. They also want to make sure that defendants in lawsuits do not have “but the supplement told me to take it” as a defense. Compliance with FDA and FTC regulations is crucial for medical device manufacturers to avoid penalties and enhance consumer trust. Companies can achieve compliant advertising by substantiating claims, ensuring clear digital disclosures, and regularly auditing advertising practices.
May 1, 2025
Healthcare
Nurse Practitioner Practice Authority
According to the American Medical Association (AMA), physician involvement of nurse practitioners is required for diagnosis and treatment. The AMA identifies the nurse practitioner practice authority for all 50 states and the District of Columbia. Cal. Bus. & Prof. Code §2835.7, according to the AMA, defines a nurse practitioner as an RN (registered nurse) “Who possesses additional preparation and skills in physical diagnosis, psychosocial assessment, and management of health-illness needs in primary health care, and who has been prepared in a program conforms to board standards as specified in Section 1484. (16 Code Cal. Rules 1480 (a)).” In addition to any other criteria, standardized procedures may be implemented that authorize an NP to do any of the following: (1) Order Durable Medical Equipment. (2) In collaboration with a physician and surgeon – and after the performance of a physical examination by the nurse practitioner – certify that a patient has a disability as defined by Section 2708 of the Unemployment Insurance Code. (3) “For individuals receiving home health services or personal care services, after consultation with the treating physician and surgeon; approve, sign, modify, or add to a plan of treatment or plan of care.” A “standardized procedure” is the legal mechanism for RNs and NPs to perform functions that would otherwise be considered the “practice of medicine.” To use standardized procedures, an organized healthcare system must collaboratively (by agreement) develop standardized procedures with the system’s nursing, medicine, and administration departments. Standardized procedure functions “are the diagnosing, prescribing, and severing or penetrating of tissue functions under the ‘MPA’.” The standardized agreement should clarify: When a nurse must obtain a second opinion What limitations on the standardized procedure apply What education the nurse must have to utilize the standardized procedure The settings where standardized procedures can be used How the standardized procedure will be evaluated California’s New Scope of Practice Law for Nurse Practitioners – Part Two California passed a new law, effective January 1, 2023, that permits nurse practitioners in specific settings to provide care (under certain conditions) that does not meet “standardized procedures.” What are collaborative agreements? A few of the key points that medical practitioners and practices should understand about “collaborative agreements” are the following: State requirements. Each state, such as California, determines the necessity and terms of nurse practitioner (NP) practice agreements (called collaborative agreements). Essentially, collaborative agreements “define the scope of medical care provided by NPs in collaboration with licensed physicians.” Medicare requirements. Medicare may also require collaborative agreements (even in states with “full practice” environments to obtain reimbursement. Hospitals may also mandate the use of collaborative agreements to control their liability and oversight requirements – especially where NPs can prescribe medications. According to The Intake, California (in part due to the COVID-19 pandemic) began to relax the “regulatory requirements on NPs, including temporarily waiving certain supervisory requirements.” As the country emerges from the pandemic, the opportunities for NPs to expand their medical care duties are still continuing due to an ongoing national physician shortage. In California, and most other states, collaborative agreements/practice agreements will continue to play a role in how NPs perform their duties. Additional California’s NP considerations California also has different NP categories with different restrictive practice obligations. According to the California Board of Registered Nursing, these two new nurse practitioner categories permit NPs to “function within a defined scope of practice without standardized procedures.” “103 NP – Works under the provisions outlined in Business and Profession Code Section 2837.103. This NP must work in a group setting with at least one physician and surgeon.” “104 NP – Works under the provisions outlined in Business and Professions Code Section 2837.104. This NP may work independently within the population focus of their National Certification.” California Assembly Bill (AB)-890 and Two New Nurse Practitioner Categories California AB-890 authorizes two categories of nurse practitioners who can practice without physician supervision if specific criteria are met. What doctors and NPs should know about collaborative agreements A collaborative agreement is a contract between the collaborating physicians and NPs to expand the medical services NPs can provide. Physicians and NPs should understand the different types of medical practices and their state’s collaborative agreement requirements for each type of practice. According to the American Association of Nurse Practitioners (AANP), NP medical care is regulated as follows: Full practice states. In these states (such as New York, New Mexico, Colorado, and Washington) all NPs can: “Evaluate patients; diagnose, order and interpret diagnostic tests; and initiate and manage treatments, including prescribing medications and controlled substances, under the exclusive licensure authority of the state board of nursing.” Restricted practice states. In these states (such as California, Michigan, Florida, and Texas),“State law requires a career-long regulated collaborative agreement with another health provider in order for the NP to provide patient care or state law limits the setting of one or more elements of NP practice.” Reduced practice states. In these states (such as Pennsylvania, Louisiana, Indiana, Ohio, and Illinois), the NP must have a regulated collaborative agreement with another health provider to provide patient care. “State law requires career-long supervision, delegation, or team management by another health provider in order for the NP to provide patient care.” Nurse Practitioner Telehealth Functional Medicine vs. Coaching (Laws & Legal) In today’s video, we are going to combine three different threads: a Nurse Practitioner wants to start a functional medicine practice, via telehealth, multi-state, and she wants to call it “coaching.” Practice agreements and Medicare requirements The Medicare Regulations state that: “Medicare Part B covers nurse practitioners’ services in all settings in both rural and urban areas, only if the services would be covered if furnished by a physician and the nurse practitioner … Performs them while working in collaboration with a physician. [Emphasis added]. Collaboration under Medicare is defined as ‘a process by which the nurse practitioner has a relationship with one or more physicians to deliver health care services’.” This means that even in full-practice states, an NP will need to execute a collaborative/practice agreement in order for the NP to receive reimbursement from Medicare. Hospitals, long-term care facilities, and other institutions may also require collaborative agreements for other reasons. Many states, like California, permit nurse practitioners to provide some patient care – provided that there is a collaborative agreement (also known as a practice agreement) between the NP and a medical practice or medical institution that sets forth the specific criteria for providing patient care.
April 5, 2025
Healthcare
Compliance in Value-Based Care: Legal Strategies for Healthcare Providers
Care that is reimbursed on a value basis is intended to do three things: improve the outcomes for patients, cut back on the costs associated with their healthcare, and link provider payment to the kind of care they give. High-quality care is what we should expect as a matter of course; low-cost, high-quality care is distinctively American and should be the unfailing goal of our system. But navigating the complex landscape of laws that govern our healthcare system without running off the road requires paying very close attention to a few guiding strategies. Those strategies can help keep you on the road, can keep your venture in good shape. Key Compliance Requirements for Value-Based Care Models When you are structuring care models that provide for their value, you absolutely must make sure you’re complying with both federal and state regulations. Otherwise, you’re courting disaster, as many of the recent healthcare enforcement actions show. Even the forthright federal prosecutors responsible for those actions would concede that knowing the law is half the battle. Healthcare stakeholders must adopt legal strategies that align with the multitude of federal and state regulations that apply to value-based care models. Structuring Value-Based Agreements to Meet Anti-Kickback Safe Harbors The Anti-Kickback Statute forbids any type of payment in return for patient referrals. Yet, recent updates to the regulations have carved out safe harbor protections for certain value-based care models. These safe harbors are meant for coordinated care arrangements involving shared financial risk and performance-based incentives. For compliance, payments to doctors in value-based agreements have to reflect fair market value. This ensures that the financial incentives in these contracts are based on actual performance—like how well your doctor manages your blood pressure—not on the number of patients referred to the hospital. The Office of the Inspector General (OIG) requires that you maintain documentation that details the arrangement’s structure, goals, and duration (in other words, “how it’s supposed to work” and “for how long”). Navigating Stark Law Exceptions for Value-Based Care Arrangements The Stark Law limits doctor’s self-referrals for designated health services (DHS). While this might seem like a bad thing for coordinated care, the truth is that the reforms that the Stark Law has undergone in recent years make it much more possible for healthcare providers to have the kinds of financial relationships that help them provide the better cohesive care that today’s healthcare models require. Most modern exceptions to the Stark Law are structured around full or partial risk arrangements, which are, for all intents and purposes, the healthcare insurance plans of the future. The following are necessary for these exceptions to apply and be deemed compliant: When performance-based, as opposed to referral volume-based, metrics determine the compensation; When all aspects of value-based agreements between DHS entities and potential referral sources are documented with clear articulation of the logic model that outlines how the mission of the agreement will be fulfilled; and When all aspects of the payment structure are adequately identified. A healthcare network did all of this and managed to document it in a way that made it comprehensible to auditors. Managing Patient Data Privacy Under HIPAA in Value-Based Care Models Value-based care necessitates that providers share data. Therefore, value-based care requires that those who practice it be HIPAA-compliant. Under HIPAA, as you may recall, providers must safeguard “protected health information” (PHI) even when they are sharing it for good and reasonable purposes—like for the shared treatment of a patient, say. See more information on HIPAA’s privacy rule. Electronic health records (EHRs) and data-sharing systems must be made to comply with HIPAA. Security standards established by HIPAA must be met. Those security standards require “covered entities” (like EHR vendors and healthcare organizations) to protect electronic health information (ePHI) in several ways: through encryption; through access controls; and by ensuring that information is transmitted securely. When shared data is managed by a third-party vendor, these compliance concerns are often handled by executing a Business Associate Agreement (BAA) with that vendor. Conducting Compliance Audits and Training for Value-Based Care Initiatives Value-based care models present legal risks that regular compliance audits and employee training can identify and reduce. Audits are necessary to establish that financial agreements comply with the Anti-Kickback Statute (AKS) and the Stark Law, which together prevent referral-based incentives that could undermine the integrity of the healthcare system. Regular audits serve as a principle check against the kinds of noncompliant arrangements that could exist if left unchecked. They help ensure that the organization is in good legal standing and allows value-based care to function as it should, without noncompliant arrangements acting as speed bumps in the way of necessary healthcare. Training programs for staff should center on policies governing the sharing of data under HIPAA, standards for fair market value, and the requirements set forth by the Anti-Kickback Statute (AKS) and Stark Law. If a healthcare facility finds that it is employing non-compliant practices in internal or external audits, those practices need to be stopped. Corrective actions must be taken. Agreements must be revised. Documents must be updated. Security protocols must be shored up. Common Legal Risks and Penalties for Non-Compliance in Value-Based Care Not adhering to the Anti-Kickback Statute, Stark Law, or HIPAA can lead to serious negative outcomes, such as being fined, getting kicked out of federal healthcare programs, and/or suffering damage to your reputation. Consequences of not complying with these laws can include: Financial penalties and exclusion from Medicare and Medicaid (for AKS violations). Legal actions, hefty fines, and demands for repayment of claims (for Stark Law violations). Penalties, along with tough scrutiny of your operations. Meeting federal regulations is a basic must for healthcare providers who wish to implement value-based care. The provider first must understand and set up their financial arrangements so that they are aligned with both the Anti-Kickback Statute (AKS) and the Stark Law. Then providers must safeguard the patient’s data and ensure regulatory compliance with HIPAA.
March 22, 2025
Healthcare
Understanding the Stark Law: Compliance Essentials for Healthcare Practices
The Physician Self-Referral Law, more commonly known as the Stark Law, is very important in keeping our healthcare system as conflict-free as possible. It states that if you are a physician and you have a patient who is on Medicare, you cannot refer that patient to any entity for “designated health services” (DHS) if you have a financial interest in the entity to which you are referring. Prohibited Self-Referrals and Financial Relationships Doctors cannot refer patients covered by Medicare to places where they or their immediate family members have a financial interest. They sure can’t do it legally. And yet the Department of Justice (DOJ) and Department of Health and Human Services (HHS) continue to bring cases against doctors, alleging that they have done just this. Services to which doctors can’t refer under these conditions are called designated health services (DHS). They include inpatient and outpatient hospital care; imaging; lab tests; and services that involve physical therapy and durable medical equipment. The Stark Law covers financial relationships that include not just direct ownership but also compensation arrangements of various kinds, such as payment for services, office leasing, or other financial arrangements that tie together physicians and DHS providers. If a Stark Law violation is uncovered, the penalties can be steep, running as high as unfathomable fines and the kick to a medical practice that could easily put it out of business: being excluded from Medicare. And repayment of claims found to be in violation can also result in a hefty bill that might be called a fine but in effect is restitution to the taxpayer. A significant legal case involved a medical center that received penalties because its doctors were referring patients for imaging services to a business in which they had a financial interest. The center got into compliance by restructuring the financial relationship between the physicians and the imaging services business. Exceptions That Allow Compliant Financial Arrangements Stark Law has strict prohibitions, but it also has specific exceptions that allow certain financial relationships to exist under certain conditions. One crucial exception is the in-office ancillary services exception, which permits physicians to provide certain designated health services—like lab tests or imaging—within their practices if the services are supervised and billed properly. Another critical exception to consider is the Bona Fide Employment Exception. This exception allows physicians to receive compensation through employment agreements. To comply, however, the payments need to reflect fair market value, and they must not be linked to the volume of referrals that the physician might send to the residential care facility. For instance, one clinic effectively formed its in-office lab services under the In-Office Ancillary Services Exception to the Stark Law, which allows certain lab services to be performed in a physician’s office under specific conditions. This particular clinic set up its services in a way that allowed it to comply with the Stark Law and bill for those lab services without running afoul of the regulations. Proper Documentation for Stark Law Compliance Keeping meticulous records of all monetary dealings with doctors is crucial for ensuring that Stark Law is followed and that an audit could be passed without problems. Every financial arrangement—including leases, employment contracts, and service agreements—should be documented in writing. These arrangements must outline the services provided, specify payment terms, and ensure that compensation aligns with fair market value. When depending on a Stark Law exception, practices must maintain meticulous documentation that demonstrates compliance. This includes assessments of fair market value and a full accounting of all contract terms. Practices must not only keep these documents current; they should also review them regularly to ensure that they reflect any changes in compensation, services, or market conditions that are bound to occur over time. A healthcare organization steered clear of Stark Law penalties by keeping the most copious documentation on all its physician compensation arrangements. This allowed the organization not only to show, but also to demonstrate, that it followed fair market value requirements. Conducting Compliance Audits to Mitigate Risks Stark Law compliance risks can be identified and addressed through routine audits. Healthcare practices can avoid the expense of enforcement actions by reviewing their financial arrangements and ensuring that they comply with legal requirements. Non-compliant financial relationships can be found and corrected before they lead to penalties by conducting regular audits. These audits help find and fix problems in three concentration areas: ownership interests, compensation arrangements, and compliance with exceptions to Stark Law. A big part of risk management is ensuring that compliance policies are correct and up to date, and that staff members are properly trained. Programs should underscore the importance of not getting into conflicts of interest and knowing when the law allows certain actions that might otherwise appear unethical and would, if misunderstood, lead to a risk judgment. If the auditors find any problems, the first step is to take the obvious corrective action—fix the compliance problem. A hospital that engaged in consistent auditing of its physician pay arrangements was able to identify and fix compliance issues before they became significant problems, allowing the facility to avoid some hefty penalties and paybacks. Legal Risks and Potential Penalties for Non-Compliance Not following the Stark Law can lead to very serious financial and legal results, including being booted out of the Medicare program and facing some hefty fines. Here are some frequent violations and the associated risks: Self-Referral Is Prohibited: Physicians may not refer patients for designated health services (DHS) to entities in which they have a financial interest. If they do, and if they do it knowingly, they can get (1) a monetary penalty; (2) a several-times-the-amount-of-the-penalty civil fine; or (3) exclusion from the Medicare program. Meeting the Exception Criteria: If a financial arrangement satisfies fully the applicable Stark Law exception, then legal and financial penalties cannot be imposed. Insufficient Documentation: Poor record-keeping heightens the likelihood of audits and makes it difficult to demonstrate compliance. Unfair Market Value Arrangements: If financial relationships involve payments that are above or below fair market value, practices may be required to make certain repayments and could face additional fines. Ensuring Ongoing Compliance Healthcare practices that bill Medicare must comply with the Stark Law if they wish to avoid serious regulatory consequences. Eluding the Stark Law’s grasp typically demands a three-part strategy. First, attempts to stay within the law’s confines should lead to the structuring of financial arrangements in accordance with the Stark Law’s many exceptions. Second, the law’s compliance should be documented in detail, with the documentation designed clearly not to mislead. Third, the arrangement’s actual compliance should be audited routinely.
March 15, 2025
Healthcare
Anti-Kickback Statute Compliance for Healthcare Providers and Facilities
The federal Anti-Kickback Statute (AKS) is a vital regulation that healthcare service providers and facilities must follow to maintain ethical financial relationships and steer clear of really bad legal outcomes. This statute makes it crystal clear that you can’t offer, pay, solicit, or receive anything of value in exchange for referrals that involve federal healthcare programs. You can imagine why folks in the healthcare business would be concerned about this law (and about violating it, of course). Understanding the Anti-Kickback Statute and Its Scope The AKS casts a wide net over all kinds of remuneration that might be given or received in exchange for healthcare referrals. They cover cash, gifts, and a whole range of other benefits that might serve as bait. The law obviously targets bad behavior—hospitals buying up doctors to ensure a steady supply of patients, for instance—but risk-averse healthcare providers might take the absence of specific legal safe harbors to mean that they ought to avoid almost any kind of profitable interaction with a referral source. Not complying with the rules can get you into a lot of trouble. If the law is broken, the violators can serve up to five years in jail, pay eye-popping fines, and be banned from all sorts of federal programs. But it’s crucial to understand what the rules do and don’t allow, and to get clear on the difference between the AKS and the Stark Law. The latter isn’t in our purview, but a case study associated with it makes the relevant point. A hospital offers a lot of services (of the “designated health service” variety), and it was in the hospital’s best interest if doctors referred to those services. The offer to make it happen, however, was borderline illegal. The case was risk-laden, and the hospital won the suit but lost money in the process. More details on AKS compliance are at the OIG’s website. Leveraging Safe Harbor Provisions for Compliance The AKS includes safe harbor provisions that protect particular financial arrangements from enforcement actions if they satisfy established criteria. These provisions pertain to typical business arrangements, such as leasing space for offices, service contracts, and managed care arrangements. To qualify for safe harbor protections, such arrangements must adhere to three basic requirements: 1) they have to be at fair market value, 2) they have to serve a legitimate business purpose, and 3) they have to be independent of any referrals for services or items that would be covered by Medicare or Medicaid. More details on safe harbor provisions are available at the OIG site. A compliant arrangement in a clinic that serves as a lease agreement can be seen as a “safe harbor.” This is when a healthcare provider is upheld as not violating the Anti-Kickback Statute. A lease agreement can also serve as a format that allows a provider to stay above board and not be seen as paying for patient referrals. A safe harbor way to carry out a lease agreement is for it to be carried out as a clinic serves an arrangement. A clinic’s lease can be seen as a way that keeps the clinic and the working arrangements of its healthcare providers in a non-violation mode. A clinic and its providers are seen as working in compliance with the Anti-Kickback Statute because a lease serves as a safe harbor. Structuring Employment and Compensation Agreements for Compliance Healthcare entities must guarantee that their employment and compensation arrangements are compliant with the standards set by the AKS. One of the main high-risk areas is payments that are linked to referrals. Compensations must reflect fair market value and be based strictly on actual services that were rendered, and not on the number of referrals given or the amount of generated revenue from federal healthcare programs. Suppliers should steer clear of compensation models that are productivity-based and that link payments directly to the number of referrals. Agreements should spell out the nature of services, the terms of the arrangement, and the payment to be made to illustrate a business purpose that is not “primarily to induce referrals.” A once-accused-compliance-under-the-AKS healthcare organization found itself in trouble because it used unscrupulously designed compensation contracts to pay “too much” to referring physicians—around 115% of “fair market value.” After a redesign in 2007, with help from the OIG, Ingenix, and other experts, the group achieved compliance with the AKS and now works “under the radar.” Conducting Compliance Audits and Employee Training It is crucial to conduct compliance audits and staff training regularly to avoid Anti-Kickback violations. These routine audits help to uncover financial arrangements that pose a high risk of not complying with the law. That risk is generally associated with these kinds of arrangements: incentive payments, or payments made to individuals with the intent to induce or reward referrals. People who conduct these high-risk financial arrangements must do so under the watchful eyes of regular compliance audits. The key to compliance is a well-trained workforce. Employees must understand the overall picture—why we have laws like the AKS and what could happen if we don’t comply. They also need to know the specifics—what counts as a violation and what doesn’t; what is a permissible financial arrangement, and what is a “risky” one that could get us into hot water with the OIG, the Department of Justice, or both. Audits are a big part of the federal enforcement picture these days. Understanding the Legal Risks and Penalties of Non-Compliance Failing to comply with the AKS can lead to serious outcomes like fines, exclusion from federal healthcare programs, and damage to one’s reputation. Some of the violations that happen most frequently are: Paying or receiving prohibited financial incentives to induce or reward referrals. Not observing the provisions that are supposed to create safe harbors Inadequately documenting financial arrangements with potential referral sources For instance, paying people to be your friends can result in fines, prison time, and being kicked out of federal health care programs. Not complying with safe harbor protections can also lead to increased regulatory scrutiny and harm to your reputation. And paying for referrals without a sufficient basis in fair market value can invite legal action and loss of those oh-so-important Medicare dollars. Similarly, having inadequate documentation can raise your audit risk, make proving compliance much harder, and push some poor soul in your organization toward the edge of the Sarbanes-Oxley compliance cliff. To gain more knowledge about AKS compliance, healthcare providers can look to: Office of Inspector General (OIG) Provider Compliance Training on the Anti-Kickback Statute (AKS) The Anti-Kickback Statute (AKS) is a key law for establishing and maintaining ethical financial relationships in the healthcare sector. It is a criminal law that prohibits payment of anything of value to induce or reward referrals for services reimbursed by federal healthcare programs. Healthcare providers can avoid the risks associated with the AKS by using the safe harbor provisions, structuring their financial relationships at fair market value, and conducting regular compliance audits.
March 8, 2025
Healthcare
What Is Emergency Use Authorization?
The Federal Drug Administration uses “Emergency Use Authorization (EUA)” to “help strengthen the nation’s public health protections against chemical, biological, radiological, and nuclear (CBRN) threats including infectious diseases.” The FDA uses medical countermeasures (MCMs) when public health emergencies require more aggressive procedures to protect the public from harm – such as during the COVID-19 pandemic. COVID-19 Vaccination Requirements and Laws The US Centers for Disease Control and Prevention has clinical care guidelines for the three vaccines that have been approved – the two mRNA vaccines and the Jansen vaccine. How does the EAU authority process work? According to the FDA, “A determination under section 319 of the Public Health Service Act that a public health emergency exists does not enable FDA to issue Emergency Use Authorizations. A separate determination and declaration are needed under section 564 of the Federal Food, Drug, and Cosmetic Act to enable FDA to issue Emergency Use Authorizations, provided other statutory criteria are met.” The FDA cannot issue an EUA under section 564 of the FD&C Act unless one of the four following determinations occurs “The Department of Defense (DoD) Secretary issues a determination of military emergency or significant potential for military emergency. The Department of Homeland Security (DHS) Secretary issues a determination of domestic emergency or significant potential for domestic emergency. The Department of Health and Human Services (HHS) Secretary issues a determination of a public health emergency or significant potential for a public health emergency. The DHS Secretary issues a material threat determination.” If the above criteria are met, the HHS Secretary can issue a declaration that circumstances exist to justify issuing the EUA. The FDA Commissioner or delegate can, in consultation with the HHS Assistant Secretary for Preparedness and Response (ASPR), the CDC, and the NIH, then issue the EUA, if other statutory conditions are met. What is the difference between emergency use authorization and full FDA approval? According to Yale Medicine, an emergency use authorization (EUA) is a useful tool during a public health emergency that the FDA can use to expedite the availability of drugs, vaccines, and other medical products. An EUA can only be granted during the time the public health emergency exists: “When no adequate, approved, available alternatives exist,” and “When the known and potential benefits outweigh the potential risks.” Generally, the FDA has the duty to ensure that the medical products FDA grants “full approval” to comply with “rigorous safety and efficacy standards.” Normally, this process can take years. There are still strict compliance standards for EAU approvals – but the timeline for approval is generally much shorter. Since the COVID-19 pandemic was officially recognized in 2020, the FDA has granted many different COVID-19 EUAs including: Two vaccines (Pfizer-BioNTech, for ages 16 and up, and Moderna, for 18 and up) One treatment (Gilead Science’s remdesivir). The history of EUAs The authority of the FDA to grant EUAs dates back to 2004 when EUAs were used for “threats of bioterrorist attacks, including anthrax.” Since 2004, other EUAs have been granted for: H1N1 (swine flu) Ebola Avian flu Middle Eastern Respiratory Syndrome (MERS) Other public health threats. The FDA has the authority to revise or revoke an EUA during a public health emergency as the FDA evaluates current needs and data. “For example, the FDA issued an EUA for hydroxychloroquine during the first phase of the COVID-19 pandemic. Later, when it became clear that the treatment posed a risk but did not offer significant benefit, the FDA retracted the EUA.” Key differences between an EUA and a full approval The two main differences between an FDA EUA and an FDA “full approval” are: An EUA (such as for a COVID-19 vaccine) requires that “at least half of the clinical trial participants be followed for at least two months after vaccination.” The time limit for a full FDA approval is at least six months. Full approval of a medical product “requires more data about the vaccine maker’s processes and facilities, including inspections of manufacturing plants.” How does the normal full FDA approval process work? The FDA full approval process differs depending on the type of product. Vaccines, drugs, and other treatments and therapies are evaluated differently than medical devices and other medical products. The full approval process For vaccines and therapeutics (drugs, treatments, and therapies) the companies seeking full approval file a “biologics license application” (a BLA). For a vaccine BLA, the applicant must comply with the following steps: Research and discovery stage. In this phase, scientists test their vaccines in laboratory settings – usually testing animals. Pre-clinical stage. Here, researchers conduct additional tests on animals to test how well the vaccine works and whether humans can safely benefit from the vaccine. Clinical development stage. Before testing humans, the companies seeking FDA approval compile the results of their prior test and the applicable manufacturing technology. Manufacturers submit this information to the FDA which determines whether to approve the clinical trials which consist of four phases.Phase I. In this phase, about 20-100 volunteers receive the trial vaccine. Phase II. If Phase I is successful, several hundred people will receive the vaccine- based on “varying health statuses and from different demographic groups.” Phase III. In this phase, thousands of people receive the vaccine. The company tests these people for efficacy (the percentage reduction of disease in people who received the trial vaccine versus those who received a placebo), safety, and immune response. Phase IV. This phase includes “monitoring trials.” Assessment of the manufacturing stage. During the clinical trials, FDA reviews the manufacturing process by visiting the company’s facility to ensure the process meets FDA regulations. Seeking approval stage. On completion of the clinical trials and acceptance of the manufacturing process, the company submits its BLA – with all the necessary documentation confirming the steps above. Full approval granted stage. “If the vaccine is approved (or licensed, as it is also known), the company can market it for use in the population for which it was approved.” FDA may seek input from its Vaccines and Related Biological Products Advisory Committee (VRBPAC)—a group of outside, independent experts from scientific and public health fields. After FDA’s full approval, the FDA continues to monitor the safety and production of the vaccine – which includes inspection of the facilities. FDA may also require the Phase IV trials listed above to monitor the vaccine’s effectiveness and to identify “uncommon adverse events and long-term complications.” The Vaccine Adverse Event Reporting System (VAERS) may also participate in reviewing any reports of possible health problems after vaccination. Stem Cell Therapies and Clinical Trials Developers and manufacturers of stem cell therapies need to understand how to conduct clinical trials in order to process FDA investigational new drug (IND) applications. Red Flags that Leads to FDA Warning Letters The FDA issues warning letters for numerous products including dietary supplements. FDA violations include findings that the supplement is a new drug, product adulteration, misbranding, and […] The EUA approval process? Many of the steps to obtain an EUA approval are similar to obtaining a full FDA approval. Applicants must conduct laboratory research and animal testing, and submit an application. The Phase I, II, and III clinical trial runs examine the same safety and efficacy issues. The FDA conducts an assessment of manufacturing practices. A few of the differences are the following: Safety boards. “An independent data safety monitoring board (DSMB) evaluates data from the Phase III trials and tells the manufacturer whether or not they have met criteria for a clinical endpoint (showing how well a vaccine prevents COVID-19, for example) that had been pre-established by the FDA.” The manufacturer makes the decision “whether and when to submit an EUA request.”Unlike a VRBPAC, the vaccine manufacturer establishes safety boards: “As part of a trial and have access to unblinded trial data that they review while the trial is ongoing to see if there are any safety or efficacy signals that warrant action being taken before the trial is scheduled to conclude.”For the EUA COVID vaccines, a DSMB determined that “the vaccines were highly effective and prompted submission to the FDA—where VRBPAC then met and reviewed the formal submission.” FDA review. When the manufacturer submits an EUA, scientists and physicians from the FDA’s Center for Biologics Evaluation and Research (CBER) evaluate the application. The formally oversees the review of vaccines for both the EUA and BLA applications. Public meeting. “The FDA convenes a public meeting of its VRBPAC to go over the data from the clinical trials.” Public meetings are generally used for both EUA and BLA applications. “Although the FDA is not required to consult their advisory committees, FDA typically do for major decisions, such as authorization of COVID-19 vaccines.” EUA decision. The next step is for the CBER to review the input from the public meeting and continue their evaluation. If the EUA criteria are met, the FDA can approve the EUA – approving the vaccine for emergency use. Continued monitoring. The FDA expects that manufacturers will monitor their vaccines for “safety, including deaths, hospitalizations, and other serious adverse events among those who receive the vaccine under an EUA.” The FDA also expects that the manufacturers of the EUA vaccines will continue their clinical trials and pursue full FDA approval of their vaccine. How long do full approval and EUA approvals of medical products take? According to Yale Medicine, the median clinical development period (meaning from a Phase I trial to approval) for 21 approved vaccines over the past 10 years was just over 8 years, including a median FDA review period of about a year. The COVID-19 vaccine from Pfizer-BioNTech (the first to receive an EUA), was under clinical development for six months before Pfizer submitted its EUA. The FDA granted the EUA less than one month later – and full approval eight months later. The Yale Medicine report is dated March 7, 2022, and does not reflect any updates. Additional FDA guidance For more information on the EUA approval process, please review the following: Public Readiness and Emergency Preparedness (PREP) Act Emergency Use Authorization of Medical Products and Related Authorities FDA questions and answer document, dated January 2014, about EUA authority What happens to EUAs when a public health emergency ends Pfizer-BioNTech COVID-19 Vaccine Emergency Use Authorizations for Drugs and Non-Vaccine Biological Products Emergency Use Authorization helps to ensure that America has the drugs, vaccines, and other medical products the country needs during chemical, biological, radiological, and nuclear threats. While there are similarities to the FDA full approval process, the timeline for approval is generally much shorter and there are key differences in the formal approval process. Healthcare providers should understand when EAU applies to the vaccines and other medical products they prescribe – and when full approval is necessary. Generally, when the emergency ends, the EAU ends unless the drug, vaccine, or medical product receives full approval.
March 5, 2025
Healthcare
Legal Guidelines for Functional Medicine Practices: Navigating Regulations and Compliance
As more individuals pursue personalized, holistic healthcare, the functional medicine field is gaining traction. Yet providing care in this evolving space can come with legal complexities. This is primarily because the laws that govern healthcare in the U.S. are made at both the federal and state levels. While federally set standards, such as those found in the Affordable Care Act, apply to all states, much of the functional medicine legal landscape is painted with the brush of state law. And here the picture can vary widely. Both the laws in different states and the informed consent decisions that different groups of practitioners make can—and do—lead to different legal outcomes. Understanding Scope of Practice Regulations Every state has individual laws that define what services healthcare providers can offer based on their credentials. These scope-of-practice laws tell us what kind of procedures and treatments professionals like naturopathic doctors, nurse practitioners, and physicians are allowed to perform. It’s essential to work within the legal confines of your license. Practicing outside your authorized scope—like a prescriptive authority, for example—can land you in serious trouble: fines, for one thing; and suspension or even revocation of your license, for another. Even if you’re trying to do the right thing by documenting your qualifications to practice in a “specialty” area, you could still end up with a black mark on your record—like a naturopathic doctor in limited-prescriptive-authority state recently did, when he was found to have prescribed a controlled substance—if you haven’t really got the legal “go ahead” to be doing what you’re doing. Managing Informed Consent in Functional Medicine The fundamental legal protection is informed consent, especially in functional medicine, where the treatments may involve therapies that are not traditional. Forms for consent should explain in detail the kinds of treatments that are being proposed. Consent forms should be clear and should help make the patient the primary decision-maker. To that end, AMA’s website nicely summarizes and gives several practical examples of the kinds of things that might be covered in “consent” in this functional medicine space. When treatments involve experimental or off-label therapies, it’s necessary to tell the patient about these particulars and to obtain consent. Furthermore, because consent is an “up-front” process, it shouldn’t be considered something that’s done once and then forgotten. Patients should be kept in the loop and made aware of any significant changes to their treatment plans. Experimental (and off-label) therapies taken together can amount to what could be seen legally as a large red flag, but if consent is obtained and the reasons (along with the risks) for going this route are well-documented, then the provider in this case has a much better chance of emerging legally unscathed. Licensing and Multistate Practice Considerations Numerous functional medicine practitioners provide telemedicine services or treat patients who reside in different states, making it crucial for them to comply with the myriad of state licensing requirements. Some states allow out-of-state telemedicine services, while others require the provider to be in possession of an in-state license before treating any patient remotely. For a detailed rundown of which states require what, check out “Telemedicine Licensure Policies by State,” located on the Federation of State Medical Boards website. The streamlined process of the Interstate Medical Licensure Compact (IMLC) allows physicians to practice in multiple states. Non-physician providers could have a more strenuous climb to set up a diverse interstate practice. Why? Because ensuring compliance isn’t just a best practice; it’s a necessity as demanding and obdurate as the interstate highway system itself. And the path to compliance—federal, state, and sector-specific guidelines for licensure and more—that’s where the real work lies. Pave that path successfully, and you can widen your patient base with almost as much accessibility as the telecommunication towers that make FDA-compliant telehealth possible. Compliance with Dietary Supplement and Off-Label Therapy Regulations Dietary supplements and off-label therapies are often recommended by functional medicine providers. Both of these categories of health products are regulated by the federal government and by most state governments. However, the regulatory path to the marketplace is very different for supplements and for off-label therapies. Supplements are deemed foods by the federal government. Off-label therapies are deemed drugs. Both are recommended and used by functional medicine providers. So, let’s take a look at the two and their respective regulatory guises in a little more detail. Practitioners should tell patients when they are recommending therapies that are not used in the way intended—off-label. Patients should know they are using therapies and supplements that are not the usual or typical treatments. The types of information practitioners should tell patients include the following: If a supplement has not been shown in studies to work for the condition the patient has. Whether the supplement has any shown safety concerns. If the clinician has used this supplement with other patients and what happened. Common Legal Risks and Consequences Failure to comply with state licensing, scope-of-practice laws, or informed consent standards can lead to disciplinary actions, fines, and complaints from patients. Among the most prevalent legal risks are: Violations of the Scope of Practice can result in fines, suspension of licenses, and other disciplinary measures. Insufficient Informed Consent: If patients are not adequately informed about their treatment choices, they may lodge complaints or take legal action against their healthcare providers. Licensing Problems: Not getting the right licenses can lead to losing licenses or being limited in accessing telemedicine. Violating FDA supplement regulations occurs when health claims about dietary supplements are made without verification. This problem can result in warning letters and harm to the company’s reputation. For functional medicine providers to sidestep potential legal trouble and provide top-notch care, they must comply with licensing, scope-of-practice regulations, and informed consent guidelines. These legal frameworks exist not to bind practitioners but to ensure that patients are cared for safely, effectively, and ethically.
March 1, 2025
Healthcare
Compliance Tips for Nutritional Supplement Companies: Navigating FDA and FTC Regulations
Nutritional supplements are becoming big business, but sellers of these products must follow the law if they wish to operate without interference. The Food and Drug Administration (FDA) and the Federal Trade Commission (FTC) regulate the marketing of nutritional supplements. The two agencies have a set of rules, laws, and guidelines that they expect those in the business of selling supplements to follow. This article is an overview of what those rules are and what happens if you don’t follow them. Key Compliance Requirements for Nutritional Supplement Companies The dietary supplement industry has unique regulatory issues because of the stringent FDA and FTC standards it must meet. This document outlines essential steps necessary for maintaining compliance in this complex, paper-based realm. 1. Adhering to FDA Labeling and Ingredient Disclosure Requirements All labels on dietary supplements must be accurate and complete, according to the FDA. This ensures that consumers know what is in a product and how it is supposed to function. Accurate Ingredient Labeling: The FDA requires that all ingredient lists on supplement labels be in descending order by weight. For clarity, each ingredient must be identified with its common name. Supplement Facts Panel: Every product that is a supplement must contain a Supplement Facts panel. This panel tells you the serving size for the product, the amount per serving, and the % Daily Value for each nutrient, if they have established a value. The panel’s presence is about more than just following rules; it’s about helping consumers make choices. Caution Statements: Some ingredients found in dietary supplements, such as iron, carry health risks and require that warnings be placed on the product label. Ensure that any necessary warning statements are visible and legible to the consumer. An FDA action was faced by a supplement company for an inaccurate label that failed to include certain ingredients. The company avoided problems in the future by updating its label to meet the FDA’s requirements. Key Action: Verify that all supplementary materials contain precise ingredient lists; a complete and informative Supplement Facts panel; and any and all precautionary statements that are required to keep consumers safe. 2. Making Compliant Health Claims in Supplement Advertising Prompted by public complaints, the FTC investigates potentially deceptive advertising. When the FTC seeks an injunction against an advertiser, it must prove that the advertising is misleading. The advertisers can then defend their claims. If the FTC wins, substantial penalties can follow. Differentiating Structure-Function Claims from Disease Claims: How a nutrient supports normal body functions is what the nutrient claim is all about. For example, many of the dietary supplements on the market today make claims like “supports healthy immune function.” These days, you won’t find many dietary supplements on the market making the good old-fashioned “cure”-related claims of the past. And that’s just as well, since most “cure” claims that were made in the past, such as the “cure” for “rheumatism,” in the 1960s, or the “cure” for “bad nerves,” in the 1950s, were not supported by solid scientific evidence. Substantiating Claims with Scientific Evidence: Reliable scientific evidence must support all health claims, and in most instances, this means clinical studies. The FTC does not look kindly on health claims that are propped up by anecdotal evidence or that consist of no evidence at all. Avoiding Misleading Testimonials: Consumer experiences must be used as the basis for writing testimonials. Those written on the basis of experiences of atypical results must carry a disclaimer to clarify that results can and do vary from person to person. Indeed, the use of the word “guaranteed” in any testimonial is a definite no-no. Case Study: A nutritional supplement firm was warned by the FTC for using testimonials that suggested unreal results. The company sidestepped any further trouble by rewriting the testimonials to reflect “typical” experiences. For more on the FTC’s guidelines concerning health claims, visit. Key Action: Only use health claims that are substantiated by science and make sure that any testimonials you use meet the guidelines set by the Federal Trade Commission. 3. Ensuring Ingredient Safety and Compliance with FDA’s cGMP Standards Manufacturers of nutritional supplements must comply with the FDA’s Current Good Manufacturing Practice (cGMP) standards to ensure that the products they make are safe and of high quality. cGMP Requirements for Supplement Manufacturing: The cGMP quality standards cover all aspects of the life of a dietary supplement from the very beginning—when the ingredients are being sourced—to the very end—when the supplement is ready for people to take. At each stage from sourcing to production, there is quality control. And with cGMPs, nothing is taken for granted. Manufacturers are required to document and to verify that what is supposed to happen at each step does indeed happen. If you want to know more about cGMPs, a good place to start is the FDA’s own explanation at the link given. Testing for Ingredient Purity and Potency: Regular testing of raw materials and finished products is a must for manufacturers to verify ingredient purity and potency. Testing is necessary to make sure that what goes into products and the products themselves are free from any and all harmful contaminants. Testing is also necessary to verify that manufacturers are making only the label claims that they are allowed to make. Quality Assurance and Record-Keeping: Keeping cGMP compliance is all about documentation. Maintain detailed records of every batch—production dates, ingredient sources, quality tests—that support traceability from finished product back to individual raw materials. A dietary supplement manufacturer was penalized for not conforming to the FDA’s current good manufacturing practices (cGMPs), which led to the recall of its products. The company bore the brunt of this cGMP penalty, and we presume it did what most of us would do when recovering from a penalty: It built a quality assurance (QA) system. Regardless of the state of its QA system before the penalty, the company today complies with the cGMPs and is now presumably maintaining a state of control in its quality department. Key Action: Adhere to cGMP standards for all manufacturing processes. This includes testing of all ingredients and ensuring quality control throughout the entire system. 4. Complying with FDA and FTC Requirements for Supplement Marketing The marketing of supplements is regulated by both the FDA and the FTC. Their shared concerns? Truthful representation. Transparent labeling. Accurate information for consumers. Avoiding Disease Claims in Marketing: Unless they are FDA-approved as drugs, supplements cannot make disease claims. You should be making structure-function claims that tell the audience what the supplement is doing in normal, healthy people—that is, in the kind of people who would be taking your supplements. If you want to know what the FDA thinks a supplement can claim, go to the website of the FDA. Using Qualified Health Claims Carefully: Health claims that are qualified need a disclaimer that describes the level of scientific support for the claim. Be careful with these, as they require evaluation by the FDA (and sometimes the FTC) and can be complex to implement correctly. Disclosing Material Connections: The FTC mandates that companies reveal any significant connections—like payments or complimentary products—when they utilize endorsements or testimonials in their marketing. Clear and upfront disclosure preserves the vital element of consumer trust. A warning from the FTC was issued to a supplement company for making health claims on its website that were not approved. The company still operates and now complies with the FTC’s guidance on making health claims. According to the FTC, when making health-related claims, the standard for the supplements is that they not only have to work but also be safe. If the company makes a structure claim, the way it works should be in line with what science has shown. If the company makes a health claim, the supplement should not have serious side effects or any effects that outweigh the benefits. Key Action: Do not make disease claims, use health claims that are not misleading and that qualify your statements, and disclose any material connections you have in endorsements. Common Legal Risks and Penalties for Supplement Non-Compliance Failing to comply with FDA and FTC standards can result in penalties, product recalls, and damage to one’s reputation. For more information on FDA and FTC compliance for nutritional supplements, see: FDA Dietary Supplement Labeling Guide FDA cGMP Requirements FTC Health Claims Guidance Compliance with FDA and FTC regulations is necessary for brands in the nutritional supplement sector to safeguard their identity and prevent regulatory scrutiny. Adhering to the standards set for labeling and advertising, as well as following the good manufacturing practices laid out by the FDA, allows supplement companies to compete with confidence and without legal threat in a largely unregulated marketplace.
February 15, 2025
Healthcare
Marketing Cosmetics Safely: FDA Compliance Tips for Cosmetic Companies
The cosmetics industry is highly competitive, with new products constantly entering the market. However, cosmetics companies must comply with FDA regulations to avoid enforcement actions related to misbranding, unsafe ingredients, and misleading claims. This guide covers essential FDA compliance tips to help cosmetic companies market their products safely and legally. Key FDA Compliance Requirements for Cosmetic Companies FDA compliance in cosmetics focuses on proper labeling, avoiding drug claims, and ensuring ingredient safety. Below are essential steps for staying compliant and protecting your brand. 1. Proper Labeling for Cosmetic Products Accurate labeling is a critical compliance area for cosmetics companies. Improper labeling can result in products being classified as “misbranded,” leading to enforcement actions from the FDA. Statement of Identity: Every cosmetic product label must include a statement of identity that clearly describes the nature of the product. This helps consumers understand what they are purchasing. See FDA’s full labeling guidelines. Ingredient List: Cosmetics labels must list all ingredients in descending order of predominance. Ingredients must be listed by their common names to ensure transparency for consumers and avoid misbranding. Warning Labels: Certain cosmetic products, like those containing alpha hydroxy acids (AHAs), may require warning labels about potential risks. Label warnings help educate consumers on safe use. Case Study: A cosmetics company received a warning letter for failing to include an ingredient list on its product packaging. By updating labels to meet FDA guidelines, the company avoided further enforcement actions. See a guide on cosmetics labeling. Key Action: Ensure all cosmetic product labels include a statement of identity, complete ingredient list, and warnings where necessary. 2. Avoiding Drug Claims in Cosmetic Marketing The FDA defines cosmetics as products intended to beautify or cleanse, whereas drugs are products intended to treat or prevent disease. Making drug claims in cosmetic marketing can result in the product being classified as a drug, subject to additional regulations. Understanding Drug vs. Cosmetic Claims: Claims that a product “reduces wrinkles” or “heals acne” are considered drug claims, as they imply treatment or prevention of a condition. For example, saying a product “promotes healthy skin” is generally acceptable, while “treats eczema” is not. For guidance on cosmetic claims, visit this page. Using Structure-Function Claims: Structure-function claims describe how a product supports the structure or function of the body without implying treatment. For instance, “moisturizes skin” is a structure-function claim that does not cross into drug territory. Reviewing Marketing Language: Regularly review product descriptions, advertisements, and social media posts to ensure that claims do not imply drug functions. This minimizes the risk of FDA enforcement. Example: A skincare brand avoided FDA scrutiny by carefully reviewing marketing language to eliminate drug claims, instead focusing on benefits like “promotes radiant skin.” See more cosmetic claims. Key Action: Avoid drug claims in cosmetic marketing, and focus on structure-function claims to stay within FDA regulations. 3. Ensuring Ingredient Safety and FDA Compliance Cosmetic companies are responsible for ensuring the safety of their products and ingredients. The FDA does not pre-approve cosmetics, so companies must verify ingredient safety before marketing. FDA’s Voluntary Cosmetic Registration Program (VCRP): Although not mandatory, companies can participate in the VCRP to provide the FDA with information on products and ingredients used. The VCRP helps companies demonstrate commitment to safety. Prohibited and Restricted Ingredients: The FDA restricts certain ingredients, like mercury compounds, in cosmetic products due to safety concerns. Review the FDA’s list of prohibited and restricted ingredients to ensure compliance. Safety Testing and Documentation: Conduct safety testing on new products, particularly if they contain novel ingredients. Document all safety assessments and testing results to demonstrate compliance in case of FDA inquiries. Case Study: A cosmetics company conducted safety testing on a new product containing botanical extracts, documenting results to ensure compliance. See the list of prohibited ingredients. Key Action: Verify that all ingredients comply with FDA restrictions and consider participating in the VCRP to support product safety. 4. Compliant Advertising and Social Media Claims Marketing for cosmetics must comply with both FDA and FTC standards to avoid misleading claims and consumer complaints. Be cautious with claims on websites, social media, and other promotional materials. FTC Requirements for Truthful Advertising: The FTC requires that all advertisements be truthful, non-deceptive, and substantiated. Avoid exaggerated claims and ensure that all product benefits are backed by evidence. Social Media Disclosures: Influencers and endorsers must disclose any material connections to the brand, such as sponsorship or free products. Failure to disclose can result in FTC action. Use of Before-and-After Photos: Ensure that any before-and-after photos accurately represent typical results. Misleading or altered photos can attract both FDA and FTC scrutiny. Example: A cosmetics brand used social media influencers to promote a new product, ensuring that all posts included clear sponsorship disclosures. See FTC guidelines on advertising. Key Action: Ensure all advertising and social media claims are truthful, supported by evidence, and meet FTC requirements. Common Legal Risks and Penalties for Cosmetic Non-Compliance Non-compliance with FDA or FTC standards can lead to significant penalties, product recalls, and reputational damage. Here’s a breakdown of common risks and potential consequences: Example Penalty Breakdown for Cosmetic Non-Compliance Violation Type Potential Consequences Misbranding (Improper Labeling) Warning letters, product recalls Drug Claims in Marketing Reclassification as a drug, FDA enforcement Unsafe Ingredients Product bans, recalls, liability risks Misleading Advertising FTC fines, mandatory corrective advertising For additional information on FDA and FTC compliance in cosmetics, see these resources: FDA Cosmetics Labeling Guide FDA Cosmetic Claims Guidelines Voluntary Cosmetic Registration Program (VCRP) FDA List of Prohibited Ingredients FTC Advertising FAQs Guide FDA and FTC compliance are essential for cosmetic companies to avoid enforcement risks and protect brand reputation. By meeting labeling, marketing, and ingredient safety requirements, your cosmetic business can thrive in a competitive market.
February 1, 2025
Healthcare
Coaching and Counseling Across State Lines: Legal Compliance for Multistate Wellness Businesses
As coaching and wellness counseling become more popular, many wellness professionals are offering their services across state lines, often through telehealth or virtual sessions. However, providing services across state borders introduces complex legal and regulatory considerations, including licensing, scope of practice, and patient privacy laws. This guide provides essential legal tips for compliance in multistate coaching and counseling services. Key Compliance Considerations for Multistate Coaching and Counseling When offering coaching and counseling services in multiple states, it is crucial to understand state-specific regulations, particularly licensing and scope of practice limitations. Below are important compliance steps for managing a multistate wellness practice. 1. Determining Licensing Requirements for Cross-State Coaching and Counseling Licensing laws vary significantly by state and often depend on the type of service provided. Licensed counseling or therapy requires a state-specific license, while coaching is generally less regulated but still subject to state laws. Licensing for Mental Health Professionals: Mental health counselors, therapists, and psychologists typically must be licensed in the state where the client resides. Exemptions for Coaching: Coaching services that focus on personal development rather than mental health may not require a license in most states. However, some states may regulate certain coaching activities if they overlap with licensed therapy practices. Interstate Licensure Compacts: Certain professions, like counseling and psychology, are exploring licensure compacts that facilitate cross-state practice. The Psychology Interjurisdictional Compact (PSYPACT) allows psychologists to provide telepsychology services across participating states. Example: A psychologist used PSYPACT to offer telepsychology services in multiple states, ensuring compliance without obtaining individual state licenses. See more on PSYPACT. Key Action: Review licensing requirements in each state where clients are located, and consider compacts like PSYPACT for expanded practice options. 2. Staying Within Scope of Practice for Coaching vs. Counseling Coaching and counseling have distinct scopes of practice, and staying within these boundaries is essential to avoid legal risks. Counseling or therapy involves mental health treatment, while coaching generally focuses on goal-setting and personal growth. Defining Scope of Practice: Coaching services must avoid diagnostic or therapeutic language associated with mental health treatment to avoid violating licensing laws. For example, using terms like “depression” or “anxiety” may cross into therapy. Avoiding Dual Roles: If a licensed counselor also offers coaching, they should clearly separate the two services to avoid confusion or licensing issues. Mixing coaching with licensed therapy can blur the lines and lead to regulatory concerns. Documenting Service Types: Maintain separate documentation and contracts for coaching and counseling services. Use disclaimers in coaching agreements to clarify that coaching does not substitute for therapy or mental health care. Case Study: A licensed counselor who also offered life coaching created separate service agreements for each to clarify roles and maintain compliance. Key Action: Define the scope of your coaching services carefully and avoid crossing into counseling or therapy without appropriate licensure. 3. Protecting Client Privacy and HIPAA Compliance Client privacy is essential in coaching and counseling, especially when using virtual platforms. While HIPAA applies to mental health counseling, it may not apply to coaching, depending on the service type. HIPAA for Licensed Counseling: Licensed mental health professionals must comply with HIPAA when handling Protected Health Information (PHI). Use HIPAA-compliant telehealth platforms to protect client data. Client Consent for Virtual Coaching: While coaching may not require HIPAA compliance, it’s still important to secure client consent for using virtual platforms. Include privacy disclaimers in your coaching agreements, especially if sensitive information is discussed. Data Security for Coaching Platforms: Even if not HIPAA-regulated, consider using secure platforms with encryption to protect client data. This helps build trust and ensures data security across all client interactions. Case Study: A wellness coach offering virtual sessions used a HIPAA-compliant platform, building client trust and ensuring secure communication. See HIPAA privacy resource. Key Action: Use HIPAA-compliant platforms for counseling and secure virtual tools for coaching to protect client privacy. 4. Compliant Advertising and Marketing for Coaching and Counseling Services Marketing coaching and counseling services across state lines requires adherence to advertising standards set by the FTC and state laws. Ensure that all claims are accurate and supported by evidence. Avoiding Misleading Claims: Avoid claims that suggest coaching or counseling services can “cure” or “treat” mental health conditions. Use general language that highlights personal growth and self-improvement rather than therapeutic outcomes. See FTC advertising guidelines. Using Testimonials Responsibly: The FTC requires that testimonials represent typical client experiences. Avoid exaggerated claims in testimonials, and disclose any material connections with endorsers or affiliates. Clear Service Descriptions: Describe coaching and counseling services clearly on your website and marketing materials. Avoid using terms that imply mental health treatment unless licensed to provide it. Example: A life coach received an FTC warning for advertising services as a “cure for anxiety.” By revising marketing language to focus on “personal growth,” the coach complied with advertising standards. See FTC’s guidance on advertising claims. Key Action: Avoid making therapeutic claims in coaching marketing materials, and ensure that all testimonials and descriptions are truthful. Common Legal Risks and Penalties for Multistate Coaching and Counseling Non-Compliance Non-compliance in multistate coaching and counseling can lead to regulatory penalties, licensing issues, and client trust issues. Here’s a breakdown of common risks and potential consequences: Example Penalty Breakdown for Multistate Coaching and Counseling Non-Compliance Violation Type Potential Consequences Licensing Violations Fines, cease-and-desist orders, disciplinary action Scope of Practice Violations Regulatory scrutiny, licensing penalties HIPAA and Privacy Violations OCR fines, reputational damage Misleading Marketing Claims FTC fines, required advertising corrections For additional resources on compliance in coaching and counseling, explore these links: ASPPB State Licensing Information Psychology Interjurisdictional Compact (PSYPACT) HIPAA Privacy Rule Overview NBCC Code of Ethics FTC Advertising Guide Operating a coaching or counseling practice across state lines involves navigating complex regulations to ensure compliance. By meeting licensing, scope of practice, privacy, and advertising standards, your wellness business can grow while avoiding legal pitfalls.
January 22, 2025
Healthcare
Functional and Integrative Medicine: Compliance Essentials for Your Practice
Functional and integrative medicine practices offer holistic care and personalized treatment plans, focusing on patient-centered approaches. However, compliance is crucial, particularly because these practices operate at the intersection of traditional and alternative medicine. From licensing to scope of practice, this guide explores compliance essentials that integrative and functional medicine practitioners need to know to avoid regulatory risks and operate legally. Key Compliance Considerations for Functional and Integrative Medicine Practices Functional and integrative medicine practices face unique regulatory requirements, including licensing, patient privacy, and advertising standards. Below are essential compliance steps to help these practices operate within legal boundaries. 1. Ensuring Proper Licensing for Functional and Integrative Medicine Providers Licensing for functional and integrative medicine providers varies by state and may require additional or specific credentials, depending on the types of treatments offered. State Licensing Requirements: Each state has unique licensing requirements that vary based on the practitioner’s background, whether they are MDs, DOs, NDs, or other healthcare professionals. See the list of state-specific licensing boards. Additional Certifications for Alternative Therapies: Practitioners offering alternative therapies, such as acupuncture or naturopathy, may need additional certifications. Some states require separate licenses for non-traditional treatments. Research your state’s licensing requirements carefully. Interstate Practice Considerations: Functional and integrative medicine practitioners looking to provide telemedicine or cross-border care should verify licensing requirements for each state they plan to serve. Certain states may require practitioners to hold an in-state license for telemedicine services. For more on telemedicine licensing, see the IMLC website. Example: A naturopathic doctor offering telehealth services across multiple states verified licensing requirements through the Interstate Medical Licensure Compact to ensure compliance. For more information on the compact, see the IMLC website. Key Action: Verify licensing requirements for each state in which you practice and obtain any additional certifications required for alternative therapies. 2. Adhering to Scope of Practice Laws Scope of practice laws dictate what treatments and services a healthcare provider can offer based on their professional license. Integrative and functional medicine practitioners must comply with these laws to avoid penalties. State-Specific Scope of Practice: Each state defines what medical professionals can and cannot do based on their license type. Functional and integrative medicine practitioners should understand the boundaries of their scope to avoid disciplinary actions. See the scope of practice guidelines. Limits on Prescription Authority: In many states, non-MD/DO practitioners, such as naturopaths, may have limited or no prescription authority. Practitioners must comply with state-specific rules on prescribing medications or recommending supplements. Delegation and Supervision: Some states allow healthcare providers to delegate certain tasks to support staff under supervision, while others restrict these activities. Ensure that delegated tasks fall within legal boundaries, especially when involving alternative treatments. Case Study: An integrative medicine practitioner exceeded their scope of practice by administering IV therapy without proper credentials, resulting in fines. After aligning their services with scope of practice regulations, the practitioner operated compliantly. See more on scope of practice. Key Action: Review your state’s scope of practice laws to ensure that each service offered aligns with your professional license. 3. Protecting Patient Privacy Under HIPAA and State Laws HIPAA and state privacy laws protect patient health information and apply to all healthcare practices, including integrative and functional medicine. Complying with these laws is essential to avoid penalties and maintain patient trust. HIPAA Compliance for Patient Data: HIPAA requires all healthcare providers to secure Protected Health Information (PHI) through administrative, physical, and technical safeguards. For HIPAA guidelines. Patient Consent for Alternative Treatments: Many states require informed consent for alternative treatments, where patients must understand the risks and benefits of non-traditional therapies. Consent forms should be stored securely. Telemedicine Privacy Compliance: Integrative and functional medicine practitioners offering telemedicine services must ensure their technology meets HIPAA standards for data protection, including encryption and secure login measures. Case Study: An integrative medicine provider offering telemedicine consultations implemented a HIPAA-compliant video platform and informed consent forms for alternative treatments, avoiding privacy-related fines. See HIPAA compliance resources. Key Action: Use HIPAA-compliant platforms and implement informed consent protocols to protect patient privacy and comply with legal requirements. 4. Advertising and Marketing Compliance for Functional Medicine Practices The FDA and FTC enforce rules on advertising and marketing for healthcare practices, including functional and integrative medicine. All claims must be truthful and substantiated to avoid regulatory action. Avoiding Misleading Health Claims: Functional medicine practices should avoid making claims that imply treatment or cure for diseases, as these can attract FDA scrutiny. Instead, focus on general wellness benefits and be transparent about services offered. See FDA’s guidance on advertising. Using Structure-Function Claims: Structure-function claims describe how a supplement or therapy supports body function without implying treatment. For example, “supports immune health” is permissible, while “prevents colds” is not. Complying with FTC Guidelines: The FTC requires that all health-related claims be substantiated by scientific evidence. Practices should ensure that any testimonials or endorsements accurately reflect typical patient outcomes. Example: A functional medicine clinic received an FTC warning for advertising a supplement as a “cure for chronic fatigue.” By revising their language to focus on general health benefits, the clinic met compliance standards. F Key Action: Avoid disease claims and ensure all marketing materials are truthful, supported by scientific evidence, and compliant with FDA and FTC regulations. Common Legal Risks and Penalties for Functional and Integrative Medicine Non-Compliance Functional and integrative medicine practices that fail to comply with regulations risk fines, disciplinary actions, and reputational damage. Here’s a breakdown of common risks and potential consequences: Example Penalty Breakdown for Non-Compliance in Functional and Integrative Medicine Violation Type Potential Consequences Licensing and Scope of Practice Violations Fines, license suspension, disciplinary actions HIPAA and Privacy Violations OCR penalties, patient trust issues Misleading Advertising Claims FTC fines, required advertising corrections Non-Compliant Telemedicine Practices Regulatory fines, increased scrutiny For more guidance on compliance for functional and integrative medicine, explore these resources: FSMB State Licensure Information Interstate Medical Licensure Compact (IMLC) HIPAA Privacy Rule Overview FDA Health Fraud and Scam Information FTC Advertising Health Claims Guide Functional and integrative medicine practitioners must navigate complex regulations to deliver holistic care legally. By complying with licensing, scope of practice, HIPAA, and advertising guidelines, your practice can operate safely and effectively.
January 15, 2025
Healthcare
The Complete Guide to Healthcare Provider and Facility Licensing and Accreditation
Healthcare providers and facilities are subject to a wide array of licensing and accreditation requirements that vary by state and specialty. Licensing ensures that providers and facilities meet minimum standards for safety and quality, while accreditation often represents a higher level of excellence. Understanding these requirements is essential to avoid costly penalties and ensure high-quality patient care. This guide provides a comprehensive overview of licensing and accreditation essentials for healthcare providers and facilities. Key Licensing and Accreditation Requirements Licensing and accreditation requirements cover different aspects of healthcare practice. Licensing is mandatory, whereas accreditation is often voluntary but can enhance credibility. Here are the primary areas to consider for healthcare providers and facilities. 1. Licensing Healthcare Providers: Ensuring Compliance with State Regulations Healthcare providers, including physicians, nurses, and therapists, must be licensed to practice in each state where they operate. Licensing boards ensure that professionals meet the standards necessary for patient safety and quality care. State Licensing Boards: Each state has specific licensing boards responsible for credentialing healthcare providers, including medical, nursing, and allied health boards. Continuing Education and Renewals: Most states require providers to complete continuing education credits to maintain their licenses. Renewal periods and continuing education requirements vary by profession and state. Interstate Licensing Compacts: Certain professions, like medicine and nursing, participate in interstate compacts allowing providers to practice in multiple states. For more information on the Nurse Licensure Compact, visit this site. Example: A nurse practitioner used the Nurse Licensure Compact (NLC) to practice in several states without needing separate licenses, streamlining her ability to provide telehealth services across state lines. Key Action: Verify state licensing requirements for your healthcare profession, and ensure licenses are current and compliant with state regulations. 2. Facility Licensing for Healthcare Operations Healthcare facilities, including hospitals, clinics, and laboratories, must be licensed to operate legally. Facility licensing requirements vary by state and facility type and are essential for ensuring patient safety and quality care. State Health Departments: Most state health departments regulate healthcare facility licensing, covering safety standards, staff qualifications, and infection control. For facility licensing standards, visit this page. Certificate of Need (CON) Requirements: Some states require a Certificate of Need (CON) for establishing new healthcare facilities or expanding existing ones. This aims to prevent oversupply of healthcare services in certain areas. For more on CON regulations, visit this page. Specialty Facility Licenses: Certain healthcare facilities, such as ambulatory surgery centers or long-term care facilities, may require specialty licenses based on the services provided. Case Study: A new hospital in a state with a Certificate of Need law faced delays due to the CON process. By meeting state requirements, the hospital gained the necessary approval to open its facility. Key Action: Ensure your facility meets state licensing standards and check for any CON requirements if expanding or establishing a new facility. 3. Accreditation for Healthcare Providers and Facilities: Voluntary but Valuable Accreditation by recognized bodies, such as The Joint Commission or CARF, is often voluntary but adds value by demonstrating high standards in healthcare quality and patient safety. The Joint Commission: This organization accredits a wide range of healthcare facilities, including hospitals and surgery centers, based on rigorous quality and safety standards. Accredited facilities often meet or exceed licensing requirements. CARF International: CARF accredits rehabilitation and behavioral health facilities, focusing on patient-centered care and evidence-based practices. CARF accreditation enhances reputation and operational effectiveness. Benefits of Accreditation: Accreditation can improve patient trust, streamline processes, and in some cases, enable reimbursement from insurers. It provides an objective review of quality and operational standards that go beyond state licensing requirements. Example: A behavioral health facility achieved CARF accreditation, which boosted patient trust and facilitated reimbursement from insurers. Key Action: Consider voluntary accreditation to enhance facility credibility, improve quality standards, and potentially secure higher reimbursement rates. 4. Differences Between Licensing and Accreditation Licensing and accreditation serve different but complementary roles in healthcare. Licensing is a legal requirement for operating, while accreditation is often pursued to demonstrate excellence beyond the minimum standards. Mandatory Nature of Licensing: Licensing is legally required and focuses on meeting baseline standards for safety, professionalism, and quality. Failure to maintain licensing can result in fines, closures, or revocation of permission to operate. For more on licensing requirements, see this page. Accreditation as a Voluntary Quality Indicator: Accreditation is not mandatory, but it signals a commitment to high-quality care and often aligns with industry best practices. Accredited facilities are reviewed regularly to ensure they meet rigorous standards. Reimbursement and Patient Trust: While licensing is essential for basic operation, accreditation can help build patient trust and may be required by certain payers for reimbursement. Facilities may find that accreditation leads to better patient outcomes and improved operational efficiency. Example: A hospital maintained both state licensure and Joint Commission accreditation, which reassured patients of its commitment to high standards and facilitated insurance reimbursements. Key Action: Maintain required licensing for legal operation and consider accreditation to enhance credibility and attract patients and payers. Common Legal Risks and Penalties for Non-Compliance in Licensing and Accreditation Failure to comply with licensing or accreditation standards can lead to penalties, reputational damage, and operational disruptions. Here’s a breakdown of common risks and potential consequences: Example Penalty Breakdown for Licensing and Accreditation Non-Compliance Violation Type Potential Consequences Licensing Violations Fines, facility closure, loss of operating license Accreditation Failures Loss of payer contracts, reputational harm CON Requirements Non-Compliance Delays, legal penalties, inability to expand Failure to Meet Safety Standards Increased scrutiny, mandatory corrective actions For additional information on licensing and accreditation requirements, explore these resources: FSMB State Licensure Information Nurse Licensure Compact Information CDC State Health Department Directory Certificate of Need (CON) State Laws The Joint Commission CARF International Accreditation Licensing and accreditation are foundational for healthcare providers and facilities, ensuring compliance with state laws and quality standards. By meeting licensing requirements and pursuing accreditation, your practice or facility can operate legally while demonstrating a commitment to quality and patient safety.
January 8, 2025
Healthcare
How to Structure Your Medical Spa with Professional Medical Corporations and MSOs
The rapid growth of the medical spa industry has led to an increase in regulatory scrutiny. Structuring a medical spa within compliant ownership models—such as Professional Medical Corporations (PMCs) and Management Services Organizations (MSOs)—is essential for legal operation. This guide explains how to legally structure a medical spa, including key considerations for ownership, control, and state-specific regulations. Key Components of Structuring a Medical Spa Structuring a compliant medical spa involves understanding scope-of-practice laws, corporate structure options, and management agreements. Below are practical strategies to ensure your medical spa aligns with state laws and operates within a legal framework. 1. Understanding the Corporate Practice of Medicine (CPOM) Doctrine The Corporate Practice of Medicine (CPOM) doctrine restricts non-licensed individuals and entities from owning or controlling medical practices in many states. For medical spas, this means only licensed professionals can own and operate medical services. CPOM Restrictions and State Variations: Each state has specific CPOM rules dictating who can own and control a medical spa. California, for example, enforces strict CPOM laws requiring licensed medical professionals to hold majority ownership. See California’s CPOM laws. Physician Ownership and Oversight: Medical procedures offered at medical spas, such as injectables and IV hydration, are considered medical services in many states. This means a physician or similarly licensed professional must oversee and potentially own the medical aspect of the spa to comply with CPOM rules. Avoiding CPOM Violations: Non-licensed business owners can face penalties if they control or influence medical decisions in a CPOM-regulated state. It’s essential to understand state-specific rules to avoid fines or forced restructuring. Case Study: A medical spa in California, owned by a non-physician, faced regulatory penalties for CPOM violations. The business restructured by establishing a physician-owned PMC to comply with California’s CPOM laws. See CPOM regulations. Key Action: Verify CPOM requirements in your state and structure ownership to ensure that only licensed professionals control the medical aspects of the spa. 2. Establishing a Professional Medical Corporation (PMC) for Medical Services A Professional Medical Corporation (PMC) is a corporation owned by licensed medical professionals that can legally deliver medical services. Structuring the medical component of a spa as a PMC helps ensure compliance with state laws. PMC Ownership Requirements: In states with CPOM laws, PMCs must be owned primarily by physicians or other licensed healthcare providers. Some states, like California, allow physicians to hold a minimum of 51% ownership in a PMC while permitting certain other licensed professionals to own the remaining 49%. Role of Physicians in PMCs: Physicians in PMCs must maintain control over clinical decisions, while administrative and non-medical functions may be handled by other entities, such as MSOs. This ensures that medical decisions remain under licensed supervision. Compliance with State Corporate Requirements: States like California have specific requirements regarding PMC ownership and operations. These requirements often prohibit non-medical professionals from having any control over patient care or clinical protocols. Case Study: A medical spa in California structured its operations as a PMC with a physician holding the majority share. This model complied with state CPOM laws, allowing the spa to offer medical services legally. See guidance on California PMC structures. Key Action: If your medical spa provides medical services, establish a PMC owned by licensed professionals to comply with CPOM laws. 3. Implementing a Management Services Organization (MSO) Model The Management Services Organization (MSO) model allows non-physicians to manage non-clinical aspects of a medical spa, such as administration, marketing, and billing, while the PMC handles medical services. How the MSO Model Works: An MSO handles the business side of the spa, while the PMC, owned by licensed medical professionals, delivers medical treatments. This model enables non-physicians to invest in the business without violating CPOM laws. Drafting a Comprehensive MSO Agreement: MSO agreements should clearly define the division of responsibilities between the PMC and the MSO. The MSO can handle all non-medical services, including human resources, facilities, and general operations, without interfering in clinical decision-making. Benefits of the MSO Model: The MSO model provides flexibility for non-physicians to invest in the medical spa and manage business operations, while ensuring that licensed professionals retain control over medical care. Proper MSO structuring helps avoid CPOM violations. Example: A medical spa in Texas used an MSO to handle administration and marketing while a physician-owned PMC managed clinical services. This structure allowed non-medical investors to participate without compromising legal compliance. See more on MSO models. Key Action: Create an MSO agreement to manage non-clinical operations and separate medical decision-making from administrative functions. 4. Addressing Regulatory Compliance for Medical Spa Operations Operating a medical spa requires adherence to a range of regulatory standards, from scope-of-practice rules to patient safety protocols. Ensuring Scope of Practice Compliance: Each treatment offered at a medical spa, such as Botox or IV therapy, falls within a specific scope of practice, which can only be performed by appropriately licensed professionals. Patient Safety and Informed Consent: Medical spas must implement patient safety protocols and provide informed consent forms for all treatments. These forms should outline the potential risks, benefits, and limitations of each treatment. Advertising and Marketing Standards: Medical spas must comply with FTC guidelines on advertising to avoid making misleading claims about results. Be cautious with language, and ensure that all claims are substantiated and accurately represent the services provided. Example: A medical spa faced scrutiny for offering services beyond its licensed scope. By revising protocols and ensuring that licensed professionals performed each procedure, the spa avoided penalties and achieved compliance. Key Action: Adhere to scope-of-practice, informed consent, and advertising standards to ensure regulatory compliance and patient safety. Common Legal Risks and Penalties for Non-Compliance in Medical Spa Structuring Improper structuring and non-compliance in medical spas can lead to severe legal consequences. Here’s a breakdown of common risks and potential penalties: Example Penalty Breakdown for Medical Spa Structuring Non-Compliance Violation Type Potential Consequences CPOM Violations Fines, restructuring mandates, cease-and-desist orders Scope of Practice Violations Licensing board sanctions, penalties Inadequate MSO Agreements Legal disputes, regulatory scrutiny Misleading Marketing Claims FTC fines, corrective advertising requirements For more information on structuring a compliant medical spa, explore these resources: California Corporate Practice of Medicine Laws MSO Structuring Tips: FSMB State Licensure Information AMA Informed Consent Guidelines FTC Advertising Guide Structuring a medical spa using PMCs and MSOs is essential for compliance, ensuring that licensed professionals control medical services while allowing non-physicians to manage business operations. By aligning your structure with CPOM laws, scope-of-practice rules, and MSO agreements, your medical spa can operate legally and profitably.
December 22, 2024
Healthcare
Medical Spas and Aesthetic Clinics: Key Legal Insights for Safe and Compliant Operations
The popularity of medical spas has soared, offering clients advanced treatments like IV hydration, injectables, and aesthetic enhancements. However, medical spas operate within a highly regulated landscape. Compliance with scope-of-practice laws, corporate structure regulations, and advertising standards is essential to avoid enforcement actions. This guide provides key legal insights to help medical spas operate safely and legally, balancing innovation with compliance. Key Legal Considerations for Medical Spa Compliance Medical spas face distinct regulatory requirements, especially when it comes to ownership, licensing, and patient safety. Below are practical tips to help your medical spa remain compliant and thrive in this competitive industry. 1. Understanding Scope of Practice for Medical Spa Treatments The scope of practice for services like IV hydration and injectables varies by state, with strict regulations regarding who can administer certain treatments. Compliance with these rules is essential for safe, legal operations. Licensed Medical Professionals: Most states require that medical procedures like injectables and IV hydration be performed or supervised by licensed medical professionals, such as physicians, nurse practitioners, or physician assistants. Check your state’s specific scope-of-practice laws to ensure compliance. Delegation and Supervision: In states where delegation is allowed, ensure that appropriate supervision is provided and that staff are trained for each service offered. Some treatments may require direct physician oversight, especially when IV therapy or prescription-based injectables are involved. Liability Considerations: Medical spas should carry liability insurance that covers treatments offered. Non-compliance with scope of practice can lead to disciplinary actions, fines, or potential malpractice claims. Example: A medical spa in California faced penalties for allowing unlicensed staff to administer injectables without physician supervision. After adjusting their protocols to ensure licensed staff performed these services, the spa achieved compliance. See California-specific scope of practice rules. Key Action: Verify that only licensed professionals perform medical treatments and that necessary supervision is in place. 2. Structuring Your Medical Spa with Professional Medical Corporations and MSOs Structuring your medical spa within legal ownership models is essential to remain compliant. Professional Medical Corporations (PMCs) and Management Services Organizations (MSOs) offer models for operating legally while allowing non-physicians to invest in the business. Professional Medical Corporations (PMCs): Many states, including California, mandate that only licensed medical professionals own medical corporations. In these states, a physician must own a majority stake in the PMC. See California’s specific rules, refer to the Moscone-Knox Act. Management Services Organizations (MSOs): MSOs allow non-physicians to manage non-clinical aspects, including marketing, administration, and billing. This model is often used by med spas to separate the clinical and business sides of the practice. Compliance with State Corporate Practice of Medicine (CPOM) Laws: States with CPOM laws prohibit non-licensed individuals or companies from owning or controlling medical practices. Ensure your spa’s ownership model aligns with your state’s CPOM rules. Case Study: A California-based med spa operated as an MSO, with a physician-owned PMC delivering all medical services. This structure aligned with California’s CPOM laws, allowing the business to legally offer IV hydration and aesthetic treatments. See a summary of CPOM laws. Key Action: Structure your medical spa as a PMC and/or MSO based on state CPOM requirements. 3. Patient Safety Protocols and Standard Operating Procedures (SOPs) To provide high-quality care, medical spas must implement SOPs that focus on patient safety and risk management, especially for invasive procedures. Informed Consent: Patients should receive a clear informed consent form for each treatment, outlining potential risks and expected outcomes. Consent forms should be signed before any procedure, particularly for treatments like injectables or IV hydration. Sterilization and Infection Control: All equipment should be sterilized according to healthcare standards, and infection control procedures should be followed meticulously. Failure to maintain a sterile environment can lead to health department inspections and penalties. Emergency Preparedness: Staff should be trained in emergency response protocols, including recognizing and managing adverse reactions to treatments. Emergency equipment, such as oxygen tanks and epinephrine, should be readily available. Example: A medical spa faced a client complaint due to an adverse reaction from an injectable treatment. By updating emergency protocols and enhancing staff training, the spa improved patient safety and maintained compliance. See patient safety standards. Key Action: Develop SOPs that emphasize patient safety, infection control, and emergency preparedness. 4. Compliant Marketing and Advertising for Medical Spas Marketing for medical spas must comply with FTC and state advertising standards to avoid misleading claims. Clear, accurate marketing promotes patient trust and reduces regulatory risk. Truthful Advertising and Avoiding Guarantees: Avoid claims that guarantee results or suggest the ability to cure medical conditions. Focus on describing wellness benefits in general terms, such as “supports hydration” or “promotes wellness.” Visit FTC advertising guidance. Use of Testimonials and Social Media: Be cautious with testimonials and social media promotions. The FTC requires that all testimonials reflect typical outcomes, and influencers must disclose any material connections with the spa. Disclaimers in Digital Marketing: Use disclaimers on websites and ads to clarify that your services are wellness-focused and do not replace medical treatment. Disclaimers help manage client expectations and protect the spa legally. Case Study: A medical spa received an FTC warning for advertising guaranteed results. After revising its language and including disclaimers, the spa met compliance standards and minimized future regulatory risk. Visit FTC’s advertising rules. Key Action: Ensure all marketing claims are accurate, substantiated, and include disclaimers to avoid FTC scrutiny. Common Legal Risks and Penalties for Medical Spa Non-Compliance Non-compliance with medical spa regulations can lead to severe penalties. Here’s a breakdown of common risks and potential consequences: Example Penalty Breakdown for Medical Spa Non-Compliance Violation Type Potential Consequences Scope of Practice Violations Fines, license suspension, cease-and-desist orders Misleading Marketing Claims FTC penalties, required advertising corrections Inadequate Patient Safety Protocols Health department inspections, client complaints CPOM Law Violations Regulatory penalties, restructuring requirements For more guidance on operating a compliant medical spa, see the following resources: Moscone-Knox Act: California Corporate Practice of Medicine Laws FTC Health Claims Advertising Guide OSHA’s Guidelines for Infection Control Medical spas must comply with a range of legal requirements to offer safe, professional treatments. By structuring your business correctly, training staff, adhering to scope-of-practice rules, and marketing accurately, your spa can thrive while avoiding regulatory pitfalls.
December 15, 2024
Healthcare
3 Legal Keys to know when Starting an IV Hydration Clinic or Medical Spa
Hi there, are you wanting to start an IV Hydration clinic or a Medical Spa, maybe you wanted to be multi-state or let’s just take one state to showcase, let’s just say, Florida. What are the legal basics that you would need to know? Well, here’s first one. At the moment, there is no single Florida agency that directly and unambiguously regulates IV hydration clinics. The legislature just hasn’t gotten that far. But, that doesn’t mean that an IV hydration clinic is not subject to a host of other existing legal rules. So, for example, think about who’s providing the therapy? Let’s just say it’s a nurse practitioner. Let’s just say the client use a nurse practitioner. So, can you start this IV hydration clinic autonomously? This is actually two different questions. In Florida, the scope of autonomous nursing practice is limited to primary care areas like internal medicine, family practice, pediatrics, geriatrics. The board of nursing has not really further defined the scope of nursing practice to include (or not include) IV hydration clinics. So, our recommendation right now if you’re going to use a nurse practitioner, then the nurse practitioner should have a relationship with a supervising physician in Florida. Now, in some states, this is a collaborative physician, the scope of practice varies by state. And the next question is whether you need what’s called a good faith exam. Currently, Florida does not have this requirement of initial evaluations. But we recommend it because it’s best practice, it can be protective, a regulator might say that you should have one even if it’s not explicitly written into the law. It really sets the foundation for the clinical relationship with the patient which can be protective against potential malpractice as well. The follow-ups can be done via telehealth but if you do the first exam by telehealth, it might violate the standard of care or there might be any number of reasons that regulators could take offense to that kind of procedure. And the only way you are going to know that is by having a bird’s eye view of lots and lots of situations and seeing where people get in trouble, and the rule aren’t always perfectly well delineated. Third, do you need a license? So, Florida has rules about “home infusion therapy.” When you do that, you need a home health agency license. Home infusion therapy is defined as providing IV therapy in a person’s home or residence. So, if you do it in a hotel (unless that’s your home or residence) typically that doesn’t fall within those parameters. What you’re seeing is that a lot of times the law is just silent – it doesn’t say anything so you’re left in-between this gray zone and that means you need legal interpretation from somebody who both knows the law, knows the gaps in the law, and is a veteran, they’ve seen a lot situations and they have practice experience to know what’s going to fly, what’s high-risk, what’s medium-risk. So, those are some cornerstones of IV clinical practice in Florida, again, it varies by state. We just use Florida to give you an example. If you’re going to do something across states, then you really need to understand what the rules of the road are in different places. Testimonials
December 8, 2024
Healthcare
4 Things to Know When Naming a California Professional Medical Corporation
Hi, I’m Michael H Cohen, founding attorney of Cohen Healthcare Law Group. In today’s video, we’ll talk about what you need to put in a name in a California Professional Medical Corporation., affectionally known as a “PMC.” The rules in California are very specific: You need this Professional Designation that is a professional corporation. Words like “Professional Corporation,” “P.C.,” or “Prof. Corp.” So, for example, our law firm “Cohen Healthcare Law Group, PC” There are certain permitted words, and the words really should indicate the specific profession or type of services. For example, “Dermatological Practice” or “IV Hydration Clinic” or “Medical Spa.” The name have to be distinct from other names of similar entities in California, so that the consumer is not confused. Typically, you want to include the physician’s name. For one, it’s common practice. And secondly, it helps with the branding and the recognition especially if it’s a well-known doc. There might be other very specific medical board or department of public health regulations depending on the exact type of practice, or company, or clinic. So, you will want to check with us but these are the general rules. Another point is that if you got a corporation that say has a 51% MD owner, a 49% Nurse, you might want to put the physician’s name in the title so that nobody gets confused about the ownership of the corporation. Now, a lot of these rules are common sense, and you have to be careful because even if you do follow these rules, there can be what I call a collateral line of attack. So, for example, you could have the medical board, or some other agencies come in for another reason. They might just say that the name is not good enough, it’s false and misleading, it’s deceptive advertising. So, you’re going to want a healthcare lawyer’s eyes on this simple, even though precisely defined persnickety little point of California law, which is how you name your professional medical corporation. Now, one exception: Let’s say you’re not the physician, but you’re the MSO, you’re the driving business that’s going to brand this medical spa across states. Then, you have to kind of work with these rules to make sure you accommodate them, but you also want to brand the MSO. So, you could come in to create arrangements, like, for example, licensing a name. So, how do you deal with that? We have some more resources on our blog, and also we’d love to work with you. We’ve helped hundreds and hundreds of clients every year. So, if you’re interested, please give us a call and we’d love to get you started. Testimonials
November 15, 2024
Healthcare
How do healthcare certification, accreditation, and licensing differ?
Doctors, nurses, and all healthcare professionals need to understand the professional requirements that must be met in order to practice their profession and treat their patients. Medical practices should employ staff members who understand these requirements for the doctors who work in their state and type of medical practice. In this article, we focus primarily on the licenses and certifications for physicians. In our next article, we will focus on the other healthcare professions including nurses and EMTs. What is the purpose of licensure? A medical license is the way for other medical practitioners and patients to understand that a healthcare professional has the necessary prerequisite knowledge to perform the duties of their profession. The licensing requirements differ from state to state because each state has its own medical view of what skill set and experience a practitioner should have. Medical licensing for physicians According to the American Medical Association, doctors are licensed on a state-by-state basis. The requirements for each state differ. California’s license requirements are different than New York, Texas, and Iowa. Generally, applicants for a physician’s license must pass a licensing examination – either the United States Medical Licensing Examination (USMLE) or the Comprehensive Osteopathic Medical Licensing Examination of the United States (COMLEX-USA). Some states limit the number of times and the time window for passing the exam. Both types of examinations consist of three parts – with the third part being completed during residency training. During a medical student’s residency, the resident is “licensed through a training certificate which is a form ‘issued to physicians who are in accredited residency programs that permits them to practice under supervision until fully licensed.’” Some residents may seek to become licensed so they can “moonlight” perform medical duties during the resident’s residency. “Some graduate medical education (GME) institutions may require a physician to be licensed at a certain point in their training.” In California, the medical licenses of physicians and surgeons are governed by the Medical Board of California. “The Board licenses and regulates Physicians and Surgeons, Postgraduate Training Licenses, and Licensed Midwives. In addition, the Board registers Polysomnographic Trainees, Technicians, and Technologists; Research Psychoanalysts and Student Research Psychoanalysts; and issues Special Faculty Permits and Special Program permits.” “A licensed physician may diagnose, prescribe, and administer treatment to individuals suffering from injury or disease. Physicians are authorized to administer and prescribe medication, use devices to sever or penetrate tissues, and to use all methods in the treatment of diseases, injuries, deformities, and other physical and mental conditions.” Osteopathic physicians and surgeons are licensed and regulated by the Osteopathic Medical Board of California. Medical licenses aren’t confined to doctors. The following medical professionals must obtain a medical license: Nurses Emergency medical technicians (EMTs) Paramedics Physical therapists Occupational therapists Radiologists Many other healthcare professions Physician license limitations All medical licenses may have conditions in order to maintain the license including continuing education requirements and being free from certain types of medical misconduct or ethical violations. For example, a medical license may be affected if a doctor is found to be in violation of certain laws such as the federal False Claims Act, the Anti-Kickback Statute, Stark Law, or corporate practice of medicine laws. Our healthcare lawyers advise medical practices and doctors about their legal requirements, what actions can jeopardize their license or certification, and how to respond if the healthcare provider receives an official notice that their license or certification is at risk. Our healthcare lawyers also advise medical practices about how managed service organizations (MSOs) can review which licenses and certifications are current. We’ll explain the role of both the MSO and the physicians in the practice in helping a medical practice meet its licensing and certification requirements. Generally, a license only permits a doctor or other medical licensee to practice in one state – unless the doctor/healthcare provider has other licenses in other states. Some medical professionals (such as psychology) may permit licensees to practice in other states. Why the False Claims Act Affects Your Medical Practice Violations of the AKS and Stark Law are usually violations of the False Claims Act. Penalties can include treble damages and exclusion from Medicaid and Medicare Payments The New Stark and AKS Laws Physicians and medical practices should review their MSO and referral arrangements to help comply with the new Stark Law and AKS changes. The First Steps to Understanding Stark Law In today’s video, we will be introducing you to Stark Law. Medical certifications for healthcare providers A medical certification is generally used for physicians who want to show that the physician has the qualifications to practice in specific specialties or subspecialties. Unlike medical licensure which is mandatory, obtaining a medical board certification is voluntary. A medical license shows that the physician has passed the “minimum competency requirements to diagnose and treat patients” but the licensure is not specific to any specialty. “Board certification, however, demonstrates a physician’s ‘exceptional expertise in a particular specialty and/or subspecialty of medical practice,’ according to the American Board of Medical Specialties.” The initial requirement for obtaining board certification is that the physician has their medical license and has completed an accredited residency program. Applicants and medical practices should be aware of the cost of obtaining their license and the cost of any board certifications. An experienced healthcare lawyer can help physicians and practices determine who pays for the cost of obtaining any board certifications. Another difference between a medical license and a board certification is that the medical license examination is usually a written test while the board certification is an oral examination. Certifications can affect a non-healthcare provider in other ways than confirming their unique qualifications in a specific area of medicine. In some states, certification can mean the right to practice without having a supervisor approve everything the healthcare provider does. While many healthcare certifications fulfill requirements, others highlight excellence in a specific field or skill. For example, a nurse can obtain certification in Pediatric Advanced Life Support, demonstrating the ability to resuscitate children in critical situations. What is a health science certification? According to ICEV, accreditation generally refers to an association, institution, or an entire company – as opposed to an individual professional. Usually, accreditation refers to “safety, efficiency, and validity.” “High-risk workplaces like distribution centers or manufacturers can get safety accreditations from OSHA. Non-profits can earn accreditation from third-party organizations that set ethical, financial, and representational standards.” According to Southern Careers: The primary goal of accreditation is to gauge a healthcare facility’s ability to live up to predetermined industry standards set by veritable bodies within their field. This inspires confidence and trust in a facility with the patients the facility serves. Accreditation gives healthcare providers the ability to do the following: Show their commitment to quality Separate themselves from their competition Encourage continuous improvement Accreditation helps patients feel that patients are receiving competent care and gives employees confidence that they are working for a respected organization or facility. The differences between licensure and accreditation are that: Licensing is awarded by a government body such as the federal government or a state government while accreditation is awarded by non-governmental entities. Licenses apply to individuals such as physicians, registered nurses (RN), nursing assistants, medical technicians, or another individual healthcare professionals. Accreditation applies to facilities including “hospitals, nursing homes, urgent care centers, or any other kind of healthcare facility that provides care.” Generally, each state has its own licensing, certification, and accreditation requirements. These requirements generally include having the appropriate degrees, passing approved courses, having sufficient experience, and/or passing state examinations. A medical license is necessary to practice your medical profession. A certificate may be a prerequisite to obtaining a license or evidence that a medical practitioner meets specific specialization requirements for their type of medical practice.
November 7, 2024
Healthcare
Does a Professional Medical Corporation Prevent Liability?
In today’s video, we’re going to talk about whether owning and operating a professional medical corporation actually protects the physician or other clinician against liability. So, the same question could be asked of a professional nursing corporation, professional physician assistant corporation, professional Chiropractic acupuncture corporation, and so on. Hi everyone. I am still Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients like you navigate the complex terrain of healthcare and FDA law so you can launch, grow, and scale your healthcare business. Generally, one of the purposes of any corporation is to limit professional liability and transfer that risk to the entity. So, in broad terms, when the professional medical corporation gets sued, that liability is supposed to accrue to the corporation, not the individual. Now, there’s one really significant exception that’s known as piercing the corporate veil. Ouch. If corporation is really a sham, if it doesn’t follow corporate formalities like having a board of directors and regular meetings minutes, or is seriously undercapitalized, then yes, it’s possible that the limited liability protection can be pierced, punctured. The other important caveat is that if there is a malpractice lawsuit against the physician who’s head of the professional medical corporation, or against any clinical staff that the physician is responsible for supervising, or for example, there might even be a claim of malpractice based on negligent supervision by the physician. Then, staff or the physician could be held personally liable, and the corporation then would not shield them against the liability. So, for that reason, it’s important to get good malpractice policy with standard coverage amounts and that include the clinician or clinicians and including the physician owner as well as the corporation. Thanks for watching. Please contact us with any questions. We’ve helped lots of healthcare industry clients build their dream and we look forward to talking to you and we wish you every business success. Testimonials
November 2, 2024
Healthcare
Can an MSO Switch Medical Directors?
In today’s video, we’ll talk about the role of the medical director in a med spa, or an IV hydration clinic, or integrative medicine center wellness clinic. What happens when a healthcare venture tries to swap out one medical director and swap in another? So, in our hypothetical today, Mary sue, managing member of an LLC that operates an MSO for medical spa, presents us with an oddball situation. And these oddball situations come up all the time with twists and turns. So, Mary sue had created a so called friendly professional medical corporation. Friendly, meaning that the MSO controls the hiring and firing of a medical doctor in charge of the professional medical corporation. Now, some state enforce a strong Corporate Practice of Medicine prohibition. This is a no. The medical board is not friendly. And they say that the MSO can’t control the hiring and firing of medical doctors. No way, no how. But Mary sue was in a presumably weak corporate practice medicine state or no corporate practice of medicine state. So, she simply hired a new medical director and transferred to this new MD the shares of the old medical director. And having made this move, Mary sue came to us after the fact for legal advice. Well, this took a bit of unwinding. So, as mentioned, the very first question is whether the so-called friendly PC model or the MSO calls the shots of who controls the professional medical corporation will even pass muster in a state where corporate practice medicine is supposedly weakly enforced, or not enforced at all. Now, you can get a chart off the Internet and it’s going to tell you, no CPM, no CPOM. I don’t know why they call it CPOM. It’s a funny name, but whatever. It’s what the regulators say when they read and interpret the law. And, you know, also, there are different roles. Like the physician can be a director of the professional medical corporation, they can be an officer, they can be a shareholder or an employee anywhere, any combination. And Mary sue would have to be sure that each role is addressed. So simply swapping out shares is not enough. Hi, everyone. I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. And we help healthcare industry clients like you navigate the complex terrain of healthcare and FDA law so you can launch, grow, scale your healthcare business. Now, in addition to ensuring that all the relevant roles are being handled: director, officer, shareholder, employee, or contractor, they’re all different. Mary sue would need a meeting by the board of directors authorizing the transfer of shares. Now, often the corporation. In the shareholders agreement, the corporation has the right of first refusal, which means that they get first dibs on buying back the shares. Now, they may not want to, but the shares have to be appraised, typically, and sold at fair market value. There are these different mechanisms. And, for example, the new physician has to enter into the shareholders agreement. The old one has to exit that agreement. There might also be some corporate filing, for example, filing a statement of information with the state Department of corporations or some kind of filing with, say, medical board. And the incoming physician then has to be appointed the officer as an officer, the president as president, el presidente of the professional medical corporation. So, there are lots of loose ends. Got a lot of loose ends and it shouldn’t be done with a single document, like a one page supposed shareholder transfer form that they got off the Internet, as I used to say years ago, like, don’t roll the dice. Get legal advice. So, thanks for watching. Please contact us with any questions. We’ve helped lots of healthcare agency clients and your situation navigate these byzantine waters. We look forward to talking with you, and we wish you well on your journey to success. Testimonials
October 22, 2024
Healthcare
Can an MSO Get Paid More Than Fair Market Value?
In this video, we’re going to talk about the MSO and whether it is possible to transfer all the money from the professional medical corporation or practice actually to the MSO. It’s like MSO fee. Hi, I’m Michael H. Cohen. I’m founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients like you navigate the complex terrain of healthcare and FDA law so you can grow, launch, scale your healthcare business. So, the answer is no. You cannot simply transfer, like all of the funds from a medical practice to an MSO. California laws require that the percentage that’s paid to the MSO represent fair market value for the MSO services. Now, there’s no bright line rule for what is and is not fair market value, but there are appraisers in this industry, people who could give you a valuation opinion. As a law firm, we don’t provide opinions about valuation, but we do have kind of a general rule of thumb. So, if the MSO’s fee is really high, people assign different percentages. Some say 50, 60, 75%. The point is, at some point, it tips the balance toward looking like there’s so much control by the MSO that it’s a corporate practice of medicine problem. Please note that the fees, how they calculated, should be fixed in the agreement. And they shouldn’t just wobble up and down, you know, based on circumstances, because that would be a kickback. Unless they represent the fair market value of the MSO services, they’re at arm’s length and there’s some other, you know, conditions on that which we can go over when we talk. Now, having said that, as we said, California law does allow a variable fee, but it doesn’t just wobble up and down all over the place, depending on how many patients are treated, how many clients are served. It’s fixed in the agreement that there’s, for example, a percentage of revenue that represents the fair market value of MSO services and that’s going to be the MSO fee. And that percentage, you know, might vary over time, but it’s not going to wobble all over the place, because varying a fee by value and volume of patients, especially doing it willy nilly regularly, without any preset arrangement, that’s going to be regarded with heavy scrutiny. We can take you deeper in a legal strategy session. We appreciate you watching, and we look forward to your call and we hope to work with you soon. Testimonials
October 12, 2024
Healthcare
Can a Paramedic Own and Operate an IV Hydration Business?
Today’s question is: Can a paramedic own and operate an IV hydration clinic? Glad you asked that question. Hey, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. We help you navigate healthcare and FDA laws so you can grow your healthcare venture. Call us with any questions. We’re here to grow your health care business. Now here from the wild, a question of who can own and operate an IV hydration business really varies by state and by professional. And as well, owning is different from providing services or operating the business. So that’s even different because that could be management. So, the first thing to do is to look at the legal definition of paramedic scope of practice in a given state. And this means looking at the licensing statute. Oftentimes, the licensing statute will give the paramedic legal authority to administer IV in an emergency situation. Now, an IV hydration clinic doesn’t exist for emergencies. It’s for general wellness. And so, regulators here could see some kind of line crossing into unlicensed practice in medicine. So generally, no go. Recently, we researched a statute that allows paramedics to administer IV hydration in non-emergency situations, for example, in urgent care clinics. Now, that’s urgent, but maybe not an emergency, but the statute that we’re talking about limited the paramedic to providing IV hydration during their official duties. Now, what is official duties mean? We asked the local state board, and of course, we got no response. They said, consult a lawyer or lawyers. We asked a federal agency, and the tone was conservative enough for us to warn the client against practicing medicine without a license. Now, we know how clients would like the phrase to be interpreted, because my competitors are doing it. But wishful thinking can get you in trouble when it comes to the line between a given clinical service and scope of practice on one hand and the practice on medicine on the other. At the end of the day, it’s really the client’s judgment call as to whether to accept the regulatory risk. But bear in mind that licensing statutes for practicing medicine without license typically carry criminal penalties. Now, there is this bureau of EMS. It’s an authoritative body, and it does allow IV hydration within the scope of practice for paramedics in both emergency and non-emergency situations. But that’s not the end of the matter. There are number caveats. The care must be delivered as part of the paramedic’s official duties. As we said, otherwise, it could be considered practical medicine. So, you know, you come back to that. What are official duties? So, we’re here to help you interpret it as well as read the rules. See you soon. Let us know if you have questions. We look forward to working with. Testimonials
September 10, 2024
Healthcare
FDA Guidance on Direct-to-Consumer Prescription Drug Advertisements
In December 2023, the Federal Drug Administration issued guidance on the topic “Presentation of the Major Statement in a Clear, Conspicuous, and Neutral Manner in Advertisements in Television and Radio Format Final Rule” This guidance is not binding on the public or the FDA. The guidance does represent the current view of the FDA. The guidance was created to help advertisers advertise drugs to consumers. The FDA, under its authority based on the Food, Drug, and Cosmetic Act (FD&C Act), regulates drugs, food, medical devices, vaccines, blood, biologics, cosmetics, tobacco, and animal and veterinary products. The FD&C Act, as amended in 2007 requires that direct-to-consumer (DTC) TV and radio ads identify the name of the drug and the conditions of use including the side effects and contraindications (“major statement”) in a clear, conspicuous, and neutral (CCN) manner. The guidance set forth in the agency’s CNN Final Rule creates standards to ensure the major statement in these DTC TV and radio ads is properly presented. The CNN Final Rule generally applies to pharmaceutical companies that use TV and the radio to advertise their products. These companies should also review with legal counsel the various regulations that govern advertising through the Internet and through print and social media advertising. Questions and answers about the Direct to Consumer TV and Radio drug ads The FDA begins by stating that that list of major side effects and contraindications is not a list of every risk. The guidance documents do not create “legally enforceable responsibilities.” The guidance recommendations are recommendations. To understand what FDA requirements are enforceable, please speak with our experienced FDA compliance lawyers. We’ll explain what laws and regulations govern FDA compliance and what steps you can take to help show that you are in compliance. We’ll also explain that while the guidelines may not be directly enforceable, compliance with the rules is generally advisable. Avoid common FDA mistakes marketing health products Avoid these common FDA mistakes marketing health products: communicating with FDA without legal counsel, making disease claims, misunderstanding the rules. Which advertisements are subject to the standards established in the CCN Final Rule? The FDA DTC guidance recommendations apply to human prescription drug ads that: Are presented directly to consumers Are in television or radio format State the name of the drug and its condition(s) of use. What is the compliance date for the CCN Final Rule? Advertisers should work to show that their DTC TV and radio ads are in compliance by no later than November 20, 2024. Do the standards established in the CCN Final Rule change the content of the major statement? No. The identification of major side effects and contraindications “is not changed by this final rule.” How can pharmaceutical companies and other advertisers know whether their major statement is “presented in a clear, conspicuous, and neutral manner?” FDA established the following five standards to help ensure that the major statement is being presented – clearly, conspicuously, and that the major statement is neutral. The five standards are: Standard 1 (21 CFR 202.1(e)(1)(ii)(A)). The major statement language should be consumer-friendly and consumers should be able to readily understand the terminology. Standard 2 (21 CFR 202.1(e)(1)(ii)(B)). The audio part of the major statement that discusses the major statement should be at least as understandable – in terms of the “volume, articulation, and pacing used” – as the audio information presented in the rest of the advertisement. Standard 3 (21 CFR 202.1(e)(1)(ii)(C)). In television advertisements, the major statement should be “presented concurrently using both audio and text (dual modality).” Dual modality should be obtained:Either by displaying the key terms or phrases of the text verbatim with the corresponding audio or the text should be displayed verbatim with the complete transcript of the corresponding audio The text should be shown for a sufficient duration so the text can be read easily. The CNN Final Rule further details the amount of time that is considered “sufficient.” Standard 4 (21 CFR 202.1(e)(1)(ii)(D)). TV ads should include a text portion of the major statement. The size and style of the font, the contrast with the background, and the placement on the screen should all allow for the text/information to be read easily. Standard 5 (21 CFR 202.1(e)(1)(ii)(E)). While the major statement is being presented, the advertisement should “not include audio or visual elements, alone or in combination, that are likely to interfere with comprehension of the major statement.” Standard 1 compliance requirements – the major statement should be consumer-friendly and understandable The emphasis on consumer-friendly language and readily understandable terminology means that advertisers should avoid using medical or technical jargon or terms that healthcare providers are more likely to use and understand. The language and terms should not be ambiguous or vague – open to different interpretations. The CCN Final Rule does not use a reading scale or grade level scale such as – understandable at a 10th-grade level. FDA does understand that some medical language (such as referring to a disease like “tuberculosis”) will be necessary. Standard 1 does require that ordinary consumers should be able to understand the risks – but does give advertisers some flexibility in designing their DTC TV/radio ads. When Will FDA Likely Regulate Your Product as an OTC Drug and Not a Cosmetic? In today’s video, we talk about when your product is likely to cross the line and be regulated by the federal Food & Drug Administration (“FDA”) as a cosmetic and not a prescription or Over the […] Standard 2 compliance requirements – the major statement should be comparable to the rest of the advertisement The CNN Final Rule requires that advertisers review the volume, the articulation, and the pacing of the audio. The volume shouldn’t be softer than the rest of the ad. The pace shouldn’t be faster than the rest of the ad – consumers need to be able to absorb the information. The articulation should enable consumers to understand the words in the major statement. Standard 3 compliance requirements – the dual modality (audio and text) requirement for television advertisements Advertisers have some discretion about how they present the text which explains the key parts of the major statement. Advertisers can either use the “same words used in the corresponding audio presentation of the major statement (not synonyms), or advertisers can display a complete transcript of the corresponding audio, using the same words used in the corresponding audio.” For example, if the audio part of the TV ad states, “The most common side effects of DRUGX are dry mouth, headache, and heartburn,” the firm could display on the screen either of the following: Key phrases and terms – “• dry mouth • headache • heartburn.” The full transcript – “The most common side effects of DRUGX are dry mouth, headache, and heartburn” Standard 3 also requires that “the ad begins displaying the major statement text at the same time that the corresponding major statement audio information begins and stops displaying the text at approximately the same time that the corresponding audio information ends.” In other words, the visual presentation and the audio sound must be in sync. Standard 4 compliance requirements – TV ad text format, size, font style, contrast, and background requirements of the major statement Standard 4 applies only to the major statement presentation. The presentation conditions should ensure that consumers should be able to easily read the advertisement. Bigger fonts are more legible than smaller fonts. Some fonts are easier to read than other fonts. Contrasts between the text and the background are also easier to read. The placement of the text should be where the consumer will focus their attention. The key focus is the overall combination of conditions. For example, smaller font sizes may be just as readable as bigger font sizes if a more legible type of font is used. Standard 5 compliance requirements This standard also only applies to the major statement portion – not the rest of the drug advertisement. Generally, the major statement presentation should not include sounds, music, text, or images that “alone or in combination, are likely to interfere with comprehension of the major statement.” The CNN Final Rule does recognize that “multiple elements can actually be used to reinforce risk information.” The Rule doesn’t specifically prohibit drawings, music, or sound effects. These elements may even help. The bottom line is that the consumer must be able to fully understand the risks and contraindications of the drug being advertised. Does FDA provide any resources to firms to help ensure that an advertisement complies with the CCN Final Rule? Advertisers can seek comments from the FDA about their ads – before the ad airs. The ads will be reviewed by people in “FDA’s Office of Prescription Drug Promotion (OPDP) within the Center for Drug Evaluation and Research (CDER) and reviewers in the Advertising and Promotional Labeling Branch (APLB) within the Center for Biologics Evaluation and Research (CBER).” Consumers have the right to know what side effects and contraindications of the drugs they take may be dangerous so consumers can make informed decisions. FDA in November 2023 provided a guide (a Final Rule) for advertisers about whether their TV and radio ads that promote drugs directly to consumers properly inform consumers about the drug’s side effects and contraindications. The clear, conspicuous, and neutral (CNN) Final Rule provided by the FDA includes 5 standards that pharmaceutical companies and advertisers should meet. Informed Consent and Risk Waivers The doctrine of informed consent is based on the principle that adults of sound mind should have the right to decide what can be done to their bodies.
August 1, 2024
Healthcare
MSO Ownership issues for Medical Spas
There are a number of compliance issues involved with running a medical spa. These issues often overlap. Our experienced healthcare compliance lawyers can help you sort out these issues which include: What is a Medical Spa? What entity should a medspa use? What do medical professionals need to understand about owning and operating a medical spa?Medical spas and the practice of medicine Medical spa compliance requirements Who can own a medical spa? What is the role of an MSO in a Medical Spa? Additional benefits of using an MSO for a medical spa Some of these issues we’ve discussed already (just follow the red links). What is a Medical Spa? According to the American Med Spa Association, a “medical spa” (also called a medspa, a med spa, and a Medi Spa) is a: “Branded term for a medical practice where a patient can go for a variety of cosmetic and (typically) non-invasive procedures, ranging from Botox to chemical peels and laser treatments.” Investors and owners of medspas need to review the legal compliance issues that medspas must follow based on their type of practice, the state where the medspa is located, and other factors. Health businesses such as health and wellness centers and IV hydration centers should understand their comparable regulatory compliance issues. What entity should a Medical Spa use? “Owning” a healthcare venture usually involves two business entities: A PC (professional corporation) or PLLC (Professional limited liability corporation) A second company (an MSO) that owns the management and marketing team. An MSO is usually either an S-corporation (for a small number of owners) or an LLC The three legs of a medical practice are: Generally, the medical staff (doctors, physician assistants, and nurses) work for the PC or LLC. Generally, the bookkeepers, accountants, marketers, schedulers, and phone staff are hired by the MSO. A contract between the PC/LLC and the MSO explains the services the MSO will provide – at fair market value – to the healthcare entity. WHAT ENTITY SHOULD I USE FOR MY MEDSPA? Many medical spa, IV hydration, and health and wellness center clients call us with this question: can you help us with “entity formation”? Which entity should I use? What do medical professionals need to understand about owning and operating a medical spa? Medical spas and the practice of medicine Medspa businesses need to understand which of the services the medspas provide are “medical.” In most states, many more services are considered medical than an investor or owner might think. Examples include any diagnosis, treatment, or operation of a patient. Any prescription for any human disease, injury, pain, deformity, or other physical or mental condition of someone is considered as the practice of medicine in most states. Many “cosmetic” treatments are “medical treatments.” Each state has specific qualifications for who can perform medical services on a patient and to whom that healthcare provider can delegate the specific services– provided the delegation is in the appropriate scope of practice. Medical spa compliance requirements Owners of medical spas should consult with experienced healthcare lawyers to understand their legal requirements. Each state has different requirements. One common requirement is called “the corporate practice of medicine (CPOM). “This state law requirement is enacted to ensure that ‘only licensed physicians or entities wholly owned by licensed physicians practice medicine, thus limiting the commercialization of medicine by non-physicians.’” Generally, licensed MDs and DOs can own and operate a medspa in every state. Who can own a medical spa? Some states permit a licensed physician to partner with nurse practitioners (NPs), physician assistants (PAs), or registered nurses – to open a medspa. There are often limitations. California’s CPOM law requires that at least 51% must be owned by the licensed physicians. Non-physicians can have an interest in a medspa through an MSO. The MSO’s purpose is to provide different types of support (management, marketing, technical, and administrative) to other businesses such as medical practices. The core idea to keep in mind is that the medical practice and the MSO work together so that the medical practice can focus on providing the best medical care possible to the practice’s patients while the MSO manages the business side of the practice. In this way: The physicians are providing care based on the patient’s best needs and the financial needs of the patient. The medical practice keeps its responsibility to house the medical equipment and hire the medical staff. The MSO is providing the best care for the business side of the practice while ensuring that the MSO does not interfere with medical/clinical decisions. The MSO agreement (also called a management services agreement – MSA) helps establish these parameters. The MSO receives a fair market value fee and has no investment in the profits of the business. The MSO will also provide the terms for any leasing arrangements. Often, for example, the MSO will purchase office space and medical equipment that the MSO leases to the medical practice. Leasing is just one of the one the use of an MSO can help the medical practice comply with Stark Law and the Anti-Kickback Statute (AKS). The owners of the medspa determine the salaries and profit shares for each owner through their corporate bylaws, partnership agreements, or other legal methods. One related issues, we’re often asked about regarding the structure of a medical spa is: Can non-physicians hire a medical doctor for their medical spa? As we’ve discussed: Medical practices such as medspas should avoid using the term “medical director.” Medical physicians direct clinics, not business ventures. The MSO should not make flat-fee payments to a medical director because that could violate Stark Law and the federal and state anti-kickback laws. Only doctors can own a majority stake in the medical spa. Licensed nurses and other designated clinicians can own up to 49% of the medical spa. Anyone (a doctor, clinician, or layperson) can own any percentage or even 100% of an MSO. DO YOU KNOW THE KEY DIFFERENCES BETWEEN THE 4 AMBULATORY SAFE-HARBORS TO THE FEDERAL ANTI-KICKBACK STATUTE (AKS)? There are four types of ambulatory safe harbors in the federal Anti-Kickback Statute. We explain the key differences between the ambulatory safe harbors to the federal anti-kickback statute (AKS) CAN YOU GET A MEDICAL DOCTOR OR MEDICAL DIRECTOR FOR YOUR MEDSPA? We’re awash–pardon the pun–in medical spas, IV hydration centers, nurses opening healthcare practices, multidisciplinary centers, and health and wellness groups of all types. This stuff is […] Additional benefits of using an MSO for a medical spa An MSO can help a medical spa in many ways including: Helping the medspa comply with various federal and state regulatory compliance requirements such as the three we discussed above – The corporate practice of medicine, Stark Law, and the AKS. You should always start with a legal review of your healthcare compliance issue. An experienced MSO can help create and enforce procedures such as keeping accurate records, implementing HIPAA compliance, and many other compliance laws and regulations. Handling the administrative work. An MSO can help a medical spa by managing payroll, managing human resources (provided medical decisions are left to the clinical side of the practice), and implementing a scheduling system. Handling the medical coding and billing. MSOs can help medical spas by setting up an invoicing system, assigning the proper insurance codes so the insurance carriers will pay the medspa’s claims, and working to collect the payments for the medspa service from the insurance companies and whatever sums the patient owes. Providing the technological support the medical practice needs. This support includes such software as practice management software, electronic health records (EHR) systems, and software tools to increase the productivity of the medical practice. Providing financial support. An MSO for a medical spa can provide billing management, regular financial reports, and handle the contracts with insurance companies. Obtaining and leasing office space. An MSO can help a medical spa find office space, negotiate the lease, and manage the office. As we mentioned above, the MSO can even buy the office space and lease the space to the medical practice. Leasing office space, if properly done, is considered an exception/safe harbor under the Stark Law and AKS statutes. Training the staff. While MSOs cannot provide any clinical training, MSOs can ensure that the medical staff understands their compliance requirements as reviewed with legal counsel. Helping with the hiring of administrative staff. MSOs can decide who to hire provided the people being hired are not working for the clinical side of the medical practice. Helping with healthcare professionals’ credentials. While an MSO for a medical spa can’t decide which healthcare professionals to hire, the medspa can review a healthcare professional’s credentials. Our healthcare professionals will help your medical practice determine which personnel are considered healthcare professionals and what their medical license and certification requirements are. Purchasing equipment, supplies, and medications. An MSO can’t make decisions about the medical quality of medical product purchases but the MSO can purchase specific medical products for the medical spa. We’ll review your medspa’s Stark Law and AKS compliance issues and how an MSO can help. Helping a meds spa practice in differing locations. Healthcare providers and non-healthcare providers who wish to operate a medical spa need to understand the laws in their state that determine who can own a medical spa and who can manage a medical spa. Once there is a determination about who the owners should be, legal decisions need to be made regarding the business structure of the medical spa. Generally, an MSO is a preferred choice for helping to separate the medical side of the practice from the business side of the practice to ensure patient care comes first.
July 22, 2024
Healthcare
Using the terms “Organic,” Healthy,” and “Natural” on Food Labeling
The term “natural” is often used to describe food. The question is – what does the term mean? The same confusion applies to terms like “organic” and “healthy.” The FDA provides little guidance on these issues. Legislation has been proposed that would help clarify these terms but so far, generally, there are no specific laws that define these terms and how the FDA is supposed to monitor and regulate the use of these terms. FDA authority over labeling food The Food and Drug Administration has the authority to regulate food based on the Food, Drug, and Cosmetics Act (enacted in 1938) and amended in 1997 by the United States Food and Drug Administration Modernization Act of 1997 (FDAMA). The claims that can be made on food labels include “health claims, nutrient content claims, and structure/function claims.” REGULATORY COMPLIANCE FOR COSMETICS, NUTRITION, AND CANNABIS COMPANIES – PART 2 Regulatory compliance of cosmetics, diet, and CBD products including FDA misbranding and adulteration, FTC compliance, labeling requirements, and other legal issues. The use of the term “organic” on food labels The FDA “does not regulate the use of the term ‘organic’ on food labels.” Any regulation of the term “organic” on food labels is regulated by the National Organic Program (NOP) which is regulated by the US Department of Agriculture (USDA). These regulations are separate from the FDA regulations. “Food products that are ordinarily under the FDA’s jurisdiction and labeled with organic claims must comply with both USDA NOP regulations for the organic claim and FDA regulations for food labeling and safety.” WHY AM I A HEALTHCARE AND FDA LAWYER At a surface level this is a story of professional development whose roots go deep into my childhood, the fact that I’m I healthcare lawyer. The use of the term “healthy” on food labels According to the FDA, foods that use the claim “healthy” must meet specific “nutrient-related criteria.” The FDA is seeking to update when the term “healthy” can be used so the term comports with current nutrition science and federal dietary guidance. For example, the FDA states that: “The agency also remains committed to continuing to create a healthier food supply through its recently released guidance to reduce sodium in processed, packaged and prepared foods; to providing consumers with valuable and accessible nutrition and labeling information about the foods they eat; and to providing industry with recommendations on how to use and improve dietary guidance statements on food packaging.” The FDA issued a proposed/rule defining the word “healthy” on September 28, 2022. The use of the term “natural” on food labels The FDA did request around 2016 for comments on the use of the term “natural” on food labeling for humans. The FDA stated that the agency was seeking comments based on three Citizen Petitions asking the FDA to define the term “natural” in food labeling and one Petition asking that the term be prohibited. The FDA also sought comments based on federal court comments requesting “administrative determinations from the FDA regarding whether food products containing ingredients produced using genetic engineering or foods containing high fructose corn syrup may be labeled as ‘natural.’” The FDA states that the agency (while it hasn’t announced a specific rule): “Has considered the term ‘natural’ to mean that nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in that food.” “This policy was not intended to address food production methods, such as the use of pesticides, nor did it explicitly address food processing or manufacturing methods, such as thermal technologies, pasteurization, or irradiation. The FDA also did not consider whether the term ‘natural’ should describe any nutritional or other health benefit.” The FDA sought guidance on: “Whether it is appropriate to define the term ‘natural?’” What the definition of “natural,” should be “How the agency should determine appropriate use of the term on food labels.” FDA PROPOSES UPDATES TO NUTRITION FACTS LABEL ON FOOD PACKAGES The U.S. Food and Drug Administration today proposed to update the Nutrition Facts label for packaged foods to reflect the latest scientific information. The Nutrition Facts Label The FDA, in 2016, updated its Nutrition Facts label requirements on packaged foods and drinks. The new design and information aim to help consumers make better and healthier food choices. The 2016 label requirements address the following issues: The serving size. The servings per container and how big a serving size is will appear in large, bold font. The serving size (which is not a recommendation of how much to eat) will better reflect what people truly eat and drink. The amount of calories. The amount of calories in the package will also be in large, bold font. The standard amount of calories (allowing for adjustments based on age, height, weight, sex, and physical activity level) is 2,000 calories each day. The percent daily value. This value “shows how much a nutrient in a serving of food contributes to a total daily diet.” Generally low value is 5% or less of a nutrient per serving while 20% is considered high. Nutrient list. Information that is no longer required includes the calories from fat (because the type of fat is more important) and whether the food or drink has Vitamin A or C. The nutrition label does need to include the amount of added sugars (sugars added to the food process, sweeteners, and “sugars from syrups and honey, and sugars from concentrated fruit or vegetable juices.”) The levels of calcium and iron continue to be required. The presence and level of Vitamin D and potassium. These nutrients can help reduce the risk of osteoporosis and high blood pressure, respectively. The Food Safety Modernization Act of 2011 The Food Safety Modernization Act (FSMA) of 2011 (not 2023), according to the FDA, is “transforming the nation’s food safety system by shifting the focus from responding to foodborne illness to preventing it.” FDA has: “Finalized several rules to implement FSMA, recognizing that ensuring the safety of the food supply is a shared responsibility among many different points in the global supply chain for both human and animal food. The FSMA rules are designed to make clear specific actions that must be taken at each of these points to prevent contamination.” A proposed Food Labeling Modernization Act of 2023 According to Food Navigator, the Food Labeling Modernization Act of 2023 (revised since 2018) has been proposed in both houses of Congress to establish a “single, standard front-of-package nutrition labeling system that would clearly distinguish between produces of greater or lesser nutritional value.” According to the Centers for Science in the Public Interest, the Food Labeling Modernization Act (FLMA) of 2023 would “align labeling regulations with the latest nutrition science and advance national public health priorities through food labeling policies.” The proposed law aims to provide online information, new health information, and counter misleading claims. The 2032 proposed FLMA aims to address the following issues: Front-of-Package Labeling. The proposed law directs the FDA “to establish a standard front-of-package nutrition labeling system for all of the packaged foods it regulates.” This system would complement the Nutrition Facts Label discussed above and “would clearly convey when high levels of sodium, added sugar, or saturated fat (nutrients linked to chronic disease)” are present– comparable to what has already been done in Canada, Child, and other countries. Sodium substitution. “The FLMA would amend ‘standards of identity’ to allow salt substitution across all packaged foods.” Reducing the amount of sodium intake can lower the risk of hypertension and cardiovascular disease. Online grocery items. The proposed law would require that Nutrition Facts, ingredient, and allergen information now on packages be available for online grocery items. Consumers can benefit from online information while they’re shopping. Deceptive labeling. The proposed law aims to address promises that food is healthy when it’s not. For example, “many people don’t know that terms like ‘wheat,’ ‘multigrain,’ and ‘made with whole grain’ tell us nothing about the amount of whole grains in a food.” The new law would require that products that have whole grain claims include the percentage of whole grains in the products. Fruit & Vegetable Claims. Many products that look or sound like there is a lot of fruit or vegetables only have a minimum amount that don’t “provide the same health benefits as fresh, frozen, or canned produce.” Access to concealed information. The FLMA will require that the risks of certain food products like too much caffeine (especially for people who are pregnant, take certain medications or supplements, or have certain health conditions) be disclosed. “The FLMA would require disclosure of caffeine content in foods with more than 10 milligrams of caffeine per serving.” The proposed 2023 FLMA will address other issues including gluten-containing grains. “Passage of the FLMA will require food labels to reveal potentially harmful ingredients.” Food manufacturers and sellers should inform consumers about their products honestly and according to the current laws. Claims such as that a food or drink is “organic,” “healthy,” or “natural,” may be subject to review by the FDA, the USDA, and other agencies – especially if new laws such as the Food Labeling Modernization Act of 2023 are enacted.
July 16, 2024
Healthcare
Should NPs, PAs and MDs be 1099 or Employees?
In today’s video, we’ll discuss whether nurse practitioners and physician assistants can be 1099 contractors in a medical practice in California. Hi, I’m Michael H. Cohen. I’m founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients like you navigate the complex terrain of healthcare and FDA law so you can grow, launch, scale your healthcare business. So generally, it’s almost always legally safer in a highly regulated, highly litigious environment such as California or similar states for a practice, a medical practice to pay its clinical service providers as W2 employees. In general, depending on the state, penalties can be very high for misclassifying employees as independent contractors. Classifying nurse practitioners and physician assistants as employees can bring several risk mitigation benefits. Secondly, mitigates the risk of a disgruntled worker leaving the practice and then finger pointing at the practice on, you know, the behest of a plaintiff’s attorney saying that they were illegally misclassified as 1099 when they should have been a W2 and received salary and employment benefits. Now, of course, contractors can be more profitable and healthcare startups weigh the legal risk against the business advantages. So, some healthcare entities do assume the risk of misclassification. I mean, I wouldn’t push it too far, but they do pay workers on a 1099 basis. But they should know that the control test is what normally applies. So, the more control the healthcare business has over the worker, the more likely the worker is going to be classified as an employee, not a 1099. Now, if the worker is providing minimal part time services to the practice, arguably there’s less control. But even then, you can never totally eliminate the risk of misclassification. Now be aware that physicians, aka licensed medical doctors, cannot be employed by general corporation or LLC like an MSO, like a medical spa or IV hydration clinic. That’s not a professional corp if there’s a strong corporate practice of medicine doctrine. So, in those cases, the MSO contracts with the professional medical corporation in a medical service agreement. This is the well-known MSO model and it’s designed to protect against unlicensed and corporate practice of medicine. Thanks for watching. Please let us know if you have questions. We help industry clients just like you every day in similar ventures and we wish you all the success and we look forward to talking to you soon. Testimonials
July 16, 2024
Healthcare
Aromatherapy and FDA Compliance
Aromatherapy uses natural plants and essential oils to promote beauty, health and well-being. According to Healthline, aromatherapy “enhances both physical and emotional health.” Aromatherapy has been used for thousands of years. Aromatherapy uses diffusers, inhalers, aromatic spritzers, body oils, lotions, facial steamers, cold and hot compresses, bathing salts, and other methods to help users smell the products and help the skin absorb the products. There are many different types of products. Generally, the oils are not regulated by the FDA. The key factor that determines FDA regulation is whether the product is considered or advertised as a cosmetic or a drug. FDA does not generally need to pre-approve cosmetic products or ingredients. There is an exception for color additives which must be approved for their intended use. This doesn’t mean businesses that sell cosmetics have no responsibility to consumers. Businesses and individuals who market cosmetics must ensure the safety of their products. The FDA can still take action if the agency has “reliable information showing that it is unsafe when consumers use it according to the directions in the labeling or in the customary or expected way.” Generally, cosmetic products that the FDA does provide information to the public about include: Aromatherapy Disposable Wipes EOS Lip Balm® Products Hair Products (Dyes, relaxers, removers, and cleansing products) Makeup Nail Products Soaps & Lotions (Soap makers’ FAQs, anti-aging products, cellulite treatments, and more) Tanning Products Tattoos & Permanent Makeup The FDA also has resources for cosmetic Ingredients. FDA oversight of aromatherapy You should also review how the FDA regulates aromatherapy with our experienced healthcare compliance lawyers. Generally, the FDA does not get involved with the preapproval of aromatherapy products that are considered cosmetics. The FDA will get involved if there is reason to believe aromatherapy products are being used as drugs. FDA may review whether an aromatherapy product is a cosmetic or a drug based on the intended use of the product. FDA will review various factors such as claims about what the product can do for a user. The claims that FDA can review include the labels, websites, advertising, and marketing – and what consumers expect the product will do. FDA reviews aromatherapy products on a case-by-case basis. According to the National Association for Holistic Aromatherapy, the most popular essential oils are: Clary Sage Cypress Eucalyptus Fennel Geranium Ginger Helichrysum Lavender Lemon Lemongrass Mandarin Neroli Patchouli Peppermint Roman Chamomile Rose Rosemary Tea Tree Vetiver Ylang Ylang When aromatherapy is considered a cosmetic FDA will likely consider that your product is a cosmetic if the intended purpose is to cleanse the body or make the person who uses the product more attractive. For example, perfumes and colognes that are used to make a person smell better will likely be considered cosmetics. Similarly, a shower gel will likely be considered a cosmetic because the purpose of the shower gel is to make the user cleaner. Again, cosmetics do not require pre-approval by the FDA. However, the FDA can file an action against the makers, sellers, or marketers of a cosmetic if the FDA reasonably believes the aromatherapy product is not safe when users follow the directions on the label, “or in the customary or expected way, or if it is not labeled properly.” When aromatherapy is considered a drug An aromatherapy product may be considered to be a drug if the product is intended for therapeutic use. Examples of therapeutic uses include preventing or treating diseases and claims that a product can affect the function or structure of the body. FDA states that, for example, “claims that a product will relieve colic, ease pain, relax muscles, treat depression or anxiety, or help you sleep are drug claims.” Other claims associated with aromatherapy that may lead the FDA to believe the product is a drug include claims that the aromatherapy product can treat asthma, insomnia, tiredness, depression, inflammation, menstrual issues, cancer, menopause, arthritis, and other conditions. Just because an ingredient or fragrance comes from a plant doesn’t mean the product can’t be regulated as a drug. FDA requires that drugs must be pre-approved by the FDA for safety and effectiveness before the drug can be marketed. You can learn more about how the FDA regulates drugs by reviewing its website and contacting our experienced healthcare lawyers. WHEN WILL FDA LIKELY REGULATE YOUR PRODUCT AS AN OTC DRUG AND NOT A COSMETIC? In today’s video, we talk about when your product is likely to cross the line and be regulated by the federal Food & Drug Administration (“FDA”) as a cosmetic and not a prescription or Over the […] Can a product qualify as both a cosmetic and a drug? Yes. Some products qualify as both cosmetics and drugs. As an example, if a baby lotion is marketed with claims that the baby lotion “both moisturizes the baby’s skin and relieves colic” that product would be both a cosmetic and a drug. The FDA will need to pre-approve the product as a drug and can regulate the product if the claims about the product’s benefits and uses fail to protect consumers. ARE THESE DRUG CLAIMS OR COSMETICS CLAIMS? In today’s video, we focus on anti-aging products to determine whether FDA will likely regulate your product as a drug instead of cosmetic. Can an aromatherapy product be regulated outside the FDA? Yes. The Consumer Product Safety Commission (CPSC) does regulate some fragrance products – including “air fresheners, scented candles, laundry detergents, and household cleansers.” If an “essential oil” or other fragrance is “natural” or “organic,” doesn’t that mean it’s safe? Products that come from plants aren’t inherently safe. Essential oils and other aromatherapy ingredients may be “toxic, irritating, or likely to cause allergic reactions when applied to the skin.” The FDA provides the example that “cumin oil is safe in food, but can cause the skin to blister.” Some citrus oils that can be used safely in food may cause harm if they are applied to skin that has been exposed to the sun. “FDA doesn’t have regulations defining “natural” or “organic” for cosmetics.” The key requirement is that the product must be safe. Healthcare providers can learn more by reviewing the following FDA sites “Organic Cosmetics” and “FDA’s Poisonous Plant Database.” How are advertising claims about aromatherapy products regulated? Generally, the FDA regulates the labeling of cosmetics and drugs. Advertising claims are regulated by the Federal Trade Commission. Aromatherapy oils and products may be regulated by the FDA if the products are considered drugs because the companies that make and market the oils and products make therapeutic claims – such as that the aromatherapy products can treat cancer. Many marketing claims may be considered therapeutic even if the claims are made by other individuals and companies. Aromatherapy oils and products may also be subject to FDA oversight, if the claims about substances may endanger the safety of the consumers who use or apply the oils and products according to the labels or expected usage. Aromatherapy products may also be subject to FTC oversight.
May 22, 2024
Healthcare
Collaborative Practice Agreements for Independent Pharmacies
Healthcare providers regularly write prescriptions for all types of healthcare conditions. These prescriptions are then filled out by a pharmacist of the patient’s choosing – not the physician’s choosing. While many doctors and pharmacists work independently, there are suggestions by both doctors and pharmacists that coordinating all types of pharmaceutical care with healthcare may be beneficial to patients. These suggestions have been placed into practice through the use of collaborative practice agreements (CPAs) between pharmacists and healthcare providers. Why collaborative practice agreements are being encouraged The National Community Pharmacists Association (NCPA) states that as more patients seek medical care, the administrative requirements increase, and payment is tied to quality; prescribers are finding the ability to meet their patients’ needs more challenging. Some patients can wait months for an appointment. The NCPA emphasizes that pharmacists can “increase patient access to care, decrease the overall number of hospitalizations, improve patient outcomes, and reduce total net healthcare spend.” A CPA is a contract between a pharmacist and a prescriber that defines what patient care functions –“like prescribing or modifying drug therapy” can be delegated to the pharmacist and when and how the pharmacist can provide those functions. The CPA “delegates patient care functions to pharmacists beyond the pharmacist’s typical scope of practice.” “This collaboration improves the efficiency and reduces the fragmentation of patient care.” “When used to their full potential, collaborative practice agreements have the ability to increase access to care, expand available services to patients and increase the efficiency and coordination of care,” said Jeff Durthaler, pharmacist consultant in the Division for Heart Disease and Stroke Prevention with the U.S. Centers for Disease Control and Prevention (CDC). What are collaborative practice agreements? The NCPA defines collaborative practice agreements as voluntary, formal relationships between the pharmacist and physician or other healthcare provider that allows for certain patient care functions, including but not limited to: Modification or initiation of drug therapy Performing, interpreting, or ordering laboratory tests Conducting physical assessments, as authorized by the practitioner under specified situations and conditions. “Expanding enhanced services opens the door for community pharmacists to embed themselves within a provider’s practice or provide additional patient care services directly in the pharmacy.” Pharmacists may be able to help patient outcomes (and be compensated) through chronic care management. “Chronic Care Management is a monthly management program for Medicare patients with two or more chronic conditions. Community pharmacists can provide just about every CCM activity under a physician’s supervision, and can assist prescribers obtain a more complete picture of their patients. Pharmacists are in a prime position to manage patients with complex medication regimens and improve a physician’s quality measures.” How do collaborative practice agreements improve patient health? According to the US Centers for Disease Control and Prevention (CDC), a CPA between healthcare providers and pharmacists can help improve a patient’s health by: Reducing “fragmentation of care,” lowering healthcare costs, and improving health outcomes. Recognizing that team-based care can improve blood pressure control when a pharmacist is included on the team. According to PBA Health, “Collaborative partnerships between pharmacists and physicians empower team-based care, which has been proven to result in better quality care and health outcomes for patients,” said Anne Burns, R.Ph., vice president, professional affairs at the American Pharmacists Association (APhA). Collaborative practice agreements, as mentioned above, are very useful for patients who have chronic disease management problems. CPAs and compliance issues While there are many benefits to collaborative practice agreements, there are some major compliance issue concerns. The CPA arrangements cannot violate Stark Law and the Anti-Kickback Statute which govern referral arrangements between healthcare providers and companies. There are also state laws that govern the scope of practice of medicine that must be reviewed if a pharmacist’s medical duties are expanded by a CPA. CPAs also need to comply with any other relevant state laws and the rules and regulations of the state pharmacy and medical practice boards. PBA Health states that federal and state laws place limits on the ability of pharmacists to improve patient healthcare. A CPA, PBA Health asserts, is a way to help solve those limitations. Before entering into a CPA, pharmacists and physicians should review these limitations and the terms of any CPA with experienced healthcare compliance lawyers. A CPA provides the way for a pharmacist, if certain conditions are met, to “directly adjust patients’ medication regimens to optimize outcomes without constantly consulting the physician for approval.” Without a CPA, a pharmacist would normally need permission for the doctor to modify a patient’s drug therapy. A CPA can reduce a lot of fax, email, and phone call communications so that the pharmacist can authorize drug therapy modifications without having to wait for a doctor’s permission each time. What are the terms of a collaborative practice agreement? PBA Health states that the CPA can specify the patients, the disease states, and the medications that the CPA covers. CPAs can be adjusted, depending on state law, to meet the needs of the community. Each CPA is different. Common CPA services, depending on the state’s laws and regulations include: Authorizing refills. The physician/prescriber grants the pharmacist the ability to “extend refills based on the pharmacist’s assessment of the patient.” Chronic disease management. “The prescriber authorizes the pharmacist to initiate, modify or discontinue medications.” Laboratory tests. “The CPA may authorize the pharmacist to order and interpret laboratory tests essential to effectively monitor medications or the status of chronic conditions.” Therapeutic Interchange. “The prescriber authorizes the pharmacist to substitute another drug in the same drug class for the medication originally prescribed.” A few examples of CPAs PBA Health discusses how a pharmacy in Rhode Island was able to enter into a CPA to help the community by enabling the pharmacy to provide emergency prophylactics to patients with Lyme Disease. The pharmacy is still required to evaluate patients according to detailed criteria outlined in the agreement such as requiring that the patient “bring in the tick or a photograph of the tick for the pharmacist to identify as a deer tick.” Another criterion is that the tick bite must have occurred within the prior 72 hours. The CDC examples include: The El Rio Community Health Center at Arizona’s El Rio Community Health Center switched to an electronic health record system that helped healthcare providers“Set up CPAs with local pharmacists for the center’s 800 patients who are receiving diabetes management services. Doctors and nurse practitioners refer patients to the pharmacist through the EHR. The pharmacist care plan is then documented in the EHR, along with a copy of the CPA.” “Changes to patients’ medications—such as the introduction of a new medication or a change to a current prescription—are tracked in the system, and this information is accessible to the provider and pharmacist.” In Asheville, North Carolina: The Asheville Project, the Patient Self-Management Program for Diabetes (PSMP), and the Diabetes Ten City Challenge (DTCC) were efforts by self-insured employers to provide education and mentoring for employees with chronic health problems such as diabetes, high blood pressure, and high cholesterol. Patients were enrolled in collaborative care programs that included a community pharmacist on their health care team. Health spending savings included: The Asheville Project. Average net savings of $1,622–$3,356 per person per year. PSMP. Average net savings of $918 per person per year. DTCC: Average net savings of $1,079 per person per year. Patient care improved as follows” Asheville: 50% average reduction in number of sick days. PSMP:100% of study participants had their glycosylated hemoglobin (A1C) level tested; 94% of patients met the Health Plan Employer Data Information Set (HEDIS) goal of 7% or less for A1C. DTCC: A1C and screening rates improved to 97%; 91% of patients achieved an A1C level that met the HEDIS goal. What are the business benefits of a CPA for pharmacists? Some of the factors that should be reviewed with an experienced healthcare lawyer when considering a CPA include: Whether the service is reimbursable How much more efficient is the CPA? Does more efficiency mean more business and more retention of patients? Does the CPA mean more patients for the pharmacy or the physician? What conditions may limit the ability of the pharmacist to provide a service to the patient? Another benefit may be obtaining more referrals – provided that the referral arrangement does not violate Stark Law or the AKS. PBA Health states that “Collaborative practice agreements also help pharmacy businesses adapt to evolving payer preferences because they position pharmacists as providers.” There are also a lot of practical issues involved with determining which physicians pharmacists may want to work with, developing a working relationship with that physician, preparing and negotiating the CPA, and ensuring that the arrangement complies with federal and state laws and regulations. State limitations of collaborative practice agreements Some of the state limitations that may govern a pharmacist/physician CPA include: Limiting which kinds of practitioners can participate What terms must be included in the CPA That length of time the CPA is valid The functions that the pharmacist can legally perform How can a seasoned healthcare lawyer help pharmacists and physicians prepare collaborative practice agreements? Some of the issues experienced healthcare lawyers will review include: Whether the CPA needs to be registered with a pharmacy board or any other medical boards. Negotiating the terms of the agreement. Reviewing any business associate agreements and data sharing arrangements – to comply with HIPAA and for other reasons. Addressing the scope of service issues. Other formalities such as obtaining a pharmacist National Provider Identifier number. The lawyer will also review any referral arrangements, Stark Law and AKS compliance, and whether any Stark Law exceptions or AKS safe harbors apply. Stark Law. Stark Law is a federal law that prohibits physicians from making referrals to any business entity where the physician or an immediate family member has a financial interest in the business entity. Possible Stark Law exceptions include “physician services” if the pharmacist is a member of the group practice and other conditions apply, “preventive services” covered by Medicare, a “personal service arrangement” that meets specific criteria, and the arrangement qualifies as “fair market value compensation.” The AKS. The Anti-Kickback Statute prohibits either the pharmacist or physician from paying anything of value to the other healthcare provider in order to receive referrals. Scope of practice laws. The scope of practice laws govern the type of services healthcare providers can provide and when and how one healthcare provider may be able to provide healthcare services if that healthcare provider is properly supervised and monitored by another healthcare provider who is providing care clearly within the scope of his/her practice. Exceptions to the Stark Law Prohibition of Medical Referrals The Stark Law governs what types of referrals doctors can make if they bill for Medicare and Medicaid. The presumption is that that referrals made by a doctor to a designated health service are […] Anti-Kickback vs. Stark: When do these laws apply? In today’s video, we give a brief refresher on the difference between Stark and anti-kickback laws. California’s New Scope of Practice Law for Nurse Practitioners – Part One California passed a new law, effective January 1, 2023, that permits nurse practitioners in specific settings to provide care (under certain conditions) that does not meet “standardized procedures.” Pharmacists, physicians, and patients may all benefit from collaborative practice agreements. These agreements expand the opportunities for pharmacists to provide essential health care subject to the conditions set by the physician. Collaborative practice agreements may be profitable for the healthcare providers while providing more efficient and timely care for patients. There are compliance issues though. The agreements should be reviewed with legal counsel to help ensure the agreements comply with Stark Law, the AKS, scope of practice laws, and any other federal or state regulations – as well as medical board requirements.
April 8, 2024
Healthcare
How Much is a Medical Practice Worth?
Medical practices that want to purchase another medical practice need to understand the different ways of valuing a medical practice depending on whether the whole practice is being purchased or whether it will be merged with an existing practice. There are many factors that determine the value of any medical practice, including the value of the assets, the income the practice can yield, the liabilities of the medical practice, the type of care being provided, the reputation and experience of the medical practice being acquired, and many other factors. When two medical practices merge, many of the same factors that are used to value a medical practice should be reviewed by both practices to help determine if the merger is wise. Experienced healthcare lawyers help medical practices understand the factors that are used to determine the financial value of a medical practice, the ability to obtain financing, other factors that may affect the ability of the new medical practice to produce income, the ability to expand the medical services to more patients, and many other financial value issues. We also work with financial appraisers who are skilled at placing a value on a medical practice. LEGAL KEYS EVERY MEDICAL DOCTOR MUST KNOW BEFORE MERGING WITH OR ACQUIRING A MEDICAL PRACTICE If you plan to acquire a medical practice or any healthcare venture, consult a healthcare and FDA attorney who understands the specific legal and regulatory landscape Medical practice valuation methods include the following: Using a multiplier This method examines the general revenue of the business – the amount of yearly receipts for medical services – and then multiplies that amount by a “multiplier” which varies depending on the type of practice, the location, and many other factors. The fair market value (FMV) approach This financial appraisal method examines similar medical practices in the region where you practice. Whether a practice is similar must take into account the type of practice, the number of physicians, the services that are offered, how long the medical practice has been in office, and other factors. The FMV is commonly used in the buying and selling of a home or a building. The difference is that the sales of homes are generally of public record because the sale is recorded with the local county offices. Medical sales are generally not publicly recorded. Even if the sales of comparable medical practices are recorded, there often are not enough comparable sales to make a reliable analysis. The income approach This approach examines the cash flow of the practice – usually for the past few years – and the potential future income that the practice can expect to generate. The income approach analyzes the following: Analyzing the stream of income. This analysis normally examines prior tax returns and financial statements along with other documents to determine the “net” income of the business. The net figure considers the liabilities of the practice starting with the federal, state, and local tax returns. The analysis may differ depending on the type of medical practice, how the bills are submitted and paid, and other standards. Forecasting the future income flow. This analysis reviews market trends, the overall industry outlook for your type of practice, and any other information that can indicate how much income the medical practice will generate over the next 3-5 years. Growth and risk factors. This part of the income analysis examines the competition, how much the practice is regulated, the possibilities for providing additional services, and the growth potential of the medical practice. Applying a discount rate. An analysis of future income needs to be discounted to reflect the rate of return the practice would obtain if the practice just invested the funds in safe investments such as certificates of deposit. “The discount rate is typically based on industry benchmarks, market rates of return, and the specific risk profile of the practice.” The discount rate is then used to determine the current value of the medical practice. The termination value. This analysis estimates the value of the practice at the end of a specific term such as 3-5 years. Whether the income approach is the best way to value a medical practice is debatable. We’ll explain whether this approach is reliable – especially in light of other factors such as an aging population or any likely expenditures over and above normal overhead. The asset approach This method is more common for valuing a medical practice. The approach examines the tangible assets of the practice, the intangible assets, and the goodwill of the medical practice. This approach helps determine the value of each type of asset. The approach is useful for accounting and tax purposes. The asset approach generally uses the following analysis: The tangible assets. This portion of the value includes the physical items in the office including the medical equipment, fixtures, furniture, and filing cabinets. The value is what a willing buyer would pay for these items – not what the practice originally paid for the items or how much the seller thinks the assets are worth. A big expense for any medical practice is the cost of medical equipment such as diagnostic equipment, software and hardware, surgical tools, and other types of healthcare equipment. A key question is whether the new practice will buy these assets or rent them. The revenue of the medical practice. This figure represents the total receipts of the practice before considering the expenses. This sum is the gross income. For a medical practice, gross income generally means the accounts receivable and any income from lectures or other health services. The net income of the medical practice. This sum is the profit – the amount the medical practice receives (takes in) minus – the amount of the expenses and operating costs – such as the computer costs, salaries, and rental costs. Any add-backs. These items include such things as the benefits to the doctors such as healthcare, travel reimbursements, salary, and other items. Goodwill. This asset is essentially the medical practice’s reputation. Generally, the practice that is buying the business also wants to acquire the patients of the other practice (or keep those patients) if there is a merger. As we explained in our general discussion on acquiring or merging a medical practice, there are certain legal and ethical considerations to ensure that patients can make free decisions about which doctors the patients will use and their electronic health records. Goodwill is essentially a calculation as to whether the old patients will continue to see the doctors in the new medical practice. Goodwill also includes the location of the practice, how well the staff connects with patients, and other factors. Other factors include the expenses of the business and any intellectual property such as patents. Another issue is that the new practice may not assume some of the expenses of the old office. For example, the buyer may keep some of the staff but not all of the staff or some of the equipment but not all of the equipment. Additional valuation factors for a medical practice A few other notable factors that will affect the value of a medical practice include: The general state of the economy. The payment arrangement including whether there is a full payment or the sale of the practice is financed by having the seller accept payments over time as the new practice evolves. The payment terms may also have tax consequences. Tax considerations. The tax considerations do affect how much a buyer will be willing to pay for a medical practice and how much the seller will accept. The need for cash. A doctor who is retiring may be more in need of cash now than a younger doctor who is quitting to pursue other interests and has the time to accept a payout. Whether other medical practices are interested in the same practice that is being sold Generally, the more a medical business has been in existence and the better reputation that practice has, the higher the value of the medical practice will be. Many other factors may also affect the value of a medical practice. HEALTHCARE M&A: DO’S AND DON’TS OF BUYING OR SELLING A MEDICAL PRACTICE Buying and selling a medical practice is much different than selling a commercial business. Due diligence must address special healthcare legal compliance issues, licensing requirements, patient […] Other factors to consider regarding the cash flow of a business include: Income cash flow issues The cost of replacing office space or equipment that cannot be transferred to the new practice. The cost to hire new physicians and other medical care providers. Whether Stark Law or AKS affects these purchases and compensation needs. How likely the doctors in the practice that is being bought are to help the new practice during the transition period Legal costs The cost of any litigation if the business being acquired has any judgments, current lawsuits, or lawsuits that may be filed. Any outstanding contracts and other obligations that should be obtained through a due diligence review. According to Medical Economics, the appraisal of a medical practice should also examine where existing and new patients are coming from, and examine all the contracts with doctors and nonphysician providers. It’s very important to actually visit the medical office you’re acquiring. Some offers may be subject to negotiation. Other offers may be one-time offers. Aesthetics can add value to a medical practice. If the medical practice you’re acquiring has an MSO, that can add value by simplifying the need to separate the business side of the practice from the medical/clinical side of the practice. Medical practices can be valued in different ways – by using a multiplier, fair market value comparables, estimating net income, and the value of tangible and intangible assets including goodwill. Our seasoned healthcare lawyers work with medical appraisers who are skilled at placing value on a medical business. Our team is skilled at all the related issues such as legal and healthcare compliance, financing issues, agreements of sale, and other issues.
April 1, 2024
Healthcare
Can the MSO Management Fee be More Than 90% of the Revenue of the Medical Practice?
The anti-kickback laws require these fees to be fair market value and not take into consideration the referral of any patients that might come from the MSO to the medical practice. It so happens these days that a lot of MSOs will provide marketing services for the medical practice. And depending on your state law, it could open the door to interpretations that there are patient referrals and that part of that fee may be in consideration for the volume or value of the patient referrals. There’s no one answer, what is fair market value? 90%, just kind of my gut reaction to it, is that’s way too high for a management company to be charging. And I always tell clients, at the end of the day, put yourself in the position where you’re defending this fee, and if you’re in court and you see the person up there in the black robes and you’re trying to justify this fee, it might look a little strange that the lion’s share of the practice is going to a lay business, the management company. And so that would raise a number of alarm bells to most judges, to most enforcement agencies out there. Testimonials
March 23, 2024
Healthcare
The MSO/Physician Contract: Compliance with Stark Law’s personal service agreement and the fair market value compensation exceptions.
Many medical practices enter into contracts with a Managed Service Organization (MSO) to help separate the clinical and administrative sides of the medical practice. There are many federal and state laws that regulate both aspects of medical practice. State medical boards also regulate medical practices in various ways. Skilled healthcare professionals understand how MSOs can assist medical practitioners in focusing on practicing medicine while the MSOs concentrate on the medical business—complying with relevant Stark Law exceptions and other compliance requirements. Stark Law and the AKS The Stark Law, also known as the federal physician self-referral law, prohibits doctors from recommending that patients obtain designated health services (such as lab tests) that Medicare and Medicaid pay for from entities in which the doctor (or an immediate family member) has a financial interest—unless a Stark Law exception applies. The federal Anti-Kickback statute (AKS) authorizes criminal penalties when entities or individuals knowingly provide or receive any remuneration: In return for any service paid for by a federal healthcare program, including Medicare or Medicaid. In return for “purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal healthcare program.” (Source: Legal Information Institute) Remuneration includes cash payments, vacation, positions on medical boards, and many other improper benefits. An Anti-Kickback statute (AKS) violation may result in a prison sentence of up to 5 years, fines of up to $25,000 per occurrence, and exclusion from participating in federal healthcare reimbursement programs. Violations of the Stark Law and the AKS may also constitute a breach of the federal False Claims Act. Doctors, medical practices, and Managed Service Organizations (MSOs) also need to understand their state’s corporate practice of medicine laws, which regulate who can have an ownership interest in a medical practice. The benefits of an MSO An MSO helps medical practices do more than just manage the business side of a medical practice. It can assist medical practices in demonstrating that the business side is separate from the clinical side by specifically meeting the exceptions to the Stark Law and the safe harbors to the Anti-Kickback Statute (AKS) as defined in those statutes. An MSO can also help demonstrate that a medical practice is not violating the False Claims Act and is meeting the requirements of state and local medical boards. Additionally, an MSO can aid a medical practice in coming into compliance with corporate practice of medicine laws. WHEN USING A MANAGEMENT SERVICES ORGANIZATIONS (MSO) IS THE RIGHT CHOICE FOR YOUR MEDICAL PRACTICE Managed Services Organizations help physicians focus on practicing medicine by freeing doctors from many administrative tasks. Failure to consult with an MSO healthcare lawyer can cause civil and […] What tasks can MSOs perform? MSOs can undertake various administrative tasks and assist medical physicians/practices in complying with the Stark Law and the Anti-Kickback Statute (AKS) if specific requirements, such as the Stark Law’s personal service arrangement exception and fair market compensation exception, are met. Some of the general services that MSOs can perform, according to the Physicians Practice Group, include: Medical billing and collection Training of the medical staff Compliance with HIPAA (Health Insurance Portability and Accountability Act), the FMLA (Family and Medical Leave Act), and other laws Obtaining and verifying credentials IT needs Financial matters including marketing, payroll, procurement, and audits Risk management Scheduling Medical record transcription Public relations Disaster management Negotiating contracts Quality assurance Other administrative duties Stark Law, MSOs, and personal service arrangements The Stark Law provides for a personal service arrangement exception, allowing the medical practice and the Managed Service Organization (MSO) to enter into a contract where the MSO provides personal services to the medical practice, and the medical practice provides remuneration for the MSO. Generally, services from the physician/medical practice to the MSO need to comply with the personal services arrangement Stark Law exception. Services from the MSO to the physician/medical practice need to comply with the fair market value Stark Law exception described below. Compliance with the personal services arrangement exception requires the following: The personal services arrangement is set forth in writing; both the physician/medical practice and the MSO sign the contract, and the specific services that will be provided are detailed in the written contract. Unless the services satisfy another section (Section Z, involving the limited remuneration of a physician) of the Stark Law exceptions, the personal services arrangement should cover all the services that the physician (or an immediate family member of the physician) will provide to the MSO. This requirement is met if:All separate arrangements between the entity (MSO) and the physician and the entity (MSO) and any family members incorporate each other by reference or cross-reference a master list of contracts that is maintained and updated centrally and is available for review by the Secretary upon request. The master list must preserve the historical record of contracts, and a physician or family member may furnish services through employees they have hired for the purpose of performing the services, through a wholly-owned entity, or through locum tenens physicians. (Source: Legal Information Institute) The combined services that the personal services arrangement covers must not exceed the services that are reasonable and necessary for the legitimate business purposes of the arrangement(s). The personal services arrangement must last for one year or longer. To comply with this requirement, if the personal service arrangement is terminated, with or without cause, the parties may not enter into the same or substantially the same arrangement during the first year of the original arrangement. The compensation to be paid during the duration of each personal service arrangement should be:Set in advance Not exceed the fair market value Not consider the value or volume of any referrals or other business generated between the physician/medical practice and the MSO, unless there is a valid physician incentive plan. The personal service arrangement services should not involve the counseling or promotion of a business arrangement or other activity in violation of state or federal law. If the personal services arrangement ends after at least one year:A holdover arrangement immediately following the expiration of the arrangement [should] satisfy the requirements of paragraph (d) if additional requirements are met. If remuneration to the physician is conditioned on the physician’s referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4). Our skilled healthcare compliance lawyer can clarify whether the physician incentive plan exception applies to the relationship between the medical practice and the MSO. The specific terms of the incentive plan exception are outlined in the Stark Law exceptions. To gain a comprehensive understanding of how these exceptions may impact your situation, we invite you to schedule a Legal Strategy Session with our expert healthcare compliance attorney. Take proactive steps to ensure compliance and navigate the complexities of the Stark Law. Stark Law, MSOs, and the fair market value compensation exception The fair market value compensation exception to the Stark Law applies to compensation arrangements where the MSO provides services to the physician or medical (group) practice in exchange for remuneration from the physician/medical group. Compliance with the fair market value exception generally requires satisfaction of the following requirements: The arrangement between the physician/group practice and the MSO must be in writing, signed by the physician/medical practice and the MSO, and cover services specifically outlined in the written contract. The writing should specify the compensation under the arrangement’s terms and the timeframe for the arrangement. The arrangement, which includes services provided in return for fair market value compensation, can be for any period and include a termination clause. Renewal is allowed, one or more times, provided the terms and compensation remain consistent with the prior arrangement, though exceptions may apply. The compensation:Must be set in advance. Should be consistent with fair market value and “not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.” Compensation for the rental of office space or equipment may not be determined using certain formulas set forth in the Stark Law. The contract should be “commercially reasonable even if no referrals were made between the parties.” The contract should not violate the Anti-Kickback Statute (AKS) or involve counseling, business promotion, or other activities in violation of state or federal law. The arrangement satisfies the requirements of § 411.354(d)(4) (directed referral requirement) in the case of certain types of physician remuneration, group practice remuneration, or other Stark Law terms. Experienced healthcare lawyers understand how MSOs can be utilized to help medical professionals demonstrate compliance with the Stark Law, along with the conditions that must be met to fulfill those compliance requirements. Our healthcare lawyers can also provide insights into whether the contract between the MSO and the physician/medical practice might violate the Anti-Kickback Statute (AKS) and whether any AKS safe harbors apply. Many AKS safe harbors share similarities (though not identical) with the Stark Law exceptions. A Managed Service Organization (MSO) is a valuable method for assisting medical practices in focusing on practicing medicine while the MSO takes care of the administrative side of the practice. MSOs are also instrumental in demonstrating that a medical practice is in compliance with federal referral laws such as the Stark Law. The MSO contract itself must comply with the Stark Law and any other relevant laws. Achieving compliance often involves drafting MSO/physician practice contracts that meet the personal service arrangement and fair market value compensation exceptions of the Stark Law.
March 15, 2024
Healthcare
What Can a Nursing Corporation in California be Used For?
I just want to make extra clear that in California, the Medical Board has issued a number of different opinions that the medical spa must be a medical corporation, not a nursing corporation. I can’t tell you how many times people have formed a nursing corporation, and then we have to unwind everything and fix it, and it gets expensive to do that. So to the extent any of you are on the verge of forming an entity, it would be a medical corporation in California, not a nursing. Testimonials
March 9, 2024
Healthcare
HIPAA Compliance for Pharmacies – Violations and FAQs
This is our second article about what pharmacies should know about complying with HIPAA. In the first part, we discussed which HIPAA rules apply to pharmacies, as well as the best practices for pharmacies to demonstrate HIPAA compliance. This article provides examples of HIPAA violations and the potential consequences of violations. This article also answers FAQs about pharmacies and HIPAA compliance. GOT HIPAA? GET HIPAA? JOYCE EXPLAINS WHY AND HOW Interview with an expert in healthcare privacy and security, both on the federal side with HIPAA, and the state side, especially California law. What conduct by a pharmacy is considered a violation of HIPAA? A few examples of HIPAA privacy violations include disposing of Patient Health Information (PHI) in the trash instead of shredding it, leaving prescription information in areas that can be accessed by the public, and disclosing any prescription information to third parties without patient’s consent. HIPAA violations include the following: Unauthorized access. This includes intentionally or accidentally accessing patient health information – without patient authorization or a legitimate need – thus violating the patient’s privacy rights. Improper disposal. Pharmacies may be cited for HIPAA violations if they improperly or incompletely dispose of patient records, medication information, or prescription labels that potentially expose sensitive data to people who are not authorized to see the information. Inadequate Physical Security. This type of violation includes the failure of the pharmacy to develop and implement physical safeguards to protect Patient Health Information. Improper handling of prescriptions. Pharmacies may violate HIPAA if they disclose patient’s prescription information to a third party without the patient’s consent or failing to follow specific verification procedures, thus compromising the patient’s confidentiality. Failing to train the staff and volunteers. Pharmacies need to educate and train their workers and volunteers about HIPAA’s privacy, security, and breach notification rules. What are the consequences for pharmacies that violate HIPAA’s requirements? According to the HIPAA Journal, when the Health and Human Services (HHS) Office for Civil Rights (OCR) receives a complaint or a notice of a breach, the office will conduct a review to determine if an enforcement action is required. If OCR believes a violation has been committed, the agency has the right to impose a civil penalty. Often, the Health and Human Services Office for Civil Rights will provide technical help to prevent future violations from occurring or require that the pharmacy implement a corrective action plan if the violation is attributable to an underlying culture of non-compliance. In a small minority of cases the Health and Human Services Office for Civil Rights will impose a civil penalty. Depending on the severity (tier) of the penalty and the level of culpability, the HIPAA Journal states that the following penalties can be imposed (subject to any HHS changes): Tier 1 – Reasonable Efforts. The penalties range from $127 – $63,973. The maximum yearly penalty for each violation is $1,919,173. Tier 2 – Lack of Oversight. The penalties range from $1,280 – $63,973. The maximum yearly penalty for each violation is $1,919,173. Tier 3 – Neglect – Rectified within 30 days. The penalties range from $12,794 – $63,973. The maximum yearly penalty for each violation is $1,919,173. Tier 4 – Neglect – Not Rectified within 30 days. The penalties range from $63,973 – $1,919,173. The maximum yearly penalty for each violation is $1,919,173. The Attorney Generals for the different states also have the authority to impose civil penalties for each violation. If a pharmacy’s violations involves criminal activity, the violation may be referred to the US Department of Justice. A few examples of violations and penalties, according to the HIPAA Journal, include the following: In 2009, CVS Pharmacy settled potential HIPAA violations with OCR for $2.25 million after it was discovered that prescription bottles and receipts had been disposed of improperly. In 2010, Rite Aid Corp settled with OCR for $1 million to resolve violations of HIPAA relating to the improper disposal of PHI. In 2014, Walgreens was fined $1.4 million for the impermissible disclosure of a patient’s PHI. A pharmacist shared a patient’s PHI with her husband and at least three other people. In 2015, Cornell Pharmacy, a small pharmacy in Denver, was fined $125,000 for the improper disposal of PHI. Even if there is no civil fine, the costs of technical help and corrective action plans can be expensive. To minimize the risk of HIPAA violations and to help address all other compliance issues, pharmacies should speak with experienced healthcare lawyers. HIPAA COMPLIANCE IS NOT THE END OF LIABILITY FOR COMPROMISING PATIENT PRIVACY You think you’ve got HIPAA compliance handled, in order to try to stay ahead of steep federal penalties, and then learn that is just the beginning of the story. HIPAA compliance itself is thorny. […] FAQs about Pharmacies and HIPAA Compliance When could a pharmacy not be considered a HIPAA-covered entity? While pharmacies generally are considered “Covered Entities” and must thus comply with HIPAA’s Privacy and Security Rules – some exceptions do apply: A pharmacy doesn’t transmit health information. This may occur for example for campus pharmacies where a student’s medical records may be considered part of the student’s educational records under FEPRA – the Family Educational Rights and Privacy Act. A pharmacy doesn’t send or receive health information electronically. Paper and phone conversations that are not digital are not considered electronic communications under HIPAA. A pharmacy exclusively sells or dispenses drugs, devices, or equipment for which no prescription is required. If just one transaction involves a prescription, then “every operation becomes covered by HIPAA.” How does individually identifiable health information differ from Protected Health Information? Individually identifiable health information is health information that alone or with other common identifiers could be used to identify an individual. When common identifiers such as an individual´s name, date of birth, or address are stored in a designated record set with health information, the common identifiers and the health information become Protected Health Information. When can a pharmacy be able to disclose PHI to law enforcement officers? PHI generally includes a patient’s name. The PHI could include their physical description. Pharmacies (and staff members) may be permitted (but generally are not required) to disclose PHI to law enforcement officers in the following six instances: There is a court order, court-ordered warrant, or subpoena that requires disclosure. To help identify a suspect, a missing person, a witness, or a fugitive. An official request by a law enforcement official about a victim or someone suspected of being a victim of a crime. To inform law enforcement that someone has died – if the pharmacist thinks that the death is due to criminal conduct. When the manager of a pharmacy believes that protected health information is evidence of a crime that occurred on the premises. When essential to inform law enforcement about the commission and nature of a crime not occurring on the premises, the location of the crime or crime victims, and the perpetrator of the crime. Permitted disclosures of PHI to federal and state law enforcement officers are subject to the Minimum Information Necessary Standard. What is the Minimum Information Necessary Standard? The Minimum Information Necessary Standard requires that pharmacies (and pharmacy staff) should only use, disclose, or request the minimum amount of PHI necessary to achieve the objective of the use, disclosure, or request. A pharmacist, for example, doesn’t normally need to send a patient’s entire medical history to an insurance company to check if the patient is eligible for any prescriptions. Which laws may be even more strict than HIPAA? Most states have their own privacy and licensing laws that were enacted to protect patients. Many of these laws require even more stringent protections than HIPAA. For example, some laws also protect a patient’s genetic or biometric data. Generally, the HIPAA requirements must be followed but state laws may need to be followed – if stricter protections are required. Pharmacies should review with experienced healthcare lawyers any other federal compliance laws regarding patient privacy and any state compliance laws. For example, pharmacies may need to consider “the confidentiality of substance abuse disorder patient records (42 CFR Part 2) and privacy requirements within the Combat Methamphetamine Epidemic Act, Food and Drug Administration Amendments Act, and Patient Protection and Affordable Care Act.” Why should all people who work for a pharmacy undergo HIPAA security and privacy training? In today’s world, even employees who do not regularly access patient health information may be affected indirectly by a phishing email or malware which could provide an outsider with the credentials needed to access the pharmacy’s computer system – including any PHI in that system. HIPAA violations include unauthorized access to patient health information, the improper disposal of PHI, a lack of security, improper handling of prescriptions, and failing to train staff about HIPAA compliance. Fines may be imposed by the US Department of Health and Human Services and the local states for violating patient’s healthcare privacy rights. A few commonly asked questions include when might a pharmacy not be considered a covered entity, when can a pharmacy disclose PHI to law enforcement, and what is the minimum information necessary standard?
March 8, 2024
Healthcare
Should the MSO be an S-Corp and the Medical Practice be a C-Corp or Vice Versa?
The S-Corp C-Corp distinction is a tax distinction. Under the IRS, you have the ability to do an S election or remain a C-Corp, and C-Corp is double taxation on the corporate level, and the individual S-Corp is on the individual only. It’s a pass-through. We always recommend getting a CPA involved to help determine what tax election you should make and so that would be the answer to that one. It really depends on revenue projections and things like that. Testimonials
March 2, 2024
Healthcare
Why Posting Patient Photographs on Social Media Accounts May Violate HIPAA and FTC Advertising Regulations
Many doctors seek to use patient photos as testimonials for their medical practices. The photos are often before and after pictures to show how a patient looked before the medical care was provided and after the treatments were provided. Photos can also be used along with text to state that the patient recommends a doctor due to the care that was provided. Medical practices and organizations also may want to use patient photos to announce when certain services are available, to promote healthy lifestyles, and to discuss current health issues – and for many other reasons. Doctors and medical practices that provide plastic surgery, beauty, or anti-aging services are among the practices most likely to want to post patient pictures – but almost any medical practice could promote its practice through patient photos. Healthcare providers need to understand the ethical requirements and federal and state laws that govern the use of patient photos. For starters, the posting of patient photos must comply with the Health Insurance Portability and Accountability Act (HIPAA) of 1996 and with the Federal Trade Commission’s (FTC’s) social media rules. The HIPAA Journal states that medical practices and healthcare organizations do need to comply with HIPAA even though HIPAA was enacted before most social media platforms came into existence. These practices and organizations also need to comply with the FTC rules on advertising. GOT HIPAA? GET HIPAA? JOYCE EXPLAINS WHY AND HOW Interview with an expert in healthcare privacy and security, both on the federal side with HIPAA, and the state side, especially California law. FTC ENFORCES FALSE ADVERTISING RULES AGAINST ‘CELL REPAIR’ PRODUCTS In today’s video, we discuss the dangers of marketing products without proper legal review—in this case, not just FDA enforcement, but even more significantly, FTC (Federal Trade Commission) […] The FTC rules on social media The Federal Trade Commission Act applies to all types of advertising and marketing including social media. The FTC has the authority to review online and offline advertising. The agency can file warning letters and seek injunctive relief to stop any improper advertising. In addition, the FTC can seek civil penalties. Advertising and marketing are considered deceptive if: “A representation, omission, or practice misleads or is likely to mislead the consumer; A consumer’s interpretation of the representation, omission, or practice is considered reasonable under the circumstances; and The misleading representation, omission, or practice is material.” FTC REGULATIONS YOU MUST KNOW FOR HEALTHCARE ADVERTISING Lots of physicians and healthcare companies have had us reviewed their marketing materials, and inevitably, we’ve quickly spotted gaping holes where they’ve left themselves vulnerable to […] The HIPAA Social Media Rules? Covered entities and business associates can use social media to promote their practices and products – provided the HIPAA and FTC requirements are met. Covered entities are: “Healthcare providers, like doctors, dentists, and pharmacies. Health plans, like HMOs and employer health plans. Healthcare clearinghouses, which process health information.” Business associates are partners of the covered entities that need access to health information to perform certain services. HIPAA applies to Protected Health Information (PHI) by “covered entities and business associates.” The PHI must comply with HIPAA’s privacy and security rules. “Protected health information (PHI) is individually identifiable health information transmitted or maintained in any form or medium by a Covered Entity or its Business Associate. Individually identifiable health information is information, including demographic data that relates to an individual’s physical or mental health or the provision of or payment of health care, which identifies the individual.” Patient authorization and HIPAA (HIPAA’s privacy rules) Any PHI that is disclosed requires the individual consent of the patient. The HIPAA authorization rules can be found in §164.508 of the HIPAA Privacy Rule. Valid authorizations must include the following core elements: “A meaningful description of the information to be used or disclosed A meaningful description of the purpose of the use or disclosure An explanation that the information may be further disclosed The individual’s right to revoke the authorization An expiration date for the authorization” The patient should be informed that the social media post with their PHA may be widely shared, published, and republished. This means that even if the patient does request a revocation of the authorization, the medical practice/organization may not be able to comply because the PHI has already moved quickly across the various social media platforms. What steps can medical practices and organizations take to comply with HIPAA? The consequences for violation of HIPAA’s privacy rule can include large fines and even possible imprisonment. Medical practices and medical organizations that use social media should consult with experienced healthcare providers to understand the do’s and don’ts of posting medical information (including patient) photos online. The practice/organization should establish social media policies, train the staff on permissible and impermissible uses, enforce policy violations, and create safeguards to protect against inadvertent disclosures. Access to social media accounts within the medical office should be limited to specific staff members. A few FAQs about social media postings and HIPAA The HIPAA Journal provides a few commonly asked questions about social media and HIPAA. What is one reason that social media increases the risk for HIPAA violations? Photographs are a large driver of social media content. The staff in medical offices can take someone’s picture and load the picture to the Internet almost immediately. The posting of the photograph will likely violate HIPAA unless the medical practice has the patient’s consent. Is the posting of a photograph of a patient a HIPAA violation if the patient’s name is not provided? Generally, the posting of the photograph will be a violation if the patient’s identity can be determined from the image. Medical practices should expect that patients can identify themselves in a social media photo. The medical practice should obtain the patient’s permission before posting a photograph online. Do the HIPAA social media rules apply to all accounts or just corporate accounts? HIPAA applies to business and personal social media accounts. In fact, posting a patient’s photo from a corporate account onto a private account will likely violate both HIPAA’s privacy rule and security rule. Practical suggestions for medical practices regarding social media Medical practices should train their staff about HIPAA’s privacy and security requirements, what information constitutes patient health information, and what the consequences will be for violating these requirements. The medical practice should also establish protocols, with the help of experienced healthcare lawyers, for obtaining permission from patients to use their patient health information. The patients should understand what information is being disclosed, where it’s being disclosed, why it’s being disclosed, who may see the information, and the other consequences for seeing their photo on social media accounts. The written consent form should be drafted to address the patient’s legal rights and ethical concerns. American Medical Association Guidelines for social media posts The American Medical Association (AMA) reviewed a case study of a woman who consented to having her images posted on social media. She broke down in tears when she discovered that images of her breast (the doctor performed breast reduction surgery) were posted online. While the doctor emphasized that the images were for educational purposes, the woman complained that the images were not respectful. The AMA analysis stated that informed consent may not be enough to protect a doctor in the age of social media. The AMA recommended that the plastic surgeon change “his social media practices for future patients,” and share his specific plans for change so the patient could feel “like she is making a difference and thus ease the tension.” The AMA stated that there must be: (1) Fully informed consent (2) A commitment to professional content (3) Avoidance of abusing the patient-physician power differential. The AMA summarized the basic principles for using patient images on social media as follows: “Complying with the Health Insurance Portability and Accountability Act (HIPAA) Maintenance of separate private and personal social media accounts Minimal online interactions with patients Familiarity with hospital policies on social media. Patient confidentiality must be protected at all times, as HIPAA’s security rule protecting identifiable health information that a provider creates, receives, maintains, or transmits electronically applies to social media as well.” This means that the images should be “deidentified” – though some images cannot be completely deidentified. Online communications between the doctor and patient should not be a substitute for the patient-physician relationship. Doctors, such as plastic surgeons, should understand any hospital policies or medical practice policies in addition to the applicable social media laws. The AMA states that some entities, like the Social Media Task Force of the American Society of Plastic Surgeons (ASPS) are still in the process of developing applicable policies. Both the physician and the patient should understand that many social media viewers are under 25 years of age. A practical suggestion is to show the patient the pictures that are going to be posted BEFORE the pictures are posted. HIPAA Violations – Civil and Criminal Penalties HIPAA violations are classified as follows: Tier 1: A violation that the covered entity was unaware of and could not have realistically avoided, had a reasonable amount of care had been taken to abide by HIPAA Rules Tier 2: A violation that the covered entity should have been aware of but could not have avoided even with a reasonable amount of care. (but falling short of willful neglect of HIPAA Rules) Tier 3: A violation suffered as a direct result of “willful neglect” of HIPAA Rules, in cases where an attempt has been made to correct the violation Tier 4: A violation of HIPAA Rules constituting willful neglect, where no attempt has been made to correct the violation within 30 days. The penalties for HIPAA violations, by tier, are as follows: Tier 1: Minimum fine of $100 per violation up to $50,000 Tier 2: Minimum fine of $1,000 per violation up to $50,000 Tier 3: Minimum fine of $10,000 per violation up to $50,000 Tier 4: Minimum fine of $50,000 per violation The penalties increase based on an inflationary index. “If healthcare professionals knowingly obtain or use protected health information for reasons that are not permitted by the HIPAA Privacy Rule, they may be found to be criminally liable for the HIPAA violation under the criminal enforcement provision of the Social Security Act.” [Emphasis added]. Doctors and medical practices also need to understand that obtaining consent near the time of the actual procedure is problematic since the patient is focused primarily on their health – patients may not dissent because patients don’t want to upset their doctor when he/she is about to perform a medical procedure. Another concern raised by the AMA is that posting images online may be detrimental to the medical practice in addition to the patient because photos that seem inappropriate may suggest that the plastic surgeon or other type of physician does not respect the physician-patient relationship. Doctors and medical practices need to understand how HIPAA, the FTC social media rules, and state and local ethics rules govern the posting of photographs on corporate and personal social media sites. At a minimum, health professionals and practices should obtain a proper written consent to post photographs online for marketing purposes, education, and other reasons. The consequences for violating HIPAA, the FTC rules, and doctor-patient confidentiality can be quite severe.
February 22, 2024
Healthcare
Can a Dentist be a Medical Director?
The medical director, and again, just because a doctor has to own 51% of the medical practice doesn’t mean that doctor has to act as the medical director. The vast majority of times, yes, they do because they don’t have to do a whole lot and it beats finding someone and paying them separately, but you don’t have to be the medical director if you’re the owner, but you do have to be an MD to own a medical practice. If you get a doctor who’s a 51% owner or a doctor who is the full-owner, say in the state of New York, or if it’s a corporate practice at medicine state, that allows anybody to own it, and you just go and hire a medical director, the medical director has to be trained in the procedures that are being performed. You just have to make sure that the medical director has at least enough training in the particular procedures that the nurse will be performing in the clinic. Testimonials
February 15, 2024
Healthcare
Physician Recruitment Compliance Issues, Stark Law Exceptions, and MSOs
When hospitals and medical practices hire new doctors, they must consider various balances — the need for doctors capable of providing essential medical care to patients, the doctor’s capacity to attract new patients, and the imperative to comply with federal and state laws governing physician recruitment. The fundamental requirement of these laws is that patient care must always take precedence. Our experienced healthcare lawyers are prepared to elucidate how these balances operate. We strive to assist hospitals, medical practices, and doctors in delivering high-quality medical care, fostering business growth, all while adhering to legal requirements. Two key legal issues we help healthcare professionals address are compliance with Stark Law and the Anti-Kickback Statute (AKS). We excel in negotiating and drafting contracts that not only demonstrate compliance with Stark, the AKS, and other legal obligations but also ensure that all parties prioritize patient care and financial success. Additionally, we can explain how a Managed Service Organization (MSO) can assist medical practices in managing the business side of their practice once a new physician is hired. Stark Law generally provides exceptions that aid hospitals and medical practices in hiring qualified physicians. Violations of Stark Law and the AKS can lead to civil and criminal actions, potentially resulting in the loss of a medical license. While MSOs can offer administrative support, such as credential verification, it’s important to note that they cannot provide recruitment support, as MSOs are not authorized to practice medicine. As we’ve previously discussed, hospitals and medical practices regularly find the need to hire physicians who fulfill specific specialty requirements and engage in research. Newly graduated talent from medical school requires training, while experienced professionals often undergo an adjustment period and address practical issues, such as the new doctor’s preference to practice in a specific geographical area. Often, hospitals, which grant the right to practice within their facilities, collaborate with medical practices to recruit new physicians. Ideally, from the hospital’s perspective, the physician will “refer” patients to the hospital for surgeries and specialized care, with such referrals needing to comply with Stark Law, the Anti-Kickback Statute (AKS), and state laws. From the medical practice’s standpoint, the goal is for the practice to receive fees for the services the doctor provides both at the hospital and within the practice, while the physician also refers patients to the medical practice. The ideal scenario involves the doctor earning a base fee until their medical practice can be expanded. Each of the three participants—the hospital, the medical practice, and the doctor—has their own set of concerns during the physician recruitment process. These concerns include: The geographical area where the doctor will practice, including the potential need for relocation. The amount of compensation. The duties of the physician. The length of the employment contract. The loan – “The agreement by the hospital to pay the salary or part of the salary is considered a loan.” Covenants not to compete – where legally applicable. It’s important to note that covenants not to compete are generally not enforceable in California. Other contract terms. Useful Stark Law exceptions for physician recruitment Hospitals and medical practices offering inducements to attract doctors to work within their facilities must ascertain whether such inducements or the working relationship violate anti-referral laws, namely Stark Law and the Anti-Kickback Statute (AKS). Generally, recruitment arrangements that meet specific criteria may be deemed valid under the following Stark Law exceptions: Bona Fide Employment Exception: Applicable to medical practices, organizations, and hospitals hiring physicians. The physician has a bona fide employment relationship if: The employment services are clearly identified. The remuneration paid to the physicians is consistent with the fair market value of the services. Unless an exception applies, the remuneration is not based on the volume or value of any referrals by the referring physician (the newly hired physician). The remuneration is provided under an arrangement that would be commercially reasonable even if no referrals were made to the employer. Productivity bonuses based on services personally performed by the physician (or an immediate family member of the physician) may be permissible. If the physician’s remuneration is conditioned on referrals to a particular provider, practitioner, or supplier, the referral arrangement must meet other Stark Law exceptions. Hiring the Physician as an Independent Contractor: The contract or services should be in writing, identify all the services the physician will perform, be for specific time periods, contain a termination clause, specify the terms of payment in advance, and be consistent with the fair market value of the services. The arrangement should not factor in the volume or value of any referrals or business generation. The arrangement should be commercially reasonable (even if there were no referrals) and further the legitimate business purposes of the employer and the contractor-physicians. Physician Recruitment Exception: Remuneration provided by a hospital to recruit a physician that is paid directly to the physician may meet this Stark Law exception if certain conditions are met: The agreement is placed in writing and signed by the hospital, the physician, and the medical practice if all three are involved. The agreement is not conditioned on the referral of patients by the physician to the hospital. The amount of remuneration under the arrangement is not determined in any manner that takes into account the volume or value of actual or anticipated referrals by the physician or other business generated between the parties. The physician is allowed to establish staff privileges at any other hospital(s) and to refer business to any other entities (some exceptions may apply). The terms of the employment contract generally can’t be altered once the contract is signed. The medical practice must also sign the agreement if the doctor is going to work for the medical practice and not full-time at the hospital. Other conditions may apply depending on the terms of the agreement. As previously mentioned, our healthcare lawyers elucidate the additional conditions that must be met (to comply with a Stark Law exception) for a medical practice (without using a hospital) to be able to hire a doctor as an employee or as an independent contractor. Generally, payment should be based on fair market value and not on the amount or worth of any referrals. The AKS may provide safe harbors for certain physician employment relationships and recruitment efforts if specific conditions are met. Notably, the AKS uses the term “practitioner recruitment” instead of “physician recruitment.” Physician recruitment agreements must also adhere to any IRS 501(c)(3) requirements. In addition to hiring physicians, hospitals, and medical practices must understand whether Stark Law, the AKS, and other federal or state laws regulate the hiring of non-physician healthcare providers. Our experienced lawyers represent one of the three participants in physician recruitment, with the signer we represent varying depending on our client. We work diligently to address all other relevant legal, business, and medical issues. PHYSICIAN RECRUITMENT AGREEMENTS OBLIGATE THE HOSPITAL, MEDICAL PRACTICE AND THE PHYSICIAN – MAKE SURE YOU KNOW WHAT YOUR OBLIGATIONS ARE Physician recruitment agreements involve the rights and duties of three parties. Experienced healthcare lawyers craft the proper exceptions to the Anti-Kickback Statute and Stark Law What is a managed service organization (MSO)? An MSO is often utilized to manage the administrative and marketing aspects of a medical practice. In California, physicians typically own the medical corporation, while ownership interest in an MSO is open to anyone. An agreement outlining the duties and obligations of each party to the agreement should be established between the medical corporation and the MSO. Beyond addressing a state’s corporate practice of medicine (CPM) laws, MSOs are employed to demonstrate the medical practice’s compliance with Stark Law and the Anti-Kickback Statute (AKS). The medical practice’s primary focus should be on providing healthcare, with the MSO supporting the business side of the medical practice. Our healthcare lawyers comprehend how MSOs can benefit a medical practice and identify tasks exclusive to the medical practice. Generally, the MSO cannot participate in the recruitment of physicians, as decisions regarding physician employment pertain to the physician’s ability to provide healthcare to patients. The MSO may be able to assist with several issues when a medical practice is considering hiring (or has hired) new physicians or other medical staff who must be under the supervision of appropriate medical personnel, such as nurses, physician assistants, medical assistants, and other healthcare staff requiring supervision. These issues include: Scheduling appointments Leasing office space or equipment to the medical practice Billing and collection on behalf of the medical practice Checking the credentials of the physician, such as their medical licenses and their status Educating and training medical staff on topics such as compliance training, various diseases, office software systems, and other non-medical issues. MSOs can also perform additional tasks, including: Educating and training medical staff on compliance and various diseases Medical coding Regulatory compliance with federal and state laws, such as HIPAA (Health Insurance Portability and Accountability Act), OSHA (Occupational Safety and Health Administration) regulations, FMLA (Family and Medical Leave Act), CLIA (Clinical Laboratory Improvement Amendments of 1988), and state laws Credentialing staff and hiring clinical and administrative staff, credentialing health plans, and managing enrollment Public relations Disaster management Hospitals and medical practices require physicians and other healthcare providers to attend to their patients, especially when expanding to other locations or offering additional services. In the process of recruiting or hiring physicians, hospitals, medical practices, and the physicians involved must seek guidance from experienced healthcare lawyers. This consultation is essential for understanding employment incentives, conditions, and duties that align with Stark Law, the Anti-Kickback Statute (AKS), and other pertinent federal and state laws. Utilizing Stark Law exceptions during the drafting of employment contracts can be beneficial. Employing an MSO is an effective method for ensuring that a newly hired physician can concentrate on practicing medicine while leaving the administrative side to the MSO. Ensure Legal Compliance in Physician Recruitment
February 15, 2024
Healthcare
Key Considerations When Merging or Acquiring A Medical Practice – Part Two
In part one of our discussion of the legal issues involving buying a new medical practice or merging your practice, we discussed many of the practice issues such as cultural compatibility issues, how to determine if the merger is working, and why one medical practice decides to acquire another medical practice or merge with an existing medical practice. In this article, we discuss some of the many legal and healthcare compliance issues such as Stark Law, the Anti-Kickback Statute (AKS), and HIPAA. We also discuss the corporate practice of medicine, due diligence, healthcare compliance issues such as the need to keep patients informed, and the agreement of sale or merger agreement. In subsequent articles, we’ll discuss the different ways to place a financial value on a medical practice, the use of an MSO to manage the new medical practice, Stark Law exceptions and AKS safe harbors, and other specific legal issues. When Using a Management Services Organizations (MSO) Is the Right Choice for Your Medical Practice Managed Services Organizations help physicians focus on practicing medicine by freeing doctors from many administrative tasks. Failure to consult with an MSO healthcare lawyer can cause civil and […] Legal compliance issues when merging or acquiring a medical practice The Corporate Practice of Medicine California law requires that medical practices must be owned by a medical corporation. As we’ve discussed earlier in our article on buying and selling a medical practice: The Moscone-Knox Professional Corporation Act regulates “who can invest in and own the professional medical corporation and the limits that apply to non-medical practitioners.” The bottom line is that the clinical/medical operation of the business must be separate from the administrative side of the business. The medical side generally must be owned by physicians while the administrative side can be owned by the doctors and by “investors, managed service organizations, and other non-professional managers.” California medical corporations must also comply with “The Medical Practice Act, Business and Professions Code section 2052, which provides that the unauthorized practice of medicine is illegal.” “The California Business and Professions Code section 2400 which prohibits corporations and “other artificial entities: from having “professional rights, privileges, or powers.” Other laws including federal and state privacy laws The state and medical regulations for each type of medical practice Other states have their own specific medical practice requirements. Stark and AKS When one medical practice buys out or merges with another, these anti-referral laws need to be reviewed to ensure compliance with how the bills are submitted and paid, whether the fee arrangements violate any of the terms of these laws, whether the manner of payment of the physicians violates these laws, whether the purchase or leasing of the office space or equipment violates any of these laws, and other possible Stark or AKS violations. Our skilled healthcare lawyers will also review whether any exceptions or safe harbors may apply and how to implement those exceptions or safe harbors. Experienced healthcare lawyers also review how a managed service organization (MSO) can be used to address any possible Stark or AKS violations. We’ll explain what payment arrangements may be permissible and what documentation and evidence is necessary to confirm those arrangements are legal. Healthcare M&A: Do’s and Don’ts of Buying or Selling a Medical Practice Buying and selling a medical practice is much different than selling a commercial business. Due diligence must address special healthcare legal compliance issues, licensing requirements, patient […] Financing Buyers and sellers may have different thoughts and due diligence requirements with regard to financing. If a buyer is willing to pay a lump sum at the time of settlement, that removes the financing issues. Since many medical practices have substantial value, a buyer may ask the seller to be allowed to pay the sales price in installments. The seller may also extend credit – by allowing the buyer to pay in installments based on the funds received from patients and insurance companies during the length of the new medical business operation. A seller may require a security interest in the new medical practice in return for accepting a payout. A buyer may not want to pay a lump sum in order to have time to complete any necessary conditions such as repairs or obtaining consent from patients. There are many different possibilities that we’ll review with you. Due Diligence In part one we discussed the need to conduct due diligence reviews about the legal, financial, and operational aspects of the medical practice you’re buying or merging with. Due diligence includes reviewing any existing or likely new legal, financial, or regulatory claims or complaints such as legal actions, judgments, or security interests. Other due diligence issues include: Any current MSO agreements Any corporate practice of medicine issues All open contracts with vendors, suppliers, third parties and administrators Any open litigation Any open rental or lease agreements All open contracts with contractors and employees Any other open contracts of any nature Our skilled lawyers will review whether these contracts can be assigned to the new practice and all related legal issues. The Agreement of Sale/Merger Agreement Perhaps the most critical part of the purchase, sale, or merger of a medical practice is the agreement of the sale or the merger agreement. The agreement of sale/merger establishes the price of the sale, the legal and business structures of the medical practice, the terms and conditions of the sale, the remedies of each practice for any breaches, the handling of the legal compliance issues, the handling of the medical compliance issues, the rights of each medical practice and the physicians in each practice, and many other legal, medical, financial, and practical issues. In our prior discussion of the sale of business, we reviewed the following issues – most or all of which apply to merging medical practices (though many additional terms will likely need to be addressed). Identifying what items are being sold and what is not being sold. The “professional and personal obligations of each party to the sale” “The terms of the sale. This includes the consideration and purchase price. It includes the time for the buyer to obtain financing or the terms of any payments if the seller is giving the buyer time to pay for the medical practice. The agreement of sale should make clear what happens if the buyer can’t get the necessary financing or defaults on any payments.” The remedies on default including the right to demand arbitration Identifying any representations of either medical practice The licenses, credentials, education, and qualifications of each physician That there “are no current complaints pending or disciplinary action with the state and local medical boards” The terms of the integration topics we reviewed in our general article on this topic – integration planning, stakeholder communication, cultural compatibility, integration planning, human resources integration, and performance management. The healthcare M&A lawyers should also review the following topics with their clients: Drug Enforcement Agency (DEA) requirements. “Normally, the DEA will not allow controlled substances to be sold with the practice. The seller should understand its duties regarding drugs in its possession when the practice is sold. The buyer normally needs to make new arrangements regarding the acquisition of new controlled medications.” Insurance issues. The agreement of insurance should determine which insurance coverage applies, from which medical practice, for medical malpractice claims, general liability claims, workers’ compensation claims, and other claims that may be filed after the date of sale. New insurance policies may be required. Liabilities and warranties. The buyers in acquisition and sales and both buyers in mergers will normally want representations as to any liabilities and warranties as to their status. Non-compete clauses. Physicians who buy new practices generally do not want the selling physicians to compete with them. Non-compete clauses should be in writing and definite as to their terms. California specifically forbids non-compete clauses. The legality of these clauses in other states will vary. Additional legal compliance issues Experienced healthcare lawyers also help medical practices that are obtaining, selling, or merging medical practices with: Determining the value of a medical practice. We will discuss this issue in a separate article. Any open contracts Employee and staff retention and relations Patient list and patient rights requirements Many other legal issues With proper planning and analysis, “Sellers can get the right price for their practice, satisfy their legal requirements to their patients, and feel confident that the sale won’t have any after-shocks. Buyers, with the use of skilled lawyers, will be able to focus on their new medical practice while understanding their medical and legal obligations.” Healthcare compliance issues involved with the purchase, sale, and merger of medical practices Medical practices that buy other practices or merge with other practices need to work with lawyers who understand the healthcare compliance issues for medical practices. Some of these issues our healthcare lawyers will review include: Healthcare compliance laws. In addition to Stark Law and the AKS, medical practices need to understand all other federal and state laws that regulate medical care and their specific types of practice. One important law that needs to be reviewed is the Health Insurance Portability and Accountability Act (HIPAA) which requires that medical practitioners comply with privacy and security requirements for electronic health records. There are also state privacy laws that must be reviewed. Additional healthcare compliance issues include how to bill public healthcare programs and private insurers, the False Claims Act, FTC compliance issues, FDA compliance issues, and many other compliance requirements. Patient notification. Patients have the right to know about any sales or mergers that involve their doctors. Patients should be informed of their HIPAA rights. Our lawyers will review the need to obtain authorizations from the patients to transfer medical records from one medical practice to another. Patients should also be informed about the new medical practice so the patients can decide whether they want to be treated by the new medical practice or be treated by a different medical practice. We’ll help draft these medical letters so the practices don’t put undue pressure on a patient. Medical records. The agreement of sale should make clear who owns the medical records after the sale and the requirements for keeping those records. Billing and coding. The medical practices need to review their billing codes and how bills are submitted so that the codes comply with the False Claims Act or any state false claims acts. Insurance carriers and medical programs. The Agreement of Sale should “also review which insurance carriers and medical programs the medical practice works with, how quickly and how much of the bills those insurance carriers and programs pay and any issues that have been raised in the past or currently regarding payment.” The insurance carriers, Medicare, Medicaid, and other payors should be notified about the new medical practice arrangement so the payors know who can submit bills and to whom payments should be made. License requirements. The medical licenses and qualifications of each doctor should be analyzed. Financial records and tax records. Due diligence requires reviewing these records for at least the prior three years. There should also be a review of “any withholding taxes that may be due, unpaid vacation pay, the status of any worker’s compensation and unemployment compensation accounts, business and medical insurance, and many other financial issues.” The medical practices should also review their relationships with their nurses, technicians, and other medical and non-medical staff so these personnel understand their roles in the new practice and so that the practices can keep the staff the practices need on their payroll. Contractors and vendors should also be informed about the new medical practice. When leaving a medical practice, can you take patient records? When leaving a medical practice, can you take patient records? Experienced legal counsel helps medical practices review the federal and state laws that regulate the practice of medicine along with the various requirements to keep patients informed. When a doctor or medical practice is considering buying or merging with another practice, our skilled healthcare lawyers will review your goals, the legal and healthcare compliance requirements, and the rights and remedies of the medical practices after the sale or merger is completed. We’ll help negotiate the proper legal documents and with the preparation of compliance plans.
February 8, 2024
Healthcare
Key Considerations When Merging or Acquiring A Medical Practice – Part One
Merging or buying a healthcare practice or clinic is complicated. You need to understand the legal compliance issues, the medical compliance issues, the financial concerns, and many practical issues. Experienced healthcare lawyers can help you understand these requirements. Healthcare lawyers can explain the pros and cons of the various issues and help you anticipate all the things that may go wrong as well as the things that should go right. Skilled healthcare lawyers will prepare and negotiate the contracts that are necessary to specify the terms of the merger or buyout. In this article, we will begin the discussion of the overall concerns that doctors need to address. In subsequent articles, we will focus on some of the more complex issues such as how to value a business, Stark and Anti-Kickback requirements, and other legal compliance issues. We’ll also discuss how a management services organization (MSO) can help provide the new medical practice the business services it needs so the practice can focus on providing medical services to their patients. Practical considerations in merging or buying a medical practice Some of the issues that affect a merger or acquisition of a medical practice are: What type of medicine are your physicians authorized to practice? What states can you practice in? Are you buying a practice or merging the practice with your current practice? Do you have a letter of intent? What part of the practice is being sold? Is the whole practice being sold? Are just the assets being sold? Who will be responsible for the liabilities of the business? What will be the role of each of the physicians from the current practices in the new practice? Who has the responsibility for preparing the agreement of sale or the terms of the merger? What will be the payment terms? Will there be a lump sum payment or a buyout? Strategic planning issues when merging or acquiring medical practices Before considering the buyout or merger, physician practices need to review many different issues with their healthcare lawyer. Some of these issues include the following: Why do you want to buy, merge, or sell your medical practice? Possible purposes include expanding the medical services you can provide, increasing marketing share, expanding the territory where you practice, and other reasons. What regulatory and compliance issues do you need to review? Some of these issues include complying with federal and state anti-referral laws, licensing, accreditation, privacy laws, and laws requiring notice to patients about the new business arrangement. There are also laws that need to be reviewed about the corporate practice of medicine, the type of supervision required of the medical staff, and many other factors. Why do you need a legal and financial due diligence review? Medical practices that wish to acquire a medical practice or merge their medical practice need to conduct due diligence reviews about the legal, financial, and operational aspects of both organizations. These reviews can inform your practice of any current or likely future claims or issues that you may be assuming if you buy or acquire another medical practice. The review should also disclose any legal, financial, or regulatory challenges that need to be addressed. Experienced healthcare counsel can explain how to conduct due diligence, what issues should be reviewed, and how to handle or negotiate any issues that arise. Another key consideration is which is the bigger practice. The bigger practice will normally want to control the terms of any merger. HEALTHCARE M&A: DO’S AND DON’TS OF BUYING OR SELLING A MEDICAL PRACTICE Buying and selling a medical practice is much different than selling a commercial business. Due diligence must address special healthcare legal compliance issues, licensing requirements, patient […] Integration Planning Each medical practice must have a detailed integration plan that outlines the timeline, tasks, and responsibilities for each phase of the merger or acquisition. The integration plan should identify key leadership roles and responsibilities for the integrated organization – including medical roles and business roles. Stakeholder Communication The parties to the merger or acquisition should develop a comprehensive communication plan for employees, patients, vendors, and other stakeholders. These communications should address such issues as the reasons behind the merger, the benefits, and the potential changes in services. There are laws that require that patients be notified of their rights to keep the same doctors or choose other physicians outside of the new medical practice – and their rights to take possession of their medical records. Cultural Compatibility A key factor that helps determine whether the new practice (whether obtained by purchase or a merger) is culturally compatible. Some of the issues that should be reviewed are the work cultures of each medical practice, the financial values of the practices, and how the work cultures may affect the integration process. Information technology (IT) and Data Integration Virtually every medical practice has hardware and software to manage their business. The practices should have electronic health records (EHRs) and data management systems. There are technical concerns that should be addressed to make the integration of the IT systems, including access to patient records, as seamless as possible. There will also be HIPAA and possibly other privacy issues that need to be reviewed in order to properly integrate the EHRs. Human Resources Integration The buyout or merger of medical practices requires reviewing the credentials and skills of the healthcare providers and healthcare staff. Some of the issues that should be reviewed on a personnel level include staffing redundancies, compensation, benefits, and cultural integration. The new medical practice will want to retain key talent and manage any necessary staff transitions after the merger or buyout. Performance Measurements The new practice should create metrics to track the success of the merger or acquisition. The metrics should monitor the financial, operational, and clinical performance of the new venture to ensure that objectives are being met. The metrics and evaluation should be ongoing. Adjustments should be made as needed. The strategies should be refined when necessary. The status of the facilities and the equipment of both practices should be reviewed. Some facilities and equipment may need to be sold. Some can be combined. The Stark and AKS laws need to be reviewed to help ensure there are no violations of these anti-referral laws. Resources should be consolidated or optimized when necessary. A critical performance measurement involves the quality and continuity of patient care. During the transition to the new practice, patient care should not be disrupted. Ideally, patients will be happy with the new medical practice. A major goal of the buyout or merger is aligning the clinical practices, treatment protocols, and patient care standards. These practices, protocols, and standards need to be assessed. It’s a good idea – before the acquisition or merger, to obtain input from all of the medical staff members. THE NEW STARK AND AKS LAWS Physicians and medical practices should review their MSO and referral arrangements to help comply with the new Stark Law and AKS changes. Why do medical practices consider buying, selling, or merging with a medical practice? The reasons for wanting to acquire or merge a medical practice include the following: Increased leverage with paying patients Sharing overhead costs and other operational costs Merging the brand image of the practices The potential for growth Diversifying a practice within the limits of the original practice areas The senior leadership of each medical practice should have a clear vision of why the leadership wants to buy, sell, or merge a medical practice. The practices need to ask – “Why do we want to change our medical practice?” When conducting due diligence, the medical practices should understand on a daily basis what bills will be due, should look for any conflicts of interest, and should examine the online reputation of each medical practice. The North Carolina Medical Society recommends that medical practices consider the following when buying, selling, or merging their medical practice. Consider that much of the revenue of a medical practice comes from the doctor’s knowledge, skills, personality, and reputation. These features are generally not transferrable. The patient list generally should be valuable. Doctors may consider buying, selling, or merging their medical practice to obtain better professional support, more stability, the prospect of internal referrals from within the new organization, and a better work-life balance. The doctors should recognize that the other physicians in the practice may have different interests. While one doctor may want to retire, the other doctors may want to continue practicing. Generally, the buyers of medical practices are: New physicians who want to purchase a seller’s medical practice A small medical practice that wants to grow – in the same or a related specialty A larger medical practice that wants to acquire new patients, decrease overhead expenses, or move into a new geographic location A large specialty group entering a new market, for example; kidney dialysis, radiation oncology, or anesthesia A hospital or healthcare system A physician wants to relocate due to personal or professional reasons The types of medical practices that may be sold include: Private practices Group practices Emergency practices A broad range of specialty practices Direct family care practices Hospital-based practices HMOs Urgent care centers There are many pros and cons to acquiring a new medical practice or merging with an existing practice. Once a practice has decided to buy or merge with another practice, both practices should speak with experienced healthcare counsel who can explain the legal and healthcare compliance issues along with many financial, medical, and practical considerations. The more legal, medical, business, compatibility, and performance issues that are reviewed at the start, the more likely the new practice is likely to be successful.
February 1, 2024
Healthcare
Should an MSO be an LLC?
There’s no particular state requirement. It’s just a regular business, and that’s what a management company is. Even though it’s in the healthcare space, it’s just a regular business, and so there’s no requirement that business be a certain structure. So a LLC is the easiest way to do it. It’s the cheapest kind of entity to file, and I think it affords you the greatest protection personally and professionally. That’s why LLCs were created. So that’s what I would suggest. But again, a good idea is to check with the CPA with your particular needs and concerns and make sure you’re getting the right advice and you file the right entity. Testimonials
January 4, 2024
Healthcare
Can a Physician Assistant (PA) Set Up a California Medical Spa?
In today’s video, we turn to the question of whether a physician assistant (PA) can set up a California medical spa, or an integrative medicine, functional medicine, or any other multidisciplinary wellness center. Hi, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients like you, navigate the complex terrain of healthcare and FDA law so you can grow, launch, scale, your healthcare business. Here’s a familiar medical spa scenario. Paul, a Physician Assistant, excels at marketing and getting patients. He wants to set up a medical spa. He wants to hire an exercise physiologist, a registered nurse, personal trainer, a bunch of other practitioners. Can he do it? First, as we know the Corporate Practice of Medicine prohibits the practice of medicine by an unlicensed person or corporation. So, Paul should look for an MD or DO, who can bring a professional medical corporation to the table to run the medical side of the spa. The physician should supervise all the services to be offered by the medical spa, all the clinical services. In California, either the MD or DO, PA under the physician’s supervision, or the NP in a collaboration agreement with the physician, can perform that initial, good-faith exam. The physician should have standardized procedures for each medical procedure, and properly supervise the PA and registered nurse. The physician should also be responsible for hiring and firing these clinical providers within their professional medical corporation. Exercise physiology, personal training, those are independent. They could even be hired by the MSO that manages and markets the branded medical spa. Paul, the PA, can potentially have several streams of income. First, he has his own professional practice under supervision of the MD. Second, he might be a shareholder in the professional medical corporation, if the MD agrees. And third, he might be full or part-time owner in the MSO. All the marketing materials, including the website, should identify who does what services and what are the licensure and credentials for so performing these services. The marketing materials should be reviewed by legal counsel to ensure that there are not red flags for enforcement as being false and misleading advertising. We’ve seen a lot of stuff happen. California now includes increased penalties for medical spa owners who violate the corporate practice of medicine and engage in unlicensed medical practice. The law targets many popular medical spas that provide non-surgical, cosmetic procedures out there today like laser skin resurfacing, dermal fillers, cellulite treatments and much more. So, that’s why it’s important for Paul to have his business model vetted by healthcare counsel that understands the nuances of laws applicable to medical spas. Corporate practice of medicine is just one area of risk though. As mentioned, the PA got to be supervised by the physician. According to the California regulatory boards the supervising physician oversees the activities of and accepts responsibility for the medical services rendered by the PA. The supervising physician must adhere to the following mechanisms to provide supervision. Adherence to adequate supervision as agreed to in a practice agreement that meets the requirements of Business and Professions Code section 3502.3. And the physician must be available by telephone or other electronic communication method at the time the PA examines the patient. The supervising physician does not have to be on-site but has to be available as indicated. Before a PA can issue drug orders, the supervising physician must first prepare and adopt a written, practice specific formulary and protocols that specify all criteria for the use of a particular drug and any contraindications. The drugs listed constitute the formulary and can only include drugs that are appropriate for use in the practice. Any variations require advance approval from the supervising physician for the particular patient before the PA may issue a drug order. Thanks for watching. Please contact us with any questions. We helped healthcare clients in the industry just like you every day build their dream. We look forward to talking to you and we wish you well on your journey to success! Testimonials
October 28, 2023
Healthcare
HIPAA Compliance for Pharmacies Part One: HIPAA Rules and Best Practices
Pharmacies across the country need to understand and comply with the Health Insurance Portability and Accountability Act of 1966. According to the US Centers for Disease Control and Prevention (CDC), HIPAA is a federal law that provides national standards to protect sensitive patient information from being disclosed without their knowledge or consent. The US Department of Health and Human Services (HHS) issued a Privacy Rule and a Security Rule to implement the law’s requirements and to specifically protect a subset of the information (electronic patient information) that the Privacy Rule covers. HHS also has an Enforcement Rule to ensure compliance with HIPAA. The HIPAA Privacy Rule The HIPAA Privacy Rule applies to the use and disclosure of “protected health information” (PHI) by “covered entities.” The Privacy Rule also includes standards for how the PHI is used. The aim of the Privacy Rule is to ensure that there is a proper balance between protecting PHI and “allowing the flow of health information needed to provide and promote high-quality healthcare, and to protect the public’s health and well-being. FIVE STEPS TO MEET HIPAA OBLIGATIONS AND PRIVACY & SECURITY COMPLIANCE If you’re submitting claims electronically for reimbursement, you are under HIPAA. This subjects you to all the privacy and security obligations of HIPAA. Simply having an electronic medical record system that says, HIPAA Compliant, is not going to be enough. The HIPAA Security Rule The HIPAA Security Rule protects the confidentiality, integrity, and availability of electronic protected health information. Electronic refers to the subset of PHI that is digital. Covered Entities HIPAA’s Privacy and Security Rules apply to “covered entities.” Covered entities are defined as: Healthcare providers. “Every healthcare provider, regardless of size of practice, who electronically transmits health information in connection with certain transactions. These transactions include: Claims Benefit eligibility inquiries Referral authorization requests Other transactions for which HHS has established standards under the HIPAA Transactions Rule.” Health plans. Health plans include: Health, dental, vision, and prescription drug insurers Health maintenance organizations (HMOs) Medicare, Medicaid, Medicare+Choice, and Medicare supplement insurers Long-term care insurers (excluding nursing home fixed-indemnity policies) Employer-sponsored group health plans Government- and church-sponsored health plans Multi-employer health plans An exception may apply for smaller self-administered employer plans Healthcare clearinghouses. These are defined as “Entities that process nonstandard information they receive from another entity into a standard (i.e., standard format or data content), or vice versa. In most instances, healthcare clearinghouses will receive individually identifiable health information only when they are providing these processing services to a health plan or healthcare provider as a business associate.” HIPAA also applies to “business associates” who are people and organizations (with some exceptions) who use the PHI for claims processing, data analysis, utilization review, and billing. Business associates may be directly liable for HIPAA violations. Pharmacies and other healthcare practices may be liable for any HIPAA violations of their business associates. HIPAA compliance for pharmacies – The Rules According to the HIPAA Journal (which provides numerous articles on HIPAA compliance, HIPAA certification, HIPAA software, and many other HIPAA-related topics), most pharmacies do need to comply with HIPAA’s Privacy and Security Rules and, possibly, other even more stringent requirements. Pharmacy-related HIPAA topics include the following: How Do Pharmacies Qualify Under HIPAA While most pharmacies qualify as HIPAA Covered Entities, how they qualify is a little more problematic. HIPAA’s Administrative Simplification Regulations defines HIPAA Covered Entities as “a health plan, a health care clearinghouse, or a health care provider who transmits any health information in electronic form in connection with a transaction covered by this subchapter”. Most, but not all, pharmacies transmit health information electronically. Pharmacies are generally considered health care providers. The HIPAA Journal states that the complexity of whether a pharmacy is “covered” arises as follows: Health care providers are defined in 45 CFR §160.103 as: “A provider of services (as defined in 42 U.S.C. 1395x(u)), A provider of medical or health services (as defined in 42 U.S.C. 1395x(s)), and Any other person or organization who furnishes, bills, or is paid for health care in the normal course of business.” Most pharmacies do not qualify based on the first two criteria – 42 U.S.C. 1395(x) – either u or s. Most pharmacies do qualify based on the third category because health care is defined in the Administrative Simplification Regulations as including “[the] sale or dispensing of a drug, device, equipment, or other item in accordance with a prescription.” This means that any pharmacy that does qualify as a covered entity must comply with HIPAA’s Administrative Requirements which include the Privacy Rule, the Security Rule, and “if a breach of unsecured Protected Health Information occurs – the HIPAA Breach Notification Rule.” Pharmacies should already be familiar with these rules but periodic reviews can help eliminate mistakes and poor practices. The HIPAA Privacy Rule. This rule can be the hardest HIPAA rule to comply with for pharmacies because the rule may be hard for customers to ask questions and for pharmacists to answer questions – in retail environments – without being overheard and without disclosing PHI to the public. “It may also be difficult to comply discretely with requests for a permitted disclosure from (for example) law enforcement officers.” This means that employees of pharmacies need to be educated on what uses and disclosures of PHI are permissible and what standards must be met to protect the patient’s HIPAA rights. Pharmacy owners and managers also need to have policies in place to make sure each customer receives and acknowledges the receipt of the Notice of Privacy Practices. Each employee must also understand the contents of this Notice to “avoid unintentional violations of HIPAA.” The HIPAA Security Rule. This rule requires that covered entities implement safety measures to protect the “confidentiality, integrity, and availability” of electronic PHI. Pharmacy owners and managers (or a company compliance owner) must identify threats to the security and data that are likely to occur and “protect that data and the computer systems used to store that data – from unauthorized access, alteration, theft, or other impermissible uses and disclosures.” All pharmacy members should take security training – even if they do not access PHI. The members of the pharmacy staff should also be subject to the pharmacy´s HIPAA sanctions policy. The Breach Notification Rule. This HIPAA rule mandates which procedures pharmacies must use to protect unsecured PHI if the PHI is exposed to a third party – such as being overheard in a retail setting. Generally, pharmacies need to notify the individuals whose PHI was involved and the HHS Office for Civil Rights. The notification should identity the breach including what occurred, what information was not protected, and what steps the pharmacy is taking to mitigate any harm. The individual should be given advice about what steps they can take to mitigate any harm. Any use or disclosure (electronic, paper, or verbal) of PHI that is not authorized and not permitted is presumed to be a breach – unless the pharmacy can show that there is little likelihood that the Protected Health Information has been compromised. Best Pharmacy Practices for HIPAA Compliance While there is not one overall standard, each state has its own laws, and different pharmacies may operate differently. The HIPAA Journal recommends the following best practices for HIPAA compliance. We also recommend that you speak with our experienced healthcare compliance lawyers who will explain HIPAA’s provisions and the recommended ways for becoming compliant. The best practices include: The appointment of privacy and security officers. Pharmacies can choose any staff member to be a designated privacy and/or security officer. The responsibilities of this position include risk assessment, identification of confidentiality threats, and maintaining the integrity and availability of patient health information. The officer(s) should develop and implement HIPAA policies and procedures to reduce the risks to an appropriate level. Ensuring that PHI is not disclosed impermissibly. It’s not just the deliberate disclosure of PHI in violation of HIPAA’s Privacy Rule that is problematic. Pharmacies need to work to protect PHI information that is accidentally disclosed. Pharmacies need to create and implement policies and procedures to reduce the risk of all types of disclosures. “Care must also be taken not to disclose more than the ‘minimum necessary’ PHI.” Obtain authorizations when necessary. Pharmacies need to disclose PHI if requested by a patient or the HHS´ Office for Civil Rights. Pharmacies may use PHI for “treatment purposes, requesting or receiving payment, and pharmacy operations.” All other disclosures and uses must be authorized by the patient – in writing – and before the PHI is disclosed or used. Obtain business associate agreements. If a third party needs to access PHI to perform a service on the pharmacy’s behalf, that party is considered a “business associate.” “A business associate must provide reasonable assurances to the pharmacy, by means of a business associate agreement, that the requirements of HIPAA have been understood and that HIPAA Rules will be followed.” Inform patients of the pharmacy’s privacy practices. Pharmacies should place their privacy practices in writing and share those written policies with their patients. Patients should sign that they have received these policies. The policies should inform the patient how they can complain if they think their HIPAA privacy rights have been violated. Give patients copies of their PHI. Patients have the right to see their PHI (subject to some possible exceptions) on requests made to the pharmacy. Handle the disposal of PHI properly. Prescription labels and other documents should be disposed of so the PHI cannot be reconstructed or viewed. “Paperwork such as labels should be shredded, pulverized, pulped, or incinerated. ePHI on electronic devices must be permanently erased before disposal.” Educate the pharmacy staff. The staff and anyone who assists the pharmacy should be trained about HIPAA’s Privacy and Security Rules if they may come into contact with any patient health information. These workers and volunteers should also be trained about any federal or state PHI rules that may be stricter. Pharmacies generally qualify as “covered entities” under HIPAA and must therefore comply with HIPAA’s Privacy Rule regarding patient health information (PHI), Security Rule regarding electronic PHI, and the Breach Notification Rule in case protected information is improperly used or disclosed. Best practices include appointing HIPAA compliance officers, making sure patients have written copies of their rights, obtaining authorizations when necessary, and entering into business association agreements with outside companies. Pharmacies should contact Cohen Healthcare Law Group, PC to discuss their HIPAA compliance requirements. Our experienced healthcare attorneys advise pharmacies and healthcare practices about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
August 15, 2023
Healthcare
Are Anti-Aging Claims Drug Claims or Cosmetics Claims?
In today’s video, we focus on anti-aging products to determine whether FDA will likely regard your product as a drug instead of a cosmetic, which where you wanted to be. Hi, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. It’s a sunny day, it’s really me, and the glasses are photogray. We’ve helped lots of clients just like you, navigate the health and wellness industry through the legal requirements. Let’s talk about the Intended Use Doctrine. FDA determines that the intended use of a product could make it a drug, it looks to the labeling. And “labeling,” under the federal Food, Drug & Cosmetic Act (FDCA) will mean “all labels and other written, printed, or graphic matter (1) on any article or any of its containers or wrappers, or (2) accompanying such article.” In other words, “labeling” includes everything on the website, such as the blog, the product name, all the marketing. Everything is “labeling.” Worse (for you), this “intended use” doctrine gives FDA broad enforcement discretion. FDA can look at everything you’ve put out about the product and say, hey, this sounds like a drug to us. That’s the intended use, gleaned from the totality of the contents. Next, FDA gives particular scrutiny to some kinds of products, for example, Weight loss. The market is flooded with weight loss products whose claims go too far, and if you get to the end of this video, I guarantee you’ll lose two inches off your waist! That is, if you simultaneously engage in caloric restriction, read the fine print please. Okay, weight loss products, big problems for the FDA and the FTC. Now, you can’t look to what other companies are doing as evidence that they are successfully beyond enforcement scrutiny. Lots of people out there, not everyone gets caught. People are doing things, sometimes it takes years, but it can happen and it does happen. So, enough about weight, let’s talk about wrinkles. And there are some fine lines here, pardon the pun. If a product is intended to make lines and wrinkles less noticeable, simply by moisturizing the skin, the FDA will likely regard the product as a cosmetic. Similarly, makeup or “primers” intended to make the signs of aging less noticeable just by hiding them, are also considered, cosmetics. But products intended to affect the structure or function of the body, such as skin, are regulated as drugs. Note, if they’re not applied topically to the skin, and are machines, they might be considered medical devices. So, for example, if a product is intended to remove wrinkles or increase the skin’s production of collagen, it’s likely a drug or a medical device. Put another way, FDA emphasizes that products that are merely “intended to make people more attractive” generally are cosmetics. FDA states that its concern is with claims “that involve supposed effects on the structure of function of the skin.” Sound familiar? That’s part of the definition. Remember that drugs and medical devices are much more expensive to bring to market, and the regulatory burden is much higher, so it’s better if you can tame your claims to keep your product in the regulatory bucket of a cosmetic—assuming you can do this without sacrificing too much marketing power. And that’s where legal strategy comes in, as FDA lawyers we enjoy working with language, our goal is to help you choose marketing claims that won’t likely make the FDA bull charge at you, yet will also waive the flag sufficiently for marketing so that you’ll gain market share. Along these lines, we’d like to refer you to other materials on our Healthcare & FDA blog that talk about ten ways you can unwittingly end up making an implied disease claim for your product. Thanks for watching. Please contact us with your questions, comments. We have helped hundreds, thousands of healthcare companies just like you, market their products, navigate the legal and regulatory boundaries. We look forward to working with you on the journey to your success! Testimonials
August 8, 2023
Healthcare
The “Complementary and Alternative Medicine” Safe Harbor to Unlicensed Practice
In today’s video, we talk about the safe harbor to unlicensed medical practice and what it requires of the practitioner. Hi, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients like you, navigate the healthcare and FDA legal landscape so you can grow, or scale, or launch your healthcare business. Some years ago, a number of laws were enacted in various States to help create greater access to complementary and alternative medical therapies. These were generally known as “medical freedom” statutes, because they increased consumer access and choice. There are two types of such laws. The first limits the ability of State medical boards to discipline a licensed medical doctor solely on the basis that the physician choose to use a complementary therapy. It’s a pretty old statute. The second is a legal safe harbor for limited practice by someone who is not a licensed medical doctor or DO. In California, this safe harbor became known as SB 577 and was codified into the Business & Professions Code. Typically, this kind of healthcare freedom statute has a number of components. One, the practitioner cannot perform surgery or any kind of invasive procedure, prescribe, or otherwise practice “medicine.” Prescribing medication is disallowed but recommending dietary supplements might be allowed depending on what is said either there or elsewhere in State law. Two, the practitioner must disclose that they are not State licensed. Three, they have to talk about their training, methodology and disclose that. Four, they must recommend that the client consult their own primary care or other relevant physician. There can be a number of other requirements, such as that the practitioner have adequate liability insurance. There are of course other things to watch for, like whether the particular kinds of services offered by the practitioner, as well as their marketing claims, might potentially bring their work outside of the legal safe harbor and back into the prohibition against unauthorized practice, and that’s something we can help evaluate. And it might be unlicensed practice of medicine, nutrition, psychology, or some other prohibited professional practice. Thanks for watching. Please contact us with your questions. We have helped so many healthcare industry clients build their dream. We look forward to working with you on your journey to success! Testimonials
July 18, 2023
Healthcare
Nurse Practitioner Telehealth Functional Medicine vs. Coaching (Laws & Legal)
In today’s video, we are going to combine three different threads: a Nurse Practitioner wants to start a functional medicine practice, via telehealth, multi-state, and she wants to call it “coaching.” Hi, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients just like you, navigate healthcare and FDA legal issues so you can lunch, or grow and scale your healthcare business. The first piece here is you have an NP. While Nurse Practitioners typically do have a lot of practice autonomy, and we know that, normally there must at least be some collaborative relationship with a physician. Granted, “collaboration” is less than “supervision.” The point is, though, there is a medical doctor somewhere in the picture, and there is a legal agreement between the two that has to satisfy the requirements of State law for collaboration agreements between MDs and NPs. The next piece is telehealth. As we know, while the legal map for telehealth varies by State, there are some common elements across most States. Normally, a fax or email is not considered “telehealth,” so while it might be subject to HIPAA, it’s not subject to telemedicine rules. Then, in telehealth, the standard of care is the same as for in-person healthcare practice. So, practitioners must follow that standard of care. And healthcare providers who are not MDs or DOs must practice within their standard of care and scope of practice as well. We also know that typically, the practitioner must do certain things to “establish” the patient relationship. This can involve, for example, verifying the identity of the patient and also, ensuring that the patient has the ability to verify the identity and licensing status of the healthcare provider. In many states, the physician-patient or NP-patient relationship can be established virtually, as long as these criteria are satisfied, and the communication includes visual as well as audio. Informed consent must be given and documented. In some states, prior to prescribing, the provider must perform a medical interview sufficient to establish an informed diagnosis, it has to be as good as if the provider had performed an in-person physical examination. And an online questionnaire alone is not considered enough, it’s “static”, it’s insufficient. The supervising or collaborative physician must be available in person or electronically to consult if and as needed. If you dig more deeply into the statutes and regulations, you will also typically find a prohibition against advertising or promoting goods or services in which the healthcare provider has a financial interest. The telehealth portal can link to education and information, as long as there’s no profit for the licensee. Please look to our other videos for more drill-down on legal issues relevant to a functional medicine practice, or to telehealth and other issues. Thanks for watching. If you still have questions, give us a call, contact us via our website. We have helped so many healthcare industry clients on their journey to business success and we look forward to working with you too. Testimonials
July 2, 2023
Healthcare
The Possibilities and Legal Risks of ChatGPT for Doctors and Medical Practices
According to News Medical Life Sciences, ChatGPT, which was launched in November 2022, is an artificial intelligence (AI) chatbot developed by Open AI. ChatGPT can do many things that humans can do which is exciting and frightening. Some of these tasks include writing articles, completing job applications, and writing jokes and poetry. Already, Chat GPT has shown that ChatGPT can pass law school and business exams given at prestigious universities. “ChatGPT is poised to disrupt numerous industries, and search engines, education, graphic design, research, healthcare, retail, banking, manufacturing, logistics, and travel are already identified as those that stand to benefit from the technology.” News Medical Life Sciences states that ChatGPT will help healthcare professionals in many ways including the remote management of healthcare, clinical decision-making in real-time, drug management, medical record-keeping, real-time translation, clinical trials, and many other functions. How could ChatGPT be used to help healthcare providers and patients? Some of the possibilities for ChatGPT usage in the medical profession, according to Forbes, include personalized treatment plans, monitoring patients remotely, and the following: Telemedicine – virtual assistants. ChatGPT will be used to help patients schedule their appointments, manage their health information, and even receive treatments. Many patients are already using telemedicine to review their appointments, prescriptions, test results, and other aspects of their medical care. Clinical decision support. ChatGPT will be used to help doctors provide “real-time, evidence-based patient recommendations.” ChatGPT could review dangerous drug interactions, suggest possible treatments, and provide clinical guidelines. Recordkeeping. ChatGPT will help doctors and nurses dictate their notes so these healthcare providers can focus more on their patients. The AI software will also help summarize and analyze patient interactions and the patient’s medical histories. Chat GPT should also make test results more readily available. Medical translation. ChatGPT can be used to “translate medical jargon, technical terms, and common expressions, allowing patients to understand their diagnosis, treatment options, and medication instructions.” Managing medications. ChatGPT will help doctors keep track of the various medications their patients are taking and the dosages for each medication. The AI software should also help explain the possible adverse reactions, side effects, drug interactions, contraindicators, and other medication management issues. Disease surveillance. Doctors, researchers, and even regular citizens will be able to use ChatGPT to review global health data which can provide “real-time insights into potential outbreaks and facilitate early response efforts.” The AI software can look for patterns and anomalies that indicate a new disease is spreading or how quickly and where a known disease is spreading. In turn, public health officials, doctors, and others should then be able to take a more measured response to this new information. Medical writing and documentation. ChatGPT could be used to help doctors and other healthcare professionals write and document their medical reports including clinical notes and discharge summaries – along with “real-time suggestions and corrections.” Clinical trial research. ChatGPT could be used to identify possible participants in clinical studies by analyzing large sections of patient data to find eligible participants. “By leveraging ChatGPT’s capabilities, clinical trial recruitment efforts can become more efficient, targeted, and effective in reaching diverse populations.” Checking for symptoms. ChatGPT can be used to help patients understand their symptoms and the seriousness of their symptoms so patients can decide when medical care is necessary, what “self-care measures a patient can take before seeking medical attention, such as home remedies or over-the-counter medications,” and what other immediate steps are necessary. Triage of patients. ChatGPT could be used to determine which patients require priority care (including the need for surgery) by asking the patients questions about their medical history and their symptoms. Medication information. As discussed in the medication management section, ChatGPT can be used to see what drug side effects, consequences, and possible contraindications are possible. Patients will be able to ask questions in their layman’s language and ChatGPT can respond “with accurate and timely information, helping patients make informed decisions about their medications.” ChatGPT should also be able to quickly provide details about the “proper dosage, administration, and storage of medications, as well as potential alternatives for patients who are allergic or intolerant to specific prescriptions.” ChatGPT will help doctors stay current about new drugs, drug recalls, and other critical pharmaceutical information. Medical education. ChatGPT will help students, doctors, and other healthcare professionals obtain medical information and resources to help with their studies and with ongoing medical learning. Mental health support. ChatGPT “can be used to provide behavioral health support to patients, including screening for mental health conditions, offering coping strategies, and connecting patients with resources for further support.” Remote monitoring of patients. ChatGPT will work with patients who are wearing medical devices and sensors to help doctors and healthcare providers have access to real-time patient information – to alert the doctors/providers that a patient is in danger or has health issues that should be addressed. Early intervention should lead to better health outcomes. Medical professionals and hospitals will need to keep current with the latest AI tools to better serve their patients. What are some of the concerns about the use of ChatGPT in the healthcare sector? There are many different legal and ethical issues involved with the use of ChatGPT. Some current and federal laws already do apply to the use of any type of artificial intelligence in the healthcare sector. Many laws and regulations will likely be enacted as the use of ChatGPT and AI expands and the consequences of using this computer software become better understood. Confidentiality. Much of the data involved with ChatGPT comes directly from patients. There are already laws that protect patient information such as the Health Insurance Portability and Accountability Act of 1966 (HIPAA) and various federal and state laws. In addition to these laws, state medical agencies also regulate the use and storage of patient information. The manufacturers of ChatGPT software and the doctors who recommend and use the AI software will need to ensure that their patient information is private, secure, and complies with the applicable laws. Patients will need to be consulted about how their medical information is used. Generally, patients will likely have to “opt-in” for the AI software to be able to use a patient’s data. Healthcare providers will need to understand when their patient’s information is being used by ChatGPT and what information the providers need to explain to their patients about how ChatGPT may use their patient data. Many medical practices may need to update their HIPAA forms and their relationships with their various healthcare vendors. Accuracy. The software does need to be tested for accuracy. Patients’ lives are at risk. The information that is being analyzed needs to be accurate. The unauthorized practice of medicine. On the surface, the ability of ChatGPT to be used for clinical trials and medical research sounds like a worthy goal – but ultimately doctors and licensed healthcare professionals need to make medical decisions for their patients. The line between gathering and analyzing data and making medical decisions is likely to become a very fine one – and the subject of further laws and regulations about the medical and legal limits of ChatGPT. ARTIFICIAL INTELLIGENCE AND THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996 (HIPAA) AI in the healthcare industry almost by definition, requires constant access to patient information. Developers and covered health providers need to understand when and how HIPAA applies to their […] Other legal issues regarding ChatGPT may involve: Intellectual property issues Bias issues FDA compliance – there are already FDA regulations regarding the use of artificial intelligence as medical devices and for medical treatment. FDA oversight of ChatGPT is just beginning and is likely to expand. Many other developing issues ChatGPT offers many possibilities and promises for providing quality healthcare for patients and allowing doctors to provide better and more advanced healthcare to their patients. The AI services aim to both help the doctor better communicate with the patient and provide better patient outcomes. Both the developers of new software and the medical practices that use ChatGPT for their patients will need to understand the medical and legal limitations of ChatGPT. The legal limitations include issues of patient privacy, data security, the unauthorized practice of medicine, and many other issues. FDA POLICY ON WHEN SOFTWARE THAT USES ARTIFICIAL INTELLIGENCE AND MACHINE LEARNING QUALIFIES AS A MEDICAL DEVICE As more artificial intelligence products become available, the FDA is reevaluating its approval criteria. For now, De novo approval and 501(k) are being used along with premarket approval. Physicians and developers should contact Cohen Healthcare Law Group, PC to discuss the legal and ethical concerns about using ChatGPT. Our experienced healthcare attorneys advise physicians and developers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
June 8, 2023
Healthcare
Can Physicians Legally Invest in a Startup-Owned Pharmacy?
In today’s video, we address whether a physician can legally invest in a pharmacy that is owned by a startup that provides online telehealth services, including diagnosis and prescription based on a questionnaire to its customers. Hi everyone, I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare industry clients just like you, navigate healthcare and FDA legal issues so you can grow your healthcare business. In a prior video we said that the proposed venture that we’re talking about is legally risky from a variety of standpoints, including the way that telehealth rules in many States tend to require an in-person, good faith exam prior to physician prescribing, and the way regulators can frown upon prescription based solely on an online questionnaire. So, there are risks there depends on how aggressive you want your model to be. On the pharmacy side, many States do prohibit physicians from owning or investing in a pharmacy. So, that’s problematic. One State that is a little bit unusual in this regard is Texas. In Texas, physicians may own or invest in a pharmacy, as long as the ownership structure fits within the Texas Patient Non-Solicitation Law exceptions. So, we have to look at those. Now, even with that, physicians have to bear in mind that there is a federal Stark law, which prohibits self-referral; and the federal Anti-Kickback Statute (AKS), which prohibits payment in exchange for referrals for items or services paid for by Federal health care programs. Texas like many states has its own State law prohibitions against self-referral and kickbacks. Wherever you look: New York, California, you’ll find those prohibitions. So, in analyzing the proposed compensation arrangement, one thing physicians and startups should bear in mind is that legal or regulatory trouble can come from a variety of places, including some side doors that one might not expect. For example, many States have, as we know, been reviewing physician investment into compounding pharmacies and looking there for unlawful or medically unnecessary referrals. So, it might be that kind of regulatory activity that triggers legal jeopardy. Regulators possibly could see, for example, this as an arrangement where physicians are given a financial incentive (also known as an inducement) to refer patients to medications, where the physicians themselves benefit or profit as soon as the patient buys the medicine from the pharmacy where the physician has an ownership interest. Some of these arrangements, for example, might involve creams to alleviate pain; DNA tests; genetic tests; or referrals to affiliated labs for urine testing, there are lots of different varieties and flavors. Some States will impose on physicians the requirement of disclosing their ownership or investment or other compensation interest to an entity or in an entity to which they refer patients. Remember that kickbacks are often defined to involve any remuneration, “direct or indirect.” This is a powerful catch-all, “indirect,” it can be used where the business structure involves multiple entities and a roundabout way of getting compensation to the clinician. So, it pays to have these innovative business structures well vetted by experienced legal counsel, and we’ve seen many. Thanks for watching. Feel free to contact us with your questions or book an appointment. We have helped hundreds and hundreds of healthcare industry clients just like you build their dream. We look forward to working with you on your journey to success! Testimonials
April 24, 2023
Healthcare
How MSOs Help Medical Practices with Office and Equipment Rental
A Managed Service Organization (MSO) has numerous benefits. At the core, an MSO helps doctors and other healthcare professionals separate the administrative side of a medical practice from the clinical side. The clinical side is regulated in many ways through federal laws, state laws, and the regulations and policies of state and local medical boards. Federal and state laws the regulate medical practices Stark Law is a federal law that prohibits referrals by doctors to entities called designated healthcare services that the doctors (or a close relative) have a financial interest in – when medical practices submit bills for payment to Medicare and Medicaid. Stark Law imposes civil penalties including fines and the possible cessation of the medical practice for violations. The Anti-Kickback Statute (AKS) regulates referrals to and from physicians by entities such as pharmaceutical companies if the referral is based in any way on an improper financial incentive such as the payment of cash, positions on medical boards that are just ways to pay a doctor who does little or no work for the payment, vacations, and other benefits. The AKS applies to bills submitted to Medicare, Medicaid, and any other federal healthcare agency that pays medical bills such as TRICARE. Violations of the AKS can result in civil and criminal penalties. Violations of Stark Law or the AKS may also result in complaints that the doctor/medical practice violated the federal False Claims Act or a state false claim law because bills to federal agencies such as Medicare or Medicaid were made fraudulently. Physicians who have an ownership interest in a medical practice also need to understand their state’s corporate practice of medicine laws. These laws regulate who can have an ownership interest in a medical practice. The aim of all these laws – Stark Law, the AKS, the False Claim Act, and the corporate practice of medicine laws is to ensure that the health of the patients comes before any financial interests of the physicians. The benefits of an MSO An MSO helps medical practices do more than just tend to the business side of a medical practice. An MSO can help medical practices show that the business side of the practice is separate from the clinical side by specifically meeting the exceptions to Stark Law and the safe harbors to the AKS that are defined in those statutes. An MSO can help show that the medical malpractice is not violating either the federal or state False Claims Acts and is also meeting the requirements of the state and local medical boards. An MSO can help a medical practice come into compliance with corporate practice of medicine laws. As we’ve discussed, MSOs supply the business side of a medical practice – with human resources, payroll and employee benefits, education, compliance, and other non-medical matters. While MSOs mainly provide services for physicians, Physicians Practice Group states that “MSOs can help hospitals and other medical ventures. MSOs can be owned by different entities including hospitals, physician groups, investors, and others.” MSOs can also provide the capital for a medical practice and then offer the practice office space, equipment, and other essentials. In order for an MSO to show the medical practice is compliant with the various federal and state laws that prioritize patient safety over financial profit, a medical practice should review the specific statutory exceptions and safe harbors, what tasks the MSO can and can’t perform, and what contractual arrangements should be entered into between the medical practice and the MSO with an experienced healthcare lawyer. WHEN USING A MANAGEMENT SERVICES ORGANIZATIONS (MSO) IS THE RIGHT CHOICE FOR YOUR MEDICAL PRACTICE Managed Services Organizations help physicians focus on practicing medicine by freeing doctors from many administrative tasks. Failure to consult with an MSO healthcare lawyer can cause civil and […] What tasks can MSOs perform? Some of the general tasks MSOs can perform, according to Physicians Practice Group, include: Medical coding for billing, payment, and collection to help ensure False Claims Act compliance and other federal/state compliance issues Educate and train the medical staff Compliance with HIPAA (Health Insurance Portability and Accountability Act), OSHA (Occupational Safety and Health Administration) regulations, FMLA (Family and Medical Leave Act), CLIA (Clinical Laboratory Improvement Amendments of 1988), and state laws Ensuring that the medical and administrative staff have the proper credentials The information technology needs of the medical practice Various financial issues including procuring supplies and medications, audits, financial management, payroll and benefits, marketing, sales Risk management Scheduling Transcription of medical records Public relations Disaster management Quality assurance Contract negotiations Insurance risks Other administrative aspects of the medical practice According to Physicians Practice MSOs can: Provide business services that allows the medical practice to be quite independent of the MSO Own/buy the tangible assets of the practice and manage the assets directly In this type of MSO- the MSO owns the office space, equipment, and supplies – and leases the space/equipment/supplies back to the medical practice. “That is, the physicians continue to practice in their existing office space and own their medical records, keep their existing insurance plan contracts, staff, and so on, but no longer own the administrative expense and burden of managing those assets.” This makes it hard for the medical practice to terminate the agreement with the MSO but can help the medical practice meet its compliance issues and shifts the burden of administering the medical practice to the MSO. Stark law exceptions and office space rentals Stark law provides numerous exceptions to help medical practices come into compliance. One exception is for compensation arrangements involving payments for office space made by a lessee to a lessor. “This exception would also apply when a solo-practice physician establishes such a relationship through his/her practice or wholly owned legal entity, or where a physician stands in the shoes of his/her physician organization for purposes of the office space lease arrangement.” Stark Law provides the following exception for the rental of office space: Payments for the use of office space made by a lessee to a lessor should comply with this Stark Law exception if the arrangement meets the following requirements: The lease agreement must be in writing, signed by the parties (such as the MSO and the medical practice), and specify what property is covered. The length of the office space rental must be at least one year. If the lease contract terminates with or without cause, the parties (such as the MSO and the medical practice) can’t enter into a new lease contract for the same space for the remainder of the first year of the original lease contract. The office space that is rented/leased cannot be more than what is reasonable and necessary “for the legitimate business purposes of the lease arrangement” and shouldn’t be shared with the lessor or any person/entity related to the lessor. – unless certain specific conditions set forth in the Stark Law exception statute are met. The rental charges during the term of the lease should be set in advance and should be “consistent with fair market value.” The rental charges during the term of the lease should not be based in any manner on: “The volume or value of referrals or other business generated between the parties; or By using a formula based on A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space; or Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee.” The lease contract should be “commercially reasonable even if no referrals were made between the lessee and the lessor.” If the lease arrangement expires after a term of at least 1 year, a holdover lease arrangement immediately following the expiration of the lease arrangement satisfies the other requirements of the exception and other specific conditions set forth in the Stark Law exception statute. Generally, tenants can make payments for common areas such as central reception areas if the lease payments meet certain pro-rate share and fair market value conditions. Stark law exceptions and equipment rentals In many respects, the Stark Law exception for renting equipment is similar to the exception for office space. Again, for our discussion, the MSO should be considered the lessor and the medical practice the lessee – though Stark Law permits the physician to be either the lessor or the lessee – provided the specific terms of the exception are met. The equipment rental exception: “Would also apply when a solo-practice physician establishes such a relationship through his/her practice or wholly owned legal entity, or where a physician stands in the shoes of his/her physician organization for purposes of the lease arrangement.” The essential terms of the lease arrangement require: That the rental or lease agreement is in writing, signed by the parties, and specifies what equipment is covered. The equipment rented or leased should meet the reasonable and necessary business needs of the medical practice and be used exclusively by the lessee (not shared with the lessor or people/entities related to the lessor). The lease should be one year or more. Similar termination conditions to the office space rental requirements apply. The rental charges are set in advance, are based on fair market value, and are not based on the volume or value of any referrals or other business generated between the parties (the MSO and the medical practice), or other criteria set forth in the statute. The lease contract would be commercially reasonable even if there were no referrals between the parties. “A holdover month-to-month rental for up to six months immediately following an agreement with a term of at least one year is allowed,” provided certain conditions are met. The AKS and – office space rentals and equipment rentals The Office of Inspector General does permit similar office and equipment agreements between an MSO and a medical practice. Normally, payment for rental space wouldn’t violate the AKS – provided the payment isn’t below fair market value or the tenant/medical practice rents more than is commercially necessary. Payments below fair market value or for more spaced than commercially necessary could be considered “kickbacks.” Generally, for either the office space rental or equipment rental safe harbors to the AKS to apply: The lease must be signed by both parties (the MSO and the medical practice) The lease should cover the premises leased or the equipment leased. The lease should specify any lessor access rights. The length of the lease should be at least one year. The rental should be set forth in advance and be consistent with fair market value, The office space/equipment should be what is necessary for the practice and no more. MSOs and the Corporate Practice of Medicine For more information about how MSOs can help with corporate practice of medicine compliance, please see our prior discussion of this topic. There are some direct exceptions to the California laws that prohibit the corporate practice of medicine, such as creating a professional medical corporation. There are also strategies that can be used such as the use of a management services organization (MSO) to help ensure that the medical practice meets its financial needs while also ensuring that the care and treatment of patients are the priority. Medical practices should consider using a managed service organization to administer the business side of their practice so the medical practice can focus on the medical side of the practice – and also help show the practice is in compliance with Stark Law, the Anti-Kickback Statute, corporate practice of medicine laws, and other laws that serve to prioritize patent safety over financial profit. EXCEPTIONS AND ALTERNATIVES TO THE CORPORATE PRACTICE OF MEDICINE California has a strict corporate practice of medicine law. Physicians should consider a professional medical corporation. Doctors need to be aware of Stark Law and the AKS. An MSO may be advisable. Physicians and medical practices should contact Cohen Healthcare Law Group, PC to discuss how an MSO can help address federal and state compliance laws and regulations. Our experienced healthcare attorneys advise physicians and medical practices about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
April 15, 2023
Healthcare
Stem Cells Therapy Clinic Startups – Legal Compliance Issues
The FDA has the authority to regulate a practice’s regenerative medicine products or treatments. Healthcare companies that don’t understand and comply with these regulations may receive warning letters. Their products may be seized. The FDA may seek injunctions against the companies. There could even be fines and criminal penalties. Stem cells are one form of regenerative medicine. Other forms include platelet-rich-protein (PRP) therapy, and gene therapy. WHY THE FDA WON’T APPROVE YOUR REGENERATIVE MEDICINE PRACTICE Regenerative medicine includes many treatments and products such as stem cell therapy, PRP, and gene therapy. An experienced stem cell and regenerative medicine lawyer can explain the FDA requirements. What are stem cells products and therapies? According to the Mayo Clinic, stem cells are the cells of the human body: “From which all other cells with specialized functions are generated. Under the right conditions in the body or a laboratory, stem cells divide to form more cells called daughter cells. These daughter cells become either new stem cells or specialized cells (differentiation) with a more specific function, such as blood cells, brain cells, heart muscle cells or bone cells. No other cell in the body has the natural ability to generate new cell types.” Stem cells are useful in understanding how diseases happen. Stem cells can generate healthy cells that replace deceased cells or repair damaged cells (regenerative medicine). Some of the possible beneficiaries of stem cell therapy may include helping people with “spinal cord injuries, type 1 diabetes, Parkinson’s disease, amyotrophic lateral sclerosis, Alzheimer’s disease, heart disease, stroke, burns, cancer, and osteoarthritis.” Stem cells may be used to test drugs for safety and quality. For example, “nerve cells could be generated to test a new drug for a nerve disease.” Stem cell sources include: Embryonic stem cells. Embryos that are 3-5 days old and are considered versatile enough to “regenerate or repair diseased tissue and organs.” Adult stem cells. These cells are usually found in bone marrow or fat (or the hip). Adult stem cells have more limited utility than embryonic cells though researchers are discovering evidence that “adult stem cells may be able to create various types of cells. For instance, bone marrow stem cells may be able to create bone or heart muscle cells.” Currently, “adult stem cells are currently being tested in people with neurological or heart disease.” Adult cells altered to have the properties of embryonic stem cells. Using genetic programming, “researchers can reprogram the cells to act similarly to embryonic stem cells.” Scientists aren’t sure yet about the adverse effects in humans. Perinatal stem cells. Scientists have also found stem cells in amniotic fluid as well as umbilical cord blood that have the ability to change into specialized cells. There is some controversy (including moral and ethical concerns) about the use of embryonic stem cells. Stem cell products and therapies generally are injected into a person’s damaged anatomy – with the aim of regenerating a healthy anatomy. There are concerns with all types of regenerative medicine including the concern that cells could mutate which could cause cancer. The National Institutes of Health created guidelines for human stem cell research in 2009. FDA oversight of stem cell therapies and regenerative medicine Stem cell products are treated like biological drugs. Stem cells are regulated through the FDA’s Center for Biologics Evaluation and Research (CBER). “The Center for Biologics Evaluation and Research (CBER) regulates cellular therapy products, human gene therapy products, and certain devices related to cell and gene therapy. CBER uses both the Public Health Service Act and the Federal Food Drug and Cosmetic Act as enabling statutes for oversight.” “Cellular therapy products include cellular immunotherapies, cancer vaccines, and other types of both autologous and allogeneic cells for certain therapeutic indications, including hematopoetic stem cells and adult and embryonic stem cells. Human gene therapy seeks to modify or manipulate the expression of a gene or to alter the biological properties of living cells for therapeutic use.” The National Institutes of Health states that, in 1997, the FDA began a “Risk-based, tiered approach to regulating cellular and tissue-based products. As a result, human cells, with the exception of those deemed minimally manipulated and used for autologous treatments, would be subject to FDA premarket approval as biologics.” So far, the FDA has been slow to place products in the “minimally manipulated category.” In addition to FDA regulation, state medical boards and the states themselves can regulate experimental stem cell therapies and do regulate the practice of medicine. The FDA’s authority to regulate stem cells is derived from Section 361 of the Public Health Service Act (providing authority for the FDA to establish regulations for all HCT/Ps to prevent the introduction, transmission, and spread of communicable diseases) and a series of rules known as the HCT/P regulations. HCT/P stands for human cells, tissues, and cellular and tissue-based products. Manufacturers of stem cell therapies and other products in this category must comply with the HCT/P regulations including registering the stem cell therapy with the FDA’s CBER. “Manufacture means, but is not limited to, any or all steps in the recovery, processing, storage, labeling, packaging, or distribution of any human cell or tissue, and the screening or testing of the cell or tissue donor.” We’ve written about these regulations including discussing such terms as homologous use, autologous use, reproductive use, minimal manipulation, and other terms. Since stem cell therapies are handled by the FDA as drugs – these therapies are also subject to current Good Manufacturing Practices (cGMPs). Section 351 of the Public Health Service (PHS) Act defines a biological product as a “virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, or analogous product, … applicable to the prevention, treatment, or cure of a disease or condition of human beings. “Both the FDA’s Center for Drug Evaluation and Research (CDER) and Center for Biologics Evaluation and Research (CBER) have regulatory responsibility for therapeutic biological products, including premarket review and oversight.” Again, since stem cell products are intended to treat disease, stem cell products fall within the definition of a biological drug, requiring FDA approval. California has its own stem cell regulations. CALIFORNIA STEM CELL REGULATIONS GUIDE THE EMERGING STEM CELL RESEARCH EFFORT AND INDUSTRY California stem cell laws boost the stem cell industry by funding stem cell research, but the product side of industry is largely in the hands of the FDA. FDA and stem cell warnings The FDA has raised concerns about stem cells. The FDA has expressed concerns that “stem cells have been called everything from cure-alls to miracle treatments.” The agency states that stem cell therapies do offer the hope that the therapies can treat diseases or conditions for which few treatments exist. The FDA is expanding its oversight of stem cell products because the products may be illegal, potentially harmful, and offer false promises. Stem cell therapies – FDA safety concerns The FDA has numerous safety concerns about unproven stem cell treatments. For example, “attendees at a 2016 FDA public workshop discussed several cases of severe adverse events. One patient became blind due to an injection of stem cells into the eye. Another patient received a spinal cord injection that caused the growth of a spinal tumor.” Some of the safety issues include: “Administration site reactions The ability of cells to move from placement sites and change into inappropriate cell types or multiply Failure of cells to work as expected The growth of tumors” The FDA emphasizes that even when stem cell therapies involve your own cells, there are still safety risks. “In addition, if cells are manipulated after removal, there is a risk of contamination of the cells.” STEM CELL LAWS AND REGULATIONS: FDA REGULATION OF STEM CELL THERAPIE If you wanted to upgrade the old film, “The Graduate,” you’d have Dustin Hoffman’s character shouting out “stem cells!” instead of “plastics!” Of course, he would immediate meet his favorite […] FDA approval of stem cell therapies Generally, stem cells products cannot be approved for market use unless the stem cell products are either approved by the FDA (premarket approval or 510 (k) clearance)) or are studied in a clinical investigation that is approved by the FDA. A clinical investigation is called an Investigational New Drug Application (IND). An IND is a “clinical investigation plan submitted and allowed to proceed by the FDA.” The review process also generally investigates how the stem cell therapy will be manufactured so the “FDA can make sure appropriate steps are being taken to help assure the product’s safety, purity, and strength (potency). The FDA also requires sufficient data from animal studies to help evaluate any potential risks associated with product use.” Clinical trials that aren’t conducted pursuant to a formal IND investigation may be subject to FDA warning letters or oversight. What is an IND? An Investigational New Drug Application (IND) is a clinical study sponsor request for FDA authorization to “administer an investigational drug or biological product to humans.” Unless an exemption applies, the sponsor for a clinical study must obtain FDA authorization for conducting the study by submitting an IND Application. Before a new drug or biological product such as a stem cell therapy treatment can be shipped in interstate commerce, the IND must be filed if the drug/biological product is not “the subject of an approved New Drug Application or Biologics Product License Application.” “Clinical studies must follow a set of laws and regulations, which are intended to protect the right, safety, and welfare of human subjects participating in human trials, ensure the quality, validity, and integrity of the clinical trial data, and promote the availability of new medical products to the public. These laws and regulations define the roles and responsibilities of entities, such as sponsors, clinical investigators, and institutional review boards. In addition, various guidance documents and standard operating procedures are available to clarify policies and procedures for the IND process.” The content and format of an IND submission must be “complete, well-organized as per 21 CFR 312, and include all applicable FDA Forms.” These forms can also be found in FDA’s Form Database. There are specific submission requirements including requirements for electronic submissions for commercial INDs. The current status of FDA-approved products derived from Stem Cells FDA’s approval of stem cell products is minimal. The only stem cell-based products that are FDA-approved for use in the United States consist of blood-forming stem cells (hematopoietic progenitor cells) derived from cord blood. One approved stem cell product is Hemacord, a cord blood-derived product manufactured by the New York Blood Center and used for specified indications in patients with disorders affecting the body’s blood-forming system…. Other approved licensed HCT products from the Office of Tissues and Advanced Therapies (OTAT) can be found on the FDA’s website. PHYSICIAN STEM CELL THERAPIES LEGALLY AMBIGUOUS, WHILE REGENERATIVE CLINICS PROSPER Recent press calls into question widespread “regenerative” and anti-aging medicine, and physician practices that use stem cell therapies. Possible FDA actions on for unapproved stem cell products The FDA may issue warning letters and seek many types of administrative and judicial actions, including criminal enforcement, depending on the violations involved. In August 2017, the FDA announced that the FDA would be increasing its oversight of stem cell therapies and regenerative medicine. And in March 2017, the FDA published a perspective article in the New England Journal of Medicine in March 2017, to further clarify the benefits and risks of stem cell therapy. The FDA has also provided Important Patient and Consumer Information About Regenerative Medicine Therapies. Stem cell therapies usually are reviewed through an Investigational New Drug (IND) process (otherwise a more formal premarket approval process is required). In turn, clinical studies are normally used to obtain IND approval. There are other legal compliance issues including privacy and diversity in clinical studies. Since stem cell therapies often involve cutting-edge technology and research, there are also intellectual property issues including possibly patent issues that need to be addressed. The developers and users of stem cell therapies should contact Cohen Healthcare Law Group, PC to discuss the FDA and other compliance issues. Our experienced healthcare attorneys advise medical companies and the doctors who prescribe stem cell therapies about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 28, 2023
Healthcare
New California Laws for Physicians and Surgeons for 2023
The Medical Board of California (MBC) recently discussed many of the new California laws that govern the practice of medicine in California. We summarize a few of those new laws here starting with – AB 2178 (Bloom) – Physicians and surgeons: special faculty permits: academic medical center. This law, according to MBC, updates how a medical center is defined and certain Board specific permit programs. AB 2178 states that the Medical Practice Act generally prohibits physicians and surgeons from practicing medicine unless the physician/surgeon has a certificate issued by the Medical Board of California. The Medical Practice Act also authorizes a person who “meets certain eligibility requirements to apply to the board for a special faculty permit.” The special faculty permit authorizes the applicant to “practice medicine without a physician’s and surgeon’s certificate only within: The medical school itself Any affiliated institution of the medical school, or An academic medical center, and Any affiliated institution in which the permit holder is providing instruction as part of the medical school’s or academic medical center’s educational program and for which the medical school or academic medical center has assumed direct responsibility.” Current California law defines an “academic medical center” for these purposes as a facility that meets specific requirements, including: Training a minimum of 250 residents and postdoctoral fellows annually Having foreign medical graduates in clinical research, and Offering clinical observership training. AB 2178 changes the definition of “academic medical center” by: “Requiring the facility to train a minimum of 250 resident physicians in specified residencies Removing the requirement that the research of the foreign medical graduates be clinical, and Requiring the facility to instead offer clinical observer experiences.” AB 2168 specifically updates the definition of the term “academic medical center” as follows: “A facility licensed by the State of California. The facility conducts both internal and external peer review of the faculty for the purpose of conferral of academic appointments on an ongoing basis. The facility conducts clinical and basic research for the purpose of advancing patient care. The facility trains a minimum of 250 resident physicians in Accreditation Council for Graduate Medical Education accredited residencies on an annual basis commencing each January 1. The facility has more than 100 research students or postdoctoral researchers annually. The facility has foreign medical graduates in research. The facility offers clinical observer experiences. The facility is accredited by the Western Association of Schools and Colleges and the Accreditation Council for Graduate Medical Education.” The time that a special faculty permit holder spends in a faculty position is not “counted toward the postgraduate training required for licensure and shall not qualify the holder of the permit for waiver of any written examination required for licensure.” The medical school or academic medical center shall not “appoint the holder of a special faculty permit to a position as a division chief or head of a department without express written authorization from the board.” California Medical Board lowers supervision threshold for medspa and cosmetics affiliated physicians California law now lowers the threshold of supervision of nurses and other appropriate licensed healthcare practitioners in medical spas.In recent rule-making the Medical Board of California […] Other physician and surgeon laws summarized by the Medical Board of California Other California laws (effective in 2023) that MBC suggests physicians and doctors understand include the following: AB 852: (Wood) – Health Care Practitioners: Electronic Prescriptions. This law governs when healthcare providers must provide electronic prescriptions, what exemptions may apply, the obligations of the pharmacies to fill electronic prescriptions, and the need for prescribers who qualify for an exemption to register with the Board of Pharmacy. AB 1102: (Low) – Telephone Medical Advice Services. This law addresses the requirements for providing telephone medical advice services from an out-of-state location. AB 1120: (Irwin) – Clinical Laboratories: Blood Withdrawal. This California explains how a certified phlebotomy technician can collect blood including the requirement that the “blood collection procedure is performed under the general supervision of a physician and surgeon and the blood collection procedure is performed using a device or devices approved by the United States Food and Drug Administration.” AB 1278: (Nazarian) – Physicians and Surgeons: Payments: Disclosure: Notice. AB 1278 requires written, office, and website notice requirements that physicians must provide “informing patients of the federal Centers for Medicare and Medicaid Services Open Payments online database.” “Physicians working in a hospital emergency room are exempted from these requirements.” AB 1636: (Weber) – Physician’s and Surgeon’s Certificate: Registered Sex Offenders. This law explains the Board’s authority regarding a physician and surgeon (P&S) license who is convicted or disciplined for acts of sexual misconduct. AB 1797: (Weber) – Immunization Registry. This law provides for the disclosure of certain patient information (such as race and ethnicity) that must be disclosed to certain local, regional, or state health departments regarding immunization information. AB 1954: (Quirk) – Physicians and Surgeons: Treatment and Medication of Patients Using Cannabis. This law prohibits physicians and surgeons “from automatically denying treatment or medication to a qualified patient based solely on a positive drug screen for tetrahydrocannabinol (THC) or report of medical cannabis use without first completing a case-by-case evaluation of the patient that includes a determination that the qualified patient’s use of medical cannabis is medically significant, as defined, to the treatment or medication.” Other conditions also apply. AB 2098: (Low) – Physicians and Surgeons: Unprofessional Conduct. AB 2098 “establishes that it is unprofessional conduct for a physician and surgeon to share mis/disinformation to a patient under their care in the form of treatment or advice, as defined.” AB 2176: (Wood) – Live Birth Registration. Changes the deadline to register live births. AB 2288: (Choi) – Advance Health Care Directives: Mental Health Treatment. “Clarifies that advance health care directives include mental health and treatment” and other provisions. AB 2338: (Gipson) – Health Care Decisions: Decisionmakers and Surrogates. “Creates a list of relatives who can make medical decisions for an incapacitated adult who does not otherwise have a legally recognized health care decisionmaker.” AB 2436: (Bauer-Kahan) – Death Certificates: Content. Updates the information that should be included. SB 189: (Committee on Budget and Fiscal Review) – State Government. Addresses MBC public meeting requirements. SB 528: (Jones) – Juveniles: Medication Documentation. “Requires certain forms related to the provision of psychotropic medications be included within a foster youth’s case plan.” Other new California laws of concern to physicians and surgeons include: SB 872: (Dodd) – Pharmacies: Mobile Units SB 923: (Wiener) – Gender-affirming Care SB 1029: (Hurtado) – One Health Program: Zoonotic Diseases SB 1184: (Cortese) – Confidentiality of Medical Information Act: School-linked Services Coordinators SB 1237: (Newman) – Licenses: Military Service SB 1259: (Laird) – Pharmacists: Furnishing Opioid Antagonists SB 1346: (Becker) – Surplus Medication Collection and Distribution SB 1440: (Roth) – Licensed Midwifery Practice Act of 1993: Complaints A summary of recent MBC enforcement actions The MBC’s recent newsletter also discusses its enforcement actions for 2022. The MBC stated that: For the fiscal year 2021-2022, nearly 10,00 complaints were filed with the Board. More than 82% of these complaints were closed. Administrative actions were taken on 438 complaints. “A physician who fails to provide the requested records may be subject to a civil penalty of $1,000 a day for each day the records have not been provided, up to $10,000.” “In FY 2021-2022 (pg.17), the following case types had administrative action taken: Gross Negligence/Incompetence – 211 Licensees Inappropriate Prescribing – 44 Licensees Unlicensed Activity – 1 Licensees Sexual Misconduct – 14 Licensees Mental/Physical Illness – 15 Licensees Self Abuse of Drugs/Alcohol – 64 Licensees Fraud – 10 Licensees Conviction of a Crime – 14 Licensees Unprofessional conduct – 65 Licensees” California enacted many laws in 2022 that are now effective including AB 2178 which explains licensing requirements and issues for physicians and surgeons who work at academic medical centers. AB 2178 updated the definition of an academic center. Other new California laws address many other licensing, treatment, practice, and do’s and don’ts of the medical profession. Physicians and other healthcare providers should contact Cohen Healthcare Law Group, PC to discuss the newest federal, state, and medical board laws and requirements. Our experienced healthcare attorneys advise doctors and other types of healthcare providers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 22, 2023
Healthcare
California’s New Electronic Prescription Law – AB 852
More and more states like California are requiring that doctors and any other health providers who have the authority to prescribe medications should prescribe medications electronically. California recently passed a law, Assembly Bill (AB) 2789, that requires that all prescriptions, effective January 1, 2022, issued by a licensed healthcare provider be submitted electronically. Healthcare providers who fail to comply with the new law may be subject to disciplinary action. According to the California Hospital Association, there are some exceptions. A few exceptions include: The technology or electrical failures prevent the prescription order from being sent. The prescription is dispensed from a non-California pharmacy. The prescription is “issued to a patient who has a terminal illness “pursuant to Section 11159.2 of the Health and Safety Code. Other exceptions to the electronic transmission requirement listed in the AB 852 statute include: Prescriptions issued pursuant to Section 11159.2 of the Health and Safety Code. A hospital emergency department or urgent care center issues the prescription and at least one of the following conditions apply: The patient resides outside of California or outside the hospital’s geographic area. The patient is homeless, indigent, and doesn’t have a preferred pharmacy. The prescription is issued “at a time when a patient’s regular or preferred pharmacy is likely to be closed.” A veterinarian is the prescriber. The prescription is for eyeglasses or contact lenses. “The prescribing health care practitioner and the dispenser are the same entity.” Other statutory conditions AB 852 provides that additional exceptions to the electronic data transmission prescription requirement may apply for prescribers who are registered with the California State Board of Pharmacy and who state that the prescriber meets the exception criteria – for example, that the prescriber issues 100 or fewer prescriptions each calendar year. AB 852 also provides “specified exceptions to the requirement for a pharmacy to immediately transfer an electronic prescription to an alternative pharmacy upon request of the patient, including if the action would result in a violation of any state or federal law.” The full list of exemptions is located at Section 688 of the California Business and Professions Code. The Board of Registered Nursing, according to the California Hospital Association, is recommending that licensed prescribers also have paper prescription forms “that meet the requirements of AB 149 should a technological or electrical failure prevent a prescription from being issued electronically.” The California state attorney general’s website has a list of approved security prescription printers. AB 852 – California Assembly (2021-2022) AB 852 states that prior to the January 1, 2022 effective date of the law, existing law: “Provides for the regulation of health care practitioners and requires prescription drugs to be ordered and dispensed in accordance with the Pharmacy Law. The Pharmacy Law provides that a prescription is an oral, written, or electronic data transmission order and requires electronic data transmission prescriptions to be transmitted and processed in accordance with specified requirements.” AB 852 requirements: AB 852 now: Requires that healthcare practitioners who are authorized to issues prescriptions – should have the capability to issue electronic data transmission prescriptions. Pharmacies, pharmacists, or other practitioners authorized to dispense medications should have the capability to receive electronic data transmission prescriptions. AB 852 also requires that: The pharmacy promptly notify the prescriber if the prescription order failed or there was a problem with the prescription order. Healthcare providers who issue “a prescription for a controlled substance” but don’t “transmit the prescription as an electronic data transmission prescription shall document the reason in the patient’s medical record as soon as practicable and within 72 hours of the end of the technological or electrical failure that prevented the electronic data transmission of the prescription.” Patients or people authorized on behalf of the patient may request that a pharmacy that has received an electronic data transmission prescription (from a healthcare provider who has not yet dispensed the medication to the patient) immediately send that electronic prescription to a different pharmacy requested by the patient or an authorized person on the patient’s behalf. As discussed, if the pharmacy (or staff) is aware that the electronic prescription transmission failed or is incomplete the pharmacy must promptly notify the prescriber of the failure/incomplete transmission. AB 852 does not “require the pharmacy verify that a written, oral, or faxed prescription satisfies the specified exemptions.” The law exempts healthcare providers, pharmacists, and pharmacies who provide healthcare to specified individuals – who are under the Department of Corrections and Rehabilitation’s jurisdiction. Other exceptions and conditions may apply that skilled California healthcare lawyers can explain. Additional B 852 regulations AB 852, according to OpenStates, would: “prohibit a pharmacy, pharmacist, or other practitioner authorized to dispense or furnish a prescription from refusing to dispense or furnish an electronic prescription solely because the prescription was not submitted via, or is not compatible with, their proprietary software.” AB 852 would: “Authorize a pharmacy, pharmacist, or other authorized practitioner to decline to dispense or furnish an electronic prescription submitted via software that fails to meet any one of specified criteria, including compliance with the federal Health Insurance Portability and Accountability Act of 1996.” Failure to comply with AB 852 Healthcare providers, pharmacists, and pharmacies that fail to comply with AB 852 will be “referred to the appropriate state professional licensing board solely for administrative sanctions, as provided.” E-prescribing and CMS The Centers for Medicare and Medicaid Services defines E-prescribing as electronic prescriptions that are “accurate, error-free, and understandable” to a pharmacy. CMS supports electronic prescriptions because they help reduce medication errors. CMS requires Part D sponsors, prescribers, and dispensers to support electronic prescribing consistent with regulations at 42 CFR § 423.160. E-prescribing outside of California States outside of California have their own e-prescription laws. For example: “Nevada Assembly Bill 310 mandates that all controlled-substance prescriptions be electronically prescribed. The bill outlines additional regulations for controlled substance prescriptions including penalties for prescribers. See Nevada E-Prescribing for further details.” New York “was the first state to mandate e-Prescribing and put penalties in place for non-compliance. The Internet System for Tracking Over-Prescribing, or I-STOP, mandate was passed in 2012 and requires prescribers to electronically prescribe both non-controlled and controlled.” E-prescribing and HIPAA The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is a federal law. HIPAA creates standards for protecting sensitive health information from disclosure without the consent or knowledge of the patient. According to the US Centers for Disease Control and Prevention (CDC), HIPAA applies to “every healthcare provider, regardless of size of practice, who electronically transmits health information in connection with certain transactions.” HIPAA also applies to healthcare plans and other healthcare entities. Generally, the transmission of electronic prescriptions is required by HIPAA – which means that the patient needs to consent to the electronic transmission and the sender and receiver need to comply with HIPAA security rules to protect the patient’s health information. The transmission of electronic prescriptions may involve other federal and state privacy and protection laws that our skilled healthcare lawyers can explain. According to HIPAA Journal, healthcare providers and pharmacies need to review HIPAA’s administrative rules, privacy rule, security rule, and breach notification rule. There are also “best practices” for pharmacies. There are penalties for pharmacies that fail to comply with HIPAA. In addition to compliance with AB 852, CMS rules, and HIPAA, healthcare providers and pharmacies that send and receive electronic prescriptions need to understand the US Department of Justice rules for the electronic prescription of controlled substances. Prescriptions based on telemedicine may raise other legal issues including telemedicine issues and FDA compliance issues. Healthcare providers and pharmacies in California need to understand the new compliance requirements for sending and receiving electronic prescriptions. Failure to comply with the new California Law, AB 852, and other electronic prescription laws such as HIPAA can result in severe disciplinary actions. FAQs About HIPAA and the Right of Access, Part one The US Department of Health and Human Services provides questions and answers to the HIPAA Privacy Rule’s Right of Access. These FAQs directly affect healthcare practices. FAQs About HIPAA and the Right of Access Part two The US Department of Health and Human Services provides questions and answers to the HIPAA Privacy Rule’s Right of Access. These FAQs directly affect healthcare practices Doctors and pharmacies should contact Cohen Healthcare Law Group, PC to discuss California’s new electronic prescription law – AB 852. Our experienced healthcare attorneys advise any healthcare provider with the authority to prescribe or dispense medication about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 15, 2023
Healthcare
California Assembly Bill (AB)-890 and Two New Nurse Practitioner Categories
Assembly Bill 890 was signed by California Governor Newsom. The law which went into effect on January 1, 2023, creates two new Nurse Practitioner (NP) categories. The California Association for Nurse Practitioners (CANP) states that the law enables NPs in certain practice settings to start practicing without physician supervision and expand much-needed care. The law, according to the California Board of Registered Nursing (BRN), also provides education, regulatory, training, certification, and medical staff governance requirements for those two categories. The BRN provides the following list of Frequently Asked Questions and Answers. Our seasoned healthcare compliance lawyers are ready to discuss all your AB 890 questions and review all your federal, California, and local healthcare compliance requirements. What are the New NP Categories? AB 890 establishes two new categories called 103 NP and 104 NP. The two new categories don’t “significantly extend or alter the current NP’s scope of practice.” The new NP categories provide additional authority to work without standardized procedures. Please see our prior discussion of nursing and scope of practice requirements for more information. Please see our prior discussion of standard procedures for additional information. California’s New Scope of Practice Law for Nurse Practitioners – Part One California passed a new law, effective January 1, 2023, that permits nurse practitioners in specific settings to provide care (under certain conditions) that does not meet “standardized procedures.” California’s New Scope of Practice Law for Nurse Practitioners – Part Two California passed a new law, effective January 1, 2023, that permits nurse practitioners in specific settings to provide care (under certain conditions) that does not meet “standardized procedures.” How Doctors & Nurses Use Standardized Procedures for Medical Spa Compliance Doctors and nurses and standardized procedures, oh my! Well it doesn’t quite have the same resonance as Dorothy’s chant in Wizard of Oz, but doctors and nurses and standardized procedures really […] 103 NP This category of nurse practitioner works under the provisions of the Business and Profession Code Section 2837.103. A 103 NP “can work without standardized procedures, in a group setting with at least one physician and surgeon, within the population focus of their National Certification.” BPC Section 2837.103 provides that in addition to any other authorized practices, an NP who meets the requirements of the statute “may perform the following functions without standardized procedures in accordance with their education and training:” Conduct advanced assessments. Order, perform, and interpret diagnostic procedures. “For radiologic procedures, a nurse practitioner can order diagnostic procedures and utilize the findings or results in treating the patient. A nurse practitioner may perform or interpret clinical laboratory procedures that they are permitted to perform under Section 1206 and under the federal Clinical Laboratory Improvement Act (CLIA).” Establish primary and differential diagnoses Prescribe, order, administer, dispense, procure, and furnish certain therapeutic measures, including, but not limited to those set forth in the BPC. “After performing a physical examination, certify disability pursuant to Section 2708 of the Unemployment Insurance Code.” Delegate some tasks to a medical assistant based on other regulations A 104 NP A 104 NP works pursuant to Business and Professions Code Section 2837.104. A 104 NP “may work without standardized procedures, outside of a group setting, within the population focus of their National Certification.” Among other provisions that experienced healthcare lawyers can explain, BCP 2837.104 provides that: (c) A nurse practitioner authorized to practice pursuant to this section shall comply with all of the following: “(1) The nurse practitioner, consistent with applicable standards of care, shall not practice beyond the scope of their clinical and professional education and training, including specific areas of concentration and shall only practice within the limits of their knowledge and experience and national certification.” “(2) The nurse practitioner shall consult and collaborate with other healing arts providers based on the clinical condition of the patient to whom health care is provided. Physician consultation shall be obtained as specified in the individual protocols” and under the circumstances set forth in the statute such as when a patient requests a physician consultation, emergency conditions that require “prompt medical intervention after initial stabilizing care has been started,” and other circumstances. (3) “Nurse practitioner consultation with a physician and surgeon alone shall not create a physician-patient relationship. The nurse practitioner shall be solely responsible for the services they provide.” [Emphasis added]. (4) “The nurse practitioner shall establish a plan for referral of complex medical cases and emergencies to a physician and surgeon or other appropriate healing arts providers.” The plan should meet additional criteria set forth in the BCP law. (d) “A nurse practitioner shall verbally inform all new patients in a language understandable to the patient that a nurse practitioner is not a physician and surgeon. For purposes of Spanish language speakers, the nurse practitioner shall use the standardized phrase “’enfermera especializada.’” Can an NP start practicing independently as an NP immediately in January 2023? No. An NP who wants to practice “without standardized procedures, must apply to the BRN for a special certification before they can do so.” There is no automatic grant of this authority. To apply for 104 NP status, a 103 NP must work as “a 103 NP in good standing for at least 3 years prior to becoming a 104 NP.” This means that the earliest the California Board of Registered Nursing can certify 104 NP is 2026. How do I apply to become a 103 NP? The BRN has released the new 103 NP application via BreEZe. Eligible NPs can start applying now. The BRN is encouraging all licensees to routinely check their emails to confirm that their application is live. What are the eligibility requirements to become a 103 NP? Business and Profession Code Section 2837.103, requires that the NP meet the following requirements to obtain 103 NP status: Certification as an NP by the California Board of Registered Nursing. Hold[ing] a National Certification in a recognized population focus consistent with 16 CCR 1481 by a national certifying body accredited by the National Commission for Certifying Agencies or the American Board of Nursing Specialties and recognized by the Board. Completion of a “transition to practice within the category of your National Certification in California of a minimum of three full-time equivalent years of practice or 4600 hours within 5 years of the date of your application.” What is a transition to practice? Business and Professions Code 2837.101 states that “transition to practice refers to additional clinical experience and mentorship provided to prepare a nurse practitioner to practice independently.” Examples of this additional clinical experience and mentoring include “managing a panel of patients, working in a complex health care setting, interpersonal communication, interpersonal collaboration and team-based care, professionalism, and business management of a practice.” The clinical and mentorship experience must include either three-full time equivalent years or 4600 hours completed – in California, within five years prior to the date the applicant applies for certification as a 103 NP, after BRN certification as an NP, or if direct patient care meets additional criteria. How does the Board verify an applicant has completed their transition to practice? The 103 NP needs to provide proof the NP completed the “transition to practice.” The NP will submit to the BRN information about the provider(s) “who oversaw and provided the mentorship during the transition to practice period.” The BRN will then request that the provider(s) attest to the applicant’s training. The providers must be competent in the same specialty area or category listed in 16 CCR Section 1481(a) in which the applicant seeks as a 103 NP. The person or entity that attests to the NP’s transition to practice “cannot have a familiar or financial relationship with the applicant and will be attesting to the applicant’s completion of the transition to practice requirement under penalty of perjury.” Can a 103 NP or 104 NP work in any content area without standardized procedures? No. An NP applicant can only obtain certification as a “103 NP or 104 NP and practice without standardized procedures in whichever of the six NP categories outlined in 16 CCR 1481(a) that the [NP] received their education and training in, hold a national certification in and completed their transition to practice clinical experience in.” These six categories are: Family/individual across the lifespan Adult-gerontology, primary care, or acute care Neonatal Pediatrics, primary care, or acute care Women’s health/gender-related Psychiatric-Mental Health across the lifespan Will the Board certify 103 NPs and 104 NPs in categories other than those outlined in 16 CCR 1481(a)? “According to Business and Professions Code Section 2837.103(a)(1)(B) and Section 2837.104(b), a 103 or 104 NP must hold a certification from a national certifying body accredited by the National Commission for Certifying Agencies or the American Board of Nursing Specialties and recognized by the Board.” “NPs who wish to progress to a 103 or 104 can only do so in whichever of the six NP categories outlined in 16 CCR 1481(a) in which they received their national certification in.” The Board cannot currently grant a 103 or 104 NP status in additional specialty areas such as an Emergency NP or a Dermatology NP. Can I open an independent practice as a 104 NP? “Yes. After 2026, when approved by the Board to become a 104NP, a 104 NP can practice without standardized procedures outside of a group setting. However, they cannot practice beyond the scope of their clinical and professional education and training, including specific areas of concentration. A 104 NP can only practice within the limits of their knowledge and experience and national certification.” BPC 2837.104(c) requires that “a 104 NP conduct a certain level of consultation, collaboration, and referral to other healing arts providers based on the clinical condition of the patient receiving care.” How can an employer, patient, or any interested party verify whether a licensee has been certified by the Board as a 103 NP or 104 NP? The authority to practice as a 103 NP or 104 NP will be “displayed along with their RN license status through DCA’s License Search,” an online search tool. Additional information about Assembly Bill 890 includes the following: Overview of Assembly Bill (AB) 890 (ca.gov) OPES Occupational Analysis for Nurse Practitioners (AB 890) BRN’s Proposed Regulations to Implement AB 890 Overview of Assembly Bill (AB) 890 – Presentation by Reza Pejuhesh, Board Legal Counsel California AB -890 authorizes two categories of nurse practitioners who can practice without physician supervision if specific criteria are met. A 103 NP can work in a group setting with at least one physician and surgeon, within the population focus of their National Certification.” A 104 NP may work without standardized procedures, outside of a group setting, within the population focus of their National Certification.” There are specific eligibility and practice requirements for both categories of NP – 103 and 104. Nurse practitioners should contact Cohen Healthcare Law Group, PC to discuss the eligibility and practice requirements for 103 NP and 104 NP status. Our experienced healthcare attorneys advise nurses and other healthcare professionals about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 8, 2023
Healthcare
SB 994 and AB 2685: California’s New Naturopathic Doctors’ Laws
California, in 2022, passed two laws that affect naturopathic doctors – SB 994 and AB 2685. SB 994 allows naturopathic doctors to hire licensed vocational nurses (LVNs). AB 2685, Prior law, created “the Naturopathic Medicine Committee within the Osteopathic Medical Board of California for the licensure and regulation of naturopathic doctors.” AB 2685, titled the Naturopathic Doctors Act, renames the Naturopathic Medicine Committee as the “California Board of Naturopathic Medicine” and places the Board within the Department of Consumer Affairs. AB 2685 specifies that any reference in any law or regulation to the Bureau of Naturopathic Medicine or the Naturopathic Medicine Committee refers to the California Board of Naturopathic Medicine. The Naturopathic Doctors Act prohibits the board from “incurring any costs as a result of its name change beyond what is absorbable within existing resources.” What is naturopathic medicine? The Association of Accredited Naturopathic Medical Colleges defines naturopathic medicine as a field or practice “that combines the wisdom of nature with the rigors of modern science. Naturopathic doctors (NDs) are trained as primary care providers who diagnose, treat and manage patients with acute and chronic conditions, while addressing disease and dysfunction at the level of body, mind and spirit.” “NDs concentrate on whole patient wellness through health promotion and disease prevention, while addressing the underlying cause of the patient’s condition. Naturopathic physicians care for patients of all ages and genders, and practice in settings ranging from private clinics to integrative medical centers, urgent care clinics and hospitals.” NDs “provide individualized, evidence-informed therapies that balance the least harmful and most effective approaches in order to help facilitate the body’s inherent ability to restore and maintain optimal health. Naturopathic doctors are experts in natural medicine, and naturopathic medical education is the most efficient and direct way to train as a primary care doctor who specializes in natural medicine.” FAQs about SB 994 and AB 2685 The American Association of Naturopathic Physicians provides the following questions and answers about licensed vocational nurses who now, in California, can be hired by naturopathic doctors. What is a Licensed Vocational Nurse (LVN)? A California LVN is licensed and governed by the Board of Vocational Nursing and Psychiatric Technicians (BVNPT). LVNs have finished an approved practical nursing program. LVNs, through the direction of a California licensed Registered Nurse (RN), Nurse Practitioners (NPs), physicians, and other authorized healthcare providers – provide skilled nursing care and execute nursing interventions. SB 994 now provides that licensed naturopathic doctors in California can, effective January 1, 2023, direct LVNs in the same care and interventions. What is the scope of practice for an LVN working under the supervision of a California Licensed Naturopathic Doctor? An LVN in California is directed by a licensed ND, NP, RN, or physician – in the manual and technical skills learned in an approved school of vocational nursing. In addition to performing the same tasks as a naturopathic assistant, an LVN can: Administer IV therapy (vitamins, minerals and blood products only – no medications or herbs) Treat patients “carrying out the ND’s treatment orders without the ND needing to be present in the office at all times.” When directed and supervised by a naturopathic doctor, an LVN can also: “Administer medications by hypodermic injection.” Withdraw blood from a patient, if prior thereto such LVN has satisfactorily completed a prescribed course of instruction approved by the Board of Vocational Nursing and Psychiatric Technicians (BVNPT). “The LVN must have a certificate from a training provider approved by the BVNPT for both phlebotomy and IV therapy prior to performing these functions.” “Start and superimpose intravenous fluids under the supervision of a Naturopathic Doctor after completing a BVNPT-approved IV therapy certification course.” An LVN must be Board certified to perform IV therapy and blood withdrawal. “Important note: LVNs can be trained to draw blood in an office setting by an MD or DO, but not by an ND. Any LVN that [an ND] hires must take a BVNPT-approved IV and blood draw training. As a result of the passage of AB 2685, the LVN can obtain an Intravenous Therapy (IVT) Specialty license from the California Board of Naturopathic Medicine (formerly the Naturopathic Medicine Committee).” Can LVNs perform IV therapy? Yes – provided that the: LVN has the property Intravenous Therapy Specialty License The LVN has completed an IV certification course approved by the Board of Vocational Nursing and Psychiatric Technicians (BVNPT) “The supervising ND has ordered the IV treatment. (In other words, a new patient cannot just walk into the office and receive an IV treatment without the ND conducting an initial appropriate prior examination and ordering the IV with specific ingredients and dosages). The initial exam need not be performed before each IV – just before the first IV treatment – “and again if the patient’s health changes or the IV ingredients change and at appropriate intervals.” LVNs can only carry out an ND’s treatment decisions. LVNs cannot take over the care of a patient. Generally, provided the above requirements are met, LVNs can prepare IVs. LVNs can also start IVs – “but only peripheral lines. They cannot access ports.” What can LVNs infuse? “LVNs can infuse fluids, vitamins, minerals, nutrients and blood products. LVNs CANNOT infuse medications or herbs – so this means, for example, LVNs cannot infuse chelating agents, Zofran, curcumin, or other medications or herbs.” Can an ND give an order to an LVN to give someone medication or an injection or to perform an IV at a patient’s home? No, not at a patient’s home. The patient must be in the physician’s office or a health care setting, like a skilled nursing facility. Can LVNs give IM and SC injections? Yes. “LVNs can give IM and SC injections, such as vitamins and hormones under the supervision of a California licensed ND (*Note this does not include hormone pellets). However, the LVN cannot give IM and SC injections of any other medications unless the supervising ND has a supervising California physician (MD/DO) to allow the ND to prescribe such medications. In other words, the LVN cannot administer medications that the supervising ND is not authorized to prescribe or administer. Additionally, LVNs CANNOT inject glutathione.” There are additional options and requirements if the ND has a supervising MD/DO. Can an LVN administer vaccines? Yes. “Pursuant to the standing orders of the Naturopathic Doctor, if the Naturopathic Doctor has a supervision agreement in place with an MD/DO for prescribing vaccines. And the Naturopathic Doctor must ensure that the LVN demonstrates competence in the administration of the vaccines and knowledge of all the indications and contraindications and recognition and treatment of any emergency reactions.” Does the ND need to be in the office when the LVN is taking care of patients? Generally, the answer is no. However, the supervising naturopathic doctor “MUST be available by phone at all times that the LVN is providing patient care and must always be the one that does all diagnosis and ordering of treatments.” The LVN can’t determine what care to provide. Their job is just to carry out the supervising ND’s orders. Can LVNs do triage or answer a patient’s questions about their care? “No. Unlike NPs and RNs with appropriate standardized procedures, LVNs cannot triage patients or do assessments.” 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. What Are the Legal Risks Involved With An IV Therapy Business? Doctors, registered nurses and EMTs should review with an experienced healthcare attorney – corporate practice of medicine issues, medical and business practices, and other legal issues before […] What Are the Legal Risks Involved with An IV Therapy Business? Part Two IV therapy owners and practitioners need to discuss with experienced healthcare lawyers who can prescribe IV therapy, who can prepare the solution, and who can administer the therapy. Additional requirements for naturopathic doctors who hire LVNs The LVN must be a supervising ND’s employee. There must be a written supervision protocol in place. This protocol can “be part of the LVN’s employment agreement or can be a standalone document separate from their employment agreement.” The written supervision protocol must: Describe the LVN’s duties and responsibilities Set forth specific policies and procedures that ensure adequate supervision of the LVN. These policies should include, among other policies, a communication line between the Naturopathic Doctor and LVN, “availability of supervision, location(s) of where services are to be provided, and availability of consultations between the Naturopathic Doctor and LVN regarding the services provided.” The policies and procedures should also set forth the training methods and “continuing evaluation of the competency and qualifications of the LVN.” What is LVN prohibited from doing? LVNs are NOT permitted to: Administer any botulinum toxin, dermal filler or glutathione injections Perform platelet rich plasma treatments Remove skin growths Perform any other cosmetic treatments outside of the scope of an LVN Administer laser, light, steam, or UV treatment therapies unless directed by the ND for a medically necessary purpose (not cosmetic) NDs can hire LVNs starting on January 1st, 2023. Can an ND hire an RN (registered nurse) and have the RN do only the things listed as in the scope of an LVN? “No, an ND cannot hire, direct or supervise an RN or NP under any circumstances.” “RNs can only perform patient care services ordered by and within the scope of licensure of a physician, dentist, podiatrist, or clinical psychologist, as defined by Section 1316.5 of the Health and Safety Code.” AB-2685 Naturopathic Doctors Act: California Board of Naturopathic Medicine and licensing requirements AB 2685, in addition to renaming the “Naturopathic Medicine Committee” as the “California Board of Naturopathic Medicine, placing the board within the Department of Consumer Affairs, and other provisions we discussed above; updates the requirements and prohibitions for appointing healthcare professionals to the new Board. According to Open States, AB 2685 AB 2685 also changes current law regarding naturopathic medicine as follows: The California Board of Naturopathic Medicine will be required to hire a full-time employee whose duties would include enforcement against violations of the new law. That staff position will be under the direction of the executive officer. Expand the current requirement that applicants for licensure “pass the Naturopathic Physicians Licensing Examination (NPLEX) or an equivalent examination approved by the North American Board of Naturopathic Examiners to pass any NPLEX elective examinations relevant to a licensee’s scope of practice in California.” Expands how applicants could meet their continuing education requirements. Expands the requirements for a naturopathic doctor to be certified for the specialty practice of naturopathic childbirth attendance. The law extends “the operation of the act until January 1, 2027, and would also make nonsubstantive changes to those provisions.” California recently passed two laws that affect the ability of naturopathic doctors to practice medicine. The first grants NDs the right to hire licensed vocational nurses. The second creates the California Board of Naturopathic Medicine. Healthcare professionals who work in these fields need to understand the new compliance issues for each profession including what tasks LVNs can and cannot perform. Naturopathic doctors can take pride in the creation of a new Board for their professions but need to understand the duties and obligations of their new Board. California’s New Scope of Practice Law for Nurse Practitioners – Part Two California passed a new law, effective January 1, 2023, that permits nurse practitioners in specific settings to provide care (under certain conditions) that does not meet “standardized procedures.” Naturopathic doctors, licensed vocational nurses, and other healthcare providers should contact Cohen Healthcare Law Group, PC to discuss the current federal, state, and medical board compliance requirements for their type of practice and scope of employment. Our experienced healthcare attorneys advise doctors, nurses, and other types of healthcare providers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
February 28, 2023
Healthcare
Informed Consent and Risk Waivers
The doctrine of informed consent is based on the principle that adults of sound mind should have the right to decide what can be done to their bodies. Before making a decision about what treatments or procedures to consider, a patient should understand the pros and cons of any treatment/procedure – the benefits and the risks. The risks include any side effects and any complications. To ensure that the patient understands the benefits and dangers of any treatments or procedures, various states, agencies, and medical boards require that the doctor who is responsible for the treatments and procedures should obtain a written informed consent from the patient. The written document should list the benefits and risks of the treatment or procedure. By signing and dating the written informed consent, the patient is acknowledging he/she has been informed of the possible consequences – and agrees that the treatments and procedures can be provided to the patient. The treatments and procedures that require a patient’s informed consent include: Medical research. The Department of Health and Human Services (HHS) requires that researchers obtain the legally effective informed consent of the subject or the subject’s legally authorized representative, unless: The research is exempt under federal law There are appropriate waivers -if waivers are permitted for the type of research being conducted FDA has its own set of informed consent requirements Treatments and procedures performed by a doctor or another type of health provider who has the legal authority to provide the treatment or procedure. What is the relationship between informed consent and a risk waiver? By signing the waiver (if properly worded), the patient does more than acknowledge his/her understanding of the pros and cons of the treatment or procedure. The signature on the informed consent form generally will be used by the doctor, hospital, or another healthcare provider to protect the doctor, hospital or another healthcare provider from liability. The liability protection is generally confined to complaints by the patient that an adverse consequence occurred during the treatment or procedure – that was identified on the informed consent document. Essentially, medical professionals use informed consent forms for more than just providing information. The professionals use the form as a waiver of liability claims by the patient. Informed consent forms are also called liability waivers, risk waivers, medical release forms, release of liability forms, and other similar names. There is a reverse problem for doctors. The signing of an informed consent/risk waiver may protect the physician or healthcare provider that provides the treatment or procedure from a liability claim. Conversely, the physician or healthcare provider may be subject to a medical malpractice claim (for non-emergency treatments or procedures – if the patient suffers as a result of the treatment or procedure. The physician or healthcare provider may even be liable if the physician or healthcare provider does everything correctly – because the patient may argue he/she wouldn’t have had the treatment or procedure if he/she had known of the possible dangers. A physician or healthcare provider may also be liable – if there is a signed informed consent – if the treatment or procedure provided is different than what was identified in the informed consent document. Even with an informed consent, doctors may also be liable for other reasons – such as mistakes that were clearly avoidable such as leaving a surgical instrument in a patient after the surgery is complete. AVOIDING MALPRACTICE THROUGH STRONG INFORMED CONSENT PRACTICES Informed consent is critical in all areas of medicine; it takes on added importance with integrative medicine, functional medicine, anti-aging and aesthetic medicine, and non-mainstream […] When do healthcare providers use informed consent? Some of the common types of informed consent uses include: Surgeries. Generally, doctors and hospitals require that a patient sign an informed consent form before any surgeries are performed. Drug prescriptions. Healthcare providers may also request that a patient sign an informed consent/risk waiver before nonsurgical remedies. For example, doctors and pharmacies regularly require informed consents from patients before the doctor prescribes any medications and the pharmacy fills the prescription. Common risks with drugs include the possible side effects, the dangers involved with taking the prescribed amounts, the dangers with taking amounts other than prescribed amounts, possible interactions with other drugs, and many other adverse consequences. Research. Many doctors, universities, hospitals, agencies, and other entities conduct research on the effectiveness of various drugs and various treatments. The people who volunteer to participate in these clinical studies have the right to be informed of the possible risks and dangers. An informed consent may be required for many other types of reasons. Our experienced healthcare lawyers will explain when informed consents are advisable – whether a healthcare provider is performing surgery, conducting a telemedicine consultation, or for any other reason. HOW TO DRAFT A TELEMEDICINE INFORMED CONSENT In today’s video, we discuss whether you need a specific type of consent form to offer patients telemedicine or telehealth services. What happens if the patient cannot provide consent? Patients may not be able to provide consent for different reasons: During emergencies when the patient is in too much pain or is otherwise unable to give his/her consent When then patient is not mentally competent If the patient is a minor In these situations, the physician, hospital, or another healthcare provider will try to obtain the consent of someone with the authority to give their consent to the treatment or procedure for the patient. The authority may be based on: A power of attorney from the patient to another adult that authorizes an informed consent A guardian of the patient A parent of the patient Other people depending on the circumstances Informed consent and California law The duty to obtain an informed consent is generally defined by California case law – the decisions of judges in prior comparable cases. There are some statutes as well. For example, in our discussion of new healthcare laws for 2021, we discussed the following law: AB-1280 California Hospice Licensure Act of 1990 This law was signed into law on October 4, 2021. The law sets new requirements for hospice referrals. The law prohibits: Hospice providers (and hospice staff and agents for the hospice) from “paying referral sources for the referral of patients to the hospice.” “A hospice salesperson, recruiter, agent, or employee who receives compensation or remuneration for hospice referrals or admissions from providing consultation on hospice services, hospice election, or informed consent to a patient, patient’s family, or patient’s representative.” Certain authorized persons, such as a registered nurse or a medical social work can “complete the election of hospice, informed consent, completed signatures, and counsel on the election of hospice with a patient, patient’s family, or patient’s representative.” The new law also requires that that hospice give a patient or his/her representative a verbal and written notice of the patient’s rights and responsibilities – in a language and manner the patient or representative can understand – before providing any care. Doctors, nurses, and other healthcare providers should understand when an informed consent from a patient is required and the terms and explanations that must be set forth in the informed consent. The need for an informed consent doesn’t just apply to surgeons. The duty to obtain the medical consent doesn’t just apply to a doctor’s office. Nurses, acupuncturists, dentists, medical spas, and other types of health provider should review when an informed consent is necessary for their practice or business. CALIFORNIA HEALTHCARE LAWS THAT WERE PASSED IN 2021 Pharmacies, hospitals, mental health facilities, hospices, and substance abuse facilities need to understand how the recently passed California healthcare laws apply to their practice Physicians and other healthcare providers should contact Cohen Healthcare Law Group, PC to discuss the federal, state, and medical board requirements for obtaining an informed consent. Our experienced healthcare attorneys advise doctors and other types of healthcare providers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
January 22, 2023
Healthcare
Compliance Issues for Consulting Fees, Honoraria, Medical Directorships, and Other Types of Remuneration
Doctors need to be very careful about accepting consulting fees, honoraria, and other compensation and awards. Physicians need to know the source of the remuneration and why the fees and other benefits are being offered. Any payments or compensation that are paid in order to entice the doctor to refer patients to the source of the payments (such as a pharmaceutical company), may result in criminal charges that the doctor violated the federal Anti-Kickback Statute (AKS) or other anti-referral laws. The consequences for violations of the AKS and other anti-referral laws can be quite severe. In addition to being required to return the compensation or awards, the physician may be subject to fines. His/her medical license can be in jeopardy. Criminal charges could be filed which could result in imprisonment. Our skilled healthcare compliance lawyers review the following questions and concerns with physicians. What is the Anti-Kickback Statute? What are the statutory provisions of the AKS? What types of payments and awards may lead to AKS violations? What safe harbors are available for the AKS? Do you have any examples of AKS actions against physicians who wrongfully accept medical compensation or benefits? What laws other than the federal AKS regulate the acceptance of compensation or benefits? What is the Anti-Kickback Statute? The AKS was enacted to ensure that patient care is prioritized over the financial concerns of physicians and the entities the doctors work with – for services and products billed to federal healthcare programs. The law was also enacted to ensure fair competition among healthcare providers and companies. According to the US Office of Inspector General, there are four things physicians should know about the What transactions are illegal. The AKS makes it illegal to “knowingly and willfully offer, pay, solicit or receive anything of value to induce or reward for referrals of Federal health care program business.” While it may be OK in some businesses to have referral arrangements, referrals for federal healthcare programs such as Medicare and Medicaid are generally illegal unless a “safe harbor” applies. The AKS applies to both the physician who receives the compensation and the entity that provides the compensation. Illegal compensation (kickbacks) include the following among other types of compensation: Cash Gifts Vacations “Sham” consulting fees “Sham” medical directorships Bribes Rebates Sham essentially means that the payments are for services that aren’t offered or for payments that are above the fair market value of those services. The penalties for violating the AKS. The AKS is a criminal statute. A violation of the AKS is a felony. If convicted, a physician or an entity that offered the compensation can be imprisoned for up to 10 years and ordered to pay up to $100,000 (or both) for each violation. In addition, the US Department of Justice may file a False Claim Act claim (the FCA is a civil statute) demanding repayment of funds received from the government based on the illegal referral arrangement. In addition, the offender may be penalized up to three times the amount of money the government lost – plus $11,000 for each improper claim. The doctor may be precluded from submitting any future claims to the federal healthcare programs (for a period of time), such as Medicare and Medicaid, covered by the AKS. A civil complaint may also be brought through the Civil Monetary Penalties Law (CMPL). A physician may also be subject to disciplinary action by the state medical boards which could result in the loss of the physician’s license to practice medicine. The types of programs covered by the AKS. The AKS generally applies to federal healthcare programs. Another commonly used federal healthcare program, in addition to Medicare and Medicaid, is TRICARE – the medical program for military members and their families. CHAMPVA is another commonly used federal healthcare program. What safe harbors can be used so that the compensation is likely to be considered legal? The AKS does have safe harbors that do cover many types of referral arrangements. While you do not have to have a safe harbor arrangement, if you do – then the safe harbor can help protect you a physician from AKS legal actions. For example, there are AKS safe harbors for certain employment arrangements and for the leasing of office space or equipment – provided very specific conditions are met. Our skilled healthcare compliance lawyers understand when you may be able to use a safe harbor and the requirements to meet the safe harbor conditions. Other exceptions may apply which our healthcare lawyers will explain. What are the statutory provisions of the AKS? The US Department of Justice (DOJ) states that The Anti-Kickback Act of 1986 is codified in 42 U.S. Code § 1320a–7b. The prosecution must show the following conditions apply in order to pursue an AKS claim: The prohibited conduct. The Act prohibits attempted as well as completed “kickbacks.” Kickbacks include “any money, fees, commission, credit, gift, gratuity, thing of value, or compensation of any kind. The act also provides that the “inclusion of kickback amounts in contract prices is prohibited conduct in itself.” The purpose of kickback. The government must show that the “purpose of the kickback was for improperly obtaining or rewarding favorable treatment. It is intended to embrace the full range of government contracting. Prior to 1986, the “kickback” was required to be for the inducement or acknowledgment of a subcontract.” Covered class of “kickback” recipients. The AKS prohibits “kickbacks” to prime contractors, prime contractor employees, subcontractors, and subcontractor employees. Physicians are generally part of this covered class. The type of contract. The Act defines kickbacks to include payments under any government contract. Prior to this legislation, the statutes’ applicability was limited to negotiated contracts. A key part of an AKS prosecution is that the government must show that the defendant/physician “knowingly and willfully engaged in the prohibited conduct for the imposition of criminal sanctions.” OIG ADVISORY OPINION REGARDING POSSIBLE AKS VIOLATIONS. PART ONE. A pharmaceutical company sought an advisory opinion to determine if payment for travel, lodging, and other costs are an inducement that violates the federal Anti-Kickback Statute. What types of payments and awards may lead to AKS violations? Some of the many entities that have been involved with providing kickbacks or illegal compensation in return for the expectation a doctor will refer patients are – hospitals, nursing homes, pharmaceutical companies, medical device manufacturers, dialysis centers, diagnostic centers, and other healthcare companies. Illegal incentives include: Cash payments Paying doctors consulting fees or large salaries to serve as medical directors or consultants – where the doctors don’t do any work or very little work of any value or merit. Offering the physicians the opportunity to gain a financial interest in an ambulatory surgical center, joint ventures, or other investments – especially if the financial opportunities are based on the value of the referrals. Providing office space, support staff, and other benefits at below-market value Paying bonuses and salaries based on the volume of referrals Buying medical practices for prices above market value Paying kickbacks to pharmacies and doctors to get the pharmacies and doctors to use a specific pharmaceutical drug Expensive vacations and dinners The AKS can even apply to marketing and sales representatives and patients. What safe harbors are available for the AKS? A physician or other entity requesting payment from Medicare or any other federal healthcare program may be in violation of the AKS: unless there is a safe harbor, when pays for any of the purchase. Covered payments include ordering, or leasing of any service, good, or facility paid by the government – provided the request for payment is based on the improper remuneration. For example, the space rental safe harbor allows a provider to rent space to a potential referral source. Hospitals frequently lease space to independent physicians, pharmacies, or testing laboratories. Other safe harbors include: Bona fide employment Personal services contracts Discounts Copay and deductible waiver Other safe harbors Generally, the safe harbor arrangements must be in writing, be valid for at least one year, consistent with the fair market value, not tied into the amount of any referrals, and other specific requirements. Our healthcare lawyers will explain whether a safe harbor may be available and the very specific requirements for meeting the requirements. THE NEW STARK AND AKS LAWS Physicians and medical practices should review their MSO and referral arrangements to help comply with the new Stark Law and AKS changes. DO YOU KNOW THE KEY DIFFERENCES BETWEEN THE 4 AMBULATORY SAFE-HARBORS TO THE FEDERAL ANTI-KICKBACK STATUTE (AKS)? There are four types of ambulatory safe harbors in the federal Anti-Kickback Statute. We explain the key differences between the ambulatory safe harbors to the federal anti-kickback statute (AKS) Do you have any examples of AKS actions against physicians who wrongfully accept medical compensation or benefits? A few examples of AKS violations that have also resulted in False Claims Act actions according to the US DOJ included the following: Arriva Medical LLC and its parent, Alere Inc., a mail-order diabetic testing supply company settled a False Claims Act claim based on allegations that Arriva paid “kickbacks to Medicare beneficiaries by providing them ‘free’ or ‘no cost’ diabetic testing glucometers and by routinely waiving or not making reasonable efforts to collect their copayments for glucometers and diabetic testing supplies.” David McCollum and related laboratories and clinics paid $140 million and another $9 million civil consent judgment for paying unlawful kickbacks to providers “to include their referrals of urine drug tests.” Athenahealth Inc., an electronic health records technology vendor paid $18.25 million to settle allegations “it invited customers and prospective customers to lavish all-expense-paid sporting, entertainment, and recreational events to generate sales of its EHR product.” Other matters relating to kickback violations involved psychiatric hospitals and a substance abuse treatment facility (Oglethorpe Inc.), home health care agencies (BAYADA), hospitals (Akron General Health System, Texas Heart Hospital of the Southwest LLP, and Prime Healthcare Services), pharmaceutical companies (Biogen Inc.), diagnostic testing (Alliance Family of Companies LLC) and medical devices (Merit Medical Systems Inc). What laws other than the federal AKS regulate the acceptance of compensation or benefits? California has its own AKS statute. California, Welfare and Institutions Code; Kickbacks, Bribes or Rebates, Cal. Welf. & Inst. Code § 14107.2. Most other states also have some type of AKS statute. Any type of compensation to induce doctors to make referrals to the health companies that provide the compensation may violate the Anti-Kickback Statute – if the doctor or health company submits bills for payment to a federal healthcare program such as Medicare or Medicaid. Before you accept any payments, vacations, consulting fees, or other forms of remuneration that are based on referring patients, you should speak with an experienced healthcare lawyer. The compensation may lead to civil and criminal actions that could cost you much more than the amount of the compensation. Physicians, other health providers, and medical companies should contact Cohen Healthcare Law Group, PC to discuss the laws that govern providing any form of compensation in return for patient referrals. Our experienced healthcare attorneys advise physicians and medical companies about the federal and state Anti-Kickback Statutes. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
January 15, 2023
Healthcare
MSOs For Nursing Businesses
More and more, nurses are starting their own businesses. Some of these ventures include IV hydration, Ketamine infusion, holistic care, health coaching, medical spas, chronic care, concierge nurses, research, and other nursing professions. These ventures are exciting opportunities for nurses to own their own businesses while providing care to those in need. There are many laws that regulate medical businesses in California and other states. For starters, California has a corporate practice of medicine law that regulates who can own and run a medical practice in California. The law is designed to ensure that the health and safety of the patient is prioritized over the financial profits of those who own the medical practice. There are anti-referral laws, including Stark Law and the Anti-Kickback Statute, that regulate when and how referrals between the medical practice and other medical entities can be handled. Many referral arrangements are illegal. There are also privacy laws such as the Health Insurance Portability Accountability Act of 1996 (HIPAA) that govern the handling of electronic patient information. Our healthcare compliance lawyers understand the laws that apply to nursing practices. We’ll review your compliance requirements and the ways you can help show that you are in compliance with these various laws. One common way to address compliance issues is to use a Managed Service Organization (MSO). An MSO is an entity that handles the administrative side of your nursing business while the owners and staff handle the clinical/medical side of the business. In this article, we’ll discuss how an MSO can help your practice meet its compliance requirements. We’ll discuss: What are some of the different types of nursing businesses? What is the corporate practice of medicine doctrine? What is a Managed Service Organization (MSO)? How can an MSO allow your Nurse practice to coexist with your business needs? Can an MSO help a Nurse practice with the obligations of Stark Law and Anti-Kickback Statutes? What are some of the different types of nursing businesses? According to Nursepreneurs, new nursing businesses include: IV hydration clinics. This business provides medical care by licensed, professional concierge nurses. The treatments involve the intravenous injection of vitamin additives to help the client get the nutrients he/she needs. IV hydration may be used for arthritis, depression, dehydration-related illnesses, migraines, skin rejuvenation, and for other conditions. Concierge nurses. These nurses provide in-home care and custom nursing care for clients who generally pay for the nurse’s services out of their own pockets. Medical spas. There are specific California laws for the operation of medical spas. Some of the procedures include chemical peels, dermal fillers, botulinum toxins, and the use of laser, light, and radiofrequency devices. According to Selfemployed.com, some nursing businesses include: Nurse health coaches. These nurses teach clients how to care for themselves – such as through a holistic approach that reviews the client’s medical, work, environmental, nutrition, and mental health. Registered nurses may find this profession attractive. Fitness nurses. This nurse can work for corporations, spas, heart care rehabilitation, patients recovering from surgery, professional athletes, and others. A fitness nurse helps the client develop a program that includes exercise, wellness, and the prevention of diseases. Specialized care nurses. These nurses provide telehealth nursing, childbirth training, hospice care for end-of-life patients, in-home senior care, and other services. Nurses who teach continuing education classes What is the corporate practice of medicine doctrine? Most states have corporate practice of medicine (CPOM) laws. The purpose of these laws is to ensure that the medical side of a healthcare practice is distinct from the business side of the healthcare practice. California’s corporate practice of medicine laws include the following: Business and Professions Code, Section 2052 states that practicing medicine without a valid license is unlawful. Business and Professions Code Section 2400 states that: “Corporations and other artificial entities shall have no professional rights, privileges, or powers.” Generally, corporations cannot hire physicians because corporations don’t have a license to practice medicine. Corporations don’t have the education, training, and skills needed to obtain a medical license. Corporations are not able to develop a professional relationship of trust with patients. In short, California does not want business to run medical practices. California does permit licensed medical practitioners to incorporate and operate professional medical corporations (PMCs). The law that permits PMCs is the Moscone-Knox Professional Corporation Act. A PMC must generally be formed for a specific type of medical service, not a range of services. Registered nurses can be employed by a PMC. Registered nurses can also own up to 49% of the PMC (by themselves or with others) but at least 51% of the PMC must be owned by a physician or physicians licensed in California. In addition to the corporate practice of medicine laws, California has laws that regulate the supervision of healthcare providers by physicians – including recent laws regarding when supervision of nurses is not required. In California, “Because of the CPM doctrine, a non-physician in California cannot own a medical clinic or hire physicians. However, they can own a management entity which can serve as an administrative and non-medical, management services organization (“MSO”) for the clinic or medical practice, which is frequently organized as a professional medical corporation.” EXCEPTIONS AND ALTERNATIVES TO THE CORPORATE PRACTICE OF MEDICINE California has a strict corporate practice of medicine law. Physicians should consider a professional medical corporation. Doctors need to be aware of Stark Law and the AKS. An MSO may be advisable. CORPORATE PRACTICE OF MEDICINE, PSYCHOLOGY, PHYSICAL THERAPY RISKS TO INVESTORS In today’s video, we discuss how investors can profit from businesses that deliver clinical services—and where they get themselves in trouble. CORPORATE PRACTICE OF MEDICINE: MEDICAL MANAGEMENT ORGANIZATIONS AND PROFESSIONAL MEDICAL CORPORATION–WHO CONTROLS WHAT? The Corporate Practice of Medicine (CPM) doctrine continues to befuddle, beleaguer, and bewilder healthcare companies seeking to venture with physicians and non-physician entrepreneurs. What is a Managed Service Organization (MSO)? A Managed Service Organization is a business that nursing businesses can hire to do the administrative work of the nursing business while the nurses (and doctors) focus on treating the patients. An MSO can also be used to help address the issues raised by Stark Law and the Anti-Kickback Statute (AKS). These laws may apply when a nursing business works with drug companies, lab companies, hospitals, or other medical businesses. The laws address the concern that the nursing practice should refer patients to these other businesses – based on the best needs of the patient and not the profits of the nursing business. Stark Law prohibits referrals if the nursing practitioners have a financial interest in the other medical company (the one that is accepting referrals from the nursing business). The AKS prohibits medical companies from providing compensation or remuneration to the nursing practice in order to receive referrals from the nursing practice. Stark Law and the AKS generally apply when the physician or the related entities submit bills to federal healthcare programs such as Medicare and Medicaid. Our skilled healthcare lawyers will explain when and how an MSO can be used to address corporate practice of medicine concerns, Stark Law, and the AKS. We’ll help negotiate and draft the agreements between the nursing practice and the MSO. How can an MSO allow your Nurse practice to coexist with your business needs? In order to meet any Stark Law exceptions or AKS safe harbors, the financial relationship between the nursing practice and the MSO must comply with very specific requirements. For example, most relationships must be in writing, must be based on fair market value, cannot be based on the value or quantity of the referrals, and the relationship must last for at least one year. MSOs may also be useful to address other healthcare compliance laws such as the Health Insurance Portability and Accountability Act (HIPAA). Some of the Stark Law exceptions and AKS safe harbors and MSO may be able to satisfy include: Personal service arrangements Fair market value exceptions Office space and equipment leases Physician payments for items and services Compliance training Group practice arrangements with a hospital Incidental payments for medical staff Non-monetary compensation Risk-sharing arrangements The isolated transaction exception which can help raise capital for these new services. Some of the tasks that an MSO can do for a nursing practice include: Education and training. For example. An MSO can educate the owners and staff of the nursing practice about how to implement HIPAA, Occupational Safety and Health Administration regulations, the federal and state Family and Medical Leave Acts, and the Clinical Laboratory Improvement Amendments of 1988. Billing, coding, and collection. An MSO can do the bookkeeping and billing for the nursing practice. Rental leases for office space and equipment for the nursing practice. An MSO can help a nursing practice lease (or purchase) the office space and the equipment the nursing practice needs to run their practice. The credentials. The doctors need to decide what credentials their employees must have. An MSO can review whether the applicants have those credentials. The MSO can also help with the purchase of technology for the nursing practice, the administrative staff, quality assurance, disaster management, and other tasks. STARK LAW EXCEPTIONS THAT MIGHT APPLY TO YOU In today’s video, we discuss some exceptions to Stark Law, which deals with improper referrals by physicians and healthcare practitioners. Our law firm advises nurse practices about their federal and state compliance issues. These issues include the corporate practice of medicine, Stark Law, the Anti-Kickback Statute, HIPAA, and other laws. Our team will explain if an MSO is a good option for your nursing practice. We’ll negotiate and write the contracts necessary to implement the MSO. Nurses and nursing practices that own or run their own enterprises should contact Cohen Healthcare Law Group, PC to discuss their federal and state legal compliance requirements. Our experienced healthcare attorneys advise medical providers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
January 8, 2023
Healthcare
MSOs For Oncology Practitioners
There are many different types of oncology practices and many different healthcare workers who work in each type of practice. Some of these practices include medical oncologists, radiation oncologists, surgical oncologists, geriatric oncologists, gynecological oncologists, hematologist-oncologists, and other types of oncologists. Ancillary oncology healthcare professionals include healthcare workers who provide acupuncture, aromatherapy, art therapy, guided meditation and mindfulness, massage therapy, reiki therapy, and yoga. Any type of oncology practice needs to be aware of several key legal issues starting with their state’s laws on the corporate practice of medicine. In California, for example, the corporate practice of medicine laws prohibits corporations from practicing medicine or hiring a physician to provide medical services. This rule was created to prevent the commercialization of the practice of medicine and prevent corporations from interfering with a physician’s medical judgment. In this article, we’ll explain: What is the corporate practice of medicine doctrine? What is a Managed Service Organization (MSO)? How can an MSO allow your oncology practice to coexist with your business needs? Can an MSO help an oncology practice with the obligations of Stark Law and Anti-Kickback Statutes? What is the corporate practice of medicine doctrine? Most states have corporate practice of medicine laws. These laws aim to separate the medical side of a healthcare practice from the business side so that the health and welfare of the patient are prioritized over the financial concerns of the business. California has its own corporate practice of medicine laws: Business and Professions Code, Section 2052 states that practicing medicine without a valid license is unlawful. Business and Professions Code Section 2400 states that: “Corporations and other artificial entities shall have no professional rights, privileges, or powers.” Together, these laws: “Are interpreted as a ban on corporations practicing medicine by employing physicians because corporations and other artificial entities are not granted licenses and therefore have no professional rights, privileges, and powers. Courts, California Attorneys General, and the legislature have since determined how this statute would apply to the practice of medicine. According to the Medical Board of California, limitations on the rights, privileges, and powers of corporate and other artificial entities are intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment.” The corporate practice of medicine laws were enacted because corporations: Cannot have the training, education, and personal characteristics that are needed to receive a medical license. Are unable to develop the relationship of trust and confidence that is necessary for the relationship between a professional and patient or client Must not employ physicians because the physician’s acts would then be attributable to the unlicensed employer. An exception to the corporate practice of medicine laws, that applies to oncology practices as well as other practices, is the Moscone-Knox Act – which is the California law that grants physicians the right to incorporate and operate professional medical corporations (PMCs). These approved PMCs can charge patients for their services and hire or supervise what medical services are rendered – provided the PMC is at least 51% owned by a physician or physicians licensed in California. Up to 49% of the PC may be owned by registered nurses, physician assistants, and other healthcare licensees. A non-physician cannot own any shares of a PC. In California, “the prohibition against corporate practice of medicine imposes strict rules on contractual arrangements between physicians and non-physicians.” “Neither non-physicians nor lay corporations (corporations that are not medical professional corporations) nor limited liability companies (LLC) 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. (Business & Professions Code §§2052 and 2400.)” “Because of the CPM doctrine, non-physician in California cannot own a medical clinic or hire physicians. However, they can own a management entity which can serve as an administrative and non-medical, management services organization (“MSO”) for the clinic or medical practice, which is frequently organized as a professional medical corporation.” EXCEPTIONS AND ALTERNATIVES TO THE CORPORATE PRACTICE OF MEDICINE California has a strict corporate practice of medicine law. Physicians should consider a professional medical corporation. Doctors need to be aware of Stark Law and the AKS. An MSO may be advisable. CORPORATE PRACTICE OF MEDICINE: MEDICAL MANAGEMENT ORGANIZATIONS AND PROFESSIONAL MEDICAL CORPORATION–WHO CONTROLS WHAT? The Corporate Practice of Medicine (CPM) doctrine continues to befuddle, beleaguer, and bewilder healthcare companies seeking to venture with physicians and non-physician entrepreneurs. What is a Managed Service Organization (MSO)? MSOs are a way to separate the medical/clinical side of the practice from the administrative side. An MSO helps clarify that the business side of the practice is not engaged in the practice of medicine. The MSO is also useful to avoid complaints about fee-splitting and referrals which may violate Stark Law and the Antik-Kickback statute. With an MSO the oncology doctor and his/her team of medical care providers can focus on the cancer patient while the MSO pays the bills and performs other administrative tasks. Our experienced healthcare lawyers understand when to consider an MSO, how to implement an MSO, and what an MSO can and cannot do. The initial step in developing an MSO is preparing the contract between the PMC and the MSO. MSOs can benefit an oncology practice in the following ways: Help with numerous administrative tasks including: Patient scheduling Leasing space and equipment to the Professional Medical Corporation (PMC) Paying the bills and bookkeeping Submitting bills for physician and medical provider services Staffing – providing the MSO’s involvement is administrative and not medical. For example, an MSO cannot hire and terminate healthcare providers but the MSO can set up the payment arrangements An MSO can make it easier to establish offices in various locations within a state Help a non-non MD establish a health and wellness practice Help navigate the use of digital healthcare including telemedicine MSOs cannot generally provide any medical services. There are restrictions on the type of marketing of the practice the MSO can promote. The PMC must compensate the MSO at fair market value. The MSO cannot be compensated based on the amount of business the MSO brings into the PMC. An MSO cannot guide what services are available. Any referrals by the MSO to the PMC may violate Stark Law, the AKS, or the California Health & Safety Code, Section 445 (Medical Referral Services). Our experienced healthcare lawyers will explain how an MSO helps address these restrictions. How can an MSO allow your oncology practice to coexist with your business needs? Our skilled healthcare compliance lawyers will review the various legal compliance issues an oncology practitioner needs to review – such as the Corporate Practice of Medicine, Stark Law, AKS, HIPAA, and other federal and state compliance laws. We’ll explain whether an MSO is right for the oncology practice and any related services. For example, generally, an MSO can help Tom, who owns an oncology practice, in the following ways: Education and training. The MSO can explain the compliance issues to everyone involved in the practice, so the medical workers keep electronic patient records secure. The MSO can explain what steps the doctors, licensed healthcare providers, and non-licensed healthcare providers need to meet the requirements of various federal and state laws including: HIPAA (Health Insurance Portability and Accountability Act). Occupational Safety and Health Administration regulations The federal and state Family and Medical Leave Acts Clinical Laboratory Improvement Amendments of 1988 Billing, coding, and collection. The MSO can work with Medicare, Medicaid, other federal and state insurance agencies, and private insurers. Today’s MSO should have software that is readily compliant with all relevant federal and state privacy laws, referral laws (such as Stark Law, the AKS, and California’s referral laws), billing laws, and other related laws. Obtaining office space and equipment for the oncology practice. The MSO can help Tom select the best location for his practice and negotiate office rentals or purchases. The MSO can also help Tom obtain the medical equipment he needs for all the services he wants to provide. Credentials. The MSO can help review the licensing and certification requirements of each employee and contractor in the practice. Tom or another MD in the oncology practice must be the person who chooses which healthcare professionals to hire. Technology. The MSO can help choose the best technology (hardware, software, and other computer services) for Tom’s oncology practice and provide technical support – provided the HIPAA and any other regulations are met. The MSO cannot make any medical decisions about which technology to use. Many other services. The MSO can help with quality assurance, disaster management, and other services provided the MSO doesn’t engage in the practice of medicine. In addition, if Tom, an oncologist wants to help cancer patients with more than just diagnosis and the available treatments, an MSO can help Tom with those goals too. For example, Tom may want to help his patients feel better and hopeful while the patients are going through their treatments. He may want to bring in dieticians, nutritionists, people who make people look better when the patients lose their hair, and other healthcare providers. An MSO for these new healthcare services can provide many of the same services an MSO can provide for the oncology practice. We’ll also explain when and how the main oncology practice and the ancillary practice can work together – including addressing the relevant federal and state anti-referral laws. We’ll explain what the MSO can and cannot do and when separate MSOs may be required. Can an MSO help an oncology practice with the obligations of Stark Law and Anti-Kickback Statutes? As discussed, Tom wants to have working relationships other medical service providers. He wants to know what steps he can take to address the anti-referral provisions of Stark Law, the Anti-Kickback Statute, and California’s anti-referral laws. He knows that referrals are a common way of getting business and helping other boundaries – but he wants to make sure he’s in compliance with the anti-referral laws. Generally, Stark is a federal law the prohibits physicians from receiving from and referring to “designated health services” (DHS) that submit Medicare and Medicaid bills – where the doctor (or an immediate family member) has a “financial relationship” in the DHS. Our healthcare compliance lawyers will review whether the referral arrangements are legal or illegal. If they might be considered illegal, we’ll discuss how an MSO might be used to meet an exception to the Stark Law that may make the referral arrangements legal. Stark Law exceptions may be legal if an MSO performs the following tasks: Personal service arrangements Fair market value exceptions Office space and equipment leases Physician payments for items and services Compliance training Group practice arrangements with a hospital Incidental payments for medical staff Non-monetary compensation Risk-sharing arrangements The isolated transaction exception which can help raise capital for these new services. We’ll explain whether an exception applies and the very precise requirements for meeting each type of exception. Our healthcare lawyers will also explain if there are any “safe harbor” arrangements that can be used by the MSO to address concerns the business relationships may violate the Anti-Kickback Statute. The AKS generally makes referrals that provide payments or compensation in return for referring business to Tom’s practice STARK LAW EXCEPTIONS THAT MIGHT APPLY TO YOU In today’s video, we discuss some exceptions to Stark Law, which deals with improper referrals by physicians and healthcare practitioners. Our law firm helps oncology practices and other medical practices comply with federal and state healthcare compliance practices. We review corporate medical compliance, anti-referral law compliance, HIPAA compliance, and many other privacy and consumer protection laws. We’ll explain if an MSO is a good option for your practice. If an MSO is a wise choice, we’ll help negotiate the terms of the MSO for your practice including setting forth the terms, obligations, and available remedies. We’ll also help with any ancillary oncology practices. Oncology practices and healthcare practices that work with oncology practices should contact Cohen Healthcare Law Group, PC to discuss their federal and state legal compliance requirements. Our experienced healthcare attorneys advise physicians, nurses, acupuncture providers, and other healthcare providers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
January 1, 2023
Healthcare
Are Per-Patient Bonuses Legal?
In today’s video, we talk about the thorny question of whether bonusing staff on a per-patient business is legal or legally risky. I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare industry clients just like you navigate healthcare and wellness legal and regulatory landscape so you can launch, or scale, your business or product or service. Let’s say you have a medical office that does plastic surgery, a medical spa, a telemedicine practice, something else. You’re the physician and the Registered Nurse or Physician Assistant whom you supervise is super-personable and popular. Because of this mid-level, patients come back again and again. So, they come back for an IV infusion, or Botox, an injectable or laser treatment, hair removal, or some other aesthetic medicine or anti-aging, functional medicine, integrative medicine, or some other therapeutic procedure or approach. In fact, let’s just say it’s the RN or the PA that is responsible for 90% of your business. They are the magnet. They are expert at marketing and customer relations. You want to retain them long-term, obviously. Can you bonus them based on patient retention and return? Could you pay them as an independent contractor, with variable compensation depending on revenues? The answer is a two-letter word: No, you shouldn’t bonus clinical staff based on the financial story of their financial success with patients. Anti-kickback laws prohibit any compensation that varies based on the VALUE or VOLUME of patients. So, compensation that varies with the dollar revenue figure or number of patients returning, would violate these laws. And an employment arrangement is much less risky than an independent contractor arrangement for two reasons: first, bona fide employment is a safe harbor to anti-kickback law; and second, supervision implies control, and control means the person should be classified as an employee. Now, if you would want to bonus your staff person, what can you do? You can reward performance and productivity. The clearest way to do this, is to establish KPI, Key Performance Indicators. The KPI should not be tied to the value or volume of patients. So, for example, let’s take patient satisfaction. It’s a measure of performance. The more satisfied the patients the more likely they will return; you’ll have more revenue – but you are measuring satisfaction and not the number of patient visits or how many dollars they generated. You can apply this same approach to your marketing staff, and we’ve got blog posts on that. Set objective KPI that reward actual performance, not revenue results. And last, ensure that compensation as always reflects fair market value for the services rendered. Fair market value should be set according to performance—in other words, effort—not results. As one formulation of the black-letter law, in California, Business & Professions Code Section 650(b) requires that the bonus be: “for services other than the referral of patients” and “commensurate with the value of the services furnished.” Thanks for watching. If you still have questions, click on the link below, cohenhealthcarelaw.com/contact, to send us a message or book an appointment. Here’s to the success of your healthcare venture, we look forward to speaking with you soon. Testimonials
December 8, 2022
Healthcare
What Physicians Need to Know about Physician Contracts with Hospitals
Both physicians and hospitals need to be aware of the numerous legal compliance issues when these health providers enter into contractual relationships. Violations of the federal laws and state laws along with violations of local medical board requirements can result in fines, suspension of a medical license, and other consequences. Our experienced healthcare compliance lawyers review hospital/physician contracts before you sign the contracts. Often, we negotiate changes to help you meet your compliance obligations. We also advise physicians when problems arise for noncompliance with the laws, regulations, and the contract itself. Some of the many issues we review are the following: Stark Law and AKS compliance Stark Law and the Anti-Kickback Statute (AKS) are both laws that are designed to ensure physicians place the healthcare of their patients first – before any financial benefits for the physician are considered. Stark Law and the AKS apply when either entity seeks reimbursement from government agencies such as Medicare and Medicaid for health services. Experienced healthcare lawyers review when these laws apply, the consequences for non-compliance, and what exceptions or safe harbors can be included in the contract to help show the healthcare providers are in compliance. Stark Law is a civil law that regulates referrals by a physician to a designated healthcare facility – when the physician or a family member has a financial interest in the designated healthcare facility. A common example is the referral of patients to diagnostic centers or ambulatory service centers (ASCs). The AKS is a criminal law that regulates referrals to any entity in which the physician has received some type of financial incentive (cash, vacations, a directorship, or other benefits) in order to entice the physician to make the referral to that entity. A common example is when physicians recommend certain medications based on the pharmaceutical that made those medications paying the physician to recommend the pharmaceutical company’s drugs. Other compliance laws include the False Claims Act and the Civil Monetary Penalties Law. The False Claims Act governs the fraudulent/dishonest submission of medical bills to governmental agencies. The Civil Monetary Penalties Law regulates forms of abuse involving Medicare and Medicaid. Other compliance laws include the state corporate practice of medicine laws. The corporate practice of medicine laws are designed to separate the practice of medicine from the profit of medicine. Corporations that are subject to the corporate practice of medicine laws cannot hire physicians to provide medical services and the corporations cannot provide the medical services themselves. Can I Own a Medical Practice if I am Not a Doctor? An Overview of Corporate Practice of Medicine We spoke about a series of webinars talking about a trending topic in the legal aspects of corporate medicine, Management Services Organization. And with much anticipation, we bring you – Part II […] The Stark exception and AKS safe harbor exceptions for personal service arrangements Stark Law generally provides a specific exception for physician agreements with hospitals if the following conditions are met: In general, the remuneration from the hospital for physician services must be: In writing, signed, and must identify the services to be provided. The contract should cover all the services to be provided. The “aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement.” The contract must be for at least one year. The compensation should be set in advance, should not exceed fair market value, and except for physician incentive plans (defined in another part of the statute), and should not take into account the volume or value of any referrals or other business generated between the parties. The services should not involve “the counseling or promotion or a business arrangement or other activity that violates any State or Federal law.” Should comply with other requirements necessary to protect the program or patients from abuse.’ The Physician incentive plan exception. This provision of Stark Law provides that a physician incentive plant that “takes into account directly or indirectly the volume or value of any referrals or other business generated between the parties,” should meet the following conditions: “No specific payment is made directly or indirectly under the plan to a physician or a physician group as an inducement to reduce or limit medically necessary services provided with respect to a specific individual enrolled with the entity.” Many other conditions A ‘physician incentive plan’ means any compensation arrangement between an entity and a physician or physician group that may directly or indirectly have the effect of reducing or limiting services provided with respect to individuals enrolled with the entity [hospital]. Other requirements and conditions may also apply that experienced healthcare lawyers will review. Physician recruitment inducements Generally, Stark Law also provides for exceptions for hospital remuneration “to a physician to induce the physician to relocate to the geographic area served by the hospital in order to be a member of the medical staff of the hospital, if— “The physician is not required to refer patients to the hospital, The amount of the remuneration under the arrangement is not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician, and The arrangement meets such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.” The AKS has a similar (but not identical) safe harbor for certain hospital/physician arrangements. Stark exceptions and AKS safe harbors which can benefit doctors if properly created and documented require that the contracts with the physicians be in writing – if the physician is an independent contractor. It is also good practice to also have written contracts between physicians and hospitals when physicians are employees of a hospital. We’ll explain what Stark, AKS, and practical legal issues apply to contractor and employment contracts. The terms of the physician-hospital contract In addition to addressing Stark and AKS issues, written contracts provide numerous other benefits such as determining the length of employment, when a physician can and cannot be discharged, how much the physician will receive in wages and other benefits, the duties of the physician, the duties of the hospital, the right to patient contact information, and many other issues. The contract should establish: Who the parties to the contract are. The contract should clarify whether the party to the contract is a hospital or a medical practice/physician group. Stark Law does require that the contract clearly identify when a practice group is providing the medical services and the relationship between the group and the individual doctors. Other types of contracts we handle include physician contracts with community mental health centers, long-term care facilities, school-based health centers, and hospices. The status of the physicians. The contract should specify whether the doctor who is performing the medical services is an employee or a contractor. The contract is an indicator of status but not conclusive. Generally, the IRS standards for determining employment status will control. A key factor is whether the hospital controls the hours and work performance of the physician. What services will be provided? The physician/hospital contract should set forth the clinical services, administrative functions, and other services the doctor will provide. The contract should identify when and how these services can be assigned to others. The times of service. The contract should set forth whether the physician works full-time, part-time, or when the doctor is needed. The ability to change these schedules should also be written in the contract. Where the services will be provided. The contract should clarify where the physician will work – especially when the hospital has multiple locations. Independent judgment. The contract should make clear that the physician’s primary duty is to the patient and that the physician should be able to use his/her independent professional judgment. This provision may help address any corporate practice of medicine issues. Intellectual property. Experienced healthcare contract lawyers help physicians keep the rights to any intellectual property the physicians generate during the scope of their employment. Credentials. Generally, the hospital will want the doctor to keep current with their medical requirements including board certifications, insurability, DEA registration, and the ability to participate in government programs such as Medicare. The doctor’s credentials may also include any restrictions on the right to practice, Stark or AKS complaints, or any other items on their medical record which might limit their ability to provide the requested medical services. Work performance. The contract should require that the physician and hospital comply with the appropriate rules and regulations, the proper standards of care, and payer requirements. The contract should also set forth the physician’s obligations to participate in various medical staff duties, comply with any investigations, and act on behalf of the patient first. Medical records. The hospital should require that doctors comply with the appropriate medical requirements – including compliance with the Healthcare Insurance Portability and Accountability Act (HIPAA). Doctors will be required to complete any open medical records when the contract ends in a timely manner. Other medical requirements may apply including compliance with the Social Security Act. The contract should indicate who owns the medical records. Supplies and staff. The duties of the hospital. The contract should provide terms for what equipment, supplies, and staff the doctor can use – along with what office and surgical space can be used. For example, the safe harbor provisions of the AKS provide that leasing agreements must be in writing and signed by the hospital and the physician. The lease must specify that premises and equipment that are included. “If access to the space or equipment is for periodic intervals, a schedule for the use and exact lease payments must be set out in advance.” The lease must be at least for one year. The lease payment obligations must be written in advance and based on fair market value. Compensation. Doctors deserve to be paid for their medical services. The compensation should, to comply with various federal laws and rules, be based on the fair market value of the services given the doctor’s qualification and experience. The compensation generally should not be based on the volume of the practice or the amount of any referrals. The contract should also document any signing bonuses, relocation expenses, loan repayments, and any other benefits the doctor is receiving. Hospitals, physician groups, and individual physicians should understand the Stark and AKS requirements. For example, generally, doctors cannot be paid by a hospital or physician group practice based on “ancillary services” such as lab tests that the doctor orders. There are many other considerations that affect the compensation part of the contract – such as tax considerations. Additional benefits. In addition to a salary, financial payments, and other cash considerations; the contract should include such benefits as insurance benefits, pensions and other retirement benefits, vacation time, and sick time. Another common benefit point is that Continuing Medical Education (CME) benefits (payment for the courses). Referrals. Stark Law may allow some referrals provided the specific terms of any exceptions are met. Any discussion of the referral arrangements should be in writing. Other physician/hospital contract issues include patient collections issues, liability insurance coverage, worker’s compensation payments, the contract term, indemnification issues, how the contract can be terminated, confidentiality requirements, and post-termination requirements. Generally, California does not authorize covenants not to compete (noncompetition clauses). Other states may authorize noncompetition clauses. The contract may also have a non-solicitation clause to ensure that the physician can’t solicit patients – though there are laws that ensure that the best interest of the patient comes first that we’ll explain. There are many other provisions we’ll review such as how disputes are resolved and other issues. Physician service agreements with hospitals must comply with Stark Law and the AKS. There are specific rules for physician service agreements in both statutes. Doctors should review with skilled healthcare lawyers the full range of legal, practical, and medical issues that each contract should address. Physicians should contact Cohen Healthcare Law Group, PC before signing any employment contracts with a hospital or a physician’s group. Our experienced healthcare attorneys advise physicians about their federal and state healthcare compliance requirements. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
December 1, 2022
Healthcare
Healthcare Compliance Issues for Medical Drones
Advances in drone technology have begun to entice developers and medical care providers. There are numerous projects already in development that will use drones to help deliver medicine and medical supplies, help seniors, and a host of other possible medical uses. The legal issues involving how these devices will be regulated by the FDA (as a medical device or for other reasons) and other agencies are just beginning. This article explores many of the potential uses of drone technology. As with new innovations, developers and medical providers need to review the lines between the business aspect of this technology and the medical needs of the patients. Our experienced healthcare providers will review many different drone medicine issues including: Whether Stark Law, the Anti-Kickback Statute, or other anti-referral laws apply? When can and when can’t developers provide incentives to medical practices to use the developer’s drone technology? When can a physician have and when can’t he/she have an interest in a service that uses drone technology? Whether the corporate practice of medicine laws apply? Generally, only doctors can provide medical advice. To the extent the drones are considered medical, there will need to be a discussion about who can own the drone technology company. Who can prescribe and administer drone technology that has a medical component? Does HIPAA apply if the drone technology includes any electronic information about the patient? Many other legal questions depending on the scope and applications of the medical drone technology. DRUG AND MEDICAL DEVICE MANUFACTURERS NEED TO COMPLY WITH THE ACA’S SUNSHINE ACT – PART ONE The Sunshine Rule of the Affordable Care Act requires that drug and medical device manufacturers disclose to CMS any payments they made for the benefit of physicians regarding the drugs or devices. STARK LAW EXCEPTIONS THAT MIGHT APPLY TO YOU In today’s video, we discuss some exceptions to Stark Law, which deals with improper referrals by physicians and healthcare practitioners. CAN I OWN A MEDICAL PRACTICE IF I AM NOT A DOCTOR? AN OVERVIEW OF CORPORATE PRACTICE OF MEDICINE We spoke about a series of webinars talking about a trending topic in the legal aspects of corporate medicine, Management Services Organization. And with much anticipation, we bring you – Part II […] Drones and the delivery of medications or other health services Many publications such as Very Well Health have begun to review the benefits of drone technology for the practice of medicine. Very Well Health discussed the following pros and cons of using drones to deliver prescription medication to the homes to patients. For example, Zipline, a leading drone manufacturer is working with Magellan Health and Intermountain Healthcare to deliver prescription medications and medical supplies via drone to a patient’s home. The company is already planning to make deliveries in Charlotte, North Carolina and there are plans to service Salt Lake City, Utah – pending FAA (Federal Aviation Administration) approval. The drones, which are battery-operated can make medical deliveries in about 30 minutes – as compared to hours or days for more traditional services. According to Zipline, “autonomous aircraft are much more sustainable and fuel-efficient per delivery and also reduce congestion and wear and tear on the highways.” Zipline already is delivering medical products in Rwanda and Ghana. During the pandemic, Zipline was able to deliver personal protective equipment to North Caroline frontline healthcare workers. The company has also delivered, as of the date of the Very Well Health article, 650,000 COVID-19 vaccines. The benefits of drone medical delivery The advantages to drone delivery of medical products according to Very Well Health include getting necessary medical products to people who don’t have transportation or who cannot drive due to chronic health problems. The delivery services also mean deliveries can be made according to the patient’s schedule. Drone delivery is especially helpful in rural areas and any areas where the location may be hard to reach or difficult to traverse – such as islands, wetlands, or mountains. Drone delivery services help ensure the patient gets the medications promptly and with less personal contact which can reduce the possibility of spreading infectious diseases. Drone delivery could be especially useful when disasters happen. Drone delivery generally works by having a doctor, nurse, or health technician send a request to the drone company. The drone then delivers medications, vaccines, antivenoms, antibiotics, blood transfusions, and many other medical products. The product is dropped by parachute so that the product lands at a rate of speed that should prevent the medication or medical product from being damaged. The drone then flies back to the company launch site. Concerns about using medical drone services A few of the disadvantages of medical drone services include the following: Storage issues if the medications need to be kept at a certain temperature and a specific humidity level. “In 2021, Zipline partnered with Pfizer to complete the first long-range drone delivery of COVID-19 vaccines, which must be stored at extremely cold temperatures.” The expense of building and maintenance of the drone Equipment failure Training costs Possible damage or theft of the medications and other medical equipment Privacy concerns Weather-related challenges such as rain, snow, heat, cold, and wind Battery-related capabilities Fuel issues Drone propellor function There are regulations (or will likely soon be regulations) that monitor the path of the drone and the number of drones that can be in the sky. Drones generally land on a person’s front yard, backyard, or driveway. This strategy works well for homeowners. The strategy can require more work for apartment renters. “Another big disadvantage of drone delivery would be bypassing the ability for patients to speak directly with their pharmacist about any questions or concerns regarding their medications.” Many patients like to ask questions of their pharmacists when they pick up their prescriptions or medical supplies. Other concerns include insurance coverage, the cost of the delivery, and what happens if there’s a drone accident. Drone medical deliveries – the next stages Most Americans live within five miles of a pharmacy. While there would seem to be substantial benefits for people in rural or remote locations, the question begs how practical medical drones are for urban areas. Very Well Health adds that the delivery of medications and medical products “will require the involvement of multiple federal agencies including the FAA, Federal Trade Commission, Food and Drug Administration, Drug Enforcement Agency, and the Department of Health and Human Services.” Currently, the expectation is that medical drones will primarily be used to test their benefits and risks. Additional uses of medical drones According to Drones in HealthCare, medical drones are being developed for purposes other than delivering medications. Drones, like mobile apps, wearable technology, telemedicine, robots, and artificial intelligence are helping provide medical care throughout the country. In addition to helping people in their homes, drone delivery services could work with nursing homes that often, on average, how more patients in need of medical care than the general public. Drones could also help seniors stay in their homes instead of having to move into a nursing home. Drones could help deliver meals to people who can’t make their own meals Drones could help monitor patients with dementia. Drones could possibly help patients who are having cardiac problems and other medical orders that require a defibrillator. “Automated external defibrillators (AED) [could] fly to the patient in a public space to provide rapid defibrillation for ventricular fibrillation. No longer would a person have to obtain AEDs from a specific location that may be challenging to find in a rapid fashion. Simply summon the AED with the push of a button or smartphone app.” Drone deliveries can also be useful inside hospitals. Drones can make deliveries from floor to floor and building to building – faster the making the deliveries by walking or through pneumatic tube systems. Other factors that affect how well drone medical services work in hospitals are GPS signals and radio signals – which work outdoors but not as well indoors. As with most technology, there are concerns that drones can affect the jobs of various healthcare workers. Drones could be designed to deliver more than just medications. Drones could be programmed to sort laundry, grab a glass of water, or clean around the home. The psychology of having drones fly around a home needs to be considered. A drone is also referred to as an unmanned aircraft system (UAS). Forbes profiled a few other medical uses for drone technologies. One interesting possibility is to use drones equipped with cameras and a display screen so the patient can use telehealth services from their home or any other location to speak with a doctor. Drones can also be designed to enable patients to administer self-lab tests. In this way, the telehealth service could be combined with some diagnostic services. According to the US NIH: “Drones are used for surveillance of disaster sites, areas with biological and chemical hazards, and tracking disease spread. It has been shown that drones can gather information about the number of patients in need of care and triage in high-risk environments.” “Drone technology has been used to detect health hazards, such as heavy metals, aerosols, and radiation.” “The ability of drones to acquire real-time, high-resolution temporal and spatial information at low cost makes them viable for epidemiology research.” Drone technology is helping provide medical care in many ways. A primary way is the delivery of medications and medical supplies – especially to remote areas. Drone technology may also help when disasters strike, with medical research, and with the use of telemedicine. Drone manufacturers and medical practices need to understand when and how the FDA, the FTC, and other federal or state agencies may regulate drone technology. Companies need to review referral arrangements, medical supervision issues, and many other healthcare issues – with experienced healthcare attorneys. Developers, transit systems, hospitals, and health practices that are using drone technology for medical care should contact Cohen Healthcare Law Group, PC to review the federal and state legal compliance issues (in the health sector) that apply. Our experienced healthcare attorneys advise manufacturers, medical practices, and healthcare companies and providers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
October 15, 2022
Healthcare
What Are the Legal Risks Involved with An IV Therapy Business? Part Two
In our first article about IV therapy, we discussed what IV therapy is, why it’s popular, and who can own an IV therapy practice. There are many more questions that practitioners of IV therapy need to review with an experienced healthcare attorney. We’ll discuss some of the following IV therapy legal compliance topics below: Who can prescribe, prepare, and administer IV therapy? What referral laws apply to IV therapy? What rules and regulations govern the marketing of IV therapy? We strongly suggest you make an appointment to discuss the topics listed above – and all healthcare regulations that govern IV therapy in your state – with healthcare lawyers with a record of service in the healthcare industry. What is the business structure of the IV therapy practice – and does the business structure comply with the corporate practice of medicine laws? Does the manner and delivery of the IV therapy make a difference – in a hospital, at a medical office, at home, or through a mobile app? What notices, consent issues, and contracts are involved – between physician and patient? Does the Federal Drug Administration (FDA) have to approve the IV therapy solution? What state agencies and medical boards have oversight over IV therapy? IV practices also need to review any medical malpractice issues, business issues, contractual issues, and other health, financial, and legal considerations. IV HYDRATION THERAPY – LEGAL STRATEGIES In today’s video, we discuss some of the legal perils involving IV hydration therapy and potential legal strategies and solutions. Who can prescribe, prepare, and administer IV therapy? Generally, a physician prescribes the IV therapy, a pharmacist prepares the IV solution, and a registered nurse administers the IV therapy to the patient. The states differ on which other healthcare professionals can participate in each phase of the IV therapy treatment. Some orders can be delegated from one healthcare professional to another; but others may not. For example, an emergency medical technician may also (you need to check with your lawyer) administer IV therapy to a patient. Many states do not authorize EMT administration of IV therapy. Other agencies that have oversight over IV therapy include the US FDA, state medical boards, state pharmacy boards, and state health and human services departments. There are also additional rules for prescribing IV therapy through a telemedicine interview as opposed to an in-person interview of a patient. For example, Cal. Code Regs. tit. 16 § 2542.1 provides that: The Board will consider a licensed vocational nurse as competent to start and superimpose intravenous fluids via primary or secondary infusion lines who has completed one of the following: An approved intravenous therapy course A submitted certification that meets specific medical board and California Business and Professions Code requirements. According to the American MedSpa Association, in addition to the corporate practice of medicine issues, the chain of care (including prescription and administration of the IV therapy) must be consistent with the diagnosis and treatment requirements of the procedure. An entity that has the legal authority to provide IV therapy must conduct an examination of the patient to determine the health status of the patient. As we recently discussed, California has modified its supervision and delegation requirements for registered nurses. The American MedSpa Association also states that a non-physician provider can be a physician’s assistant (PA), nurse practitioner (NP), or registered nurse (RN). In some states, a licensed practical nurse (LPN) or a licensed vocational nurse (LVN) may also have the authority to administer the IV therapy. Just a few states authorize an EMT or a paramedic to administer IV fluids. Supervision rules can include being on the site while the IV solution is administered – to being immediately available in case there is an emergency. For example, [as we discussed above] in California, an RN may administer the IV therapy under the supervision of either a physician, PA or NP. An LVN will be considered competent to start and superimpose IV fluids via a primary or secondary line if the LVN has completed either a nursing board-approved intravenous therapy course or submitted certification to prove that the LVN has the knowledge, skills, and abilities to safely administer IV services. In New York, an LPN must be under the “direct supervision of a physician, PA, RN, or NP. LPNs must be trained to administer IV therapy.” CALIFORNIA’S NEW SCOPE OF PRACTICE LAW FOR NURSE PRACTITIONERS – PART ONE California passed a new law, effective January 1, 2023, that permits nurse practitioners in specific settings to provide care (under certain conditions) that does not meet “standardized procedures.” What referral laws apply to IV therapy? The medical practices that provide IV hydration/vitamin therapy must also comply with laws designed to place patient safety before the profits of the medical practice. The laws (some civil, some criminal) generally provide that a doctor must refer patients to related services such as diagnostic labs and IV therapy services based on what is in the best interest of the patient. Some of the laws that we’ve also discussed that govern medical referrals include: Stark Law. This law prohibits doctors from referring patients to a designated health service (one in which the physician has a financial interest or a family member has a financial interest) unless certain Stark exceptions are met. The Anti-Kickback Statute (AKS). This law prohibits medical practices, such as IV therapy practices, from providing incentives (such as cash payments, directorships, or vacations) in return for the physician referring patients to the medical practice. The AKS does authorize certain safe harbors which may make the referral legal. The False Claims Act. This law prohibits medical providers from submitting false bills to Medicare, Medicaid, and other federal agencies. The law encompasses both Stark Law and the AKS. This means that a medical practice that is charged with a Stark Law or AKS violation may also be charged with violating the False Claims Act. California has its own False Claims Act that generally applies to false claim submissions to Medicaid. What rules and regulations govern the marketing of IV therapy? There are different laws and regulations that govern how medical practices including IV therapy practices can market their product and services. One federal agency that regulates false advertising is the Federal Trade Commission (FTC). We have a short video on FTC oversight of IV therapy online. IV therapy mixtures generally contain water, minerals, vitamins, and amino acids – that are administered through an IV drip. So, for starters, the marketing must be truthful as to what products are in the IV solution and how the solution is administered. The FTC does review company websites, social media, and print marketing materials. A website or marketing brochure that claims, as one company did according to an FTC enforcement action in 2018, that their IV mixture can cure specific diseases such as congestive heart failure, diabetes, or cancer – without any scientific evidence to support the claim – will likely result in a warning letter from the FTC and possible enforcement action. A settlement with the company was reached that prohibits the company from making false or unsubstantiated claims that its IV cocktails: “Are an effective treatment for any of the diseases included in the complaint. Produce fast, lasting results. Cure, mitigate, or treat any diseases, unless the claim is supported by competent and reliable scientific evidence.” The settlement order also prohibited the company “from making any express or implied health, safety, or efficacy claims unless they are not misleading and are supported by scientific evidence.” FTC enforcement also can require that companies prohibit misrepresentations about the healthcare professionals involved in designing, testing, and approving the IV products. Companies that fail to comply with FTC warning letters can be forced to suspend production of their products – along with other consequences. IV therapy is becoming a popular treatment for many patients. While there are opportunities for profit for the medical practices that prescribe and administer the solutions and the pharmacies that prepare the solutions – there are numerous legal compliance issues. Medical practices need to understand who can prescribe IV therapy, who can prepare the mixture, and who can administer the solution. The practices need to understand when referrals are legal and when referrals are not legal. All marketing claims must be honest and comply with legal requirements. IV therapy practices should contact Cohen Healthcare Law Group, PC to review the federal and state legal compliance issues. Our experienced healthcare attorneys advise physicians, nurses, pharmacies, and other healthcare providers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
October 1, 2022
Healthcare
Can a Chiropractor Employ a Medical Doctor?
Can a chiropractor employ a licensed medical doctor? The question reminds me a tee-shirt I once saw which said: “Can I pay my Mastercard with my VISA?” Hi, I’m Michael H Cohen, founding attorney of Cohen Healthcare Law Group. We provide legal strategy and regulatory advice to businesses like yours that accelerate health and wellness. The question about chiropractors employing licensed medical doctors brings up legal issues generally around multi-disciplinary healthcare practices, medical spas, wellness centers, IV hydration clinics, mental and behavioral health centers, addiction centers, and other types of healthcare group arrangements in which providers cross-pollinate. In California we’ve got the Moscone-Knox Professional Corporations Act, which allows a kind of mixing-and-matching among healthcare practitioners as owners, directors and employees within a professional corporation. Typically, it’s a professional medical corporation although it could also be a professional chiropractor corporation, nursing, psychological, acupuncture, or professional naturopathic corporation, and so on. One legal tip: simply because Moscone-Knox in California does allow a particular business structure does not mean that the business arrangement will pass scrutiny under corporate practice of medicine and anti-kickback prohibitions. For example, in California, a “strong” corporate practice of medicine State, non-physicians cannot hire and fire physicians, because this implies excessive control over the practice of medicine. The same restrictions over MSO practices would apply here to the chiropractor. Therefore, we would recommend structuring the venture so that the chiropractor is housed within a chiropractic corporation; the medical doctor within a medical corporation; then let’s say the chiropractor, our client, they could also own the MSO which provides MSO services to each professional corporation. Does this sound complicated? Not really. It’s the same MSO model we discuss over and over on the website, on the blog. The nuance is, we get a better structure than one that allows the chiropractor too much control over medical decision-making. Instead, the MSO is involved in management and marketing, basic business operations. It might include something as powerful as branding and marketing the entire center. Thanks for watching, if you have questions contact us, we look forward to working with you soon. Testimonials
October 1, 2022
Healthcare
California’s New Scope of Practice Law for Nurse Practitioners – Part Two
This article is a continuation of our discussion about how California law AB 890 makes treating patients easier for nurse practitioners – without physician supervision or the need to comply with “standardized procedures.” In part one, we ended by discussing how NPs could meet the provisions of the new law by working in specific types of settings and organizations. This article continues that discussion by explaining the role of NPs in nursing corporations. NPs in Nursing Corporations California law already provided, before AB 890, that nurse practitioners could create nursing corporations: “2775. A nursing corporation is a corporation which is authorized to render professional services, as defined in Section 13401 of the Corporations Code, so long as that corporation and its shareholders, officers, directors, and employees rendering professional services who are registered nurses are in compliance with the Moscone-Knox Professional Corporation Act, the provisions of this article and all other statutes and regulations now or hereafter enacted or adopted pertaining to such corporation and the conduct of its affairs.” “With respect to a nursing corporation, the governmental agency referred to in the Moscone-Knox Professional Corporation Act is the Board of Registered Nursing.” 2776. This section states that violations of the act (indirect or direct attempts to violate the act, and other acts such as aiding in the violation of the nursing corporations statute, the Moscone-Knox Professional Corporation Act, or any regulations duly adopted under those laws – will be considered unprofessional conduct and a violation of this chapter. 2777. This provision provides that a nursing corporation is bound by the same statutes and regulations as a person holding a license under this chapter. 2778. This provision states that: “the name of a nursing corporation and any name or names under which it may render professional services shall contain the words “nursing” or “registered nursing,” and wording or abbreviations denoting corporate existence.” 2779. Except as provided elsewhere in the Corporations Code; “each shareholder, director and officer of a nursing corporation, except an assistant secretary and an assistant treasurer, shall be a licensed person as defined in Section 13401 of the Corporations Code.” Other provisions pertain to the income of a nursing corporation attributable to professional services rendered while a shareholder is a disqualified person – and what regulates can be adopted and enforced to carry out the objectives of the nursing corporation law. When AB 890 becomes effective in 2023, a nurse practitioner that meets the new scope of practice requirements (that permit an NP to practice in a setting/organization-specific practice – without standardized procedures) will: “Be able to practice independently with an additional three years of practicing in good standing (i.e., no discipline against the NP’s BRN RN license or NP certificate) in a setting-specific practice, for a total of six years (i.e., three years in TTP + 3 years practicing in good standing), to practice as an independent NP outside the setting-specific practices.” AB 890 also provides the following benefits and rights for nurse practitioners: Medical Staff Membership and Voting Rights. A nurse practitioner will be able to serve on “organized medical staff and hospital committees and adhere to all applicable medical staff bylaws in healthcare facilities.” In certain setting/organization practices, an NP will be eligible to attend department meetings. The NP will not be able to vote at a department, division, or other meetings unless their vote relates to the determination of NP privileges, peer review of NP clinical practice, certain licensee employment considerations, or the vote is “otherwise allowed by the applicable Medical Staff bylaws.” If an NP in a nursing corporation is eligible to join an organized medical staff (after January 1, 2023), the nurse practitioner will have the right to vote at all department, divisions, or other meetings. Referrals and evaluation of care. NPs should refer a patient to a doctor, surgeon, or another licensed health care provider – if the care that a patient need is beyond the skill and experience level of the nurse practitioner. According to the California Association of Long Term Care Medicine, NPs already are required to refer patients if the patient needs help above the skill level of an NP. NPs and other health care providers regularly make authorized referrals – such as “to a specialist Cardiology clinic for uncontrolled hypertension or Physical Therapy and Occupational Therapy in the Skilled Nursing Facility (SNF) setting for evaluation of a safe discharge.” For NPs in Nursing Corporations, NPs in SNFs Generally, most nurse practitioners who work in a skilled nursing facility (SNF) will be practicing within a setting-specific group – and will not require standardized procedures and physician supervision – once the California BRN creates new regulations. If a nurse practitioner in an SNF wants to create a nursing corporation, “they will then practice as an independent individual NP or NP group in 2023, under certain conditions.” Until the new law and new BRN regulations go into effect, nurse practitioners must enter into a written practice agreement with an individual doctor or a physician group: “Because the regulations governing SNFs require that a physician may not delegate a task when the regulations specify that the physician must perform it personally, which includes the initial comprehensive visit in an SNF during which the physician completes a thorough assessment, develops a plan of care, and writes or verifies admitting orders for the resident.” Medicare requires that the doctor cannot delegate the initial comprehensive visit in an SNF. Generally, non-physician practitioners may perform other medically necessary visits before and after the physician’s initial comprehensive visit. AB 890 should enable a better SNF workflow as NPs can practice without physician supervision and standardized procedures – and doctors will have a lighter workload and less paperwork. According to the California Association of Long-Term Care Medicine, “NPs in California have been working for over 20 years to get full practice authority. While there are still regulatory rules that need to be created, NP practices now have the statute for full practice authority.” How to Use a Management Services Organization for Profit if you’re a Doctor, Nurse, or Entrepreneur This video is excerpted from a Webinar held by Clara Salvai, Matthew Stokke, and Molly Fashola on April 14th, 2022. We are sharing some legal industry insights to the ever changing landscape of […] What Physicians and Investors Must Know About California Medical Corporations Doctors must comply with California’s Professional Corporation Act. A professional medical corporation provides many advantages over a partnership or sole proprietorship. Affordable Care Act creates scope of practice legislative scramble for healthcare practitioners Healthcare reform is creating incentives for even more legislative scrambles by different practitioner lobbying groups for favorable legislation that will protect, preserve, and expand their own […] What regulations may be needed to implement AB 890? According to the California BRN: The term “transition to practice,” will need to be defined. Currently, the term means: “Additional clinical experience and mentorship provided to prepare a nurse practitioner to practice independently.” “Transition to practice” includes, but is not limited to, managing a panel of patients, working in a complex health care setting, interpersonal communication, interpersonal collaboration and team-based care, professionalism, and business management of a practice. The board shall, by regulation, define minimum standards for transition to practice. Clinical experience may include experience obtained before January 1, 2021, if the experience meets the requirements established by the board. The BRN will need to determine process for Nurse Practitioner Advisory Committee to advise the Board on disciplinary matters* This regulation may or may not be necessary depending on the process used “Lower experience requirement to practice under 2837.104 for NPs holding a DNP (if desired*) (*This is not a prerequisite to full implementation of AB 890, as it is within the Board’s discretion to determine whether to lower this requirement).” “Establish certificate to practice under section 2837.104, and corresponding fee for certificate.” “Establish supplemental examination, if deemed necessary.” “The Board may consider whether other portions of AB 890 require a regulation in order to implement, interpret, or make specific any of the statutes in the bill.” What has the BRN done so far? Currently, the California Board of Registered Nurses is engaged in developing proposals and regulations to implement AB 890. Additional considerations by a local medical association According to the Alameda-Contra Costa Medical Association, there are some additional considerations: The California Medical Association (CMA) will be closely involved in the implementation of AB 890, monitoring and advocating during the regulatory process at the Board of Registered Nursing and at the Medical Board of California, as necessary. AB 890 allows Section 103 and 104 NPs to do the following: “Conduct an advanced assessment Order, perform; and interpret diagnostic procedures, as specified with regard to radiologic and clinical laboratory procedures Establish primary and differential diagnoses Prescribe, order, administer, dispense, procure, and furnish therapeutic measures including referrals, pharmacological agents, and nonpharmacological interventions, as specified Certify disability for state disability benefits Delegate tasks to a medical assistant.” AB 890 requires Section 103 and 104 NPs to do the following: “Verbally inform all new patients in a language understandable to the patient that the nurse practitioner is not a physician; Post a notice in a conspicuous location accessible to public view that the nurse practitioner is regulated by the BRN, including information about how complaints can be made; Practice only within the scope of their education and training; Refer patients to a physician in specified circumstances; and Carry professional liability insurance.” AB 890 Does Not End Physician Supervision. The bill does not prohibit the supervision of NPs – including the two new categories created under AB 890 – or otherwise seek to regulate or modify the operative law regarding the governance of nurse practitioners who do not receive additional training. Current arrangements regarding the practice and supervision of NPs are not regulated or changed by AB 890. AB 890 Requires Consultation and/or Referral. AB 890 requires “Section 10”’ NPs to refer cases beyond their training and education to a physician. AB 890 also requires “Section 104” NPs, who are practicing in facilities that may not have a physician on site, to consult with and refer patients to a physician in specified circumstances. AB 890 Explicitly Protects the “Corporate Bar.” AB 890 specifies that the corporate bar applies to Section 103 and Section 104 NPs. That means entities including hospitals may not hire, employ or otherwise control the Section 103 and Section 104 NPs unless one of the existing exceptions to the corporate bar applies. California AB 890 expands the ability of nurse practitioners in California to provide patient services without following “standardized procedures” in certain settings and through nurse corporations. The California Board of Registered Nurses is developing regulations to implement the new law. Nurse practitioners and medical practices should contact Cohen Healthcare Law Group, PC to how to comply with AB 890. Our experienced healthcare attorneys advise doctors, nurses, and other health care providers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
September 1, 2022
Healthcare
California’s New Scope of Practice Law for Nurse Practitioners – Part One
The California Board of Nursing states that a new California law, AB-890 expands the scope of practice rules for nurse practitioners. The law is effective January 1, 2023. To take advantage of the new law, nurses must meet specific California requirements. Nurse practitioners who do meet the requirements may be able to practice “independently,” in some cases. Nurses who do not meet the requirements must comply with “Standardized Procedures, the mechanism for Nurse Practitioners to perform functions which would be considered the practice of medicine.” What were the standardized procedures that nurse practitioners needed to meet prior to AB 890? The standardized procedures are those set forth in California law. Standardized procedures mean either of the following: “(1) Policies and protocols developed by a health facility licensed pursuant to Chapter 2 (commencing with Section 1250) of Division 2 of the Health and Safety Code through collaboration among administrators and health professionals including physicians and nurses. (2) Policies and protocols developed through collaboration among administrators and health professionals, including physicians and nurses, by an organized health care system which is not a health facility licensed pursuant to Chapter 2 (commencing with Section 1250) of Division 2 of the Health and Safety Code. The policies and protocols shall be subject to any guidelines for standardized procedures that the Division of Licensing of the Medical Board of California and the Board of Registered Nursing may jointly promulgate. If promulgated, the guidelines shall be administered by the Board of Registered Nursing.” What duties do nurses perform? Nursing as defined by the statute means: “Those functions, including basic health care, that help people cope with difficulties in daily living that are associated with their actual or potential health or illness problems or the treatment thereof, and that require a substantial amount of scientific knowledge or technical skill, including all of the following: (1) Direct and indirect patient care services that ensure the safety, comfort, personal hygiene, and protection of patients; and the performance of disease prevention and restorative measures. (2) Direct and indirect patient care services, including, but not limited to, the administration of medications and therapeutic agents, necessary to implement a treatment, disease prevention, or rehabilitative regimen ordered by and within the scope of licensure of a physician, dentist, podiatrist, or clinical psychologist, as defined by Section 1316.5 of the Health and Safety Code. (3) The performance of skin tests, immunization techniques, and the withdrawal of human blood from veins and arteries. (4) Observation of signs and symptoms of illness, reactions to treatment, general behavior, or general physical condition, and (A) determination of whether the signs, symptoms, reactions, behavior, or general appearance exhibit abnormal characteristics, and (B) implementation, based on observed abnormalities, of appropriate reporting, or referral, or standardized procedures, or changes in treatment regimen in accordance with standardized procedures, or the initiation of emergency procedures.” Before the passage of the new law nurse practitioners (NPs) could also: Order durable medical equipment Certify if a patient is disabled Approve or modify a plan of treatment or plan of home health care Furnish drugs or devices “consistent with the practitioner’s educational preparation or for which clinical competency has been established and maintained,” under physician and surgeon supervision (§ 2836.1). Specific supervision requirements include: “collaboration on the development of the standardized procedure, approval of the standardized procedure, and availability by telephonic contact at the time of patient examination by the nurse practitioner.” Furnish or order buprenorphine. Why was the AB 890 legislation enacted? According to the California Association of Long Term Care Medicine, the California NP scope of practice law was enacted to help mitigate COVID-19. AB90 was one of many bills introduced nationwide to help healthcare providers respond to the pandemic. Other COVID bills passed in California included bills to: Provide minimum personal protective equipment (PPE) requirements Expand the ability of pharmacists to give vaccines for COVID-19 Create statewide peer support specialist standards AB 890 is still awaiting new rules which will be drafted by the California Board of Registered Nursing (BRN). What did Assembly Bill (AB) 90 do? The new law: Established Article 8.5 in the Nursing Practice Act – that provides when and how NPs can practice without the use of standardized procedures (sections 2837.103 and 2837.104). Established a Nurse Practitioner Advisory Committee within the Board of Registered Nursing. This committee will advise the board about nurse practitioner issues including disciplinary issues. “Extended the prohibitions of section 650.01 to NPs practicing independently under section 2837.103 or 2837.104 – which “Makes it a misdemeanor for specified healing arts practitioners to refer a patient to another practitioner/entity for certain services, if the licensee or their immediate family has a financial interest with the person/entity that receives the referral. In this respect, the AB 890 is akin to Stark Law.” Extends “the requirement of section 805 to NPs practicing independently under section 2837.103 or 2837.104. “Section 805 requires certain peer review organizations to file an “805 report” with the applicable healing arts board, providing information about adverse actions taken against certain healing arts licensees for medical disciplinary cause.” Directs the California Board of Registered Nursing to “work with the DCA Office of Professional Examination Services on an occupational analysis, an assessment of the competencies tested by the national NP exam, and a determination of whether a supplemental exam is necessary to validate competency for independent practice.” Assigns other duties to the California Board of Registered Nursing to implement the new law. The First Steps to Understanding Stark Law In today’s video, we will be introducing you to Stark Law. What are the nurse practitioner requirements to be eligible to practice independently? AB 890 essentially provides two ways for nurse practitioners to practice without standard procedures and physician oversight: Setting specific practices This part of the bill is effective in 2021 – only after the BRN creates the necessary regulations. The key provisions are that the: NP passes a national NP board certification examination. “The Department of Consumer Affairs, Office of Professional Examination Services (OPES) will complete an occupational analysis of NPs performing the functions in the scope of practice statute and will possibly create an exam to cover aspects of the scope of practice statute if the national NP board certification exams do not cover them.” The NP must be properly certified by “a national certifying body accredited by the National Commission for Certifying Agencies or the American Board of Nursing Specialties and those national certifications need to be recognized by the BRN.” The nurse practitioner must provide documentation to show their training was “consistent with current BRN standards and any applicable regulations as they specifically relate to requirements for clinical practice hours. Online educational programs that do not include mandatory clinical hours shall not meet this requirement in the new law.” The NP must finish a California transition-to-practice (TTP) requirement of three full-time equivalent years or 4600 hours – according to BRN regulations. “To expand their practice outside of these settings: “a nurse practitioner must practice within the limits of their knowledge, experience, and national certification and have practiced in good standing for at least three (3) years after meeting the requirements to transition to practice.” “Nurse practitioners who practice outside of the limited settings listed above “shall consult and collaborate with other healing arts providers based on the clinical condition of the patient to whom health care is provided and establish a plan for referral of complex medical cases and emergencies to a physician and surgeon or other appropriate healing arts providers.” NPs who complete the above steps and work at one of the following six settings/organizations can, pursuant to AB 90, practice without standardized procedures or physician supervision: Clinics as defined by the Health and Safety Code A health facility as defined by the Health and Safety Code – with exceptions for correctional treatment centers, state hospitals, and other types of facilities. A medical group practice, including a professional medical corporation… another form of corporation controlled by physicians and surgeons, a medical partnership, a medical foundation exempt from licensure, or another lawfully organized group of physicians and surgeons that provides health care services. A home health agency. A hospice Each of these settings is defined in more detail in the California statutes. In response to the COVID pandemic, California passed a law that makes it easier for nurse practitioners to treat patients. The law provides that nurse practitioners who complete specific requirements can practice in a medical group practice and other settings – without the requirement to follow standardized nursing procedures. 7 Reasons Why Nurses Lose Their License Registered nurses, nurse practitioners, nurse specialists, and all nurses need to understand HIPAA, fee-splitting and revenue laws, a doctor’s duty of supervision, and other legal issues that […] Did COVID Relax Telemedicine Laws? In today’s video, we discuss whether COVID relaxed telemedicine laws. Nurse practitioners, medical practices, and other health providers who work with nurse practitioners should contact Cohen Healthcare Law Group, PC to review how California’s new AB 890 expands the practice of nursing practitioners Our experienced healthcare attorneys advise nurse practitioners, doctors, and others about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
August 22, 2022
Healthcare
Drug and Medical Device Manufacturers Need to Comply with the ACA’s Sunshine Act – Part One
The Affordable Care Act includes a provision called the “Sunshine” Rule. More formally, the rule is called “The National Physician Payment Transparency Program: Open Payments.” The Centers for Medicare & Medicaid Services (CMS) announced the terms of the rule in 2014. The rule is designed to help patients and others understand when the medications and medical devices their doctors recommend come with a catch – that the doctor has a financial interest with the drug company that makes the drugs or the device manufacturer that make the medical devices. According to the CMS deputy administrator for Program Integrity, “Disclosure of these relationships allows patients to have more informed discussions with their doctors.” The rule applies to drugs, devices, biologicals, and medical supplies – that are covered by Medicare, Medicaid, or the Children’s Health Insurance Program (CHIP). The manufacturers are required to report any payments or transfers of items of value that the manufacturers make to doctors and teaching hospitals – to CMS. CMS will post that information on its public website. The rule also mandates that the manufacturers and group purchasing organizations (GPOs) disclose to CMS any doctor ownership or investment interests. The aim of the rule is to provide increased transparency. The rule is designed to “help reduce the potential for conflicts of interest that physicians or teaching hospitals could face as a result of their relationships with manufacturers.” The rule become effective on August 1, 2013. CMS began disclosing the data on its website on September 30, 2014. The rule can be viewed at Federal Register: Federal Register Documents Currently on Public Inspection According to Health Affairs, the Sunshine rule, also called, “The Physician Payments Sunshine Act,” is based on section 6002 of the Affordable Care Act (ACA) of 2010. Why was the Sunshine Rule enacted? Drug and medical device manufacturers rely on doctors to refer their products to their patients. It’s one thing for a doctor to refer a drug or device based on an independent review by the doctor of all the appropriate drugs and devices (and the brands of each drug and device) – and another to make a recommendation based on a conflict of interest. Doctors should recommend medical products based on the best health outcomes for their patients and not on their own financial interests. The concern about a conflict of interest between the patient and doctor is so concerning that there are several federal laws that regulate referrals by doctors of all medical products in which the doctor has a financial interest in the product or has been given a financial incentive to recommend the medical product. Stark Law. Stark Law prohibits healthcare providers from making referrals to certain designated medical practices such as laboratories in which the physician or a close family member has a financial interest. Stark law applies to services and products that are ordered for Medicare patients. A financial interest includes compensation, investment, and ownership. There are some exceptions that generally do not endanger a patient’s health. The Anti-Kickback Statute (AKS). This law is a criminal statute that forbids medical companies from paying or providing financial incentives to physicians to refer the company’s products to the patients of the physicians. Some safe harbors do apply to the AKS. The drafters of the ACA were concerned about incentives such as free meals and speaker, or consulting fees paid to the doctors. According to Health Affairs, the financial relationships: “Can have many positive outcomes and–particularly in the context of consulting and research funding–are often a key component in the development of new drugs and devices.” However, they can also create conflicts of interest and in some cases can blur the line between promotional activities and the conduct of medical research, training, and practice. The financial interdependence between physicians and the manufacturers of medications, medical devices, biologicals, and medical supplies is far from minimal. According to a 2009 nationwide survey, nearly 84 percent of doctors had some type of financial relationship with the manufacturers. – of which, more than ½ were meals provided in the workplace. About 20 percent of doctors were reimbursed for attending a meeting or CME (continuing medical event). Less than 15 percent of doctors received payment for professional services. The numbers for the survey were lower than a similar survey taken five years earlier. One of the factors for the decrease, according to Health Affairs, “may be the growing awareness among researchers and policy makers of the ways that physician-industry relationships can bias physician decision making, encourage inappropriate prescribing that drives up health care costs, and undermine the independence and rigor of clinical research.” Professional bodies, academic institutions, and medical journals have all begun to implement conflict-of-interest protocols. Five states and the District of Columbia, prior to the ACA, had already passed laws mandating that the makers of drugs, devices, medical supplies, and biologicals report certain details of their financial relationships with clinicians. The US National Institutes of Health requires that all grantees disclose “Significant financial relationships with manufacturers.” The Food and Drug Administration (FDA) requires that “drug sponsors report on any financial ties with clinical investigators that reach certain monetary thresholds (which are higher than those set by the Sunshine Act).” Some drug manufacturers and medical device companies, prior to the Sunshine Rule, were required to disclose these relationships as part of legal settlements with the US DOJ (Department of Justice). In 2008 and 2009, respectively, the Medicare Payment Advisory Commission and the Institute of Medicine published influential reports on physician conflicts of interest – documenting the need for more transparency of physician-industry relationships. “Both documents also called for the establishment of a standardized, nationwide, mandatory public reporting program, which could supplement or replace the patchwork reporting system currently in place.” Senators Chuck Grassley and Herb Kohl first introduced the Physician Payments Sunshine Act in 2007. That initial version of the bill did not pass. The provisions were later amended and incorporated into the ACA as section 6002. STARK LAW EXCEPTIONS THAT MIGHT APPLY TO YOU In today’s video, we discuss some exceptions to Stark Law, which deals with improper referrals by physicians and healthcare practitioners. NEW PROPOSED RULES FROM THE CMS AND THE OIG-HHS ON STARK LAW AND FROM THE ANTI-KICKBACK STATUTE The CMS and HHA are proposing new rules, such as the Patients over Paperwork Initiative, where the focus of Stark and AKS will be on value-based arrangements What are the provisions of the Physician Payments Sunshine Act? The Sunshine Rule applies to manufacturers of drugs, devices, biologics, and medical supplies. The Rule applies to three different categories of payments when the bills for the payments are covered by Medicare, Medicaid, or CHIP. General payments or transfers of value. These include travel reimbursement, meals, and consulting fees. Ownership and investment interests, in manufacturing companies, by the physicians (or immediate family members). Ownership and investment interests in group-purchasing organizations (GPOs). GPOs are “entities that negotiate pharmaceutical contracts on behalf of health care providers.” All physician-owned distributors of medical devices are also expected to report. Research payments. This category includes payments for participation in preclinical research, clinical trials, or other product development activities. “To qualify as research under the final rule, it must be subject to a written agreement or a research protocol.” The amount of the payments will be handled separately “to reflect the fact that a research grant made to an investigator typically flows through a host organization and may not directly accrue to the physician leading the research.” Some exemptions from the disclosure requirement do apply. Drug and medical device manufacturers do not need to disclose payments under $10 – unless the individual payments add up to more than $100 for the year. Manufacturers are also exempt from disclosing payments for educational materials that are intended solely for the patients – or for product samples. However, manufacturers must still submit data to the FDA about the “identity and amount of samples requested and distributed to physicians.” Other exemptions may apply to products that are still in development and have yet to be approved by the FDA. Payments to a CME organization “to subsidize educational events will also be exempt from reporting, provided the event is accredited by a provider association (any one of five associations identified by CMS) and the manufacturer in question has had no direct role in the choice or compensation of the speaker(s).” Our skilled healthcare lawyers can explain whether any of these exemptions still apply in 2022. Generally, once the data is posted – the manufacturers, GPOs, physicians, and teaching hospitals have 45 days to review the data attributed to them and 15 days after that to dispute and correct the data. The Physician Payments Sunshine Act imposes the following penalties (our lawyers can explain any changes) for failing to comply with the ACA reporting requirements: The penalty for each payment a manufacturer or GPO doesn’t report is between $1,000 and $10,000. The maximum yearly penalty amount for non-compliance is $150,000. The penalties increase if the manufacturer or GOP “knowingly” failed to report a payment, for knowing violations, the penalties for each violation range from $10,000 to $100,000. The maximum penalty is $1 million. The CMS rules also provide that complying with the Physician Payments Sunshine Act (PPSA) does not protect the manufacturer, GPO, doctor, or teaching hospital from Stark Law, the AKS, the False Claims Act, or other healthcare referral laws. The reverse is often the case – meaning that the disclosure of the payments increases the likelihood of an inquiry into these civil and criminal laws. The Physician Payments Sunshine Act is part of the Affordable Care Act requires manufacturers, GPOs, physicians, and teaching hospitals to disclose certain payments and transfers of value to the physicians they work with or that receive the payments/transfers. These companies and practices should review the PPSA and other federal and state laws that regulate physician referrals and recommendations with experienced health care lawyers. There are specific requirements. Some exceptions may apply. There are severe penalties for failing to comply with the PPSA. AFFORDABLE CARE ACT CREATES SCOPE OF PRACTICE LEGISLATIVE SCRAMBLE FOR HEALTHCARE PRACTITIONERS Healthcare reform is creating incentives for even more legislative scrambles by different practitioner lobbying groups for favorable legislation that will protect, preserve, and expand their own […] Medical companies, doctors, and teaching hospitals should contact Cohen Healthcare Law Group, PC to ensure compliance with the CMS Sunshine Act. Our experienced healthcare attorneys advise medical business practices about their healthcare compliance requirements and the dangers of non-compliance. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
June 23, 2022
Healthcare
Can an MSO Operate a Medical Practice?
In today’s video, we talk about whether and how an MSO can operate a medical practice. I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare industry clients just like you navigate healthcare and FDA legal issues and launch, or continue to scale, your health and wellness service, products, software, or app. The key here is, what do we mean by the term, “operate?” Are we talking about the business side, the clinical side, something in-between? If you have a medical spa, a multidisciplinary clinic, a medical group, a telemedicine venture, psychology group, software or an app that involves MDs, psychologists, or you’re in a situation where the non-medical entrepreneur wants to control the venture, but can’t entirely hand it over, due to corporate practice of medicine and fee-splitting concerns, that is where you’ll want legal advice on what your MSO can and can’t do. When we say MSO or Medical Services Organization, we mean the business that provides management and marketing services to the medical aspect of your overall architecture. For example, the non-MD runs the medical spa, but doesn’t participate in clinical decision-making and clinical staffing. Some states are tougher on MSOs than others. When we say “tough”, we mean that they have a “strong” prohibition against the corporate practice of medicine, as opposed to the “weak” form of CPM, in which the only real prohibition is against the MSO having actual control of medical decision-making. In the weak form of CPM or CPoM, non-medical corporations CAN hire and fire medical doctors. In the stronger form of CPM, MSOs can make many administrative and marketing decisions, but the professional medical corporation has authority over hiring and firing of clinical staff, final authority over advertising, and other such control. We cover this in much more depth in some of our other videos and our healthcare law blog. Here are some questions posed and quick answers we’ve given about this relationship between the MSO and the Professional Medical, or psychological Corporation in a “strong” anti-corporate practice of medicine state. 1. Can a Physician be an officer of or own an MSO? Many of our clients do, in fact, give the medical doctor an equity stake in the MSO. It’s quite common. Technically having said that, it could be considered a conflict of interest: because every time the physician provides services, the MSO also makes money, as the MSO typically charges the physician or the physician’s professional medical corporation at fair market value for MSO services. This conflict of interest is an ethical violation, possibly a legal violation in principle, and at a minimum should be disclosed to the patient. Having said that, some risks are more or less intense as others, so part of it is evaluating the risk and it depends on the client’s risk tolerance. 2. Can the business model be such that all the customer payments go through the MSO – the software, the app, and from there a portion gets retained by the MSO and a part goes to the doctor? In the old days—I’d say about ten to fifteen years ago—this flow of payments would pose a problem. Technically, it’s fee-splitting, in the sense that it makes it seem as though the MSO is getting paid the professional fee and then splitting it up between the MSO and the doctor. Or the MSO or platform, software platform, telemedicine platform could be seen as giving the physician a kickback for the referral. But today, these arrangements are common, they are facilitated by software and it’s just seen as a way to split up what the MSO gets for its MSO services, and the doctor for their professional services. One thing that what would be a no-no is for the MSO to pay the physician a salary. At least in California, MSOs cannot hire physicians. MSOs cannot hire them as W2 employees or as 1099 independent contractors. So, we typically use an MSO Agreement to govern the relationship between the MSO and the physician of the professional medical corporation, otherwise there’s the CPM risk. 3. Can you bonus the MSO staff? You can, but bonuses must be tied to KPI, not tied in any way tied to the value or volume of patient referrals the staff generates. 4. The physician sells the medical practice, the professional corporation. Can they be generous and give money to the MSO or their staff? Not a great idea, that’s apples and bananas. The physician owns at least 51% of the professional medical corporation, and the MSO owner is not a healthcare licensee and can’t own the 49% because they’re not a nurse, not a chiropractor, acupuncturist and so on. Alright, i hope that clears some of the dust here. If you have any questions, just send us a message or book an appointment at cohenhealthcarelaw.com. Here’s to the success of your healthcare venture, and we look forward to working with you soon. Testimonials
June 9, 2022
Healthcare
More Anti-Kickback & Fee-Splitting Legal Basics
In today’s video, we discuss more basics of federal and state anti-kickback and fee-splitting prohibitions. Hi, I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare industry clients just like you navigate healthcare and FDA legal issues so you can launch, or continue to scale, your health and wellness product or service. PREVIOUSLY on Stark and Anti-Kickback Basics. I always flash back to 24: So, Previously on 24. Well, on this channel we talked about how Stark is the federal law that prohibits self-referral, how self-referral involves certain designated health services or DHS, and how state laws contain mirror-Stark provisions. For example, California has PORA, the Physician Ownership & Referral Act, which is like a state law mirror to Stark, the federal prohibition against self-referral. That is all codified in Business & Professions Code, Section 650.01. Just as Stark has exceptions, similarly, PORA has exceptions that allow certain arrangements or deem them unlawful or lawful. Then we discussed the definition of a kickback, how federal law prohibits unlawful referrals, and we mentioned some of the safe harbors that federal law offers to arrangements that federal law deems legitimate or not illegitimate. On the state side, we said that there are mirror laws prohibiting kickbacks and fee-splitting. California’s anti-kickback and fee-splitting prohibition is contained in Business & Professions Code, Section 650. Simply put, a kickback is an unlawful inducement to refer a patient for healthcare services. Business & Professions Code Section 650(a) says: “… 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 co-ownership in or with any person to whom these patients, clients, or customers are referred is unlawful.” There are 3 key parts: 1, there is an offer or acceptance by a licensed healthcare practitioner. 2, the offer or acceptance involves, basically, money or something valuable like money. The language Business & Professions Code Section 650(a) is: “rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise.” 3, the money or value is compensation or an inducement for referring that involve patients, clients, or customers to another person. Violating this prohibition, period, is unlawful, whether or not the person that’s doing the referring has shares or membership interest in the business to which the referral is made. While federal law provides a whole series of safe harbors, California law keeps it simple, just one: Section 650(b) which says, you can pay money for services OTHER than referring patients, as long as the referral is based on a percentage of gross revenue or similar type of arrangement at fair market value. Arrangements between entities, businesses, and persons, get complicated, so it is helpful to have your healthcare lawyer at your back analyze the arrangement for possible Stark, self-referral, anti-kickback, and fee-splitting issues. Thanks for watching. If you still have questions, click on the link below, cohenhealthcarelaw.com/contact, to send us a message or book an appointment. Here’s to the success of your healthcare venture, we look forward to speaking with you soon. Testimonials
March 23, 2022
Healthcare
Adaptogens and FDA/FTC Compliance
Adaptogens ingredients refer to supplements and herbs that are used in the practice of alternative medicine. The makers and sellers of products with adaptogen ingredients claim that the ingredients have properties that help to strengthen and normalize a person’s bodily functions. According to Michigan State University, adaptogenic ingredients can be found in “traditional Ayurveda and Chinese medicine and other holistic herbal alternative medicine practices.” According to the European Medicines Agency, adaptogen ingredients must include: An almost non-toxic response in the recipient. Non-specific pharmacological properties that increase an organism’s resistance to a broad spectrum of adverse biological, chemical, and physical factors. The ability to be a regulator by having a normalizing effect on an organism’s various organ systems or other profound pathologic changes in the organism. According to the Washington Post, consuming adaptogenic drinks in moderation has a low risk. Still, consumers need reliable advertising and marketing claims. The Post article states that adaptogens are a “broad class of herbs, botanicals, and mushrooms that have been associated with enticing effects — including relieving stress and improving mood — that are sometimes linked to the experience of drinking alcohol.” Adaptogens are being marketed as an alternative to alcohol. Nonalcoholic beverages promise some of the same reduced stress effects as alcohol drinks. Some nonalcoholic beverages from companies such as Kin Euphorics, Curious Elixirs, and Rasasvada include adaptogens. There isn’t any current research or scientific evidence that currently supports the efficacy of adaptogen ingredients. The ingredients do not qualify as drugs, according to the FDA definition of drugs because they do not “treat, cure, or prevent any known ailments or diseases.” FDA does review any claims by a manufacturer or seller that the adaptogen ingredients act as drugs. If a company markets products as drugs, the company will likely be sent a warning letter to cease any such claims on the grounds that the products are adulterated and misbranded. Adaptogens are considered dietary supplements. FDA has oversight over dietary supplements and dietary ingredients. Generally, FDA is limited in its ability to regulate supplements, according to Michigan State University, before the supplements are available for sale. While the manufacturers are responsible for the ingredients, FDA generally cannot recall the supplements until a sale has taken place and a consumer has filed a complaint. IS YOUR PRODUCT A DIETARY SUPPLEMENT OR AN FDA-REGULATED DRUG? (PART 2) In today’s video, we’ll talk about some more not so obvious ways that FDA can classify your dietary supplement as a drug. What ingredients are common in adaptogens? According to MSU, some common adaptogen ingredients include “Ashwagandha, Astragalus root, Bacopa Monnieri, cordyceps, Eleuthera, holy basil, licorice, maca, maitake, Rhodiola rosea (Arctic root), reishi, schizandra, shiitake, Siberian ginseng, and wild yam.” Common adaptogen claims Some of the statements that nonalcoholic drink companies make are: Kin Euphorics website says “BYE BYE BOOZE. HELLO COSMIC WONDER,” and advertises that its drinks have “mood-boosting” or “mind-calming” ingredients. Curious Elixirs describes its offerings as “complex booze-free cocktails infused with adaptogens to help you unwind.” Adam Perlman, a physician and integrative and functional medicine specialist at the Mayo Clinic says that. “Very often there is some science to back these claims, but the science is often not as definitive as we’d like it to be.” Mikhail Kogan, a geriatrician and medical director of the Center for Integrative Medicine at George Washington University says that adaptogens refers to a natural substance that “somehow protects against negative impacts of stress.” “Kogan said he uses tinctures of adaptogens himself, including schisandra, ginseng and rhodiola, and has recommended them to patients.” Norbert Kaminski, a professor of pharmacology and toxicology and director of the Center for Research on Ingredient Safety at Michigan State University says, “The idea is these adaptogens help maintain your body and equilibrium.” While the functions associated with the ingredients largely match the advertising language for nonalcoholic adaptogenic drinks, the claims are often vague. Kaminski said. “The things that they supposedly do often are very difficult to measure. You can’t quantify a lot of this.” Adaptogenic products such as herbs, plants, and mushrooms do have a history of healing abilities – “But while some scientific evidence suggests there are benefits to consuming adaptogens, experts said much of the research involved animal studies, and that the few human trials were limited by small sample sizes.” Do adaptogens actually meet the claims that these products reduce stress and balance systems? Adaptogen warning letters. The FTC also has oversight over false claims makers and sellers of adaptogen ingredients make. The FTC regulates how a manufacturer or sell can advertise and market its dietary supplements. Claims must be truthful and substantiated. Claims cannot be misleading. FTC can send warning letters to the manufacturers and retailers of the dietary supplements if the agency believes the supplements are harmful or if the claim about their efficacy is improper. For example, claims that adaptogen ingredients can cure, prevent, or mitigate COVID-19 symptoms will be met with FDA and FTC warning letters. benjaminmcevoy.com – 607149 – 05/14/2020 | FDA. FDA and FTC filed a joint warning letter against Benjamincovey.com claiming that the respondent sold products, including dietary supplements, through Amazon and promoted the products on the company website. The website includes claims “representing or implying that the products can mitigate, prevent, treat, diagnose, or cure COVID-19[2] in people.” The warning letter asserted that these claims cause the products to be classified as unapproved new drugs under section 505(a) of the Federal Food, Drug, and Cosmetic Act (FD&C Act), 21 U.S.C. § 355(a). The warning letters also stated that the products are misbranded drugs under section 502 of the FD&C Act, 21 U.S.C. § 352. Further, the warning letters said that the introduction or delivery of these products into interstate commerce violated the FD&C Act and that it was illegal under the FD&C Act “to do any act with respect to a drug, if such act is done while the drug is held for sale after shipment in interstate commerce and results in the drug being misbranded.” Some of the claims that the warning letter said were improper included: “Ashwaghanda [Amazon associate link] . . . Ashwaghanda is an adaptogen . . . which has many studied but yet to be understood positive effects on the immune system. Adaptogens reduce cortisol levels and improve immune response . . . You can learn more and buy ashwaghanda here [Amazon associate link].” The respondent was given a deadline to respond to the warning letter or face further action. A warning letter was filed against Red Moon Herbs. The warning letter was filed by FDA and the FTC. The letter stated that agencies reviewed the company’s website and social media accounts. The agencies found that the company sold numerous products that “are intended to mitigate, prevent, treat, diagnose, or cure COVID-191 in people.” The warnings made similar assertions to the previous warning letter (Benjamincovey.com) that the products are new drugs and are thus adulterated, misbranded, and violate various provisions of the FD&C Act. Included among the postings was the statement: “Immunomodulating herbs – my top go-tos which are showing up again and again in the building literature surrounding this pandemic are astragalus, any and all medicinal mushrooms (reishi, turkey tail, chaga, lion’s mane, and Mushroom Elixir are favorites), and adaptogens including ashwagandha and ginseng. Echinacea and usnea are both effective immune stimulants and usnea have an affinity for the lungs which may prove relevant here. Astragalus and reishi are particularly gentle and good for all ages and my three year old takes them daily.” The respondent was also given a deadly to reply or face further legal action. Claims about adaptogen products FDA and dietary supplements FDA regulates finished dietary supplement products and dietary ingredients. The FDA regulates dietary supplements differently than drugs or food. Under the Dietary Supplement Health and Education Act of 1994 (DSHEA): Manufacturers and distributors of dietary supplements and dietary ingredients are prohibited from marketing products that are adulterated or misbranded. That means that these firms are responsible for evaluating the safety and labeling of their products before marketing to ensure that the products meet all the requirements of DSHEA and FDA regulations. FDA has the authority to take action (usually beginning with warning letters) “against any adulterated or misbranded dietary supplement product after it reaches the market.” According to the FDA, “FDA’s Center for Food Safety and Applied Nutrition (CFSAN) is responsible for the agency’s oversight of these products. The Dietary Supplement Health and Education Act (DSHEA) of 1994, which amended the Federal Food, Drug, and Cosmetic Act, created a new regulatory framework for the safety and labeling of dietary supplements. FDA is not authorized to review dietary supplement products for safety and effectiveness before they are marketed.” FDA and new dietary supplement regulation According to former FDA Commissioner Scott Gottlieb, M.D., ¾ths of Americans take a dietary supplement on a regular basis. 4/5ths of seniors take a dietary supplement. Based on those large numbers, FDA announced new goals for dietary supplement regulation. Since the Dietary Supplement Health and Education Act (DHSEA) was passed more than 25 years ago, the dietary supplement industry has grown from $4 billion to $40 billion and from about 4,000 products to at least 50,000 products. While most manufacturers and sellers are responsible, the number of companies “marketing potentially dangerous products or making unproven or misleading claims about the health benefits they may deliver” has increased. These proposed new goals apply to all dietary supplements including adaptogens. Commissioner Gottlieb stated for the FDA: The first priority is ensuring safety – that the products don’t cause harm. The second priority is “product integrity: we want to ensure that dietary supplements contain the ingredients that they’re labeled to contain, and nothing else, and that those products are consistently manufactured according to quality standards. “ The third priority is “informed decision-making. We want to foster an environment where consumers and health care professionals are able to make informed decisions before recommending, purchasing or using dietary supplements.” This last priority gets to another reason why it’s important to speak with an experienced healthcare lawyer. Skilled healthcare lawyers advise both the manufacturers and sellers of dietary supplements such as adaptogens and the physicians who recommend these supplements about their FDA compliance requirements. The key steps Commissioner Gottlieb announced (that logically apply to adaptogens) are: Better communication when there are concerns an ingredient is illegal, potentially dangerous, and shouldn’t be marketed as dietary supplements – including faster notifications about a product’s concerns to the public. Flexibility in evaluating product safety while promoting innovation -including “steps to foster the submission of new dietary ingredient (NDI) notifications.” “Working closely with our partners in industry to achieve our primary goal of protecting public health and safety. As the dietary supplement industry develops new products and ingredients, advances new delivery systems and innovates in other ways, the FDA must do more to leverage its existing resources and authorities to evaluate these products.” One step is the creation of the Botanical Safety Consortium, “a public-private partnership that will gather leading scientific minds from industry, academia and government to promote scientific advances in evaluating the safety of botanical ingredients and mixtures in dietary supplements.” Developing new enforcement strategies including sending warning letters, and continuing compliance and “enforcement efforts against firms that have shown persistent inability to comply with the current good manufacturing practice requirements for dietary supplements, and taking action to protect the public against unsafe imports and recalled products.” Many companies are making and selling products with herbs and other adaptogens that claim to relieve stress. These companies and any doctors who recommend adaptogens to their patients need to understand the FDA regulations that regulate drugs and dietary supplements. Skilled healthcare lawyers help clients take proactive steps to reduce the risk of FDA or FTC complaints and responsive steps if a company or doctor receives an FDA or FTC warning letter. Makers of dietary supplements and the physicians who recommend or prescribe them should contact Cohen Healthcare Law Group, PC to discuss FDA compliance and other regulatory issues. Our experienced healthcare attorneys help physicians and health companies understand their compliance requirements. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 1, 2022
Healthcare
Integrative Medicine and Nutrition – Compliance Issues
Integrative medicine encompasses many features such as homeopathy, cardiology, and acupuncture. Nutrition is another type of healthcare that physicians are using as part of their treatment plans. According to the American Board of Physician Specialties, integrative medicine means more than just recommending a standard dietary intake of vegetables, fruit, dairy, and protein. Integrative nutrition means “ascertaining the individual dietary requirements of patients in order to develop personalized plans that optimize macro- and micro-nutritional intake.” The Board states that dietary guidelines should consider the following: “Taking into account a patient’s lifestyle (sedentary vs. active). The influence of nutritional balance on overall health. How a mindful approach to eating patterns can contribute to better health. The ability of food (as opposed to nutritional supplements) to meet nutritional requirements.” Doctors who provide nutrition advice or work with nutritionists need to understand the federal and state rules that might affect this working relationship. Referrals between the doctor and a nutritionist practice may violate Stark Law or the Anti-Kickback Statute. Doctors and nutritionists need to understand how HIPAA affects the exchange of electronic patient information. Doctors and nutritionists need to understand what licensing requirements apply, the California law on the corporate practice of medicine, the unauthorized practice of medicine, and what type of supervision by the doctor is required. A failure to understand the compliance issues can result in fines and possible loss of license and liberty. How do physicians and medical practices incorporate nutrition into their medical treatments? There are many different nutritional theories and approaches. Integrative medicine generally moves beyond traditional approaches such as surgeries, medications, and physical therapy. Integrative medicine, according to Todays Dietician, seeks to combine conventional medicine with “complementary and alternative medicine (CAM). One school, the Institute for Integrative Nutrition, even combines the two concepts by using the term “integrative nutrition.” Alternative medicine generally includes “unconventional healing modalities ranging from acupuncture, aromatherapy, biofeedback, and reflexology to healing touch.” Integrative medicine also focuses on the mind and spirt as well as the body. Generally, nutritionists focus on a combination of food, vitamins, minerals and supplements to improve a patient’s health. For example, conventional medicine might use medications and therapy to treat depression whereas nutritional medicine focuses on herbs, dietary supplements, and diet. Today’s Dietician states that some of the components of integrative medicine include: Food-mood connection. Doctors and registered dieticians (RDs) examine how certain foods and supplements can affect emotional eating, depression, and behavior. Some studies show that a diet of fruit, vegetables, and healthy fats can “alleviate depression and decrease irritability among the elderly and adolescents compared with a diet high in processed foods and sugar.” Food cravings and addictions. RDs focus on examining the factors (the type of food, when cravings occur, the patient’s emotional state, and the “release of specific chemicals related to cravings and addictions”) that affect a person’s well-being. For example, there are studies that show that food addictions are similar to drug addictions. Dietary trends. Doctors and RDs keep current with the latest food trends such as raw food diets and the Paleo diet. Antioxidants and phytonutrients. “Nutritionists examine antioxidants and phytonutrients at the cellular level and how they relate to gene expression.” Dieticians also examine many broader food issues such as “food sustainability, food production methods, buying local food, organic vs. conventional farming practices, genetically modified foods, food marketing, and food labeling.” RDs should, according to the principles of quality integrative nutrition set forth in Today’s Dietician: Conduct an initial assessment that involves taking a thorough medical history Evaluate the client’s medications, including those sold over the counter as well as supplements. Examine the patient’s food habits Review the patient’s emotional relationship with food Discuss whether the patient has any food or medication allergies. Doctors and RDs should also consider evidence-based treatments such as pain management, gastrointestinal health, and autoimmune diseases – and migraine headaches and depression. Migraine headaches. Doctors and RDs work (often together) to determine the causes of migraine headaches which include caffeine, refined sugars, foods with monosodium glutamate (MSG), and other products. Unbalanced blood sugar levels and sinus problems may also cause migraines. Medical treatments and medical supplements are some of the possible remedies. Depression. Treatments often include medications, psychological counseling, and regular exercise. Nutrients “have a positive impact on the brain neurotransmitters norepinephrine, dopamine, and serotonin. Depending on the number of nutrients a client consumes, nutrients can influence the quantity of neurotransmitters produced. RDs who counsel clients suffering from depression should ask clients if they experience episodes of emotional eating since depression can cause it.” Some of the vitamin and mineral supplements that may help relieve supplements include: Omega-3 fatty acids Folic acids SAMe B vitamins Herbal supplements Turmeric Boswellia Other products including licorice and aloe vera. Anti-inflammatory foods help with depression and other medical disorders. Inflammatory foods are known factors in “arthritis pain, atherosclerosis, inflammatory bowel disease, and eczema.” Today’s Dietician states that: “Whether recommending herbal or vitamin and mineral supplements, it’s important for RDs to know how the supplements are absorbed and impact the body, and to consult with their clients’ physicians before recommending them or any aspect of an integrative plan.” “Dietitians should use supplements from only reputable sources because the supplements’ quality can influence tolerance and effectiveness.” “Dietitians need to know the contraindications and drug interactions associated with each supplement and be cognizant of how the nutritional treatments may affect patients with various other health problems. It’s also important to monitor patients for any side effects or adverse events.” Integrated medicine and nutrition – the unauthorized practice of medicine We’ve written about the broad legal issues involved with integrative medicine before. The discussion of the current uses of nutrition to help patients with a range of physical and emotional disorders shows that there is often a fine line between giving patients medical advice and giving patients nutritional advice. As a general starting point, doctors and registered dieticians (or other nutritionists) need to understand when physicians must control, supervise, monitor, or provide nutritional decisions. California has the following laws that apply to nutritionists and physicians who fail to properly their medical practice with the nutritionist’s healthcare practice: ARTICLE 3. License Required and Exemptions 2051. The physician’s and surgeon’s certificate authorizes the holder to use drugs or devices in or upon human beings and to sever or penetrate the tissues of human beings and to use any and all other methods in the treatment of diseases, injuries, deformities, and other physical and mental conditions. 2052. (a) Notwithstanding Section 146, 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, without having at the time of so doing a valid, unrevoked, or unsuspended certificate as provided in this chapter or without being authorized to perform the act pursuant to a certificate obtained in accordance with some other provision of law is guilty of a public offense…[Certain punishments apply]. In addition, the Medical Board of California regulates the practice of medicine. Failure to comply with these regulations may result in the loss of a medical license and other consequences. Our skilled healthcare lawyers explain the laws and regulations that apply to the integrative practice of nutrition. We also review what proactive steps physicians, registered dieticians, nutritionists, and other healthcare nutritional professionals should take to reduce the risk of non-compliance. 5 LEGAL ISSUES FOR INTEGRATIVE HEALTH PRACTITIONERS IN THE NEW YEAR With 2015 right around the corner, here are 5 legal and regulatory issues that integrative health practitioners need to know. The corporate practice of medicine and integrative nutrition California, like most states, requires that the patient care and the financial interests of the physicians be separated so that doctors are making decisions based on the best interests of the patient and not the financial interests of the medical practice. As medical practices expand the healthcare professionals who are part of the practice and the owners of the practice need to make sure that the practice is run by the physicians – and not by any nonphysicians such as non-physician nutritionists – and not by corporations or related businesses. The law that governs the corporate practice of medicine is the Moscone-Knox Professional Corporation Act. This law requires that only doctors licensed in California can own a medical practice. There is an exception which doctors and nutritionists should review with experienced healthcare lawyers. Provided the majority of the owners are state-licensed physicians, non-physicians can own a minority interest in the medical practice. Integrative nutrition and the Health Insurance Portability and Accountability Act (HIPAA) HIPAA regulates the electronic exchange of patient health information. HIPAA applies to healthcare providers, insurance companies, and other entities. The law applies to “claims, benefit eligibility inquiries, and referral authorization requests.” When doctors work with dieticians and nutritionists, there is often the need to share a lot of information. As discussed above, dieticians need to understand a patient’s medical history, what medications the patient is taking, and many other medical issues. Whether the doctor or nutritional practitioner is bound by HIPAA depends on how the patient information is shared and what the information is used for. Protocols should be set in place to properly share information while respecting the patient’s rights and privacy. One factor that may affect whether HIPAA applies is whether the nutritionist bills the insurance carrier for their medical care. Another factor involves the business relationship between the physician practice and the nutritionist – for example, whether the nutritionist is an employee of the medical practice or independent from the physician practice Integrative nutrition and Stark Law, the AKS, and patient referrals. Medical and nutritional practices need to understand how Stark Law (a civil law) and the Anti-Kickback Statute (a criminal law) apply to their business relationships. When a medical practice refers patients to a nutritional practice (and vice-versa), the referral must be based on what is the best medical care for the patient and not the financial health of the healthcare practices. Skilled healthcare lawyers explain what conduct violates Stark Law or the Anti-Kickback Statute (AKS), whether any exceptions/safe harbors apply, and what steps should be considered to meet the exceptions/safe harbors. Stark Law essentially prohibits physicians who bill Medicare or Medicaid from referring patients to a nutritional practice – if any physicians or the practice itself has a financial interest in the nutritional practice. Stark Law also applies to referrals from the nutritional practice to a medical practice. Stark Law exceptions may be permitted, if the proper steps are taken, to permit a nutritional practice (or medical practice) to lease office space, rent medical equipment, maintain bona-fide employment relationships, keep personal service arrangements from the other practice. Other exceptions may also apply. The AKS prohibits referrals based on any type of inducement such as cash, vacations, meals, or medical directorships. The AKS generally applies when bills are submitted to federal agencies such as Medicare, Medicaid, and TRICARE. The AKS uses “safe harbors” which are similar but not identical to the Stark Law exceptions to help justify certain financial relationships between a medical practice and a nutritional practice. Both Stark Law and AKS violations may result in the filing of a False Claims Act lawsuit. STARK LAW EXCEPTIONS THAT MIGHT APPLY TO YOU In today’s video, we discuss some exceptions to Stark Law, which deals with improper referrals by physicians and healthcare practitioners. RECENT STARK LAW AND ANTI-KICKBACK STATUTE CASES Medical providers must abide by Stark Law and the AKS. Referrals must be based on what is best for the patient. If profit is the driver, the providers will often pay a substantial settlement or […] Additional integrative nutritional compliance issues FDA does regulate dietary supplements. Doctors and nutritionists who prescribe or recommend dietary supplements should review the FDA dietary supplement regulations with an experienced healthcare lawyer. There are also regulations that govern the marketing and advertising of dietary supplements, medical practices, and nutritional practices. California generally requires that healthcare providers comply with the state’s informed consent requirements. Integrative nutritional practices offer more care options for patients and more opportunities for doctors and nutritionists. Physicians and nutritionists need to understand when the care they provide may constitute the unauthorized practice of medicine, may violate the corporate practice of medicine, may fail to comply with Stark Law or the AKS, and may violate other federal and state laws and regulations. Physicians, medical practices, registered dieticians, and nutritionists should contact Cohen Healthcare Law Group, PC to discuss their federal and state compliance issues. Our experienced healthcare attorneys help healthcare providers understand and address their legal requirements. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
February 22, 2022
Healthcare
Legal Compliance Issues for Homeopathy
Homeopathic medicine is a holistic system of treatment based on the thought that the substances that cause sickness can also cure people when given in the correct proportions. The general idea is that these remedies are believed to stimulate a person’s healing properties. Homeopathic practitioners refer to the drugs that are used in conventional medicine as “allopathy.” While drugs may have a different meaning for homeopaths, everyone who works with homeopathic products needs to understand that FDA approval of drugs is required for any product designed to diagnose, treat, mitigate, or cure a disease. Homeopathic practitioners also need to understand when their practice may violate state corporate practice of medicine laws. When providers and practitioners work with conventional doctors, everyone needs to understand when referrals of patients and products may be illegal. There are many other compliance issues that an experienced healthcare care lawyer can explain. What is homeopathy? According to the US National Institute of Health, homeopathy was developed in Germany in the early 19th century. Homeopathy is “based on two unconventional theories: “Like cures like”—the notion that a disease can be cured by a substance that produces similar symptoms in healthy people. “Law of minimum dose”—the notion that the lower the dose of the medication, the greater its effectiveness. Many homeopathic products are so diluted that no molecules of the original substance remain. Homeopathic products come from many different sources such as: Plants – Red onion, arnica [mountain herb], poison ivy, belladonna [deadly nightshade], and stinging nettle). Minerals such as white arsenic. Animals such as crushed whole bees. Homeopathic products are produced in many forms. The most common form is a sugar pellet placed under the tongue. Other forms include ointments, gels, drops, creams, and tablets. The treatments are unique for each person. “Homeopathy uses a different diagnostic system for assigning treatments to individuals and recognizes clinical patterns of signs and symptoms that are different from those of conventional medicine.” Homeopathy in the United States – FTC and FDA compliance The NIH states that based on a 2012 National Health Interview Survey, about 5 million adults and 1 million children used homeopathy in the prior year. A 2016 survey indicates that most adults who use homeopathic products “self-prescribe them for colds and musculoskeletal pain” instead of seeing a homeopathic practitioner. There are several compliance issues regarding homeopathic products: The US Federal Trade Commission (FTC) stated in 2016 that it holds the sellers of over-the-counter homeopathic drugs to the same efficacy and safety standards as the sellers of other products making comparable claims. The agency said that the FTC will require that the companies making health claims about homeopathic products must have “competent and reliable scientific evidence to support the claims – including claims that a product can treat specific conditions. The US Food and Drug Administration (FDA) in 2017 proposed more scrutiny of homeopathic products – especially the products with the greatest risks, including: Homeopathic products with reported safety concerns. Homeopathic products that are not taken by mouth or rubbed on the skin. Homeopathic products for vulnerable populations. Homeopathic products that do not meet “legal standards for quality, strength, or purity.” Homeopathic products intended to be used for preventing or treating serious and/or life-threatening diseases and conditions. HOW FTC COMPLIANCE WORKS: LABELING YOUR DIETARY SUPPLEMENTS In today’s video, we talk about more common labeling mistakes that dietary supplement manufacturers and distributors make when creating marketing claims for their products. The scientific analysis of the effectiveness of homeopathy The NIH states that: “A 2015 comprehensive assessment of evidence by the Australian government’s National Health and Medical Research Council concluded that there is no reliable evidence that homeopathy is effective for any health condition. However, it is important to note that studies included in the assessment of evidence were required to meet a number of rigorous criteria (e.g., having a sample size of more than 150 participants, the highest rating of methodological quality, and other measures). In total, 57 systematic reviews that contained 176 individual studies were included in this assessment. A new review of evidence by the Australian government is currently underway.” “Homeopathy is a controversial topic.” Homeopathic theory and basic scientific concepts are often at odds. “For example, homeopathic preparations can be so dilute that a substance considered to be the “active ingredient” becomes unmeasurable, which creates major challenges to the rigorous investigation of such products.” The US Centers for Disease Control and Prevention (CDC) says there is no credible scientific evidence to support claims that certain homeopathic products (called “nosodes” or homeopathic immunizations) are substitutes for conventional immunizations. “The National Center for Complementary and Integrative Health (NCCIH) supports the Centers for Disease Control and Prevention’s recommendations for immunizations/vaccinations.” The NCCIH provides information on numerous topics. Just the “A”s include: Acai Acupuncture Aloe Vera Alzheimer’s Disease Antioxidants Anxiety Are You Considering a Complementary Health Approach? Aromatherapy Asian Ginseng Asthma Astragalus Attention-Deficit Hyperactivity Disorder Autism Ayurvedic Medicine The NIH also states that: Even though many homeopathic products are highly diluted, some products (labeled or sold as homeopathic) may contain “substantial amounts of active ingredients, which may cause side effects or drug interactions. Negative health effects from homeopathic products of this type have been reported.” Some homeopathic products may cause adverse effects – some of which may be serious. “Liquid homeopathic products may contain alcohol. The FDA allows higher levels of alcohol in these than in conventional drugs.” Research on homeopathic aggravations is scarce. Homeopathic aggravations are worsening of a patient’s condition after taking a homeopathic prescription. FDA has issued warnings to consumers about homeopathic products. In one case, in 2017, FDA informed consumers that some homeopathic teething tablets had excessive amounts of the toxic substance belladonna. In another case, in 2015, FDA “warned consumers not to rely on over-the-counter asthma products labeled as homeopathic, because they are not evaluated by the FDA for safety and effectiveness”. SEPTEMBER 2020 FDA WARNING LETTERS FDA and FTC warning letters continue to find violations of the FD&C Act when companies boast their products can cure or treat diseases such as COVID-19. FDA and homeopathic products According to FDA, homeopathic products have “been identified through “provings,” in which substances are administered to healthy volunteers in concentrations that cause symptoms. “If a substance causes a particular symptom, individuals experiencing that symptom would be treated with a diluted solution made from that substance.” FDA has not approved any products that have a homeopathic label. This means that homeopathic products sold in the United States are not being marketed with FDA evaluation of the products’ safety or effectiveness. Homeopathic products are generally “marketed as natural, safe and effective alternatives to approved prescription and nonprescription products, and are sold online and in major retail stores.” What is FDA’s concern about homeopathic products? FDA is generally concerned: That some homeopathic products contain measurable amounts of active ingredients – which could cause patients significant harm. Some homeopathic products, after FDA testing, “were improperly manufactured, which can cause incorrect dilutions and increase the potential for contamination.” Some homeopathic products are marketed to treat serious health disorders and diseases. A few examples of FDA oversight include: FDA alerts consumers of Kadesh Incorporation’s voluntary nationwide recall of Puriton Eye Relief Drops due to non-sterile production conditions FDA alerts consumers of Sprayology’s voluntary nationwide recall of homeopathic water-based medicines due to microbial contamination FDA alerts consumers and pet owners of Silver Star Brand’s voluntary recall of homeopathic drug products FDA alerts consumers of HelloLife’s voluntary recall of Neuroveen, Respitrol, Thyroveev and Compulsin Homeopathy and the corporate practice of medicine Homeopathic practitioners and product companies need to review their FTC and FDA compliance issues with an experienced healthcare provider. Practitioners and product companies also need to review with a skilled healthcare lawyer how the California laws on the corporate medicine apply to their business. In California, corporations and related businesses cannot conduct the practice of medicine. California corporate practice of medicine laws were enacted to ensure doctors make health decisions based on the patient’s best interest and not their financial interests. The corporate practice of medicine law is called the Moscone-Knox Professional Corporation Act. Non-physicians cannot own a medical practice. An experienced healthcare lawyer will review the Moscone-Knox Professional Corporation Act and related issues such as the unauthorized practice of medicine by homeopathic practitioners. CORPORATE PRACTICE OF MEDICINE, PSYCHOLOGY, PHYSICAL THERAPY RISKS TO INVESTORS In today’s video, we discuss how investors can profit from businesses that deliver clinical services—and where they get themselves in trouble. Common questions about homeopathy in California A few common questions and answers about homeopathy in California, provided by the Naturopathic Medicine Committee, are the following. Your lawyer can help you understand how these questions and answers apply to your practice or business. “Do I need to be licensed to practice naturopathy or homeopathy in California? No. You do not need a license to practice naturopathy and homeopathy in California. However, you must disclose in your advertisements and on your client intake form that you are providing unlicensed healing arts services (Business and Professions Code sections 2053.5 and 2053.6). Can I advertise as a naturopath? Yes. You may advertise as a naturopath, traditional naturopath, or homeopath but you must state in your advertisements that you are not licensed by the State of California per Business and Professions Code section 2053.6 Do I need to tell my clients that I’m not licensed? Yes. Before you begin treatment, you must inform each client in writing that you are not licensed. All clients must confirm in writing that they were given information about your license status (Business and Professions Code section 2053.6). Am I allowed to diagnose as a naturopath? No, unlicensed individuals may not diagnose a physical or mental condition of any person. In addition, unlicensed individuals must comply with BPC 2053.5 and 2053.6. I am board-certified and hold a degree in naturopathic medicine but cannot get a license because my school is not approved. Can I still use the title ND, naturopathic doctor, or naturopathic physician? No. In California, you must be licensed by the Naturopathic Medicine Committee to use the titles ND or naturopathic doctor, or other titles, words, letters, or symbols with the intent to represent that you practice, are authorized to practice, or are able to practice naturopathic medicine as a naturopathic doctor. (Business and Professions Code section 3660). If I use the title “ND” or “naturopathic doctor” without being licensed, what will happen? If you use the titles illegally, the Committee may issue you a citation and fine (California Code of Regulations, Division 40, Title 16, Section 4254). If you violate these California laws, the Naturopathic Medicine Committee can refer your case to the Division of Investigation, Department of Consumer Affairs, where they may issue you a misdemeanor citation, as well. If someone is harmed by an unlicensed naturopath, “the Committee may forward an enforcement case to the District Attorney’s office for criminal prosecution.” Additional compliance issues Homeopathic practitioners need to comply with the Health Insurance Portability and Accountability Act (HIPAA) which regulates how a patient’s personal health information (in electronic form) is disclosed. Homeopathic providers and companies who work with conventional physicians need to review with a skilled healthcare law how Stark Law, the Anti-Kickback Statute, and other referral laws apply to their business relationship. Violations of these laws can result in substantial fines and, in AKS cases, may result in criminal charges. Other homeopathic integrative medicine compliance issues include informed consent issues, additional California Labor Code issues, and other federal and state compliance issues. Homeopathic medicine is an alternative medical practice that appeals to millions of people. Anyone involved with the practice of homeopathy needs to understand FTC compliance issues, FDA oversight including the illegal marketing of homeopathic as drugs, licensing, referral laws, and many other compliance issues. Homeopathic practitioners and product companies should contact Cohen Healthcare Law Group, PC to discuss all the federal and state compliance issues that may affect their business. Our experienced healthcare attorneys help integrative healthcare practices including homeopathy. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
December 22, 2021
Healthcare
Exceptions and Alternatives to The Corporate Practice of Medicine
While most states prohibit the corporate practice of medicine, many do have exceptions. Physicians need to understand which working relationships – with hospitals, other physicians, and with non-physicians – are permitted. Health care ventures that do research or provide ancillary medical services need to understand when their work might violate the corporate practice of medicine laws. An experienced health care lawyer will review the current laws and regulations. He’ll also help you explore and develop alternatives that may be permissible. The status of corporate practice of medicine laws Most states allow for corporations to hire physicians if physicians own the corporation – the essence of a professional medical corporation. Some states allow certain government, nonprofit, and corporate entities to hire physicians. According to a California Senate study, 28 states permit hospitals to hire doctors. 30 states give physicians the right to operate a medical practice as a limited liability company. The three states with the most robust bans against the corporate practice of medicine and the prohibition against the hiring of physicians (outside of limited exemptions) are California, Colorado, and Iowa. Many states that do have bans against the corporate practice of medicine include dentists in the ban. Exceptions to the California prohibition against the corporate practice of medicine There are some direct exceptions to the California laws that prohibit the corporate practice of medicine, such as creating a professional medical corporation. There are also strategies that can be used such as the use of a management services organization (MSO) to help ensure that the medical practice meets its financial needs while also ensuring that the care and treatments of patients is the priority. Aside from professional medical corporations, the entities that generally use an exception to the prohibition against the corporate practice of medicine in California are either nonprofits or government organizations. Generally, both nonprofit hospitals and hospitals owned by healthcare districts are subject to the ban. Conversely, medical school health systems, which sometimes compete with nonprofit and for-profit hospitals, are not subject to the ban. What Physicians and Investors Must Know About California Medical Corporations Doctors must comply with California’s Professional Corporation Act. A professional medical corporation provides many advantages over a partnership or sole proprietorship. Exemption for Professional Medical Corporation The California Senate California Research Bureau prepared a document called “The Corporate Practice of Medicine in a Changing Healthcare Environment” in 2016. The research discussed some of the exemptions to the California Practice of Medicine Law. One key exemption many doctors are now using is the Moscone-Knox Professional Corporation Act. Passed in 1968, Section 12400-13410 provides one exemption to the prohibition of the corporate practice of medicine. The exemption is common (though there are differences) in many other states. The law permits physicians, dentists, and lawyers to create professional corporations. Doctors, based on the act, can create professional medical corporations. The law was enacted to comply with the requirements of the Internal Revenue Service. To qualify for professional medical corporation status, the professional corporations must, in general, be engaged in providing medical services for a single profession. For example, doctors and lawyers, still “cannot serve as shareholders, officers, directors, or professional employees of each other’s corporations.” The Moscone-Knox Law, however, exempted medical professions. This means that “license holders in a variety of other health professions can also serve as shareholders, officers, directors, or employees of professional medical corporations. These include podiatrists, psychologists, nurses, optometrists, marriage and family counselors, clinical social workers, physician assistants, chiropractors, acupuncturists, naturopathic doctors, professional clinical counselors and physical therapists.” Exemption for Clinics and Hospitals Operated for the Purpose of Medical Education The Senate research document states that the original law, which was clarified in an appellate court decision, indicates that medical schools are not “subject to the corporate ban even if they are in competition with nonexempt organizations” – since every patient is a teaching case even though the patient may not “be seen by an intern, resident or other trainee.” Exemption for Nonprofit Community Clinics “A community clinic is a clinic operated by a tax-exempt nonprofit corporation that is supported and maintained by donations, grants, and government funds.” Generally, the patient pays for the services according to the patient’s ability to pay. Exemption for Nonprofit research clinics These entities are licensed by the California Department of Public Health. Nonprofit research clinics research medical diseases such as heart disease and prostate cancer. These clinics generally only provide care to patients through the results of their research. Clinics may generally hire doctors and charge for their professional services. A clinic “shall not interfere with, control, or otherwise direct the professional judgment of a physician and surgeon in a manner prohibited by Section 2400 or any other provision of law.” Exemption Licensed charitable institutions, foundations or clinics Pursuant to 16 California Code of Regulations, Section 1340, the Medical Board of California permits any licensed charitable institution, foundation or clinic to employ physicians and surgeons so long as the entity does not charge for professional medical services. In such a case, the physician or surgeon would directly bill the patient or the insurance company. Additional exceptions Other entities that may qualify for exempt status include: County hospitals State agencies Nonprofit research clinics Specialty pediatric hospitals Other medical entities Generally, according the California Senate study, HMOs are exempt from California’s ban on physician employment, (based on the federal Health Maintenance Organization Act of 1973). California’s Knox-Keene Act allowed HMOs to hire physicians if the HMO model was a staff model. Most HMOs are not staff models. Most HMOs are group or independent practice association models. Stark law and the hospital/physician employment exception In states where hospitals can hire physicians (under broad exceptions like many states or limited exceptions such as in California) there is another roadblock to the hospital/physician employment contract that must be addressed. Stark Law was enacted to ensure that patients weren’t being referred to a designated healthcare facility (such as hospital) because the physician was receiving a referral fee or benefit. Referrals should be made to hospitals based on the best interest of the patient and not the financial interest of the doctor. Recent Stark Law and Anti-Kickback Statute Cases Medical providers must abide by Stark Law and the AKS. Referrals must be based on what is best for the patient. If profit is the driver, the providers will often pay a substantial settlement or […] There are many exceptions to Stark Law including the physician employment contract – provided the terms of the Stark exception are met. An experienced Stark Law attorney can help draft the appropriate contracts. Stark law requires that the employment contract between the hospital and physician be a “bona fide employment relationship.” This means that any sums paid by the hospital to the doctor (or an immediate family member) who has a bona fide employment contract with the hospital for services may be allowed if the following conditions are met: The employment is for specific identifiable services The amount being paid under the employment contract should: Align with the fair market value for those services With limited exceptions, should not be based (indirectly or directly) on the volume of any referrals by the referring doctor. The payment/remuneration should be “provided under an arrangement that would be commercially reasonable even if no referrals were made to the employer.” A payment may be acceptable if the payment is in the form of a productivity bonus. Stark law has a separate section which sets forth when and how hospitals can use remuneration payable to the physician in order to recruit physicians to relocate their medical practice to a geographical area serviced by the hospital. The Anti-Kickback Statute and the hospital/physician safe harbor The AKS statute was enacted to ensure the integrity of the healthcare professions. The law prohibits the payments of kickbacks or inducements to encourage or pressure physicians to make referrals based on economic incentives instead of doing what’s best for the patient. In states that permit hospitals or clinics to hire physicians, the hospital and doctor must still comply with the AKS. Violations of the law can result in criminal charges and civil lawsuits. The AKs does have a safe harbor which an experienced healthcare lawyer can explain. One safe harbor that applies to hospital/physician employment is the safe harbor for “personal services and management contracts.” This safe harbor can help protect the hospital/doctor employment contract if: The agreement is set forth in writing and signed by the hospital and physician. The contract covers all the services the physicians will provide to the hospital. The contract provides the details as the length and schedule of services and the charges – if the arrangement is not for full time work, The agreement should be for one year or more. The combined compensation to the physician should be consistent with fair market value and shouldn’t be based on the volume or value of referrals between the hospital and doctor – “for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs.” The contract shouldn’t violate state or federal law The total services shouldn’t be more than what are “reasonably necessary to accomplish the commercially reasonable business purpose of the services.” As with Stark Law, the AKS safe harbor includes physician recruitment issues. The management services organization (MSO) – a practical exception In California, and other states, the managed service organization can be a useful way to address concerns about the corporate practice of medicine, Stark Law, and the Anti-Kickback Statute. An MSO is a way for non-physicians to own a management services organization (MSO) which is specifically designed to run the administrative and non-medical parts of the medical practice. An MSO is a way for physicians to focus on the business side of their medical practice while working to avoid any conflict with the independent medical judgment of the physicians. As we discussed in our article on when an MSO is the right choice for a medical practice, an MSO can “buy the assets of a practice (to provide capital) and then offer the practice essentials such as equipment or space.” The MSO can provide a range of services including: Educating and training staff Payroll and medical coding Managing equipment Office rental Staff credentials The information technology side of the business Marketing and sales Disaster management Insurance Many other non-medical judgment issues It is critical that the doctors not cede too much control to the MSO. If physicians do cede too much control, then these health providers may violate California’s (or another state’s) prohibition against the corporate practice of medicine. When Using a Management Services Organizations (MSO) Is the Right Choice for Your Medical Practice Managed Services Organizations help physicians focus on practicing medicine by freeing doctors from many administrative tasks. Failure to consult with an MSO healthcare lawyer can cause civil and […] An experienced healthcare lawyer can explain what exceptions to the corporate practice of medical laws apply and whether any of those exceptions can be used for your practice or your health venture. Even when health providers can pass the corporate practice of medicine test, there are other hurdles that must be addressed to such as fee-splitting and improper referrals – which are monitored by Stark Law and the Anti-Kickback statute. An MSO is a common strategy for separating the business functions of a medical practice from the business functions. Contact Cohen Healthcare Law Group, PC for legal counsel on healthcare transactions, regulatory compliance, and FDA and FTC law. Our experienced healthcare & FDA attorneys advise healthcare companies and healthcare providers ranging from medical centers, to integrative and functional medicine practices, cosmetics and supplement companies, and medical device manufacturers. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
December 1, 2021
Healthcare
What Physicians Need to Know about the Corporate Practice of Medicine
The old days of getting a medical degree and hanging up a shingle by your office are long gone. Most doctors who have a private practice begin their medical career or advance their medical career by considering the best business formation. Formation possibilities include a solo practice, a partnership with other doctors, or working relationships with other hospitals and existing practices. Experienced healthcare lawyers will review the various options. They’ll also review what laws apply. Many states, such as California, prohibit the corporate practice of medicine. Some states allow for exceptions. Physicians also need to consider whether their business and medical relationship might violate Stark Law or the Anti-Kickback Statues. Decisions about business formation and medical practice issues become more complicated as physicians expand their medical service practices and expand who the physician works with. Developing a medical spa or acupuncture practice to complement a pain management practice, for example, may sound like a great idea, but if the employees at the medical spa aren’t licensed physicians, complications can arise. It’s more than just physicians who must understand the corporate practice of medicine issues. Any health venture that wants to set up a clinic or a venture that provides health services needs to understand how corporate practice of medicine applies to them as well. How Healthcare Ventures Can Craft a Corporate Practice of Medicine Legal Strategy Is the corporate practice of medicine a historical anachronism that’s going to be done away with over time or even in the very short term? The corporate practice of medicine concept across the United States The corporate practice medicine laws were designed for many reasons, according to the American Medical Association (AMA). These reasons include the following concerns: If corporations can hire physicians or practice medicine, then the practice of medicine will become commercialized. The obligation of a physician should be solely to his/her patient and not to company profits. Physicians should be able to make patient decisions based on independent medical judgment – what’s best for the patient. Corporations owe a fiduciary duty to their shareholders which may not comport with the doctor’s duties to his/her patients An overview of state corporate practice of medicine laws The AMA states that the corporate practice of medicine laws are generally based on a variety of issues: The individual state statutes Case decisions Opinions of the attorneys general of the various states The positions of the state medical licensing boards While most states prohibit the corporate practice of medicine, states do provide for professional medical corporations. Many states also have exceptions for employment of doctors by specific entities. These exceptions do vary from state to state. States the do permit professional medical corporations do regulate: How the corporation can be structured Who can be a shareholder Who can be on the board of directors Most state laws require that the owners, board of directors, and shareholders must be licensed to render the “same professional service as the professional corporation.” There are some states that permit non-physicians owners and shareholders – provided that the combined ownership interest is in the minority. “For example, Colorado’s statute provides that all shareholders of a medical corporation must be licensed to practice medicine in the state of Colorado except that one or more persons licensed by the board as a physician assistant may be a shareholder as long as the physician shareholders maintain majority ownership of the corporation.” In another example of broader ownership interest, in “Rhode Island; physicians, dentists, registered nurses, podiatrists, optometrists, physician assistants, chiropractic physicians, physical therapists, psychologists, and midwives or nurse-midwives can form a professional corporation in which they engage in a combination of their professions.” There are many states that have an exception for the employment of doctors by certain entities such as hospitals. Some states grant broad permission for hospitals to hire doctors. Some require that the hospital be a nonprofit. Others, like California, mostly prohibit hospitals from hiring doctors. When states do give hospitals the right to hire doctors, there is normally a requirement that the hospital cannot interfere with the “autonomy of the physician’s clinical decision making.” “For example, statutes in Texas allow critical access hospitals, sole community hospitals, and hospitals in counties with fewer than 50,000 people to employ physicians subject to certain protections, including a requirement that physicians must “retain independent medical judgment in providing care to patients at the hospital and other health care facilities owned or operated by the hospital and may not be disciplined for reasonably advocating for patient care.” According to the AMA, California, which has one of the nation’s strongest prohibitions against the corporate practice of medicine provides that some hospitals and clinics can hire doctors provided the hospital or clinic “doesn’t interfere with, control, or otherwise direct the professional judgment of a physician and surgeon.” In California, according to the DHHS Office of Inspector General, “the prohibition does not apply to clinics operated by university medical schools or to public hospitals.” Similarly, Indiana’s laws also permit hospitals and doctors from entering into employment contracts provided the hospitals don’t control or direct the doctor’s independent medical judgment. In Illinois, hospitals can employ doctors if the doctor signs a statement to the same effect – that the doctor’s judgment must be an independent medical judgment as to diagnosis, care, and treatment. Some states set forth the independent judgment in the state statutes and codes. In other states, such as Alabama, the state medical licensing commission and the state board of medical examiners authorized hospital hiring of physicians where the agreement specifically requires that the doctor makes all judgments concerning what medical services the patient should receive. Both doctors and hospitals need to understand that there are dangers in any employment relationship, which should be reviewed by an experienced healthcare lawyer. Professional agreements may also violate Stark Law and the Anti-Kickback statute unless it’s clear than an exception or a safe harbor applies. California’s law on the corporate practice of medicine California’s law on prohibiting the corporate practice of medicine is one of the strictest in the nation. The law on the corporate practice of medicine in California is fairly complex. Even the Medical Board of California has this advisory on its website. “Note: This area of law can be complicated, therefore physicians are encouraged to discuss their medical practices and business enterprises with appropriately knowledgeable legal experts. The Medical Board of California continues to receive complaints and inquiries about the law, and some repeating issues are presented here.” The two governing statutes on the corporate practice of medicine are: The Medical Practice Act, Business and Professions Code section 2052. This statute, provides: “Any person who practices or attempts to practice, or who holds himself or herself out as practicing…[medicine] without having at the time of so doing a valid, unrevoked, or unsuspended certificate…is guilty of a public offense.” Business and Professions Code section 2400, within the Medical Practice Act, provides in pertinent part: “Corporations and other artificial entities shall have no professional rights, privileges, or powers.” As with the other states, the core idea behind the prohibition is that if unlicensed doctors make any medical judgments that would constitute both the unauthorized practice of medicine and the corporate practice of medicine. It’s the link that’s the concern. Corporations shouldn’t be the people deciding medical issues because that would constitute the unauthorized practice of medicine. Decisions that are medical and not business or management decisions Examples of medical judgments that must be made by physicians include: Analyzing which diagnostic tests such as blood tests or MRIs are required for specific medical complaints and disorders Determining when a doctor needs to consult with a medical specialist or refer a patient to a medical specialist – or to another physician Deciding what treatment options are advisable and what overall medical care is required for the patient While the number of patients a doctor must see in a set time (day, week, and month) might seem like a business decision, the Medical Board of California states that the quantity of patients treated by a physician is also a medical decision. There are many decisions which physicians and medical practices make that may seem like they’re more business choices than medical choices. When the choices are clearly business choices, then an independent entity such as a management service organization (MSO) may be qualified to make them. The Medical Board of California requires that only a physician licensed in California make the following decisions: “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. Selection, hiring/firing (as it relates to clinical competency or proficiency) of physicians, allied health staff and medical assistants. Setting the parameters under which the physician will enter into contractual relationships with third-party payers. Decisions regarding coding and billing procedures for patient care services. Approving of the selection of medical equipment and medical supplies for the medical practice.” It “may” be permissible for a doctor to consult with an MSO or non-licensed physician about the above items but ultimately the licensed physician must make the final decision. Additional decisions that may appear business-related that are indeed medical and must be made by a physician include: A business relationship in which someone who is not a licensed California doctor owns or runs a company that provides an evaluation, a diagnosis, care, or treatment to the patient. Physicians cannot operate a medical practice “as a limited liability company, a limited liability partnership, or a general corporation.” While management service organizations (MSOs) can generally provide administrative staff and services for a medical practice, MSOs cannot arrange for medical services, advertise for medical services, or provide medical services. Physicians cannot act as a “medical director” unless the physicians own the medical 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.” Will Corporate Practice of Medicine Kill Your Healthcare Venture? Whether your healthcare venture involves digital health, mobile health, or a physical health and wellness center, strong vs. weak corporate practice of medicine prohibitions can be deadly. According to the Medical Board of California, “It is important to note that pursuant to Business and Professions Code section 2417.5, a business organization that offers to provide or provides outpatient elective cosmetic medical procedures or treatments that is not in compliance with the ban on the corporate practice of medicine is guilty of knowingly making or causing to be made a false or fraudulent claim for payment of a health care benefit pursuant to paragraph (6) of subdivision (a) of Section 550 of the Penal Code.” All states want to ensure that physicians are doing what is best for the patient. One of the ways states help to regulate a physician’s practice is to ensure that the doctor’s business relationships are managed so that the doctor or the medical practice only has one boss – the patient. The corporate practice of medicine laws generally require that doctors create professional medical corporations and that any working relationship with a hospital be based on helping the patient, not the financial well-being of the hospital. States like California take an aggressive approach that most health care ventures may cross the line into the corporate practice of medicine. Contact Cohen Healthcare Law Group, PC for legal counsel on healthcare transactions, regulatory compliance, and FDA and FTC law. Our experienced healthcare & FDA attorneys advise healthcare companies and healthcare providers ranging from medical centers, to integrative and functional medicine practices, cosmetics and supplement companies, and medical device manufacturers. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
November 1, 2021
Healthcare
Legal Compliance Issues For Diagnostic Testing Centers
Diagnostic testing is the lifeblood of the medical profession. Doctors and hospitals constantly refer patients for various types of bodily fluid, imaging, genetic, and other tests. Tests are usually performed at diagnostic centers that are located separately from the physician’s office. Most hospitals have their own diagnostic centers but hospitals may also refer some patients to separate facilities too. Diagnostic tests are usually ordered for purposes of screening, to diagnose whether a patient has a disorder, to evaluate how severe a disorder is, and to monitor how well (or poorly) the patient is responding to treatment. Many disorders are treated after the diagnostic test but some, such as colonoscopies, are treated contemporaneously with the test. Physicians and diagnostic centers should speak with an experienced healthcare lawyer before starting any practice and before developing any new business relationship. There are numerous federal and state laws that regulate medical practices and services. What are the common types of diagnostic tests? Diagnostic tests include: Bodily fluid analysis. These tests include blood tests, urine tests, tests for the fluid that surrounds the spinal cord and brain, and synovial fluid (joint) tests. Physicians may also order tests for saliva, sweat, and gastric tract liquids. Imaging tests. These tests take take pictures of parts of the body. Common diagnostic imaging tests include: X-rays. CT scans (computed tomography) MRIs (magnetic resonance imaging) Other imaging tests such as “ultrasonography, radioisotope (nuclear) scanning, positron emission tomography (PET), and angiography.” This test uses a viewing tube to observe body organs and cavities. The end of the endoscope has a camera and light so the physician can observe through a monitor. Tools can be passed through an endoscope channel. An endoscopy is used to examine, among other organs – the nose, mouth, respiratory tracts, colon, bladder, and uterus. Sometimes the physician needs to create incisions to use the endoscope. Measuring bodily functions. Common examples include examining the electrical activity of the heart – an electrocardiography (ECG) and the brain – electroencephalography (EEG). This test examined tissues simples that are moved and then examined with a microscope. The physician or medical examiner is usually looking for abnormal cells that may show disorders such as cancer. Genetic testing. This type of testing generally involves examining cells (from a patient’s blood, skin, or bone marrow) to check for chromosome abnormalities and gene (including DNA) abnormalities. Genetic testing involves testing a fetus for a genetic disorder and children/adults for whether they are at risk for a disorder, and adults. There are some risks with every test. Test results are normally based on the average values within a healthy population. Physician supervision of diagnostic tests Medicare has different rules and regulations for different types of diagnostic tests. An experienced healthcare lawyer can explain how Medicare monitors and regulates various tests. One of the most common types of tests are imaging tests. The Centers for Medicare & Medicare Services (CMS) generally uses the standards set by the Joint Commission on Accreditation of Healthcare Organizations (JACAHO) for inpatient diagnostic imaging standards. The CMS requires that physicians must supervise imaging tests for outpatient diagnostic services. According to AAPC, only “a doctor of medicine or osteopathy legally authorized to practice medicine in his or her state of practice, as defined by §1861(r) of the Social Security Act,” may act as a supervisory physician. Generally, the following people do not qualify as a “physician” and cannot act in a supervisory physician capacity – for purposes of diagnostic tests: Nurses Physician assistants Clinical nurse specialists Certified nurse midwives There are also rules that your healthcare compliance lawyer can explain about – if and when a radiologist can order his/her own imaging tests. CMS “recognizes three primary levels of physician supervision” for outpatient diagnostic services: General supervision. Here, the medical procedure should be under the doctor’s control and direction. The doctor who orders the test is responsible for maintaining the testing equipment and training staff on how to perform the tests. The physician does not need to be in the room during the procedure. Direct supervision. The term “direct supervision” “varies according to the precise location at which the service is provided:” In the doctor’s office. Here, the supervising doctor must be physically in the office suite and readily available to provide aid and direction throughout the procedure. Hospital outpatient diagnostic services at an independent diagnostic facility. “The supervising physician must be present in the office suite and immediately available to furnish assistance and direction throughout the procedure’s performance.” The doctor cannot be performing another procedure that cannot be interrupted. He/she must be able to provide timely aid. There are additional rules for on-campus health providers. Personal supervision. Here, the doctor must be in the room where the procedure is being performed. The supervision requirements apply “to the technical component (the actual test administration) of a diagnostic service.” Doctors must always provide “the professional component (reading/interpreting of results) for diagnostic services.” If the physician fails to provide the necessary level of supervision, then CMS may not find that the service is reasonable or necessary – and, thus, may not pay the claim. CMS also has diagnostic imaging requirements for determining who can order medical imaging tests and who is qualified to administer the imaging tests. In addition to the CMS physician supervision tests, doctors may be bound by state law and the laws and regulations for their types. Diagnostic centers and Stark Law Physicians and diagnostic centers need to be extra careful when doctors refer their patients to a diagnostic center. It is commonplace for general practitioners and specialists to regularly recommend diagnostic centers to their patients. If, however, the doctor has a financial interest in the diagnostic center, then all sorts of red flags are raised. Stark Law is a civil law that regulates referrals of patients who use Medicare to any designated health service (DHS) where the physician (or an immediate family member) has interest in that DHS. A diagnostic center is a designated health service. CMS prohibits the DHS from presenting claims to “Medicare (or billing another individual, entity, or third-party payer) for those referred services.” Designated health services include: Clinical laboratory services. Radiology and certain other imaging services. Radiation therapy services and supplies. Durable medical equipment and supplies Other services. The core principle behind Stark Law is that doctors should refer patients to a DHS based on what is in the best health interests of the patient – and not what is financially beneficial to the doctor or the diagnostic center. CMS has numerous rules about referrals to a DHS. CMS also regularly publishes an updated list of codes in the Physician Fee Schedule for a relevant DHS “because our regulations define certain DHS by CPT and HCPCS codes.” An experienced diagnostic center lawyer can explain what services qualify as a designated health service. Some services may not be included. Stark law also provides many exceptions that have very precise definitions. Skilled healthcare lawyers help physicians, medical practices, and diagnostic centers understand when these exceptions may apply and what the requirements are. A general principle is that any financial arrangements between the physician and the DHS cannot be based on the volume, percentage, or amount of any referrals. What Stark Law exceptions may apply to the relationship between a physician/medical practice and a diagnostic center? Stark Law provides for different types of exceptions including ownership/investment arrangements, compensation arrangements, and exceptions involving both ownership/investment and compensation. Several of the combination (both compensation and investment) exceptions include the following. consider for referring patients to a diagnostic center. Physician services In-office ancillary services Preventive screening tests, immunizations, and vaccines Eyeglasses and contact lenses following cataract surgery Intra-family rural referrals Compensation exceptions (for Stark Law) include: Rental of office space Rental of equipment Bona-fide employment relationships Personal service arrangements Physician recruitment Non-monetary compensation Fair market value exception Medical staff incidental benefits Risk-sharing arrangements Compliance training Many other exceptions The in-office ancillary services exception is often considered for heart doctors, orthopedists, and other professionals who conduct their imaging tests in their office. Stark Law Exceptions that Might Apply to You In today’s video, we discuss some exceptions to Stark Law, which deals with improper referrals by physicians and healthcare practitioners. The Anti-Kickback Statute and diagnostic centers The AKS is a federal law that imposes criminal penalties for unauthorized referrals. Illegal referrals generally include any inducement – by an entity such as a diagnostic center that is made to a physician – to include the physician to refer patients to the center. Most doctors provide a list of centers the doctors work with to their patients and let the patient choose which one the patient likes best. When diagnostic centers provide the doctor/medical practice with a benefit, the referral is tainted – because the referral is based on the financial well-being of the doctor and not by what is healthy for the patient. Illegal inducements include financial payments, expensive meals, vacations, positions on various medical boards or organizations, and virtually anything of any value. Violations of the AKS may result in a criminal conviction, imprisonment, fines, and other consequences. Both violators of Stark Law and the AKS may be precluded from the ability to submit any future bills to Medicare or Medicaid. The AKS has “safe harbors” which can be implemented to help show a medical practice or diagnostic center is not in violation of the AKS. These safe harbors include many transactions and arrangements that are similar to the Stark Law exceptions. Experienced California healthcare lawyers explain how safe harbors work and when safe harbors should be considered for your medical practice. Additional legal compliance issues for diagnostic centers? Physicians and doctors need to be careful that the center does not order or provide tests that suggest the center is providing any medical advice or treatment. Doctors, health providers, and staff members must understand what actions may result in an unauthorized practice of medicine complaint. HIPAA (Health Insurance Portability and Accountability Act) is a federal law that generally regulates how electronic health records are handled. Physicians regularly submit electronic requests to diagnostic centers to perform blood tests, imaging tests, and other tests. In return, the diagnostic centers regularly send the results of these tests to the physicians that ordered them. An experienced healthcare lawyer can explain when HIPAA applies and what conditions (including obtaining consent from the patient) must be met – when exchanging patient health information. A failure to follow the strict legal compliance issues governing diagnostic centers and physician practices can result in fines, bills that will not be approved by Medicare and other healthcare agencies/entities, possible imprisonment, loss of license, and other consequences. Skilled diagnostic center compliance lawyers advise both physicians and diagnostic centers about Stark Law, the Anti-Kickback Statute (AKS), state anti-referral laws, Medicare requirements, the unauthorized practice of medicine, the corporate practice of medicine, the (HIPAA), the Medicare Anti-Markup Rule (AMR), and other compliance issues. Physicians and diagnostic centers should contact Cohen Healthcare Law Group, PC to discuss referral arrangement, supervision requirements, HIPAA and other testing and business relationship laws. Our experienced healthcare attorneys help a broad range of healthcare providers and services. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
October 15, 2021
Healthcare
Legal Compliance Issues for Various Types Of Integrative Medical Practices – Acupuncture
Integrative medicine (also called complementary or alternative medicine) is the name for medicine that is not part of traditional standard care. Alternative medical therapies are currently being used in combination with traditional medicine as the safety and efficacy of these alternative therapies become clearer. Integrative medicine is often used with people who have cancer, fibromyalgia, chronic fatigue, and chronic pain. Common types of integrative medicine include: Acupuncture Aromatherapy Animal-assisted therapy Massage therapy Music therapy Dietary supplements Meditation Functional medicine Spiritual healing Ayurvedic medicine Coaching Generally, integrative medicine is offered to supplement conventional medical care – not to replace traditional medical care. Some types of alternative medicine are not advisable for certain conditions or people. The National Center for Complementary and Integrative Health (NCCIH) is a US agency that conducts scientific research on complementary and integrative health approaches. This research includes examining the usefulness and safety of these therapies in improving people’s lives. Some of the legal issues acupuncture practitioners and the doctors who work with them need to understand Integrative medicine providers usually operate independently from hospitals and medical practices. However, many physicians do recommend integrative medicine for certain patients with certain medical disorders. For example, an orthopedist surgeon may recommend that someone who just received a new hip may benefit from treating with an acupuncturist to help manage the pain while the hip heals. Many medical spas and chiropractors work with integrative medicine practitioners. How closely physicians and other medical practices work with integrative medical practices such as acupuncture can be problematic. If the relationship is too close or if there are improper incentives for referrals, the physicians and the integrative medication practitioners may be in violation of Stark Law or the Anti-Kickback Statute. Acupuncture practitioners and other integrative practitioners need to understand California’s or their own state’s laws on the unauthorized practice of medicine. Doctors who also have acupuncturists need to understand what duties they need to perform and what duties they can assign to any medical providers who are not physicians. California also has specific requirements on who can have an interest in a medical practice. An experienced healthcare lawyer can explain whether integrative medicine qualifies as the practice of medicine. Other legal issues for integrative practitioners including acupuncture practitioners include: Medicare and Medicare coding requirements FDA laws and regulations HIPAA compliance State licensing requirements State licensing requirements Every integrative practitioner needs to review with their healthcare lawyer the state licensing requirements for their practice area. Many professions such as acupuncture and chiropractic medicine do have state licensing requirements. All professions should have education and certification requirements. A license to practice a specific type of medicine may be valid in California may not be valid in another state – and vice-versa. Integrative medicine providers need to review the scope of their license. The providers need to understand when their services may cross over into unauthorized services – to the extent the providers could be charged with practicing a profession – such as psychology, medicine, or nutrition – without a license. Your healthcare lawyer will review which statutes apply to your practice, whether any medical boards regulate your practice, and whether any other rules apply. Your lawyer can also explain whether any exceptions apply. Generally, an integrative medical practitioner cannot make a diagnosis or order treatments for any disease, injury, physical, or mental condition – and cannot recommend any products to treat any disease or disorder. Integrative medicine providers also need to be careful when they order lab results or review the lab results – or that could be considered the practice of medicine too. For example, the California Board of Acupuncture regulates “the practice of Asian medicine through acupuncture in California and is the sole issuer of acupuncture licenses in the state.” The Board determines the standards for qualification – mainly through its licensing authority. As of 2021, there are more than 12,000 registered acupuncturists. The Board has the authority to investigate criminal conviction histories of applicants and licensees and to discipline licensees who “may jeopardize the health, safety, and welfare of consumers.” The unauthorized practice of medicine is a crime. Compliance with the Health Insurance Portability and Accountability Act (HIPAA) HIPAA regulates the disclosure of personal health information in electronic form by covered entities. Covered entities include: Healthcare providers. Health providers include any healthcare provider “who electronically transmits health information in connection with certain transactions. These transactions include claims, benefit eligibility inquiries, referral authorization requests.” Healthcare providers such as health insurance companies, Medicare, Medicaid, long-term care insurers, and other entities Health clearinghouses Business associates (other than a covered entity’s workforce) If an integrative healthcare provider is required to comply with HIPAA, it is normally because they fit into the “health provider category.” Your healthcare lawyer can explain if your integrative medical practice is considered a “health provider.” Part of the answer may depend on how the integrative healthcare provider bills his/her client. Many acupuncturists and other healthcare providers do not submit bills to insurance companies because the insurance often doesn’t cover the services. We have discussed whether HIPAA applies to acupuncturists before. There’s currently no clear-cut answer but there are many U.S. Department of Health & Human Services guidelines and discussions that suggest (again, there is no absolute answer) that acupuncturists are considered health providers who should comply with HIPAA – if and when they submit electronic health records. Your lawyer can also explain whether any state laws protect the disclosure of healthcare information. In California, the disclosure of healthcare information is governed by the California Confidentiality of Medical Information Act. 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 & […] The corporate practice of medicine and integrative medicine California, like most other states, provides that corporations or related business entities cannot conduct the practice of medicine. The reason laws regulate the corporate practice of medicine is to ensure that the physicians are making decisions based on the best needs of the patient and not the financial needs of the business. Corporate directors should not be able to tell doctors how to treat their patients. The law is formally known as the Moscone-Knox Professional Corporation Act. The Moscone-Knox Professional Corporation Act requires that only state-licensed physicians are permitted to own a medical practice. The law also provides that non-physicians (for example nurses and medical technicians) cannot own a medical business. Non-physicians may generally own an interest in a medical corporation provided that the majority ownership of the corporation is in control of the physicians. Your California healthcare lawyer can explain whether an integrative medical practitioner can own shares in a medical corporation. Additional corporate practice of medicine issues include when a physician can act as a medical director of the corporation and when they can’t. The issue of who can own shares becomes more complicated when physicians and integrative health providers (licensed or unlicensed) work together. There are also issues that you need to review with a healthcare lawyer involving what acts constitute the practice of medicine. The lawyer will work to explain what boards and laws regulate the definition of the practice of medicine. One specific type of medical practice that can be especially problematic are medical spas. Medical spas often work with acupuncturists and other integrative healthcare providers. If you run or work for a medical spa, you need to review the proper boundary lines and regulations. The California Acupuncture Board’s – Laws and Regulations Relating to the Practice of Acupuncture. The Board Defines Acupuncture Corporations. “An acupuncture corporation is a corporation which is authorized to render professional services, as defined in Section 13401 of the Corporations Code, so long as that corporation and its shareholders, officers, directors, and employees rendering professional services who are acupuncturists are in compliance with the Moscone-Knox Professional Corporation Act, this article and all other statutes and regulations now or hereafter enacted or adopted pertaining to that corporation and the conduct of its affairs.” Regulates acupuncture corporation income. “The income of an acupuncture corporation attributable to professional services rendered while a shareholder is a disqualified person (as defined in Section 13401 of the Corporations Code) shall not in any manner accrue to the benefit of such shareholder or his or her shares in the acupuncture corporation.” The name of the acupuncture corporation. “The name of an acupuncture corporation and any name or names under which it may render professional services shall contain words ‘acupuncture’ or ‘acupuncturist’ and wording or abbreviations denoting corporate existence.” Referrals and financial relationships with integrative medical providers There are two federal laws that govern referral arrangements between medical practices and integrative medicine providers. Stark Law is a civil law. The Anti-Kickback Statute is a criminal law. Stark Law. Stark Law applies to physicians who treat patients on Medicare or Medicaid. The law prohibits physicians from referring Medicare or Medicaid patients to designated health services (called ancillary services) in which the physician (or a member of the physician’s family) has a financial interest. Doctors must work on behalf of the patient and not their own financial interests. Essentially, the doctor must recommend ancillary services based on what is best for the patient’s health – without consideration of any financial arrangement between the doctor and the service. Doctors need to be particularly careful when they align themselves with medical spas who often use a variety of integrative health services. There are numerous exceptions to Stark Law. These exceptions, in large part, center around the requirement that the relationship between the physician and the ancillary service should – not consider the volume or value of the physician referrals or business generated by the physician and the service. The exceptions also require that the financial arrangements be based on fair market value and commercial reasonableness. Some of the Stark Law exceptions include: Leasing office space Renting medical equipment Bona-fide employment relationships Doctor recruitment Personal service arrangements Other statutory exceptions The Anti-Kickback Statute (AKS). The AKS is a criminal statute the forbids inducements in order to obtain referrals from physicians. Inducements can include cash, vacations, meals, appointments to directorships, and other benefits that would not be paid or provided – except for the desire to obtain the referral. The AKS generally applies to any claim submitted to the federal government for payment including Medicare, Medicaid, and TRICARE. Violations of the AKS include civil and criminal penalties. Both the person or entity providing the inducement and the person or entity receiving the inducement can be charged under the AKS. The AKS does have “safe harbors” which can justify a financial relationship between a physician and an integrative health service. These safe harbors are comparable (but not identical) to the Stark Law exceptions. An experienced California healthcare lawyer can explain how safe harbors work and how they differ from Stark Law. Experienced healthcare lawyers will also explain how the Anti-Kickback Statute is similar to Stark Law and how it differs. In addition, the attorney will explain what state anti-referral laws apply to a medical spa practice. Skilled healthcare lawyers will also review whether the violations of Stark Law or the AKS can lead to charges the physician or practice violated the False Claims Act. We discuss Stark Law, the AKS, and California’s anti-referral (the Physician Ownership and Referral Act of 1993 in our article titled Quick Summary of Federal “Stark” Self-Referral & Anti-Kickback Law and California Self-Referral and Fee-Splitting Prohibitions. Additional integrative medicine compliance issues A few other of the many compliance issues integrative healthcare provides such as acupuncturists should review with their health care provider are: The informed consent requirements for procedures How the FDA regulates drugs, medical devices, cosmetics, dietary supplements, and other products How the FTC regulations the marketing and branding of your integrative healthcare practice Crucial Issues for Aesthetic Medical Practices – Part One The various California laws including the California Labor Code Integrative health practices include many different professions. Each profession needs to understand the applicable healthcare compliance issues. The doctors who work with integrative health practices also need to understand the full range of healthcare compliance issues. These issues include licensing, the corporate practice of medicine, the unauthorized practice of medicine, HIPAA, anti-referral laws, and other federal and California laws. Doctors and integrative healthcare practices should contact Cohen Healthcare Law Group, PC to discuss all the laws and rules that regulate their profession. Our experienced healthcare attorneys help integrative healthcare practices and medical practices with federal and state compliance requirements. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
October 8, 2021
Healthcare
Do Health & Wellness Online Authors Risk Lawsuits?
If you’re someone who is publishing a book or e-book on health and wellness and you’re looking at a lot of media opportunities, and you’re concerned about your potential liability, then this video is for you. I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare industry clients navigate healthcare and FDA legal issues and launch or successfully continue to grow their health and wellness product or service. Today, I’m going to explain some of the key legal mis-steps that authors make when they put content out into the marketplace on health and wellness. By author, I mean someone who puts out content. You could be writing a book or e-book, PDF, broadcasting a podcast or hosting a YouTube channel, appearing on someone else’s website, blog or video series; or you could be a hologram emanating from the skull of Princess Leah- Virtual reality, whatever the technology brings. Whatever the format, here’s the deal: you’re the creator. You’ve gone on the hero’s journey. Maybe it was your health you saved, maybe the health and wellness of a loved one. You used a certain therapy, a certain method of healing, you followed some protocol, or you discovered or designed your own magical blend. Remember the movie, Lorenzo’s Oil? It came out a long time ago. But worth watching Susan Sarandon battle the doctors and motivate an industry to research and validate a therapy she pioneered to save her son. So, maybe that’s your story, and it’s the story of a lot of our clients and maybe you put this information out to the public. Can you do it without incurring too much legal exposure? What can you do to manage your liability risk? At first, this seems like a fairly simple question. Don’t engage in unlicensed practice of medicine. But, the question is how you will put it all together? That is the question. Are you embarking on a purely educational venture, or are you giving specific advice to individuals about their health and journey back to health? In the old days, a book was this physical thing you received in the mail. There was a lot of distance between the author and the reader. The point of the book was to draw you into the page, so you could forget that someone else had spent a lot of time in another space putting it together. These days, technology narrows the gap. You can be right there doing a Zoom call, or some other platform virtually alongside your client or customer. So, going back to my question, how are you going to put it all together without incurring undue liability? Consider these three points to help manage legal risk. First, in the eyes of the law, there is a difference between a purely educational venture, on one hand, and, clinical services on the other. The difference is super obvious if you think about a book on one hand, and a doctor’s visit on the other. Where the boundaries get blurred is where you use an online platform to access the customer. For example, if I text my therapist, clearly that is a clinical encounter. If I attend her webinar and raise my hand in the Chat box and ask about whether glucosamine is good in general for joint health, that is usually going to be considered education. But again, it depends on the facts and circumstances. Second, disclaimers are useful. You are not providing medical advice, you are not diagnosing and so on. But, disclaimers don’t tell the whole story. You need to make sure that what you are doing, is congruent with the disclaimers. You can’t put in a disclaimer saying, “this is not medical advice” and then give medical advice. For example, reviewing someone’s lab test would be considered clinical advice. Third, there is a lot of other legal language you can put in that could be protective. For example, a clause limiting your liability in case your general educational content doesn’t solve the customer’s health problem – General Liability Disclaimer. Beyond these three key points, there are a lot of nuances. For instance, do you take a medical history? In the eyes of prosecutors looking for unlicensed practice of medicine, the intake form itself could be a red flag, it could be evidence. And, different people have different risk profiles. Some want to take a lot of risk, some of our clients want to take little bit or risk, some are like goldilocks – it’s got to be just right. If you have a health and wellness startup, let’s say a telehealth or telemedicine app that connects patients to medical doctors or therapists digitally, you’re likely to have a different risk profile than, say, a lone MD who wants to style themselves a health coach. One thing that I enjoy about our practice at Cohen Healthcare Law Group is that we’re not only familiar with the legal essentials, we’re also very experienced at the nuances, and we’ve been at this since 1999. We understand the variations when it comes to these fines lines (and wrinkles) between putting out educational content as commercial free speech, and engaging in the kinds of professional encounters that do require a healthcare license. Thank you so much for watching. If you still have questions, click on the link below, cohenhealthcarelaw.com/contact, to send us a message or book an appointment. Here’s to the success of your healthcare venture, we look forward to speaking with you soon. Testimonials
September 23, 2021
Healthcare
Health Compliance Issues for Dentists and Orthodontists
According to Colgate.com, dentists are professionals who complete four years of undergraduate school and four years of dental school. Dentists must then pass a written test and a clinical licensing exam before they can become qualified to practice. Dentists generally use one of the following designations. DDS (Doctor of Dental Surgery) DMD (Doctor of Medicine in Dentistry or Doctor of Dental Medicine) Orthodontics is a dental practice specialty that requires additional training. About six percent of all dentists are orthodontists. Orthodontists normally have to complete a two/three-year residency program. According to the American Association of Orthodontists (AAO), dentists: Provide regular checkups Diagnose and treat cavities Treat mild gum disease and oral hygiene problems. Extract teeth that cannot be saved Work on teeth by “applying bonding, veneers or crowns to teeth that are broken, chipped, misshapen or severely decayed.” Look for signs of oral diseases Give advice on oral health According to the AAO, orthodontists “specialize in aligning the jaws, and moving the teeth.” These professionals “correct crowded teeth, gaps between teeth, teeth that stick out, and jaws that don’t align properly.” Dentists use various medical products including “braces, lingual braces, and clear aligners.” Dentists usually work with X-rays and photographs. Dental practices usually include the dentist, dental assistants, dental hygienists, and dental technicians. While most dentists work in private practice, dentists also work in dental hospitals, the military, and prisons. Dentistry/orthodontist practice and illegal referrals. Kickbacks, and improper fee-splitting Professionals who work in dentistry, orthodontics, and other medical-related fields often work with other professionals. For starters, dentists often refer patients to orthodontists. Orthodontists work with various medical device companies. Dental professionals may work with diagnostic labs, medical suppliers, cosmetic companies, and other businesses. Dental professionals need to understand what financial relationships are permissible and what relationships may lead to charges the professional relationships violate Stark Law, the Anti-Kickback Statute (AKS), or other related laws. Many of the cases that the US Department of Justice settles in civil fraud cases involve the healthcare profession. These cases include hospitals, drug manufacturers, and many different types of healthcare practices. The best course for any type of dental practice is to consult with an experienced California health lawyer before starting the practice or starting any new professional relationships. Your lawyer will review which compliance laws apply to the dental profession. He’ll explain that referrals of patients to any entity the dental practice has a financial relationship or stake in – are especially suspect. The lawyer will also explain what exceptions and “safe harbors” to these laws can help protect your professional relationships – when the fees for services or products are paid by federal or state government programs. Many dental patients, for example, use Medicare or Medicaid to pay for their dental care. Your lawyer will review, among other compliance issues: What types of referral arrangements are permissible What marketing strategies can be used to entice patients to use your dental or orthodontist practice How a properly managed service organization (MSO) can be used to protect your practice. What do dental practices need to know about Stark Law? Stark Law prohibits doctors from referring patients who use Medicare from referring that patient to a “designated health service” with which the dentist has a “financial relationship.” The idea behind the law is that dentists should refer patients based on what is best for the patient’s health – and not what is best for the dentist’s finances. Stark law does provide numerous exceptions which we have discussed in many articles. There are specific requirements for each type of exception. Some of these exceptions include: In-office ancillary services Office space rental Preventive services Equipment rental Physician recruitment Many other relationships Dentists and dental practices who violate Stark Law can be held civilly liable. Civil liability means paying back to Medicare any improper payments. Civil liability also the possibility of statutory fines and exclusion from Medicare. Dentists need to understand that Stark Law is fairly strict. There’s no formal requirement that the government needs to show the dentist intended a violation of the law – in order for the dentists to be found liable. The establishment of the referral through Medicare and the designated health service is enough to hold the dentist liable. Stark law does apply to dentists – though there is a practical concern. Medicare generally does not cover dental payments which means most dentists do not submit bills to Medicare. What Medical Practices Should Know about the Stark Law The Stark Law is named after California U.S. Congressman, Peter Stark. It seeks to regulate how physicians refer Medicare and Medicaid patients. The law is part of the Omnibus Budget […] 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 […] What do dental practices need to know about the Anti-Kickback Statute The Anti-Kickback Statute also regulates the referral relationship. Generally, the AKS prohibits referrals that are based on providing anything thing of value to induce the referral – such as cash, free vacations, speaking engagements, and other items dentists might consider valuable. There are many similarities but also critical differences between the AKS and Stark Law. The AKS uses the term “safe harbors” instead of exceptions. The AKS applies to referrals of patients covered by Medicaid and other federal programs – in addition to Medicare. While Medicare generally does not cover dental services, most state Medicaid programs do cover dental services. The AKS is a criminal statute unlike Stark Law which is civil in nature. The AKS requires that the government show criminal intent. If convicted, a dentist or any physician can be sentenced to prison and ordered to pay substantial fines and penalties. Dentists who violate Stark Law or the AKS may also be in violation of comparable state laws. Dentists may also lose their license to practice dentistry or their dental specialty. Some of the AKS safe harbors include: The use of a Managed Service Organization (MSO) Renting space arrangements The sale of a medical practice Equipment rentals Personal service contracts Group purchase organizations Incentives for rural practitioners Use an MSO to Comply with Federal Anti-Kickback Safe Harbors What can an MSO, a Management Services Organization, do to augment your healthcare compliance? How are referrals between dentists and orthodontists reviewed? As a practical matter, many dentists refer their patients who need specialized dental care to orthodontists. Dentists and orthodontists should review their relationships with an experienced healthcare lawyer. The relationship may cause legal compliance issues if there is a financial relationship between the dentist and the orthodontist. It is generally permissible to refer patients to each other if the referral is based on merit and neither the dentist nor the orthodontist has a financial stake in the other’s business (which may indicate a Stark Law compliance violation)– and there is no quid pro quo or exchange based on the referral (which could indicate a violation of the Anti-Kickback Statute. Some of the issues that may indicate a Stark Law or AKS problem include: If one practitioner has an employment relationship with the other practitioner If one practitioner leases dental office space from the other practitioner These two examples and many other relationships may be more likely to be considered in compliance with these laws if the relationships are structured, with the help of a skilled healthcare compliance lawyer, to meet a Stark Law exception or an AKS safe harbor. HIPAA and dental care compliance issues Dental practitioners, orthodontists, and all other types of related practices need to consider HIPAA compliance requirements. All dental professionals need to ensure that they comply with HIPAA (Health Insurance Portability and Accountability Act of 1966). This includes understanding what records can and cannot be exchanged (and how the records can be exchanged) – if a dental practitioner refers a client to an orthodontist, diagnostic center, or other dental practice – or even if there is no referral. It is also a violation of HIPAA for a dental practitioner or dental specialist to offer an incentive (such as a discount) to a patient who uses Medicare or Medicaid – with the aim of influencing that patient to recommend the dental practitioner/dental specialist to other patients who use Medicare or Medicaid. The penalties include civil monetary penalties of $10,000 for each violation. An experienced healthcare compliance lawyer can explain the limitations of any type of incentive program. There are exceptions to the Medicare incentive law that your lawyer can explain. These include: Some inexpensive gifts with limited value Some items or services that fit within the statutory exceptions: Waivers of cost-sharing amounts based on financial need Properly disclosed copayment differentials in health plans Incentives to promote the delivery of certain preventive care services Any practice permitted under the federal Anti-Kickback statute pursuant to 42 CFR 1001.952 Waivers of hospital outpatient copayments in excess of the minimum copayment amounts. A skilled California healthcare lawyer will explain whether any of the referrals, incentives, or other transactions that may be permissible under a federal law exception or safe harbor – violate any California laws. Additional dental care compliance issues Some of the many other healthcare compliance issues dental practitioners need to review with a seasoned healthcare law are: FDA violations The Food and Drug Administration regulates: Drugs Medical Devices Food and nutritional products Cosmetic products Other products The regulations include determinations about: Whether the products are adulterated or misbranded Current good manufacturing compliance Introduction of unapproved drugs into interstate commerce Other regulations Dentists, orthodontists, and other health practitioners need to understand how FDA regulations apply to their practice. This understanding applies to different parts of their practice such as: The drugs, medical devices, and other products dentists use for their patients. The statements dentists make online and offline about the merits of any of these products to help patients with their oral health problems. FTC violations The Federal Trade Commission monitors the representations dental practitioners and dental supply companies make about the services and products they perform or use. These days, most dentists use websites, social medial, and print marketing to help promote their practice. The FTC has the authority to review your marketing and branding. If the FTC believes your promotions violate the Federal Trade Commission Act and FTC regulations or rules, the FTC can send a warning letter and take other appropriate action. The corporate practice of medicine In California, decisions about the practice of medicine (including dentistry) must be made by the physicians and not by the business. In California, a medical corporation can be formed by complying with the California Moscone-Knox Professional Corporation Act. The medical corporation is a separate legal entity that must be owned by one or more physicians. Non-physicians can have a minority stake in a professional medical corporation. Dentists can also practice as sole proprietors or in partnership with other dentists. An experienced healthcare lawyer can explain the pros and cons of each type of business structure. The unauthorized practice of medicine Dentists need to ensure they fully understand what tasks dentists can assign to their staff, which tasks dentists must perform themselves, and which tasks staff members can perform under their direct supervision. Dentists must also ensure that they and the people the dentists work with are properly certified and their continuing medical education requirements are being met. Generally, the Dental Board of California licenses and regulates over 100,000 dentists, registered dental assistants, and registered dental assistants in extended functions (RDAEF). The Board “has the responsibility for setting the duties and functions of unlicensed dental assistants.” Dentists, like other physicians, need to understand how Stark Law and the Anti-Kickback Statute apply to their practice and business relationships. Dentists need to understand their HIPAA compliance duties, and many other compliance issues such as FDA requirements, FTC requirements, and various California laws. Doctors and medical practices should contact Cohen Healthcare Law Group, PC to discuss HIPAA and other laws that affect vaccination and other health records. Our experienced healthcare attorneys help healthcare providers establish HIPAA compliance protocols. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
September 22, 2021
Healthcare
Stark & PORA Basics
In today’s video, we discuss the basics of federal Stark law, and the anti-kickback and fee-splitting prohibitions. Hi, I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare industry clients just like you navigate healthcare and FDA legal issues so you can launch, or continue to scale, your health and wellness product or service. Ted is a medical doctor, he works in a hospital 3 days a week and the rest of his time he runs his specialized clinic. Let’s say that Dr. Ted accepts Medicare patients (So he’s bound to Medicare and Medicaid rules) and he participates in commercial insurance with several plans. Ted’s partner in the clinic has his own medical corporation, and that medical corporation contracts as an independent contractor with Dr. Ted’s medical corporation. Their clinic also subcontracts a billing agency and pays the agency on a percentage of collections. Dr. Ted has questions about referrals between his hospital practice and his private practice. So he asks about Stark and anti-kickback law and here are some basics. One: when does federal law apply, and what does Stark prohibit? Two: when do state self-referral prohibitions apply, and what do they prohibit? First, federal law applies whenever physicians accept Medicare or Medicaid patients. The federal self-referral law, known as Stark, prohibits medical doctors from referring Medicare or Medicaid patients to so-called designated health services, or DHS. DHS include many of the ancillary services that family physicians provide, such as clinical laboratory services, outpatient prescription drug services and family and occupational therapy and imaging services (e.g., MRI, CT, ultrasound). Stark has several exceptions. A big one is referral to the referring physician’s “group practice.” This includes referrals by the doctor to the doctor himself or herself, or someone in the physician’s group practice, or someone supervised by a medical doctor in that practice. Another common exception is known as in-office ancillary services, or IOAS. There’s a long complicated definition which we cover more on our blog: www.cohenhealthcarelaw.com/blog. Second, states have their own mirror-Stark laws, prohibiting what is known as self-referral. For example, California law contains prohibitions against self-referral in the Physician Ownership and Referral Act of 1993 (“PORA”), as well as California Labor Code Section 139.3, and some other statutes. California has its own definition of DHS. Third, it’s important to remember that where federal reimbursement monies are involved, federal anti-kickback law also can apply and it can apply to all practitioners, not just physicians. Fourth, self-referral prohibitions apply whenever a “referral” is made. This doesn’t necessarily require a referral in the sense of a phone call or written document. Enforcement authorities can look to the overall business model and conclude that there is something fishy, there’s a disguised unlawful referral arrangement. More typically, such a scenario would arise in a kickback situation rather than self-referral, which we’ll cover on a subsequent video. If you or someone you know could benefit from a Legal Strategy Session with one member of our Legal Team, let us know. Thanks for watching. Here’s to the success of your healthcare venture, we look forward to connecting with you soon. Testimonials
July 23, 2021
Healthcare
Can Physicians Legally Do Health Coaching?
In today’s video, we talk about how physicians can tackle the legal and regulatory issues that often arise with health coaching. I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare entrepreneurs just like you navigate the very complex healthcare and FDA legal issues so you can launch, or continue to scale, your health and wellness service or product. And we’ve helped over a thousand clients in recent years. Health coaching as we know is a popular way to deploy all the gifts and skills that many people can bring to help clients in need of better health, be it physical, mental, or spiritual, environmental. And today, there are some large professional organizations devoted to health coaching and they are expanding the legal boundaries around what health coaches can do. The challenge is this. Back in the 1880’s, the States decided that they would license practices involving healthcare or health and wellness, and that anyone who said they were practicing “medicine” had to have a license from the State to do so. One practitioner and his name was “Dent” challenged these laws, the case went all the way up to the Supreme Court and he did not make a dent. The Court actually affirmed the State’s right to license medicine, and to decide who can and cannot get a license. That decision still holds today. The problem is that the definition of practicing “medicine” is very broad, and includes anything that could be considered diagnosis, diagnostic, treatment of any health conditions. So it’s very broadly written and interpreted that way. Many of the legal definitions in different states of “practicing medicine” do not depending on whether or not the practitioner charged a fee for their service. If you find some newfangled technique to help people get over this or that, and you think it’s miraculous when you limit yourself to family and friends, it’s still possible you might have crossed the line into the practice of “medicine.” These broad statutory definitions create a legal peril for the charge of “practicing medicine without a license.” This is where all my healthcare legal research started. This peril can affect at least two different audiences. One, if you’re a health coach and you’re not licensed, you could be at risk of unlicensed medical practice or practice of psychology or even possibly nutritionist and dietetics. But, if you’re licensed in your state but not others, and your client is in that other state, then you could be at risk of unlicensed practice of medicine in that State. Some of our clients are licensed providers, such as medical doctors, psychologists, and chiropractors. They present a strategic question: is it better to continue their coaching under their licensed practice—and try to get a license (typically for MDs) in the remote states where they want to offer telehealth services? I would say by in large, yes, because there are many vendors that will help you get a license in those states. But another idea is to have a hybrid model where they see the patients as a licensed provider in their home state, and then style themselves as a health coach in States where they are not licensed. This has some pros and cons. Using a hybrid model requires a bit of skill and savvy, and, an understanding of the legal and regulatory risks and how to mitigate them. I had someone say minimize, but we don’t minimize – we mitigate. Here are three of some risk mitigation strategies we might use. One: if you are functioning in a health coaching mode only, avoid diagnostic categories and language—such as, depression and obesity—so speak in coaching language, like talking about habits, motivation, and goals. Two, even if licensed, for example as an MD or a chiropractor or psychologist, prominently disclaim your role, often times with an asterisk or box on the Consent or Disclosure form or website bio or all of the above so that you qualify your use of a professional title such as “doctor.” Three, limit the kinds of services you offer, so that they do not cross the line into diagnosis and treatment of disease. For example, reviewing and commenting on lab tests. Health coaches want to do that all the time but I would consider that a clinical function in the eyes of a regulator. Whereas telling someone to keep a food diary, is just telling them to keep a diary. Thanks for watching. Here’s to the success of your healthcare venture, we look forward to speaking with you soon. 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. Testimonials
July 2, 2021
Healthcare
IV Hydration Therapy – Legal Strategies
In today’s video, we discussed some of the legal perils involving IV hydration therapy and potential legal strategies and solutions. Hi, I’m Michael H. Cohen. I’m founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients, just like you, navigate the complicated regulatory terrain of health and wellness, with all of its many issues and challenges, as you continue to scale or simply launch a new health and wellness product. Now, imagine that you’re a healthcare serial entrepreneur and your friend Doris is a licensed MD who worked part time at a medical spa. You ask Doris if you can hire her as a 1099 to do mobile IV hydration therapy clinic. She loves the idea and she says, “Sure. Are there any legal risks?” What should you do or not do? What do you tell her? Well, this is a very typical scenario that we’ve seen so many variations on a theme from our healthcare clients, many from our startups and they want it to provide mobile IV hydration therapies and other therapies. IV services are very popular also in the era of COVID-19. Some IV therapies have a immune boosting properties. Mind you, I’m not selling these therapies. I’m not promoting them. I’m simply responding to some of the legal issues that our clients are raising, who do want to provide IV hydration therapy. I’m not an academic, I’m just in the civilian space. I’m talking to you about the healthcare of entrepreneurial space and the legal issues that you might be battling. I’m also talking to you about how to anticipate some of the regulatory perils or the plaintiff’s lawyers who come to you after the fact. Now, there are in fact multiple legal and regulatory challenges. First of all, one question is, are you prescribing the IV or is the clinician prescribing, or is it simply an order, and does it make a difference? Remember, prescription is a legal term. Order, furnish, administer, these are all different terms. There’s questions as to whether your clinician needs to be in that state or can be licensed elsewhere. Second, who’s the clinician? Could it be a nurse? Could it be a paramedic or an EMT? What would they do? Would they have to be supervised? How would they be supervised by Dr. Doris? What about corporate practices of medicine concerns? What about supervision lines? Third, what’s the right structure? Would it be a corporation, an LLC, or maybe a professional corporation for the clinical staff? Who’s where under which structural house and how do you get this right? Fourth, could Dr. Doris get paid a percentage of production in terms of the number of IV units delivered, or would this itself create a kickback, fee splitting, or even Stark Law concerns? Fifth, does it matter what goes in the IV cocktail? What goes in there? Does the cocktail have to be FDA approved? Who can transport it? Some state licensing agency can get involved. Where do you find these rules? We do get very deep in the weeds into these issues and many more. Some of them we cover in various blog posts on our website. We have one called Independent Contractor, Physician Kickback or Compensation. Just one example how deep we go on our blog into corporate practice of medicine, FDA regulation of IVs, regulation of other substances, good business structures. When to you use the professional corporation or PLLC versus, for example, a general company that serves as an MSO. By the way, let’s talk about marketing. How do you market the services? Thanks for watching. If you still have questions, click on the link below, cohenhealthcarelaw.com/contact to send us a message or book an appointment. Here’s to the success of your healthcare venture. We look forward to speaking with you soon. Testimonials
June 10, 2021
Healthcare
What are the Compliance Issues for Veterinarians?
What are the Compliance Issues for Veterinarians? Veterinarians have unique compliance issues. Many of the rules and regulations these physicians follow are the same that govern medical practices that treat and care for humans. Still, there are also differences because animals are involved. Failure to comply with federal, state, and local laws as well as the ethical rules of conduct can result in the fines, penalties, and the forced closure of the business. Experienced healthcare lawyers can explain which laws, regulations, and ethical rules apply to a veterinary practice. Skilled healthcare attorneys understand which drugs and dietary supplements are regulated by the FDA. They understands what solicitation and promotional marketing is acceptable and what advertising may lead to complaints and litigation. It is advisable for veterinarians and veterinary practices to consult a skilled veterinary healthcare lawyer if they have not done so. It’s often much easier to address problems before they occur, rather than waiting until you receive a warning letter or are told you have just days to respond to formal actions. Telemedicine Telemedicine, also called telehealth, involves remote consultations and reviews. During the current pandemic, many medical practices and veterinary practices are using telemedicine more and more to avoid physical contact. Veterinarians use telehealth to: Review medical records about any pet or any email Review medical images Consult with the owner of a dog, cat, bird, or other pet that isn’t feeling well or with the owner of any livestock. These consultations may be face-to-face video. The consultations may also involve submitting questions by email or through a form and then waiting for a reply. Veterinarians who wish to use telemedicine should work with IT professionals to ensure they have the right equipment for communicating with clients. Veterinarians also need to understand the laws that apply to telemedicine. Traditionally, doctors in a broad array of specialties and practices consult with their patients in person so the veterinarians can see, touch, feel and speak to the humans and see, touch, and feel the animals the vets are taking care of. Telemedicine is a trade-off of convenience and, in the age of COVID-19, safety – for the inability to be in direct contact with the animal and the animal’s owner. To ensure that veterinarians maximize this trade-off so the veterinarians can provide quality care, the American Veterinary Medical Association (AVMA) and other veterinary organizations have developed guidelines for when and how telemedicine should be used. The starting point is that there should be an existing Veterinarian-Client-Patient Relationship (VCPR). Different organizations may define this term differently. Essentially it is the creation of a formal relationship in which the veterinarian agrees to provide medical care to the owner’s animal in return for compensation. According to the AVMA: “Telemedicine, which is client-facing, includes the delivery of information specific to a particular patient and is allowable only within the context of an established VCPR; and non-client-facing models that involve delivery of general advice, telemarketing, and advertising.” In non-client-facing models, the veterinary may be able to give general advice but not advice that applies to a specific animal. The participants in a veterinary telemedicine conference can include: The veterinarian The animal The client – generally, the owner of the animal A pharmacy or medicated feed distributor A specialist The healthcare team Telehealth includes: Telemedicine Teleconsulting Telemonitoring Teleadvice Teletriage E-prescriptions Mobile health The AVMA has guidelines for how to use telehealth/telemedicine. The guidelines are just advisory. Each state has its own veterinary licensing boards. For example, California has a veterinary medical board. The board regulates: Licenses to practice veterinary medicine. Licensees need to understand their continuing education requirements, their duties regarding controlled substances, and animal shelter issues. Enforcement issues. For example, veterinarians need to know if animal shelters are practicing safe veterinary medicine. Inspection issues. Some of the regulations of the California Veterinary Medical Board include: Telemedicine Animal Control and Humane Officer Training Fee schedules Consumer protection If there is a valid VCPR, veterinarians, in general, can offer and charge for telemedicine services – provided the veterinarian provides competent medical care. In most telemedicine consults, for animals and humans, it is helpful (and possibility mandatory) that the veterinarian/doctor have an initial in-person consultation with the pet/person. Anti-referral laws – Stark Law and the Anti-Kickback Statute Medical practices including veterinary practices are subject to the federal and state anti-referral laws. These laws are designed to ensure fair competition and to ensure that patients (including the owners of dogs, cats, cows, and other animals) are being advised based on what is in their best health interest and not on what is in the best interest of the physician. Both Stark Law and the AKS regulate how and when referrals can be made – and what exceptions and safe harbors apply. Stark Law Stark law prohibits doctors who have a financial relationship in a designated health facility from referring patients to the facility if that facility then charges Medicare for the services or products that are provided. A common example of a designated health facility is an ambulatory surgery center. A financial interest can be direct or indirect. Stark Law applies if the doctor or a member of the doctor’s immediate family has a financial interest or investment in the designated health facility. Stark Law provides for civil penalties in the form of reimbursement of any fees to Medicare, statutory penalties, and treble damages. Violations of the Stark Law are often also violations of the federal False Claims Act. The Anti-Kickback Statute This federal law forbids the use of any incentive to pressure or compel a physician to make a referral to the party providing the inducement. Common examples include the payment of cash or the creation of sham directorships by a drug company in order to induce physicians to suggest patients use the drug company’s products instead of drugs manufactured or sold by other companies. The AKS is a criminal statutes that includes fines and possible imprisonment. Violations of the AKS may also be violations of the False Claims Act. An experienced veterinary and healthcare compliance lawyer will review any referral arrangements the veterinary practice has with others. Some types of conduct and actions such as waving copayments, providing discounts, accepting reduced payments, and gifts raise red flags that the referral is not based on merit. Exceptions and safe harbors The lawyer can also explain which exceptions and safe harbors apply. Some of the exceptions to Stark Law include: In-Office Ancillary Services Exception. This exception allows a veterinary or other medical practice to make referrals for ancillary services such as laboratory services – if certain conditions are met. Fair Market Compensation Exception. This exception is useful if the arrangement for referrals is in writing, there’s a specific timeframe, the compensation is based on fair market value, and the transactions are not based on the volume or amount of the referrals – and other conditions are met. There are also Stark Law exceptions for the following, among others, if all the conditions are met: Physician services Referrals made to organizations that provide prepaid health services to enrollees such as HMOs and plans approved by Medicare Academic medical centers Preventive services Rental of office space Equipment rental Bona fide employee relationships Personal service arrangements Nonmonetary compensation up to $3,000 a year – if the veterinarian didn’t solicit the compensations and the compensation isn’t based on the amount of referrals Physician recruitment Medical staff incidental benefits There are AKS safe harbors which also offer protection. Many of the safe harbors are comparable to the Stark Law exceptions. An experienced veterinary healthcare compliance lawyer can explain the similarities, the differences, and the key requirements as far as Stark Law exceptions and AKS safe harbors are concerned. 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 […] California Medical Board Veterinarians cannot abandon their patients. If the veterinarian leaves a medical practice or is fired from the practice, the physician must inform the owner of the pet, that the owner will need to hire a new veterinarian. Veterinarians should also make the medical records of the animal available to the owner in a timely manner. FDA and FTC compliance Veterinarians and vet practices must comply with the FD&C Act and the FTC Act. These agencies will send out warning letters and file legal actions if any of the following are condoned by the veterinary practice. False, misleading, or deceptive statements are made on company websites, social media accounts, print advertising, and any other marketing. Examples of false statements and misbranding include claims that treatments or medications can provide relief, can cure diseases, can prevent diseases, or can reduce the severity of animal disorders – when the statements are not supported by scientific evidence and/or clinical studies. The veterinarian provides drugs or treatments that aren’t medically approved. The FDA works to “assure that animal food is safe, made under sanitary conditions, and properly labeled, that animal drugs, animal devices, and animal food additives are safe and effective, and in cooperation with other agencies that no harmful residues in food-producing animals enter the human food supply.” Additional veterinary rules and regulations Veterinarians are generally required to comply with the California laws that govern medical practices such as the: California Medical Practices Act, The Controlled Substances Utilization Review and Evaluation System (CURES) Various consumer protection laws The laws and principles of informed consent – where the owner of the pet should be notified of the risks and dangers of proposed medications, treatments, and medical procedures. The confidentiality of veterinary patient records Additional legal services for veterinarians Skilled healthcare lawyers also advise veterinarians on a range of other issues including: What type of business entity to use for the practice The use of managed service organizations Employment contracts Contract negotiation Non-solicitation and non-compete clauses Severance packages Billing and coding issues including issues of upcoding and of bundling of services Whether American Animal Hospital Association (AAHA) Accreditation is required When Using a Management Services Organizations (MSO) Is the Right Choice for Your Medical Practice Managed Services Organizations help physicians focus on practicing medicine by freeing doctors from many administrative tasks. Failure to consult with an MSO healthcare lawyer can cause civil and […] Veterinarians should consult with experienced healthcare attorneys before starting their medical practice and any time they expand their practice. A skilled lawyer will review the anti-referral laws, the telemedicine laws and guidelines, the federal and state laws and boards that regulate veterinary practice, and the practical and legal issues of complying with these laws. Contact Cohen Healthcare Law Group for a review of the laws, regulations, ethics requirements, and other compliance issues that govern veterinary practices. Our experienced healthcare attorneys understand the compliance issues at stake and advise clients on proactive strategies and on responding to complaints. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
May 8, 2021
Healthcare
The Difference Between Non-Solicitation and Abandonment Of Patients
The time for doctors and other healthcare providers to review their employment relationship and their duties to their patients isn’t when the doctor is about to leave a medical practice. The time to conduct these reviews is before the doctor joins a new medical practice. Physicians generally enter into written employment contracts with a medical practice, unless the physician is just a sole practitioner. Doctors who are joining a medical practice are focused on making the new employment relationship work. New doctors often fail to anticipate that the relationship may not work. The doctor may be fired from the practice. The doctor may want to go out on his/her own. The doctor may want to join a new practice. Doctors need to understand that in many cases, the best time to discuss what happens when the employer/employee relationship ends or a partnership relationship ends is right when the relationship begins. An experienced healthcare lawyer can explain the main factors in end-of-employment contracts that need to be reviewed upfront. These main factors are: Non-solicitation clauses in the contract. Covenants not to compete with the medical practice when the doctor leaves. The duty to provide the best care possible for the patient. In California, the covenant not to compete clause has generally become unenforceable due to legislation passed in 2018. As always, there are exceptions. The net result is that the main balances that need to be reviewed in the employment contract are the right of the medical practice to keep its patients, the right of the new doctor to develop his/her new practice, and the need to service the patient. In general, doctors can’t become so focused on avoiding contact with a patient – so as to avoid non-solicitation complaints – as to forget about their patient. When and why should a healthcare lawyer review the employment contract for solicitation issues? A lawyer should review the employment relationship at the following times: Before the contract is signed. Before the doctor is thinking of leaving or immediately after the doctor is terminated If the physician is considering accepting a severance agreement. The need to review non-solicitation and abandonment issues involves medical centers, wellness centers, integrated medical centers, and other medical employment relationship. The issues apply to physicians, chiropractors, and other healthcare providers. The aim of legal review is to avoid lawsuits by: The employer The patient Regulatory enforcement agencies such as local and state medical boards A skilled legal review of your employment contract, before you sign it, will: Include an explanation of what actions constitute a breach of the contract Explain what the consequences of a breach may be Explain what practical issues may arise such as the withholding of your pay by the medical practice if the employer thinks there is a breach Review what your ethical duties to your patients are The lawyer will then work to redraft the contract to remove, limit, or provide clarity as to your legal rights and obligations and how practical attempts to enforce the agreement such as withholding payments can be addressed. What is a non-solicitation agreement? The non-solicitation clause is generally a broad promise by the doctor not to solicit patients AND not to solicit employees from the first medical practice so that the patients or employees will follow the doctor into his/her new medical practice. Non-solicitation agreements may also apply to people and companies that do business with the medical practice. For example, common language in a medical employment contract states: “Physician Employee acknowledges that any solicitation he makes of any patients or employees of Medical Practice will involve misappropriation of Medical Practice’s confidential information, and constitute a breach of this agreement.” Unless the contract specifically defines non-solicitation, just sending a postcard that you’ve left the practice could constitute solicitation – and lead to a lawsuit for breach of the contract. A breach of contract claim can involve demands for hundreds of thousands of dollars and the cost to pay a lawyer to defend you in court. How a healthcare lawyer can help A skilled attorney can help define the definition of non-solicitation to limit its scope and to clarify any ambiguities. The lawyer will also work to limit the penalties for non-compliance with the non-solicitation agreement. For example, the contract should detail what actions constitute solicitation and what actions will NOT be considered solicitation. Some of the language that explains what acts are NOT solicitation could include: Initiation of contact by the employee or the patient with the physician Instances where the employee or patient knew or worked with the physician before the employment relationship with the first medical practice began Contact initiated by a patient or employee in response to a notice in a newspaper on an online website that the doctor has opened a new practice Covenants not to compete Employers, including medical practices, generally argue the medical practices put a lot of money and time into training doctors and helping them develop their skills and their practices. The non-compete clause, the medical practices assert, protects their investment so the doctor doesn’t leave as soon as a better offer comes along. Non-compete clauses generally must be limited in time and geography. The medical practice can’t prevent the employee/doctor from competition forever. The medical practice also can’t prevent the doctor from competing in a location that isn’t direct competition. For example, non-compete clauses are generally invalid if the clauses prevent a doctor from working in another state. California has clarified the non-compete issues by effectively declaring that all non-compete clauses are invalid. The California Business and Professions Code Section 16600 provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” As always, there are exceptions and unique situations that may apply – which you should review with an experienced healthcare lawyer. Even though California’s non-compete law is active, it is still best to remove any non-compete clause from an employment contract. The California law may also help limit or remove the employer’s request for a non-solicitation clause. The argument is that California courts may consider non-solicitation clauses as non-compete clauses in disguise, so it’s in the best interest of the employer to be reasonable. Abandonment of patients Physicians who begin to treat a patient owe that patient a duty of competent medical care. That duty generally includes properly informing the patient that the physician can no longer treat the patient. Patients, especially patients who have a continual treatment plan with their physician, rely on that continuity. Delays in finding out the doctor can no longer treat the patient and the time needed to find a new physician can be harmful or even deadly. To avoid the time needed for new oral examinations and medical tests, patients need to have access to their medical records. The California Medical Board provides the following minimal requirements for termination or ending the physician/patient relationship: “Terminating/Severing Physician/Patient Relationship” “Although a physician is allowed to sever or terminate the patient/physician relationship, in order to avoid allegations of patient abandonment (unprofessional conduct), a physician should notify patients of the following in writing when the physician wishes to discontinue care: The last day the physician will be available to render medical care, assuring the patient has been provided at least 15 days of emergency treatment and prescriptions before discontinuing the physician’s availability. Alternative sources of medical care, i.e., refer patient to other physicians, by name, or to the local medical society’s referral service. The information necessary to obtain the medical records compiled during the patient’s care (whom to contact, how and where).” Doctors do have the right to terminate the relationship for many reasons including: Non-payment of bills The need to have the patient treated by a specialist because the doctor doesn’t have the necessary skills and training Not having the necessary medical equipment Any situation where continued treatment would violate the doctor’s code of ethics or duty of competent medical care Doctors who abandon a patient may be subject to: A lawsuit for negligence if the patient suffered injury because he/she couldn’t find a suitable replacement doctor in time. Disciplinary action by the state or local medical board The intersection of non-solicitation and abandonment It can be quite confusing for a doctor who is leaving a practice or is fired from a medical practice to know how the doctor is supposed to inform their patients. If the doctor doesn’t properly inform their patients, the doctor can be sued for negligence and be faced with disciplinary action by the appropriate medical boards. On the other hand, if the doctor does inform their patients of their new status, the employer may claim that the contact constitutes solicitation and a breach of the employment contract. It’s a real Catch-22. Doctors who are leaving a medical practice or are fired will naturally wonder: When can I tell my patients I’m leaving? What can I tell my patients? Who should control the patient records? Can I take the original records with me? Can I take copies of the records? There may also be issues involving HIPAA that need to be addressed when electronic patient information is exchanged. Whether a patient is abandoned may also depend on whether the patient has finished his/her treatment or is still receiving treatment. Some of the factors that may favor a settlement of the non-solicitation and abandonment issues Unless there is a negotiated agreement between the physician and the medical practice, the decisions about solicitation and abandonment will depend on many ambiguous factors. It helps to detail what solicitation means. Generally, broad appeals such as newspaper ads, mailings to people in a certain zip code, and broad website postings are less likely to be considered solicitations than targeted specific mailings such as direct letters mailed to each patient’s address. Letters mailed to each patient advising the patient the doctor is leaving the old practice and giving the address of the new practice are likely to be considered solicitation. There are solutions which depend on the original contract and the desire of the employer and employee to resolve their differences. Just as the employee has a duty not to abandon a patient, the employer has a duty not to abandon their patient. While employees can’t be solicited, employers generally don’t function well when employees are unhappy. The employer may not be able to handle the caseload of the doctor who left and may not be interested or have the time to find a replacement. The solutions may include having the employer send out the notice that the employee is leaving. This notice, depending on the terms of the negotiation, may/may not include the location of the doctor’s new practice. Another factor is the view of the courts. Because the position of a judge is uncertain, employers and employees may both benefit from reaching a settlement rather than risk having a judge decide whether the solicitation does or doesn’t constitute abandonment. Physicians need to work with experienced health care lawyers before they sign any employment or severance contracts and before they are considering leaving a medical practice. Doctors need to understand they have the right to negotiate the terms of non-solicitation agreements. They need to properly balance their duty to comply with non-solicitation agreements and their duty to prevent patient and regulatory complaints that the non-solicitation constitutes abandonment of the patient. Contact Cohen Healthcare Law Group for legal counsel for a broad range of healthcare providers and a variety of specialties. Our experienced healthcare attorneys negotiate non-solicitation agreements so that doctors can serve their patients while protecting their right to start a new medical practice. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
April 8, 2021
Healthcare
Legal Compliance Issues for American Medical Tourism Health Practices
American physicians are among those who are trying to determine how to take advantage of foreign medical tourism. The National Institutes of Health recently studied how medical tourism works abroad by examining some of the issues involved with foreign health care in Guatemala. While the study focuses on Guatemala, the study also indicates many of the concerns that may apply if an American physician wants to encourage foreigners from around the world to come to the US for American medical care and an American vacation. Are medical tourism legal questions variations on MSO-Physician arrangements? Are medical tourism legal questions variations on MSO-Physician arrangements? The study focused on Americans seeking healthcare based on their health needs while living in America – and not because the American became ill or injured while vacationing in Guatemala or because the American was living mostly abroad. Foreign countries are encouraging Americans to seek medical help in foreign countries and adding a vacation in that country while they recuperate. American doctors are encouraging foreign patients to come to America for treatments and care. The study found the following concerns: The education and regulation of the health providers is a major concern The accreditation of the physicians and the health facilities is another concern. While Americans traveling abroad need to be concerned with substandard care, American physicians who offer medical services to foreigners need to ensure that their accreditations are current for the types of medical services they provide. Medical providers in America need to understand when services in the US might be illegal if the services were performed abroad. As medical tourism expands, there will be additional American regulations that regulate “medical tourism brokers, on-line sites, or specialized training programs or certifications in medical tourism.” The rights and duties regarding patient privacy and security of medical records needs to be addressed. Many foreign patients who receive treatment in America will want to take their medical records with them. The FDA and FTC may have concerns about which medications, cosmetics, medical devices, and other medical products are used on foreign patients Many other regulatory and safety issues may apply to medical practice by American physicians. Corporate practice of medicine Many states regulate the corporate practice of medicine. “No matter how many times we address corporate practice of medicine and fee-splitting, they keep coming up in our practice, because in the arena of health and wellness services, non-doctors ultimately want to bring doctors into their venture.” The two laws that govern the corporate practice of medicine in California are: The Medical Practice Act, Business and Professions Code. This law requires that anyone who practices or tries to practice (or holds themselves out as practicing) medicine must have a valid certificate to practice medicine that hasn’t been suspended or revoked. The Business and Professions Code, within the Medical Practice Act, requires that “Corporations and other artificial entities shall have no professional rights, privileges, or powers.” This means that when a California medical practice sets up a second business to encourage foreign patients to come to the US for treatment and for foreign doctors to recommend patients to come to California, that these second businesses may be practicing medicine without a license and may be engaging (along with the California medical practice) in the corporate practice of medicine. An experienced healthcare attorney will explain that medical and clinical activities must be kept separate from the business of the non-medical company. The attorney may offer alternative arrangements such as the creation of a management services organization so that the business and medical practices can be separated. Fee-splitting California medical practices that work with other companies may be at risk for Stark Law violations and Anti-Kickback statute violations – especially if the physician has a financial interest in the related company. Stark Law protects patients by requiring that physicians not refer patients to designated health companies (such as other medical providers, testing services, therapy services, and medical device companies) if the physician or an immediate family member has a financial interest in the designated health service. The Anti-Kickback Statute (AKS) provides that physicians cannot offer or receive remuneration (cash payouts, expensive vacations, sham directorships) in order to refer patients to the entity providing the inducement/kickback. The purpose of both Stark Law and the AKS is to ensure physicians advise patients based on the patients’ best interests and not the financial interests of the physicians. The laws also help to preserve the integrity of the healthcare system among other healthcare providers who play by the rules. Regulators of medical tourism ventures need to ask: Whether there were any improper referrals Whether the entity used to market and promote foreign patients is a designated healthcare facility Whether such items as travel arrangements qualify as inducements/kickbacks Whether the designated health facility or secondary company is receiving part of the patient fee Marketing and advertising These days, much of the advertising that a medical practice does involves the Internet. Internet marketing can generally be read anywhere in the world. The Federal Trade Commission (FTC) is a federal agency which monitors most forms of advertising, including website and social media advertising, to ensure that the representations are honest and that consumers/patients are not deceived. The FTC has the power to take enforcement actions against any medical practice that engages in dishonest marketing. When necessary, the FTC may employ translators to determine the meaning and veracity of advertising in foreign countries. Physicians and medical practices that target foreigners who might want to come to the US for medical treatment need to review their online (and offline) advertising with an experienced FTC healthcare lawyer. A main condition behind the enforcement authority of the FTC is that the FTC can require that each and every claim be substantiated. The physicians and medical practices that make claims need to have a reasonable basis for those claims. For example, if physicians assert that their treatments are only available in the US or only work well in the US, they need to have a reasonable basis for implying those treatments aren’t available or effective in other countries. “A firm’s failure to possess and rely upon a reasonable basis for objective claims constitutes an unfair and deceptive act or practice in violation of Section 5 of the Federal Trade Commission Act.” “Absent an express or implied reference to a certain level of support, and absent other evidence indicating what consumer expectations would be, the Commission assumes that consumers expect a “reasonable basis” for claims. The Commission’s determination of what constitutes a reasonable basis depends, as it does in an unfairness analysis, on a number of factors relevant to the benefits and costs of substantiating a particular claim. These factors include: the type of claim, the product, the consequences of a false claim, the benefits of a truthful claim, the cost of developing substantiation for the claim, and the amount of substantiation experts in the field believe is reasonable. Extrinsic evidence, such as expert testimony or consumer surveys, is useful to determine what level of substantiation consumers expect to support a particular product claim and the adequacy of evidence an advertiser possesses.” FDA Regulatory Compliance The Federal Drug Administration has authority to regulate American drugs, medical devices, dietary supplements, biologics, and cosmetics. A major incentive for foreigners to come to the US is that these medical products aren’t available in their home country. Likewise, Americans often travel abroad to obtain access to drugs and other products and devices that haven’t been FDA approved. FDA has the authority to inspect practices, inspect products, and inspect online and offline marketing materials to ensure that the products FDA regulates aren’t adulterated, that there aren’t misrepresentations about the products, that products haven’t been improperly classified, and to ensure other safety issues regarding the products. Physicians who work in the field of medical tourism need to review with experienced healthcare lawyers when the products the physicians use on behalf of foreign patients may violate FDA rules and regulations. Physicians also should review with the attorney if and how FDA can expand its regulatory powers outside the United States. In addition to compliance issues in the medical tourism sector, experienced attorneys can also help with issues of corporate structure, physician contracts, and many other business matters. Practical considerations An experienced healthcare lawyer will review the medical tourism practice of a California doctor by examining many issues such as: Identifying which bills should be paid to the professional medical corporation Identifying which bills the patient should pay to the medical tourism company for travel and related services Helping to ensure that the American medical practice isn’t paying any third-party medical practice (especially one that the physician has a financial interest in) for giving referrals or receiving referrals When and how the medical tourism company might be able to charge either the California medical practice or a foreign medical practice for management and marketing services so that the company would likely meet the requirements of the California law against the corporate practice of medicine, and also meet Stark Law exceptions or the AKS safe harbor. For example, written contracts based on fair market value and commercial practices that are not based on the amount or quantity of referrals may be valid if other conditions are also met. American physicians who want to encourage foreigners to come to the US for medical treatment need to be very careful of how they set up their medical practices and their relationships with any other companies such as a marketing or advertising company. If there are questions about whether any company is practicing medicine without authorization, that company may be charged with corporate practice of medicine. If the relationship between the physician practices and the management practices or other medical practices revolves around the payment of any fee, discount, or monetary matter, everyone involved may be subject to Stark Law and the Anti-Kickback Statute. All claims by the medical practice and the business practice may be reviewed by both the FTC and the FDA. Contact Cohen Healthcare Law Group, PC for legal counsel on healthcare transactions, regulatory compliance, and FDA and FTC law. Our experienced healthcare & FDA attorneys advise healthcare companies and healthcare providers ranging from medical centers, to integrative and functional medicine practices, cosmetics and supplement companies, and medical device manufacturers. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
February 22, 2021
Healthcare
Ambulatory Surgery Center (ASC) Compliance Issues
Ambulatory surgery centers (ASCs) are often used in place of having a surgery in a hospital. There are many advantages that the owners of these facilities tout and the doctors and patients who have surgeries there praise. These benefits include: Better outcomes. Generally, the surgeries are shorter, the recovery times are faster, and the rate of infections as compared to hospitals is almost twice as low when the ASC is used for the operation. As a general rule, patients who have a surgery at an ASC also do not need as much hospital follow-up. More practical. The waiting time and processing time at an ASC is usually shorter than for hospital surgeries. Lower costs. The cost of an ASC surgery is half as much as a hospital procedure. These savings help not only the patient but private insurers and taxpayers who help fund public health programs such as Medicare. DHHS estimates that taxpayers save $15 billion and Medicare patients save $3 billion from ASC use. While the costs are lower, the quality of care is generally comparable to hospital surgeries. Better individual service. Since the focus of an ASC is just on the surgery, the time to schedule appointments is generally much better. In many cases, the doctors and staff provide more personalized care and follow-up than hospitals do. In 2014, surgeries at ASCs accounted for nearly 66% of all surgeries. ASCs are subject to regulations by the federal and state agencies especially when the ASCs treat patients who use Medicare or Medicaid – which is virtually true for all ASCs. Some of the compliance issues which an experienced healthcare lawyer can explain and can help you prepare compliance for are the following: The Anti-Kickback Statute and Stark law The federal Anti-Kickback Statute and Stark law both regulate the ways in which doctors and medical practices can make referrals of patients and also receive referrals. The aim of both is to ensure that referrals are based on what is best for the patient and not what is best for the financial well-being of the doctor/medical practice. The Anti-Kickback Statute prohibits doctors from receiving, offering, paying, or accepting any form of remuneration in return for obtaining a referral. Remuneration includes financial payments, sham directorships, expensive lunches and vacations, paying for medical equipment, or most anything of value. Stark Law provides that doctors cannot refer patients to any designated medical health service in which the doctor, medical practice, or immediate family members has a financial interest in. An ambulatory surgery center is a classic example of a designated medical health service. The AKS allows for safe harbors which can reduce the risk of an AKS complaint. Similarly, Stark Law has a list of predefined exceptions which, if properly created, can work as a defense to any claim the medical provider violated Stark Law. At the core of these safe harbors and exceptions are that the relationships: Should be in writing Should be based on fair market value Should not be based on the volume or quantity of referrals Other factors that depend on the type of business relationship 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 […] The government is spending more money and time on prosecuting medical fraud. Violations of the AKS and of Stark Law are also considered violations of the False Claims Act (FCA). The FCA encourages employees, vendors, contractors, and partners to disclose kickbacks and illegal referrals. In return, these whistleblowers are paid a percentage of the recovery. The penalties for violating these laws can result in severe civil penalties, statutory fines, orders that the medical practice be prohibited from billing Medicare and other federal health care agencies, interest, and legal fees. The AKS is a criminal statute which means violations can result in prison time. Doctors, labs, testing facilities, ASCs, and other healthcare providers and health companies need to consult with experience AKS and Stark Law attorneys who can give advice on the legal issues and the ways to reduce the risk of criminal and civil charges. Some of the areas that are red flags for ASCs include selling shares in the ASC to doctors at below fair market value, leasing equipment at below fair market value or an a per-click basis, and the use of sham directorships, and other types of misconduct. Additional ASC financial relationship concerns that may run afoul of the AKS or Stark Law include: Junior physicians. Care is required in distinguishing the rights of junior physicians to buy into an ASC. Some of the factors that need review are the number of shares, the justification for lower valuations, and the ability to obtain loans. A major requirement is that the transactions be at fair market value. If a lower value is used for a junior doctor than a senior one, that lower valuation should be justified. Buy outs of doctors who fail to use the center. Generally, since the investments are not tied into the quality and quantity of referrals, neither the medical practice nor the ASC should be able to terminate a doctor’s right to perform surgeries at the ASC. Purchases of additional shares in the ASC. In the same way that doctors who underperform cannot be terminated, medical relationships can be hard to qualify for a safe harbor or a Stark Law exception when a doctor who uses the ASC a lot wants to buy additional shares in the surgery center. It may be feasible, depending on the circumstances which the doctors should review with experienced counsel, to buy shares from other physicians – provided the reason for selling the shares does not relate to the volume of the referrals and the sales are at fair market value. The use of ancillary services such as anesthesia and pathology. There are safe harbors and Stark Law exceptions for ancillary services. There are a variety of legal and medical issues that must be addressed for both anesthesia and for pathology which need to be reviewed with experienced healthcare lawyers. Per-click relationships. According to Becker’s ASC review: “There have traditionally been several different types of “per-click” arrangements for such items as gamma knives, lithotripters, lasers, CT and MRI scanners and other types of equipment. However, the government has now outlawed most per-click relationships (at least in the Stark context). Although the changes to the Stark Act and the accompanying regulations do not necessarily apply to surgery centers, the analysis and concerns are applicable under the Anti-Kickback Statute to surgery centers.” CMS has provided some guidance on this issue as well – which generally prohibits the use of per-click payment arrangements. Medical directorships. The critical factor is that medical directorships are generally permissible – only if the physician is providing a valuable medical service and only if the payment for those services is based on fair market value. Generally, ASCs have at most a physician medical director and an anesthesiologist medical director. If there are medical directorships for each specialty, that raises a red flag. HIPAA compliance The ASC centers and the physicians often trade electronic medical health records. The exchange of the records must comply with HIPAA requirements. Often, a key danger when electronic records are being shared is that there is data breach of confidential information which requires that the patient be notified. A skilled healthcare lawyer can review the HIPAA compliance requirements and the protocols to help address breaches. Additionally, HIPAA now requires that patients have the “right to receive medical records with little cost even if the surgery center must incur costs to provide the medical records.” GOT HIPAA? GET HIPAA? JOYCE EXPLAINS WHY AND HOW Interview with an expert in healthcare privacy and security, both on the federal side with HIPAA, and the state side, especially California law. Medical bylaws The bylaws generally cover what the bylaws are, if and how the bylaws can be waived or changed, how a doctor can be removed from the medical staff, and how “removal from the medical staff under the bylaws impacts redemptions from the surgery center as an owner.” The use of out-of-network reimbursement Generally, the “ability to profit substantially from out-of-network patients continues to decrease. While many parties profit from out-of-network payments, payors are increasingly aggressive regarding recoupment, collection of appropriate co-payments from patients and increasing co-payment and deductible responsibilities. Thus, the ability to make outsized profits or have serious negotiation leverage through the use of out-of-network continues to be hampered.” Physician-owned equipment companies “One of the interesting new scenarios is where physicians own an equipment company and sell equipment to the surgery center. In essence, the physicians become a middleman between the surgery center and the equipment provider. This allows the physicians to profit on the sale of equipment used in any cases that the physicians perform. ASCs should be cautious regarding these relationships.” Additional ASC legal issues Doctors who operate in ASCs and the ASCs must also be prepared to address any issues if the doctor advises patients through the use of telemedicine. All medical staff members must be properly licensed and certified. Only qualified medical personnel are allowed to perform medical procedures. Violations may result in charges of the unauthorized practice of medicine and state and local medical society complaints. Additional issues include: Medicare and Medicaid coding and payment compliance issues Contracts between the doctors and the ASCs Corporate governance requirements Other applicable healthcare laws The purchase and sale of the membership interests and the purchases and sale of the ASC Overall compliance plans While ambulatory surgery centers are becoming the norm for the fairly routine surgery, there are dangers that the relationship between the ASC and the doctors who use the ASC may violate the AKS and Stark Law. Skilled healthcare lawyers can explain when ASC safe harbors and Stark Law exceptions may apply. Contact Cohen Healthcare Law Group, PC for legal counsel on healthcare transactions, regulatory compliance, and FDA and FTC law. Our experienced healthcare & FDA attorneys advise healthcare companies and healthcare providers ranging from medical centers, to integrative and functional medicine practices, cosmetics and supplement companies, and medical device manufacturers. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
February 15, 2021
Healthcare
Who Wants to Be a Physician Pharmacy Owner?
In today’s video, we discuss whether physicians something that many of our physician clients have asked us about, namely, whether they can operate and open their own pharmacies or even have ownership interest in a pharmacy. Many of our physician clients have indeed asked us this very question, and it’s quite understandable that medical doctors who have their own healthcare businesses would think of branching out into a pharmacy. By the end of this video, you’ll be familiar with some of the kinds of regulations facing physicians who want to start pharmacies. I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We’ve advised hundreds and hundreds and hundreds of healthcare industry clients on healthcare and FDA legal issues, including many physician clients just like you. To start examining this issue of physician pharmacy ownership, let’s take a look at Texas law just for example. Texas law does not specifically prohibit physician ownership in pharmacies, however, if the physician owner is a referral source, then the Texas Anti-Solicitation Statute will apply, making it illegal. In order to determine then whether this is allowed in Texas, we need to analyze whether being a physician and sharing in the profits or making referrals from your company or practice falls under an exception or safe harbor. The statute is not limited to Medicare and Medicaid but it applies equally to private insurance and cash payers. Go figure, it’s a state statute. The next thing to note is that there are some states, and Texas was one of these, where physicians are not allowed to dispense medicines onsite. These states may have an “immediate need exception” allowing the physician to dispense for example 3 days of medication, or permit dispensation for rural areas with few pharmacies. However, under these exceptions medications generally must be sold at-cost. An experienced healthcare attorney can help explain the legal and regulatory environment in your state to you. And again, states do differ but there are some common realities which is why we go through these in the video. Another issue that has to be considered is the type of prescriptions that will be offered. Prescriptions for controlled substances or compounded prescriptions require further analysis since they have different requirements. Texas and other states have increasingly been scrutinizing physician investment in compounding pharmacies with expanding investigations into kickbacks and referrals. So, after considering the state-level regulations and how those could affect you, as we just did for some of the Texas ones, this is the next one you’ve got to consider. There’s more to this than just a quick dive, if you have more questions, please contact us to book an appointment. We look forward to speaking with you soon. Testimonials
February 9, 2021
Healthcare
The FDA Provides New Guidance on the “Minimal Manipulation and Homologous Use” of Cell and Tissue Products.
The Food and Drug Administration (FDA) recently issued a set of regulatory guidelines setting forth their thoughts on: The criterion for minimal manipulation and The criterion for homologous use of human cells, tissues, and cellular and tissue-based product (HCT/P): The guidelines should help stem cell and tissue manufacturers, healthcare providers, and FDA staff. The definitions of these terms are critical factors in determining whether a product is more than minimally manipulated. Exceeding the minimal manipulation threshold and the homologous use standard can mean millions of dollars. Products that exceed the minimally manipulated threshold (or the homologous use test) are generally required to apply seek approval from the FDA as a drug. This means the manufacturer will need to spend time and money: Applying for an IND (Investigational New Drug Application) Conducting clinical trials Investing a lot of money Taking 10-15 years for final approval HOPING TO TAKE ADVANTAGE OF THE NEW MEDICAL POSSIBILITIES WITH STEM CELL THERAPIES? BE INFORMED. The FDA has developed new guidelines that expand the safety requirements and manufacturing standards for stem cell treatments. Background The FDA regulations explain the types of HCT/Ps that do not require premarket approval and the registration, manufacturing, and reporting steps that must be taken to prevent the introduction, transmission, and spread of communicable disease by these HCT/Ps. The FDA authority for regulating human cell and tissue products is based on the Federal, Drug, and Cosmetic Act (FD&C Act) and the Public Health Service Act (PHS Act). “HCT/Ps are defined in 21 CFR 1271.3(d) as articles containing or consisting of human cells or tissues that are intended for implantation, transplantation, infusion, or transfer into a human recipient. “ PHYSICIAN STEM CELL THERAPIES LEGALLY AMBIGUOUS, WHILE REGENERATIVE CLINICS PROSPER Recent press calls into question widespread “regenerative” and anti-aging medicine, and physician practices that use stem cell therapies. The FDA has the authority to define and regulate HCT/Ps as drugs, biological products, or medical devices using a tiered, risk-based approach which was implemented by the FDA in 2005. HCT/Ps that meet specific criteria or fall within detailed exceptions do not require premarket review and approval. The FDA considered the following factors in the development of its tiered, risk-based approach (commonly called the “tissue rules”): Public health and regulatory concerns, including how transmission of communicable disease can be prevented What processing controls are necessary to prevent contamination that could result in an unsafe or ineffective product, and to preserve integrity and function so that the products will work as they are intended How clinical safety and effectiveness can be assured DOES FDA DEEM MY PRODUCT TO BE A MEDICAL DEVICE? Does FDA deem your product to be a medical device, or is it just a consumer product that would not be regulated by FDA? Here are basic steps you can take to work through the puzzle. When HCT/Ps qualify for the FDA exceptions HCT/P Products will be regulated as a drug, device, and/or biological product pursuant to the FD&C Act (or the PHS Act) – and will require premarket approval – unless the product meets all following conditions: The HCT/P is minimally manipulated The HCT/P is intended for homologous use only, as reflected by the labeling, advertising, or other indications of the manufacturer’s objective intent The manufacture of the HCT/P does not involve the combination of the cells or tissues with another article, except for water, crystalloids, or a sterilizing, preserving, or storage agent, provided that the addition of water, crystalloids, or the sterilizing, preserving, or storage agent does not raise new clinical safety concerns with respect to the HCT/P Either: The HCT/P does not have a systemic effect and is not dependent upon the metabolic activity of living cells for its primary function or The HCT/P has a systemic effect or is dependent upon the metabolic activity of living cells for its primary function, and: Is for autologous use; Is for allogeneic use in a first-degree or second-degree blood relative; or Is for reproductive use. The new guidelines are in response to numerous requests for guidance as to what these definitions mean. The minimal manipulation standard The FDA defines minimal manipulation as: For structural tissue, processing that does not alter the original relevant characteristics of the tissue relating to the tissue’s utility for reconstruction, repair, or replacement; For cells or nonstructural tissues, processing that does not alter the relevant biological characteristics of cells or tissues. The homologous use standard Homologous use means: “The repair, reconstruction, replacement, or supplementation of a recipient’s cells or tissues with an HCT/P that performs the same basic function or functions in the recipient as in the donor. “This criterion reflects the Agency’s conclusion that there would be increased safety and effectiveness concerns for HCT/Ps that are intended for a non-homologous use, because there is less basis on which to predict the product’s behavior, whereas HCT/Ps for homologous use can reasonably be expected to function appropriately (assuming all of the other criteria are also met).” The FDA position is that it will look at the intended use of the HCT/P based on: Labeling Advertising Other manufacturer intent indicators This means companies involved with making and developing HCT/P products should be especially careful about how they promote their products. An experienced FDA HCT/P lawyer can help will review your marketing and promotional materials along with the evidence needed to qualify for exception to a drug/device/or biological product classification. Key features of the new guidelines for HCT/P products Some of the many useful features, of the new FDA guideline, according to Stem Cell Assays, include: A helpful feature is the inclusion of a Questions and Answers section – with numerous examples and explanations of confusing issues. It’s the bulk of the document. The difference between structural and non-structural tissues is explained The discussion of adipose tissue – a “highly controversial and poorly understood type of HCT/P,” is explained. The FDA considers the default position to be “more than minimally invasive,” which means manufacturers and others have the burden of showing their product is minimally invasive. The guidance document will be modified after comments from readers are analyzed. A few of the Q and As Question: Why is there a different definition of minimal manipulation for structural tissue and for cells or nonstructural tissue? Answer: Under the regulations, HCT/Ps are considered either structural tissues or cells/nonstructural tissue, based on the characteristics of the tissue in the donor…Structural HCT/Ps generally raise different safety and efficacy concerns than do cells or nonstructural tissues. Question: How do I determine whether an HCT/P is structural tissue or cellular/nonstructural tissue for purposes of applying the minimal manipulation criterion? Answer: To apply the minimal manipulation criterion, you first determine whether the HCT/P is structural or cellular/nonstructural. This determination is made based on the characteristics of the HCT/P in the donor, before recovery and before any processing that takes place. Then, you apply the appropriate definition to determine whether the HCT/P has been minimally manipulated. Question: What if the HCT/P provides dual functions? Answer: HCT/Ps may perform multiple functions and the FDA acknowledges that structural tissues contain cells. FDA also acknowledges that some manufacturers assert that an HCT/P has both a structural and cellular/nonstructural function. However, under the regulations, HCT/Ps are considered either structural tissues or cells/nonstructural tissues. HCT/Ps that physically support or serve as a barrier or conduit, or connect, cover, or cushion are generally considered structural tissues for the purpose of applying the HCT/P regulatory framework. Examples of structural tissue are provided in question 6 (see section III.B. of this document). HCT/Ps that serve metabolic or other biochemical roles in the body such as hematopoietic, immune, and endocrine functions, are generally considered cells/nonstructural tissues for the purpose of applying the HCT/P regulatory framework. Question: If my HCT/P is a structural tissue, how do I determine whether it is minimally manipulated? Answer: To evaluate whether processing of a structural tissue would meet the regulatory definition of minimal manipulation, you should consider whether the processing alters an original relevant characteristic of the tissue, relating to the tissue’s utility for reconstruction, repair, or replacement as structural tissue. There are many more useful Qs and As in the new guidance document Examples from the new FDA minimal manipulation and homologous use guide Examples of structural tissue and cells or nonstructural tissues are provided in the document. Two of the example Q and As are: Example 1. What types of tissues are considered structural tissues? “Tissues that physically support or serve as a barrier or conduit, or connect, cover, or cushion in the donor are generally considered structural tissues for the purposes of determining the applicable regulatory definition.” Examples of structural tissues include: Bone Skin Amniotic membrane and umbilical cord Blood vessel Adipose tissue Articular cartilage Non-articular cartilage Tendon or ligament Example 2. What types of tissue are considered cells or nonstructural tissues? “Cells or nonstructural tissues are generally those that serve predominantly metabolic or other biochemical roles in the body such as hematopoietic, immune, and endocrine functions. Examples of cells or nonstructural tissues include: Reproductive cells or tissues (e.g., oocytes) Hematopoietic stem/progenitor cells (e.g., cord blood) Lymph nodes and thymus Parathyroid glands Peripheral nerve Pancreatic tissue. Secreted body fluids (e.g., amniotic fluid) are generally not considered HCT/Ps. Cells from secreted body fluids are generally considered HCT/Ps, and the definition of minimal manipulation for cells or nonstructural tissues would apply.” Regulatory scope and additional information There are exceptions to these FDA requirements. For example, There are surgical procedure exceptions. There are exceptions for products that don’t meet the CFR definition of HCT/P. Platelet rich plasma (PRP – blood taken from an individual and given back to the same individual as platelet rich plasma) is not an HCT/P under the Code of Federal Regulations (CFR) because it is a blood product. FDA compliance consideration considering new guidance regulation The FDA, to give manufacturers time to submit an IND or marketing application after reviewing the new guidance document, states it will be using enforcement discretion during the first 36 months following the issuance of the guidance document – unless there are reported safety concerns or safety concerns that are potentially significant. In response to numerous questions about the FDA rules on when human cell and tissue products qualify for an exception for the need to seek approval as a drug, biological product, or medical device – the FDA recently announced new guidelines. These guidelines will be amended after a sufficient review period. The guidelines seek to answer many questions including when HCT products meet the minimal manipulation and the homologous use steps. HCT/Ps that don’t qualify for an exception will need to be approved as IND for drugs or will need to meet the FDA approval requirements for medical devices and biological products. Contact Cohen Healthcare Law Group, PC to speak with an experienced FDA healthcare & FDA lawyer regarding compliance and regulatory issues surrounding your regenerative or stem cell medicine or healthcare products. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
December 8, 2020
Healthcare
Do Telemedicine Laws Require a Minimum Number of In-Person Visits?
In today’s video, we discuss what are the minimum number of times per year and that a physician must see a patient, in-person, prior to treating the patient via telehealth? By the end of today’s video, you’ll have a deeper understanding of telemedicine legal requirements regarding the physician-patient relationship. You’ll also separate myth from fact when it comes to having the MD or DO see the patient physically, in-person, prior to further digital, online, or mobile health treatment. I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. Since 1999, our law firm has counseled hundreds of healthcare industry clients each year on healthcare and FDA legal issues. Telemedicine is one of our core areas; we were early pioneers as telehealth, also known as digital health, e-health, and/or mobile health, began to catch on. We recognized that telemedicine was the future of medicine, as professional relationships move from physical to digital and virtual space. Along the way, we heard many myths about telemedicine law. For example, “you’re okay so long as you have at least one visit in person a year with the patient.” That’s a myth, nobody knows where it started, but somehow it feels self-soothing to say, “I’m legally ok as long as” dot-dot-dot is the case. And healthcare companies believe the myth because, like the song goes: “I heard it from a friend who … heard it from a friend who … heard it from a friend.” We lawyers call that quadruple hearsay. It doesn’t matter that one of the friends in the chain was a lawyer. Let’s dispel the myth and get to the law. When the technology began to evolve to allow effective video communication between doctors and patients, states at first were slow to catch up. Many state laws, and medical board regulations and policy statements, required a “face-to-face” visit between doctor and patient, the idea being that these faces had to be in the same room, physically, at the same time. In fact, the statutes, regulations, policy statements, medical board disciplinary cases, and judicial opinions, often said that, for example, telehealth treatment and prescription based on an online questionnaire were not standard of care, and, were prohibited by law. Sometimes the rules were stricter for prescribing than diagnosis and treatment. Over time, a patchwork of laws formed across states. Then, lawmakers and regulators opened up a more liberal pathway for telehealth. In this new version, they did not require the physical exam and in-person encounter, but rather, allowed telemedicine, provided that the physician first “established” the physician-patient relationship. The physician-patient relationship could be “established” in a variety of ways, including not only the in-person, “good faith” exam or clinical encounter, but also by an audio-visual encounter, augmented by an effort to ensure that the patient was really who they claimed to be. Among other things, the audio-visual connection had to be sufficiently reliable. Once this physician-patient relationship was established, the physician then would be subject to certain professional obligations and liability. This is pretty much the current trend. Remember, though, that the telehealth encounter still has to meet the standard of care, and that the technology used has to be sufficient to allow for accurate treatment and diagnosis in accordance with that standard of care. Depending on the state, the community standard, and the type of condition involved, standard of care might or might not require a medical history and physical examination. Standards of care evolve over time. In dermatology, for example, video technologies can provide high levels of accuracy in diagnostic imaging. In other situations, medical boards might want the doctor to see the patient in person, and, could use standard of care as an enforcement hammer, depending on the situation, even if the statute is liberal. This happened recently in one case involving a physician named Dr. Holmes, who was prescribing for ED, based on an Internet questionnaire. To the extent the prescription involves a controlled substance, the federal Ryan Haight Act requires, with few exceptions, that the physician conduct an in-person evaluation of the patient before issuing the prescription. At this point, many law firms have jumped into giving legal advice in the telemedicine space. Some even claim to have a “secret sauce” with extensive, and expensive, multi-state surveys of state law. We can address that more fully in a legal strategy session. Let’s just say that we still have our edge, with strategic advice tailored to the client. Let’s face it: some lawyers are dream-killers: they just say “no” to everything. That way they’re a hundred percent safe, you’re pretty much assured of zero compliance battles, and, no one takes a risk. And some are “yes men” (and women): they’ll give all the assurances for a buck (or a hundred thousand, plus greenbacks). We prefer the goldilocks territory, somewhere in between. That’s where the subtle lies, the strategy lives. Thanks for watching. Here’s to the success of your healthcare venture, we look forward to speaking with you soon. Testimonials
October 3, 2020
Healthcare
Red Flags that Leads to FDA Warning Letters
The FDA regulates dietary supplements, cosmetics, medical devices, and many other products. It’s essential to consult with an experienced FDA warning lawyer before developing and marketing these products. Establishing proper compliance protocols and understanding the common violations the FDA looks for as early as possible can help minimize the odds of a warning letter. The FDA doesn’t give companies or individuals much time to reply to a warning letter. The consequences for failure to comply can be extremely expensive. There are usually substantial fines. In some cases, the FDA may order that development and distribution cease. FDA or other agencies might even file criminal complaints. HOW TO RESPOND TO AN FDA WARNING LETTER ABOUT DIETARY SUPPLEMENTS OR COSMETICS The United States Food and Drug Administration (FDA) regulates much more than food and drugs. It regulates dietary supplements, cosmetics, medical devices, tobacco products, animal food, […] Dietary supplements The FDA regulates both dietary supplements and dietary ingredients. Unlike other foods and drugs, dietary supplements are regulated pursuant to the Dietary Supplement Health and Education Act of 1994 (DHSEA). The DHSEA precludes manufacturers and distributors of the dietary products from marking products that are misbranded or adulterated. Makers and distributors of dietary supplements and ingredients have a duty to study the safety of the products and how they’re labeled to make sure they comply with FDA and DHSEA regulations. The FDA will pursue companies and individuals if these adulterated or misbranded products reach the market. The Food, Drug, and Cosmetic Act defines a dietary supplement as: “A vitamin; mineral; herb or other botanical; amino acid; dietary substance for use by man to supplement the diet by increasing the total dietary intake; or a concentrate, metabolite, constituent, extract, or combination of the preceding substances.” A major red flag for drug supplement companies is that they should NOT qualify as drugs. This means that supplements shouldn’t make claims that they can treat, diagnose, prevent, or cure diseases. Statements such as “this product reduces pain” or “treats cancer,” are likely to result in an FDA warning letter. FDA ISSUES WARNING LETTER TO DIETARY SUPPLEMENT COMPANY FOR INCLUDING CANCER OR DIABETES IN SEARCH FIELD The FDA issued a warning letter citing a dietary supplement company for its online content.In its warning letter to dietary supplement manufacturer M.D.R. Fitness Corp., the FDA warned that […] Examples of FDA warning letters for dietary supplements Adulterated dietary supplement – Avalon Packaging On November 8, 2018, the FDA issued a warning letter to Avalon Packaging, a Utah company. The FDA inspected the company’s facility and collected samples containing kratom. The FDA warning letter asserted the following violations: Adulterated dietary supplement. The samples were found to be adulterated because they contained 13 strains of the human pathogen Salmonella. Healthy people who contract salmonella can develop severe diarrhea, fever, chills, abdominal pain, and other complications. For less healthy individuals, salmonella can be fatal. The FDA warning letter identified the 13 strains. CGMP violations. The FDA also found that the company violated Current Good Manufacturing Practices (CGMP). The FDA asserted that it was the violation of these safety practices that allowed the dietary supplements to become adulterated. The warning letter further indicated that the company was made aware of its defective practices and had failed to properly establish and follow written safety procedures. The letter added: “… failed to establish specifications for any points, steps, or stages in the manufacturing process where control is necessary to ensure the quality of the dietary supplement and that the dietary supplement is packaged and labeled as specified in the master manufacturing record, as required by 21 CFR 111.70(a).” The FDA warning letter said that it reviewed the company’s response to early letters but that the company had not properly detailed its corrective actions. The FDA said that Avalon Packaging had failed to “prepare and follow a written master manufacturing record (MMR) for each unique formulation of dietary supplement that you manufacture, and for each batch size, to ensure uniformity in the finished batch from batch to batch as required by 21 CFR 111.205(a).” New Dietary Ingredient. The warning letter also addressed the dietary ingredient “kratom”. The letter cited the relevant law in stating that a dietary supplement that has a dietary ingredient that wasn’t marketed in the US before October 1, 1994 is adulterated unless: The dietary supplement with the new ingredient has been present in the food supply as an article used for food in a form in which the food has not been chemically altered or There is proper evidence of its safety The FDA found that the company has yet to show its supplement, with “kratom”, meets either of these requirements. The FDA warning letter gives the dietary supplement maker (name the company) 15 days to identify what corrective steps will be taken. Misbranding – Dietary supplement is a drug – DynaPro International On October 31, 2018, the FDA issued a warning letter to a co-owner of DynaPro International, Inc. located in Utah. The FDA warning letters stated that the agency found violations after inspecting the company facility, reviewed the product labels, and reviewed the company website. The FDA found that: “The company labels and website establish that one company product is a drug because it is ‘intended for use in the cure, mitigation, treatment, or prevention of disease.’” The product is misbranded because there are improper claims that the product can help people with ulcers and diabetes. The FDA found that the product is not safe and should be qualified as “new drugs” which need to be verified based on scientific data. The drug is also misbranded because it doesn’t have “adequate directions for intended use.” The warning letter also found that the dietary supplement products were adulterated because they didn’t meet Current Good Manufacturing Practice. The FDA further found that the dietary supplements (with names such as DynaPro Vanilla Supreme, DynaPro Stress Remeday, and DynaPro Berry Supreme) are misbranded because: The products doesn’t declare the necessary nutrition information Doesn’t declare the quantity of certain ingredients Improperly list dietary ingredients that aren’t present or have zero amounts Doesn’t properly state that they are dietary supplements Other violations Further, one product that was listed as a dietary supplement was also labeled “Use it as a snack or a full meal replacement.” Dietary supplements can’t be labeled as both a dietary supplement and a conventional food. 10 LEGAL TIPS TO STOP FDA FROM CLASSIFYING YOUR DIETARY SUPPLEMENT AS A DRUG Your dietary supplement products could be regulated as a new drug by FDA, unless you pay attention to these regulatory fundamentals. Misbranding – Dietary Supplement as Drug – Teeter Creek Herbs, Inc. On May 21, 2013, the FDA issued a warning letter to the owners of Teeter Creek Herbs, Inc. The letter was issued base on an investigation of their Missouri facility. CGMP violations. The facility inspected noted significant violations of the Current Good Manufacturing Practice regulations for dietary supplements. Some of the CGMP violations included claims that the dietary supplement manufacturer: “Failed to qualify a supplier of a component by establishing the reliability of the supplier’s certificate of analysis (COA) through confirmation of the results of the supplier’s tests or examinations, as required by 21 CFR 111.75(a)(2)(ii)(A). “ “Failed to establish a specification for any point, step, or stage in the manufacturing process where control is necessary to ensure the quality of the dietary supplement and that the dietary supplement is packaged and labeled as specified in the master manufacturing record, as required by 21 CFR 111.70(a).” “Failed to prepare a written master manufacturing record (MMR) for each unique formulation of dietary supplement that you manufacture, and for each batch size, to ensure uniformity in the finished batch from batch to batch, as required by 21 CFR 111.205(a). “Failed to include the strength, concentration, and weight of the dietary supplement to be manufactured, and the measure of each dietary ingredient for each batch size [21 CFR 111.210(a)]. “ Unapproved New Drug. The FDA also reviewed samples of the labels for the dietary supplements (with names such as Lymphaid, Sheep Sorrell, and Blood Build). The review indicated that the products are drugs because they are “intended for use in the cure, mitigation, treatment, or prevention of disease” Some of the claims that indicate the dietary supplements are drugs included: Featured Herb: Astragalus [an ingredient in your Immunaid and Astragulus products]: “They should be considered for those with cancer, those who have had long-term infections like Hepatitis, as well as by those with auto-immune and allergic … disorders … The herbs include Astragalus, Maitake, Shiitake, Reishi and Turkey Tail mushrooms, Elecampane, and Ginseng.” “Astragalus is … for those with chronic immune deficiencies leading to re-current infections; including viral infections.” “It is also a valuable aid in recovery from infectious diseases.” “Astragalus and the mushrooms … valuable for those with any form of chronic Hepatitis or … for those who have been taking chemo or other drug therapy.” Featured Herb: Dandelion [an ingredient in your Blood Build product]: “The leaves have … relieve high blood pressure.” “It is an aid in…hepatitis, gall bladder…formation of stones…” “[A]n aid in food allergies.” “A preventative in high cholesterol and arteriosclerosis.” “Dandelion … A blood purifier for the toxins that aggravate arthritis, rheumatism and gout.” “Used … for chronic metabolic disorders; … cirrhosis, both high and low blood sugar, anemia.” “[O]ther uses … for Dandelion include breast conditions (mastitis, breast tumors and cancer) …” The FDA found that the above products: “The products identified above are not generally recognized as safe and effective for the above referenced uses and therefore, the products are “new drugs” under section 201(p)(1) of the Act [21 U.S.C. §321(p)(1)]. New drugs may not be legally marketed in the U.S. without prior approval from FDA as described in section 505(a) of the Act [21 U.S.C §355(a)]. FDA approves a new drug because of scientific data submitted by a drug sponsor to demonstrate that the drug is safe and effective.” The FDA also found that since these products aren’t amenable to self-diagnosis and treatment by non-medical practitioners – that adequate directions couldn’t be written. The lack of adequate directions means the products are misbranded. Labeling violations. The FDA further stated that even if the dietary supplements didn’t have disease claims, they would still be misbranded because the labeling requirements of the Code of Federal Regulations (CFR part 201) were not met. These violations included failing to list quantities of the ingredients, failing to include a domestic address or domestic phone number through which the responsible person may receive a report of a serious adverse event with such dietary supplement, and other failures. The FDA has the authority to issue warning letters for violations of their regulations and violations of many federal laws including the Dietary Supplement Health and Education Act of 1994 (DHSEA) and the Food, Drug, and Cosmetic Act. Some of the products the FDA regulates include dietary supplements, cosmetics, and medical devices. Dietary supplement manufacturers and distributors need to understand that the FDA will examine their facility, their products, their labels, their websites, and their marketing. The FDA will almost certainly look for claims that the dietary supplements can be used to diagnose, treat, and cure diseases. The FDA also regularly reviews labels. Common violations include new drug violations, adulteration, misbranding, and failure to follow current good manufacturing processes. If the recipient of the FDA warning letter fails to properly comply with the terms of the letter, the company could face civil and criminal penalties, the seizure of their assets, and an injunction to cease making and distributing their products. FDA warning letters are published online. The best legal protection is legal prevention—i.e., the best remedy is to establish procedures that minimize the likelihood a warning letter will be issued. If FDA has issued a warning letter with respect to your dietary supplement or cosmetics product, you need to properly respond to the warning letter. Experienced FDA lawyers understand why FDA dietary supplement, cosmetic, or other warning letters are issued. FDA attorneys help companies review their claims and labeling, and respond to the FDA warning letter. Contact our FDA warning letter lawyers at Cohen Healthcare Law Group, PC for legal advice regarding your FDA warning letter. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
September 1, 2020
Healthcare
Physician Recruitment Agreements Obligate the Hospital, Medical Practice and the Physician – Make Sure You Know What Your Obligations Are
Hospitals and medical practices need quality physicians to do necessary research and to treat their patients. Getting new talent includes hiring existing physicians – who often work for other hospitals and other practices. It also includes hiring newly trained doctors. Most hospitals and practices need a combination of experienced specialists and newly trained physicians. There are usually three sides to a physician recruitment agreement: The existing medical practice The hospital The physician Each party to the agreement needs to understand more than just the financial and medical benefits. The parties need to understand what laws regulate physician recruitment agreements. Violations of Stark Law and Anti-Kickback laws can result in heavy fines, civil and criminal actions, and even the loss of a medical license and operating privileges. Other laws can affect the enforcement ability of the agreement which is a legal contract. There are also business and tax considerations that must be evaluated. PHYSICIANS SHOULD REVIEW THEIR EMPLOYMENT AGREEMENT OR RISK VIOLATING FEDERAL AND STATE LAW Physicians who fail to consult with legal counsel before signing an employment contract often lose more than just money, benefits, and the freedom to leave on their terms. They may be putting […] What the Agreements Typically Provide Recruiting new doctors takes a lot of time and costs a lot of money. There’s no guarantee that the doctor will have the necessary medical, business, and personal skills. In large measure, the hospital (which usually funds the practice’s recruitment efforts) agrees to also pay the new doctor’s base salary for a limited time period. The limited time frame that the medical practice and hospital guarantee is usually one year. The hospital often agrees to pay the difference between the negotiated salary and the money the doctor brings into the practice. The hospital benefits by having a doctor nearby who will ideally “refer” patients to the hospital if surgeries or more advanced care is required. Typically, the doctor will do the medical work at the hospital or refer the patient to other doctors at the hospital – if other types of care (than the one the new doctor does) are needed. Referrals must be done correctly though so they don’t violate the Anti-Kickback Statute, Stark Law, or any state laws. The medical practice benefits by having a doctor on staff who can treat patients while the practice gets the fees for services – and ideally referrals of new patients from satisfied patients. The medical practice also gets to test how good or bad a fit the doctor is. The doctor benefits by having a base fee until he/she can build up their medical practice. He/she also gets to see if they’re a good fit with the medical practice that hires them and the hospital. Some of the concerns each side may have to a physician recruitment agreement Experienced healthcare lawyers review the following rights and duties of each of the three signers to the agreement. The geographical pledge. The physician agrees that if he/she moves out of the geographical area for a predefined period (such as 2-4 years), that the doctor will be in breach of the contract and must pay a penalty or some sum set forth in the contract. A promissory note is often used to guarantee payment if the doctor breaches the contract. Because the doctor will absorb financial damages if he/she leaves the geographical area, it is important that the doctor review with legal counsel and with his/her own medical and family needs – their commitment to the geographical region. The geographical portion of the physician recruitment should be drafted to address external contingencies such as the need to move due to a death in the family or the needs of a child. The compensation. Agreements should detail whether the pay is based on hours of service, a yearly salary, productivity factors such as the number of patients treated, or other factors. The physician’s duties. The agreement should detail what services the physician will perform for the medical practice and, when needed, for the hospital. For example, it should be clear when a doctor is – on call. The length of the agreement. The guaranteed base salary usually covers a year or two. The agreement will also normally detail how long the doctor agrees to work for the medical practice and how many years he/she will commit to working for the hospital – after the guaranteed period has expired. The agreement will detail what happens if there is a breach. What happens includes more than just the financial damage. It can include many issues such as whether the case is arbitrated or can be heard in court and other matters. The loan. The agreement by the hospital to pay the salary or part of the salary is considered a loan. The loan is essentially repaid by the physician and or the practice through performance of medical duties or by cash – depending on the contract terms. The loan is normally accompanied by a note which can be used to obtain a legal judgment if the doctor breaches the agreement. Covenants not to compete. Physicians should review with experienced healthcare contract lawyers their rights if the contact ends – due to either their desire or needs or the desire or needs of the hospital (or medical employer). Hospitals and employers may try to restrict the right of the doctor to practice in the same geographical region – for the term of the guarantee or the full term of the contract. Generally, covenants not to compete are not enforceable in California. A doctor will still likely to have pay any amount due on the loan. Additional contract terms. Other items that an experienced healthcare lawyer will review in physician recruitment agreements are: The tax consequences. The timing and length of payments may be subject to adjustments to limit the federal and state taxes due The requirements for terminating the contract The consequences for terminating a contract Additional contract terms All parties to the agreement should review the agreement before signing it. Once the agreement is signed, it becomes very hard to overturn the contract unless fraud was involved. The Anti-Kickback Statute (AKS) and Stark Law The AKS and Stark Law are two separate federal laws that seek to protect patients and consumers. Stark Law prohibits certain types of referrals. The idea behind the law is that patients have the right to trust that when a physician makes a recommendation – that the recommendation is based on merit and not because the physician has a financial stake in the referral. Stark prohibits self-referrals by doctors who bill Medicare or Medicaid if the referral is to an entity that provides “designated health services.” – if the doctor has a financial relationship with that entity. Stark Law defines the types of designated health services (DHS). DHS services includes such things as physical therapy, occupational therapy, radiology services, ultrasound services, different types of medical supplies, clinical laboratory services and other services. A financial relationship includes investment interests, ownership, and compensation agreements. Stark also forbids referrals to entities the provide the designated health service – if an immediate family member has a financial interest in that entity. On the surface, physician recruitment agreements raise the possibility of violating Stark Law if the hospital is seeking referrals from the physician or some financial benefit due to the doctor’s working relationship with the hospital. However, Stark Law does have exceptions. One specific exception is for recruitment services if all the conditions of the law are met. Some of the key details of the Stark Law exception for physician recruitment include the following: The physician recruitment exception: Stark law permits a hospital to induce a doctor to “relocate his or her medical practice to the geographic area served by the hospital in order to become a member of the hospital’s medical staff, if all of the following conditions are met: The arrangement is set out in writing and signed by both parties. The arrangement is not conditioned on the physician’s referral of patients to the hospital. The amount of remuneration under the arrangement is not determined in a manner that takes into account (directly or indirectly) the volume or value of any actual or anticipated referrals by the physician or other business generated between the parties and The physician is allowed to establish staff privileges at any other hospital(s) and to refer business to any other entities (except as referrals may be restricted under an employment or services arrangement that comply with other parts of Stark Law. 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 […] Additional exception requirements for the physician recruitment exception: A physician will be considered to have relocated his or her medical practice if the medical practice was located outside the geographic area served by the hospital and – The physician moves his or her medical practice at least 25 miles and into the geographic area served by the hospital; or Other factors based on the geographical area such as the source of revenues for three years prior to the signing of the physical recruitment agreement The relocation requirement may not apply if the doctor had limited experience, worked in a federal or state bureau of prison, or for other listed agencies or services. The conditions generally indicate that the doctor wouldn’t be able to refer many patients because of his/her background. Where payments are made by the hospital directly or indirectly through another physician practice: The physician practice also signs the physician recruitment agreement Except for actual costs incurred by the physician practice in recruiting the new physician, the remuneration is passed directly through to or remains with the recruited physician. Many other specific and precise conditions an experienced Stark law attorney an explain Additional rules for rural hospitals apply Other conditions for non-rural hospital may also apply The core idea behind the exception is that the new doctor should fill a need (specialty) and add to the hospital’s service. Generally, the terms of the recruitment contract can’t be varied after it is signed. Other Stark problems and exceptions may be needed for recruiting and hiring non-physician staff. An experienced Stark law attorney can explain how the conditions may vary if a medical practice (without using a hospital) hires a doctor as an employee or as an independent contractor. The payment should be based on fair market value and not the amount or worth or any referrals. The Anti-Kickback Statute forbids the payment, solicitation, offering, or receiving of anything of value for the purpose of inducing referrals or the generation of health care business through federal agencies. The AKS uses voluntary safe harbors instead of mandatory exceptions. Generally, most of the requirements for meeting the Stark Law exception will also qualify for the AKS safe harbor. 42 CFR § 1001.952 Section n. The AKS uses the term “practitioner recruitment” instead of “physician recruitment.” A skilled physician recruitment lawyer an explain and negotiate any differences between the AKS and Stark that may apply. Physician recruitment agreements should also comply with any IRS 501(c) (3) requirements. Skilled healthcare lawyers represent one of the three signers to the physician recruitment. They focus on: Any laws or regulations that might result in the violation of Stark, the AKS, or other federal or state laws The terms of the loan, promissory note, salary benefits, and the benefits and obligations of each signer Related medical issues such as when a physician must be on-call Any other relevant legal, business, medical, and business issues If you have any questions about physician recruiting contracts, Contact the physician recruitment agreement lawyers at Cohen Healthcare Law Group, PC. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
May 8, 2020
Healthcare
Concierge Medicine – Membership Model & Consent
In this video, we talk about some of the foundational legal documents you will need when you decide to implement a membership model for your medical practice or other healthcare clinical operation. I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We’ve advised over a thousand healthcare industry clients on healthcare and FDA legal issues. Among our clients are many medical doctors, chiropractors, dentists, psychologists, and other licensed healthcare professionals. Many of our physician clients are overwhelmed by the demands of their patient population and simply want a more streamlined, fulfilling medical practice. To that end, they work to implement more of a concierge model. When it comes to concierge medical practice, we’ve been around the block, so to speak—we’ve done quite a few rodeos ever since the earliest days of concierge medicine. Some folks still call it concierge medicine; some say VIP medical care; we’ve even seen some journals in the literature refer to “retail” medicine, “boutique medicine” and other mysterious sounding names. In terms of the legal work, we’ve worked on the agreement foundationally between the medical doctor or medical practice on one hand, and the patient or the member on the other—the contract for, let’s call it, concierge medical services. Again, this agreement can go by many names, but it’s essentially a rose by other names, the same document. Some call it a concierge medical services agreement; some call it a Subscription Agreement; we like keep it simple these days, we call it a Membership Agreement – just like what you get from your gym. The reason is, fundamentally this is like the agreement you have with your gym in some respects. For example, typically, you go month to month; you pay a certain fee; and for that monthly fee, you (the patient) get some things and use the doctor to deliver some things and not other things. For example, you might get an initial doctor’s visit and some follow-up visits included, but you won’t get medications and supplements covered by your membership fee, and all of that is spelled out in your contract. Also, there are important things we need to say in that agreement—for example, we will want to say that this is an agreement for medical services, and not it’s healthcare insurance. We’re just going to spell that out. There are some other nuances to the membership agreement for a concierge medical practice. For example, if you’re going to do recurring charges, which are also known as auto-payments or a subscription, then in most states, there are laws that require you to make special disclosures, which let the patient know that you’ll be auto-debiting their card at regular pre-schedule intervals, unless, prior to that within a certain interval, the customer ends the contract. Note, we have two options here for you – we can customize the concierge membership agreement for you, which we like to do as your legal counsel– or you can buy our form agreement online on a separate website, www.healthcarelegaladventures.com. The other key form we like to work on for a specialized medical practice—whether it’s functional medicine, integrative medicine, conventional care, or something else in a subscription, medical membership, concierge model—is the Consent to Medical Treatment. Here’s what you, as the doctor, should have at the very top of your consent form, as one example of some language: “TO THE PATIENT: You have the right, as a patient, to be informed about your condition and the recommended surgical, medical, or diagnostic procedure to be used so that you may make the decision whether or not to undergo the procedure after knowing the risks and hazards involved. This disclosure is not meant to scare or alarm you; it is simply an effort to make you better informed, so you may give or withhold your consent to the procedure.” See the way I talked about it, I just made it very, very friendly. That pretty much announces, in plain English, what the Consent form, which is a legal and ethical requirement, is all about. Now, the Consent should also have a couple of other provisions, and let’s talk about what they are. First, a description of your practice. If your practice, for example, involves integrative medicine or functional medicine, you can describe what this means and how it’s different than a regular healthcare practice, and thereby you are putting in marketing emphasis on legal language as well. Second, a disclaimer of the physician’s role by limiting the role to specialized care, and, for the most part (but not all) of our medical clients, they want to disclaim primary care and put themselves in that specialist role. Third, and this is most important, you want to describe the anticipated benefits of the designated diagnostic and therapeutic approaches; a discussion of the clinical risks involved; and your disclosure in very clear clinical terms of reasonable and feasible alternatives. For our specialized medical practices, such as those working in integrative and functional medicine, we recommend at least mentioning the conventional alternatives. We’ve seen very little case law in which a patient claimed that a complementary and alternative medical approach was available but not disclosed, or that a functional medicine approach should have been recommended. We do believe that case law, in that case will show up in the courts, someday soon, but it has not yet shown up, as of today’s taping. Next, we might have some additional consent language, such as, for example, consent to follow-up care by telemedicine. Here, we will want to first check compliance with existing telemedicine laws and regulations, and then, we will want to embody appropriate language into the Consent form. Last, we will incorporate some important protective language for the clinician, such as a provision for dispute resolution by arbitration. Thank you so much for watching. Here’s to the success of your medical practice or healthcare venture, we look forward to speaking with you soon. Testimonials
May 8, 2020
Healthcare
Legal Issues When Leaving a Medical Practice: Navigating Non-Solicitation vs. Abandonment
In today’s video, we talk more about what to do and what to do and NOT to do, if you’re a physician who is leaving someone else’s medical group, or medical practice, where you’ve been happily employed until you decide to no longer be employed there. We’ve seen litigation scenarios played out between departing physicians as well as chiropractors on the one hand, and the medical groups, practices, and centers where they had been affiliated as employees or even co-founders on the other. Today, we’ll just talk about the employment role. We’ve helped these physicians and chiropractors navigate their exit, whether they’ve been at a conventional medical practice, or in an integrative medicine center, functional medicine center, or health and wellness group of any other sort. I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We’ve advised over a thousand healthcare industry clients on healthcare and FDA legal issues. These clients include physicians in all types of medical practices and healthcare centers, as well as chiropractors, nurses, dentists and many other practitioners. We’ve helped our clients navigate the legal landscape so they can avoid or at least mitigate the risk or severity of patient lawsuits, litigation from former medical employers, and, regulatory enforcement. Recently, the common scenario came to light when a medical doctor left a practice, and, sent a postcard to his patients from the practice, letting them know where they could find him in his new practice. It sounds pretty innocuous, right? The medical practice found out, and wrote the physician a demand letter, alleging that he had violated the non-solicitation clause in his employment agreement, which prohibited him from soliciting patients for up to a year following his exit from the medical practice. The demand letter cited a breach of the employment agreement; HIPAA violations from accessing the medical records; and misappropriation of trade secrets. This is a common deadly combo that plaintiffs’ lawyers will fire off to try to chill the departing MD and exact a six-figure settlement. What’s the best legal advice when you’re hammered by plaintiff’s demand letter? Again, these issues are best navigated at the START of the employment relationship, when all the goodwill is there and the parties still have their heads on their shoulders about how to work things out amicably, should the professional association not work out. Call it a business prenuptial, that’s where we like to intervene. The fact is that medical practices are highly competitive, and, former medical employers are likely to be zealous and jealous of attempts to take patients with you to your new medical practice. That’s just a fact of life, just like these planes flying overhead. If you download patient names and contact information before you go, this can be legally problematic – and, you’re also giving legal ammunition to your former employer even if you think you should have the right to do so. Now bear in mind that your former employer has obligations too – both sides have a duty to not abandon patients. The ideal solution at this late stage is a communication from both the medical group and the departing doctor, that tells patients where the doctor is going and how that doctor could be reached in the future. A joint announcement is more neutral and it can help the departing physician ease the suspicion that they are trying to steal away, or in the words of your employment agreement “solicit”, the existing practice’s patients. A joint announcement also can help quell the concern that either or both are abandoning these patients. You don’t want to be involved in an ethical no-no. Ideally, the medical practice will cooperate in transferring files of those patients that decide to migrate to the departing doctor (which could be you) at their new location. On the other hand, should those patients decide to stay with the medical practice, the medical practice will provide a list of alternative physicians at the practice who can continue care. Please, do yourself a favor and think through these issues and discuss them with legal counsel, BEFORE you sign any employment agreement to join a medical practice. We can help you, we can give you solid advice at that stage and when you’re contemplating an exit, but the best thing to do is negotiate ahead of time, so when the time comes for separation, you can make it smooth and protect your interest in continuing with the patients who choose to stay in with you, while not provoking a costly and unnecessary lawsuit with your former employer. As John F. Kennedy said: “Let us never negotiate out of fear, but let us never fear to negotiate” Here’s to the success of your healthcare venture, old or new, we look forward to speaking with you very soon. Testimonials
April 23, 2020
Healthcare
Medical Practice Departure: Non-Solicitation vs Abandonment vs Non-Compete
In today’s video, we talk to the physician or chiropractor some more about what to do and NOT to do when you are leaving someone else’s medical group, medical practice, integrative medicine center, functional medicine center, health and wellness group, whatever it’s called, where you’ve been, up until now, gainfully employed. By the end of today’s video, you’ll be able to think much more clearly about three different legal issues you might face as that physician or chiropractor: the risk of getting sued for violating the non-solicitation clause in your employment agreement, the risk of violating a non-compete, and the ethical obligation of non-abandonment. In fact, all three might hit at once. Navigating among these three hazards can be tricky, but we’ve helped physicians and chiropractors and other providers stare down the dragon before, without getting fried by fire. I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. It’s been our distinct pleasure to serve hundreds and hundreds if not thousands of clients on healthcare and FDA legal and regulatory issues. These include physicians in all types of medical and healthcare centers, as well as chiropractors, nurses, dentists, psychologists, life coaches, other practitioners. We’ve helped our clients navigate so they can avoid the multi-headed Hydra of patient lawsuits, litigation from medical employers, and, regulatory enforcement – that might be three heads there. The first tip is to have your healthcare lawyer review (yes, actually review) your employment agreement (don’t just sign it) and laser focus in on the promises that you are making in that contract, NOT to do certain things. More specifically, there are two different provisions in the physician employment agreement we’re going to talk about. One is called Non-Solicitation and the other is called Non-Compete or Non-Competition. The non-solicitation clause typically is a very broad promise. Typically it spells out that you cannot solicit employees from your medical group or medical practice employer; and also, importantly, that you cannot solicit patients. Here is some typical language: “Physician Employee acknowledges that any solicitation he makes of any patients or employees of Medical Practice will involve misappropriation of Medical Practice’s confidential information, and constitute a breach of this agreement.” You don’t want to do that: liability. What that means is that if you simply send your existing patients, we talked about a little post card – “Hey I’ve left my medical practice employer”, the Medical Practice could sue you for violating the non-solicitation clause. We’ve seen demand letters and claims going into the hundreds of thousands of dollars and it costs a lot to get out of. The non-solicitation provision could be paired with provisions prohibiting theft of trade secrets and other confidential information. The non-compete typically generates a lot of attention, because employers are quick to insert it and just as fast to lawyer up and get a demand letter out when you, as the departing clinician, decide to open a practice in violation of the non-compete, whether that is enforceable or not. So even if that non-compete appears overly broad and unreasonable, and even if your lawyer or best friend or best friend physician colleague’s son’s, wife’s lawyer told you the clause is unenforceable, still, if you agree to such a provision, you won’t be surprised if and when you receive a nasty demand letter alleging that you breached the non-compete. So let me be very clear, you can get advice, but there’s still practical realities. And then there is your ethical obligation, the third regulatory triangle to not abandon your patients. Here you are under scrutiny from the medical board. The Board wants you to notify patients that you’re leaving; and if you do, then you can get blowback from the medical practice … and, it could hurt. So, there’s a kind of catch-22 here. Now here’s another thing to consider, too: as you’re giving notice, the medical practice might suddenly start withholding payment, arguing that there is some issue with collections from your patient. Alternatively, you might be giving notice BECAUSE the medical practice has been monkeying with your paycheck for months, causing financial hardship. So now you are tens of thousands of dollars in the hole and to quote a kid’s book I’m reading, the anger spot in your brain is telling you that you want to lawyer up yourself and sue. But then again, it can cost a lot of money to sue and your employer will lawyer up to the hilt. They probably have greater resources, and you know they probably will, because otherwise they would not have been so bold as to monkey with your checks in the first place. Check. It’s your move. What do you do? For one thing, it would be better to handle some of these issues before, perhaps by making an agreement as to how existing patients of the practice will be notified when an upcoming physician departs from the practice. So, getting work ahead of time here in better shape. We’ll have more tips ahead in the coming video and other videos we’ve done. Thanks for watching. Here’s to the success of your healthcare venture, we look forward to speaking with you soon. Testimonials
March 22, 2020
Healthcare
Why the FDA Won’t Approve Your Regenerative Medicine Practice
The Food and Drug Administration does have Congressional authority to investigate and regulate a wide variety of medical products and services. It’s crucial for doctors, researchers, medical device companies, and other health providers to speak with an experienced FDA approval lawyer before working with any type of regenerative medicine. If the FDA has authority to regulate a practice’s regenerative medicine products or treatments, and the health business fails to follow their requirements, the business could be subject to warning letters, seizure of the products, injunctions against further work, fines and even criminal penalties. Stem Cell products and therapies Stem cells use the patient’s own cells to help repair tissues, blood, muscles, bones, and other parts of the body. Cells are usually taken from the hip or a person’s bone marrow. The cells are injected into the damaged part of the part with the aim of regenerating that part of the body. One concern is that the cells may mutate which could cause tumors. The Food and Drug Administration does regulate stem cell therapies but it doesn’t regulate the practice of medicine. States regulate the practice of medicine. For this reason, physicians often, usually without success, try to argue that their stem cell treatments are just the practice of medicine. The FDA recommends that consumers check that the stem cell therapies being offered by their physicians are FDA approved or are part of a clinical study that has been given the green light by the Food and Drug Administration. Patients need to check for FDA approval even when their own stem cells are being used – which is often the case as there are safety concerns and dangers involved. PHYSICIAN STEM CELL THERAPIES LEGALLY AMBIGUOUS, WHILE REGENERATIVE CLINICS PROSPER Recent press calls into question widespread “regenerative” and anti-aging medicine, and physician practices that use stem cell therapies. Stem cell products are treated like biological drugs. This means they are regulated through the FDA’s Center for Biologics Evaluation and Research (CBER). The National Institutes of Health states that, in 1997, the FDA began a “risk-based, tiered approach to regulating cellular and tissue-based products. As a result, human cells, with the exception of those deemed minimally manipulated and used for autologous treatments, would be subject to FDA premarket approval as biologics.” To date, the FDA has been slow to place products in the “minimally manipulated category.” “Regulating stem cell therapies is a challenge. The FDA has sent warning letters to several clinics that claim to offer treatments, prevention, or even cures using stem cell therapies that are not approved. For example, the FDA took action against Regenerative Sciences, LLC, which manufactured a product called Regenexx™, which consisted of autologous mesenchymal stem cells that were manipulated outside of the body and injected back into patients with orthopedic injuries.” In addition to regulation by the FDA, state medical boards: Can regulate experimental stem cell therapies Do regulate the practice of medicine States are helping to fund regenerative medicine research because it has the potential to help make so many people’s lives better. Along with this research, states, such as California, are also creating laws and regulates to monitor regenerative medicine products and therapies. CALIFORNIA STEM CELL REGULATIONS GUIDE THE EMERGING STEM CELL RESEARCH EFFORT AND INDUSTRY California stem cell laws boost the stem cell industry by funding stem cell research, but the product side of industry is largely in the hands of the FDA. As we’ve pointed out, the bottom line for physicians practicing regenerative and anti-aging medicine is that: FDA maintains that a stem cell product cannot get to market unless it is either approved by FDA or studied under a clinical investigation that has been submitted and allowed to proceed by FDA. FDA has approved relatively few stem cell products. Stem cell products must comply with the HCT/P regulations, which among other things, require registration and listing. Culturing stem cells constitutes more than “minimal manipulation” (i.e., FDA approval as a biologic drug is required). PRP products and therapies Platelet rich plasma (PRP) is a regenerative medical procedure that uses your own blood. PRP uses a solution of platelet cells, proteins, and other growth factors. The platelets are rich with substances which help rebuild tissue and help the body heal. An advantage of PRP is that because it uses your own blood – there aren’t any foreign or synthetic chemicals that can cause damage. Additionally, because a patient’s own blood is used, there’s minimal chance of an allergic reaction. In a PRP procedure, the platelets are injected in the part of the body that isn’t working correctly. Basically, the medical staff draws your blood and then prepares it. The staff uses a centrifuge to separate the platelets from your red blood cells. The platelets are then injected. Normally, patients need several procedures. When PRP works, the repair to the damaged tissue or body part is usually long-term. Patients normally see quick results. PRP is used for many different types of health problems such as sports injuries. Dangers include nerve damage, infections, and bleeding. The FDA regulates two parts of the PRP process FDA Approval of the PRP device The first part of the FDA approval process is the device used to separate the platelets from the red cells. Generally, medical devices can be approved in several different ways. These include: Premarket Approval. Premarket approval (PMA) is the FDA process of scientific and regulatory review to evaluate the safety and effectiveness of Class III medical devices. Class III devices are those that support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. PMA is the most stringent type of device marketing application required by FDA. The applicant must receive FDA approval of its PMA application prior to marketing the device. PMA approval is based on a determination by FDA that the PMA contains sufficient valid scientific evidence to assure that the device is safe and effective for its intended use(s). An approved PMA is, in effect, a private license granting the applicant (or owner) permission to market the device. 510 (k) clearance. Section 510(k) of the Food, Drug and Cosmetic Act requires device manufacturers who must register, to notify FDA of their intent to market a medical device at least 90 days in advance. This is known as Premarket Notification – also called PMN or 510(k). This allows the FDA to determine whether the device is equivalent to a device already placed into one of the three classification categories. Thus, “new” devices (not in commercial distribution prior to May 28, 1976) that have not been classified can be properly identified. Specifically, medical device manufacturers are required to submit a premarket notification if they intend to introduce a device into commercial distribution for the first time or reintroduce a device that will be significantly changed or modified to the extent that its safety or effectiveness could be affected. Such change or modification could relate to the design, material, chemical composition, energy source, manufacturing process, or intended use. Generally, FDA approval of the PRP device is sought through the 501(k) clearance process because it is generally cheaper and quicker. Essentially, a 501 (k) clearance is given because the device is substantially similar to a device that has already been approved. This type of clearance only authorizes the device itself – not the treatments based on using the device. FDA approval of the platelet injections Generally, physicians can use the PRP device for its indicated usage. If the doctor uses the device for a use that isn’t indicated, that’s considered an off-label use. An off-label use requires that the doctor be well informed about the device and that its use be based on sound medical evidence and scientific principles. The doctor must keep records on the use of the device. Doctors should review with experienced regenerative medicine lawyers when they are practicing medicine (which is generally regulated by state medical boards) and when the use of the device may be regulated by the FDA – for example, when there is a non-indicated use. Gene therapy The US Food and Drug Administration (FDA) in November 2017, as reported in a BioNews release, indicated that the FDA is working to fast-track gene therapies, another form of regenerative medicine. The US National Institutes of Health states that: “Gene therapy is an experimental technique that uses genes to treat or prevent disease. In the future, this technique may allow doctors to treat a disorder by inserting a gene into a patient’s cells instead of using drugs or surgery. Researchers are testing several approaches to gene therapy, including: Replacing a mutated gene that causes disease with a healthy copy of the gene. Inactivating, or “knocking out,” a mutated gene that is functioning improperly. Introducing a new gene into the body to help fight a disease. Although gene therapy is a promising treatment option for a number of diseases (including inherited disorders, some types of cancer, and certain viral infections), the technique remains risky and is still under study to make sure that it will be safe and effective. Gene therapy is currently being tested only for diseases that have no other cures.” As of 2017, the FDA had only approved two gene therapy treatments for leukemia and lymphoma. FDA fast-track guidelines The new FDA faster-track guidelines generally apply to regenerative medicine advancements such as stem-cell therapies, PRP, and gene therapy. Treatments will be labeled high-risk will require a high degree of pre-market regulations or low-risk which requires less regulation. Therapy developers and researchers need to review these new guidelines (mentioned at the start of the first article) with experienced regenerative medicine lawyers. The new guidelines have support from developers who want to get their products to market faster but raise concerns that the rush to market could be very dangerous. Clinical trials will still be an essential part of any FDA approval process. Stem cell therapy, platelet rich protein therapy, and gene therapy are just three types of regenerative medicine. The FDA has strict regulations and new guidelines for how to bring regenerative medicine products and treatments to market. There are other federal laws and state laws that regulate regenerative medicine. Doctors who use regenerative medicine must also comply with state medical practice laws. The consequences for failing to follow FDA rules are severe. Health companies, researches, and practitioners may be enjoined from using unapproved treatments. The produces may be seized. Criminal prosecutions may be initiated by the FDA. To understand which laws apply to your regenerative medicine practice, you need the help of an experienced stem cell and regenerative medicine lawyer. We serve a broad range of medical practices including hospitals, doctors, biotechnology and life science providers, and many other types of medical companies and individuals. For skilled healthcare law advise, call Cohen Healthcare Law Group PC today at 310-844-3173 or use our online contact form to schedule an appointment. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 1, 2020
Healthcare
Recent Stark Law and Anti-Kickback Statute Cases
Stark Law and Anti-Kickback Statute Cases That Can Kill Your Healthcare Venture Several recent announcements by the US Department of Justice confirm that medical practices will pay a heavy price for illegal-self referrals. The announcements confirm settlements for violations of the Stark Law, a federal anti-self-referral law and the Anti-Kickback Statute (AKS). The purpose of Stark Law is to ensure that patients will receive medical advice and will treat with physicians based on their medical needs and not on what profits the doctors or medical practices involved. Experienced Stark Law attorneys explain to physicians and practices when Stark Law and a similar law, the Anti-Kickback Statute (AKS), apply to their medical relationships. Doctors and practices need to understand that many referrals may be legal – if the referral is covered by the Stark Law exceptions of AKS safe harbor. The healthcare lawyer can explain what documentation and what steps need to be taken to convince the government that their medical relationships comply with these exceptions or safe harbor rules. Improper billing and Stark Law referrals harm anyone who uses Medicare or other federal healthcare services – in addition to hurting the patent by not providing the best medical care possible. Firms that violate Stark Law and the AKS will be subject to criminal and civil prosecution which can result in substantial economic penalties, the cessation of the medical practice, and possible imprisonment. DO YOU KNOW THE KEY DIFFERENCES BETWEEN THE 4 AMBULATORY SAFE-HARBORS TO THE FEDERAL ANTI-KICKBACK STATUTE (AKS)? There are four types of ambulatory safe harbors in the federal Anti-Kickback Statute. We explain the key differences between the ambulatory safe harbors to the federal anti-kickback statute (AKS) Orthopedic surgery and physical therapy practice agree to pay $1.25 million to settle Stark Law claims The US Attorney for the Southern District of Alabama announced in 2019 that Baldwin Bone & Joint, had agreed to settle claims it violated the False Claims Act, a law designed to help the government recover funds for illegal transactions involving the government. The illegal transactions, in this case were violations of the Physician Self-Referral Law, also called Stark Law. The agencies that were the subject of the alleged fraud were Medicare, a healthcare program from seniors, and TRICARE, a healthcare program for retired veterans and their families. The lawsuit was brought pursuant to the qui tam provisions of the False Claims Act which reward individual whistleblowers for disclosing fraud by paying the whistleblower a percentage of any recoveries. In this case, the whistleblower was a former employee of the medical practice. The OIG office of the US Department of Health and Human Services and the Defense Criminal Investigative Service brought the legal actions on behalf Medicare and TRICARE. The basis for the False Claim Act claim was that the orthopedic practice billed for services for physical therapy that were performed by unauthorized athletic trainers and an exercise psychologist. The basis for the Stark Law claim was that the practices’ “direct compensation arrangements with its shareholder physicians, violated Stark Law because the medical providers: payments “to its shareholder physicians directly or indirectly related to the volume of each shareholder physician’s referrals for designated health services such as physical therapy, X-rays and MRI’s.” Stark Law forbids doctors from referring patients to specific designated health facilities in which the doctors have a financial relationship – where the patients bill Medicare or other federal healthcare programs. The term “financial relationship” is interpreted fairly broadly. It generally includes referrals that are based on the volume of the referrals. The law applies if the physician or a doctor has the financial relationship. Stark Law is a civil law, unlike the AKS which allows for criminal prosecution. Physicians and medical practices that violate Stark Law can be required to pay fines up to $15,000 for each billed service in addition to being required to return to Medicare any payments improperly received. In addition, the doctors and providers may be subject to triple damages on the overpayment. There are specific exceptions to Stark Law which allow for certain types of referrals under certain conditions. An experienced healthcare lawyer can explain when exceptions apply (for example – for in-house ancillary services or services based on fair market value) and what document (usually a written document) is required. The Anti-Kickback statue is similar to Stark Law but there are key differences. Specific intent is required for AKS violations but not for Stark Law violations. The AKS, as mentioned, includes criminal sanctions. The AKS applies to Medicare – and Medicaid and TRICARE. Stark Law involves referrals between a doctor and another entity. Stark Law lists specific exceptions. The AKS relies on the concept of a safe harbor. If an arrangement does not meet a Stark exception then the arrangement is non-compliant; on the other hand, the safe harbor elements need not necessarily be strictly met. As of this blog post, the whistleblower employee above will receive $200,000 for his work in obtaining the settlement. The claims were settled without a determination of liability. WHAT MEDICAL PRACTICES SHOULD KNOW ABOUT THE STARK LAW The Stark Law is named after California U.S. Congressman, Peter Stark. It seeks to regulate how physicians refer Medicare and Medicaid patients. The law is part of the Omnibus Budget […] Several Medical Facilities Agree to Pay $35 million to settle False Claims Act Charges based on Stark Law – involving Kickbacks to a Maryland cardiology practice. The US Department of Justice announced in 2019 the terms and basis of the settlement. DOJ stated that the kickbacks are alleged to be in return for patient referrals by the cardiology group – through a series of professional services contracts. “Kickbacks give doctors an incentive to pursue unnecessary treatments that are costly and sometimes even dangerous to patients,” said U.S. Attorney Robert K. Hur. “We will not tolerate medical care providers who put their patients at risk and waste taxpayers’ dollars in order to line their own pockets.” “Patients rightly expect their doctors will make recommendations based on sound medical practice – not payoffs that too often result in needless and sometimes even harmful procedures,” said Maureen R. Dixon, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “We will continue to protect patients and taxpayer-funded government health programs from these unnecessary services, as the government contended in this case.” The kickbacks were in “guise of professional services agreements” in return for “lucrative cardiovascular procedures, including cardiac surgery and interventional cardiology procedures, from Jan. 1, 2006, through July 31, 2011. The litigation was brought by several cardiac surgeons who practice together asserting violations of the Anti-Kickback Statute and the False Claims Act. The False Claims Act was involved because some of the cardiac procedures were billed to Medicare. A second whistleblower lawsuit was brought by patients of one medical doctor and several other medical facilities that some of the procedures weren’t medically necessary. KICKBACKS, FEE-SPLITTING, CORPORATE PRACTICE OF MEDICINE, STARK, MSOS: GUIDING HEALTHCARE VENTURES THROUGH THE MAZE Fundamentally, you’re worried about legal rules prohibiting kickbacks, fee-splitting, corporate practice of medicine, as well as Stark law; you don’t know whether the MSO or management structure […] A Capital Management Company and Its Affiliate Agree to Pay $3.6 Million to Settle Stark Law, AKS, and False Claim Act Allegations Doctors Referred Patients to Them Illegally The Department of Justice announced in 2019, that Rialto Capital Management LLC (Rialto) and a former affiliate agreed to the $3.6 million payment based on claims they and a hospital in Indiana entered into illegal financial arrangements with two doctors who referred patients to the Indiana hospital. “When doctors refer patients for tests and medical procedures, they must do so based on their own professional judgment and the medical needs of their patients, not personal financial benefits,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “Illegal financial arrangements between health care providers undermine the integrity of our health care system, and we will continue to pursue those who engage in such conduct.” The settlement was based on claims the hospital, under the direction of the capital management company, made personal loans to the two doctors who referred patients and then “repeatedly forbore from requiring repayment of those loans.” The government claimed that the failure to make the effort to collect on the loans was “remuneration” in return for referrals – which is prohibited by both Stark Law and the AKS. “The AKS prohibits the provision of remuneration to induce the referral of services or items that are paid for by a federal health care program.” “Stark Law restricts financial relationships that hospitals may enter into with physicians who refer patients to them.” “The False Claims Act prohibits the submission of claims to Medicare for items or services that are tainted by financial arrangements that violate the AKS or the Stark Law.” “Rialto, through RL BB, acquired KMC as part of KMC’s bankruptcy reorganization in 2013. As part of that reorganization, KMC and Rialto initially offered to award partial ownership in the hospital’s real estate to certain physicians who had been important referral sources for KMC, but those offers were challenged in the bankruptcy proceedings. Instead, Rialto approved personal loans from KMC to two of the hospital’s key referral sources, and Rialto and KMC then allegedly repeatedly forbore from requiring repayment of those loans for more than two years after each loan matured and became due in full.” “Healthcare entities need to ensure that financial arrangements with physicians are clear and appropriate,” said Lamont Pugh III, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services (OIG). “The practice of providing any kind of remuneration in exchange for the referral of Medicare patients is a violation of the Anti-Kickback Statute. OIG will continue to examine and investigate those relationships that violate federal statutes in an effort to protect vital taxpayer dollars.” The whistleblower in this case was a doctor who was awarded $612,000 for disclosing the alleged fraud. The settlement is not an admission of liability. As these cases, and many other DOJ cases indicate, the consequences for violations of Stark Law and the Anti-Kickback Statute are quite severe. Often medical practices can be named as defendant. In the last two cases, they may not have been named defendants because the whistleblowers were physicians in the practices or related somehow to the practices. There are often correct ways to establish referral arrangements that an experienced healthcare lawyer can explain. Contact Cohen Healthcare Law Group, PC to learn what financial relationships between doctors or medical practices and any health provider, hospital, family, investment firm, or other entity might fit within a Stark exception or safe harbor and which ones might result in enforcement. Our Stark and Anti-kickback attorneys have a strong track record of helping physicians and medical practices structure arrangements, and craft documents, with an eye toward mitigating potential regulatory risk. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
February 22, 2020
Healthcare
How the New California Department of Managed Health Care Regulations Affect Your Healthcare Practice
The California Department of Managed Health Care’s (DMHC) passed a new regulation, effective July 1, 2019 that expands the types of healthcare companies that must be licensed. The regulation is a response to failures of companies that contract with Knox-Keene licensees who provide health care services through subscription plans. The licenses, typically HMOs, provided service to subscribers through: Agreements with doctors, hospitals, and other health providers to accept a regular fee (often a monthly fee) to provide medical services to patients Agreements with subscribers to pay a monthly subscription/fee The new licensee agreement will give the DMCH oversight over the financial stability of these healthcare companies (often called restricted licensees or risk bearing organization). The History of Knox-Keene Act The Knox-Keene Health Care Services Plan Act of 1975 (Knox-Keene) was passed to help protect consumers who enrolled in medical health care service plans. These plans, according to the Knox-Keene Act define these plans as “any person who undertakes to arrange for the provision of health care services to subscribers or enrollees, or to pay for or to reimburse any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees.” The main targets of the Knox-Keene Act were and are health maintenance organizations, more commonly called HMOs and other organizations that provide or arrange for health care services – in return for payment on a capitated basis. Generally, the health care service plan company is required, under Knox-Keene, to obtain a license from the California Department of Managed Health Care (DHMC). The reason Knox-Keene was enacted was to help protect against the possibility members of the HMO or other plans would be left without access to care if the health plan became insolvent and couldn’t cover the cost of future healthcare services. Capitation agreements Capitation payments are agreed payment arrangements (contracts) between a health insurance company and a medical care provider. The payments are paid to physicians, medical practices, clinics, and hospitals – generally on a per-patient or per capita basis. The payments are normally fixed, monthly payments calculated 12 months in advance – regardless of how many times the patient needs medical services. Payments usually reflect the subscriber’s age and /or types of ailments. Rates can vary from one part of the country to another. Capitation plans generally identify which services must be proved to patients. There is a balance of risk between the insurance company and the medical provider. Typical medical services include: “Preventive, diagnostic, and treatment services Injections, immunizations, and medications administered in the office Outpatient laboratory tests done either in the office or at a designated laboratory Health education and counseling services performed in the office Routine vision and hearing screening” In simpler terms, a capitation plan is a per-member, per-month payment. The payments are made in advance, not after the services have been provided. PACKAGING MEDICAL SERVICES – IS IT A LEGAL CONCIERGE ARRANGEMENT, OR AN ILLEGAL KICKBACK? If you’re a medical doctor, dentist, acupuncturist, chiropractor, or other licensed healthcare provider, and you offer your patients “9 sessions, get 1 free,” have you violated kickback laws? Licensing requirements under Knox-Keene Knox-Keene § 1349 provides that: “It is unlawful for any person to engage in business as a plan in this state or to receive advance or periodic consideration in connection with a plan from or on behalf of persons in this state unless such person has first secured from the director a license, then in effect, as a plan or unless such person is exempted by the provisions of Section 1343 or a rule adopted thereunder. A person licensed pursuant to this chapter need not be licensed pursuant to the Insurance Code to operate a health care service plan or specialized health care service plan unless the plan is operated by an insurer, in which case the insurer shall also be licensed by the Insurance Commissioner.” Generally, there are two types of plans that seek licenses under Knox-Keene: Fully-licensed plans. These plans enroll groups and individuals directly. They either provide or arrange to provide medical services to the members in exchange for a premium or subscription payment. Normally, the plan will provide a set of services such as primary care, inpatient hospital care, and other services. Some licenses who provide just one basic health service such as mental health may obtain a specialized Knox-Keene license instead of a full license. Restricted plans are plans where a company contracts with a Knox-Keene licensee to provide or arrange for services to the members of the plan. Prior to the new regulation, restricted plans did not require a license. Now, as a result of the new DMHC regulations, restricted plans will require a license. The 2005 DMHC regulation which expanded Knox-Keene licensing requirements Historically, some independent physician associations (IPAs) and hospitals took part in restricted plans and/or global capitation agreements. The risk was passed from the insurance plan to the IPAs and hospitals who took part in these global capitation agreements. The health plan would create the arrangements to pay the providers a fixed monthly sum and assign a set of patients to the providers. If the patient group remained healthy – meaning they didn’t seek much use of the provider’s medical services – the providers could make a nice profit. On the other hand, if the patient group used a lot of medical services, the providers could lose a lot of money and time treating the patients in this group. This technique didn’t work too well because it was hard for the hospitals and IPAs to analyze the risk factors. So, in 2005, the DMHC created regulations that required “Risk Bearing Organizations (RBOs)” that contracted with the licensed insurers to provide financial metrics to the DMHC – so the DHMC could determine the financial health of the RBOS – and in turn, help the hospitals and IPAs better assess their risks. The law did not require that the RBO obtain their own license. Without the requirement to obtain their own license, the DHMC could only direct the licensed health insurance plan – not the RBO. The new DMHC regulation A new regulation approved by the DHMHC expands the types of organizations that must obtain a Knox-Keene license. In essence, the new regulations will require that the RBOs and restricted plans will now need to obtain a license. The current requirement to obtain a full-service Knox-Keene license or a specialized Knox-Keene license is expanded to include many types of health companies including the RBOs, the IPAs, hospitals, and other health plans that engage in global risk. The regulation becomes effective on July 1, 2019. Any health care organization that bears the financial risk of providing medical services to subscribers will need to review the new licensing requirements with an experienced California healthcare lawyer. THE MANY WAYS YOUR NEW MEDICAL BUSINESS CAN GET INTO TROUBLE IF YOU DON’T CONSULT WITH AN EXPERIENCED HEALTHCARE LAWYER Healthcare startup lawyers advise new medical business on FTC law, FDA law, marketing regulations, purchasing practices, nanotechnology, contract negotiation, and a range of business issues. The new regulations are being phased in. Health insurance plan companies and the medical practices and hospitals that contract with them should review with their healthcare lawyer: The timing of the new regulations Which arrangements will require a license. Some payment arrangements may be exempted, for now, from the requirement to obtain a license. Part of the focus of the new regulation, in addition to focusing on licensing requirements for restricted licensees, are arrangements with employers who self-insure without having a license. The newest DHMC regulation expands the definition of “Prepaid or periodic charge” to include any entity/individual that contracts to assume the risk/costs of various types of hospital services, physician services, pharmacy services, and other identifiable medical services – whether in a fixed amount or a percentage of shared profits and losses. More formally a “prepaid or periodic charge” is defined as “(a)ny amount of compensation either at the start or end of a predetermined period, for assuming the risk, or arranging for others to assume the risk, of delivering or arranging for the delivery of the contracted-for health care services for subscribers or enrollees that may be fixed either in amount or percentage of savings or losses in which the entity shares” (28 C.C.R. 1300.49 (a)(4)). Other key definitions in the new regulation include: “’Global risk’ means the acceptance of a prepaid or periodic charge from or on behalf of enrollees in return for the assumption of both professional and institutional risk.” “’Restricted health care service plan’ means a person with a health care service plan license issued by the Department for the provision of, or the arranging, payment, or reimbursement for the provision of, health care services to subscribers or enrollees of another full service or specialized health care service plan under a contract or other arrangement whereby the person assumes both professional and institutional risk but does not directly market, solicit, or sell health care service plan contracts.” The regulation adds teeth to the 2005 regulations by requiring that RBOs become licensed and thus subject to regulation by the DHMC under the Knox-Keene Act. The regulation will require these new licensees provide evidence of working capital and other financial measurements – and to show the entity/person is meeting the metrics they report. The regulations also govern the ability of the RBO to pay claims, provide medical care, and provide case management. This means RBOs need to consult with experienced healthcare lawyers now. RBOs need to know if they are required to comply with the new regulation, when they must seek a license, and how they can obtain a license. In some cases, exemptions may be available – mainly if the exemption would be in the best interests of the subscribers to these plans. For example, some hospitals and organization that participate in these capitation plans may be exempt if they are already regulated through a state or federal Medicare plan. HMOs and current licensees should also review if the organizations they work with need to be licensed. In response to numerous failures of health care plans that contracted for services through periodic/subscription payments, the California Department of Managed Health Care’s (DMHC) passed a new rule. This rule means that many health care plans (whether through an employer or through an independent business) are now required to obtain a state license. The licensees will be governed by the Knox-Keene Act. Plans that are covered by Knox-Keene must: Provide specific services and access to those services Comply with the Patient Protection and Affordable Care Act Create a utilization review process Create a dispute resolution process Licensees may be required to provide financial reports and verifications to help insure their solvency. Plans that aren’t covered by Knox-Keene may still be governed by other agencies and laws – both at the state and federal level. For example, the California Department of Insurance (DOI) regulates insurance plans. The US Department of Labor has regulatory authority over ERISA plans. Knox-Keene plans may also be governed by these additional agencies and regulations. Contact Cohen Healthcare Law Group, PC to assess whether the new DHMC regulations affect your medical practice or medical company. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
January 22, 2020
Healthcare
California Anti-Kickback and Fee-Splitting Law for Smarties
California Anti-kickback and Fee-Splitting Law for Smarties is the subject of today’s video. That’s right, we’re talking to the smarties, not the dummies. Dummies don’t hire lawyers—well, not at first; they just copy stuff off the Internet and then wonder how they got in so much trouble, and then after that they hire lawyers. Smarties read statutes and they have a sense of what the law says; the problem, though, is that the law isn’t written in English, it seems to be some code that you have to figure out, and even then. That’s where attorneys come in. We read the fine print, the big print, and everything in between, as well as the print that sends you all over the law looking for related legal rules and other content that interface with the rule of law that you’re reading for reference. And in the case of California’s anti-kickback and fee-splitting laws, the rules can seem crazy-quilt, nonsensical, upside-down, or just plain contradictory. As someone once put it, “the Lord giveth, and the Lord taketh; but with lawyers, the one hand giveth, and the other hand taketh.” Well, I don’t know if that’s exactly true, but let’s go a little bit deeper into this anti-kickback law. I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. Since 1999, our law firm has counseled hundreds of healthcare industry clients every year on healthcare and FDA legal matters. In this video, I’d like to clarify for you, California Business & Professions Code 650, the main anti-kickback and fee-splitting rule that California applies, as a state, to questions involving payments and compensation between medical doctors (or other licensed healthcare providers) and businesses, where the healthcare practitioner might have a financial interest in the referral. We’ll focus on three important sections of Business & Professions Code Section 650: subsection (a), (b), and (c). Subsection (a) contains the prohibition—or as I like to say, in biblical language: Thou Shalt Not. During my first year of law school, my Criminal Law Professor, used to refer to this as “TSN” for short: TSN, Thou Shalt Not. As in, for example, TSN (Thou Shalt Not) eat the fruit from the Tree of Life in the Garden of Eden. Many statutes are framed this way, for example, section 650(a) says, essentially, Thou Shalt Not offer or receive a kickback nor split the professional fee of a healthcare licensee (such as a medical doctor). That’s it in a nutshell. Here are the actual words of Business & Professions Code Section 650(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.” Unlike federal anti-kickback law, this provision applies to “any person licensed” (as a healthcare licensee); however, there are other provisions under California law that mirror this basic anti-kickback provision and are broader, sometimes more specific. Now, Section 650(b) is the section I call, “Thou Mayest.” So, for example, “thou mayest eat any fruit in the Garden of Eden other than the fruit from the Tree of Life.” Section 650(b) provides an allowance—the thou mayest—for arrangements at fair market value: “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.” The idea here is that, if say the MD is paying your company a fee for management and marketing, and this fee is not based on the number of value of patients referred, then that is not a kickback or fee-splitting. And under California law, that fee can be based on a percentage of gross revenue. For example, the medical practice has gross revenues of a million dollars a year, and pays the MSO (or management services organization), 25% of its gross revenues on a monthly basis for management and marketing services. Here, clients often come to us with a proposed business structure and compensation arrangement, and they ask us whether, in our view, the proposed model is more likely to fall within 650(b), the allowance, or 650(a), the prohibition. Now there’s one more section I’d like to talk about. California Business & Professions Code Section 650(d) provides that, with specified exceptions: “It shall not be unlawful for any person licensed under this division to refer a person to any laboratory, pharmacy, clinic … or health care facility solely because the licensee has a proprietary interest or coownership in the laboratory, pharmacy, clinic, or health care facility, provided, however, that the licensee’s return on investment for that proprietary interest or co-ownership shall be based upon the amount of the capital investment or proportional ownership of the licensee which ownership is not based on the number or value of patients referred.” In other words, if say you’re a licensed medical doctor, if you refer your patient to a clinic or similar healthcare entity in which you have a financial interest, this is not necessarily a prohibited kickback (it might be prohibited under self-referral law), it’s not a kickback as long as your financial interest is simply that of an investment, and you’re getting paid not for the referral, but in accordance with your percentage investment. Section 650(d) adds another sentence: “Any referral excepted under this section shall be unlawful if the prosecutor proves that there was no valid medical need for the referral.” So, your referral has to be based on medical necessity. Note that there is a whole separate statute which deals with the question of self-referral. Self-referral means you refer to an entity where you have a financial interest. Under federal law, we call that Stark. So we have to consult this statute as well: in California, it’s called the Physician Ownership Referral Act, or PORA, and it’s the California counterpart to the Stark law on the federal side. But at least on the kickback front, a passive investment in a healthcare entity where you have a financial interest, is not automatically prohibited. From here, we get lots of deep-in-the-weeds questions on specific arrangements. Because lots of healthcare entrepreneurs have creative ideas about arrangements where they want to recruit doctors to share in profits from an overarching enterprise that also sends back referrals, and that inevitably raises PORA and Business & Professions Code 650 issues. We may address these in subsequent videos. For now, we wanted to give you the rudiments of 650(a), (b) and (d) as your basic building blocks in the world of California’s prohibition against kickbacks and fee-splitting. Thanks for watching. Here’s to the success of your healthcare venture, we look forward to talking with you soon. Testimonials
January 15, 2020
Healthcare
Examples of Medical False Claims Act Violations That Will be Prosecuted
Examples of Medical False Claims Act Violations That Will be ProsecutedThe False Claims Act was enacted during President Abraham Lincoln’s administration. The initial aim of the act was to help the government recoup false billings involving the Department of Defense. The scope of the Act has since been expanded to include many types of government claims – especially healthcare fraud claims. False Claims Act cases that affect the medical sector include: Fraudulent medical claims. False claims involving medical care, medical diagnosis, medical treatments, medications, medical supplies, and medical equipment Violations of the Stark self-referral laws and the Anti-Kickback Statute. These violations include improper payments for referrals and non-cash payments. Many types of acts may violate Stark or Anti-Kickback laws. There are exceptions and safe harbors to Stark and the Anti-Kickback Statute respectively that an experienced healthcare lawyer can explain. Under Stark Law, physicians (and immediate family members) who have a financial relationship with an entity that provides “designated health services” can’t refer patients to that entity and the entity can’t bill Medicare or Medicaid – unless an exemption is allowed. Medicaid and Medicaid rely on medical services being based on the legitimate needs of the patient and not the profit incentive of the physicians. Examples of Stark violations include interest-free loans, medical directorship pay that is more than the value of the medical advice provided, improper discounts, and other improper transactions. The Anti-Kickback Statute is also aimed at making sure referrals are based on the needs of the patient and not the financial interests of the physicians making the referrals. The Statute makes bribes illegal. It also makes it illegal to offer inducements to obtain referrals for medical services and treatments that will be reimbursed by a federal health care program. Both the person encouraging the referral and the person making the referral can be held liable. Improper inducements include almost anything that encourages a referral based in return for some type of remuneration. There are safe harbors which define practices the Department of Health and Human Services allows – based on the idea that they won’t affect the needs of the patient. Experienced health care lawyers can explain what safe harbors are available and what steps should be taken to meet the formal safe harbor definition. For example, a safe harbor applies to renting office space and equipment provided the lease agreements are in writing, reflect fair market value, and aren’t based on the volume or the value of the referrals. Doctors, hospitals, pharmacists, and other health providers generally must certify that they are in compliance with Stark Law and Anti-Kickback Statute before the can submit claims to Medicare, Medicaid, TRICARE, CHAMPVA, and other federal health programs. The certification requirement means that bills submitted to federal health care programs where the health provider violated Stark or the Anti-Kickback Statute are deemed false claims under the False Claims Act. Lots of types of fraud Medicare fraud which generally involves treatment of patients that are 65-years old and up and people with disabilities. It also includes Part D fraud. Medicaid fraud which generally involves people with federal health insurance because of low income. The False Claims Act also applies to hospital fraud, pharmaceutical fraud, medical spa fraud, and other types of medical fraud To prove a violation of the False Claims Act, the Department of Justice or an individual must generally show that the defendant knew he claim for payment was false and used false records or materially false statements. Types of medically-related false claims acts in the healthcare sector include: False billing Billing for services never rendered Billing for services that weren’t necessary Improper coding for services Several cases show that the hospitals, doctors, and other health providers will be prosecuted if they provide medical services that are deemed medically unnecessary or if fraudulent claims are submitted. Department of Justice Settles False Claims Act Charges for More Than $15.6 Million Against 16 Hospitals On May 7, 2015, the Justice Department announced that a settlement was reached in the Eastern District of Arkansas for charges that 16 hospitals submitted false claims for Medicare payments. The principal deputy assistant attorney general for the Civil Division of the Department of Justice said, when announcing the $15.69 million settlement that: Hospitals that participate in the Medicare program must ensure that the services they provide and bill for are based on the medical needs of patients rather than the desire to maximize profits. The Department of Justice is committed to ensuring that those who seek to abuse the Medicare program will be held accountable for their actions. The lawsuit, which was brought by a whistleblower, involved claims for “Intensive Outpatient Psychotherapy.” This therapy should be aimed at helping people with mental disorders after they have received ambulatory psychiatric services. Medicare does pay for IOP treatment provided the services are “reasonable and necessary for the diagnosis and treatment of the patient’s condition.” The lawsuit claimed that the hospitals, between 2005 and 2013, knowingly submitted false claims. The claims were improper because: The patient’s condition did not qualify for IOP; The patient’s treatments were not provided pursuant to an individualized treatment plan designed to help the patient address specific mental health needs and reach achievable goals; The patient’s progress was not being adequately tracked or documented; The patient received an inappropriate level of treatment; The therapy provided was primarily recreational or diversional in nature, and not therapeutic. Allegiance Health Service, located in Shreveport, Louisiana, provided the IOP services on behalf of the providers. The providers who were the defendants in the False Claims Act lawsuit were Health Management Associates Inc. (HMA), and 14 hospitals that Health Management Associates, Inc. owned and operated. The 14 hospitals were located in Mississippi, Texas, North Carolina, Georgia, Florida, Oklahoma, and Arkansas. Another medical center based in Texas was also a defendant. Similar allegations against “LifePoint Hospitals Inc. and two of its subsidiaries, PHC-Minden L.P., doing business as Minden Medical Center, and PHC-Cleveland Inc., doing business as Bolivar Medical Center” were settled for $4,672,469.80 in October 2013. A representative of the US Department of Health and Human Services-Office of Inspector General added that Our agency is dedicated to investigating health care fraud schemes such as this, which divert scarce taxpayer funds meant to provide for legitimate patient care, including services for the often underserved mentally ill population. The whistleblower, more formally called a relator, was awarded $2,667,300. Between January 2009 and the date of the press release, May 7, 2015, the Justice Department has used the False Claims Act to recover $24 billion. More than $15.3 billion of that $24 billion were recoveries that involved allegations of “fraud against federal health care programs.” 24 Defendants Charged with Schemes Involving Distribution of Opioids and Dangerous Narcotics The Department of Justice announced on July 13, 2017, that 24 defendants were charged, after the unsealing of three indictments, with schemes intended to divert pharmaceutical pills to the streets. The unsealing of the indictments is part of a broad health care fraud enforcement action by the Medicare Fraud Strike Force that involves 412 charged defendants across 41 federal districts. The defendants include 115 doctors, nurses, and other licensed professionals. The fraud involves $1.3 billion in false billing mostly for the roles of the defendants in prescribing and distributing opioids and other dangerous narcotics. The Acting US Attorney for the Eastern District of Arkansas said that The abuse of prescription medication, particularly opioids, is one of the largest health and crime problems Arkansas is facing, Harris said. This epidemic must be attacked on multiple fronts—by stopping the criminal doctors and medical professionals from writing medically unnecessary prescriptions, and by preventing the common drug dealers from diverting these pills to the hands of other addicts and dealers, either by writing fraudulent prescriptions or stealing dangerous drugs from pharmacies. The defendants in the cases announced by my office today illegally put hundreds of thousands of pills on the streets, and they must be stopped. The three indictments were based on the following: Indictment number one. Four defendants were charged with conspiracy to break into a business premises registered with the DEA to dispense controlled substances. The DEA uncovered a string of related pharmacy burglaries. Indictment number two. A federal grand jury charged three defendants with conspiracy charges based on fabricating prescriptions to obtain oxycodone worth more than $150,000. Indictment number three. A defendant was charged with creating fraudulent prescriptions using computer templates that were then filled at local pharmacies. The press release stated that the charges were aimed at targeting schemes involving false claims with Medicaid, Medicare, and TRICARE. The opioid epidemic is continuing to take lives. The CDC data states that approximately 91 Americans die every day of an opioid related overdose. Married Physicians Indicted for Healthcare Fraud On April 2, 2014, the US Attorney for the Eastern District of Arkansas, announced that two married doctors were indicted by a federal grand jury for conspiring to commit healthcare fraud and for six acts of healthcare fraud. The male doctor was also charged with four acts of making false healthcare statements. The indictment asserts that the married doctors worked with a massage therapist who billed health insurers for physical therapy. The fees were then split between the therapist and the doctors. The male doctor was also charged with billing for therapeutic ultrasounds – even though that test was never conducted. The false claims to Medicare and Arkansas’s Blue Cross and Blue Shield totaled more than $1.2 million. The penalties could include up to 10 years in jail on each of the six healthcare fraud counts and another 10 for the conspiracy. While settlements are not an admission of liability, the amounts of the payments are quite substantial. In addition to restitution for improper payments. Healthcare providers need to review with experienced lawyers the federal and state laws that regulate how bills and requests for payments are submitted. They need to understand what acts constitute violations of billing, self-referral, and kickback laws. Skilled healthcare lawyers can explain when exemption and safe harbors may apply. They can help craft a compliance program. Failure to comply with these can be quite severe: False Claims Act payments include civil fines and penalties. Federal penalties can amount to three times the amount of the claim. Additionally, health providers can be precluded from working with Medicare and Medicaid in the future. Stark Law violations can result in a restitution requirement, denial of the requested payment, and additional civil fines. Anti-Kickback Statute penalties include substantial fines and up to five years in prison for each violation. WHAT HEALTHCARE COMPLIANCE PROGRAM POLICIES AND PROCEDURES SHOULD BE INCLUDED IN HEALTHCARE COMPLIANCE PROGRAM? Health care governing boards can look to “Practical Guidance for Health Care Governing Boards on Compliance Oversight” for advice in designing a compliance program. For a thorough review of the laws and regulations that affect your type of medical practice, speak with an experienced healthcare lawyer – one who has advised a broad range of clients. For help now, contact Cohen Healthcare Law Group PC at 310-844-3173 or fill out our online contact form to schedule an appointment. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
January 1, 2020
Healthcare
FAQs About How California and New York Regulate Telemedicine
FAQs About How California and New York Regulate TelemedicineEach state has its own set of telemedicine laws and medical society requirements. The rules, definitions, and penalties for non-compliance vary from state to state. The laws are being constantly amended or updated. Medical societies and boards are continually making changes to their telemedicine standards. California and New York are two states that are forcefully addressing the do’s and don’ts of telemedicine practice. In this post, we answer some common questions about the status of the law regarding telemedicine. Note that this is a general description that may not necessarily reflect the latest developments, as telemedicine, mobile health, and digital health law is constantly changing. For the latest legal and regulatory telemedicine developments, and to understand how telemedicine law might apply to your healthcare business or practice, consult an experienced telemedicine lawyer. What is the History of Telemedicine Law in California? California’s initial telemedicine law was the Telemedicine Act of 1996. This law required, among other duties and obligations, that patients sign a written consent form before telemedicine services could be provided. The next law was the Telehealth Advancement Act of 2011 (AB 415). This law provided that: Store-and-forward technologies should be reimbursable when provided by a health care provider. Mandated that private payers (insurance companies) reimburse health providers for telemedicine services. Removed the requirement that the telemedicine appointment take place in a licensed healthcare facility. Many patients are more comfortable and find it more convenient to communicate with a doctor from their home. Telemedicine interactions do require that the patient’s information be kept confidential and that his/her rights be protected Health care service plans and health insurance companies including Medi-Cal should adopt payment policies (that also meet the Business and Professional Code) so that doctors, hospitals, and other authorized telehealth providers can be properly compensated for telemedicine services. Assembly Bill 1733 of 2013 provided $200 million for telemedicine education programs and new high-tech approaches. The bill provided that private healthcare plans could not mandate that there be an initial face-to-face visit before telemedicine could be used. The bill also provided that private healthcare plans couldn’t limit reimbursement if patient-site visits weren’t used. Assembly Bill 809 of 2015 provided that written patient consents for telemedicine were not required. Verbal and written consents, properly documented, are sufficient to provide telehealth services. It also deleted the rule that the health care provider be at the originating site when the consent to provide telemedicine services is obtained. What Standard of Care Must Physicians Follow When Providing Telehealth Services in California? The Medical Board of California states that: The standard of care for telemedicine is the same as for in-person visits. Physicians can provide telehealth services from out of state – provided they have a current valid California medical license Telemedicine typically includes videoconferencing or store-and-forward technology. It’s not talking on the telephone or sending emails and faxes back and forth. How Does California define “telehealth?” Section 2290.5 of the California Business and Professions Code defines “telehealth” as: “… the mode of delivering health care services and public health via information and communication technologies to facilitate the diagnosis, consultation, treatment, education, care management, and self-management of a patient’s health care while the patient is at the originating site and the health care provider is at a distant site. Telehealth facilitates patient self-management and caregiver support for patients and includes synchronous interactions and asynchronous store and forward transfers.” How is the doctor-patient relationship established? While some states require an initial in-person visit, California does not. In California, the initial consultation between doctor and patient can be through telemedicine. Additionally, non-controlled substances can be prescribed through telemedicine. To prescribe “dangerous drugs or devices,” an initial in-person office visit is required. California Code, Business and Professions Code – BPC § 2242 specifically provides that: “(a) Prescribing, dispensing, or furnishing dangerous drugs as defined in Section 4022 without an appropriate prior examination and a medical indication, constitutes unprofessional conduct.” Your quote: “In-person examinations 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. For some patients, certain drugs are contraindicated and serious injury, including death, can follow.” 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 ESTABLISHING THE PHYSICIAN-PATIENT RELATIONSHIP: TELEMEDICINE LAW OFTEN REQUIRES IT, BUT WHAT DOES THIS MEAN? Establishing the physician-patient relationship is often a requirement of state telemedicine law, but what does it mean that the physician has in fact “established” the physician-patient relationship? Which California health care providers can offer telemedicine services? Anyone licensed under Division 2 of the state’s Healing Arts statute are able to provide telemedicine care to patients. This includes, but not limited to, physicians, nurses, dentists, chiropractors, speech pathologists, registered dietitians, occupational therapists and licensed midwives. How do hospitals, physicians, and other telemedicine get paid/reimbursed in California? Payment in California generally follows the following principles: Medicaid (Medi-Cal). Medi-Cal only reimbursees for synchronous videoconferencing. It doesn’t reimburse for store-and forward, remote patient monitoring, and for telephone care. There are no limits on the patient site or on the patient’s location. Medicare. Doctors and other medical practitioners should review Medicare reimbursement with an experienced telemedicine lawyer. Generally, the patient site and geographical location are not factors. There are specific requirements though that need to be reviewed. Medicare does encourage telemedicine for people with multiple chronic conditions. Private payors. Generally, private insurers should pay for videoconferencing. They are not required to pay for other telemedicine methods such as store-and-forward or remote patient monitoring. What services does Medi-Cal Cover? The California Department of Health Care Services states that the following telemedicine services should be covered by Medi-Cal: Selected Evaluation and Management (E&M) services for patient visit and consultation. Selected psychiatric diagnostic interview examination and selected psychiatric therapeutic services. Store-and-forward tele-dermatology. Store-and-forward tele-ophthalmology. Teledentistry. Transmission costs (up to 90 minutes per patient, per day). Originating site facility fee. Interpretation and report of X-rays and electrocardiograms performed after telehealth transmission. Are there unlicensed practice of medicine and corporate practice of medicine issues in California? Doctors and health care providers do need to understand who is using their telemedicine technology. Policies should be in place so that only providers authorized by California’s telemedicine laws can provide telehealth services. If an unauthorized or unlicensed person provides telemedicine service, the medical practice may violate several laws and professional requirements including: Violating the telemedicine laws for that state Be seen as “aiding and abetting unlicensed medical practice” Be engaged in the corporate practice of medicine Telehealth includes telemedicine, digital health, and mobile health. Desktops, laptops, cellphones, smartphones, iPads, tables, and any type of mobile device should be monitored so that only authorized personnel can speak to or help patients. 3 WAYS HEALTHCARE & TELEMEDICINE COMPANIES CAN TRIGGER UNLICENSED AND CORPORATE PRACTICE OF MEDICINE LEGAL TRIPWIRES Healthcare startups, including telemedicine and mobile health startups, can unwillingly trigger unlicensed and corporate practice of medicine legal tripwires. How does the use of a questionnaire affect the issue of the unlawful practice of medicine? One of the very early legal rules you will see around telemedicine in many states is the general statement that sending a questionnaire over the Internet and using that to make a medical recommendation, is unlawful. While the law is being made more liberal, medical providers should review with experienced telemedicine lawyers whether the submission of a questionnaire through electronic means may be seen as an unlicensed diagnosis. Does California provide telehealth parity? Parity is essentially paying doctors for telemedicine services that are essentially the same as in-person services. A telemedicine parity law requiring private payers reimburse providers for telemedicine services does exist in California. Does New York provide telehealth parity? New York has provided telehealth parity since 2014. Telehealth parity covers Medicaid, state employee health plants, and private payors. It doesn’t require coverage for store and forward telemedicine nor for remote patient telemedicine monitoring. What is New York Medicaid’s Telemedicine Policy? eVisit, a major telemedicine provider in New York, states that Medicaid in New York does cover live videoconferencing, store-and-forward technology, and remote monitoring of patients through telemedicine. Medicaid does limit which health care providers can offer telehealth. Approved providers include: Asthma Educators Clinical Social Workers Dentists Diabetes Educators Genetic Counselors Home care services agency Hospice Hospital Midwife Nurse practitioner Optometrist Or any other provider as determined by the Commissioner Physician Physician assistant Physician specialists, including psychiatrists Podiatrist Psychiatric Nurse Practitioners Psychologists Registered professional nurse Speech language pathologist or audiologist “Medicaid managed care plans can choose whether to cover telehealth.” Again, please note that the laws concerning telemedicine are constantly in flux and that even as we read these laws and regulations or visit secondary sources describing them, you should only look for legal advice for your situation from an experienced telemedicine lawyer in the course of an attorney-client relationship. Covered services Under New York’s parity law, private health plans cannot exclude coverage for any telemedicine service that would be covered if delivered in-person. New York Medicaid reimburses for medically necessary services over live video. It also reimburses for specialty care such as dermatology and ophthalmology for store-and-forward telehealth. What restrictions to prescribing medications apply in New York? Legal limits on prescribing medication through telemedicine are constantly changing. Consult with your telemedicine lawyer. Remember that medical doctors must comply with other laws such as DEA requirements. What are the informed consent requirements in New York? The only type of approved telemedicine services which requires informed patient consent is telepsychiatry. What are the eligible originating sites in New York for telemedicine services? In New York, patients can originate their telemedicine care in the following sites: Their home A doctor’s office A hospital or hospice care A mental health facility such as a psychiatric center An adult care facility A child day care facility A school What is the Interstate Medical Licensure Compact? The interstate medical licensure compact is a way for qualified licensed physicians to practice medicine and thus to offer telemedicine services in multiple states. The tradeoff for allowing physicians to obtain licenses in multiple states is that the states can also “share investigative and disciplinary information.” “The IMLC is an agreement between 24 states and 1 territory and the 31 Medical and Osteopathic Boards in those states and territory. Under this agreement licensed physicians can qualify to practice medicine across state lines within the Compact if they meet the agreed upon eligibility requirements. Approximately 80% of physicians meet the criteria for licensure through the IMLC.” Questions to review with your telemedicine attorney The National Telecommunications and Information Administration – suggests doctors review the following telemedicine issues for the states where the doctor is licensed with their telemedicine attorney: Which healthcare providers can provide telemedicine services? What state legal and medical requirements apply? Can telemedicine services be offered across state lines? Where must the patient be when the telehealth services are offered? Where must the physician be when the telehealth services are offered? Must a physician be physically present when another health provider is working with the distant patient? Must the physician see the patient in the office first before telemedicine can be used? Can prescriptions be offered using telehealth? How and when can the health provider be reimbursed for the telemedicine services. Doctors, hospitals, and others health professionals should ask what laws and rules apply for the state where the physician offers the telemedicine advice. Doctors who fail to follow state telemedicine laws may lose their license and may not qualify for medical payments. To learn more about how telemedicine works and what the rules are in your state, a conversation with an experienced telehealth lawyer is a must. To learn your rights and obligations when using telehealth services, call Cohen Healthcare Law Group PC at 310-844-3173 or complete our online contact form to make an appointment. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
December 22, 2019
Healthcare
Stark vs Anti-Kickback vs Fee-Splitting
In today’s video, I’m going to speak extemporaneously about Stark Law and Anti-Kickback Law. Why? Because Stark and anti-kickback and fee splitting, also known generally as fraud and abuse, these issues come up again and again and again with every single healthcare venture. Let’s take Stark. So the Stark Law deals with self-referral… Oh, if you could please hold my helicopter up there. I guess it’s going to pass overhead and land. Anyway, we’ll just keep going. Stark generally deals with self-referral. For example, my financial interest in that helicopter, not an issue. But if you’re a physician and you send somebody to a clinical lab or a certain other designated health services, also known as DHS, where you have a financial interest, that’s a self-referral. That’s what Stark Law prohibits. Typically where you have that kind of financial interest, you also have a kickback scenario. A kickback involves giving or receiving a thing of value. In exchange, there’s a referral. Now this gets very, very tricky. So let’s say for example that you hire a marketing company and the marketing company does this job and they send you dozens of good referrals, good leads a month, and you’re paying them. You’re paying this marketing company $2,500 a month to generate leads and essentially send you patients. Is that a kickback? Well, probably not. It’s a flat fee. So flat fees are typically safer. And the thing is you’re not paying for the referral. You’re paying for the marketing company to do its services. Now, what if every time the marketing company sends you a patient, now you give them $100, they send you $25 a month, that same $2,500 but it’s $25 times 100 patients. That’s a kickback. I mean, that’s the essence of a kickback. You’re actually paying for the referral. You’re not paying necessarily for performance or for production. And what’s happening is, another way of phrasing this is that the revenue fluctuates or varies by value or volume of referral. That’s another way the kickbacks are typically defined. Now if you’ve watched other of our videos, you’ll notice that self-referral or Stark and the Anti-Kickback Statute, they have parallels in state laws. So I got this question just yesterday. What if there’s no Medicare involved? What if there’s no federal moneys being reimbursed? Well, then we’re not under Stark and the federal Anti-Kickback Statute. However, you are going to fall within state law statutes, whether those are California or New York or Texas or some other states. Just look and you’ll find these statutes and regulations that prohibit referrals where the physician and sometimes other healthcare licensees have a financial interest in kickbacks. Now the next question we get is, what’s fee-splitting? Fee-splitting is literally you take the professional fee, the $100 that the physician gets from the patient. You split it, some of it goes to the physician, some of it goes to the business person. So how do you stop fee-splitting? Well, you have to be careful that you’re not splitting the professional fees. This can get very nuanced, especially in the age of digital healthcare, the age of internet Madison, the age of telehealth and telemedicine, e-health, mobile health, connected health, whatever name you give it. Basically what you’ve got is you’re moving out of the brick and mortar where you go and visit your medical doctor in the office and you’re paying somebody online for service and that service connects you to a medical professional. In the old days, we were especially concerned about flow of payments because if the payment goes from the patient to the company and then to the physician, that can look like it’s a kickback to the physician or it can look like moneys are coming and going one way and the referral is going in the opposite direction. So this triangular relationship between the three is very important. Nowadays, we have different kinds of financial systems that can segment the payment. Maybe the payment goes there and then gets split up. We’ve got a lot more digital health, so the flow of payments I would say in my judgment is not in and of itself a red flag typically, the red flag is something else, but it can be an issue. And sometimes we try and structure these arrangements so they look more like MSO arrangements, like a business arrangement where the patient is essentially paying for the professional service and the professional service provider is paying the software company, the software platform, the app, the business provider for a management and marketing service. That’s what we call legal fiction. We’re actually stretching the law. We’re not breaking the law. It’s like Silly Putty. Like we’re moving the boundaries of the law as industry continues pushing the envelope and that’s what makes fraud and abuse so fascinating. When you’re dealing with physicians and Medicare and Stark, that case, it behooves us to pay attention to all of the exceptions and be extremely meticulous. Of course we’ll be meticulous on the fee splitting and anti-kickback side as well, I would say though that when we’re not dealing with Medicare, we’re dealing with an internet startup, we’re dealing with software. We’re going to be looking at it with a somewhat different lens so that we can understand this place where you have compliance on one hand, the industry on the other. So that’s the last topic I’d like to address because people say, “Well, what do you do? Do you do compliance?” I suppose we do. I’ve said in the past that I find compliance a little bit less than exciting because compliance sounds like just checking the boxes in you. You have to comply. But what I would say is that you have this relationship between what you want to accomplish on one hand, and the compliance and the exactitude of the regulation on another. And somewhere in the middle, somewhere in between, you have to figure out your business model. You can’t be 1,000% percent compliant and not doing anything that’s innovative. On the other hand, you can’t play fast and loose with legal rules. So it takes a good savvy lawyer with good long run of healthcare law experience, especially in fraud and abuse, to understand how to structure these deals for digital health. We can talk more about these structures in another video, but for now I just wanted to give you that extemporaneous view of how industry is pushing the envelope and the law is not necessarily well pushing back in some places and other places. It’s more about stretching the paradigm to accommodate the vicissitudes and the transformations in the industry. I’m Michael H. Cohen, founding attorney at Cohen Healthcare Law Group. Hope you’ve enjoyed this video. Thanks for watching. We look forward to your healthcare venture success and to helping you with that success. Testimonials
December 22, 2019
Healthcare
What Physicians and Investors Must Know About California Medical Corporations
What Physicians and Investors Must Know About California Medical CorporationsPhysicians can operate their practice as a sole proprietorship or as a partnership with other doctors. While these business structures have some advantages, doctors should understand the many advantages of forming a medical corporation. A medical corporation can help to limit liability, provide a vehicle for tax savings, make control and success of the practice easier, and create other opportunities and risk management benefits. Unlike many other states, California does not give physicians the option of forming a standard C-Corporation or other common professional corporations such as an S-Corporations or an LLC (Limited Liability Corporation). Physicians who incorporate must create a California professional medical corporation. The medical corporation must be formed pursuant to the Moscone-Knox Professional Corporation Act. Benefits of a Professional Medical Corporation Some of the many benefits of a professional medical corporation are: Limitation of liability. One of the key reasons for professionals to incorporate is to limit their liability if debts can’t be paid. Debts can include office rental, equipment leasing, and a full range of business obligations. Sole proprietors are personally liable for all debts the proprietor/doctor incurs. Partners are “jointly and severally liable” for their debts in accordance with the written partnership agreement. Medical corporations are separate entities therefore if the physician did not personally guarantee or sign contracts personally, only the medical corporation is liable for the business debts. If the Professional Medical Corporation is forced to close because it can’t pay the debts, the creditors normally can’t collect from the individual doctors – provided specific formalities are met such as the doctor didn’t personally guarantee any contracts. One major exception is that physicians in California can’t use the cover of a professional medical corporation to protect the negligent doctor from medical malpractice lawsuits. The corporation status can be used, however, to protect the other doctors if they didn’t contribute to the malpractice. The corporate benefit is an advantage over partnerships. If three doctors operate a partnership and one doctor commits medical malpractice, the other doctors will likely be held jointly liable Tax benefits. A second major benefit of a Professional Medical Corporation is that it can help the physicians save on taxes. A Professional Medical Corporation can elect to be taxed the same way as an S-Corporation is taxed. Taxes in S-Corporations can be passed through to the shareholders so that there isn’t a double taxation like there normally is with an C corporation. An experienced medical corporate attorney can explain what other tax benefits are available to professional medical corporations. Medical corporations typically allow for higher contributions to 401(K)s than physicians could make on an individual basis There is a counter tax concern though. Corporations normally pay a higher tax rate than individuals. This means corporations need to work with their accountants and tax professionals to pass the income down to the physicians instead of keeping the income in the practice. California medical corporations also do have to pay different state income taxes, fees, and other taxes such as a franchise tax. Continuity. A Professional Medical Corporation also helps with the continuity of the medical practice. If a doctor who practices on his/her own dies, the practice ends. If the doctor works with a partner, the partner must look for a new partner. With a professional medical corporation, the practice continues. The corporate by-laws dictate how much the spouse or family receives. Control issues are spelled out which should make the transition much smoother. California Professional Medical Corporations can also be used to provide tax deductible health insurance, life insurance, and disability insurance. Physicians can also generally use the Professional Medical Corporation for retirement plans and benefits. Key terms and provisions of the Professional Corporation Act Some important definitions found in the Moscone-Knox Professional Corporation Act are: Professional services. These are professional services that generally require a “license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act.” Who can own shares in the Professional Medical Corporation? California professional medical corporations (Professional Medical Corporations) must have one or more physician owners. While non-physicians can have a partial ownership interest, the majority interest in the Professional Medical Corporation must be held by licensed doctors. The Act also regulates the number of non-physicians that are allowed. Permissible non-physicians in a medical corporation (provided they don’t have a majority interest) include: “Licensed doctors of podiatric medicine. Licensed psychologists Registered nurses Licensed optometrists Licensed marriage and family therapists Licensed clinical social workers Licensed physician assistants Licensed chiropractors Licensed acupuncturists Naturopathic doctors Licensed professional clinical counselors Licensed physical therapists Licensed pharmacists Licensed midwives There are separate permitted non-physician interests for podiatrist medical corporations, psychological corporations, and many other licensed health professionals. All non-physicians must be licensed to practice their profession in California. Concerns and Restrictions There are some issues for anyone considering a professional medical corporation must evaluate: The Corporate Practice of Medicine. When physicians contract with non-physicians or allow non-physicians to invest in their practice (through the purchase of stock for example), an immediate red flag arises. Contracts, investments, and other transactions with non-physicians may be considered a corporate practice of medicine. In California, the Medical Board of California directly warns doctors that the corporate practice of medicine is a violation of state law. Specifically, “The Medical Practice Act, Business and Professions Code section 2052, provides: ‘Any person who practices or attempts to practice, or who holds himself or herself out as practicing…[medicine] without having at the time of so doing a valid, unrevoked, or unsuspended certificate…is guilty of a public offense.’ Business and Professions Code section 2400, within the Medical Practice Act, provides in pertinent part: “Corporations and other artificial entities shall have no professional rights, privileges, or powers.” One of the key reasons California prohibits the corporate practice of medicine “is to separate medical from business decision-making.” The prohibition includes non-physicians and “lay corporations (corporations that are not medical professional corporations), and limited liability companies. In short, in California, a non-physician can’t own (have a majority interest in) a medical corporation. Non-physicians also cannot hire physicians as either an employee or independent contractor. CORPORATE PRACTICE OF MEDICINE: MEDICAL MANAGEMENT ORGANIZATIONS AND PROFESSIONAL MEDICAL CORPORATION–WHO CONTROLS WHAT? The Corporate Practice of Medicine (CPM) doctrine continues to befuddle, beleaguer, and bewilder healthcare companies seeking to venture with physicians and non-physician entrepreneurs. The MSO alternative. One possible alternative to reduce the risk of corporate practice of medicine complaints is that non-physicians can own a management service organization (MSO) which is specifically designed to run the administrative and non-medical parts of the medical practice. Transfer of corporate shares. There are restrictions on who a shareholder can sell his/her interest to and how proxies or other stock arrangements can be handled. The transfer, sale, or arrangement must not violate the Moscone-Knox ownership requirements. The transaction also can’t result in corporate practice of medicine. Generally, the shares can only be transferred to an existing shareholder or to someone who is licensed in California to practice the same profession as the shareholder who is making the transfer. Unlicensed professionals. The California professional medical corporation must buy back the shares of any health provider who loses his/her license, certification, or is otherwise disqualified from the further practice of medicine or from providing licensed healthcare services. An experienced California medical corporation lawyer will explain the time limits for buy-backs. The lawyer will also explain why the terms of buy-sell agreements should be negotiated before any disqualification occurs. Deceased Professionals. The California Professional Medical Corporation must buy back the deceased provider’s shares in accordance with any buy-sell agreements. Compliance with federal and state laws. Professional medical corporations and the physicians who work for or have an ownership interest in the Professional Medical Corporation cannot violate Stark Law, the Anti-Kickback Statutes, HIPAA, professional codes, and any other federal or state laws that regulate their practice, billing, marketing, services, or operations. The officers and directors of the professional medical corporation must also comply with all applicable federal and state laws. Fictitious name approval. The California Professional Medical Corporation should also review whether any pre-approvals are needed before the practice uses a fictitious name to run the medical practices. An experienced corporate practice of medicine lawyer in California can explain how an MSO can also be used to help protect against Stark, Anti- Kickback, and state fee-splitting laws – in addition to using the MSO to protect against corporate practice of medicine complaints. A Managed Service Organization can be used to provide an exception to Stark Law, a safe harbor to the Anti-Kickback Statute, and a defense to California’s fee splitting lawyer. A skilled MSO and medical corporation lawyer will explain how the MSO must be formed and operate to qualify for these exceptions, safe harbors, and defenses. For example, the fee the MSO charges must be the fair market value for these services. MSOs can be used for “a conventional medical practice, a medical spa, an aesthetic medicine practice, integrative medicine, functional medicine, concierge medicine … or even a psychology practice or behavioral medicine group.” Doctors should review what other restrictions and duties may apply when forming a professional medical corporation – with their California Professional Medical Corporation lawyer. CORPORATE PRACTICE OF MEDICINE ON STEROIDS: HOW YOUR MSO AND PROFESSIONAL MEDICAL CORPORATION COULD WORK TOGETHER WITHOUT COURTING LEGAL DISASTER You, MSO is my own variation on I Claudius. Poor Uncle Claudius, everyone said. Ended up becoming Emperor of Rome. Through craft and careful strategy. So you have an MSO and want to operate […] Additional concerns and requirements Generally, the physicians will employ an experienced healthcare Professional Medical Corporation lawyer to form the medical corporation. The articles of corporation must comply with California law and with the rules and regulations of the particular practice area professional boards. The attorney will also prepare the bylaws which set forth how the corporation will function, how disputes are handled, and how the corporation can be dissolved. Speak with an experienced healthcare lawyer to understand when, how, and why to form a California medical corporation. Some of the key considerations the lawyer will review are: The requirements for physician ownership and control. The advantages to using a Professional Medical Corporation including liability benefits, tax benefits, retirement benefits, and the ability to control the Professional Medical Corporation when physicians leave the practice or when disputes arise. How to protect against the risk of being charged with the corporate practice of medicine, fee-splitting and other federal and state laws, transfer of ownership issues, fictitious name registration, and many other legal concerns. Before starting a new medical practice or agreeing to participate in an existing practice, physicians in California and elsewhere need to review the pros and cons of forming a professional medical corporation. Contact Cohen Healthcare Law Group, PC. to review when you must form a professional medical corporation and how you can use the Professional Medical Corporation to benefit your practice and the doctors in the practice. Understand the professional and legal obligations as well as the financial issues. We have helped many physicians form professional medical corporations and work with managed service organizations (MSO), so they can focus on helping their patients and growing their healthcare venture. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
November 8, 2019
Healthcare
When Using a Management Services Organizations (MSO) Is the Right Choice for Your Medical Practice
When Using a Management Services Organizations (MSO) Is the Right Choice for Your Medical PracticeSeymour Heart, MD runs a successful medical practice and would like to expand to a second office. Dr. Heart is a renowned plastic surgeon (or functional medicine doctor specializing in helping patients with obesity, reverse diabetes, or autoimmune disorders, or something like that)—and it turns out he is also successful at building a brand. Dr. Heart’s brother, Samuel, is a marketing guru whose SEO strategies have placed Dr. Heart’s medical group at the top of the search rankings for various treatments. Dr. Heart is looking for a way to collaborate more deeply with his brother and, share in the profits from the business side of his expanding medical ventures. Dr. Heart also wants to brand a line of dietary supplements and cosmetics that will further establish him as the premiere authority for patients, and, add revenue streams so that he can spend more time with his family and less time doing medical procedures. The MSO Advantage Recently a medical doctor contacted our healthcare legal team with this kind of scenario, and reported that a senior medical colleague… who heard it from another senior medical colleague… was told by his lawyer … that his compensation arrangements were violating Stark and anti-kickback laws… but… he thought MSOs were antiquated and no longer worked. This is the kind of heard-it-from-a-friend who heard-it-from-a-friend strategy that is almost inevitably based on faulty hearsay like the old game of “telephone.” In fact, the MSO model is alive and well and deeply useful for healthcare clients like Dr. Heart. Managed Service Organizations (MSOs) are designed to help physicians and other health providers with the non-clinical, administrative part of their medical practice—and to grow the business side of healthcare. Often, MSOs supply the business side of the medical or healthcare practice with human resources, payroll and benefits, compliance, and other non-medical matters. While MSOs mainly provide services for physicians, MSOs can help hospitals and other medical ventures. MSOs can be owned by different entities including hospitals, physician groups, investors, and others. According to Healthlawyers.org, MSOs can do more than provide management services. They can also buy the assets of a practice (to provide capital) and then offer the practice essentials such as equipment or space. Generally, while the idea of an MSO owning of assets allows the physician or medical practice to focus more on the medical practice, MSO ownership also can carry more risk that the arrangement might violate federal or state laws. This depends a lot on the compensation arrangements, as we will discuss below. The Healthcare Business Services an MSO can provide According to Physicians Practice, MSOs perform the following tasks: Educating and training medical staff – including compliance training and education about various diseases Medical coding for payment, billing, and collection actions – hiring coding personnel, making sure the billing doesn’t violate the False Claims Act or other federal and state laws, filing claims in a timely manner, managing accounts receivable, creating customize billing reports for the patients Managing and even providing office space – choosing the location, drafting and negotiating leases, and reviewing options to buy office space Managing equipment – determining what equipment is needed and where and how to acquire/lease the equipment Regulatory compliance with federal and state laws such as HIPAA (Health Insurance Portability and Accountability Act), OSHA (Occupational Safety and Health Administration) regulations, FMLA (Family and Medical Leave Act), CLIA (Clinical Laboratory Improvement Amendments of 1988), and state laws Credentialing staff and hiring clinical and administrative staff, credentialing health plans, and managing enrollment Information technology – managing networks, evaluating and buying software and hardware, providing support services, document management, database management, scanning, and integration of technology Procurement of supplies and medications Auditing Financial management Payroll and benefits such as health and retirement benefits Scheduling Financial statements Transcription of medical records Marketing Sales Public relations Disaster management Quality assurance Negotiating and managing contracts Managing risks and insurance Managing inventory Maintenance of electronic health records (EHR) Managed care Strategic management Legal Issues involving MSOs – Stark Law MSOs can be particularly effective at helping medical practices comply with various federal laws including Stark Law. This law covers self-referrals. Medical doctors, unless approved exceptions apply, cannot buy “designated health services (DHS)” for patients who use Medicare or Medicaid – if the physician (or an immediate family member) has a “financial relationship” with the DHS. Some financial arrangements may not violate Stark law. Often, an experienced MSO healthcare lawyer will recommend using the MSO to meet one of the approved exceptions. HOW TO HANDLE STARK AND ANTI-KICKBACK LEGAL BARRIERS WHEN PHYSICIANS INVEST IN AN MSO This is a story about how Harry, a healthcare entrepreneur, worked through a proposed arrangement that was raising Stark and Anti-Kickback issues. Financial relationships include various ownership, investment, and compensation arrangements. Referrals are “the request or establishment of a plan of care by a physician which includes the provision of the designated health service.” For an MSO arrangement to meet the financial relationship and self-referral definitions, it is crucial to create the MSO so that it meets one of the listed exceptions. These exceptions include: Personal Service Arrangement. This exception applies to physicians who are independent contractors and not employees. An MSO healthcare attorney can explain the requirements to meet the exception including reviewing that: The agreement to provide services is in writing The agreement covers all the medical services the doctor will provide to the DHS The arrangement’s duration is for one year or longer The total services aren’t more than are “reasonable and necessary for the legitimate business purposes of the arrangement.” The compensation is set in advance, isn’t more than the fair market value, and isn’t based on the value or volume of the referrals or any other business between the physician and the entity The services that will be provided can’t involve any business activity the violates federal or state law The Fair Market Value Exception. This exception applies to many different types of items and services (other than renting office space which has its own set of requirements to qualify for an exception). The key requirements that a Managed Service Organization lawyer will review to help show the compensation for providing these items and services meets the fair market value exception are: The agreement is written down, signed by the parties, and covers specifically named items and services The length of the agreement and means of termination are set forth – provided there is one agreement yearly – though agreements that are less than a year can be repeatedly renewed on the same terms Any compensation must be preset, must meet the fair market value, and can’t take volume or value of referrals into account The compensation for renting equipment cannot be based on: “A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated through the use of the equipment; or Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee. “ The agreement is commercially reasonable The arrangement doesn’t violate federal or state billing law including the Anti-Kickback statute – or any federal or state regulations. This exception permits fair market value compensation to and from DHS entities by physicians. Rental of Office Space and Equipment. If an MSO leases property, equipment or office space to a physician so the doctors don’t need to locate or maintain these items – the MSO arrangement needs to meet the relevant Stark exceptions. The main exception requirements are that The lease is put in writing, signed, identifies the property being leased, indicate that the property will be used only be the lessee, and show that the lease term is at least one year. The office space should meet what is “reasonable and necessary” for the practice The common area payments should reflect the lessee’s pro rata share The rental amounts should be preset, conform with fair market value, and should not be based on the value or volume of referrals or other business generated between the parties Payments by a Physician for Items and Services. This is a catch-all exception that applies if no other exceptions apply Other Stark exceptions may apply. Some of these exceptions that your managed service organization (MSO) lawyer will explain are: The isolated transaction exception – used when the MSO wants the medical practice’s practice assets. This can infuse the practice with needed capital. The isolated transaction exception can also be used for a sale of the practice provided additional terms are met. Indirect compensation. Certain hospital arrangements Group practice arrangements with a hospital Non-monetary compensation Medical staff incidental benefits Risk-sharing arrangements Compliance training Other exceptions Legal Issues involving MSOs – The Anti-Kickback Statute The Federal Anti-kickback statute applies to individuals and entities that receive payments through any federal healthcare program including Medicare and Medicaid. The law makes it illegal to “willfully offer, solicit, pay, or receive compensation in return for referring business.” Compensation includes bribes, kickbacks, and rebates. There are civil and criminal penalties that can result in jail time for physicians and closure of the medical practice. The payment method includes indirect payments as well as direct payments. The AKS covers cash and payments in kind. “Prohibited conduct includes not only remuneration intended to induce referrals, but also remuneration intended to induce the purchasing, leasing, ordering, or arranging for any goods, facility, service or item paid for by a federal healthcare program. “ The AKS does provide for safe harbors which protect legitimate arrangements from both civil and criminal liability. Each arrangement is judged on a case-by-case basis. MSO arrangements need to comply with the Anti-Kickback Statute Some of the safe harbors allowed by the Office of Inspector General which your MSO lawyer will review include the following: Space rental Equipment rental Personal service and management contracts The common threads to these safe harbors are: The MSO relationship should be in writing The relationship term should be a year or more The total amount of payments including for the office space, equipment, and services, should be established in advance If the relationship contract doesn’t anticipate “full-time services,” the agreement must properly address the part-time arrangement. The payments should be based on the fair market value of the space, equipment, or services and can’t change based on the value or volume of “Medicare or state health care program-covered referrals or business generated between the parties.” Another safe harbor your MSO healthcare attorney can explain is investment interest. He’ll review how this safe harbor is used and what the requirements are when a medical practice and a hospital are considering a joint venture. This safer harbor applies to investment interests: In large, publicly held companies; In smaller healthcare companies; In healthcare entities that are located in Medically Underserved Areas. Additional legal issues involving Managed Service Organizations Some additional concerns your MSO healthcare attorney will review are: The corporate practice of medicine. States are concerned about the unauthorized practice of medicine including a non-licensed individual “owning, maintaining, or operating a place of business in which an individual is employed or otherwise engaged to practice medicine”. MSOs should not be too involved in the daily practice of medicine. Contract law. At the heart of every MSO relationship is the written agreement. The terms need to be carefully negotiated and drafted. The rights and duties of the MSO and the medical practice need to be set forth in detail. The ability to terminate the contract should be precise. How disputes are handled should be identified. The consideration should be clearly identified. Compliance issues should be spelled out. Many other provisions need to be reviewed. Your MSO lawyer may also need to review antitrust laws, tax exempt organization issues, and other matters CORPORATE PRACTICE OF MEDICINE: MEDICAL MANAGEMENT ORGANIZATIONS AND PROFESSIONAL MEDICAL CORPORATION–WHO CONTROLS WHAT? The Corporate Practice of Medicine (CPM) doctrine continues to befuddle, beleaguer, and bewilder healthcare companies seeking to venture with physicians and non-physician entrepreneurs. Managed Services Organizations (MSOs) are a popular and useful tool for physician medical practices and other healthcare ventures. The advantages of an MSO are that they assign administrative tasks such as billing, compliance issues, electronic health records, leasing of office space and equipment, training and other services and items to an outside agency. There are numerous legal risks. MSO arrangements must be reviewed with an experienced management service organization lawyer. Most MSO arrangements will be considered violations of Stark anti-referral law and the Anti-Kickback statute unless the arrangements qualify for an exception or a safe harbor. MSO arrangements may also violate state laws on the corporate practice of medicine. Creating an MSO requires thinking through a wide variety of business and medical terms and considerations. MSO arrangements need to be properly negotiated and set forth in writing so that the rights and duties of the medical practice and the MSO are clear, so that disputes can be addressed, and financial benefits are maximized. MSOs that violate federal or state law can result in civil and criminal penalties. Contact Cohen Healthcare Law Group, PC. to speak with an experienced MSO healthcare lawyer. Our MSO attorneys have extensive experience drafting MSO arrangements with sensitivity to the business, financial, and legal needs of healthcare practices. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
October 8, 2019
Healthcare
Will Corporate Practice of Medicine Kill Your Healthcare Venture?
Will Corporate Practice of Medicine Kill Your Healthcare Venture? Many lawyers say that corporate practice of medicine is dead – that this is a new age of healthcare and we no longer need to worry about these old 20th century, or maybe 19th century healthcare rules. And the prohibition against corporate practice often isn’t written into statutes; the statutes prohibit unlicensed practice of medicine—referencing to individuals. Then there is often a second set of statutes that talk about the fact that corporations cannot engage in professional practices. Then usually a third set of statutes that deal with who can organize and own a professional corporation. To get to the prohibition against the corporate practice of medicine (or Corporate Practice of Medicine), you have to put these three sources together. Sometimes the medical board website spells it out and pulls it all together. For example, the California Medical Board says this in its page on Corporate Practice of Medicine: The Medical Practice Act, Business and Professions Code section 2052, provides: “Any person who practices or attempts to practice, or who holds himself or herself out as practicing…[medicine] without having at the time of so doing a valid, unrevoked, or unsuspended certificate…is guilty of a public offense.” Business and Professions Code section 2400, within the Medical Practice Act, provides in pertinent part: “Corporations and other artificial entities shall have no professional rights, privileges, or powers.” The policy expressed in Business and Professions Code section 2400 against the corporate practice of medicine is intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment. The decisions described below are examples of some of the types of behaviors and subtle controls that the corporate practice doctrine is intended to prevent. In this way, the Medical Board of California pulls together the various pieces of legislation. If you keep reading, California takes the corporate practice of medicine very seriously. So if you ask, if enforcement possible, the answer is, YES. If you ask, if enforcement likely, that’s another story. It’s very much dependent on your exact model. And our healthcare lawyers have seen a thousand variations. The answer is invariably nuanced. This is why the Medical Board of California advises: This area of law can be complicated, therefore physicians are encouraged to discuss their medical practices and business enterprises with appropriately knowledgeable legal experts. The Medical Board of California continues to receive complaints and inquiries about the law, and some repeating issues are presented here. Well, we appreciate the medical board promoting legal services. It really isn’t something you can figure out from a chart or grid or some poster you can get off the Internet. More below. “Strong” v. “Weak” Corporate Practice of Medicine States State law prohibitions against corporate practice of medicine come in to flavors: Strong form corporate practice of medicine doctrine Weak form corporate practice of medicine The distinction between the “strong” and “weak” versions can be particularly important when designing an MSO (management services organization) structure. The MSO structure can work very well in navigating the twin of corporate practice of medicine enforcement: the prohibition against kickbacks and fee-splitting. 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. The MSO model allows non-MD (non-physician) entrepreneurs to create a robust business model for the healthcare venture in which they do not “partner” or share professional fees with the medical doctors, but rather take an MSO or management fee in exchange for their management and marketing efforts. The management fee must be at fair market value. In some states (for example, California), it can be a percentage of gross revenues, whereas in other states (for example, New York), the management fee, at least historically, has had to be a flat fee. States that have a “strong” Corporate Practice of Medicine (CPM) prohibition will likely regard it as a per se violation of Corporate Practice of Medicine for a company other than a professional medical corporation (“PMC”) to hire physicians. In the strong form of Corporate Practice of Medicine, there is a typically a violation, whether the physicians are hired as employees or independent contractors, to provide medical services. This is the case in California. In some states, you have to read the various rules and figure out what the state’s position is on corporate practice of medicine. For example, in Georgia: Georgia law provides a fairly typical definition of the “practice of medicine” (O.C.G.A., Section 43-34-21) as well as a prohibition against unlicensed practice of medicine (Section 43-34-22(a)). Section 43-34-42 provides the penalty for unlicensed practice of medicine or any related violation. The crime is designated a felony, punished by a fine of $1,000 per violation or by imprisonment for two to five years, or both. Section 43-34-39 provides that the state medical board, “in addition to any other remedy or criminal prosecution” (emphasis added), may file a complaint to the superior court and seeking a restraining order and an injunction against “any person, firm, company, partnership, association, or corporation or the agent, officer, or director of such firm, company, partnership, association, or corporation” who “is or has been violating any” state law relating to the practice of medicine. Section 33-18-17, a statute that deals with nonprofit “medical service corporations,” states that this statute shall not “be construed as authorizing the corporate practice of medicine.” In Minutes of June 7-8, 2012, the Georgia Composite Medical Board cryptically stated, “The corporate practice of medicine has not been defined by the statute legislature.” But this was after stating, “the Medical Board can only license physicians to practice in Georgia, not corporations.” All this suggests that Georgia has a strong prohibition against Corporate Practice of Medicine—at least for the moment, as these legal rules can be in flux. Corporate Practice of Medicine Exceptions There are usually exceptions to the corporate practice of medicine prohibition—notably, for example, the case of hospitals. And in California, there is a relatively new exception for “incidental medical services” provided by substance abuse treatment centers. HOW SUBSTANCE ABUSE TREATMENT CENTERS NAVIGATE ANTI-KICKBACK RULES Substance abuse treatment centers must steer carefully when sending patients for labs. Self-referral, anti-kickback, and fee-splitting rules can create legal enforcement issues and must be […] Weak Corporate Practice of Medicine States & A National Strategy States with a “weak” Corporate Practice of Medicine prohibition potentially might allow such companies to hire physicians to provide medical services, so long as the contract clarifies that the company cannot interfere with clinical decision-making. For example, in Virginia there is at least one Attorney General opinion that is permissive with respect to Corporate Practice of Medicine: The Virginia Attorney General concluded that Virginia statutes and court decisions allow a hospital to employ a physician as long as the employment agreement authorizes the physician to exercise control over the diagnosis and treatment of the patient, the physician’s professional judgment is not improperly influenced by commercial or lay concerns, and the physician-patient relationship is not altered. 1992 Op. Atty. Gen. Va. 147. While there often is a Corporate Practice of Medicine exception for hospitals that hire physicians, the AG’s rationale in the 1995 opinion, cited above, provides a good statement of the logic behind the “weak” version of the prohibition against Corporate Practice of Medicine. This is good news if you are planning a multi-state or national model of health and wellness services, whether through physical healthcare clinic sites or digital health or mobile health (telemedicine, etc.). Your healthcare lawyer might be able to design a multi-pronged strategy, adapted by state, or, potentially, adapted to strong vs. weak corporate practice of medicine states. Limitations to the Weak Corporate of Medicine Allowance Even in a “weak” Corporate Practice of Medicine state, there is some ambiguity in the legal rules. As we said, the prohibition is not necessarily embodied in a statute, but rather, may be expressed in cases, or, perhaps a policy statement by the state medical board. The problem with the case is that they are typically very old. Cases can be interpreted as limited to its facts, or otherwise legally ambiguous; so much depends on the overall situation and what harms the State perceives in the arrangement and immediate facts, and, there is always enforcement discretion. Whatever the medical board says on its website is a good indication of the medical board’s enforcement position. But it is not the law, simply a restatement of what the medical board interprets the law. And sometimes, the medical board may be more aggressive in its interpretation, signaling a strong enforcement posture to the Attorney General or District Attorney who will actually be the one prosecuting the case. And “so long as the MSO does not overly interfere with the clinical duties of the medical doctors” leaves a lot of room for interpretation. If the MSO is an employer, then the MSO has the right to control its employees—by definition. There are also a lot of subtle layers of influence, as California indicates on its Corporate Practice of Medicine web page, including: Determining what diagnostic tests are appropriate for a particular condition. Determining the need for referrals to, or consultation with, another physician/specialist. Responsibility for the ultimate overall care of the patient, including treatment options available to the patient. Determining how many patients a physician must see in a given period of time or how many hours a physician must work. These are criteria that California—a strong corporate practice of medicine state—uses to assess whether there has been a corporate practice of medicine violation. These criteria also show the slippery slope and how enforcement in other states can potentially look to find intrusion by the MSO or healthcare venture into the medical doctor’s domain. For example, what if the telemedicine or digital health venture or mobile app guides the user (aka patient) to a specific pathway of diagnostic tests and/or treatments? Let’s say, for example, compounded skin care creams to treat acne? Is the MSO going too far into medical practice, in the eyes of the regulators who enforce the corporate practice of medicine prohibition? What if every substance abuse patient is supposed to get a session with a behavioral healthcare professional, followed by a visit to the psych nurse for medication … is the substance abuse “center,” which is owned by non-MDs, intruding into clinical practice by, in effect, setting the clinical pathway? Again, these situations are very fact-specific. A good healthcare lawyer will work with your healthcare venture to help structure the business model so as to help mitigate regulatory risk. Because of the limitations of the weak Corporate Practice of Medicine model, for some healthcare ventures, it makes sense to use one model—based on the strong version of Corporate Practice of Medicine—across states. Again, regulatory authorities have a lot of enforcement discretion. Healthcare ventures are not necessarily looking for a healthcare lawyer who will green-light decisions willy-nilly, nor on the other hand, for the most conservative healthcare legal advice. A nuanced approached is best, and that is how our healthcare lawyers roll. If it’s not Corporate Practice of Medicine, Watch Out for Anti-Kickback Enforcement As we noted, whenever you find Corporate Practice of Medicine concerns, you’re likely to also find state law prohibitions against fee-splitting, kickbacks, conflict of interest, patient exploitation, and so on. Enforcement has many tools at its disposal. In terms of risk mitigation, here some key legal strategies the healthcare venture can bake into its operational plan: The MSO should take care to leave anything that could be regarded as clinical decision-making or a clinical pathway to the healthcare provider. This includes evaluating or assessing the patient, treating, and obviously, prescribing. The MSO fee should reflect fair market value for the MSO’s services. While California law does allow a percentage of gross revenues under certain conditions, generally, percentages raise enforcement issues. Your healthcare lawyer can provide nuanced advice as what is good for business, often is fodder for enforcement; and conversely, what is most compliant, is often neither efficient nor profitable. One of the benefits of getting advice from an astute healthcare lawyer is finding the right “Goldilocks” strategy—neither too hot on the enforcement side, nor too cool on the profit side. Crafting the right plan takes legal experience as well as knowledge of the corporate practice of medicine, anti-kickback and fee-splitting, and other legal pitfalls that can ensnare the healthcare venture.
August 22, 2019
Healthcare
Do You Know the Key Differences Between the 4 Ambulatory Safe-Harbors to the Federal Anti-Kickback Statute (AKS)?
Do You Know the Key Differences Between the 4 Ambulatory Safe-Harbors to the Federal Anti-Kickback Statute (AKS)?The Anti-Kickback Statute (AKS) forbids physicians from knowingly and willfully soliciting, paying, offering, or accepting remuneration to: Refer a patient for services or any item for which the payment for that service or item is made (in whole or in part) by a Federal health care agency or Buying, ordering, leasing (or recommending buying, ordering, or leasing) any service, good, or facility (in whole or in part) for which payment for that service, good, or facility is made by a Federal healthcare program The federal anti-kickback statute (AKS) is violated if the scheme is indirect or direct, cover or overt, and for cash or an in-kind return. Medicare and Medicaid are the two prime examples of Federal health care programs that pays for services, goods, and facilities. Remuneration is fairly broad in scope and essentially includes anything of value. The Anti-Kickback Statute is a federal law. Violators can be given a criminal record and a prison sentence. Fines can be substantial and the violator will need to return any improperly received payments – reimburse the federal health care program directly or through the Department of Justice. Physicians who violate the Anti-Kickback Statute may lose their right to practice medicine. Violators may also be precluded from working with Medicare, Medicaid, or any federal health care program. Safe harbors to the anti-kickback statute The Anti-Kickback Statute laws do create “safe harbors,” which are ways/conduct that won’t qualify as violations of the Anti-Kickback Statute. Experienced healthcare lawyers can explain what actions and relationships qualify for safe harbor protection. Without safe harbors, many of the relationships physicians and nurses have with hospitals would violate the Anti-Kickback Statute. Many of the relationships medical device companies and pharmaceutical companies have with physicians could also violate the Anti-Kickback Statute. See our Prior post: 5 KEY STARK AND ANTI-KICKBACK LEGAL RULES YOU’LL WANT TO KNOW While federal Stark and anti-kickback laws, and state law equivalents (often known as “mini-Stark” and “fee-splitting prohibitions”) are very complex, there 5 key legal rules you’ll want to know. […] Medical practitioners should understand that there is no mandatory requirement to meet safe harbor. Many relationships between medical practitioners and medical companies may fail to meet the Anti-Kickback Statute’s prohibitions for other reasons. Some of the safe harbors in the Anti-Kickback Statute include: Renting space arrangements The sale of a medical practice Equipment rentals Discounts Personal service contracts Managed service contracts Group purchase organizations Certain types of investments such as investments in publicly traded companies, “underserved areas,” and group practices where all the “active investors” are licensed medical professionals Incentives for rural practitioners Many other types of relationships and agreements What is an ambulatory surgery center? Ambulatory surgery centers (ASC) are modern health care facilities where patients can get same day surgical care – instead of having to stay overnight at a hospital. Many Ambulatory surgery centers are closer to where the physician practices, sometimes in the same building. Ambulatory surgery centers are generally more convenient for patients. Advocates for Ambulatory surgery centers claim the risk of infection is less than in a hospital setting. Some of the prime users of Ambulatory surgery centers include procedures for: Endoscopy Pain management Plastic surgery Eye surgeries Podiatry Otolaryngology Orthopedic surgery Dental surgery The ambulatory surgery center safe harbor One key statutory safe harbor is the safe harbor for ambulatory surgery centers. Subsection r of the safe harbors to the Anti-Kickback Statute 42 CFR 1001.952 – Exceptions, provides as follows: “(r)Ambulatory surgical centers. As used in section 1128B of the Act, “remuneration” does not include any payment that is a return on an investment interest, such as a dividend or interest income, made to an investor, as long as the investment entity is a certified ambulatory surgical center (ASC) under part 416 of this title, whose operating and recovery room space is dedicated exclusively to the Ambulatory surgery centers, patients referred to the investment entity by an investor are fully informed of the investor’s investment interest, and all of the applicable standards are met within one of the following four categories surgeon-owned Ambulatory surgery centers ; single specialty Ambulatory surgery centers ; multi-specialty Ambulatory surgery centers ; and hospital/physician-owned Ambulatory surgery centers Similarities among the four Ambulatory surgery centers safe harbor categories There are key differences among the four different types of Ambulatory surgery center investments. The common threads among those four types are: The Ambulatory surgery center must be properly certified The entity or any investor (or other individual or entity acting on behalf of the entity or any investor) must not loan funds to or guarantee a loan for an investor if the investor uses any part of such loan to obtain the investment interest. As with many of the safe harbors, the investments can’t depend on the value or the volume of any referrals Secondary (ancillary) services such as anesthesia care must be an integral part of the Ambulatory surgery center procedure in order to bill Medicare, Medicaid, or other federally funded health care programs. The ancillary services can’t be separately billed to these federal health care plans. The official statutory language is that “all ancillary services for Federal health care program beneficiaries performed at the entity must be directly and integrally related to primary procedures performed at the entity, and none may be separately billed to.” The doctors and the Ambulatory surgery center can’t violate any federal health care discrimination laws or regulations The amount of payment to an investor in return for the investment must be directly proportional to the amount of the capital investment (including the fair market value of any pre-operational services rendered) of that investor. A common violation of the Anti-Kickback Statute that is not protected through an Ambulatory surgery center safe harbor is inducing another physician to perform in the Ambulatory surgery center by offering the outside physician referrals if they perform their procedures at the ambulatory surgery center. The Ambulatory surgery center safe harbor income test The Anti-Kickback Statute legislation wants to make sure that the doctor’s investment in the Ambulatory surgery center is tied into their medical practice – and not as a means to profit from referrals. For this reason, the Ambulatory surgery center safe harbor for surgeon-owned practices and single specialty practices requires that: “At least one-third of each surgeon investor’s medical practice income from all sources for the previous fiscal year or previous 12-month period must be derived from the surgeon’s performance of procedures, “- at an ambulatory surgery center or hospital surgical facility. This income test applies to surgeon owned and single-specialty Ambulatory surgery centers . The requirement also applies to multi-specialty Ambulatory surgery center investments (safe harbors) with the additional requirement that the 1/3 income be from just the investment Ambulatory surgery center. The examination of the 1/3 income test does not apply to hospital/physician Ambulatory surgery centers. The trade-off is that there are other very strict requirements the hospital/physician Ambulatory surgery center safe harbor must meet. These extra requirements are: “(v) The entity may not use space, including, but not limited to, operating and recovery room space, located in or owned by any hospital investor, unless such space is leased from the hospital in accordance with a lease that complies with all the standards of the space rental safe harbor set forth in paragraph (b) of this section; nor may it use equipment owned by or services provided by the hospital unless such equipment is leased in accordance with a lease that complies with the equipment rental safe harbor set forth in paragraph (c) of this section, and such services are provided in accordance with a contract that complies with the personal services and management contracts safe harbor set forth in paragraph (d) of this section. (vii) The hospital may not include on its cost report or any claim for payment from a Federal health care program any costs associated with the Ambulatory surgery center (unless such costs are required to be included by a Federal health care program). (viii) The hospital may not be in a position to make or influence referrals directly or indirectly to any investor or the entity.” Additional Ambulatory surgery center safe harbor considerations The definition of an ambulatory surgery center does not include cardiac catherization centers, facilities, for radiology oncology, and other specialized types of surgery centers. Only Ambulatory surgery centers certified by Medicare are included for safe harbor Ambulatory surgery center protection. The procedures that Medicare is covering in Ambulatory surgery center centers are expanding. An experienced Ambulatory surgery center healthcare lawyer can explain which facilities and which procedures are eligible for the Anti-Kickback Statute safe harbor. The expansion of eligible procedures can help physician-owned and single-practice Ambulatory surgery center meet the one-third income test. The Office of Inspector General is not currently requiring that the investors in the Ambulatory surgery center be 100% completely owned by physicians. Outside investors (who can’t refer patients to the Ambulatory surgery center and can’t perform procedures at the Ambulatory surgery center on patients they do refer) must meet some additional requirements: They can’t be employed by the Ambulatory surgery center or can’t be employed by an investor They generally can’t be in a position to influence referrals or provide services/items to the ambulatory surgery center Management service organizations cannot invest in the Ambulatory surgery center. Many other factors (in the statutes, in the OIG rulings, and elsewhere) can also affect Ambulatory surgery center safe harbor status. The four Ambulatory surgery center safe harbors defined In addition to the similarities and differences among the four types of Ambulatory surgery center safe harbors, it is important to understand how each category is defined. Standard Ambulatory surgery center safe harbor for surgeon-owned Ambulatory surgery centers The law for surgery-owned Ambulatory surgery center is as follows. The three other categories have similar provisions. Some of the key differences have been noted. Your Ambulatory surgery center investment healthcare lawyer can explain any other key differences. (1)Surgeon-owned Ambulatory surgery centers – All of the investors are general surgeons or surgeons engaged in the same surgical specialty, who are in a position to refer patients directly to the entity and perform surgery on such referred patients; surgical group practices (as defined in this paragraph) composed exclusively of such surgeons; (2) Single-Specialty Ambulatory surgery centers – All of the investors are physicians engaged in the same medical practice specialty who are in a position to refer patients directly to the entity and perform procedures on such referred patients; group practices (as defined in this paragraph) composed exclusively of such physicians; (3) Multi-Specialty Ambulatory surgery centers – All of the investors are physicians who are in a position to refer patients directly to the entity and perform procedures on such referred patients; group practices, as defined in this paragraph, composed exclusively of such physicians” (4) Hospital/Physician Ambulatory surgery centers – At least one investor is a hospital, and all of the remaining investors are physicians who meet the requirements of paragraphs (r)(1), (r)(2) or (r)(3) of this section; group practices (as defined in this paragraph) composed of such physicians; surgical group practices (as defined in this paragraph) All four categories also include the following definition – “investors who are not employed by the entity or by any investor, are not in a position to provide items or services to the entity or any of its investors, and are not in a position to make or influence referrals directly or indirectly to the entity or any of its investors.” Experienced health care lawyers understand how important relationships are between physicians and other entities such as hospitals, laboratories, and other medical providers or medical companies. Meeting with a skilled Anti-Kickback Statute attorney can help the physician understand what relationships may violate federal law. The lawyer can then explain what safe harbors such as ambulatory-surgery-center safe harbors may protect the physician’s investments. The attorney will also explain the differences among the four different types of Ambulatory surgery center safe harbors: surgeon-owned Ambulatory surgery centers, single specialty Ambulatory surgery centers, multi-specialty Ambulatory surgery centers, and hospital/physician-owned Ambulatory surgery centers Speak with an experienced health care lawyer before you plan any investments in an ambulatory service center. The difference between investing correctly or incorrectly can be the difference between your freedom and a criminal sentence which may include jail time and can mean saving money versus having to pay substantial fines, costs, and other damages. Contact Cohen Healthcare Law Group, PC. today. We have the experience and resources to help you create an ambulatory surgery center which can better comply with Ambulatory surgery centers safe harbors. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 22, 2019
Healthcare
3 FDA Legal Traps When Marketing your Dietary Supplement Product
Ask an FDA Legal Expert The world of dietary supplement claims and labeling requires a hard look at the kinds of claims FDA allows and FDA for dietary supplements. It is not simply about how much you pay to get X number of labels reviewed. That kind of bottom-feeding, discount chain mentality gets a lot of companies X’d out of the market every year. Consider the case of Seymour Heart, MD, the successful physician and You Tube personality who privately branded his dietary supplements. He got a label, wonderful, and was proud that he got the font size right and put the address of the manufacturer on it. But then, he had made 11 different claims on the label, and that was something the FDA regulatory consultant did not review. The FDA regulatory consultant vendor did not conduct any review of FDA warning letters for each particular claim. Nor the FDA regulatory consultant talk about substantiation requirements that each of FDA and FTC impose on every dietary supplement claim, whether the claim is on the label itself or on the website or other marketing materials. Dr. Heart got a nice flat fee deal and then later found himself in the crosshairs of regulatory enforcement for making drug claims for his product. Now it’s your turn. See our previous post: DIETARY SUPPLEMENT LEGAL REVIEW COULD SAVE YOUR COMPANY If you want to sell healthcare products online, the legal hurdles can be steep. FDA Legal Trap # 1: FDA Looks to Intended Use, Giving FDA Broad Enforcement Discretion The intended use doctrine gives FDA a trump card over enforcement activity. Because FDA is not limited to the definition of “labeling” in determining the “intended use” of a product, FDA can look to anything it deems relevant. As well, FTC can enforce if it determines that the advertising is untruthful or misleading. Therefore, materials on other websites that include promotional statements by the Company, can be considered evidence of intended use. If a television spot or radio ad or newspaper ad, brochure, website, or other piece of marketing collateral, contains disease claims, then, FDA will take the claims that are not structure/function claims and use intended use doctrine to prove a violation. Any states sponsored, approved, endorsed, or repeated by the dietary supplement company on its own website or in social media sites are fair game for intended use. See our previous post: FDA TAKES AGGRESSIVE STANCE ON DIETARY SUPPLEMENT PROMOTION AND LABELING The FDA has taken an aggressive stance on dietary supplement promotion and labeling in recent warning letters involving dietary supplement manufacturers’ and distributors’ response to consumer […] FDA Legal Trap # 2: Misbranding Dietary Supplements FDA considers a dietary supplement “misbranded” if the product “labeling” is false or misleading in any way, or makes inappropriate claims. “Labeling” means not only the label on the box, but also any written, printed or graphic material accompanying the product (including the website). Inappropriate claims include disease (or therapeutic) claims—those that claim a product will diagnose, cure, mitigate, treat, or prevent disease. If you make a disease claim, then the product gets regulated as a drug, which requires prior proof of safety and efficacy before selling the product in interstate commerce. The most common permissible claims for dietary supplements are structure/function claims. These describe the role of a substance intended to maintain the structure or function of the body, or general well-being from consumption of a nutrient or dietary ingredient. “Disease” is defined as “damage to an organ, part, structure, or system of the body such that it does not function properly (e.g., cardiovascular disease), or a state of health leading to such dysfunctioning (e.g., hypertension); except that diseases resulting from essential nutrient deficiencies (e.g., scurvy, pellagra) are not included in this definition.” For example: the claim, “shrinks tumors” is a disease claim, and “supports the immune system” is a structure/function claim. See our previous post: MISLEADING ADVERTISING OF HEALTH PRODUCTS TRIGGERS FTC COMPLAINT AND PENALTIES Dietary supplement manufacturers, medical device manufacturers and distributors, and makers of cosmetics should have legal review of their website advertising and marketing claims for Federal […] FDA Legal Trap #3: Misunderstanding Structure/Function Claims One point is misunderstanding is about what the structure/function has to look like. There are certain magic words that are helpful—for example, here are some common structure/function claims: “energy boosting;” “ease stress;” “maintains a healthy body and mind;” or claims that use terms such as “stimulate,” “maintain,” “support,” “regulate,” or “promote” in association with a body system, organ, or function affected by the supplement, so long as the statements do not suggest disease prevention or treatment or use for a serious health condition a consumer lacks the ability to evaluate. However, FDA looks at the overall meaning of the claim, not at whether certain terms such as, “supports,” are used. For example, when FDA published the structure/function final rule, it explained that “maintains healthy lungs in smokers” would be a disease claim, because it implies prevention of tobacco-related lung cancer and chronic lung disease. FDA lists ten different ways that a product can make a prohibited disease claim. These include a claim that the product: has effect on a disease or a symptom of a disease; is a substitute for a drug; or has a role in the body’s response to a disease. Also, a claim that consumers would understand to refer to a disease, is a disease claim. For example, “controls blood sugar in persons with insufficient insulin” would be considered an impermissible disease claim as it could easily be understood to refer to treatment of diabetes. Also where FDA regulates certain claims for OTC drugs, these are considered drug claims. FDA Legal Trap #4: Neglecting Substantiation of Dietary Supplement (or Cosmetics) Claims Both FDA and FTC require that all statements regarding a product need to be truthful and non-misleading. Among other things, this means that the advertiser must have adequate substantiation or underlying evidence for the intended use. Normally, this means the claim must be supported by “competent and reliable scientific evidence.” FDA and FTC define “competent and reliable scientific evidence” as: “tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.” In determining whether this standard has been met, FDA considers four issues: The meaning of the claim(s) being made. The relationship of the evidence to the claim. The quality of the evidence. The totality of the evidence. Testimonials and other anecdotal evidence are insufficient to substantiate a claim. A testimonial can include: descriptions of experiences of individuals using a dietary supplement product or ingredient. It might also include descriptions of the use of the product or ingredient by others, for example, by other cultures in the past or present. It might consist of an opinion or statement of an expert or someone who endorses the product. Anecdotal evidence generally would not be sufficient to substantiate claims regarding a diet. FDA regards the following factors as important to establish whether information would constitute “competent and reliable scientific evidence:” Does each study or piece of evidence bear a relationship to the specific claim(s)? What are the individual study’s or evidence’s strengths and weaknesses? Consider the type of study, the design of the study, analysis of the results, and peer review. If multiple studies exist, do the studies that have the most reliable methodologies suggest a particular outcome? If multiple studies exist, what do most studies suggest or find? Does the totality of the evidence agree with the claim(s)? Some of the issues that typically present substantiation issues include: Claims that the product is “clinically proven.” Claims about evidence (and the evidences do not meet FDA’s rigorous criteria above). Claims about expected results. Claims about mechanism or scientific process. Unsubstantiated or inadequately substantiated claims are not only problematic from the FDA perspective; they can also generate lawsuits from private plaintiffs, including consumers and competitors. Law firms representing plaintiffs are actively looking for new entrants to the dietary supplement market and scrutinizing their websites and marketing materials for potential fodder for large, class-action lawsuits. [1] Similarly, FTC considers: (1) Type of product (i.e., products related to consumer health or safety require greater substantiation); (2) Type of claim (claims that are harder for consumers to assess require more substantiation; this includes “health claims that may be subject to a placebo effect or technical claims that consumers cannot readily verify for themselves”); (3) Benefits of a truthful claim; (4) Cost/feasibility of developing substantiation for the claim; (5) Consequences of a false claim (including physical injury if the consumer relies on an unsubstantiated claim of therapeutic benefit); (6) Amount of substantiation that experts in the field believe is reasonable (the FTC looks to “accepted norms in the relevant fields of research” including those developed by a government or authoritative body). FTC notes that claims can be implied by the advertising material as well as made expressly. In assessing the implied claims, the FTC looks to the “net impression” conveyed by all elements of an ad, including the text, product name, and depictions. FTC also requires that disclosure of any necessary qualifying information be presented clearly and prominently so that it is actually noticed and understood by consumers. Similarly, where there are limited studies, and there are “significant limitations to each of the studies and a better controlled study is necessary to confirm whether the effect is genuine:” Disclosure of qualifying information must be clear and prominent. See our previous post: DIETARY SUPPLEMENTS, COSMETICS, MEDICAL DEVICES – WHY SUBSTANTIATING CLAIMS MATTERS Substantiating claims matters whenever you bring a dietary supplement, cosmetic (or skin care product), or medical device to market – why? The Structure/Function Notification to FDA The manufacturer must prepare a notification to FDA no later than 30 days after the first marketing of the product that the manufacturer is making the structure/function statement in accordance with the applicable regulation (21 CFR § 101.93(a)). Among other things, the manufacturer will need to include the structure/function disclaimer: “This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.” FDCA §403(r)(6). The statement must be “prominently displayed and in boldface type.” Id. The regulation is very specific about the text, placement, and typesize of the disclaimer. The disclaimer itself is necessary, but not sufficient, to keep the product within the bounds of dietary supplement classification. In other words, simply putting the mandatory disclaimer on the label will not prevent FDA enforcement if FDA reasonably concludes that the “intended use” is as a drug. Some Other Dietary Supplement Legal Hot Buttons Other dietary supplement legal hot buttons include: Failing to disclose the compensation paid to an expert who endorses the product Overstating what consumers generally can expect from the product Over hyping the product with terms such as “best,” “miracle” Referencing any disease (obesity, anxiety, depression, insomnia, hypertension, high blood pressure, gastrointestinal disorder such as leaky gut syndrome….) or symptom of disease Making too many claims Using “clinical proven” Using OTC claims such as “antiviral” or “antibiotic” Using the term “inflammation” Making duplicate claims and being careless in terms of implied disease claims Talking about a scientific process or mechanism of action which makes the product sound like it has drug-like properties of effects Comparing the dietary supplement to a drug, or suggesting that the dietary supplement can substitute for the drug, or is “more effective” than the drug Not doing a substantiation review to see whether the product in fact has the evidentiary backing that FDA and FTC both demand Failing to get a legal read on each and every claim, and instead assuming that the product is “safe” and therefore beyond FDA scrutiny Underestimating the power of FDA and/or FTC to make the company’s life miserable once enforcement action is initiated, and relying on the false assumption that the worst thing that can happen is a warning letter. Get Your Claims and Labels Reviewed for FDA Compliance When you want to get your dietary supplement to market, it’s tempting to pay a vendor simply to get a label reviewed. When you do that, it’s likely your dietary supplement product will skip a whole bunch of regulatory hoops that, if left unaddressed, could become fodder for later enforcement activity. Contact an FDA attorney who is knowledge about the ins and outs of dietary supplement regulation and laws governing product claims for dietary supplements. [1] Similarly, FTC considers: (1) Type of product (i.e., products related to consumer health or safety require greater substantiation); (2) Type of claim (claims that are harder for consumers to assess require more substantiation; this includes “health claims that may be subject to a placebo effect or technical claims that consumers cannot readily verify for themselves”); (3) Benefits of a truthful claim; (4) Cost/feasibility of developing substantiation for the claim; (5) Consequences of a false claim (including physical injury if the consumer relies on an unsubstantiated claim of therapeutic benefit); (6) Amount of substantiation that experts in the field believe is reasonable (the FTC looks to “accepted norms in the relevant fields of research” including those developed by a government or authoritative body). FTC notes that claims can be implied by the advertising material as well as made expressly. In assessing the implied claims, the FTC looks to the “net impression” conveyed by all elements of an ad, including the text, product name, and depictions. FTC also requires that disclosure of any necessary qualifying information be presented clearly and prominently so that it is actually noticed and understood by consumers. Similarly, where there are limited studies, and there are “significant limitations to each of the studies and a better controlled study is necessary to confirm whether the effect is genuine:” Disclosure of qualifying information must be clear and prominent. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
February 1, 2019
Healthcare
5 Key Stark and Anti-Kickback Legal Rules You’ll Want to Know
5 Key Stark and Anti-Kickback Legal Rules You’ll Want to KnowThe 5 Key Stark and Anti-Kickback Legal Rules You’ll Want to Know While federal Stark and anti-kickback laws, and state law equivalents (often known as “mini-Stark” and “fee-splitting prohibitions”) are very complex, there 5 key legal rules you’ll want to know. Think of these as The Five People You Meet in Heaven—only you meet them on Earth, and they don’t teach you about love or forgiveness or sacrifice or purpose. They teach you about compliance. Here, briefly are the 5. 1. What’s a “Referral”? Stark, anti-kickback, and fee-splitting laws often refer to illegal “referrals,” but what exactly is a “referral?” Under federal law, “referral” means 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). Taking California state law as one example, California attorney general opinions likewise interpret the term “referral” expansively. Sending the patient to a particular provider or facility for healthcare services is a “referral.” 2. How does Stark affect transactions involving family members of a physician? The federal self-referral statute (“Stark”) provides that if a physician (or immediate family member) has a financial relationship with an entity, then, unless the arrangement qualifies for a specific exception: The physician may not refer patients to the entity for “designated health services” (“DHS”) 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. 3. How are state laws like Stark and the federal anti-kickback statute? In general, state laws often have a self-referral prohibition that mirrors Stark, only is less dense and comprehensive. Sometimes these are known as “mini-Stark” statutes. For example, California law contains prohibitions against self-referral in the Physician Ownership and Referral Act of 1993 (“PORA”), as well as California Labor Code Section 139.3 (workers’ compensation), and some other statutes. See some of our prior posts: How substance abuse treatment centers navigate anti-kickback rules Substance abuse treatment centers must steer carefully when sending patients for labs. Self-referral, anti-kickback, and fee-splitting rules can create legal enforcement issues and must be […] 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. Fee-splitting 101 for medical doctors, chiropractors, acupuncturists, and others Is it fee-splitting to hire another medical doctor, chiropractor, acupuncturist, or other health care practitioner in your office and give them a “cut” of patient revenues? PORA applies to healthcare licensees. Even if none of the designated health services in the statute are being provided, then the prohibition is inapplicable; however, a disclosure of the financial interest must be provided to patients at the time of the referral. California Law Code Section 139.3 provides that: (a) …. it is unlawful for a physician to refer a person for clinical laboratory, diagnostic nuclear medicine, radiation oncology, physical therapy, physical rehabilitation, psychometric testing, home infusion therapy, outpatient surgery, diagnostic imaging goods or services, or pharmacy goods, whether for treatment or medical-legal purposes, if the physician or his or her immediate family has a financial interest with the person or in the entity that receives the referral. However, Section 139.3.1 provides: (c) (1) A physician may refer a person to a health facility as defined in Section 1250 of the Health and Safety Code, to any facility owned or leased by a health facility, or to an outpatient surgical center, if the recipient of the referral does not compensate the physician for the patient referral, and any equipment lease arrangement between the physician and the referral recipient complies with the requirements of paragraph (2) of subdivision (b). (2) Nothing shall preclude this subdivision from applying to a physician solely because the physician has an ownership or leasehold interest in an entire health facility or an entity that owns or leases an entire health facility. There is always a “however,” or a “nothing shall preclude….” That’s what makes the whole area so rich and nested. 4. What’s the big deal about the Federal Anti-Kickback Statute (“AKS”)? The federal anti-kickback statute prohibits the knowing and willful offer or receipt of remuneration 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. You don’t want to get on the wrong side of this one. Note, however, that if you violate Stark, there’s strict liability unless you find an exception that you can completely fit. With AKS, there are “safe harbors.” Meeting the elements of the safe harbor doesn’t guarantee immunity from enforcement; then again, failing to meet the elements of the safe harbor doesn’t guarantee enforcement. (We know, you can read that sentence again.) There are plenty of Stark exceptions and AKS safe harbors. For example, under 42 CFR 1001.952(r), a safe harbor exists for ambulatory surgery centers (ASCs). Specifically: “remuneration” does not include any payment that is a return on an investment interest, such as a dividend or interest income, made to an investor, as long as the investment entity is a certified ambulatory surgical center (ASC) under part 416 of this title, whose operating and recovery room space is dedicated exclusively to the ASC, patients referred to the investment entity by an investor are fully informed of the investor’s investment interest, and all of the applicable standards are met within one of the following four categories – (1) Surgeon-owned ASCs…. (2) Single-Specialty ASCs…. (3) Multi-Specialty ASCs…. (4) Hospital/Physician ASCs…. The multi-specialty ASC safe harbor adds to the criteria from the single-specialty ASC safe harbor, the requirement that: At least one-third of the procedures (as defined in this paragraph) performed by each physician investor for the previous fiscal year or previous 12-month period must be performed at the investment entity. 5. State Anti-Kickback Prohibitions Can be Just as Onerous and Tricky To take an example, with respect to potential kickbacks, California Business & Professions 650 provides: (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(a) is the “thou shalt not” and Section 650(b) is the “thou mayest.” So which one controls? Much depends on enforcement discretion and the specific circumstances. This is why it’s important to get legal counsel and specifically analyze the venture. Section 650(b) is often used to justify payment of the management fee based on a percentage of gross revenues at fair market value. This provision allows payment to management companies, billing persons, and other personnel for “services other than the referral of patients,” provided: The compensation is at fair market value (“FMV”) for the services rendered; and The compensation does not vary by volume or value of patients referred. As we note elsewhere, even though 650(b) allows compensation under these circumstances, based on a percentage of gross revenues, we typically recommend a flat fee for marketing services, because marketing activities tend to be heavily scrutinized by regulatory authorities for kickbacks and fee-splitting. We discourage any percentage-based or patient-based remuneration for marketing, which would take into account the volume or value of referrals. As well, out of abundance of precaution, and because of the influence federal standards can have on enforcement of state anti-kickback issues, it is prudent to comply with the federal safe harbor for remuneration from an entity under a personal service arrangement or management contract. But again, every venture deserves its own analysis. Now, for the back story. Stark 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. A compensation arrangement is any arrangement involving remuneration between a physician (or an immediate family member) and an entity. 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. In general, “remuneration” means “any payment or other benefit made directly or indirectly, overtly or covertly, in cash or in kind.” A first step is to determine whether DHS is involved. DHS within Stark include: 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. 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. PORA Under PORA: A “financial interest” includes “any … compensation,” whether direct or indirect. 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. 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 (Christine). 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.” 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.” The term “financial interest” is broadly defined to include, among other things: 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:” 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. Things You Wanted to Know about AKS But were Afraid to Ask Federal anti-kickback law can apply to all practitioners, not just physicians, where federal reimbursement monies are involved. Here, 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, 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.” 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,” and take enforcement action against arrangements that are merely disguised kickbacks. The Safe Harbor for Personal Services and Management Contracts We mentioned California Business & Professions Code 650(b). A similar concept is embodied in this important safe harbor to AKS, which is the basis for the MSO model. 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 a requirement that if be “set in advance.” This can cause problems, but we’ll defer these for another day. Conclusion When you’ve got health care practitioner referring to one another within a proposed business arrangement, you could have potential yellow lights in the form of federal Stark, federal anti-kickback, state mini-Stark (self-referral) and state anti-kickback, fee-splitting, and patient brokering rules. This is not an area for DIY. Contact an experienced healthcare lawyer for legal advice in the area of self-referral and kickback law. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
December 1, 2018
Healthcare
Thinking of Giving Medical Advice without a Valid California Medical License? Think Again
Thinking of Giving Medical Advice without a Valid California Medical License? Think Again Practicing medicine without authority in California is a crime. The law which is set forth in the California Business and Professions Code 2052 covers a wide range of activities. It applies to standard medical practice and is now being applied to a broad range of Internet and other electronic services. A few examples of who the statute is aimed at includes: Anyone from a foreign country, such as the UK, who has a medical license from the foreign country – but not from America. Anyone licensed by another state – but not California Someone without any medical license anywhere People who work in the healthcare profession but don’t have a valid license Anyone who exceeds the scope of their license. Nurses can generally assist in surgeries under the supervision of a doctor but they can’t operate on the patient Aestheticians who give injections CALIFORNIA MEDICAL BOARD ARRESTS MAN FOR UNLICENSED PRACTICE OF MEDICINE California and other state medical boards still run undercover investigations for unlicensed practice of medicine. California is in the minority of states that have a statute that authorizes […] The California unauthorized practice of medicine statute The illegal practice of medicine covers the following areas: What conduct is forbidden?Practicing or attempting to practice Advertising or holding oneself out as practicing What type of medicine is covered?Any system or mode of treating the sick or afflicted Diagnosing, treating, operating, or prescribing What types of medical conditions are covered?Any physical or mental condition including ailments, blemishes, deformities, diseases, disfigurement, disorders or injuries What constitutes authority?A valid medical California medical certificate (the Business and Professions Code provides) that hasn’t been suspended or revoked Any other valid legal certificate A violation of this law means the person who commits the offense: Is guilty of a public offense – either a felony or a misdemeanor Can be fined up to $1,000 or $10,000 depending on whether the offense if a misdemeanor or a felony Can be sentenced to county jail time in accordance with the California Penal Code, Section 1170 (h) Revocation or suspension of an existing medical license The law doesn’t just apply to the person who commits the offense. Anyone who conspires with the original offender or aids and abets that person can suffer the same consequences. Key considerations when considering what defenses may apply An experienced medical practice attorney works with respected criminal defense lawyers to help provide defenses. The criminal lawyer can help with issues such as violations of your Constitution rights, the chain of custody of evidence, and other matters unique to a criminal defense practice. A respected authorized practice of medicine lawyer will focus on showing that a key element of the statute does not apply if you are charged. Some of the factors medical providers and businesses need to understand are: Good intentions or good results are not defenses. Showing that you did a good job is not a defense. The patient may be grateful that your treatment worked. Maybe you even saved his/her life. But good results are not a defense. The fact that you didn’t’ make the patient worse is not a defense. That you were trying to help and didn’t intend any harm is not a defense. If you’re not authorized to provide medical care, you need to direct the patient to someone who does have that authority. Whether someone was hurt, though, can make a difference in the penalty phase. If a patient was hurt, then the violator runs a greater risk of being charged with a felony instead of a misdemeanor. The words in the statute of terms of art. The laws have precise definitions that are understood in the legal and medical communities. If the assistance given doesn’t meet any definition, then a defense may apply. For example, diagnostic tests are methods to collect clinical information for the purpose of analyzing a person’s medical condition. Examples include MRIs, CT scans, X-Rays, blood tests, oral histories, medical exams, and more. If the test was not characteristic and not diagnostic, such as identifying the color of someone’s eyes or having them step on a scale to get their weight, then it may be possible to argue – no diagnosis took place – and the statute was not violated. That the services were routine is not a defense. Many people try to argue incorrectly that the service provided wasn’t really providing medicine. An experienced medical practice lawyer explains that while many services and treatments don’t’ require a high IQ or years of practice, providing the service/treatment does still violate the statute. Services such as being a midwife acupuncturist do require a license. The best practice is to review the type of service you or an employee provides with an experienced California medical practice lawyer BEFORE you provide the service. He can explain if you need a license or certificate and what type of license. He can also review when and how you can work with someone who does have valid California medical authority. One key area of confusion is the practice of non-western medicine. While some of these practices may not be considered standard practices of medicine, they may still violate the California statute. An experienced California medical practice attorney will review whether your field of practice is considered a California medical practice. The dangers of working with out of state doctors or healthcare providers Difficult questions arise when an out-of-state doctor helps a patient who resides in California. For example, what happens when a Pennsylvania doctor gives a consultation to a doctor in California? Is the Pennsylvania doctor practicing medicine in California? Is the focus on where the patient is or where the doctor resides? Does it matter that the consultation is with a California doctor? What if the Pennsylvania health care provider wasn’t licensed in any state – can the California doctor be charged with unauthorized practice. If the Pennsylvania doctor has a valid license does he/she actually have to see the patient or patient records – or is working with the California doctor all that’s required? The issues of out-of-state practice are being raised more and more as the Internet, Skype, email, and other electronic communications are being used to connect patients in one state with doctors in another. Many companies such as health supplement or prescription companies use doctors as consultants. As a general rule, the company should use a California doctor if it is going to sell products to California patients. When is telemedicine illegal? Telemedicine is expanding as an opportunity for revenue. Some of the popular telemedicine practice areas are: Holistic health Integrative medicine Functional medicine Anti-aging medical care Regenerative medicine Using hormones like testosterone An experienced California authorized practice of medicine lawyer can explain when, who, and how telemedicine can be provided. The two main issues in telemedicine are: Providing medicine across state lines raises questions The general requirement that the treating doctor should physically see the patient The Medical Board of California prefers in-person examinations before prescriptions are prescribed. One additional area of confusion to review with your California healthcare lawyer is whether it’s a defense that a nurse practitioner conducted the medical exams – and what level of doctor supervision is required. PRESCRIBING THROUGH TELEMEDICINE RAISES LEGAL CHALLENGES: LEARN THE REGULATORY TERRAIN As prescribing through telemedicine raises legal challenges, understanding where telemedicine laws are tough can help you design your telemedicine startup. Unauthorized medical practice and corporate medical practices Some entrepreneurs think that they can make money through medical services by hiring doctors and then getting part of the profit for the medical care the doctors provide. This thought will likely lead to an unauthorized practice of medicine charge. Generally, only California physicians can own a California medical practice. It doesn’t matter that the business owners aren’t providing the treatments or medical care. The business owners can be charged with violating the statute AND the doctor can be charged with aiding and abetting the business owner’s violation of the statute. The corporate practice of medicine is very complex. Even the Medical Board of California recommends that doctors and business owners consult with an experienced California authorized medical practice lawyer. Section 2400 of the Business and Profession Code specifically provides: “Corporations and other artificial entities shall have no professional rights, privileges, or powers.” There are strict rules on contracts between physicians and non-physicians. The following cannot contract to provide medical services. Nor can they contract to have a doctor provide medical services as an employee or independent contractor: Non-physicians Non-medical corporations Limited liability corporations (LLCs) Providing medical services (such as medical spa services) includes, according to the California Medical Board: Choosing what diagnostic tests to order for a specific condition Deciding when a consult with another doctor or a referral to that doctor is required Responsibility for overall medical care including treatment options Overseeing how many patients a doctor should see or how many hours the doctor should work An experienced California medical practice lawyer will explain what possible solutions may work. For example, a management services organization (“MSO”) might be a solution for providing administrative services such as bookkeeping, advertising, and scheduling, for the professional medical corporation (“PMC”). One new area of medicine that requires review is the new marijuana laws. As with other businesses, licensed doctors should own the any venture that prescribes marijuana under the new California marijuana law. CORPORATE PRACTICE OF MEDICINE & ANTI-KICKBACK / FEE-SPLITTING RULES: DEEP DOWN THE REGULATORY RABBIT HOLE Many healthcare ventures seek to avoid corporate practice of medicine (or psychology) and fee-splitting violations, but they need to first understand how deeply down the rabbit hole these […] Is your medical assistant violating the California Business and Professions Code? Don’t run the risk of confusing a medical assistant with a medical doctor. A respected California medical practice lawyer will explain when an assistant may be violating the California unlicensed practice laws – even if the doctor is supervising the assistant. The lawyer can also explain when an exception such as the Safe Harbor for Non-Licensed Practitioners (Sections 2053.5 and 2053.6 of the California Business and Professions Code) applies. These sections include a requirement that the patient be advised about many aspects of the treatment including that the physician is not a licensed doctor. The patient should sign a written informed consent. Special rules and laws apply in other areas such as providing nutritional advice. IS YOUR MEDICAL ASSISTANT PRACTICING MEDICINE ILLEGALLY? Is your medical assistant practicing medicine illegally? Understand the difference between medical assistance and medical practice. Are you advertising that you practice medicine? Advertising includes more than just your letterhead. Your website, social media (Facebook, Twitter, etc.) emails, business cards, TV ads, radio ads, written marketing materials are just some of the many other ways people promote themselves. Each promotion can be reviewed by the state to see if you are advertising medical services. Non-licensed doctors can’t generally refer to themselves as a doctor, physician, M.D., Dr., or use any letters, words, or graphics that reasonably imply they are a doctor. Conclusion: Many people don’t understand they are violating the unauthorized practice of medicine law because they think the statute doesn’t apply to them Some of the red flags for improper practice of medicine are telemedicine, out-of-state advice, corporate practices, and relying on nurse practitioners to do medical exams There may be exceptions or defenses to the charges Arrange to speak with a California healthcare lawyer as soon as possible There may be strategies that satisfy the unauthorized practice of medicine statute while helping the medical practice survive. Don’t guess at what the law means. An experienced California medical practice authorization lawyer can explain when you need a license to practice medicine. We’ll review the proper and legal balance between protecting the patient and making a living. Improperly practicing medicine or falsely advertising your ability to provide medical care can mean jail time, large fines, and the loss of the legal right to continue providing healthcare.
November 22, 2018
Healthcare
How to Handle Stark and Anti-Kickback Legal Barriers When Physicians Invest in an MSO
This is a story about how Harry, a healthcare entrepreneur, worked through a proposed arrangement that was raising Stark and Anti-Kickback issues. Chapter 1. Harry the Healthcare Entrepreneur Confronts the Stark and Kickback Puzzle Joe, a savvy healthcare entrepreneur, has some wealthy medical doctors “lined up” to purchase investment interests in an LLC that will serve as a management company (or medical services organization, MSO, for a professional medical corporation (PMC) or medical group. The LLC has a complex structure where it is going to be 50% owned by the doctors and 50% owned by Harry. Harry proposes that the MSO operate as a typical MSO, providing management and marketing services at fair market value to physicians and professional medical corporations that operate medical groups. CORPORATE PRACTICE OF MEDICINE ON STEROIDS: HOW YOUR MSO AND PROFESSIONAL MEDICAL CORPORATION COULD WORK TOGETHER WITHOUT COURTING LEGAL DISASTER You, MSO is my own variation on I Claudius. Poor Uncle Claudius, everyone said. Ended up becoming Emperor of Rome. Through craft and careful strategy. So you have an MSO and want to operate […] Harry also has a number of ‘bells and whistles’ to his proposal. He is going to put a whole bunch of other entities into the mix. Joe has an outside, diagnostic testing lab that supplies the physicians with urine collection kits, blood collection kits, and other medical supplies. The doctors will collect samples and send them to the lab for analysis. The lab also has some equipment it wants to lease to the physician practices. The medical doctors will bill insurers for performing the screens and tests that are done within the medical groups. The labs will bill separately Through some complicated financial scheme, the lab ends up paying the MSO a share of monies it receives from insurance, and this has something to do with the fact that the lab has sales reps on-site all the time at the medical groups. Harry wants to be “100 compliant;” yet, he also wants to make a ton of money, and sign up the doctors while he still has their interest (as he recently sold them on this idea at a black-tie cocktail party). Chapter 2. Harry Gets some Stark and Anti-Kickback Legal Advice The first thing to notice is that we’ve spotted an oxymoron, and it isn’t “military intelligence.” Harry’s concern with the potentially vanishing sales prospects from the cocktail part notwithstanding, we think Harry doeth protest too much. He really does not want to be “100% compliant.” He wants to make a lot of money. If he is going to be 100% compliant then he should probably go into another business, like retail sales. There isn’t too much the government can do if you simply tell someone this shirt looks great on him (or her) when trying to sell them for the store. Also, the federal and state authorities that enforce legal prohibitions against self-referral and kickbacks / fee-splitting, don’t think or act in terms of percentages of compliance. The closest they will to this is an OIG Advisory Opinion on fraud and abuse which might say that a proposed arrangement presents a risk of fraud and abuse, but has significant safeguards, such that it is unlikely that the government will initiate enforcement action. Therefore typically, we look at the risk presented and whether we can build in some reasonable safeguards as a way to mitigate potential enforcement risk. We hope Harry is open to the advice. First, though, Harry needs to know a lot more about what he’s getting into. Chapter 3. Harry Digs into Stark and Anti-Kickback Analysis Can the physicians collectively own 50% in the MSO? Harry asks point-blank. He told them, at the cocktail party, that they could – he would place a call to his healthcare lawyer to double-check. From an anti-kickback perspective, there is a safe harbor for a straight, passive investment in an entity. Under 42 CFR 1001.952(a)(2), a safe harbor exists if the entity possesses investment interests that are held by either active or passive investors. All of the following 8 standards must be met: (i) No more than 40 percent of the value of the investment interests of each class of investment interests may be held in the previous fiscal year or previous 12 month period by investors who are in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity. Equivalent classes of equity investments may be combined, and equivalent classes of debt instruments may be combined. (ii) The terms on which an investment interest is offered to a passive investor, if any, who is in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity must be no different from the terms offered to other passive investors. (iii) The terms on which an investment interest is offered to an investor who is in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity must not be related to the previous or expected volume of referrals, items or services furnished, or the amount of business otherwise generated from that investor to the entity. (iv) There is no requirement that a passive investor, if any, make referrals to, be in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity as a condition for remaining as an investor. (v) The entity or any investor must not market or furnish the entity’s items or services (or those of another entity as part of a cross referral agreement) to passive investors differently than to non- investors. (vi) No more than 40 percent of the entity’s gross revenue related to the furnishing of health care items and services in the previous fiscal year or previous 12-month period may come from referrals or business otherwise generated from investors. (vii) The entity or any investor (or other individual or entity acting on behalf of the entity or any investor in the entity) must not loan funds to or guarantee a loan for an investor who is in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity if the investor uses any part of such loan to obtain the investment interest. (viii) The amount of payment to an investor in return for the investment interest must be directly proportional to the amount of the capital investment (including the fair market value of any pre-operational services rendered) of that investor. Harry is excited by this anti-kickback safe harbor. However, we’ve barely begun the analysis. There are other anti-, anti-kickback safeguards we would want to put in. And, there are many parts of the arrangement Harry has put together that we will not review—for example, the whole idea of making money from the lab and the tie-in between the physicians, the lab, and the MSO. (Warning, Will Robinson!) Among other things, there are dangers inherent in paying anything other than a flat fee for marketing services. And the tie-in between the lab, the supplies, the doctors, and the MSO raises a lot of issues. Here are some other brief considerations, basics Harry will want to know about: If no Medicare (or other federal healthcare) reimbursement is involved, then federal law will not apply. Technically speaking, this means that we are not looking at Stark which is federal self-referral law, and not looking at the federal anti-kickback statute (AKS). However, federal law is worth review as it may be persuasive to state authorities. Thus, we might look at OIG opinions. There is an issue of cross-referrals among the physicians who are investors in the MSO. These could potentially trigger fraud and abuse consideration. We can deal with this later, but first, let’s lay out some more background Harry should understand. One thing Harry should consider is that self-referral law often is, like Stark, black and white. In other words, it is what we call a strict liability statute. Intent is not required. Under Stark, either you meet an exception or not. Whereas, in contrast, the anti-kickback statute is intent-based. And failing to meet the safe harbor does not in itself create liability. Chapter 4. Harry learns more about Stark than he wanted to know Let’s step back to get a more birds’-eye view of Stark. Stark, the federal self-referral law, prohibits physicians from ordering “designated health services” (DHS) for Medicare and Medicaid patients from entities with which the physician (or an immediate family member) has a “financial relationship.” KICKBACKS, FEE-SPLITTING, CORPORATE PRACTICE OF MEDICINE, STARK, MSOS: GUIDING HEALTHCARE VENTURES THROUGH THE MAZE Fundamentally, you’re worried about legal rules prohibiting kickbacks, fee-splitting, corporate practice of medicine, as well as Stark law; you don’t know whether the MSO or management structure […] CAN AN MSO CONTROL PHYSICIANS GIVEN CORPORATE PRACTICE OF MEDICINE? Can a medical management company or MSO control physicians given corporate of medicine concerns, especially in a strong corporate practice of medicine state? Whether the MSO can control […] The term, “financial relationship” includes both compensation arrangements, and investment and ownership interests.” The term “referral” under the Stark Law is defined more broadly than merely recommending a vendor of designated health services (DHS) to a patient. Instead, the term “referral” means, for Medicare Part B services, “the request by a physician for the item or service” and, for all other Medicare and Medicaid services, “the request or establishment of a plan of care by a physician which includes the provision” of the DHS. DHS includes, among other things, clinical laboratory services, which makes it relevant to what Harry is trying to put together. Stark contains several exceptions. The exceptions that are typically relied upon by physicians and MSOs include: Physician Services. In-Office Ancillary Services (IOAS). Rental of Office Space and Equipment. Bona fide Employment Relationships. Personal Services Arrangements. Payments for Items and Services. Fair Market Value. Indirect Compensation. However, Stark does not have an exception for investments in group practices. This is an important limitation, because Stark expanded the definition of the performing “entity” to go beyond the entity in whose name bills were submitted to Medicare (the billing)—i.e., to include also the entity performing the services (i.e., the MSO can be deemed the performing entity under Stark). This complicates things. There is no in-office ancillary services (IOAS) exception available where the performing entity is the MSO, because the physicians do not provide services in the name of the MSO. All the physicians are essentially referring to one another, and financially benefitting from these referrals, by virtue of their equity interest in the MSO. So that knocks out the investment in group practices exception. As mentioned above, though, Stark has an “indirect compensation arrangement” exception where the compensation meets certain requirements, including that it is at fair market value, in writing, and does not violate the anti-kickback statute.42 CFR 411.357(p). However, a physician “stands in the shoes” of his or her physician organization for purposes of determining the physician’s compensation arrangements, and thus has a “direct” compensation arrangement with the entity receiving the referral (i.e., this means that the physician does not meet the indirect exception). And a physician is “a physician (including a professional corporation of which the physician is the sole owner), a physician practice, or a group practice that satisfies the Stark ‘group practice’ definition.” When determining whether a direct or indirect compensation arrangement exists between a referring physician and a DHS entity, the referring physician would stand in the shoes of: (1) another physician employing the referring physician, (2) the physician’s wholly owned professional corporation, (3) a medical practice that employs or contracts with the referring physician, or (4) a group practice of which the referring physician is a member or independent contractor. While an MSO may or may not technically be subject to these rules (i.e., a physician may not necessarily “stand in the shoes” of the MSO contracting with a lab), CMS has stated that such arrangements “may involve illegal kickbacks” even if not within Stark.72 Fed. Reg. at 51030. Also to consider, a “referral” under Stark includes a request for an item or service by the physician. Thus, when the physician orders a lab test, the physician has made a “referral.” If the physician has an ownership interest in the MSO, then the physician is receiving compensation from the referral. At the least, this triggers anti-kickback review. There is no corresponding anti-kickback safe harbor to the Stark indirect compensation exception.As well, there is no Stark exception comparable to the safe harbor available under anti-kickback statute (AKS) for certain investment interests. Harry is starting to understand that it’s a bad idea to make promises at cocktail parties about complicated schemes or thinking that his lawyer has some magical “workaround” to these nuanced legal prohibitions. He doesn’t necessarily have to wade through every exception nested within an exception to an exception to a rule; but he must learn enough of the nuances to know that isn’t necessarily to get a green light simply by pulling the right lever. Stark and self-referral law have many nuanced exceptions and anti-kickback and fee-splitting rules have many potential safe harbors. While an MSO provides an established legal vehicle to accomplish many revenue-producing goals for non-physician healthcare entrepreneurs, throwing physician investment and lab-related fees into the mix can complicate matters. Contact an experienced healthcare lawyer for legal advice relevant to complex proposed compensation arrangements involving physicians or physician investors. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
September 22, 2018
Healthcare
Can the MSO Legally Brand the name of a Medical Clinic?
If you have a medical management company (MSO), you might be wondering, can your MSO brand itself with the same name as the medical clinic, and even license the name to the physician that owns and operates the medical clinic. Background: The MSO Model We address the MSO in prior posts, including: Rock Your Practice with an MSO—MSO Compliance vs. using Independent Contactor Practitioners Kickbacks, Fee-Splitting, Corporate Practice of Medicine, Stark, MSOs: Guiding Healthcare Ventures through the Maze Corporate Practice of Medicine on Steroids: How Your MSO and Professional Medical Corporation Could Work Together Without Courting Legal Disaster Corporate Practice of Medicine & Anti-Kickback / Fee-Splitting Rules: Deep Down the Regulatory Rabbit Hole Is it fee-splitting for medical doctors to share revenues with non-medical business owners? The MSO model is a stalwart for creating a healthcare venture that involves licensed medical doctors, where the entrepreneur is a non-physician. Branding and Licensing the Clinic Name The branding path is complicated by the fact that California law treats physicians, and the practice of medicine, differently than other professions. Among other things: California prohibits the unlicensed and corporate practice of medicine. This means that management companies must take particular care to avoid enforcement scrutiny. On its webpage, Corporate Practice of Medicine, the Medical Board of California explains that the rule is “intended to prevent unlicensed persons [and companies] from interfering with or influencing the physician’s professional judgment.” However, the Board then lists a broad range of activities that constitute corporate practice of medicine. These include: Management service organizations arranging for, advertising, or providing medical services rather than only providing administrative staff and services for a physician’s medical practice (non-physician exercising controls over a physician’s medical practice, even where physicians own and operate the business). So at the start, caution is required as the medical board could see a corporate practice of medicine violation if there appears to be excessive entanglement by the MSO or management company in the affairs of the medical practice or physician. The Strange Case of the Fictitious Name Permit See our prior post, The Strange World of the California Fictitious Name Permit. This is our version of a legal Alice in Wonderland, or maybe a Benjamin Button. California law requires that a physician apply for a fictitious name permit (“FNP”) if the physician intends to practice under a name other than his or her own. On its webpage, Fictitious Name Permit, the medical board indicates that an FNP application takes approximately 4-6 weeks to process, and that the Board “closely monitors fictitious names to ensure that similar names are not issued.” Numerous management company clients have asked us about naming, branding, and licensing the trade name, and we have not always gotten clear answers from the California Medical Board. The rules themselves are byzantine and convoluted, and as we understand it, the Board has not always followed them, or has been selective in its enforcement actions. In addition to the above: The California Secretary of State (“SOS”) has rules regarding naming of business entities (see SOS, Business Entity: Name Regulations & Additional Statutory Requirements and Restrictions). If a proposed entity name is “the same as or deceptively similar to an existing name,” SOS may reject incorporation. “Substantially similar names” may be available if the existing entity consents in writing to the second entity using the name. A proposed name can be “substantially the same” if, among other things, “it implies an affiliation with” the existing entity. The Business Entity document above contains details of these rules. Legal Issues; Legal Risks – From MSOs to Medical Spas Remember that because of the prohibition against the corporate practice of medicine, the business structure for a medical spa typically involves two entities: the management company, and the physician’s professional medical corporation. The Professional Medical Corporation’s name typically is either the name of the physician (for example: George T. Smith, MD, Inc., PC) or the fictitious name for which the physician has obtained a fictitious name permit from the California Medical Board. If your brand name—let’s call it the MSO brand name which you want to license to the physician as “Your Clinic Brand Name”–has substantial value or potential value, then this presents a number of possible legal pitfalls. License the Name? Again, this is a murky area complicated by less-than-clear statutes and regulations and changing enforcement priorities. In our experience, at the present writing, there could be risks to licensing the MSO’s name to your designated physician. And, like many similar decisions, this is also common in the healthcare industry. The legal risks include: The Medical Board of California could potentially see a corporate practice of medicine violation in the management company licensing the corporate name to a physician. Presumably, enforcement scrutiny would only be triggered if the Board found other violations or issues with the whole arrangement. However, “no one has a crystal ball” is the way it goes. The physician would receive a fictitious name permit from the Medical Board of California for use of the name, “Your Clinic Brand Name.” Even were the Management Agreement to provide that the license of the name (from the management company to the physician or his professional corporation) would terminate at the discretion of the management company, the physician still would have the fictitious name permit in hand. These two areas of laws do not intersect. Presumably, the management company could send a cease-and-desist letter, demanding that the physician stop using the licensed name. It is unclear what weight the fictitious name permit would have, or what leverage it could give the physician, as a potential defense (or at least, as one way to create legal turmoil). Suppose the management company found a second physician, who would open a different location (say, Your Clinic Brand Name in Different City). The physician might apply for a fictitious name permit from the Medical Board of California, and find the Board denying the permit, based on the fact that the first physician was already granted a permit with the name, “Your Clinic Brand Name.” Note that the Board indicates on its Fictitious Name Permit website that it could grant the first physician a fictitious name permit for a second “practice address.” This is different, though. The Board notes that an FNP is not transferable to another physician if a medical practice is purchased. Thus, were your current physician to wish to sell to another physician, the FNP could not simply transfer from the seller to the buyer. Instead, the owner of a fictitious name permit must submit an Application for Cancellation of a Fictitious Name Permit and the new owner must submit a Fictitious Name Permit Application. Both must be accepted by the Board. All this is rather cumbersome, and there is no guarantee that the Board would approve of these steps. In fact, the process would be outside the control of the management company. Could all the steps be required contractually, and would this solve the problem? Theoretically, the Management Agreement could provide, for example, that: The management company licenses the name to the physician. Presumably, the physician will apply for a fictitious name permit. If the Management Agreement terminates, the physician loses the rights granted by the license, and all those rights revert to the management company. The physician must cancel the fictitious name permit and dissolve or change the name of the professional medical corporation if the professional medical corporation uses “Your Clinic Brand Name.” However, each of these raises corporate practice of medicine concerns. For example, in one conversation with the Medical Board of California, the Board representative advised us that licensing a corporate name to a physician would raise corporate practice of medicine and possibly franchise issues. Typically, the representative said, the situations the Board encounters involve a physician group licensing the name of the medical practice, to individual physicians but that is another matter. Similarly, regarding the second bullet, the management company probably cannot insist on the physician applying for an FNP, since this could tread on corporate practice of medicine sensitivities. As to the third bullet, the management company cannot insist on a physician canceling an FNP, or dissolving his or her professional corporation; nor can the management company be seen to control the physician’s advertising. Even if the FNP were not an obstacle, the California Secretary of State might not approve and file the Articles of Incorporation for another “Your Clinic Brand Name” if one already exists, as this might be considered deceptive to the public. The Secretary of State rules are additional to and separate from whatever the Medical Board of California decides. An additional concern is the set of advertising restrictions contained in Section 651 of the Business & Professions Code, which among other things, make it unlawful to disseminate “any form of public communication containing a 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.” This section can be broadly used if the Board sees confusion around naming and which entity is responsible for what. Last, if the management company branches beyond California, it could face similar issues in other states. We do not know how these states would regarding licensing a trade name to a physician or professional medical corporation. Our Bottom Line on Licensing the MSO Name to the Physician The practice of branding the physician’s medical clinic or medical practice within the medi-spa with the same name as the MSO is, as we’ve indicated, common in the industry yet legally risky. We prefer that the MSO and medical practice have different names and, depending on who we represent, we want the branding value to stay with the client. Typically, we represent the MSO and in such case, the MSO wants to drive the branding. Notwithstanding the corporate practice of medicine, the MSO wants to drive the value, and sees the physician as ancillary to the value drive. From a corporate practice of medicine standpoint, the name of the physician (or the name of the physician and his or her professional medical corporation) must be “on the door” of the medical spa and included in the advertising. Patients must know that they are going to be seeing a licensed medical doctor (or someone properly supervised by the MD) for medical services. The management company can “co-brand”—i.e., can also have its name on the door and in the marketing materials. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
July 1, 2018
Healthcare
MSO Gets Light Enforcement Touch by California Appellate Court Reviewing Management Services Agreement Legal Issues
MSO Compliance Worries Clients desiring to create MSOs or operate them in legally compliant ways often worry about enforcement efforts under the corporate practice of medicine and anti-kickback rules, and related legal rules that can create traps for the unwary. The kinds of healthcare business seeking healthcare legal advice and MSO compliance in the past year have included: A high-profile, plastic surgeon in charge of a highly profitable cosmetic and aesthetic medicine The physician decided that he would like to open a new revenue stream, by creating an MSO, alongside his lucrative practice. However, the physician was unsure about how to create value in the MSO, so it could later be sold for a high multiple.Unlike the medical practice, which could only sold to another physician (or MD majority owner in a professional medical corporation), the MSO could be sold to anyone, including a layperson.Unlike the plastic surgery practice, the MSO would attract investors.And, the physician hoped to build value in the MSO and have the branding successes and marketing dollars go to benefit the MSO. More typically, non-physician investors and entrepreneurs seeking to create a branding and marketing success. The venture folks behind the idea have access to capital, and an intelligent way to capture and bring potential patients to the medical practice. Chiropractors or acupuncturists wanting to create a multidisciplinary healthcare care, such as a holistic health care or center for integrative medicine, or simply a collaboration with practicing physicians. RNs, NPs, or PAs seeking to create a medical spa or model of care that integrates esthetic treatments with aesthetic medicine treatments. We’ve written extensively about MSO Legal Issues in many prior posts. See, for example: Kickbacks, Fee-Splitting, Corporate Practice of Medicine, Stark, MSOs: Guiding Healthcare Ventures through the Maze Corporate Practice of Medicine on Steroids: How Your MSO and Professional Medical Corporation Could Work Together Without Courting Legal Disaster Can an MSO control physicians given corporate practice of medicine? Is it fee-splitting for medical doctors to share revenues with non-medical business owners? One of the questions that comes up again and again is a variation of: How likely is it that the MSO will get in legal trouble? Legal Jeopardy: From Fines to Criminal Penalties Make no mistake about it: penalties for violating the anti-kickback laws are serious. Criminal penalties are possible. The Government provides a Roadmap for New Physicians: A Guide to Fraud and Abuse Laws, in which it warns: …[I]t is crucial to understand these laws not only because following them is the right thing to do, but also because violating them could result in criminal penalties, civil fines, exclusion from the Federal health care programs, or loss of your medical license from your State medical board. Among other things, the Roadmap explains the federal anti-kickback statute (AKS) as follows: The AKS is a criminal law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. In some industries, it is acceptable to reward those who refer business to you. However, in the Federal health care programs, paying for referrals is a crime. The statute covers the payers of kickbacks-those who offer or pay remuneration- as well as the recipients of kickbacks-those who solicit or receive remuneration. Each party’s intent is a key element of their liability under the AKS. A few days ago, I was on the phone with a new client that owned a healthcare business. The client was describing a complicated scheme involving physician equity in an MSO, a “point system,” and what essentially sounded like paying the physicians for every patient referral. With every detail the client reported, my legal Spidey-sense tingled. The client reported that many potential investors were excited by this model, and had received assurances from various salespeople for the investment vehicle that they had a found a “workaround” to the anti-kickback statute. The client then asked, “what’s the best way to do this and not get caught.” I was tempted to jokingly say: “Use a leather briefcase with small, unmarked bills.” Instead, I assured them that it wasn’t my job to “get around” laws (and I also advised that they get a legal opinion from the MSO’s lawyer that we could seriously and rigorously evaluate). Much of the time, reviewing fee-splitting and anti-kickback rules requires a rigorous evaluation of the model, to see whether the self-referral and kickback prohibitions are triggered (usually, both federal and state), and if so, whether there are applicable safe harbors and exceptions. Enforcement Varies Having said that the penalties can be serious, it’s also important to note that enforcement priorities vary. Sometimes there can be “technical” violations of the statutes yet enforcement will be light or the arrangement might be regarded as creating a low risk of fraud and abuse. One can find this attitude expressed in many OIG advisory opinions regarding the anti-kickback laws. Very often, investigation, enforcement and penalties arise from a “perfect storm” of negative facts and circumstances. See, for example, our prior post: Corporate practice challenges medical management (MSO) organizations in New York AG action In this state enforcement action, the enforcement triggers included: Extensive Consumer Complaints: There were over 300 consumer complaints to the AG about consumer experiences, including: “quality of care, billing practices, misleading advertising, upselling of medical services and products the consumers felt were unnecessary, and unclear or incomplete terms for the financing of dental care.” Extensive MSO Control: The MSO “did not merely provide arms-length, back-end business and administrative support to independent dental practices,” but rather “developed what amounts to a chain of dental practices technically owned by individual dentists but which, in violation of New York law, were subject to extensive control by” the MSO. Profit-Sharing; A Shared Trade Name: The control “included sharing individual clinic profits with the management company and the marketing by the management company under” a shared trade name. Control over Care via Banking Arrangements: The MSO “exercised undue control over the clinic’s finances by controlling substantially all of the dental practices’ bank accounts through a single consolidated account to which the clinic owners themselves did not have access.” MSO Revenue Based on Percentage Gross Profit: The MSO took a percentage of each dental office’s monthly gross profit — “an arrangement prohibited under New York law.” Over-broad non-compete and non-solicitation: The MSO “also subjected the dental practices to non-competition and non-solicitation agreements that effectively prevent the practices from competing with any other dental practice affiliated with” the MSO, regardless of location. And that brings us to Epic Medical Management v. Paquette, a recent California appellate court decision. An Epic MSO Enforcement Case In Epic, there was a dispute between an MD and a medical management company, Epic Medical Management, LLC, with which the physician had contracted to supply non-medical management services to his practice. According to the Court: The doctor and the management company had a falling out and agreed to terminate their contract. The management company believed it was due additional fees under the agreement; the doctor believed the management company had under-performed its duties under the contract and owed him money. Here are some of the key elements of the Management Services Agreement in dispute in the case: Pursuant to the agreement, the doctor engaged the management company “to provide management services as are reasonably necessary and appropriate for the management of the non-medical aspects of [the doctor’s] medical practice.” Among other things, the management company was required to lease office space to the doctor, lease to him all equipment he deemed reasonably necessary and appropriate, provide support services, provide non-physician personnel, establish and implement a marketing plan, conduct billing and collections, and perform accounting services. The doctor was responsible for providing medical services. The management company was required to provide non-physician personnel, including nursing staff, but the physician was responsible for training and supervising the nurses. Significantly: As to compensation, the contract stated the parties agreed that “it will be impracticable to ascertain and segregate all of the exact costs and expenses that will be incurred by [the management company] in performance of the [m]anagement [s]ervices. However, it is the intent of the parties that the compensation paid to [the management company] provides a reasonable return, considering the investment and risk taken by [the management company] and the value of the [p]remises, [l]eased [e]quipment and other [m]anagement [s]ervices provided by [the management company] hereunder.” The agreement then provided, “For each month that [the management company] provides the [m]anagement [s]ervices . . . , [the doctor] shall pay to [the management company] a management fee equal to one hundred twenty percent (120%) of the aggregate costs [the management company] incurs in providing the [m]anagement [s]ervices . . . in that month but not to exceed fifty percent (50%) of the Collected Professional Revenues plus twenty five percent (25%) of the Collected Surgical Revenues . . . .” A subsequent provision defined “Collected Revenues” to mean the total received by the practice, less any refunds paid and bad-debt write-offs. The contract also included an arbitration clause and a prevailing party attorney’s fee clause. According to the Court’s recitation of the background facts, the management company never charged, and the doctor never paid, a fee based on 120 percent of the management company’s costs. Instead, the management company charged, and the doctor paid, a fee calculated as 50 percent of office medical services, 25 percent of surgical services, and 75 percent of pharmaceutical expenses. In arbitration, the arbitration concluded that the physician, not the management company, had breached the agreement; and also that the physician had to keep paying management fees accrued during the term of the Management Services Agreement. The physician’s argument was that, “because some of the fees were paid for the management company’s marketing services, the payments constituted an illegal kickback scheme for referred patients.” The physician noted that some members of the MSO, who were physicians, referred patients to the physician. The physician’s argument was based not on the federal AKS statute, but rather on the California equivalent, California Business and Professions Code section 650 (section 650). The arbitrator “concluded that any such violation was ‘technical’ and did not impact the award.” Let’s jump to the appellate court decision. Here the physician also argued that the Management Services Agreement essentially violated the prohibition against the corporate practice of medicine, by referring patients to the physician, and by using the 50-25-75 method of calculating fees. The appellate decision focuses a great deal on whether the arbitrator exceeded her powers. However, the relevant portion for us is the Court’s review of the Management Services Agreement under California Business & Professions Code 650 and California’s prohibition against the corporate practice of medicine. The appellate Court stated: Referral patients were a small percentage of the patients seen while the doctor and management company were operating pursuant to the agreement. The agreement was not a referral agreement, but one for management services, of which referrals played only an incidental part. This seems to suggest that the Court finds any violation of anti-kickback rules as “incidental” and even (according to the arbitrator) “technical.” It’s difficult to completely parse this part of the opinion, as the Court focuses so much on procedural issues such as the standard of review that applies to the arbitrator’s opinion. However, one read is that the Court takes a very light enforcement stance with respect to violations that have often been considered very weighty, under relevant California law and applicable California Attorney General opinions. The Court also looks to Business & Professions Code, Section 650(b), which allows arrangements otherwise prohibited by 650(a), if at fair market value, commercially reasonable, and not influenced by the volume or value of referrals. Here the Court’s view is important: it says that 650(b) allowed the arrangement, which included “payment to a management company for management services based on a percentage of revenue – as long as the consideration is commensurate with the value of the services furnished (and facilities and equipment leased).” The Court noted: Given this flexibility in section 650, there is no absolute prohibition on consideration being paid a management company – even one which occasionally refers patients. Again, note the Court’s emphasis on “occasional” referrals of patients. The Court takes pains to go through a history of judicial opinions in California, interpreting Business & Professions Code 650. And then the Court restates 650 very narrowly: Thus, the only basis on which the contract between the doctor and the management company could be found illegal is if a finding were made that the consideration was not commensurate with the services rendered and facilities and equipment provided As to the 50-25-75 method, the Court found no violation, so long as the numbers represented a “rough correlation” to what the management company was entitled to collect under the Management Services Agreement. The Court also found no corporate practice of medicine violation, since the Management Services Agreement showed “a strict delineation between the medical elements of the practice which the doctor controls, and the non-medical elements which the doctor has retained the management company to handle.” Does Epic Change the Enforcement Landscape Our reading of Epic suggests several lessons: A “cost-plus” arrangement by which the MSO charges the physician or medical group, is not necessarily suspect, and can be significant, so long as reflective of the fair market value of the MSO services (and/or space leased). The liberal allowance of 650(b) is at least as important as the prohibition in 650(a). The physician here emphasized the familiar, twin evils of prohibited kickbacks and fee-splitting, and corporate practice of medicine. The appellate Court essentially threw sand in the face of those arguments. As a practical matter, physicians who breach their Management Services Agreements, hoping to persuade courts or arbitrators that the agreements contain illegal arrangements, may find the legal argument much more uphill than in the past. Previously, physicians might more successfully argue that an illegal contract violates public policy and is unenforceable; but as noted, the Court resisted the argument as to illegality. The Court seemingly admits that prohibited (aka illegal) referrals were involved here, but calls these “occasional” and “incidental.” The Court limits the specter of corporate practice of medicine violations, to situations in which the management company (MSO) actually has the power to interfere with, and interferes with, clinical decision-making. Reading Epic, the rules haven’t changed, but the courts’ emphasis has shifted, from the prohibition in Business & Professions Code 650(a) to the allowance in Section 650(b). Cases and Attorney General Opinions prior to Epic emphasized the public policy dangers of violations of California Business & Professions Code 650 (i.e., 650(a)). Epic emphasizes the legislative history that led to enactment of 650(b), and even restates 650 so as to say that the “only” basis on which the Management Services Agreement could be void is if the management company (MSO) did not receive fair market value for its services. In that sense, Epic changes the landscape. It is not from the highest court in California, nor is the decision binding on other states – nor does the decision express views of anti-kickback rules based on federal law. Nonetheless, as an expression of a more liberal view of MSOs and their arrangements with physician and medical groups, Epic is a sea change in regulatory policy. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
May 15, 2018
Healthcare
FDA Dietary Supplement Labeling Requirements: Comply or Die
FDA labeling is one of the most important regulatory requirements for dietary supplements in that it provides the consumer the necessary information on the product. Indeed, ensuring that all information concerning that particular dietary supplement is in compliance with FDA labeling requirements, may be difficult and often very onerous. As a matter of fact, labeling errors may result in FDA enforcement action which could tarnish your company’s reputation and business. To begin with, it is important to understand the meaning of Dietary Supplements. What are Dietary Supplements? Dietary supplements are “food” as defined in the Federal Food, Drug, and Cosmetic Act (FD&C Act)1. In general, a foreign or domestic facility that manufactures, processes, packs, or holds human food for consumption in the United States has to register with FDA under section 415 of the FD&C Act2 and is subject to the requirements related to preventive controls of the Current Good Manufacturing Practice3, Hazard Analysis Critical Control Point (HACCP is a management system in which food safety is addressed through the analysis and control of biological, chemical, and physical hazards from raw material production, procurement and handling, to manufacturing, distribution and consumption of the finished product)4, and Risk-Based Preventive Controls for Human Food rule.5 In more simple terms, dietary supplements are defined, in part, as products (other than tobacco) intended to supplement the diet that bear or contain one or more of the following dietary ingredients: A vitamin; A mineral; An herb or other botanical; An amino acid; A dietary substance for use by man to supplement the diet by increasing the total dietary intake; or A concentrate, metabolite, constituent, extract, or a combination of any ingredient mentioned above.6 Furthermore, dietary supplements are products intended for ingestion, are not represented for use as a conventional food or as a sole item of a meal or the diet, and are labelled as dietary supplements. Now that we have briefly explained the meaning of a dietary supplement, let’s move on to explore the main labeling requirements to insert on your product. Why is labeling important and what information is needed on the Principal Display Panel (PDP)? Proper labeling is an important aspect of putting the dietary supplement on the market. Moreover, labeling gives the consumer the correct information to make an informed decision of whether or not to purchase that particular dietary supplement. The following are five main labeling statements required to be displayed on the PDP: the statement of identity (name of the dietary supplement);7 the net quantity of contents statement (amount of the dietary supplement);8 the nutrition labeling;9 the ingredient list;10 and the name and place of business of the manufacturer, packer, or distributor.11 The above statements must be placed either on the principal display panel or on the information panel. In order to clarify, the PDP is that part of the package that the consumer is most likely to see, and you’ll find the above information there.12The statement of identity and the net quantity of contents statement must also be placed on the PDP.13 A product cannot include any other information, therefore only the essential information is presented on the PDP and can then be directly communicated to consumers. When creating a PDP label, the type style is as important as the information included so the label is easily readable. What is the Statement of Identity? A statement of identity is used to recognize a common name which describes a single item and this must be placed on the PDP. Within the statement of identity, there are multiple requirements for identifying dietary supplements. These include: use of the term “dietary supplement” or, manufacturers can replace the word “dietary” and use an ingredient name in its place. For example, “calcium supplement” or “vitamin B12 supplement” are common supplements seen on the shelves of stores. The statement of identity must be one of the most important features on the PDP and its bold type size must be more prominent than other features on the front panel of the label, located parallel to the base of the package. What is the Net Quantity of Contents? The net quantity of contents is defined as the amount of supplement in the container or package and can be expressed either in weight, measure, numerical or in both. If a net quantity is being defined in weight, it must be expressed in the metric or the US customary system. The weight is defined as the weight of the supplement itself. The weight of the container isn’t included in this measurement, except in cases where the supplement is designed to deliver results under pressure. The net quantity of contents must be located on the product label as a distinct item on the PDP, parallel with the base of the container. What is the Supplement Facts Panel? The “Supplement Facts” panel, the ingredient list, and the name and place of business of the manufacturer, packer, or distributor must be placed on the information panel.14 The required information on a Supplement Facts label includes: Serving size information Names and quantities of each ingredient Total calories, calories from fat, total fat, saturated fat, cholesterol, sodium, total carbohydrate, dietary fiber, sugars, protein, vitamin A, vitamin C, calcium and iron Dietary ingredients with no daily value must be listed by common name Amount per serving (this can be worded as: amount per capsule, packet, per 2 tablets, etc.) Percent daily value must be declared on all dietary ingredients This information panel is located immediately to the right of the principal display panel as the product is displayed to the consumer. The information panel may be any adjacent panel when the top of a container is the PDP.15 What to put in the ingredient list? Any compound used in the manufacture of a dietary supplement is considered an ingredient. An ingredient statement is needed unless the product ingredients are listed under the supplement facts label. Ingredients are required to be listed in descending order of prominence by weight. Ingredient listings should also include the use of spices, natural and artificial flavors. What other information is required? The street address must be listed if it is not listed in a current city directory or telephone book, the city or town, the state, and zip code. The address of the principal place of business in lieu of the actual address must be listed accordingly. What is the required format on a Dietary Supplement Label? It is a requirement to use a print or type size that is prominent, conspicuous and easy to read. The letters must be at least one-sixteenth (1/16) inch in height based on the lower case letter “o,” and not be more than three times as high as they are wide. The lettering must contrast sufficiently (it does not need to be black and white) with the background so as to be easy to read.16 Unless excepted by law, the Tariff Act requires that every article of foreign origin (or its container) imported into the United States conspicuously indicate the English name of the country of origin of the article.17 Do I need to put Warning Statements as well? Dietary supplements must also include a warning statement on their packaging. This statement must be placed prominently on the information panel located on the product’s immediate container. By way of example: “WARNING: accidental overdose of iron-containing products is a leading cause of fatal poisoning in children under 6. Keep this product out of reach of children. In case of accidental overdose, call a doctor or poison control center immediately.” FDA labeling requirements may be difficult to decipher however if you keep these five (5) labeling statements in mind, it could help you avoid the numerous FDA hurdles. 1) the statement of identity (name of the dietary supplement), 2) the net quantity of contents statement (amount of the dietary supplement), 3) the nutrition labeling, 4) the ingredient list, and 5) the name and place of business of the manufacturer, packer, or distributor. Always ask yourself: Does this dietary supplement contain enough information for me to purchase it? Be sure to contact an experienced FDA lawyer who understands the ins and outs of dietary supplement labeling. FDA can take a variety of enforcement measures, not limited to warning letters. It’s a jungle out there—or as some say, comply or die. Well, on the bright side, beef up your compliance and mitigate enforcement risk. 1 Source accessed 06/09/2017. 2 Ibid no. 8. 3Sourrce 4 Source accessed 06/09/2017 5Source accessed 06/09/2017 6 21 U.S.C. 321 7 21 CFR 101.3(a), 8 21 CFR 101.105(a), 9 21 CFR 101.36 10 CFR 101.4(a)(1) 11 21 CFR 101.5 12 21 CFR 101.2(b) and (d), 21 CFR 101.9(j)(13) and (j)(17), 21 CFR 101.36(g), (i)(2) and (i)(5) 13 21 CFR 101.1, 21 CFR 101.3(a) and 21 CFR 101.105(a) 14 21 CFR 101.2(b) and (d), 101.36(i)(2)(iii) and (i)(5), 101.5, 101.9(j)(13)(i)(A) and (j)(17). If such information does not appear on the principal display panel, except that if space is insufficient, you may use the special provisions on the “Supplement Facts” panel in 21 CFR 101.36(i)(2)(iii) and (i)(5). See questions 46 and 56 in Chapter IV for more details. 15 21 CFR 101.5 16 21 CFR 101.2(c) and (f), 21 CFR 101.15, and 21 CFR 101.105(h) 17 Section 304, Tariff Act of 1930, as amended (19 U.S.C. 304) Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
May 1, 2018
Healthcare
Is Health Coaching Legal aka Can You Function as a “Health Coach” and Avoid Medical Licensing or Board Discipline?
Physicians, chiropractors, and other healthcare licensees often want to function as “health coaches” and avoid thorny laws. Can they? Thou Shalt and Thou Shalt Not If you think about how the law is structure, statutes often come in two basic varieties: Thou Shalt (something the law obligates you to do) Thou Shalt Not (something the law forbids you from doing) There is also: Thou Mayest (something you’re allowed to do) In law school, my Criminal Law professor used to analogize to the Garden of Eden: thou mayest eat any fruit from the garden—provided, however (as we typically say in legal contracts) that thou shalt not (or “TSN” as he would say) eat from the Tree of Life. And violating the TSN carried a harsh penalty—in this case, not simply an FDA or heavenly warning letter; but actual enforcement (in this case, expulsion). The forbidden fruit was, simply put, taken off the market. Much of what you will find in healthcare and FDA law is in the form of Thou Shalt Not. For example, Thou Shalt Not: Engage in unlicensed practice of medicine Engage in unlicensed practice of psychology Commit violations in terms of false advertising, or advertise in any manner that is false or deceptive or misleading in any respect Make disease claims for cosmetics or dietary supplements Prescribe controlled substances to a patient who lives in a state where you are not licensed as a an MD Overreach as an MSO (management services organization or MSO) and engage in the corporate practice of medicine (CPM or CPOM) Get paid or pay for referrals of the healthcare business, either where healthcare services are reimbursable by Medicare, or otherwise (under state law) On the other hand, Thou Shalt: Have a healthcare license before practicing “medicine,” “psychology,” or other such professions, and read the statutes, regulations and cases so you don’t intrude on boundaries of practice. Practice in an evidence-based way so that you are mindful of the standard of care. Provide sufficient informed consent to the patient. And Thou Mayest: In some States (such as California, Minnesota, and Rhode Island), explicitly provide healthcare services under a legal safe harbor (in CA, known as “SB577), so long as you do not practice “medicine” or another licensed profession, and make certain disclosures. Market dietary supplements—so long as you only make structure/function claims, and your claims are substantiated by competent and reliable scientific evidence. Market cosmetics—so long as, you make only cosmetics claims, and your claims are substantiated by competent and reliable scientific evidence. Get paid a commercially reasonable management fee, at fair market value, for management and marketing services to a medical practice. Provide telehealth or telemedicine services, so long as certain legal rules are respected—for example, typically you must have a license in the remote state as well as the home state; and must abide by standard of care, informed consent, privacy and security, and other legal requirements. And probably thou shouldest hire a healthcare lawyer (hint hint) who can give you superb and unparalleled legal advice on these nuances of healthcare and FDA law. Now, let’s drill down into health coaching. Is Health Coaching Legal or Illegal Healthcare practices and businesses typically formulate their questions to our healthcare lawyers in a couple of yes/no, black and white ways that do not advance their cause. For example, is (health coaching, or substitute any given practice), legal or illegal? The answer, as Rodney Dangerfield said to a 27-part question in Back to School, is “42.” As healthcare lawyers, we would never advocate or encourage clients to do any illegal activity, obviously. Let’s be clear. Some activities are clearly illegal. Robbing a bank. The statutory definition of “robbery” is clear and there is no ambiguity here. There’s nothing gray about it—we’ve all seen the movies. Is running a stop sign, illegal? Yes. Have you done it? Probably. Would we tell you that it is “ok,” because enforcement is light? No. Read this blog’s lips: do not run a stop sign. Even if no one is looking. The other day, one healthcare client proposed a healthcare compensation arrangement that was very clearly a violation of Stark and anti-kickback law. We counseled the client again and again that what they were proposing would likely bring enforcement crashing down, and there were no “creative solutions” to this particular proposal. The client kept insisting and said: “we understand you are lawyers who have creative solutions and know how to get around the law.” That was a misperception, not a compliment. To the quote the not-so-great Richard M. Nixon, “let me make one thing perfectly clear.” We do not get around the legal rules. We do not specialize in workarounds. This isn’t football, where you shake off the tackle and run into the million-dollar end zone. We can think through creative business solutions, and we can advise clients on enforcement risk. For example, if you read OIG (Office of the Inspector General) advisory opinions on federal anti-kickback law, some situations are so-called “technical” violations of anti-kickback law; however, the OIG deems the risk of fraud and abuse low, and finds that there are some safeguards in the proposed compensation arrangement; and as such, OIG advises that it likely will not proceed with enforcement. This all has to be read carefully, as these kinds of situations can be very fact-specific. We can advise on risks of enforcement and safeguard in the same way that OIG can opine on these. So, back to healthcare coaching. Is it a Thou Shalt, Thou Shalt Not, or Thou Mayest? If not legal or illegal, what kind of legal advice can one give? The Big Yellow Most healthcare ventures carry some risk of regulatory enforcement. The rules are tough, and the market is innovative. It’s that simple. In the warp and woof and actual practice and legal advice, there is typically an algorithm that involves something like: The extent to which the proposed arrangement will likely trigger enforcement scrutiny because the rules are strict; The extent to which the proposed arrangement will likely trigger enforcement scrutiny because the business model is innovative, and legal rules are slower to adapt (as happens so often, for example, in telemedicine; mobile apps; and other technological developments, where the law is catching up in spurts); The extent to which the practice or business owners are willing to take measured and informed risks; The extent to which good and creative legal advice can build in safeguards to mitigate enforcement risk. Every situation is different. Put all these together, and the risk of enforcement can vary. There are very few, if any, statutes (as mentioned) that say: “Thou mayest coach clients on their health.” Why? Go back to medical licensing laws, and you’ll see that most of these go back to the 1880’s. The idea was that there was a way to practice “medicine;” that involved “diagnosis” and “treatment” (which was basically defined as anything that would help people with a disease, ailment, illness, or condition), and that required a license. It took decades and decades for other practitioners, such as chiropractors, to gain licensure; and there is a legal patchwork among states for practitioners such as acupuncturists and naturopathic physicians. Nurses, of course, are largely dependent on physician supervision or at least collaboration in many states; and physician assistants and medical assistants must have physician supervision as defined under state law. Medical licensing laws are TSN statutes. There is an absolute prohibition. Corporate practice of medicine extends the prohibition to corporations and business entities. The idea of health coaching is to find a wedge in the law, so to speak, where one can practice without running afoul of these TSN prohibitions. It’s a carve-out from the prohibition, as opposed to an activity that is explicitly allowed by law. See for example: Health Coaching and Telemedicine Are you wanting to move your medical practice or other clinical healthcare practice into more of an coaching service? Worried about telemedicine laws and unlicensed practice rules? Wanting to […] Physician health coaching raises telemedicine issues Physician health coaching raises telemedicine issues, as it’s challenging (but not impossible) for medical doctors (like any professional) to remove the professional hat. Below. Health Coaching Online Ventures Some of our healthcare clients are individuals who want to launch a health coaching practice—for example, it could be a person who does not have a healthcare license but wants to do Reiki, nutritional counseling, or something else; or a physician who wants to function as a health coach in a state where the physician is not licensed (or online). Others are business that want to operate a health coaching arm One of our business clients was relying on a physician who had his medical license suspended, and wanted to operate as a “health coach” in the interim. Sometimes we may advise that the MD, chiropractor, or other healthcare licensee have a prominent asterisk disclaiming their license and role and clarifying—so that the marketing is clear—that they are functioning in a non-licensed, healthcare coaching role. Sometimes we will advise that the physician, chiropractor or other healthcare licensee (or non-licensed individual) who wants to function as health coach, in fact stay away from activities that could put them back in the licensed realm, such as: Reviewing and interpreting lab tests Reviewing and interpreting genetic data Making treatment plans based on lab tests, genetic data, medical questionnaires, health history, or other information Ironically, individuals can get their own lab tests, genetic data, and other information, and make their own treatment decisions based on all of this material; but when this is given by the “health coach,” then can be risk of charges of: Unlicensed practice of medicine Unlicensed practice of psychology Unlicensed practice of nutrition or dietetics Unlicensed practice of genetics counseling Unlicensed practice of other professions Licensure is a big deal, and the State takes it seriously. It’s important to read the statutes, regulations, cases, and the Boards’ policy statements to understand the legal boundaries. Only then can someone craft a “health coaching” practice or business that doesn’t waive the red flag at enforcement authorities. “Health coaching” is a term lots of practitioners want to use. But remember that there are few, if any, laws that expressly allow someone to set themselves up as a “health coach.” Licensing laws control, and enforcement priorities shift from state to state. Always consult a healthcare lawyer before shifting into a health coaching business or practice. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
March 22, 2018
Healthcare
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
