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
Labor and Employment
New DOJ Memo Addresses Legality of DEI Programs for Federal Funding Recipients
On July 30, 2025, the Department of Justice released a memo from Attorney General Pam Bondi offering guidance to federal agencies and recipients of federal funding regarding practices that the administration views as potentially unlawful under federal antidiscrimination laws. While the memo focuses heavily on institutions of higher education, its implications extend to all federal funding recipients, federal contractors, and employers subject to Title VII. The memo outlines the administration’s interpretation of federal law as it applies to diversity, equity, and inclusion (DEI) initiatives and similar programs. It provides examples of practices the DOJ considers unlawful or legally questionable, as well as "best practices" intended to help organizations avoid liability. Key Takeaways Applicability Beyond Higher Education: Although many examples concern colleges and universities, the guidance expressly encourages all entities subject to federal antidiscrimination laws, including public and private employers, state and local governments, and contractors, to review and evaluate their DEI programs. DOJ’s Interpretations Are Not Binding Law: The memo reflects the DOJ’s interpretation of existing law, not a change in the law itself. Courts remain the final arbiters of what federal statutes mean, and state laws may impose different or additional requirements, especially in areas such as transgender rights, where the administration’s views may conflict with both state law and judicial precedent. Examples of Practices the DOJ Views as Unlawful or Problematic Race-Based Scholarships or Opportunities: Programs that limit access to scholarships, internships, or leadership initiatives based on race (e.g., a “Black Excellence Scholarship”) violate federal law unless they meet the very high bar for race-conscious programs. Race-Exclusive Facilities or Resources: DEI initiatives that designate certain physical spaces (e.g., “BIPOC-only lounges”) or create identity-based access restrictions may amount to unlawful segregation or exclusion, even if intended to foster inclusion. Segregated Training or Affinity Groups: Programs that separate participants based on race (e.g., mandatory DEI sessions with race-exclusive breakouts) risk violating civil rights laws. Voluntary, open-to-all professional support networks may be permissible. Diverse Slate Hiring Requirements: Mandating racial or demographic composition in interview pools (e.g., requiring a minimum number of minority candidates per hiring slate) may violate the law if used to exclude otherwise qualified individuals based on race. Race- or Sex-Based Contracting Preferences: Automatically favoring minority- or women-owned businesses in procurement decisions, without narrowly tailoring those preferences to a compelling government interest, raises legal concerns. Note: The DOJ flags this area as particularly sensitive given that many entities, including government contractors, are required to establish utilization goals for disadvantaged businesses. The legality of these long-standing programs may now be in flux. Proxies for Race or Sex Consideration: Cultural Competence or “Lived Experience” Requirements: When tied to race or ethnicity, such criteria may unlawfully advantage candidates based on protected characteristics Diversity Statements or “Obstacle” Essays: Requiring narratives that implicitly reward racial or gender identity may function as indirect proxies for discrimination The memo sharply narrows the permissible interpretation of the Supreme Court’s language in Students for Fair Admissions v. Harvard, particularly Chief Justice Roberts’ explicit statement that applicants may discuss how race shaped their experiences, provided race itself is not the basis for decisions. Recommended “Best Practices” To reduce legal risk, the DOJ encourages organizations to: Eliminate Demographic-Driven Goals: Avoid designing policies or using facially neutral criteria (e.g., “first-generation student” or “underserved zip code”) to achieve demographic outcomes tied to protected characteristics Justify Criteria with Legitimate, Non-Discriminatory Rationales: Document how selection criteria are related to objective performance or institutional needs — not race, sex, or other protected traits Evaluate Potential Proxy Effects: Before implementing race-neutral policies, assess whether they function in practice as proxies for race, sex, or other protected statuses Abandon Diversity Quotas: Avoid policies that require representation of specific demographic groups in candidate pools, committees, or final hiring selections Include and Enforce Nondiscrimination Clauses in Contracts: Require third parties receiving federal funds to comply with nondiscrimination obligations. Monitor compliance and terminate funding where violations occur. Note on Scope of Coverage The DOJ memo applies to recipients of federal financial assistance, which includes grants, loans, subsidies, and insurance, not federal procurement contracts. However, many principles may be relevant to federal contractors, particularly where compliance with Title VII or similar statutes is at issue.
August 8, 2025
Intellectual Property
Future-Proofing Your Brand During Expansion
Expanding a brand into a new category can be an exciting time. It can also be one of the riskiest moves a brand can make. Branding is more than logos or ad campaigns. It’s about identity, voice, values, and the emotional connection with your audience. Whether it's a fashion house entering beauty, a beverage company exploring wellness, or a tech firm launching a novel product, the potential for growth is enormous. But with that opportunity comes risk. When managed well, brand expansion reinforces that connection, but when rushed or misaligned, it weakens the trust that took years to build. Why Future Proofing Matters from Day One Often, brands treat category expansion like a standalone marketing campaign. They focus on quick wins, media buzz, short-term sales, or a different position in shelf space, which, without a strategic foundation, can backfire. Every product launch, brand partnership, or new line sends a message to consumers about what your brand stands for. That means any missteps risk undermining that story. Future proofing begins by asking tough but essential questions: Does this new product offering align with our brand’s culture? Will our core messaging still align as we scale or expand into new regions or categories? Define the Relationship with the Parent Brand An often undervalued aspect of expansion is the structure that connects the dots on how new offerings relate to the master brand. Will the new product be a sub-brand, an extension, or something distinct and possibly even unrelated? Consider Apple’s ecosystem: iPhone, iPad, Apple Watch, AirPods. Each product serves a unique function, yet they all come together and reinforce the parent brand’s identity of innovation and integration. That clarity builds customer trust and makes each launch feel like a natural extension of what consumers already believe about Apple. In-House vs. Licensed: A Strategic Decision Deciding to build a new category in-house or license it to a third party is important and has significant financial implications. Licensing can offer speed as well as immediate category expertise. Additionally, licensees will generally have established distribution channels in their product category. However, licensing carries the risk of inconsistent execution and diminished brand control. In contrast, in-house development ensures alignment but can stretch internal resources and delay time-to-market. Neither option is inherently better; it depends on your long-term goals. Some brands start with licensing, then bring successful categories in-house to better integrate them into the brand’s DNA. Choose the approach that supports authenticity, quality, and growth over time. Be realistic about what it takes to launch a new product category from product development through sales and distribution. Going Global? Think Local Launching into new regions multiplies complexity, particularly when expanding internationally. What resonates with customers in North America might fall flat in Asia without cultural and regional nuances. A one-size-fits-all global campaign can seem tone deaf. Moreover, international regulations pertaining to product categories can differ substantially, and fluctuating tariffs and trade treaties may also impact a company’s ability to be successful in a country or region. Strong brands can adapt for regional differences in messaging, image, tone, and packaging, etc., while still expressing a consistent global identity. Nevertheless, brands must still learn the local market and its customs, and understand how to navigate and comply with local regulations. Beyond the Launch: The Core of a Future-Proof Brand To future-proof your brand, you need to think beyond launch day. A brand isn’t defined by one product, campaign, or social media moment. It’s how your customers experience and perceive you over time. Strong brands continuously learn from their customers, observing shifts in expectations, sentiment, and values. Gen Z, for example, views itself as a stakeholder in the brands it supports. They expect companies to live up to their stated values, and they take notice and speak out on TikTok when those values ring hollow. Authenticity is key. Internal Culture Is Brand Culture Your external brand reflects your internal culture. When your employees, from C-suite to frontline workers, understand and live the brand’s values, it shows in every customer interaction. Future-proofing your brand requires embedding that alignment throughout your organization. Your brand is reflected in the way products are designed and services are delivered. Everyone should feel a sense of ownership in the brand story and understand how their role contributes to it. Every touchpoint, from social media posts, customer service exchanges, product packaging, and speaking engagements, is a chance to reinforce (or undermine) your brand. Nourish the Brand Ongoing thought leadership helps keep your brand visible, relevant, and aligned with your customers' needs. Great brands often own a point of view in their industry, publishing insights or setting trends that reinforce their authority. Measure what works through perception studies, engagement metrics, and customer feedback, and adapt accordingly. The market will change. Customers will evolve. Competitors will disrupt. Your logo may stay the same or change, but the context in which it operates never does. The launch is just the beginning. Your brand's success depends on how well it fits into a broader, evolving dialogue. Future proofing is about preparing your brand to meet what comes next.
August 8, 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
Estates and Trusts
Major Estate Tax Changes Under the One Big Beautiful Bill Act
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, is a sweeping piece of legislation spanning nearly 1,000 pages. It includes significant changes to federal estate and income tax laws that will affect estate planning. Here’s an overview of a few key provisions in OBBBA and some strategic estate planning opportunities that it provides. Estate and Gift Tax Exclusion Increased Effective January 1, 2026, the federal estate and gift tax exclusion increases to $15 million per individual (or $30 million per married couple), with future adjustments for inflation. Although the increased exclusion was made “permanent” under the Act, it may still be changed or repealed by a future Congress or administration. High-net-worth clients should take full advantage of what may be a limited window for significant planning options. Spousal Lifetime Access Trusts (SLATs) and Grantor Retained Annuity Trusts (GRATs) are excellent options for front-loading an estate plan while still allowing the client or spouse access to assets. Individuals who have already utilized all or a portion of their current exclusions should consider “topping off” their current estate plans with additional gifts. While the increase in the federal exclusion amount provides substantial federal tax relief, state-level estate and inheritance taxes still apply, in many jurisdictions: 12 states (Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington) and the District of Columbia continue to impose an estate tax Six states (Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania) impose an inheritance tax Connecticut is the only state that also imposes a gift tax New York does not have a gift tax, but adds back gifts made within three years of death to the taxable estate With proper planning, assets can still be transferred free of both federal and state-level transfer taxes, but state-specific rules must be carefully navigated. Spousal Lifetime Access Trusts (SLATs), Dynasty Trusts, and sales to intentionally defective grantor trusts offer excellent opportunities to both leverage and utilize the $15 million federal gift tax exclusion while removing those assets from a state estate tax regime. New York’s Estate Tax “Cliff” New York’s estate tax has a particularly harsh feature known as the “estate tax cliff.” This means that estates just slightly over the exclusion amount may lose the exclusion entirely and owe significant tax. For example, in 2025: A New York taxable estate of $7,160,000 will owe no estate tax A New York estate of $7,161,000 will owe $2,863 in tax A New York estate of $7,518,000 will owe $707,648 This makes planning for residents of New York and similarly situated states especially important. New York State residents, and even non-resident individuals with substantial New York situs property, should consider making immediate and significant gifts designed to lower their New York taxable estates below the cliff. If they survive three years after the gift, the gifted property will be excluded from their New York taxable estate. Generation-Skipping Transfer (GST) Tax Exemption The federal GST tax exemption also increases to $15 million per individual beginning January 1, 2026. This is particularly relevant for gifts or bequests made to “skip persons” (such as grandchildren) or to trusts subject to GST tax. Despite the increase, careful planning is still needed to make full use of this exemption. Unlike the federal estate and gift tax exclusion, the increased GST tax exemption is not “portable” – meaning that unless both spouses’ GST exemptions are used during life, they may be forfeited at the first death. And like the federal estate and gift tax exclusion, the increased GST tax exemption is also subject to a potential repeal if the political winds change. For clients and their families focused on multi-generational planning, now is the time to “use it or lose it” by fully sheltering appreciating assets from the generation skipping tax in an irrevocable trust. Careful allocation of exemption is the key to maximizing tax efficiency and wealth for future generations. SALT Deduction Cap Raised — But with Limits Starting in 2025, the cap on deductions for state and local taxes (SALT) increases from $10,000 to $40,000. This is especially beneficial for residents in high-tax states. However, the increased cap phases out for high-income earners: For those with modified adjusted gross income (MAGI) between $500,000 and $600,000, the cap is reduced by 30% of the excess MAGI The deduction is completely phased out for taxpayers with MAGI of $600,000 or more Unless extended, the cap will revert to $10,000 in 2030. Clients living in high-tax states should consider “stacking” multiple non-grantor trusts. Since each trust is treated as a separate taxpayer under the Internal Revenue Code, carefully drafted multiple trusts can potentially reallocate MAGI and shelter thousands of dollars in SALT deductions that could not otherwise be taken on an individual’s income tax return. Changes to Charitable Giving Rules OBBBA introduces new benefits and limitations for charitable giving: The 60% limitation for cash contributions to qualified charities is not “permanent” Standard deduction filers can now take an additional $1,000 charitable deduction ($2,000 for joint filers) Itemizers are subject to a new 0.5% floor, meaning charitable deductions are only allowed to the extent that total contributions exceed 0.5% of adjusted gross income (AGI) before losses To maximize deductibility, the new 0.5% floor encourages consolidating charitable giving in a single tax year. For high-net-worth individuals, this is the perfect opportunity to fund or expand a private foundation. Donor-advised funds may also provide an option for maximizing charitable giving in a single year while providing flexibility in the choice of charities and the timing of distributions. Final Thoughts The OBBBA marks a significant shift in the tax landscape for estate planning. While some changes provide enhanced opportunities for wealth transfer and charitable giving, others introduce complexity and planning pitfalls — especially at the state level.
August 7, 2025
Intellectual Property
Voice Actors Clear Early Legal Hurdle in AI Cloning Suit
Voice actors received a rare, if incomplete, victory against alleged AI infringers in a recent opinion from an SDNY judge in Lehrman v. Lovo, Inc. Voice actors Paul Lehrman and Linnea Sage filed an action against AI voiceover company Lovo, alleging the company used artificial intelligence to synthesize and sell unauthorized "clones" of their voices. Plaintiffs discovered their voices being used in YouTube videos and podcasts after they had been hired through the freelancing app, Fiverr, for what they believed were limited voice recording projects used for research purposes. The result is a case of first impression regarding AI voice cloning tech, asserting claims under New York civil rights and consumer protection laws, the Lanham Act, the Copyright Act, and various common law theories, including breach of contract, fraud, conversion, unjust enrichment, and unfair competition. Judge J. Paul Oetken issued a mixed ruling on Lovo's motion to dismiss, concluding that "for the most part, Plaintiffs have not stated cognizable claims under federal trademark and copyright law." The court explained that what plaintiffs sought was essentially "copyright protection for their voices" as abstract concepts rather than specific expressions, and that copyright "must concern the expression of ideas, not the ideas themselves." However, the court did allow the plaintiffs’ breach of contract and right of publicity claims to proceed, finding that communications through Fiverr and the platform's terms of service supported their allegations that the voice recordings were used beyond the agreed scope. The court also moved claims under New York Civil Rights Law Sections 50 and 51 forward, stating that these state laws are "tailored to balance the unique interests at stake" in voice misappropriation cases. While the ruling represents a partial victory for the voice actors, it highlights significant gaps in federal intellectual property protections for AI-generated content and voice cloning technology. The court's decision suggests that voice actors and similar plaintiffs may find more success pursuing state law remedies for unauthorized AI voice cloning rather than relying on federal copyright protections.
August 6, 2025
Estates and Trusts
Estate Planning for Musicians and Protecting Your Legacy Off the Stage
For musicians, estate planning is not just about deciding who inherits guitar collections or song royalties. It is about protecting your artistic legacy, ensuring your intellectual property is handled according to your wishes, and providing clarity for loved ones who may be unfamiliar with the nuances of the music industry. Unlike a typical estate plan, musicians face unique considerations, especially when it comes to rights management, royalties, and long-term protection of their creative works. Whether you are a seasoned performer or an up-and-coming artist, here are essential estate planning steps every musician should take. Catalog and Protect Your Intellectual Property Your songs, recordings, compositions, and even unreleased material are valuable assets. The first step is creating a comprehensive inventory of your published works, unreleased recordings or demos, copyright registrations, licensing agreements, and publishing contracts. Ensure these assets are clearly documented in your estate plan, which means if you have a revocable trust in place, these assets must be “assigned” to that trust to avoid probate. You should also provide instructions to your trustee or executor on how these assets should be managed, distributed, and monetized after your death. Establish Ownership Structures for Royalties Royalties can continue to generate income long after a musician’s passing. To ensure proper management, it is most efficient to set up a trust to collect and distribute these royalties to your beneficiaries. A trust can provide the mechanism to provide ongoing support to your loved ones to ensure they receive the funds in a way that makes sense, particularly if your beneficiaries are minors. Having a trust in place can also make it easier to manage the various income streams to ensure they flow centrally during your life in the way that you intend. Certain trusts can even provide creditor protection, protection from estate disputes, and mismanagement if you become incapacitated. When a trust is created, it is important to think about who will serve as your trustee if you can no longer act, or upon your death. The trustee chosen by you should have familiarity with your intellectual property, royalties, licensing, and the value of your catalogue. Assign Control Over Your Artistic Legacy Do you want your unreleased recordings shared with the world? Should certain songs be licensed for commercials or films? It is essential that you appoint the right person with this level of discretion to answer these questions because they can determine how your music is used after your death. It is, therefore, vital to ensure that the person you assign the control has an understanding of your legacy. This person is often referred to as a “creative executor” or a “creative trustee” who understands your artistic vision and can carry out your wishes regarding issues like posthumous releases, licensing decisions, and the preservation of your work. Digital Assets and Social Media A musician’s online presence can be as valuable as their physical recordings. A properly drafted estate plan will include instructions regarding your social media profiles, your official website, your digital music platforms (Spotify, Apple Music, YouTube channels), and access to each of those platforms. You may direct whether these platforms should remain active as they were during your life, or if you would prefer that they remain active as a memorial or taken down altogether. Business Succession Planning for Bands or Labels If you own a record label, music publishing company, or are part of a band with business agreements, succession planning is critical. Ensure that your partnership agreements address what happens in the event of your death or incapacity and how ownership interests will be transferred or managed. Your operating agreements and shareholder agreements should be reflective of your wishes and must address your particular circumstance; failure to do so allows your state to determine how those interests can be transferred or managed. Plan for Personal Assets and Family Needs Beyond your musical career, you must ensure that you have a traditional estate plan in place that also addresses bequests to your family members and friends, guardianship of your children, and designations of health agents and powers of attorney. If your musical career is successful, you should consider the issue of estate tax and consult with an insurance professional for life insurance policies that could provide economic support for your family or liquidity to pay estate tax. If your music catalog has significant value, proactive estate tax planning is essential. Strategies might include gifting portions of your catalog during your lifetime, setting up irrevocable trusts to shield assets, and working with a valuation expert to determine accurate appraisals for estate tax purposes. Musicians, like most artists, often experience fluctuating incomes, so proper planning is crucial for providing long-term security to loved ones. Final Thoughts Proper planning is the ultimate backstage pass to your legacy. It empowers musicians to control not just the financial aspects of their legacy, but also the integrity and future of their creative works. Without a solid plan, disputes over rights, royalties, and artistic decisions can tarnish the legacy you have worked so hard to build.
August 5, 2025
Franchise Law
Understanding the FDD and Franchise Agreement Before You Invest
Franchise Agreements Are Binding and Often One-Sided Franchise Agreements are typically drafted by the franchisor and presented on a “take it or leave it” basis. These contracts often impose strict controls over how you operate your business — from approved vendors and marketing strategies to pricing, hours of operation, and technology platforms. They also frequently include provisions that: Limit your ability to exit the business without penalties Impose personal guarantees and long-term non-competes Allow the franchisor to raise fees or change system rules unilaterally Require extensive marketing spend and recurring royalty payments, regardless of profitability Once signed, these agreements are legally binding, and courts generally enforce them as written. That’s why it’s critical to understand every term, especially the financial and operational obligations that can continue even if your business underperforms. The FDD Reveals More Than You Think—If You Know Where to Look Federal law requires all franchisors to provide an FDD at least 14 days before you commit to purchasing a franchise. This document includes 23 mandatory items covering everything from fees and restrictions to litigation history and franchisee turnover. Key areas to focus on include: Item Seven (Estimated Initial Investment): Are the start-up costs realistic? Do they include real estate, equipment, training, and working capital Item 19 (Financial Performance Representations): Does the franchisor provide actual revenue or profit data? If not, you’ll need to speak directly with current and former franchisees to assess performance Item 20 (System Growth and Turnover): How many outlets have closed, transferred, or terminated in the past three years? A high rate of turnover may signal problems in the system Location, Location, Location: Real Estate Considerations Matter For brick-and-mortar franchises, securing the appropriate location is mission-critical. But many prospective franchisees underestimate just how complex and time-consuming the real estate process can be. Questions to ask include: Will the franchisor assist with site selection and lease negotiations Does your market have sufficient demand for the service you're offering Have you accounted for construction costs, permitting delays, or the need for tenant improvements Before signing a lease, make sure your site is approved by the franchisor, zoned appropriately, and competitively situated within your target market. Poor location decisions can be fatal, even with a strong brand behind you. Due Diligence Is Not Optional — It’s Essential Even if a franchise system seems successful from the outside, the only way to know whether it’s viable for you is through diligent research. This includes: Contacting five to seven current and former franchisees in similar markets to ask about actual revenue, marketing effectiveness, franchisor support, and break-even timelines Building a financial model that includes royalties, fees, payroll, rent, and realistic revenue assumptions Consulting experienced franchise counsel to identify red flags or possible negotiation points (such as non-compete terms, marketing obligations, or transfer fees) Understand the Fine Print: Non-Competes and Post-Termination Restrictions One of the most overlooked — but potentially harmful — aspects of franchise agreements is the restrictive covenants that survive after your business ends. Most franchise agreements include: In-term and post-term non-compete clauses that prevent you from operating a similar business for up to two years within a certain geographic radius Non-solicitation provisions that restrict contact with former clients, employees, or vendors Injunctive relief and fee-shifting clauses that give the franchisor significant enforcement rights if they believe you’ve violated these obligations These provisions can limit your ability to earn a living in your field if things don’t work out. You must understand exactly what you are agreeing to before committing to the franchise. Franchise Investment Is a Long-Term Commitment Most franchise agreements last between five and 10 years, and renewal isn’t guaranteed. Even if renewal is offered, it often requires signing a new agreement that may include higher fees or stricter obligations. If your situation changes, selling or transferring your franchise may trigger high administrative fees or require franchisor approval. Some agreements even prohibit termination unless certain financial benchmarks are met. No Guarantees of Success Finally, it’s important to remember — buying a franchise is not a guarantee of success. Many franchisors explicitly disclaim responsibility for your profitability, and even those that provide financial data often include broad disclaimers. You bear the operational risk, and in many cases, personal financial risk. Bottom Line: Don’t Buy Blind The decision to invest in a franchise should be driven by facts — not hope, hype, or brand appeal. Review the FDD and Franchise Agreement in full. Speak to other franchisees. Build your own financial model. And don’t move forward until you’ve consulted an attorney who specializes in franchise law. The costs of skipping this step — both financial and emotional — can be far greater than you think.
August 5, 2025
Mergers and Acquisitions
Deal Flow Thawing: Is the M&A Market Finally Finding Its Footing?
After a rocky past six months, there is cautious optimism that merger and acquisition (M&A) activity is beginning to unfreeze. For much of the past year, there have been mismatched expectations around valuations and limited access to capital that have caused activity to stall. According to a recent report by PwC Global, “lending rates have long been one of the two key factors influencing M&A activity, the other being valuations.” So, while buyers were eager and sellers were hopeful, the numbers rarely lined up. But things could now start to change. The Valuation Tug-of-War One of the biggest barriers to getting deals across the finish line has been price. Many sellers have been holding onto lofty valuations based on pre-2022 market highs that simply aren’t realistic today. Meanwhile, buyers, who have been dealing with tighter credit markets and greater scrutiny from lenders, have been laser-focused on the fundamentals. All of this has resulted in a frustrating standoff where deals collapse not due to a lack of interest, but because no one can agree on what the business is truly worth. In fact, earlier this year, Arrowpoint Advisory noted a 26% decline in deal volume in North America, due in large part to “valuation mismatches between buyers and sellers.” We're now seeing a slow realignment. Valuation expectations are coming back to earth, with PwC noting that in today’s uncertain environment, it is important to not overreach on valuations. Deal structures are also evolving to bridge the remaining gaps, with earnouts, seller financing, and rollover equity becoming more common. It is this kind of flexibility that is helping to get deals done. A Shift in Diligence Dynamics Another notable change has been the quality of earnings (QoE) process. Two years ago, it was often a buyer-driven analysis, completed after signing a letter of intent (LOI). Now, many sellers are proactively conducting QoE studies before going to market. It’s a smart move to arm themselves with clean, vetted financials that can help to accelerate buyer confidence and reduce the risk of retrading. But there is a catch. Even with a proactive QoE, once a deal goes under LOI, buyers are digging deeper than ever. Diligence is intense, and the time from LOI to closing can stretch longer than expected. KPMG’s 2025 Deal Market Study points to heightened diligence and risk assessment as top challenges for 52% of corporates and 42% of private equity sponsors in the current economic landscape. And 47% of corporates also pointed to prolonged deal closing timelines as an issue, highlighting the link between deeper diligence and slower transactions. So, by the time due diligence wraps, earnings may have shifted, or market conditions may have changed, sometimes to the point where the lender’s original terms no longer match the reality of the deal. The Capital Crunch is Real, But Not Fatal Banks are still lending, but there is an increased level of caution and a decreased appetite for risk. We’ve seen situations where buyers get a term sheet for, say, $8 million in debt financing, only to find that after diligence or revised financials, the deal no longer pencils out, or the loan size is cut. That kind of late-stage shift can derail even the most promising transaction. That’s why it’s more important than ever to stress-test the deal early. Build in buffers, anticipate lender concerns, and don’t underestimate the importance of aligning everyone (seller, buyer, and lender) on realistic numbers from the start. The M&A market may not be booming, but the ice is cracking as valuations find firmer footing, buyers adapt to longer timelines, and sellers are more prepared. If you're contemplating a transaction on either side, now is the time to get your house in order. Quality of earnings, capital access, transparency, and flexibility will be the make-or-break factors in the deals that get done in the second half of 2025.
August 4, 2025
Bankruptcy
Broadway Realty Ruling Highlights Narrow Scope of Collateral Surcharges
Another bankruptcy court decision shows the skepticism of courts to Chapter 11 debtors’ arguments that they can surcharge a creditor’s collateral to pay extensive administrative expenses, such as professionals’ fees. A decision from Judge Jones in the Southern District of New York emphasizes again, how bankruptcy courts are hesitant to allow such broad surcharge claims under section 506(c) of the Bankruptcy Code. See In re Broadway Realty I Co., LLC, No. 25-11050 (DSJ), 2025 WL 1803089, at *1 (Bankr. S.D.N.Y. June 29, 2025). The decision also dealt with other issues, principally adequate protection in the form of “shared” equity cushions between multiple affiliated debtors. But in addressing 506(c), Judge Jones took issue with a sweeping effort to justify a surcharge of “millions of dollars of professional fees and other administrative expenses” on the theory that the Chapter 11 case generally benefited the secured lender. The debtors, 82 entities which owned a number of multifamily residential rental buildings, filed bankruptcy to block foreclosure actions proceeding in state court. The secured lender contested the debtors’ cash collateral motion, arguing that the proposed expenses depleted its cash collateral without adequate protection. The debtors responded, in part, by arguing that the expenses should not require an adequate protection analysis (or themselves constituted adequate protection) because they benefited the lender’s collateral and therefore could be surcharged under section 506(c). Judge Jones was not convinced. After finding that the lender was not adequately protected by “shared” equity cushions between the debtors, he addressed the surcharge argument. Section 506(c) surcharges, he found, might sometimes be relevant to the question whether a lender is adequately protected for a debtor’s expenditures, but here, the debtors argument that nearly all of its expenditures, including millions of dollars in professionals’ fees, “adequately protected” the lender was overbroad. What made the surcharge attempt particularly egregious in Broadway Realty was the fact that the debtors sought to apply the surcharge “prospectively,” that is, before the administrative expenses were incurred, and that the debtors argued that their ability to pay such expenses then surcharge the collateral, supported a claim that the creditor was adequately protected for the use of its cash collateral. Section 506(c), Judge Jones found, is not intended to serve this purpose, but was intended to apply to expenses already incurred, and was not intended to support an argument of adequate protection. There are two principal takeaways for debtors entering Chapter 11. First, most bankruptcy courts remain hostile to the argument that a secured creditor’s hypothetical benefit from the case can ever justify charging their collateral for the expenses of the case. It’s not simply a matter of crafting a convincing evidentiary showing that the creditor will do better through a Chapter 11 plan or 363 sale, instead, section 506(c) is simply not intended to govern such “broad” benefits, only to justify narrow and specific surcharges for necessary collateral-based expenses. Second, because section 506(c) is retrospective, it can only be invoked after the expenses have been incurred. This, of course, places the risk on the debtor incurring the expense, that it will be seen as a justifying surcharge. It also places the premium on negotiation with the creditor in advance of incurring the expense to mitigate that risk. In reality, if broad administrative expense support is to be sought, the debtor should attempt to do so through a restructuring support agreement or similar arrangement prior to filing the case.
August 1, 2025
Labor and Employment
Sustaining LGBTQ+ Inclusivity: Legal and Workplace Strategies After Pride Month 2025
Pride Month 2025, commemorating the 1969 Stonewall Riots, celebrates the LGBTQ+ community’s contributions, but inclusivity must extend beyond June to foster workplaces where everyone feels valued. Navigating the complex legal landscape — shaped by the Supreme Court’s 2020 Bostock decision, Executive Order (EO) 14173, and the Department of Justice’s (DOJ) Civil Rights Fraud Initiative — requires strategic planning. Cultural dynamics, including employee activism and consumer expectations, further emphasize the need for year-round inclusivity. This blog provides actionable legal and practical strategies to ensure compliance with Title VII, mitigate False Claims Act (FCA) risks, and create psychologically safe workplaces where LGBTQ+ employees can thrive without hiding their identities. Understanding the Legal Framework The Supreme Court’s Bostock v. Clayton County (140 S. Ct. 1731, 2020) decision established that Title VII of the Civil Rights Act of 1964 prohibits discrimination based on sexual orientation and gender identity for employers with 15 or more employees. The Equal Employment Opportunity Commission (EEOC) enforces Title VII, providing guidance on restroom access aligned with gender identity, harassment prevention, and protections against discrimination based on nonconformity to sex-based stereotypes (EEOC Guidance, 2021). However, a May 15, 2025, federal court ruling vacated parts of the EEOC’s harassment guidance, pending appeal. The Eleventh Circuit’s Lange v. Houston County decision underscored the importance of inclusive benefits, holding employers liable for excluding gender-affirming care from health plans. State and local anti-discrimination laws in 25 states, the District of Columbia, and many municipalities, may impose stricter standards or apply to smaller employers. Globally, over 60 countries criminalize same-sex relationships, creating risks for employees on international assignments. EO 14173, signed January 21, 2025, requires federal fund recipients to certify DEI program compliance with anti-discrimination laws, with violations risking FCA liability. The DOJ’s Civil Rights Fraud Initiative, launched May 19, 2025, targets false certifications in DEI programs, such as gender-identity-based restroom policies, using FCA’s treble damages and qui tam provisions. Addressing Workplace Challenges Post-Pride Month Beyond Pride Month, employers must address ongoing challenges to sustain inclusivity. Many LGBTQ+ employees feel pressured to “cover” (hiding aspects of their identity), such as avoiding mention of same-sex partners or gender identity to fit in, which can harm mental wellbeing and productivity. Despite Bostock, harassment over pronouns, dress codes, or benefits persists, risking Title VII claims. Employee activism, often heightened during Pride, may continue as resource groups push for robust inclusion policies. Missteps could lead to union organizing, lawsuits alleging discrimination, or consumer backlash from perceived over or under-support of LGBTQ+ issues. The DOJ’s focus on “unlawful DEI” may prompt some to scale back inclusivity efforts, while religious accommodation requests require careful balancing with Title VII obligations. FCA Defenses: Safeguarding Against DOJ Enforcement The DOJ’s Civil Rights Fraud Initiative frames false DEI compliance certifications as FCA violations, but employers can leverage robust defenses. In United States ex rel. Schutte v. SuperValu Inc. (143 S. Ct. 1391, 2023), the Supreme Court held that FCA liability requires subjective knowledge of noncompliance. Employers who reasonably believed their DEI programs complied with Title VI, Title IX, or Section 1557 — based on legal counsel or ambiguous regulations — can argue they lacked the “scienter” needed for liability. Documenting good-faith compliance efforts strengthens this defense. In Universal Health Services, Inc. v. United States ex rel. Escobar (136 S. Ct. 1989, 2016), the Court required that false certifications materially influence federal payment decisions. If the government knew of DEI practices through audits or continued funding despite disclosures, employers can argue immateriality. The Eleventh Circuit’s Honeyfund.com v. Florida (2023) decision, which invalidated anti-DEI restrictions as First Amendment violations, supports arguments that inclusivity initiatives, like employee resource groups or training, are protected speech. These defenses — good-faith compliance, lack of materiality, and free speech — help mitigate FCA risks when supported by legal counsel. Practical Strategies for Year-Round Inclusivity To sustain inclusivity post-Pride Month while complying with Title VII and mitigating FCA risks, employers can adopt the following strategies to create workplaces where employees feel safe and valued: Update Policies for Clarity and Compliance Revise anti-discrimination policies to explicitly cover sexual orientation and gender identity, aligning with EEOC guidance, state/local laws, and Title VI/IX/Section 1557. Ensure DEI programs avoid assigning benefits by protected characteristics. Support restroom and dress code access aligned with gender identity, offering gender-neutral facilities as a compliance option. Accurately reflect these practices in federal certifications to avoid FCA liability. Offer Voluntary, Inclusive Training Provide voluntary training on preferred pronouns, names, and Title VII compliance to reduce discrimination risks and foster inclusion. Training should be non-segregatory to avoid DOJ scrutiny. Equip HR with de-escalation training to handle identity-based conflicts, creating a psychologically safe environment where employees can be authentic, without fear of judgment. Implement Confidential Reporting Channels Establish confidential reporting mechanisms and thorough investigation processes to address discrimination promptly, preventing workplace hostility and Title VII claims. Swift responses to inappropriate comments, such as those about restroom access, demonstrate a commitment to inclusivity. Support Gender-Affirming Benefits and Accommodations Ensure health plans cover gender-affirming care, compliant with Lange and the Respect for Marriage Act (Pub. L. 117-228). Develop accommodation plans for transitioning employees, ensuring accurate federal certifications. For international assignments, assess destination laws and provide safety protocols for LGBTQ+ employees. Conduct Privileged DEI Reviews Perform privileged reviews of DEI programs and certifications under Title VI/IX/Section 1557, focusing on policies like restroom access that may attract DOJ scrutiny. Document compliance efforts to support Schutte defenses and track payment decisions for Escobar arguments. Foster Inclusive Cultural Observances Extend Pride Month’s spirit by integrating inclusivity into year-round observances, such as decorating contests with rainbow themes or inclusive swag like pens, to foster belonging. Apply consistent, objective criteria to cultural observances (e.g., Pride Month, Black History Month) aligned with company values to avoid FCA risks. Ensure events are voluntary and inclusive, with legal review for sponsorships or displays to address FCA and First Amendment implications. Balance Religious Accommodations Process religious accommodation requests for inclusivity initiatives compliantly, balancing with Title VII duties. Manage conflicts without compromising anti-discrimination policies to maintain a safe workplace for all. Encourage Mentorship and Allyship Promote mentorship programs to support LGBTQ+ employees, fostering career growth and a sense of belonging. Encourage allyship year-round by creating spaces where employees can be open about their identities, reducing the need to cover, and enhance wellbeing. Align Legal, HR, DEI, and PR Teams Coordinate across teams to ensure inclusivity initiatives reflect brand values and risk tolerance. Prepare communication strategies to address employee and consumer sentiment, leveraging Honeyfund arguments for expressive activities. Maintain records of compliance efforts to counter potential FCA claims. Sustaining Inclusivity Beyond Pride Month 2025 Hiding one’s identity to fit in can erode mental wellbeing and limit professional growth. With over 500 anti-LGBTQ+ bills pending and heightened DOJ scrutiny, employers must remain vigilant. By aligning with Title VII, leveraging FCA defenses (Schutte, Escobar, Honeyfund), and fostering psychologically safe environments, employers can create workplaces where authenticity thrives. Legal counsel is essential to navigate Title VII, FCA, and First Amendment complexities, ensuring sustained inclusivity for LGBTQ+ employees year-round.
July 31, 2025
Bankruptcy
The “One Big Beautiful” Bill and the State of AI Regulation
After several weeks of back and forth on a potential 10-year moratorium on state or local AI legislation and regulation enforcement, the final version of the so-called One Big Beautiful Bill Act, signed into law on July 4, 2025 (Pub. L. No. 119-21), abandoned the proposed provision. Accordingly, companies must be alert to and comply with a variety of evolving state and local laws governing the use and deployment of AI tools. In addition, companies that supply AI systems or produce outputs intended for use in the EU are subject to the EU AI Act. Here we will provide a high-level overview of the state laws that are AI-specific (as opposed to regulating use cases or general conduct that might involve AI). Colorado AI Act The Colorado AI Act is scheduled to go into effect on February 1, 2026. It is considered a consumer protection law and imposes obligations on developers and deployers of so-called "high-risk" AI systems "to use reasonable care to avoid algorithmic discrimination in the high-risk system." The law creates a rebuttable presumption that a developer or deployer used reasonable care if they complied with specified provisions in the law. Texas Responsible Artificial Intelligence Governance Act The Texas governor recently signed the Texas Responsible Artificial Intelligence Governance Act, which will become effective on January 1, 2026. It creates a regulatory system for AI development and use, AI disclosure requirements for government agencies, a program that allows AI development with relaxed legal constraints, and an advisory council to analyze AI use and provide recommendations to state agencies. Although it primarily regulates governmental agencies and health care providers, the new law is of relevance to private sector organizations, more generally the new law clarifies that: It is unlawful for any person to use an AI system to intentionally discriminate against individuals based on a protected characteristic, with limited exceptions for certain insurance companies and financial institutions. Showing a disparate impact on a given group is insufficient to demonstrate intentional discrimination. Maine Chatbot Disclosure Law On June 12, 2025, Maine enacted H.P. 1154, a law requiring disclosure of the use of AI chatbots. Under the law, a person may not use an AI chatbot of any other computer technology to engage in trade and commerce with a consumer in a manner that may mislead or deceive a reasonable consumer to believing that the consumer is engaging with a human being, unless the consumer is notified in a clear and conspicuous manner that the consumer is not engaging with a human being. Violation of the law is a violation of the Maine Unfair Trade Practices Act. New York RAISE Act New York state lawmakers passed the groundbreaking Responsible AI Safety and Education Act (RAISE Act) on June 12, 2025. New York will become the first state to impose enforceable AI safety standards on powerful “frontier models” to prevent catastrophic harm by advanced models, if the governor signs off. The law would take effect 90 days after the governor signs the bill. The law applies to AI models with $100M+ compute cost (or $5M+ for certain “distilled” versions) and covers any frontier models developed, deployed, or operated in New York The law imposes on developers, of extremely large-scale AI systems, sweeping transparency and safety obligations. They must develop a safety and security protocol and publish the safety protocols (with limited redactions for trade secrets or security purposes). Any serious incident indicating heightened risk must be reported to state regulators within 72 hours. Businesses must participate in ongoing reassessment of protocols as models evolve. Utah Artificial Intelligence Consumer Protection Amendments On March 27, 2025, Utah Governor Spencer Cox signed S.B. 226, a law governing the use of GenAI in consumer transactions and regulated services. The law: States it is not a defense to violation of any law administered by the State Division of Consumer Protection that AI:made the violative statement, undertook the violative act, or was used in the furtherance of the violation. Requires disclosure for the use of GenAI when:in connection with a consumer transaction, and providing services in a regulated occupation. Establishes a safe harbor for clear and conspicuous disclosure GenAI is used, subject to additional rulemaking specifying forms and methods of disclosure. Allows the Division of Consumer Protection to impose administrative fines of up to $2,500 per violation. Gives courts the power to:declare an act or practice violates the law, issue an injunction for violation, order disgorgement of money received in violation, impose fines of up to $2,500 per violation, plus costs and fees. The law is effective May 7, 2025. EU AI Act The EU AI Act, known as Regulation (EU) 2024/1689, is a comprehensive regulatory framework designed to govern AI systems and the organizations that supply and use them within the EU. It categorizes AI systems based on their risk levels and imposes obligations on providers, importers, distributors, and deployers of AI systems. Compliance deadlines vary, with most provisions applying from August 2, 2026, but some have earlier compliance dates, including: Prohibited AI practices are banned outright from February 2, 2025[1], AI literacy[2] obligations apply from February 2, 2025, GPAI model rules become effective on August 2, 2025, and Penalties, which apply from August 2, 2025, except penalties applicable to GPAI model providers, which apply from August 2, 2026. Rules on high-risk AI systems forming the safety components of products covered by existing EU product safety legislation apply from August 2, 2027. The EU AI Act defines AI systems as machine-based systems designed to operate with varying levels of autonomy and adaptiveness, generating outputs such as predictions, content, recommendations, or decisions that can influence environments. It excludes certain AI systems used for military, defense, national security, and other specific purposes. Organizations must determine their role in the AI supply chain, whether as providers, deployers, distributors, or importers, and comply with the corresponding obligations. Providers must create technical documentation, conduct conformity assessments, and appoint authorized representatives, among other requirements. Deployers must ensure human oversight, monitor AI system performance, and complete fundamental rights impact assessments, if applicable. Distributors must verify compliance with CE marking and conformity declarations and take corrective actions if necessary. Organizations must assess whether their AI systems are high-risk and meet technical requirements, including risk management systems and data governance practices In connection with the upcoming effective date for the general-purpose AI, the European Commission issued guidelines for providers to assess whether their model is a general-purpose AI model. Article 3(63) AI Act defines a ‘general-purpose AI model’ as ‘an AI model, including where such an AI model is trained with a large amount of data using self-supervision at scale, that displays significant generality and is capable of competently performing a wide range of distinct tasks regardless of the way the model is placed on the market and that can be integrated into a variety of downstream systems or applications, except AI models that are used for research, development or prototyping activities before they are placed on the market’. This definition lists, in a general manner, factors that determine whether a model is a general-purpose AI model. Nevertheless, it does not set out specific criteria that potential providers can use to assess whether a model is a general purpose AI model. The specific criteria the commission chose is based on computational power. An indicative criterion for a model to be considered a general-purpose AI model is that its training compute is greater than 1023 FLOP and it can generate language (whether in the form of text2 or audio3), text-to-image or text-to-video. If a general-purpose AI model meets the latter criteria, but does not display significant generality or is not capable of competently performing a wide range of distinct tasks, it is not a general-purpose AI model. Similarly, if a general-purpose AI model does not meet that criterion but, exceptionally, displays significant generality and is capable of competently performing a wide range of distinct tasks, it is a general-purpose AI model. In Conclusion Companies must create a risk-management framework to navigate a complex, evolving patchwork of rules. With compliance deadlines stretching across 2025–2027, organizations must now proactively monitor and adapt to both U.S. mosaic regulation and EU mandates depending on their markets and use cases. Ultimately, treating AI regulation as a dynamic and strategic compliance horizon will be essential to manage legal risk, maintain trust, and sustain innovation in this rapidly evolving landscape. [1] Prohibited AI practices include: Subliminal techniques which can materially distort a person's behavior by impairing their ability to make an informed decision in a way that causes or is reasonably likely to cause them significant harm. Exploiting the vulnerabilities of a person or specific groups of people (for example, due to their age, a disability or economic situation) which can materially distort their behavior in a way that causes or is reasonably likely to cause them significant harm. Social scoring systems based on known, inferred or predicted personality characteristics which causes detrimental or unfavorable treatment that is disproportionate or used in a context unrelated to the context in which the data was originally collected. Risk assessment systems which assess the risk of a person to commit a crime or re-offend (except in support of a human assessment based on verifiable facts). Indiscriminate web-scraping for the purposes of creating or enhancing facial recognition databases. Emotion recognition systems in the workplace or educational institutions (except for medical or safety reasons). Biometric categorization systems used to infer characteristics, such as race, political opinions or religion. Real-time, remote biometric identification systems in publicly accessible spaces for the purpose of law enforcement except (subject to safeguards and within narrow exclusions) searching for victims of abduction, preservation of life and finding suspects of certain criminal activities (as listed in Annex II: criminal offences permitting use of real-time biometric systems). Real time means live or near-live material, to avoid short recording delays circumventing the prohibition. [2] AI literacy is defined as the skills, knowledge and understanding of a deployer or a provider (and other affected persons) to make informed use of AI systems and to be aware of both the opportunities of AI systems and the risks of potential harm. The obligation to take measures to ensure a sufficient level of AI literacy is set out in Article 4.
July 31, 2025
Family Law
Legal and Practical Considerations Before Leaving the Marital Home During Divorce
One of the most common and emotionally charged questions people ask when facing divorce is, “Can —or should— I move out of the marital home before we have an agreement or court order?” The answer isn’t always straightforward. Moving out can have practical, financial, and legal consequences, especially if there are minor children or disputes over property. In most cases, there is no absolute legal requirement to remain in the marital home until an agreement or court order is reached. Adults generally have the right to decide where they live. However, if children are involved leaving without a plan or without understanding the implications may affect custody and parenting time. Courts tend to look at the status quo when making temporary custody decisions. If you move out and the children stay with your spouse, that could set a pattern. In some jurisdictions, one party can ask the court to award temporary exclusive use and possession of the home, especially if children are living there. Moving out doesn’t forfeit your ownership interest, but it can complicate practical issues such as access to documents, personal items, or the ability to oversee the property's condition. If there is domestic violence, threats, or a toxic environment that affects your safety or your children’s safety, moving out may be necessary. In such cases, you should document the reasons why you left and consider seeking a protective order or temporary custody order to clarify parenting arrangements and protect your rights. Your well-being and your children’s well-being always come first. If you have minor children, think carefully. Moving out without taking the children can unintentionally signal to the court that your spouse is the primary caretaker. Moving out with the children without agreement or court order may escalate conflict and may be seen as improper “self-help.” The best approach before moving is to try to reach a temporary written parenting agreement or seek a temporary custody order. Even if you move out, you may still be responsible for paying the mortgage or part of it, contributing to household expenses, and maintaining utilities or insurance. Leaving can also mean taking on the cost of a second household, which may be unsustainable during a pending divorce. If, after weighing these factors, you decide it’s best to move out, you should consult a lawyer and obtain advice, based on your jurisdiction and the specifics of your case. Document your property by making a list —and taking photos— of furniture, valuables, and documents. Secure important records like tax returns, bank statements, insurance documents, passports (take copies so you’re not left without them). Attempt to reach a temporary agreement with your spouse on issues including parenting time, bill payment, and use of property. If you and your spouse can’t agree, you may file a motion for pendente lite (temporary) relief. In such a hearing, the court can decide who stays in the home, who pays certain bills, and sets a temporary custody schedule. These temporary orders maintain stability until the divorce is finalized.
July 28, 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
Commercial Litigation
Scandal in the Spotlight: When Leadership Fails the Company Code
In my years as a commercial litigator, I have seen several boardroom implosions, but few begin with a Coldplay concert and end with the resignation of the CEO. The now-infamous “kiss cam” moment at Gillette Stadium between Astronomer’s CEO, Andy Byron, and his Chief People Officer, Kristin Cabot, was more than just a passing moment of virality. It was an object lesson on how public conduct can trigger private consequences at the intersection of fiduciary duties, employment contracts, and corporate governance. On July 16, 2025, Byron and Cabot, were caught on camera in a moment of intimate embrace. It seems innocent enough except, they were both married to other people. Their instinctive panicked reaction, as their image was broadcast to more than 50,000 fans was a dead giveaway of illicit conduct and the catalyst for instant virality. One of the concert goers captured the moment and uploaded it to her TikTok account. Within hours, the post had gathered 125 million views. In the following days, Byron was placed on leave, Cabot followed, and Astronomer’s board launched a formal investigation. From a legal standpoint, this incident raises several red flags, including a potential breach of fiduciary duty. As the CEO, Byron is a fiduciary and obligated to always act in Astronomer’s best interest. If Byron’s relationship with Cabot influenced hiring decisions, compensation, or internal investigations, then shareholders have a good-faith basis to allege that Byron breached that fiduciary duty. Another apparent issue is a serious conflict of interest involving Cabot. At its core, a conflict of interest arises when an individual’s personal interest interferes or appears to interfere with their professional obligation. Cabot’s relationship with Byron triggers scrutiny across several areas of corporate risk. As the head of Human Resources, she may have had oversight over such policies on interoffice romantic relationships, a policy that she herself has violated. Additionally, as head of Human Resources, Cabot may have had influence over executive compensation, promotions, or performance evaluations, while engaged in a romantic relationship with an executive. Overall, her behavior does not look good, even if no policies were breached. Conflict of interest is about perception and accountability. Finally, Byron’s conduct raises serious concern about a breach of his employment contract. Many executive employment agreements contain “morality clauses” that allow termination for conduct that brings disrepute to the company. Morality clauses set behavioral expectations for executives who are seen as the face and embodiment of the company. Morality clauses often cover off-duty conduct that could reflect poorly on a company’s brand. A viral cheating scandal arguably qualifies as one. If Byron’s contract contains a morality clause, then the scandal will qualify as a breach event. The board’s swift action, by placing both parties on leave and appointing an interim CEO, suggests it is trying to mitigate reputational and legal exposure. Upon a formal internal investigation, on July 19, 2025, Byron resigned from his position as CEO. Astronomer’s actions following the scandal show a commitment to leader accountability and upholding the company’s best interests. As for Cabot, her continued employment, although on leave, has sparked debate. Terminating an employee in Cabot’s position for “ugly headlines” is not always legally sound. Internal investigations must be thorough, and any termination must be substantiated by documented violations, not just public embarrassment. Overall, this is an important lesson for executives: your personal conduct can have unintended consequences. Executives should be mindful that they represent the image of their companies. And for companies, this is a reminder to revisit employment agreements, update ethics policies, and ensure your crisis response plan does not rely on hope and a hip social media intern.
July 24, 2025
Estates and Trusts
When a Corporate Trustee May Be a Disadvantage for Your Trust
Last month I explored the potential advantages of naming a corporate trustee, acknowledging that the decision is ultimately a matter of personal preference. In this second part of a two-part, “point-counterpoint” consideration of corporate trustees serving as such for individuals’ personal trusts, I take up potential disadvantages and reasons you might consider not naming a corporate trustee to manage your trust. Should you name a financial institution as corporate trustee to manage your trust when you are no longer able to do so for yourself? Whether you name a financial institution to manage your trust assets when you are no longer able to do so for yourself is ultimately a matter of personal preference and choice. In this second part of a two-part, “point-counterpoint” consideration of corporate trustees serving as such for individuals’ personal trusts, I take up potential disadvantages and reasons you might consider not naming a corporate trustee to manage your trust. $$$ - Higher Costs Relying on a financial institution to manage your trust when you are no longer able to do so for yourself generally requires a more substantial commitment to administrative costs. While friends and family might be willing to serve when you’re gone – and frequently agree to do so with no thoughts of compensation (or the time commitment potentially involved!) – no corporate trustee is going to undertake or continue the effort without being adequately compensated. Corporate trustees charge annual fees that typically range from 0.5% to 2% of the trust’s “assets under management,” depending on the size and complexity of the trust. These fees are intended to compensate reasonably for professional services required to manage the assets and administrative responsibilities. In my experience, family members and friends serving as trustees typically charge little or nothing for their trust/asset management efforts, regardless of the discretion afforded to them under the governing trust document(s). The decision whether to exercise this discretion in favor of taking a fee is typically driven on the one hand by a sense of entitlement and, on the other, by an inherent sense of fairness (including an assessment of the likelihood of heartburn and frustration) to be generated by beneficiaries’ uninformed and often unwarranted perception of impropriety occasioned by the resulting imbalance as violative of “equality for all” expectations. To be sure, individual circumstances vary widely, and a family/friend trustee should have no reservations about being reasonably compensated for work that money managers and financial advisors would otherwise be charging a significant sum. Most trusts expressly afford trustees discretionary authority to be compensated for their efforts. And, unless expressly stated in the trust document, Virginia, like most jurisdictions, allows such discretionary compensation by default. Consequently, one can generally expect trust administration costs under a corporate trustee to exceed what an individual trustee might be expected to charge (if anything) for his or her trust management services. It is typical to allow an individual trustee the discretion to take a fee for one’s services. The more substantial the trust, the more time and effort can be expected to monitor and manage – especially if one or more family members have their own expectations (however misguided or unrealistic they may be!) regarding the timing and extent of their inheritance. In my experience, there’s almost always at least one troublemaker beneficiary making things miserable for everyone else – especially the trustee. Lack of Personal Touch Corporate trustees are in the business of managing trusts and, therefore, manage many trusts at once. Consequently, a corporate trustee may not be able to provide the personalized attention that a close family member could. In all fairness, a corporate trustee cannot be expected to understand or appreciate the unique family dynamics or emotional aspects of the trust as well as a family member or close friend could. Perhaps you are in the 1% of those fortunate to have developed a close long-term relationship with a trusted advisor at a corporate trustee and have convinced yourself that no other friend or family member could possibly be trusted to do as good a job carrying out your wishes. I’m not here to talk you out of your blissful naivety, but you owe it to yourself to give due consideration to the probabilities of your trusted advisor dying and how familiar the likely successor(s) is/are with your situation. Less Flexibility Institutional trustees often operate under strict guidelines and may be less flexible or slower to respond than an individual who can make quick, informal decisions. This relative inflexibility stems, at least in part, from a higher likelihood of being held to task in hindsight for decisions which, at the time, may have seemed eminently reasonable. A beneficiary is more likely to attempt to create a legal issue about holding a corporate trustee liable for decisions that, in retrospect, turn out sub-optimally. Consequently, a corporate trustee can be expected to apply a more rigorously conservative approach to investing and discretionary distributions, for instance. Of course, this may be precisely what you’re looking for in a trustee. Alternative Asset Limitations Along with less flexibility in the manner in which they might be expected to make decisions regarding the assets under their management, corporate trustees are oftentimes limited in the asset classes they manage. Precluded from keeping particular types of assets in their portfolio, a chosen corporate trustee may become the tail wagging the proverbial dog when they prove incapable of serving 100% of your trustee needs. For instance, real estate is quite frequently beyond the purview of a corporate trustee. Therefore, if you have substantial “alternative asset” holdings (i.e., beyond the traditional “stocks and bonds,” annuities, and typical financial market holdings such as derivatives), a corporate trustee may not be the right choice for you. On the other hand, the more specialized or unique the holdings, the more likely you will want to try to find a trustee with the needed specialized expertise to manage these alternative assets appropriately. Special circumstances demand special consideration. Just recognize, as well that a corporate trustee with the relevant specialized skill set may not be the best choice to serve as your fiduciary for your other trust assets. And even if they are a potential fit across all of your asset classes, their relative expertise and/or comfort level may require some drafting cooperation to develop and settle on an arrangement with which the corporate trustee can get comfortable. For instance, we recently assisted a blended family in avoiding a potentially very costly legal fight by identifying and working with an independent corporate trustee to develop a settlement trust arrangement, the terms, procedures, and potential liability protections of which the trustee could accept. The new trust arrangement overcame the mutual distrust factors, avoided significant legal fees, and uncertain outcomes. Cooperatively addressing and overcoming the specific corporate fiduciary’s reservations ultimately afforded all of the trust beneficiaries the independent management/oversight they each needed. Final Thoughts I would be dishonoring the legal profession if I did not acknowledge, quite lawyerly, that “it depends!” If you haven’t figured it out yet, there is no one-size-fits-all “right” answer. Everyone’s situation is in some respects unique and people’s risk preferences fall across a full spectrum (from a nihilistic “what do I care? I’ll be dead!” to “I couldn’t possibly do that to my loved ones!”). Choosing a trustee is a deeply personal decision that depends on the size and complexity of your trust, your family situation, and your priorities for administration and oversight. For many, a hybrid approach—naming both a family member and a corporate trustee as co-trustees—offers the best of both worlds: professional management and personal insight. While I can’t possibly speak to my readers’ individual risk preferences, there are clearly certain factors that might lend themselves more favorably to a corporate trustee selection in a given situation. All other things being equal, you may want to consider appointing a corporate trustee in the following circumstances: Your trust is large or complex. There is potential for conflict among beneficiaries. You lack a trustworthy or capable family member to serve. You want to ensure long-term, professional management. The trust includes specialized assets such as real estate, business interests, or significant investments. Before making a final decision, I would encourage you to consult with your estate planning attorney or financial advisor to weigh the pros and cons in your specific situation. After the fact, if you find yourself trying to manage or extricate yourself from inheritance-related entanglements (with or without a trust), you should seriously consider engaging an experienced trust and estates litigator to assist in crafting and implementing an outside-the-box arrangement which might very well result in a third-party, corporate fiduciary as the answer . . . or then again, it might not. I would be glad to offer personal recommendations for an estate planning attorney, financial advisor, or trust and estates litigator, should you be interested. I would also welcome the opportunity to review your situation, provide thoughtful recommendations, and assist with implementation as appropriate. The potential significance and impact of a well-chosen trustee cannot be overstated. In short, there is no “one size fits all” solution, and, simply stated, a corporate trustee may not be right for your situation. A well-chosen trustee (corporate, professional individual, family member, or friend) can provide peace of mind. The wrong trustee choice could mean the dismantling of everything you’ve worked your entire life to accumulate and damn your loved ones to costly and frustrating litigation. Too dark? I wish. Trust management legal issues might account for only a small fraction of trust cases, but the actual percentage is of little or no consequence when 100% of the cases I’ve seen on a continuous basis for over 25 years involve some form of dispute with or over the trustee. “What about a ‘trust protector’ arrangement?” you ask. “Should I be insisting on one of those for my trust?” Next time!
July 24, 2025
Elder Law and Advocacy
Why Caregiving Matters More Than Ever in America
When Bradley Cooper released his new PBS documentary “Caregiving,” he didn’t just share a deeply personal narrative, he opened the door to a long-overdue national reckoning. His story of bathing his father, of holding his hand through cancer, of navigating a healthcare labyrinth with little support resonates because it is all of our stories. Whether we realize it yet or not. Caregiving is the invisible thread that holds my clients — the wealthy and not so wealthy — their families, and their communities together. This essential labor, both paid and unpaid, is finally stepping into the spotlight, demanding recognition, reform, and real support. The Growing Crisis The statistics are irrefutable: for the first time ever, Americans aged 65 and older are set to outnumber their children by 2034. Currently, 23 million care for older adults exceeding the 21 million caring for kids. It is important to note, however, that caregiving occurs at all ages and contributions. No one is immune from caregiving. Financial caregiving responsibilities can begin much earlier for a younger demographic if they are in a better financial position than their aging family members. Added to that, those who are having children later in life now care for their aging parents whom they presumed could help them raise their own young children. Unpaid family caregivers contribute nearly $600 billion worth of labor to the US economy annually, which is larger than the United States Department of Defense budget and a figure soon to hit $900 billion the next decade. Families, who represent the unpaid caregivers, absorb this enormous emotional, financial, and physical burden. As this author has written about in the past, caregivers generally must reduce work hours, give up career opportunities, or quit jobs entirely. These sacrifices lead to lost income, strained mental health, and mounting caregiving debt. Beyond the individual cost, caregiving faces much broader challenges, including the underfunding of resources, a fragmented health care system, policy neglect, and a lack of labor protections for professional caregivers. Millions of Americans, especially women, people of color, and low-income individuals are making impossible choices: career or care. Income or loved one. Sleep or safety. And while the dialogue surrounding caregiving has traditionally been viewed as a women’s or senior issue, it is clear that caregiving now touches every demographic and tax bracket. In fact, the recognition of today’s “Sandwich Generation,” adults caring for aging parents while raising kids, has been a topic of conversation, mostly because of the extreme pressure this generation feels with its caregiving responsibilities: even Gen Z is stepping in as caregivers, often for grandparents and disabled siblings. Most fall into caregiving during a crisis — an accident, a diagnosis, or a fall. Without a plan, the emotional, legal, and financial toll compounds quickly and sometimes in ways that cannot be controlled. Planning in advance provides options that planning during or after a crisis simply does not. The culmination of these issues leaves us all without robust systemic support, defining caregiving as a personal crisis rather than a shared responsibility. However, there is hope, and the way to hold onto that hope is through planning. Take Action Clarify wishes. Encourage your aging loved ones to clarify their wishes. Advance healthcare directives provide caregivers guidance and reduce stress of healthcare and end of life decision making. Ensure your Will or Trust is in place and up-to-date reflecting the beneficiaries chosen by the aging loved one, not by the state. Consider creating an ethical will to share with your family describing your hopes and wishes for their future and lessons you wish to impart long after you are gone. Protect assets. If your loved one’s assets are not infinite, it’s imperative to meet with an elder law attorney who can assess whether or not your loved one will qualify for Medicaid or Veterans benefits in the future to pay for long-term care. Determine if asset protection trusts can help your loved one qualify for benefits or resources in their area. If you still have time, speak with an insurance professional about qualifying for long-term care insurance. Organize roles. Nothing is more important than setting a plan in place. This means determining now who can help your aging loved one and contribute to their caregiving. Dividing and conquering roles like organizing medication, cooking meals, providing transportation to appointments, and managing finances can help caregivers avoid burnout and ensure that talents among all caregivers are utilized. Technology is even being developed to address the need such as software like Hero Generation which can make organization for the caregiver easier. Preserve dignity. Talk to your aging loved one about where they want to live as they age and, perhaps more importantly, where they do not want to live as they age. If your loved one is faced with a life-limiting condition, start the dialogue about what their idea of a “good death” looks like by consulting with organizations like Befriending Death or your local hospice agency. Thoughtful planning keeps care centered around the person’s needs, values, religious, and spiritual beliefs, not just the logistics of the end of their life. As caregivers, there is so much we can do beyond providing the care. We must acknowledge the heavy lift of caregiving: talking about it with family, co-workers, and friends to create community around the experience. We must offer respite to our friends who are caregivers and vote for public policies that support and expand care. And of course, elevate the conversation and share resources to make sure that it is easier for those who come after us. Roslyn Carter wisely said that “...there are only four kinds of people in the world: those who have been caregivers, those who are currently caregivers, those who will be caregivers, and those who will need caregivers." Caregiving is love in action and planning for it is essential. Wherever you are in your own caregiving or care receiving journey, ensuring a plan is in place is essential.
July 23, 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
Labor and Employment
Travel Bans Are Back – Are Exemptions Possible?
Travel bans are back, with an initial list of 19 countries, and that list may be expanded to include an additional 36 nations. This latest round of travel restrictions find their basis in Presidential Proclamation 10949 “Restricting the Entry of Foreign Nationals To Protect the United States From Foreign Terrorists and Other National Security and Public Safety Threats” which has put in place visa and entry restrictions on citizens of Afghanistan, Burma, Chad, Republic of Congo, Equatorial Guinea, Eritrea, Haiti, Iran, Libya, Somalia, Sudan, and Yemen. The proclamation also adds additional suspension of citizens from Burundi, Cuba, Laos, Sierra Leone, Togo, Turkmenistan, and Venezuela as visitors or students. Officials will consider additional restrictions for Egypt. Currently the administration is considering additional restrictions to a larger list of countries including: Angola, Antigua and Barbuda, Benin, Bhutan, Burkina Faso, Cabo Verde, Cambodia, Cameroon, Cote D'Ivoire, Democratic Republic of Congo, Djibouti, Dominica, Ethiopia, Egypt, Gabon, The Gambia, Ghana, Kyrgyzstan, Liberia, Malawi, Mauritania, Niger, Nigeria, Saint Kitts and Nevis, Saint Lucia, Sao Tome and Principe, Senegal, South Sudan, Syria, Tanzania, Tonga, Tuvalu, Uganda, Vanuatu, Zambia, and Zimbabwe. See Trump administration weighs adding 36 countries to travel ban, memo says | Reuters. History Repeating This is not the first set of travel restrictions that we have seen implemented. During the first term of the Trump administration, several travel bans were implemented for a variety of reasons, culminating with COVID-19 travel restrictions. What do the prior travel bans tell us about this latest proclamation? The administration has expanded its travel restrictions to include a broader set of countries, potentially including those that benefit from citizenship-by-investment programs, as well more than 20 African countries. The National Interest Exemption is Back Previous travel bans had allowed for travel in support of specific areas of national interest (NIE), which included crucial infrastructure. Authorities have reinstated the NIE as an option for obtaining an exemption from the travel restrictions. The wording of the current proclamation appears to severely limit NIEs in terms of requirements and processing. The “case by case” language suggests that NIEs will be significantly harder to obtain for individuals affected by the current restrictions. There is currently no procedure for advance application for NIEs; accordingly, they must be requested at an embassy appointment. Applicants must also qualify for the visa they are seeking before the NIE step, which raises the visa interview stakes. Accordingly, significant preparation is recommended for travelers affected by these bans, particularly in terms of visa qualification and NIE qualification. Finally, applicants must be prepared for significant administrative processing as NIEs are reviewed. Applicants seeking NIEs for visa issuance are recommended to consult immigration counsel to conduct an in-depth review of qualifications and supporting evidence. With the 2026 World Cup approaching, we can expect guidance on NIEs to evolve in the coming months.
July 18, 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
Intellectual Property
Patents and the FDA: Four Critical Considerations Medical Device Companies Must Know to Successfully Introduce New Products into the Market
The intersection of patent strategy and FDA regulatory strategy is a critical consideration for medical device companies. A well-integrated approach can create powerful barriers to entry, strengthen intellectual property (IP) portfolios, reduce risk, and attract investors. This article explores key issues and strategies to ensure your patent and FDA efforts work together effectively. An integrated patent and FDA strategy adds significant value to the business. Many companies focus solely on regulatory approval, overlooking how FDA submissions might affect their patent portfolio or vice versa. A coordinated approach between patent strategy and FDA strategy offers significant benefits to the business: stronger patent protection combined with FDA exclusivity creates complementary barriers to entry for competitors. This enhances your ability to protect innovations and ensures your patent strategy is embedded within the regulatory framework for the product that will be sold. Value for investors or later strategic acquirers is a direct result of an integrated patent and FDA strategy. Four areas where medical device regulation and patent law overlap that must be implemented carefully include: patent coverage in view of FDA submissions, Freedom-To-Operate (FTO) risk, product Labeling and Patent Marking, and patent term extension (PTE). Patent Coverage and FDA Submissions Regulatory submissions often include technical details that can affect patent protection. To avoid premature disclosures and ensure alignment, file patents before submitting your regulatory documents to the FDA. While you may have filed for protection early during the product development process, reassessing the product just before submission is an important step to ensure your patents cover what you are seeking to market in the United States. Patent counsel should certainly have the opportunity to consider the filing documents, in ALL of their detail, to consider new patent filings to augment your patent strategy. This strategy also serves other important purposes, like preventing premature public disclosures (e.g., in 510(k) summaries) that could compromise patent rights. Well-crafted summaries and filing documents could limit the usefulness of the confidential FDA data obtainable via Freedom of Information Act (FOIA) requests. Importantly, this key action ensures consistency between FDA filings and patent claims, avoiding statements that could lead to unenforceability due to inequitable conduct. In other words, saying one thing to the FDA that is inconsistent or contrary to the position you are taking regarding prior art can lead (it has) to a finding by the Court that patents are unenforceable. In addition, products evolve, certainly during development, but even after market introduction. A robust use of continuation patent applications can help maintain adequate protection as the product evolves. There are numerous benefits to considering FDA filings in light of the patent strategy and not doing this simple task is a wasteful use of resources. Talk to your patent counsel! Third-Party Patent Risk and Freedom to Operate (FTO) Patent litigation is prevalent in the medical device industry, and failure to consider your products’ freedom to operate can destroy business value. Before submitting a device for FDA approval, conduct FTO studies to identify potential infringement risks. These should include an analysis of IP related to predicate devices, especially for 510(k) submissions. In addition, understanding patents that cover competitive products is another key step in this process. Avoid using language in FDA submissions that could serve as a roadmap for infringement, such as instructions for use or device descriptions. Carefully drafting these documents is a viable way to limit risk and minimize the disclosure of otherwise proprietary information that is not Germane to the purpose of the FDA submission but might otherwise be important in the third-party patent context. Update FTO studies at key milestones, such as before submitting an investigation device exemption, 510(k), or PMA submissions. This is the best way to minimize patent risk once the product is approved, and the ever-important sales begin. Conducting this analysis based on what your business is authorized to sell in the U.S. is a critical consideration because patent risk only flows from making, selling, using, and importing into the U.S. a product that infringes a valid claim of a U.S. patent. Understanding the patent landscape related to the products that have high revenue generation potential is a required but pragmatic business practice to implement. Product Labeling, Patent Marking and Maximizing Damages Patent marking plays a crucial role in infringement cases. Generally, a patent owner is entitled to damages only after the infringer has been notified—either through a cease-and-desist letter, a lawsuit, or compliance with the patent marking statute. Because the FDA regulates product labeling, companies can implement their patent marking during regulatory submission, and in particular, where product labels are concerned. The U.S. allows for virtual patent marking, where a URL (e.g., mycompany.com/patents) is included on the product label. Once the product receives market clearance with this label, damages can accrue from that point forward. Failing to implement this strategy could delay damage accrual until after a lawsuit or cease-and-desist letter is issued. This can be potentially years after market introduction. A simple URL on a label, submitted with your FDA documents, can make a significant financial difference in your patent infringement case, should you need to file one later. There is no simpler way to increase patent value than to implement patent marking on product labels during the FDA approval process. Patent Term Extension (PTE) for FDA-Regulated Products Patents last 20 years from the date a non-provisional U.S. application is filed. During that time, the patent owner has exclusive rights to the patented invention. Once expired, however, others may freely use the invention. However, certain devices, and Pre-Market Approval (PMA) products specifically, can qualify for up to an additional five years of patent term extension. To be eligible for PTE, the product must have undergone a regulatory review period before it can be commercially marketed. The patent must not have been previously extended, and the application for PTE must be filed within a specific timeframe (typically 60 days) after the product receives regulatory approval. This extended exclusivity can significantly impact revenue. Companies should therefore actively monitor regulatory timelines to ensure the timely filing of patent term extension requests. Carefully consider the most valuable patent for extension because there is only one extension per regulatory approval allowed under the law. And finally, avoid delays during prosecution, such as taking extensions of time to file a response, as each extension of time can reduce the potential extension period. In summary, four things that can maximize business value for your medical device are: Align patent filings with FDA submissions to ensure broad, enforceable claims. Conduct and update FTO studies throughout the product lifecycle. Share FDA submission materials with patent counsel to avoid inconsistencies. Incorporate virtual patent marking into FDA labeling at the earliest possible instance. File for patent term extension when available. A successful medical device launch requires a great deal from a business. A robust patent strategy, integrated with the FDA framework, can only support a successful launch; it will not hinder it. By proactively aligning regulatory and patent efforts, companies can secure stronger protection, reduce risk, and enhance business value.
July 16, 2025
Commercial Litigation
Beyond the Verdict: The Essential Drive of Post-Judgment Discovery
You’ve navigated the complexities of litigation, meticulously built your case, and ultimately secured a judgment. The sense of victory is palpable, and you hold in your hand that seemingly definitive court order. However, it’s crucial to recognize that a judgment alone, in its initial form, is merely a declaration. The true measure of success lies not just in winning the legal battle but in realizing the fruits of that victory through effective execution. This is where the often-underestimated power of post-judgment discovery comes into play. Far too many mistakenly believe that obtaining a judgment marks the finish line. They may pause their efforts, only to discover their hard-won legal triumph remains unfulfilled. The reality is that the initial trial was just the foundational stage. Post-judgment discovery is the critical next phase—the strategic process that transforms a paper victory into tangible recovery. Think of it this way: the judgment establishes your right to a remedy. But to actually achieve that remedy, you need to understand the financial landscape of the judgment debtor—where are their assets located? What is their financial structure? Post-judgment discovery provides the essential intelligence to navigate this terrain effectively, and experienced litigators employ a variety of tools to uncover the necessary information. Among the most essential are interrogatories to the judgment debtor, which compel the debtor to provide sworn answers regarding income, assets, and liabilities. Requests for production of documents follow, demanding supporting financial records such as tax returns, real estate holdings, and bank statements. These are foundational methods for gaining a comprehensive view of the debtor’s financial footprint. If more detail is needed, litigators may conduct depositions of the judgment debtor, placing them under oath and on the record, particularly effective in uncovering inconsistencies or concealed assets. In parallel, subpoenas to third parties—such as banks, employers, or business partners—can provide critical third-party insights into financial matters the debtor may have failed to disclose. Beyond traditional discovery tools, enforcement mechanisms also play a key role. Liens on real and personal property help secure identified assets, while garnishment of wages and bank accounts allows for the direct collection of liquid funds. Turnover orders enable the creditor to obtain specific assets by court mandate, and supplemental proceedings or examinations under oath offer a court-supervised forum for investigating asset location and dissipation. Neglecting this phase is akin to stopping short of your goal after achieving a significant milestone. You possess the potential for a tangible outcome, yet you choose inaction. Don't let the opportunity to collect what you've rightfully earned slip away. While this phase might be perceived by some as less captivating than the courtroom proceedings, for those of us focused on achieving real results for our clients, post-judgment discovery is where the true work of recovery takes place. It's where we convert a theoretical win into a concrete one. So, you have the judgment in hand. But a judicial declaration, standing alone, is not self-executing. In the modern enforcement landscape, the litigant must act affirmatively—armed with both legal tools and strategic intent—to pursue the fruits of litigation. Post-judgment discovery is not a procedural afterthought; it is an indispensable function of modern civil practice. A disciplined, methodical approach—leveraging interrogatories, subpoenas, depositions, and court-sanctioned enforcement—can mean the difference between symbolic success and substantive recovery. The law offers the means; it is the diligent creditor who must bring them to bear.
July 16, 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
Intellectual Property
Supreme Court to Hear Cox Communications Case on ISP Copyright Liability
On June 30, 2025, the Supreme Court accepted a petition for certiorari brought by Cox Communications, and denied one brought by Sony in the same matter, following the advice of Solicitor General Sauer. The dispute stems from a massive $1 billion copyright infringement verdict against Cox Communications, in which music publishers (including Sony, Universal, and Warner Music, among others) alleged that Cox was liable for the illegal distribution of 10,017 musical works by the ISPs subscribers. The Fourth Circuit previously affirmed a lower court’s ruling that Cox was liable to the plaintiff publishers for contributory infringement, while overturning the lower court’s finding of vicarious liability. As a result, both Cox and Sony filed competing petitions for certiorari seeking clarification from the Supreme Court regarding different aspects of ISP copyright liability. The Supreme Court will review two critical questions that could reshape how internet service providers handle copyright infringement. First, whether an ISP materially contributes to copyright infringement by continuing to provide internet access to particular subscribers after receiving notice that their accounts have been linked to active and ongoing copyright infringement. The Department of Justice noted this ruling creates "substantial tension" with a recent Supreme Court analysis of contributory liability in Twitter v. Taamneh, where the Court found that mere passive provision of services without active assistance doesn't constitute contributory liability. Second, the Court will examine the "circumstances under which a contributory infringer can be held liable for enhanced statutory damages based on a finding of "willful infringement,"" specifically whether knowledge of subscriber infringement alone suffices for a willfulness finding or if the ISP must have reasonably believed its own conduct violated copyright law. The decision could fundamentally alter how ISPs manage their networks and respond to copyright infringement notices, with Cox arguing that overly broad liability standards could jeopardize internet access for all Americans. Depending on the outcome of this case, American internet users may see ISPs tighten their grip when enforcing against pirate websites or unauthorized distributors of IP, as ISPs aim to minimize any and all liability potential. We will continue to keep this space updated as the case progresses.
July 11, 2025
Labor and Employment
H.R.1 Ends Taxes on Tips & Overtime: Employer Guide
On July 4, 2025, President Donald J. Trump signed H.R.1—the One Big Beautiful Bill Act—into law following its narrow passage in the House of Representatives just days earlier. Touted as the Trump administration’s marquee legislative victory ahead of the 2026 midterms, the Act makes headlines for many reasons. But for employers, two provisions demand immediate attention: A new above-the-line tax deduction for qualified tip income, and A new above-the-line tax deduction for qualified overtime compensation. Both provisions are now law and will take effect starting with the 2025 tax year, bringing new complexities to wage practices, payroll reporting, and compensation strategy. Below is a summary of the legal and practical considerations employers need to know. "No Tax on Tips:" Tax Deduction for Employees Receiving Qualified Tip Income Section 70201 of the Act allows certain employees to deduct up to $25,000 annually in qualifying tip income. The deduction is aimed at hospitality and service industry workers, but its implementation raises numerous legal and compliance considerations for employers. Key Requirements Eligibility Cap: Deduction phases out beginning at $150,000 in modified AGI ($300,000 for joint returns). Qualified tips must:be voluntarily paid by the customer (not mandatory service charges or auto-gratuities), be paid in cash, by card, or through valid tip-sharing arrangements, and be received in a qualifying occupation that customarily and regularly receives tips as of December 31, 2024.The Treasury must publish a definitive list of qualifying occupations within 90 days. Excluded Occupations: Employees in law, accounting, finance, consulting, performing arts, and similar professions are categorically excluded from eligibility. Reporting Requirements Employers must report:Total cash tips received by the employee on Form W-2. The employee’s qualifying occupation (2025 approximations allowed, subject to Treasury guidance). Employer Risks and Considerations Mischaracterization of wages as tips to secure a tax advantage may trigger IRS enforcement or wage-hour liability. Employers may consider changes to tip pooling or customer-facing tipping practices, but must:remain compliant with FLSA tip pool rules, including exclusion of managers and supervisors, avoid coercing tipping in non-traditional settings where it was not previously customary, ensure 100% tip reporting is enforced among employees. Until the Treasury issues regulations and the occupation list, employers should avoid restructuring wages to exploit this provision. "No Tax on Overtime:" Deduction for Federally Mandated Overtime Compensation Section 70202 of the Act allows employees to deduct up to $12,500 ($25,000 for joint filers) in FLSA-required overtime compensation. This deduction is limited in scope but may prompt employers to rethink how overtime is classified and compensated. Qualified Overtime Compensation Applies only to overtime required under Section 7 of the FLSA (i.e., 1.5x pay for hours over 40 per week). Does not apply to:Overtime required only by state law (e.g., California’s daily overtime rules). Overtime paid voluntarily under employer policy or collective bargaining agreements. Payments already claimed as qualified tips. Reporting Requirements Employers must separately report qualified overtime compensation on Form W-2.For 2025, approximations are permitted under a reasonable method (to be defined by the Treasury). Compliance Risks With this new deduction, employers may be tempted to reengineer pay practices. However, doing so carries significant legal exposure: Example 1: Reclassifying salaried exempt employees as nonexempt hourly employees, lowering base pay, and inflating overtime hours to maintain prior salary levels = FLSA violation if hours are not actually worked and accurately tracked. Example 2: Reducing regular hourly rates for nonexempt employees while creating artificial overtime (e.g., setting an internal 30-hour threshold or applying double-time bonuses) = disallowed, as only FLSA-mandated overtime premiums qualify for the deduction. The Treasury is authorized to issue regulations preventing abuse and wage reclassification. Employers who attempt to engineer “deductible overtime” without strict compliance will face regulatory scrutiny. Practical Employer Guidance The “no tax on tips” and “no tax on overtime” provisions will likely be popular with employees and heavily publicized during the 2025 W-2 season. But for employers, the changes bring regulatory complexity, legal risk, and potential downstream litigation. What Employers Should Do Now Do not alter compensation structures prematurely.Wait for Treasury regulations, especially the occupational list for tip eligibility. Ensure accurate wage and hour records.All overtime-eligible employees must have their hours and regular rates carefully documented. Audit tip pool arrangements and ensure FLSA compliance.Exclude ineligible participants, properly allocate tips, and enforce reporting discipline. Prepare to update payroll systems.New W-2 fields for tip and overtime breakdowns will require reconfiguration. Long-Term Strategy Employers considering reclassification of exempt employees, modification of pay rates, or introduction of creative incentive structures should engage qualified employment counsel. Wage-hour compliance and federal tax strategy must be aligned to avoid triggering enforcement by the IRS, DOL, or plaintiffs’ attorneys. Final Thoughts The tax benefits of H.R.1 may create new incentives for employees, but they also present a compliance minefield for employers. The risk of misclassification, improper reporting, or wage-hour violations is high, especially as employers rush to leverage perceived tax advantages. Employers seeking to responsibly explore compensation adjustments in light of the “no tax on tips” and “no tax on overtime” deductions should consult with legal counsel familiar with FLSA compliance, payroll tax reporting, and employee classification issues. Our labor and employment team is actively advising clients on how to navigate H.R.1's implementation. Contact us to schedule a strategy session or compliance audit.
July 10, 2025
Estates and Trusts
Ashes to Ashes: Making Your Final Arrangements
William Wordsworth said that the best part of a good man's life is “his little nameless unremembered acts of kindness and of love." In this spirit, many of us work to fill each page of our life’s story with small deeds of compassion and helpfulness. One such deed we might not have considered is planning our final farewell. Anyone who has arranged a funeral knows what a challenge it can be. A funeral is the one event where the guest of honor has no say in what it should look like, where it should take place, or who should have a role to play—unless he or she plans ahead. Providing even a brief outline of your wishes is an enormous act of kindness to the people you leave behind. And this is one aspect of estate planning that doesn’t require a lawyer. There are documents a lawyer should draft. These include a will, Durable Power of Attorney, and Advance Medical Directive. But a statement of your funeral and burial preferences is one you can prepare on your own. When kept with your other important papers, these final instructions will ensure that your sendoff reflects your preferences and beliefs. Gone are the days when a funeral was almost always in a house of worship and the burial was invariably at a cemetery. In an increasingly secular society, many funerals and memorial services no longer include a religious component. And as cremation has become more popular, the person’s remains can be disposed of in any number of meaningful ways. What should your funeral look like? The decisions to be made are many and include: what funeral home to use, what kind of service you want, and whether you prefer a traditional burial or cremation. The service could include your favorite readings—whether sacred or secular—hymns, songs, or other music, and the names of loved ones who should play a part in the service. If your remains are to be present, the service is a funeral; if not, it’s a memorial service. Either way, you can name the people who are closest to you to act as actual or honorary pallbearers. If your remains are to be cremated, what should be done with the ashes? Those who desire a permanent resting place can purchase a columbarium niche to house the urn. But scattering the ashes at a meaningful location is another, less costly, option. Ashes can be scattered on the grounds of a private home that belongs to you or your next of kin, on the graves of beloved ancestors, or in a favorite body of water. Some cemeteries even have gardens specifically for scattering ashes. Ashes are not considered to be environmentally harmful, but check to make sure that your plans for disposing of them are legal. If the location is on land belonging to the government or a private party, you may need to get their written permission. Under the Clean Water Act, cremated remains must be scattered at least three nautical miles from land. The Maryland Department of Natural Resources prohibits disposing of ashes in the Chesapeake Bay within seven miles of shore. For inland waterways, you may need to obtain a permit from a state agency. Biodegradable urns are available for burials at sea; otherwise, the urn must be emptied into the water and disposed of separately (or saved as a keepsake). Whatever your wishes, get them down on paper, sign and date the document, and keep it with your important papers. As much as any bequest, this simple act of kindness will be a gift to those you leave behind.
July 10, 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
Business
Business Tax Law Provisions of the OBBBA
The business tax provisions of the One Big Beautiful Bill Act (OBBBA), as signed by the president on July 4, reflect sweeping changes aimed at incentivizing small businesses, domestic investment, and manufacturing. Outlined below are key provisions of the bill that may impact your business. Extension and Enhancement of Immediate Expensing 100% Immediate Expensing for Qualified Property OBBA permanently reinstates 100% bonus depreciation for eligible business property acquired after January 19, 2025. Immediate Deduction for Domestic Research and Experimental Expenditures Immediate expensing of domestic research and experimental expenditures is now permanent, with an election to amortize certain expenditures. Permanent Small Business Deduction (Section 199A) Section 199A Deduction Made Permanent The 20% deduction for qualified business income (QBI) for pass-through entities is made permanent. The deduction remains at 20%, with expanded phase-in thresholds and an inflation-adjusted minimum deduction for taxpayers with at least $1,000 of qualifying income from active trades or businesses. Increased Expensing for Depreciable Business Assets Section 179 Expensing Limits Raised The maximum amount a taxpayer may expense under Section 179 is increased to $2.5 million, with a phase-out threshold of $4 million, both indexed for inflation. Modification of Business Interest Deduction Business Interest Expense Deduction Expanded The calculation of adjusted taxable income (ATI) for business interest deduction purposes is permanently based on EBITDA, increasing the amount of deductible business interest. Special Depreciation Allowance for Production Property Immediate Deduction for Qualified Production Property Businesses may elect a 100% bonus depreciation deduction for qualified production property placed in service after enactment and before January 1, 2031. Renewal and Enhancement of Opportunity Zones Second Round of Opportunity Zones (OZs) A new round of Opportunity Zones is created, with at least 33% of OZs designated as rural. Enhanced benefits for rural Qualified Opportunity Funds (RQOFs) are included, with a 30% step-up in basis after five years. Expanded Low-Income Housing and New Markets Tax Credits Low-Income Housing Tax Credit (LIHTC) Reforms The state housing credit ceiling is temporarily restored and increased for 2026–2029. Permanent Extension of New Markets Tax Credit (NMTC) The NMTC is made permanent, with a five-year carryover of unused limitation. Permanent Excess Business Loss Limitation Excess Business Loss (EBL) Rules Made Permanent The limitation on excess business losses for noncorporate taxpayers is permanent, with carryforwards treated as net operating losses (NOLs). Estate and Gift Tax Exemption Increased and Made Permanent The estate and lifetime gift tax exemption is permanently set at $15 million for single filers ($30 million for married couples), indexed for inflation. State and Local Tax (SALT) Deduction Changes The SALT deduction cap is temporarily increased for 2025 to $40,000 ($20,000 for married filing separately), with a permanent increase to $40,400 starting in 2026, subject to income limitations and phase-outs. For taxable years beginning after December 31, 2029, the limitation reverts to $10,000. Section 707(a)(2) Partnership Changes Allocations and distributions from partnerships that are, in substance, payments for property or services are now treated as such, rather than as allocations and distributions from a partnership to a partner. This codifies the disguised sale rules without reliance on regulations and applies to services performed and property transferred after enactment. The following “Quick at a Glance” table distills each major OBBBA business‑tax change into a concise, one‑line summary of its scope, benefits, and effective dates. SUMMARY TABLE: Major OBBBA Business Tax Provisions (as Amended) Provision Key Change/Benefit 100% Bonus Depreciation Permanent for eligible property. Section 179 Expensing $2.5M limit, $4M phase-out, indexed. Section 199A Deduction Permanent at 20%, broader phase-in, inflation-adjusted minimum. Business Interest Deduction Permanent EBITDA basis. Opportunity Zones New round, rural focus, enhanced rural benefits. LIHTC/NMTC Increased/extended, NMTC permanent, rural/Indian prioritization. Excess Business Loss Limit Permanent, NOL carryforward. Estate & Gift Tax Exemption $15M/$30M, indexed. SALT Deduction Cap increased to $40,000/$40,400, reverts to $10,000 after 2029. Section 707(a)(2) Disguised sale rules codified, applies to property/services after enactment.
July 8, 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
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