Healthcare
Will Corporate Practice of Medicine Kill Your Healthcare Venture?
Will Corporate Practice of Medicine Kill Your Healthcare Venture? Many lawyers say that corporate practice of medicine is dead – that this is a new age of healthcare and we no longer need to worry about these old 20th century, or maybe 19th century healthcare rules. And the prohibition against corporate practice often isn’t written into statutes; the statutes prohibit unlicensed practice of medicine—referencing to individuals. Then there is often a second set of statutes that talk about the fact that corporations cannot engage in professional practices. Then usually a third set of statutes that deal with who can organize and own a professional corporation. To get to the prohibition against the corporate practice of medicine (or Corporate Practice of Medicine), you have to put these three sources together. Sometimes the medical board website spells it out and pulls it all together. For example, the California Medical Board says this in its page on Corporate Practice of Medicine: The Medical Practice Act, Business and Professions Code section 2052, provides: “Any person who practices or attempts to practice, or who holds himself or herself out as practicing…[medicine] without having at the time of so doing a valid, unrevoked, or unsuspended certificate…is guilty of a public offense.” Business and Professions Code section 2400, within the Medical Practice Act, provides in pertinent part: “Corporations and other artificial entities shall have no professional rights, privileges, or powers.” The policy expressed in Business and Professions Code section 2400 against the corporate practice of medicine is intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment. The decisions described below are examples of some of the types of behaviors and subtle controls that the corporate practice doctrine is intended to prevent. In this way, the Medical Board of California pulls together the various pieces of legislation. If you keep reading, California takes the corporate practice of medicine very seriously. So if you ask, if enforcement possible, the answer is, YES. If you ask, if enforcement likely, that’s another story. It’s very much dependent on your exact model. And our healthcare lawyers have seen a thousand variations. The answer is invariably nuanced. This is why the Medical Board of California advises: This area of law can be complicated, therefore physicians are encouraged to discuss their medical practices and business enterprises with appropriately knowledgeable legal experts. The Medical Board of California continues to receive complaints and inquiries about the law, and some repeating issues are presented here. Well, we appreciate the medical board promoting legal services. It really isn’t something you can figure out from a chart or grid or some poster you can get off the Internet. More below. “Strong” v. “Weak” Corporate Practice of Medicine States State law prohibitions against corporate practice of medicine come in to flavors: Strong form corporate practice of medicine doctrine Weak form corporate practice of medicine The distinction between the “strong” and “weak” versions can be particularly important when designing an MSO (management services organization) structure. The MSO structure can work very well in navigating the twin of corporate practice of medicine enforcement: the prohibition against kickbacks and fee-splitting. QUICK SUMMARY OF FEDERAL “STARK” SELF-REFERRAL & ANTI-KICKBACK LAW AND CALIFORNIA SELF-REFERRAL AND FEE-SPLITTING PROHIBITIONS Here is a quick summary of federal self-referral (“Stark law”) and anti-kickback law, and California self-referral and anti-kickback / fee-splitting rules. Each state has its own laws, of course. The MSO model allows non-MD (non-physician) entrepreneurs to create a robust business model for the healthcare venture in which they do not “partner” or share professional fees with the medical doctors, but rather take an MSO or management fee in exchange for their management and marketing efforts. The management fee must be at fair market value. In some states (for example, California), it can be a percentage of gross revenues, whereas in other states (for example, New York), the management fee, at least historically, has had to be a flat fee. States that have a “strong” Corporate Practice of Medicine (CPM) prohibition will likely regard it as a per se violation of Corporate Practice of Medicine for a company other than a professional medical corporation (“PMC”) to hire physicians. In the strong form of Corporate Practice of Medicine, there is a typically a violation, whether the physicians are hired as employees or independent contractors, to provide medical services. This is the case in California. In some states, you have to read the various rules and figure out what the state’s position is on corporate practice of medicine. For example, in Georgia: Georgia law provides a fairly typical definition of the “practice of medicine” (O.C.G.A., Section 43-34-21) as well as a prohibition against unlicensed practice of medicine (Section 43-34-22(a)). Section 43-34-42 provides the penalty for unlicensed practice of medicine or any related violation. The crime is designated a felony, punished by a fine of $1,000 per violation or by imprisonment for two to five years, or both. Section 43-34-39 provides that the state medical board, “in addition to any other remedy or criminal prosecution” (emphasis added), may file a complaint to the superior court and seeking a restraining order and an injunction against “any person, firm, company, partnership, association, or corporation or the agent, officer, or director of such firm, company, partnership, association, or corporation” who “is or has been violating any” state law relating to the practice of medicine. Section 33-18-17, a statute that deals with nonprofit “medical service corporations,” states that this statute shall not “be construed as authorizing the corporate practice of medicine.” In Minutes of June 7-8, 2012, the Georgia Composite Medical Board cryptically stated, “The corporate practice of medicine has not been defined by the statute legislature.” But this was after stating, “the Medical Board can only license physicians to practice in Georgia, not corporations.” All this suggests that Georgia has a strong prohibition against Corporate Practice of Medicine—at least for the moment, as these legal rules can be in flux. Corporate Practice of Medicine Exceptions There are usually exceptions to the corporate practice of medicine prohibition—notably, for example, the case of hospitals. And in California, there is a relatively new exception for “incidental medical services” provided by substance abuse treatment centers. HOW SUBSTANCE ABUSE TREATMENT CENTERS NAVIGATE ANTI-KICKBACK RULES Substance abuse treatment centers must steer carefully when sending patients for labs. Self-referral, anti-kickback, and fee-splitting rules can create legal enforcement issues and must be […] Weak Corporate Practice of Medicine States & A National Strategy States with a “weak” Corporate Practice of Medicine prohibition potentially might allow such companies to hire physicians to provide medical services, so long as the contract clarifies that the company cannot interfere with clinical decision-making. For example, in Virginia there is at least one Attorney General opinion that is permissive with respect to Corporate Practice of Medicine: The Virginia Attorney General concluded that Virginia statutes and court decisions allow a hospital to employ a physician as long as the employment agreement authorizes the physician to exercise control over the diagnosis and treatment of the patient, the physician’s professional judgment is not improperly influenced by commercial or lay concerns, and the physician-patient relationship is not altered. 1992 Op. Atty. Gen. Va. 147. While there often is a Corporate Practice of Medicine exception for hospitals that hire physicians, the AG’s rationale in the 1995 opinion, cited above, provides a good statement of the logic behind the “weak” version of the prohibition against Corporate Practice of Medicine. This is good news if you are planning a multi-state or national model of health and wellness services, whether through physical healthcare clinic sites or digital health or mobile health (telemedicine, etc.). Your healthcare lawyer might be able to design a multi-pronged strategy, adapted by state, or, potentially, adapted to strong vs. weak corporate practice of medicine states. Limitations to the Weak Corporate of Medicine Allowance Even in a “weak” Corporate Practice of Medicine state, there is some ambiguity in the legal rules. As we said, the prohibition is not necessarily embodied in a statute, but rather, may be expressed in cases, or, perhaps a policy statement by the state medical board. The problem with the case is that they are typically very old. Cases can be interpreted as limited to its facts, or otherwise legally ambiguous; so much depends on the overall situation and what harms the State perceives in the arrangement and immediate facts, and, there is always enforcement discretion. Whatever the medical board says on its website is a good indication of the medical board’s enforcement position. But it is not the law, simply a restatement of what the medical board interprets the law. And sometimes, the medical board may be more aggressive in its interpretation, signaling a strong enforcement posture to the Attorney General or District Attorney who will actually be the one prosecuting the case. And “so long as the MSO does not overly interfere with the clinical duties of the medical doctors” leaves a lot of room for interpretation. If the MSO is an employer, then the MSO has the right to control its employees—by definition. There are also a lot of subtle layers of influence, as California indicates on its Corporate Practice of Medicine web page, including: Determining what diagnostic tests are appropriate for a particular condition. Determining the need for referrals to, or consultation with, another physician/specialist. Responsibility for the ultimate overall care of the patient, including treatment options available to the patient. Determining how many patients a physician must see in a given period of time or how many hours a physician must work. These are criteria that California—a strong corporate practice of medicine state—uses to assess whether there has been a corporate practice of medicine violation. These criteria also show the slippery slope and how enforcement in other states can potentially look to find intrusion by the MSO or healthcare venture into the medical doctor’s domain. For example, what if the telemedicine or digital health venture or mobile app guides the user (aka patient) to a specific pathway of diagnostic tests and/or treatments? Let’s say, for example, compounded skin care creams to treat acne? Is the MSO going too far into medical practice, in the eyes of the regulators who enforce the corporate practice of medicine prohibition? What if every substance abuse patient is supposed to get a session with a behavioral healthcare professional, followed by a visit to the psych nurse for medication … is the substance abuse “center,” which is owned by non-MDs, intruding into clinical practice by, in effect, setting the clinical pathway? Again, these situations are very fact-specific. A good healthcare lawyer will work with your healthcare venture to help structure the business model so as to help mitigate regulatory risk. Because of the limitations of the weak Corporate Practice of Medicine model, for some healthcare ventures, it makes sense to use one model—based on the strong version of Corporate Practice of Medicine—across states. Again, regulatory authorities have a lot of enforcement discretion. Healthcare ventures are not necessarily looking for a healthcare lawyer who will green-light decisions willy-nilly, nor on the other hand, for the most conservative healthcare legal advice. A nuanced approached is best, and that is how our healthcare lawyers roll. If it’s not Corporate Practice of Medicine, Watch Out for Anti-Kickback Enforcement As we noted, whenever you find Corporate Practice of Medicine concerns, you’re likely to also find state law prohibitions against fee-splitting, kickbacks, conflict of interest, patient exploitation, and so on. Enforcement has many tools at its disposal. In terms of risk mitigation, here some key legal strategies the healthcare venture can bake into its operational plan: The MSO should take care to leave anything that could be regarded as clinical decision-making or a clinical pathway to the healthcare provider. This includes evaluating or assessing the patient, treating, and obviously, prescribing. The MSO fee should reflect fair market value for the MSO’s services. While California law does allow a percentage of gross revenues under certain conditions, generally, percentages raise enforcement issues. Your healthcare lawyer can provide nuanced advice as what is good for business, often is fodder for enforcement; and conversely, what is most compliant, is often neither efficient nor profitable. One of the benefits of getting advice from an astute healthcare lawyer is finding the right “Goldilocks” strategy—neither too hot on the enforcement side, nor too cool on the profit side. Crafting the right plan takes legal experience as well as knowledge of the corporate practice of medicine, anti-kickback and fee-splitting, and other legal pitfalls that can ensnare the healthcare venture.
August 22, 2019
Family Law
Divorce in New Jersey- Equitable Distribution
Originally posted on 3/12/2019, no content changes. Equitable distribution is the division of the marital assets and liabilities between the parties. The equitable distribution of the marital assets and liabilities is fundamentally a three-step process. The assets and liabilities acquired during the marriage must be identified. The assets and liabilities must be evaluated either by review of the account statements or other documentation, the use of appraisers or the utilization of a forensic accountant, and The method and respective percentages of the distribution must be determined. Unlike several other states (most notably California), New Jersey is not a community property state. In community property states, the assets and liabilities are divided equally regardless of any other circumstances. New Jersey is an "equitable distribution" state, meaning that the assets and liabilities acquired during the marriage must be "fairly" distributed between the parties. What is "equitable" under the facts and circumstances of a particular case is not simply a subjective determination of fairness or equity. If it were, almost every person would argue that "equitable" means that they should receive a higher percentage of the assets. They would argue that because of their perceptions as to why the marriage ended, their perceptions as to their work efforts during the marriage and their general sense of "being victimized" justifies them receiving a higher percentage of the assets. Those perceptions are, however, largely irrelevant, and the specific statutory factors which must be considered are: the duration of the marriage; the age of the parties; the physical and emotional health of the parties; any income or property brought into the marriage by each of the parties; the standard of living established during the marriage; any written agreements made by the parties either before or during the marriage; the economic circumstances of each party at the time the division of the property becomes effective; the income and earning capacity of each party; each party's educational background, training and employment skills, work experience, absence from the job market; parties' respective custodial responsibilities for the children of the marriage; the contribution of each party to the education training and development of the earning power of the other party; each party's contribution to the acquisition or dissipation of the martial assets, including:the other parties' contribution as a home maker; the tax consequences of the proposed distribution; the value of the property or asset; the need of the parent who has physical custody of a child to own or occupy the marital residence; the debts and liabilities; the need to create a trust or other fund for foreseeable medical educational expenses; and the extent to which either party deferred achieving their career goals. You should familiarize yourself with each of these factors. If there are facts or circumstances in your case which you feel relate to any of the factors, you must call them to the attention of your Attorney. As your case progresses, your position with regard to the distribution of the assets must focus upon an analysis of these factors, not your own feelings as to what is "equitable." If your case is ultimately decided by a Judge, the Judge's decision will include a specific analysis of each factor and its relevancy to the facts of your case. Therefore, in order to have some projection as to what a Judge may decide, you must analyze your case in the context of these factors. It is also important to consider that not all assets must be divided in the same percentages. It is entirely possible that some of the assets in a case could be divided equally while others, because of the relevancy of any one or more of these factors, may be distributed other than equally. For example, it is not unusual that the value of a small business or professional practice may not be divided equally between the parties. The person operating the business or professionally engaging in the practice may receive a higher percentage of the value. In some instances, the person with specific needs for certain assets, such as the household furnishings to maintain a home for the children, may receive all or substantially all of the household furnishings. Thus, it is not only important that all of the marital assets and liabilities be considered but that each asset be individually analyzed. There are also assets which may not be subject to equitable distribution and will be retained by one of the parties. Assets which are received by one of the parties by way of a gift from a third party, inherited assets or assets which are owned prior to the marriage may remain the property of the person who received, inherited or owned the assets prior to the marriage. If there are such assets, the question then becomes whether any increase in their value during the marriage is distributable. If the increase in value is solely as a result of increased market conditions or inflation, it usually will not be subject to equitable distribution. If the increase in value is the result of the efforts of one or both of the parties, it generally will be subject to equitable distribution. For example, if one of the parties owned a home at the time of the marriage and that home was renovated or improved by the parties' work efforts and/or financial investment during the marriage, the increase in value resulting from those improvements may be subject to marital distribution. If, on the other hand, the pre-owned asset was a bank account which increased in value solely as a result of interest on the account, the increase in value may not be subject to equitable distribution. If an inherited, gifted or prior owned asset is placed into joint names, sold or transferred into another asset, which is then placed in joint names, it may lose its status as an exempt asset and be converted into an asset subject to marital distribution. It is impossible to discuss all of the alternatives which may exist regarding prior owned, gifted or inherited assets in a particular case, but the point to emphasize is that you must inform your Attorney that such assets exist so as to allow them to analyze the particular circumstances surrounding those assets, and advise you as to what if any part of the value of that asset may be exempt from or included in the marital distribution. In terms of valuing the assets, some assets are very simple to value, others much more complex and the majority somewhere in between. Bank accounts, stock brokerage accounts, 401(k) accounts, or other accounts are easily valued by simply obtaining the most recent account statement. Small businesses and professional practices are very complex and difficult to evaluate. Their value can only be determined through the opinion of a competent forensic accountant who will examine the financial statements, income tax returns and nature of the business or practice and can then provide an expert opinion as to its value. Many assets may not be as simple as account statements nor as complex as small businesses but may, nonetheless, require the use of an expert or competent appraiser to determine their value. For example, a competent appraiser may have to be engaged to render an opinion as to the value of a home. Actuaries or pension experts may be engaged to offer similar opinions as to the value of pension or retirement accounts, and sometimes there are collectibles, art objects or other personal property of sufficient value to warrant retaining an appraiser as to their value. Again, it is impossible to discuss all of the alternatives as to the valuation of assets which may be subject to equitable distribution. What is, however, important is to know that you have the right to see the account statements or to obtain other competent expert opinion as to the value of the assets, and you should never settle a case without at least a reasonable level of due diligence to document and determine the value of the assets being distributed For more information on this topic, please contact Megan Smith at msmith@offitkurman.com.
August 3, 2019
Healthcare
Do You Know the Key Differences Between the 4 Ambulatory Safe-Harbors to the Federal Anti-Kickback Statute (AKS)?
Do You Know the Key Differences Between the 4 Ambulatory Safe-Harbors to the Federal Anti-Kickback Statute (AKS)? The Anti-Kickback Statute (AKS) forbids physicians from knowingly and willfully soliciting, paying, offering, or accepting remuneration to: Refer a patient for services or any item for which the payment for that service or item is made (in whole or in part) by a Federal health care agency or Buying, ordering, leasing (or recommending buying, ordering, or leasing) any service, good, or facility (in whole or in part) for which payment for that service, good, or facility is made by a Federal healthcare program The federal anti-kickback statute (AKS) is violated if the scheme is indirect or direct, cover or overt, and for cash or an in-kind return. Medicare and Medicaid are the two prime examples of Federal health care programs that pays for services, goods, and facilities. Remuneration is fairly broad in scope and essentially includes anything of value. The Anti-Kickback Statute is a federal law. Violators can be given a criminal record and a prison sentence. Fines can be substantial and the violator will need to return any improperly received payments – reimburse the federal health care program directly or through the Department of Justice. Physicians who violate the Anti-Kickback Statute may lose their right to practice medicine. Violators may also be precluded from working with Medicare, Medicaid, or any federal health care program. Safe harbors to the anti-kickback statute The Anti-Kickback Statute laws do create “safe harbors,” which are ways/conduct that won’t qualify as violations of the Anti-Kickback Statute. Experienced healthcare lawyers can explain what actions and relationships qualify for safe harbor protection. Without safe harbors, many of the relationships physicians and nurses have with hospitals would violate the Anti-Kickback Statute. Many of the relationships medical device companies and pharmaceutical companies have with physicians could also violate the Anti-Kickback Statute. See our Prior post: 5 KEY STARK AND ANTI-KICKBACK LEGAL RULES YOU’LL WANT TO KNOW While federal Stark and anti-kickback laws, and state law equivalents (often known as “mini-Stark” and “fee-splitting prohibitions”) are very complex, there 5 key legal rules you’ll want to know. […] Medical practitioners should understand that there is no mandatory requirement to meet safe harbor. Many relationships between medical practitioners and medical companies may fail to meet the Anti-Kickback Statute’s prohibitions for other reasons. Some of the safe harbors in the Anti-Kickback Statute include: Renting space arrangements The sale of a medical practice Equipment rentals Discounts Personal service contracts Managed service contracts Group purchase organizations Certain types of investments such as investments in publicly traded companies, “underserved areas,” and group practices where all the “active investors” are licensed medical professionals Incentives for rural practitioners Many other types of relationships and agreements What is an ambulatory surgery center? Ambulatory surgery centers (ASC) are modern health care facilities where patients can get same day surgical care – instead of having to stay overnight at a hospital. Many Ambulatory surgery centers are closer to where the physician practices, sometimes in the same building. Ambulatory surgery centers are generally more convenient for patients. Advocates for Ambulatory surgery centers claim the risk of infection is less than in a hospital setting. Some of the prime users of Ambulatory surgery centers include procedures for: Endoscopy Pain management Plastic surgery Eye surgeries Podiatry Otolaryngology Orthopedic surgery Dental surgery The ambulatory surgery center safe harbor One key statutory safe harbor is the safe harbor for ambulatory surgery centers. Subsection r of the safe harbors to the Anti-Kickback Statute 42 CFR 1001.952 – Exceptions, provides as follows: “(r)Ambulatory surgical centers. As used in section 1128B of the Act, “remuneration” does not include any payment that is a return on an investment interest, such as a dividend or interest income, made to an investor, as long as the investment entity is a certified ambulatory surgical center (ASC) under part 416 of this title, whose operating and recovery room space is dedicated exclusively to the Ambulatory surgery centers, patients referred to the investment entity by an investor are fully informed of the investor’s investment interest, and all of the applicable standards are met within one of the following four categories surgeon-owned Ambulatory surgery centers ; single specialty Ambulatory surgery centers ; multi-specialty Ambulatory surgery centers ; and hospital/physician-owned Ambulatory surgery centers Similarities among the four Ambulatory surgery centers safe harbor categories There are key differences among the four different types of Ambulatory surgery center investments. The common threads among those four types are: The Ambulatory surgery center must be properly certified The entity or any investor (or other individual or entity acting on behalf of the entity or any investor) must not loan funds to or guarantee a loan for an investor if the investor uses any part of such loan to obtain the investment interest. As with many of the safe harbors, the investments can’t depend on the value or the volume of any referrals Secondary (ancillary) services such as anesthesia care must be an integral part of the Ambulatory surgery center procedure in order to bill Medicare, Medicaid, or other federally funded health care programs. The ancillary services can’t be separately billed to these federal health care plans. The official statutory language is that “all ancillary services for Federal health care program beneficiaries performed at the entity must be directly and integrally related to primary procedures performed at the entity, and none may be separately billed to.” The doctors and the Ambulatory surgery center can’t violate any federal health care discrimination laws or regulations The amount of payment to an investor in return for the investment must be directly proportional to the amount of the capital investment (including the fair market value of any pre-operational services rendered) of that investor. A common violation of the Anti-Kickback Statute that is not protected through an Ambulatory surgery center safe harbor is inducing another physician to perform in the Ambulatory surgery center by offering the outside physician referrals if they perform their procedures at the ambulatory surgery center. The Ambulatory surgery center safe harbor income test The Anti-Kickback Statute legislation wants to make sure that the doctor’s investment in the Ambulatory surgery center is tied into their medical practice – and not as a means to profit from referrals. For this reason, the Ambulatory surgery center safe harbor for surgeon-owned practices and single specialty practices requires that: “At least one-third of each surgeon investor’s medical practice income from all sources for the previous fiscal year or previous 12-month period must be derived from the surgeon’s performance of procedures, “- at an ambulatory surgery center or hospital surgical facility. This income test applies to surgeon owned and single-specialty Ambulatory surgery centers . The requirement also applies to multi-specialty Ambulatory surgery center investments (safe harbors) with the additional requirement that the 1/3 income be from just the investment Ambulatory surgery center. The examination of the 1/3 income test does not apply to hospital/physician Ambulatory surgery centers. The trade-off is that there are other very strict requirements the hospital/physician Ambulatory surgery center safe harbor must meet. These extra requirements are: “(v) The entity may not use space, including, but not limited to, operating and recovery room space, located in or owned by any hospital investor, unless such space is leased from the hospital in accordance with a lease that complies with all the standards of the space rental safe harbor set forth in paragraph (b) of this section; nor may it use equipment owned by or services provided by the hospital unless such equipment is leased in accordance with a lease that complies with the equipment rental safe harbor set forth in paragraph (c) of this section, and such services are provided in accordance with a contract that complies with the personal services and management contracts safe harbor set forth in paragraph (d) of this section. (vii) The hospital may not include on its cost report or any claim for payment from a Federal health care program any costs associated with the Ambulatory surgery center (unless such costs are required to be included by a Federal health care program). (viii) The hospital may not be in a position to make or influence referrals directly or indirectly to any investor or the entity.” Additional Ambulatory surgery center safe harbor considerations The definition of an ambulatory surgery center does not include cardiac catherization centers, facilities, for radiology oncology, and other specialized types of surgery centers. Only Ambulatory surgery centers certified by Medicare are included for safe harbor Ambulatory surgery center protection. The procedures that Medicare is covering in Ambulatory surgery center centers are expanding. An experienced Ambulatory surgery center healthcare lawyer can explain which facilities and which procedures are eligible for the Anti-Kickback Statute safe harbor. The expansion of eligible procedures can help physician-owned and single-practice Ambulatory surgery center meet the one-third income test. The Office of Inspector General is not currently requiring that the investors in the Ambulatory surgery center be 100% completely owned by physicians. Outside investors (who can’t refer patients to the Ambulatory surgery center and can’t perform procedures at the Ambulatory surgery center on patients they do refer) must meet some additional requirements: They can’t be employed by the Ambulatory surgery center or can’t be employed by an investor They generally can’t be in a position to influence referrals or provide services/items to the ambulatory surgery center Management service organizations cannot invest in the Ambulatory surgery center. Many other factors (in the statutes, in the OIG rulings, and elsewhere) can also affect Ambulatory surgery center safe harbor status. The four Ambulatory surgery center safe harbors defined In addition to the similarities and differences among the four types of Ambulatory surgery center safe harbors, it is important to understand how each category is defined. Standard Ambulatory surgery center safe harbor for surgeon-owned Ambulatory surgery centers The law for surgery-owned Ambulatory surgery center is as follows. The three other categories have similar provisions. Some of the key differences have been noted. Your Ambulatory surgery center investment healthcare lawyer can explain any other key differences. (1)Surgeon-owned Ambulatory surgery centers – All of the investors are general surgeons or surgeons engaged in the same surgical specialty, who are in a position to refer patients directly to the entity and perform surgery on such referred patients; surgical group practices (as defined in this paragraph) composed exclusively of such surgeons; (2) Single-Specialty Ambulatory surgery centers – All of the investors are physicians engaged in the same medical practice specialty who are in a position to refer patients directly to the entity and perform procedures on such referred patients; group practices (as defined in this paragraph) composed exclusively of such physicians; (3) Multi-Specialty Ambulatory surgery centers – All of the investors are physicians who are in a position to refer patients directly to the entity and perform procedures on such referred patients; group practices, as defined in this paragraph, composed exclusively of such physicians” (4) Hospital/Physician Ambulatory surgery centers – At least one investor is a hospital, and all of the remaining investors are physicians who meet the requirements of paragraphs (r)(1), (r)(2) or (r)(3) of this section; group practices (as defined in this paragraph) composed of such physicians; surgical group practices (as defined in this paragraph) All four categories also include the following definition – “investors who are not employed by the entity or by any investor, are not in a position to provide items or services to the entity or any of its investors, and are not in a position to make or influence referrals directly or indirectly to the entity or any of its investors.” Experienced health care lawyers understand how important relationships are between physicians and other entities such as hospitals, laboratories, and other medical providers or medical companies. Meeting with a skilled Anti-Kickback Statute attorney can help the physician understand what relationships may violate federal law. The lawyer can then explain what safe harbors such as ambulatory-surgery-center safe harbors may protect the physician’s investments. The attorney will also explain the differences among the four different types of Ambulatory surgery center safe harbors: surgeon-owned Ambulatory surgery centers, single specialty Ambulatory surgery centers, multi-specialty Ambulatory surgery centers, and hospital/physician-owned Ambulatory surgery centers Speak with an experienced health care lawyer before you plan any investments in an ambulatory service center. The difference between investing correctly or incorrectly can be the difference between your freedom and a criminal sentence which may include jail time and can mean saving money versus having to pay substantial fines, costs, and other damages.
March 22, 2019
Healthcare
3 FDA Legal Traps When Marketing your Dietary Supplement Product
Ask an FDA Legal Expert The world of dietary supplement claims and labeling requires a hard look at the kinds of claims FDA allows and FDA for dietary supplements. It is not simply about how much you pay to get X number of labels reviewed. That kind of bottom-feeding, discount chain mentality gets a lot of companies X’d out of the market every year. Consider the case of Seymour Heart, MD, the successful physician and You Tube personality who privately branded his dietary supplements. He got a label, wonderful, and was proud that he got the font size right and put the address of the manufacturer on it. But then, he had made 11 different claims on the label, and that was something the FDA regulatory consultant did not review. The FDA regulatory consultant vendor did not conduct any review of FDA warning letters for each particular claim. Nor the FDA regulatory consultant talk about substantiation requirements that each of FDA and FTC impose on every dietary supplement claim, whether the claim is on the label itself or on the website or other marketing materials. Dr. Heart got a nice flat fee deal and then later found himself in the crosshairs of regulatory enforcement for making drug claims for his product. Now it’s your turn. See our previous post: DIETARY SUPPLEMENT LEGAL REVIEW COULD SAVE YOUR COMPANY If you want to sell healthcare products online, the legal hurdles can be steep. FDA Legal Trap # 1: FDA Looks to Intended Use, Giving FDA Broad Enforcement Discretion The intended use doctrine gives FDA a trump card over enforcement activity. Because FDA is not limited to the definition of “labeling” in determining the “intended use” of a product, FDA can look to anything it deems relevant. As well, FTC can enforce if it determines that the advertising is untruthful or misleading. Therefore, materials on other websites that include promotional statements by the Company, can be considered evidence of intended use. If a television spot or radio ad or newspaper ad, brochure, website, or other piece of marketing collateral, contains disease claims, then, FDA will take the claims that are not structure/function claims and use intended use doctrine to prove a violation. Any states sponsored, approved, endorsed, or repeated by the dietary supplement company on its own website or in social media sites are fair game for intended use. See our previous post: FDA TAKES AGGRESSIVE STANCE ON DIETARY SUPPLEMENT PROMOTION AND LABELING The FDA has taken an aggressive stance on dietary supplement promotion and labeling in recent warning letters involving dietary supplement manufacturers’ and distributors’ response to consumer […] FDA Legal Trap # 2: Misbranding Dietary Supplements FDA considers a dietary supplement “misbranded” if the product “labeling” is false or misleading in any way, or makes inappropriate claims. “Labeling” means not only the label on the box, but also any written, printed or graphic material accompanying the product (including the website). Inappropriate claims include disease (or therapeutic) claims—those that claim a product will diagnose, cure, mitigate, treat, or prevent disease. If you make a disease claim, then the product gets regulated as a drug, which requires prior proof of safety and efficacy before selling the product in interstate commerce. The most common permissible claims for dietary supplements are structure/function claims. These describe the role of a substance intended to maintain the structure or function of the body, or general well-being from consumption of a nutrient or dietary ingredient. “Disease” is defined as “damage to an organ, part, structure, or system of the body such that it does not function properly (e.g., cardiovascular disease), or a state of health leading to such dysfunctioning (e.g., hypertension); except that diseases resulting from essential nutrient deficiencies (e.g., scurvy, pellagra) are not included in this definition.” For example: the claim, “shrinks tumors” is a disease claim, and “supports the immune system” is a structure/function claim. See our previous post: MISLEADING ADVERTISING OF HEALTH PRODUCTS TRIGGERS FTC COMPLAINT AND PENALTIES Dietary supplement manufacturers, medical device manufacturers and distributors, and makers of cosmetics should have legal review of their website advertising and marketing claims for Federal […] FDA Legal Trap #3: Misunderstanding Structure/Function Claims One point is misunderstanding is about what the structure/function has to look like. There are certain magic words that are helpful—for example, here are some common structure/function claims: “energy boosting;” “ease stress;” “maintains a healthy body and mind;” or claims that use terms such as “stimulate,” “maintain,” “support,” “regulate,” or “promote” in association with a body system, organ, or function affected by the supplement, so long as the statements do not suggest disease prevention or treatment or use for a serious health condition a consumer lacks the ability to evaluate. However, FDA looks at the overall meaning of the claim, not at whether certain terms such as, “supports,” are used. For example, when FDA published the structure/function final rule, it explained that “maintains healthy lungs in smokers” would be a disease claim, because it implies prevention of tobacco-related lung cancer and chronic lung disease. FDA lists ten different ways that a product can make a prohibited disease claim. These include a claim that the product: has effect on a disease or a symptom of a disease; is a substitute for a drug; or has a role in the body’s response to a disease. Also, a claim that consumers would understand to refer to a disease, is a disease claim. For example, “controls blood sugar in persons with insufficient insulin” would be considered an impermissible disease claim as it could easily be understood to refer to treatment of diabetes. Also where FDA regulates certain claims for OTC drugs, these are considered drug claims. FDA Legal Trap #4: Neglecting Substantiation of Dietary Supplement (or Cosmetics) Claims Both FDA and FTC require that all statements regarding a product need to be truthful and non-misleading. Among other things, this means that the advertiser must have adequate substantiation or underlying evidence for the intended use. Normally, this means the claim must be supported by “competent and reliable scientific evidence.” FDA and FTC define “competent and reliable scientific evidence” as: “tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.” In determining whether this standard has been met, FDA considers four issues: The meaning of the claim(s) being made. The relationship of the evidence to the claim. The quality of the evidence. The totality of the evidence. Testimonials and other anecdotal evidence are insufficient to substantiate a claim. A testimonial can include: descriptions of experiences of individuals using a dietary supplement product or ingredient. It might also include descriptions of the use of the product or ingredient by others, for example, by other cultures in the past or present. It might consist of an opinion or statement of an expert or someone who endorses the product. Anecdotal evidence generally would not be sufficient to substantiate claims regarding a diet. FDA regards the following factors as important to establish whether information would constitute “competent and reliable scientific evidence:” Does each study or piece of evidence bear a relationship to the specific claim(s)? What are the individual study’s or evidence’s strengths and weaknesses? Consider the type of study, the design of the study, analysis of the results, and peer review. If multiple studies exist, do the studies that have the most reliable methodologies suggest a particular outcome? If multiple studies exist, what do most studies suggest or find? Does the totality of the evidence agree with the claim(s)? Some of the issues that typically present substantiation issues include: Claims that the product is “clinically proven.” Claims about evidence (and the evidences do not meet FDA’s rigorous criteria above). Claims about expected results. Claims about mechanism or scientific process. Unsubstantiated or inadequately substantiated claims are not only problematic from the FDA perspective; they can also generate lawsuits from private plaintiffs, including consumers and competitors. Law firms representing plaintiffs are actively looking for new entrants to the dietary supplement market and scrutinizing their websites and marketing materials for potential fodder for large, class-action lawsuits. [1] Similarly, FTC considers: (1) Type of product (i.e., products related to consumer health or safety require greater substantiation); (2) Type of claim (claims that are harder for consumers to assess require more substantiation; this includes “health claims that may be subject to a placebo effect or technical claims that consumers cannot readily verify for themselves”); (3) Benefits of a truthful claim; (4) Cost/feasibility of developing substantiation for the claim; (5) Consequences of a false claim (including physical injury if the consumer relies on an unsubstantiated claim of therapeutic benefit); (6) Amount of substantiation that experts in the field believe is reasonable (the FTC looks to “accepted norms in the relevant fields of research” including those developed by a government or authoritative body). FTC notes that claims can be implied by the advertising material as well as made expressly. In assessing the implied claims, the FTC looks to the “net impression” conveyed by all elements of an ad, including the text, product name, and depictions. FTC also requires that disclosure of any necessary qualifying information be presented clearly and prominently so that it is actually noticed and understood by consumers. Similarly, where there are limited studies, and there are “significant limitations to each of the studies and a better controlled study is necessary to confirm whether the effect is genuine:” Disclosure of qualifying information must be clear and prominent. See our previous post: DIETARY SUPPLEMENTS, COSMETICS, MEDICAL DEVICES – WHY SUBSTANTIATING CLAIMS MATTERS Substantiating claims matters whenever you bring a dietary supplement, cosmetic (or skin care product), or medical device to market – why? The Structure/Function Notification to FDA The manufacturer must prepare a notification to FDA no later than 30 days after the first marketing of the product that the manufacturer is making the structure/function statement in accordance with the applicable regulation (21 CFR § 101.93(a)). Among other things, the manufacturer will need to include the structure/function disclaimer: “This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.” FDCA §403(r)(6). The statement must be “prominently displayed and in boldface type.” Id. The regulation is very specific about the text, placement, and typesize of the disclaimer. The disclaimer itself is necessary, but not sufficient, to keep the product within the bounds of dietary supplement classification. In other words, simply putting the mandatory disclaimer on the label will not prevent FDA enforcement if FDA reasonably concludes that the “intended use” is as a drug. Some Other Dietary Supplement Legal Hot Buttons Other dietary supplement legal hot buttons include: Failing to disclose the compensation paid to an expert who endorses the product Overstating what consumers generally can expect from the product Over hyping the product with terms such as “best,” “miracle” Referencing any disease (obesity, anxiety, depression, insomnia, hypertension, high blood pressure, gastrointestinal disorder such as leaky gut syndrome….) or symptom of disease Making too many claims Using “clinical proven” Using OTC claims such as “antiviral” or “antibiotic” Using the term “inflammation” Making duplicate claims and being careless in terms of implied disease claims Talking about a scientific process or mechanism of action which makes the product sound like it has drug-like properties of effects Comparing the dietary supplement to a drug, or suggesting that the dietary supplement can substitute for the drug, or is “more effective” than the drug Not doing a substantiation review to see whether the product in fact has the evidentiary backing that FDA and FTC both demand Failing to get a legal read on each and every claim, and instead assuming that the product is “safe” and therefore beyond FDA scrutiny Underestimating the power of FDA and/or FTC to make the company’s life miserable once enforcement action is initiated, and relying on the false assumption that the worst thing that can happen is a warning letter. Get Your Claims and Labels Reviewed for FDA Compliance When you want to get your dietary supplement to market, it’s tempting to pay a vendor simply to get a label reviewed. When you do that, it’s likely your dietary supplement product will skip a whole bunch of regulatory hoops that, if left unaddressed, could become fodder for later enforcement activity. [1] Similarly, FTC considers: (1) Type of product (i.e., products related to consumer health or safety require greater substantiation); (2) Type of claim (claims that are harder for consumers to assess require more substantiation; this includes “health claims that may be subject to a placebo effect or technical claims that consumers cannot readily verify for themselves”); (3) Benefits of a truthful claim; (4) Cost/feasibility of developing substantiation for the claim; (5) Consequences of a false claim (including physical injury if the consumer relies on an unsubstantiated claim of therapeutic benefit); (6) Amount of substantiation that experts in the field believe is reasonable (the FTC looks to “accepted norms in the relevant fields of research” including those developed by a government or authoritative body). FTC notes that claims can be implied by the advertising material as well as made expressly. In assessing the implied claims, the FTC looks to the “net impression” conveyed by all elements of an ad, including the text, product name, and depictions. FTC also requires that disclosure of any necessary qualifying information be presented clearly and prominently so that it is actually noticed and understood by consumers. Similarly, where there are limited studies, and there are “significant limitations to each of the studies and a better controlled study is necessary to confirm whether the effect is genuine:” Disclosure of qualifying information must be clear and prominent.
February 1, 2019
Healthcare
5 Key Stark and Anti-Kickback Legal Rules You’ll Want to Know
5 Key Stark and Anti-Kickback Legal Rules You’ll Want to Know The 5 Key Stark and Anti-Kickback Legal Rules You’ll Want to Know While federal Stark and anti-kickback laws, and state law equivalents (often known as “mini-Stark” and “fee-splitting prohibitions”) are very complex, there 5 key legal rules you’ll want to know. Think of these as The Five People You Meet in Heaven—only you meet them on Earth, and they don’t teach you about love or forgiveness or sacrifice or purpose. They teach you about compliance. Here, briefly are the 5. 1. What’s a “Referral”? Stark, anti-kickback, and fee-splitting laws often refer to illegal “referrals,” but what exactly is a “referral?” Under federal law, “referral” means the request by a physician for an item or service, including the request by a physician for a consultation with another physician (and any test or procedure ordered by, or to be performed by (or under the supervision of) that other physician). Taking California state law as one example, California attorney general opinions likewise interpret the term “referral” expansively. Sending the patient to a particular provider or facility for healthcare services is a “referral.” 2. How does Stark affect transactions involving family members of a physician? The federal self-referral statute (“Stark”) provides that if a physician (or immediate family member) has a financial relationship with an entity, then, unless the arrangement qualifies for a specific exception: The physician may not refer patients to the entity for “designated health services” (“DHS”) payable by federal health care programs (including Medicare, Medicaid or CHAMPUS, and in California, Medi-Cal), and Where DHS are involved and the referral is prohibited, the physician may not present a claim to any third-payer for the same. 3. How are state laws like Stark and the federal anti-kickback statute? In general, state laws often have a self-referral prohibition that mirrors Stark, only is less dense and comprehensive. Sometimes these are known as “mini-Stark” statutes. For example, California law contains prohibitions against self-referral in the Physician Ownership and Referral Act of 1993 (“PORA”), as well as California Labor Code Section 139.3 (workers’ compensation), and some other statutes. See some of our prior posts: How substance abuse treatment centers navigate anti-kickback rules Substance abuse treatment centers must steer carefully when sending patients for labs. Self-referral, anti-kickback, and fee-splitting rules can create legal enforcement issues and must be […] Quick Summary of Federal “Stark” Self-Referral & Anti-Kickback Law and California Self-Referral and Fee-Splitting Prohibitions Here is a quick summary of federal self-referral (“Stark law”) and anti-kickback law, and California self-referral and anti-kickback / fee-splitting rules. Fee-splitting 101 for medical doctors, chiropractors, acupuncturists, and others Is it fee-splitting to hire another medical doctor, chiropractor, acupuncturist, or other health care practitioner in your office and give them a “cut” of patient revenues? PORA applies to healthcare licensees. Even if none of the designated health services in the statute are being provided, then the prohibition is inapplicable; however, a disclosure of the financial interest must be provided to patients at the time of the referral. California Law Code Section 139.3 provides that: (a) …. it is unlawful for a physician to refer a person for clinical laboratory, diagnostic nuclear medicine, radiation oncology, physical therapy, physical rehabilitation, psychometric testing, home infusion therapy, outpatient surgery, diagnostic imaging goods or services, or pharmacy goods, whether for treatment or medical-legal purposes, if the physician or his or her immediate family has a financial interest with the person or in the entity that receives the referral. However, Section 139.3.1 provides: (c) (1) A physician may refer a person to a health facility as defined in Section 1250 of the Health and Safety Code, to any facility owned or leased by a health facility, or to an outpatient surgical center, if the recipient of the referral does not compensate the physician for the patient referral, and any equipment lease arrangement between the physician and the referral recipient complies with the requirements of paragraph (2) of subdivision (b). (2) Nothing shall preclude this subdivision from applying to a physician solely because the physician has an ownership or leasehold interest in an entire health facility or an entity that owns or leases an entire health facility. There is always a “however,” or a “nothing shall preclude….” That’s what makes the whole area so rich and nested. 4. What’s the big deal about the Federal Anti-Kickback Statute (“AKS”)? The federal anti-kickback statute prohibits the knowing and willful offer or receipt of remuneration to induce the referral of business or services covered by a federal health care program, including Medicare. Even in the presence of other legitimate purposes, the courts have interpreted the statute to cover any arrangement where one purpose of the payment or offer of payment (albeit not the only purpose) was to obtain money for the referral of services or to induce further referrals. You don’t want to get on the wrong side of this one. Note, however, that if you violate Stark, there’s strict liability unless you find an exception that you can completely fit. With AKS, there are “safe harbors.” Meeting the elements of the safe harbor doesn’t guarantee immunity from enforcement; then again, failing to meet the elements of the safe harbor doesn’t guarantee enforcement. (We know, you can read that sentence again.) There are plenty of Stark exceptions and AKS safe harbors. For example, under 42 CFR 1001.952(r), a safe harbor exists for ambulatory surgery centers (ASCs). Specifically: “remuneration” does not include any payment that is a return on an investment interest, such as a dividend or interest income, made to an investor, as long as the investment entity is a certified ambulatory surgical center (ASC) under part 416 of this title, whose operating and recovery room space is dedicated exclusively to the ASC, patients referred to the investment entity by an investor are fully informed of the investor’s investment interest, and all of the applicable standards are met within one of the following four categories – (1) Surgeon-owned ASCs…. (2) Single-Specialty ASCs…. (3) Multi-Specialty ASCs…. (4) Hospital/Physician ASCs…. The multi-specialty ASC safe harbor adds to the criteria from the single-specialty ASC safe harbor, the requirement that: At least one-third of the procedures (as defined in this paragraph) performed by each physician investor for the previous fiscal year or previous 12-month period must be performed at the investment entity. 5. State Anti-Kickback Prohibitions Can be Just as Onerous and Tricky To take an example, with respect to potential kickbacks, California Business & Professions 650 provides: (a) …. the offer, delivery, receipt, or acceptance by any person licensed under this division or the Chiropractic Initiative Act of any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for referring patients, clients, or customers to any person, irrespective of any membership, proprietary interest, or coownership in or with any person to whom these patients, clients, or customers are referred is unlawful. (b) The payment or receipt of consideration for services other than the referral of patients which is based on a percentage of gross revenue or similar type of contractual arrangement shall not be unlawful if the consideration is commensurate with the value of the services furnished or with the fair rental value of any premises or equipment leased or provided by the recipient to the payer. Section 650(a) is the “thou shalt not” and Section 650(b) is the “thou mayest.” So which one controls? Much depends on enforcement discretion and the specific circumstances. This is why it’s important to get legal counsel and specifically analyze the venture. Section 650(b) is often used to justify payment of the management fee based on a percentage of gross revenues at fair market value. This provision allows payment to management companies, billing persons, and other personnel for “services other than the referral of patients,” provided: The compensation is at fair market value (“FMV”) for the services rendered; and The compensation does not vary by volume or value of patients referred. As we note elsewhere, even though 650(b) allows compensation under these circumstances, based on a percentage of gross revenues, we typically recommend a flat fee for marketing services, because marketing activities tend to be heavily scrutinized by regulatory authorities for kickbacks and fee-splitting. We discourage any percentage-based or patient-based remuneration for marketing, which would take into account the volume or value of referrals. As well, out of abundance of precaution, and because of the influence federal standards can have on enforcement of state anti-kickback issues, it is prudent to comply with the federal safe harbor for remuneration from an entity under a personal service arrangement or management contract. But again, every venture deserves its own analysis. Now, for the back story. Stark Penalties for violation of Stark can be significant. In a recent case, a large health system agreed to pay more than $25 million to resolve self-disclosed allegations that it illegally paid bonuses to doctors based on how much the system earned from their patient referrals. According to an article in Modernhealthcare.com entitled, Intermountain to pay $25.5 million to settle Stark case, the health system reportedly “characterized the violations as ‘technical in nature’ and said they arose partly because of the 300 pages of federal regulations and commentary that govern financial relationships between hospitals and physicians. “ Note the following definitions under Stark: The financial relationship can be an ownership or investment interest in the entity, or a compensation arrangement between the physician (or immediate family member) and the entity. A compensation arrangement is any arrangement involving remuneration between a physician (or an immediate family member) and an entity. The Stark regulations define a physician as a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor. In general, “remuneration” means “any payment or other benefit made directly or indirectly, overtly or covertly, in cash or in kind.” A first step is to determine whether DHS is involved. DHS within Stark include: clinical laboratory services; physical therapy services; occupational therapy services; outpatient speech-language pathology services; radiology services, including nuclear medicine, MRI, CAT scans, and ultrasound services; radiation therapy services and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment and supplies; prosthetics, orthotics, and prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospitalization services With regard to the first six categories of DHS, the Stark regulations identify the specific insurance billing codes in each category, which are considered to constitute DHS. These are updated annually by CMS. The remaining six categories of DHS are defined in the Stark regulatory text. If DHS is involved, then proposed arrangements must be structured to fit an exception. PORA Under PORA: A “financial interest” includes “any … compensation,” whether direct or indirect. In other words, a physician need not have a stock ownership in the entity to which the physician is referring, in order for PORA to apply. Spouses are considered an immediate family member under PORA. Unlike the Stark law, PORA applies to designated health care services regardless of the source of payment, i.e. for private insurers and cash patients. California’s definition of “physician” is broader than that under federal law, and includes, for example, acupuncturists (Christine). For purposes of PORA, under section 650(b)(4), the term “licensee” means “a physician as defined in Section 3209.3 of the Labor Code.” Under section 3209.3(2) of the Labor Code, the term “physician” “includes physicians and surgeons holding an M.D. or D.O. degree, psychologists, acupuncturists, optometrists, dentists, podiatrists, and chiropractic practitioners licensed by California state law and within the scope of their practice as defined by California state law.” The PORA prohibition on referrals only applies if the services provided are those designated as health services triggering the prohibition by PORA, Section 650.01(a) (laboratory, diagnostic nuclear medicine, radiation oncology, physical therapy, physical rehabilitation, psychometric testing, home infusion therapy, or diagnostic imaging goods or services). In connection with PORA, a physician must report to the California Medical Board of any “financial interest” in a “health-related facility.” The term “financial interest” is broadly defined to include, among other things: Any type of ownership interest, debt, loan, lease, compensation, remuneration, discount, rebate, refund, dividend, distribution, subsidy, or other form of direct or indirect payment, whether in money or otherwise, to a licensee or the licensee’s immediate family from a health-related facility. The term “health-related facility:” shall include a facility for clinical laboratory services, radiation oncology, physical therapy, physical rehabilitation, psychometric testing, home infusion therapy, diagnostic imaging, and outpatient surgery centers. “Diagnostic imaging” shall include, but is not limited to, all X-ray, computed axial tomography, magnetic resonance imaging, nuclear medicine, positron emission tomography, mammography, and ultrasound goods and services. (emphasis added) If any of designated health services in PORA apply, then we must look to a PORA exception. Things You Wanted to Know about AKS But were Afraid to Ask Federal anti-kickback law can apply to all practitioners, not just physicians, where federal reimbursement monies are involved. Here, practitioners may benefit from cross-referrals and be induced by the financial benefit to cross-refer to Medicare-reimbursed practitioners, irrespective of medical benefit. Among other dangers, enforcement authorities can potentially view an arrangement as a disguised kickback scheme. One of the ways this could be expressed is an unlawful joint venture between the two entities. The Office of the Inspector General (“OIG”) has expressed concern about joint ventures violating federal anti-kickback law. In order to protect beneficial arrangements, the federal Centers for Medicare and Medicaid Services (“CMS”) has published certain statutory safe harbor regulations that define practices that are not subject to the anti-kickback statute. If the conditions in the safe harbors are met, neither party will be prosecuted or sanctioned for the arrangement. Fitting into an exception under Stark is mandatory, whereas under anti-kickback law, if an arrangement does not meet every element of a safe harbor, it is not necessarily unlawful, but rather, is at risk of scrutiny by the OIG. In the preamble to the 1991 final safe harbor rules, the OIG explained that the anti-kickback statute “on its face prohibits offering or acceptance of remuneration, inter alia, for the purposes of ‘arranging for or recommending purchasing, leasing, or ordering any . . . service or item’ payable under Medicare or Medicaid.” The OIG has also observed that “many marketing and advertising activities may involve at least technical violations of the statute.” As a result, it is critical to scrutinize payments for marketing activity involving physicians for the risk of falling within the anti-kickback prohibition. If a proposed arrangement fully complies with all the detailed requirements of the safe harbor, the arrangement is not subject to enforcement under the anti-kickback statute; but practices that do not fit within a safe harbor are not necessarily illegal. The arrangement must be carefully scrutinized. The OIG will “evaluate both the form and substance of arrangements,” and take enforcement action against arrangements that are merely disguised kickbacks. The Safe Harbor for Personal Services and Management Contracts We mentioned California Business & Professions Code 650(b). A similar concept is embodied in this important safe harbor to AKS, which is the basis for the MSO model. This safe harbor applies only if all of the following standards are met: The agency agreement is set out in writing and signed by the parties. The agency agreement covers all of the services the agent provides to the principal for the term of the agreement and specifies the services to be provided by the agent. If the agency agreement is intended to provide for the services of the agent on a periodic, sporadic or part-time basis, rather than on a full-time basis for the term of the agreement, the agreement specifies exactly the schedule of such intervals, their precise length, and the exact charge for such intervals. The term of the agreement is for not less than one year. The aggregate compensation paid to the agent over the term of the agreement is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs. The services performed under the agreement do not involve the counseling or promotion of a business arrangement or other activity that violates any State or Federal law. The aggregate services contracted for do not exceed those which are reasonably necessary to accomplish the commercially reasonable business purpose of the services. Note that unlike in the Stark exception, there is a reference to “aggregate compensation,” and a requirement that if be “set in advance.” This can cause problems, but we’ll defer these for another day. Conclusion When you’ve got health care practitioner referring to one another within a proposed business arrangement, you could have potential yellow lights in the form of federal Stark, federal anti-kickback, state mini-Stark (self-referral) and state anti-kickback, fee-splitting, and patient brokering rules. This is not an area for DIY.
December 1, 2018
Healthcare
Thinking of Giving Medical Advice without a Valid California Medical License? Think Again
Thinking of Giving Medical Advice without a Valid California Medical License? Think Again Practicing medicine without authority in California is a crime. The law which is set forth in the California Business and Professions Code 2052 covers a wide range of activities. It applies to standard medical practice and is now being applied to a broad range of Internet and other electronic services. A few examples of who the statute is aimed at includes: Anyone from a foreign country, such as the UK, who has a medical license from the foreign country – but not from America. Anyone licensed by another state – but not California Someone without any medical license anywhere People who work in the healthcare profession but don’t have a valid license Anyone who exceeds the scope of their license. Nurses can generally assist in surgeries under the supervision of a doctor but they can’t operate on the patient Aestheticians who give injections CALIFORNIA MEDICAL BOARD ARRESTS MAN FOR UNLICENSED PRACTICE OF MEDICINE California and other state medical boards still run undercover investigations for unlicensed practice of medicine. California is in the minority of states that have a statute that authorizes […] The California unauthorized practice of medicine statute The illegal practice of medicine covers the following areas: What conduct is forbidden?Practicing or attempting to practice Advertising or holding oneself out as practicing What type of medicine is covered?Any system or mode of treating the sick or afflicted Diagnosing, treating, operating, or prescribing What types of medical conditions are covered?Any physical or mental condition including ailments, blemishes, deformities, diseases, disfigurement, disorders or injuries What constitutes authority?A valid medical California medical certificate (the Business and Professions Code provides) that hasn’t been suspended or revoked Any other valid legal certificate A violation of this law means the person who commits the offense: Is guilty of a public offense – either a felony or a misdemeanor Can be fined up to $1,000 or $10,000 depending on whether the offense if a misdemeanor or a felony Can be sentenced to county jail time in accordance with the California Penal Code, Section 1170 (h) Revocation or suspension of an existing medical license The law doesn’t just apply to the person who commits the offense. Anyone who conspires with the original offender or aids and abets that person can suffer the same consequences. Key considerations when considering what defenses may apply An experienced medical practice attorney works with respected criminal defense lawyers to help provide defenses. The criminal lawyer can help with issues such as violations of your Constitution rights, the chain of custody of evidence, and other matters unique to a criminal defense practice. A respected authorized practice of medicine lawyer will focus on showing that a key element of the statute does not apply if you are charged. Some of the factors medical providers and businesses need to understand are: Good intentions or good results are not defenses. Showing that you did a good job is not a defense. The patient may be grateful that your treatment worked. Maybe you even saved his/her life. But good results are not a defense. The fact that you didn’t’ make the patient worse is not a defense. That you were trying to help and didn’t intend any harm is not a defense. If you’re not authorized to provide medical care, you need to direct the patient to someone who does have that authority. Whether someone was hurt, though, can make a difference in the penalty phase. If a patient was hurt, then the violator runs a greater risk of being charged with a felony instead of a misdemeanor. The words in the statute of terms of art. The laws have precise definitions that are understood in the legal and medical communities. If the assistance given doesn’t meet any definition, then a defense may apply. For example, diagnostic tests are methods to collect clinical information for the purpose of analyzing a person’s medical condition. Examples include MRIs, CT scans, X-Rays, blood tests, oral histories, medical exams, and more. If the test was not characteristic and not diagnostic, such as identifying the color of someone’s eyes or having them step on a scale to get their weight, then it may be possible to argue – no diagnosis took place – and the statute was not violated. That the services were routine is not a defense. Many people try to argue incorrectly that the service provided wasn’t really providing medicine. An experienced medical practice lawyer explains that while many services and treatments don’t’ require a high IQ or years of practice, providing the service/treatment does still violate the statute. Services such as being a midwife acupuncturist do require a license. The best practice is to review the type of service you or an employee provides with an experienced California medical practice lawyer BEFORE you provide the service. He can explain if you need a license or certificate and what type of license. He can also review when and how you can work with someone who does have valid California medical authority. One key area of confusion is the practice of non-western medicine. While some of these practices may not be considered standard practices of medicine, they may still violate the California statute. An experienced California medical practice attorney will review whether your field of practice is considered a California medical practice. The dangers of working with out of state doctors or healthcare providers Difficult questions arise when an out-of-state doctor helps a patient who resides in California. For example, what happens when a Pennsylvania doctor gives a consultation to a doctor in California? Is the Pennsylvania doctor practicing medicine in California? Is the focus on where the patient is or where the doctor resides? Does it matter that the consultation is with a California doctor? What if the Pennsylvania health care provider wasn’t licensed in any state – can the California doctor be charged with unauthorized practice. If the Pennsylvania doctor has a valid license does he/she actually have to see the patient or patient records – or is working with the California doctor all that’s required? The issues of out-of-state practice are being raised more and more as the Internet, Skype, email, and other electronic communications are being used to connect patients in one state with doctors in another. Many companies such as health supplement or prescription companies use doctors as consultants. As a general rule, the company should use a California doctor if it is going to sell products to California patients. When is telemedicine illegal? Telemedicine is expanding as an opportunity for revenue. Some of the popular telemedicine practice areas are: Holistic health Integrative medicine Functional medicine Anti-aging medical care Regenerative medicine Using hormones like testosterone An experienced California authorized practice of medicine lawyer can explain when, who, and how telemedicine can be provided. The two main issues in telemedicine are: Providing medicine across state lines raises questions The general requirement that the treating doctor should physically see the patient The Medical Board of California prefers in-person examinations before prescriptions are prescribed. One additional area of confusion to review with your California healthcare lawyer is whether it’s a defense that a nurse practitioner conducted the medical exams – and what level of doctor supervision is required. PRESCRIBING THROUGH TELEMEDICINE RAISES LEGAL CHALLENGES: LEARN THE REGULATORY TERRAIN As prescribing through telemedicine raises legal challenges, understanding where telemedicine laws are tough can help you design your telemedicine startup. Unauthorized medical practice and corporate medical practices Some entrepreneurs think that they can make money through medical services by hiring doctors and then getting part of the profit for the medical care the doctors provide. This thought will likely lead to an unauthorized practice of medicine charge. Generally, only California physicians can own a California medical practice. It doesn’t matter that the business owners aren’t providing the treatments or medical care. The business owners can be charged with violating the statute AND the doctor can be charged with aiding and abetting the business owner’s violation of the statute. The corporate practice of medicine is very complex. Even the Medical Board of California recommends that doctors and business owners consult with an experienced California authorized medical practice lawyer. Section 2400 of the Business and Profession Code specifically provides: “Corporations and other artificial entities shall have no professional rights, privileges, or powers.” There are strict rules on contracts between physicians and non-physicians. The following cannot contract to provide medical services. Nor can they contract to have a doctor provide medical services as an employee or independent contractor: Non-physicians Non-medical corporations Limited liability corporations (LLCs) Providing medical services (such as medical spa services) includes, according to the California Medical Board: Choosing what diagnostic tests to order for a specific condition Deciding when a consult with another doctor or a referral to that doctor is required Responsibility for overall medical care including treatment options Overseeing how many patients a doctor should see or how many hours the doctor should work An experienced California medical practice lawyer will explain what possible solutions may work. For example, a management services organization (“MSO”) might be a solution for providing administrative services such as bookkeeping, advertising, and scheduling, for the professional medical corporation (“PMC”). One new area of medicine that requires review is the new marijuana laws. As with other businesses, licensed doctors should own the any venture that prescribes marijuana under the new California marijuana law. CORPORATE PRACTICE OF MEDICINE & ANTI-KICKBACK / FEE-SPLITTING RULES: DEEP DOWN THE REGULATORY RABBIT HOLE Many healthcare ventures seek to avoid corporate practice of medicine (or psychology) and fee-splitting violations, but they need to first understand how deeply down the rabbit hole these […] Is your medical assistant violating the California Business and Professions Code? Don’t run the risk of confusing a medical assistant with a medical doctor. A respected California medical practice lawyer will explain when an assistant may be violating the California unlicensed practice laws – even if the doctor is supervising the assistant. The lawyer can also explain when an exception such as the Safe Harbor for Non-Licensed Practitioners (Sections 2053.5 and 2053.6 of the California Business and Professions Code) applies. These sections include a requirement that the patient be advised about many aspects of the treatment including that the physician is not a licensed doctor. The patient should sign a written informed consent. Special rules and laws apply in other areas such as providing nutritional advice. IS YOUR MEDICAL ASSISTANT PRACTICING MEDICINE ILLEGALLY? Is your medical assistant practicing medicine illegally? Understand the difference between medical assistance and medical practice. Are you advertising that you practice medicine? Advertising includes more than just your letterhead. Your website, social media (Facebook, Twitter, etc.) emails, business cards, TV ads, radio ads, written marketing materials are just some of the many other ways people promote themselves. Each promotion can be reviewed by the state to see if you are advertising medical services. Non-licensed doctors can’t generally refer to themselves as a doctor, physician, M.D., Dr., or use any letters, words, or graphics that reasonably imply they are a doctor. Conclusion: Many people don’t understand they are violating the unauthorized practice of medicine law because they think the statute doesn’t apply to them Some of the red flags for improper practice of medicine are telemedicine, out-of-state advice, corporate practices, and relying on nurse practitioners to do medical exams There may be exceptions or defenses to the charges Arrange to speak with a California healthcare lawyer as soon as possible There may be strategies that satisfy the unauthorized practice of medicine statute while helping the medical practice survive. Don’t guess at what the law means. An experienced California medical practice authorization lawyer can explain when you need a license to practice medicine. We’ll review the proper and legal balance between protecting the patient and making a living. Improperly practicing medicine or falsely advertising your ability to provide medical care can mean jail time, large fines, and the loss of the legal right to continue providing healthcare.
November 22, 2018
Healthcare
How to Handle Stark and Anti-Kickback Legal Barriers When Physicians Invest in an MSO
This is a story about how Harry, a healthcare entrepreneur, worked through a proposed arrangement that was raising Stark and Anti-Kickback issues. Chapter 1. Harry the Healthcare Entrepreneur Confronts the Stark and Kickback Puzzle Joe, a savvy healthcare entrepreneur, has some wealthy medical doctors “lined up” to purchase investment interests in an LLC that will serve as a management company (or medical services organization, MSO, for a professional medical corporation (PMC) or medical group. The LLC has a complex structure where it is going to be 50% owned by the doctors and 50% owned by Harry. Harry proposes that the MSO operate as a typical MSO, providing management and marketing services at fair market value to physicians and professional medical corporations that operate medical groups. CORPORATE PRACTICE OF MEDICINE ON STEROIDS: HOW YOUR MSO AND PROFESSIONAL MEDICAL CORPORATION COULD WORK TOGETHER WITHOUT COURTING LEGAL DISASTER You, MSO is my own variation on I Claudius. Poor Uncle Claudius, everyone said. Ended up becoming Emperor of Rome. Through craft and careful strategy. So you have an MSO and want to operate […] Harry also has a number of ‘bells and whistles’ to his proposal. He is going to put a whole bunch of other entities into the mix. Joe has an outside, diagnostic testing lab that supplies the physicians with urine collection kits, blood collection kits, and other medical supplies. The doctors will collect samples and send them to the lab for analysis. The lab also has some equipment it wants to lease to the physician practices. The medical doctors will bill insurers for performing the screens and tests that are done within the medical groups. The labs will bill separately Through some complicated financial scheme, the lab ends up paying the MSO a share of monies it receives from insurance, and this has something to do with the fact that the lab has sales reps on-site all the time at the medical groups. Harry wants to be “100 compliant;” yet, he also wants to make a ton of money, and sign up the doctors while he still has their interest (as he recently sold them on this idea at a black-tie cocktail party). Chapter 2. Harry Gets some Stark and Anti-Kickback Legal Advice The first thing to notice is that we’ve spotted an oxymoron, and it isn’t “military intelligence.” Harry’s concern with the potentially vanishing sales prospects from the cocktail part notwithstanding, we think Harry doeth protest too much. He really does not want to be “100% compliant.” He wants to make a lot of money. If he is going to be 100% compliant then he should probably go into another business, like retail sales. There isn’t too much the government can do if you simply tell someone this shirt looks great on him (or her) when trying to sell them for the store. Also, the federal and state authorities that enforce legal prohibitions against self-referral and kickbacks / fee-splitting, don’t think or act in terms of percentages of compliance. The closest they will to this is an OIG Advisory Opinion on fraud and abuse which might say that a proposed arrangement presents a risk of fraud and abuse, but has significant safeguards, such that it is unlikely that the government will initiate enforcement action. Therefore typically, we look at the risk presented and whether we can build in some reasonable safeguards as a way to mitigate potential enforcement risk. We hope Harry is open to the advice. First, though, Harry needs to know a lot more about what he’s getting into. Chapter 3. Harry Digs into Stark and Anti-Kickback Analysis Can the physicians collectively own 50% in the MSO? Harry asks point-blank. He told them, at the cocktail party, that they could – he would place a call to his healthcare lawyer to double-check. From an anti-kickback perspective, there is a safe harbor for a straight, passive investment in an entity. Under 42 CFR 1001.952(a)(2), a safe harbor exists if the entity possesses investment interests that are held by either active or passive investors. All of the following 8 standards must be met: (i) No more than 40 percent of the value of the investment interests of each class of investment interests may be held in the previous fiscal year or previous 12 month period by investors who are in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity. Equivalent classes of equity investments may be combined, and equivalent classes of debt instruments may be combined. (ii) The terms on which an investment interest is offered to a passive investor, if any, who is in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity must be no different from the terms offered to other passive investors. (iii) The terms on which an investment interest is offered to an investor who is in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity must not be related to the previous or expected volume of referrals, items or services furnished, or the amount of business otherwise generated from that investor to the entity. (iv) There is no requirement that a passive investor, if any, make referrals to, be in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity as a condition for remaining as an investor. (v) The entity or any investor must not market or furnish the entity’s items or services (or those of another entity as part of a cross referral agreement) to passive investors differently than to non- investors. (vi) No more than 40 percent of the entity’s gross revenue related to the furnishing of health care items and services in the previous fiscal year or previous 12-month period may come from referrals or business otherwise generated from investors. (vii) The entity or any investor (or other individual or entity acting on behalf of the entity or any investor in the entity) must not loan funds to or guarantee a loan for an investor who is in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity if the investor uses any part of such loan to obtain the investment interest. (viii) The amount of payment to an investor in return for the investment interest must be directly proportional to the amount of the capital investment (including the fair market value of any pre-operational services rendered) of that investor. Harry is excited by this anti-kickback safe harbor. However, we’ve barely begun the analysis. There are other anti-, anti-kickback safeguards we would want to put in. And, there are many parts of the arrangement Harry has put together that we will not review—for example, the whole idea of making money from the lab and the tie-in between the physicians, the lab, and the MSO. (Warning, Will Robinson!) Among other things, there are dangers inherent in paying anything other than a flat fee for marketing services. And the tie-in between the lab, the supplies, the doctors, and the MSO raises a lot of issues. Here are some other brief considerations, basics Harry will want to know about: If no Medicare (or other federal healthcare) reimbursement is involved, then federal law will not apply. Technically speaking, this means that we are not looking at Stark which is federal self-referral law, and not looking at the federal anti-kickback statute (AKS). However, federal law is worth review as it may be persuasive to state authorities. Thus, we might look at OIG opinions. There is an issue of cross-referrals among the physicians who are investors in the MSO. These could potentially trigger fraud and abuse consideration. We can deal with this later, but first, let’s lay out some more background Harry should understand. One thing Harry should consider is that self-referral law often is, like Stark, black and white. In other words, it is what we call a strict liability statute. Intent is not required. Under Stark, either you meet an exception or not. Whereas, in contrast, the anti-kickback statute is intent-based. And failing to meet the safe harbor does not in itself create liability. Chapter 4. Harry learns more about Stark than he wanted to know Let’s step back to get a more birds’-eye view of Stark. Stark, the federal self-referral law, prohibits physicians from ordering “designated health services” (DHS) for Medicare and Medicaid patients from entities with which the physician (or an immediate family member) has a “financial relationship.” KICKBACKS, FEE-SPLITTING, CORPORATE PRACTICE OF MEDICINE, STARK, MSOS: GUIDING HEALTHCARE VENTURES THROUGH THE MAZE Fundamentally, you’re worried about legal rules prohibiting kickbacks, fee-splitting, corporate practice of medicine, as well as Stark law; you don’t know whether the MSO or management structure […] CAN AN MSO CONTROL PHYSICIANS GIVEN CORPORATE PRACTICE OF MEDICINE? Can a medical management company or MSO control physicians given corporate of medicine concerns, especially in a strong corporate practice of medicine state? Whether the MSO can control […] The term, “financial relationship” includes both compensation arrangements, and investment and ownership interests.” The term “referral” under the Stark Law is defined more broadly than merely recommending a vendor of designated health services (DHS) to a patient. Instead, the term “referral” means, for Medicare Part B services, “the request by a physician for the item or service” and, for all other Medicare and Medicaid services, “the request or establishment of a plan of care by a physician which includes the provision” of the DHS. DHS includes, among other things, clinical laboratory services, which makes it relevant to what Harry is trying to put together. Stark contains several exceptions. The exceptions that are typically relied upon by physicians and MSOs include: Physician Services. In-Office Ancillary Services (IOAS). Rental of Office Space and Equipment. Bona fide Employment Relationships. Personal Services Arrangements. Payments for Items and Services. Fair Market Value. Indirect Compensation. However, Stark does not have an exception for investments in group practices. This is an important limitation, because Stark expanded the definition of the performing “entity” to go beyond the entity in whose name bills were submitted to Medicare (the billing)—i.e., to include also the entity performing the services (i.e., the MSO can be deemed the performing entity under Stark). This complicates things. There is no in-office ancillary services (IOAS) exception available where the performing entity is the MSO, because the physicians do not provide services in the name of the MSO. All the physicians are essentially referring to one another, and financially benefitting from these referrals, by virtue of their equity interest in the MSO. So that knocks out the investment in group practices exception. As mentioned above, though, Stark has an “indirect compensation arrangement” exception where the compensation meets certain requirements, including that it is at fair market value, in writing, and does not violate the anti-kickback statute.42 CFR 411.357(p). However, a physician “stands in the shoes” of his or her physician organization for purposes of determining the physician’s compensation arrangements, and thus has a “direct” compensation arrangement with the entity receiving the referral (i.e., this means that the physician does not meet the indirect exception). And a physician is “a physician (including a professional corporation of which the physician is the sole owner), a physician practice, or a group practice that satisfies the Stark ‘group practice’ definition.” When determining whether a direct or indirect compensation arrangement exists between a referring physician and a DHS entity, the referring physician would stand in the shoes of: (1) another physician employing the referring physician, (2) the physician’s wholly owned professional corporation, (3) a medical practice that employs or contracts with the referring physician, or (4) a group practice of which the referring physician is a member or independent contractor. While an MSO may or may not technically be subject to these rules (i.e., a physician may not necessarily “stand in the shoes” of the MSO contracting with a lab), CMS has stated that such arrangements “may involve illegal kickbacks” even if not within Stark.72 Fed. Reg. at 51030. Also to consider, a “referral” under Stark includes a request for an item or service by the physician. Thus, when the physician orders a lab test, the physician has made a “referral.” If the physician has an ownership interest in the MSO, then the physician is receiving compensation from the referral. At the least, this triggers anti-kickback review. There is no corresponding anti-kickback safe harbor to the Stark indirect compensation exception.As well, there is no Stark exception comparable to the safe harbor available under anti-kickback statute (AKS) for certain investment interests. Harry is starting to understand that it’s a bad idea to make promises at cocktail parties about complicated schemes or thinking that his lawyer has some magical “workaround” to these nuanced legal prohibitions. He doesn’t necessarily have to wade through every exception nested within an exception to an exception to a rule; but he must learn enough of the nuances to know that isn’t necessarily to get a green light simply by pulling the right lever. Stark and self-referral law have many nuanced exceptions and anti-kickback and fee-splitting rules have many potential safe harbors. While an MSO provides an established legal vehicle to accomplish many revenue-producing goals for non-physician healthcare entrepreneurs, throwing physician investment and lab-related fees into the mix can complicate matters.
September 22, 2018
Healthcare
Can the MSO Legally Brand the name of a Medical Clinic?
If you have a medical management company (MSO), you might be wondering, can your MSO brand itself with the same name as the medical clinic, and even license the name to the physician that owns and operates the medical clinic. Background: The MSO Model We address the MSO in prior posts, including: Rock Your Practice with an MSO—MSO Compliance vs. using Independent Contactor Practitioners Kickbacks, Fee-Splitting, Corporate Practice of Medicine, Stark, MSOs: Guiding Healthcare Ventures through the Maze Corporate Practice of Medicine on Steroids: How Your MSO and Professional Medical Corporation Could Work Together Without Courting Legal Disaster Corporate Practice of Medicine & Anti-Kickback / Fee-Splitting Rules: Deep Down the Regulatory Rabbit Hole Is it fee-splitting for medical doctors to share revenues with non-medical business owners? The MSO model is a stalwart for creating a healthcare venture that involves licensed medical doctors, where the entrepreneur is a non-physician. Branding and Licensing the Clinic Name The branding path is complicated by the fact that California law treats physicians, and the practice of medicine, differently than other professions. Among other things: California prohibits the unlicensed and corporate practice of medicine. This means that management companies must take particular care to avoid enforcement scrutiny. On its webpage, Corporate Practice of Medicine, the Medical Board of California explains that the rule is “intended to prevent unlicensed persons [and companies] from interfering with or influencing the physician’s professional judgment.” However, the Board then lists a broad range of activities that constitute corporate practice of medicine. These include: Management service organizations arranging for, advertising, or providing medical services rather than only providing administrative staff and services for a physician’s medical practice (non-physician exercising controls over a physician’s medical practice, even where physicians own and operate the business). So at the start, caution is required as the medical board could see a corporate practice of medicine violation if there appears to be excessive entanglement by the MSO or management company in the affairs of the medical practice or physician. The Strange Case of the Fictitious Name Permit This is our version of a legal Alice in Wonderland, or maybe a Benjamin Button. California law requires that a physician apply for a fictitious name permit (“FNP”) if the physician intends to practice under a name other than his or her own. On its webpage, Fictitious Name Permit, the medical board indicates that an FNP application takes approximately 4-6 weeks to process, and that the Board “closely monitors fictitious names to ensure that similar names are not issued.” Numerous management company clients have asked us about naming, branding, and licensing the trade name, and we have not always gotten clear answers from the California Medical Board. The rules themselves are byzantine and convoluted, and as we understand it, the Board has not always followed them, or has been selective in its enforcement actions. In addition to the above: The California Secretary of State (“SOS”) has rules regarding naming of business entities (see SOS, Business Entity: Name Regulations & Additional Statutory Requirements and Restrictions). If a proposed entity name is “the same as or deceptively similar to an existing name,” SOS may reject incorporation. “Substantially similar names” may be available if the existing entity consents in writing to the second entity using the name. A proposed name can be “substantially the same” if, among other things, “it implies an affiliation with” the existing entity. The Business Entity document above contains details of these rules. Legal Issues; Legal Risks – From MSOs to Medical Spas Remember that because of the prohibition against the corporate practice of medicine, the business structure for a medical spa typically involves two entities: the management company, and the physician’s professional medical corporation. The Professional Medical Corporation’s name typically is either the name of the physician (for example: George T. Smith, MD, Inc., PC) or the fictitious name for which the physician has obtained a fictitious name permit from the California Medical Board. If your brand name—let’s call it the MSO brand name which you want to license to the physician as “Your Clinic Brand Name”–has substantial value or potential value, then this presents a number of possible legal pitfalls. License the Name? Again, this is a murky area complicated by less-than-clear statutes and regulations and changing enforcement priorities. In our experience, at the present writing, there could be risks to licensing the MSO’s name to your designated physician. And, like many similar decisions, this is also common in the healthcare industry. The legal risks include: The Medical Board of California could potentially see a corporate practice of medicine violation in the management company licensing the corporate name to a physician. Presumably, enforcement scrutiny would only be triggered if the Board found other violations or issues with the whole arrangement. However, “no one has a crystal ball” is the way it goes. The physician would receive a fictitious name permit from the Medical Board of California for use of the name, “Your Clinic Brand Name.” Even were the Management Agreement to provide that the license of the name (from the management company to the physician or his professional corporation) would terminate at the discretion of the management company, the physician still would have the fictitious name permit in hand. These two areas of laws do not intersect. Presumably, the management company could send a cease-and-desist letter, demanding that the physician stop using the licensed name. It is unclear what weight the fictitious name permit would have, or what leverage it could give the physician, as a potential defense (or at least, as one way to create legal turmoil). Suppose the management company found a second physician, who would open a different location (say, Your Clinic Brand Name in Different City). The physician might apply for a fictitious name permit from the Medical Board of California, and find the Board denying the permit, based on the fact that the first physician was already granted a permit with the name, “Your Clinic Brand Name.” Note that the Board indicates on its Fictitious Name Permit website that it could grant the first physician a fictitious name permit for a second “practice address.” This is different, though. The Board notes that an FNP is not transferable to another physician if a medical practice is purchased. Thus, were your current physician to wish to sell to another physician, the FNP could not simply transfer from the seller to the buyer. Instead, the owner of a fictitious name permit must submit an Application for Cancellation of a Fictitious Name Permit and the new owner must submit a Fictitious Name Permit Application. Both must be accepted by the Board. All this is rather cumbersome, and there is no guarantee that the Board would approve of these steps. In fact, the process would be outside the control of the management company. Could all the steps be required contractually, and would this solve the problem? Theoretically, the Management Agreement could provide, for example, that: The management company licenses the name to the physician. Presumably, the physician will apply for a fictitious name permit. If the Management Agreement terminates, the physician loses the rights granted by the license, and all those rights revert to the management company. The physician must cancel the fictitious name permit and dissolve or change the name of the professional medical corporation if the professional medical corporation uses “Your Clinic Brand Name.” However, each of these raises corporate practice of medicine concerns. For example, in one conversation with the Medical Board of California, the Board representative advised us that licensing a corporate name to a physician would raise corporate practice of medicine and possibly franchise issues. Typically, the representative said, the situations the Board encounters involve a physician group licensing the name of the medical practice, to individual physicians but that is another matter. Similarly, regarding the second bullet, the management company probably cannot insist on the physician applying for an FNP, since this could tread on corporate practice of medicine sensitivities. As to the third bullet, the management company cannot insist on a physician canceling an FNP, or dissolving his or her professional corporation; nor can the management company be seen to control the physician’s advertising. Even if the FNP were not an obstacle, the California Secretary of State might not approve and file the Articles of Incorporation for another “Your Clinic Brand Name” if one already exists, as this might be considered deceptive to the public. The Secretary of State rules are additional to and separate from whatever the Medical Board of California decides. An additional concern is the set of advertising restrictions contained in Section 651 of the Business & Professions Code, which among other things, make it unlawful to disseminate “any form of public communication containing a false, fraudulent, misleading, or deceptive statement, claim, or image for the purpose of or likely to induce, directly or indirectly, the rendering of professional services or furnishing of products in connection with the professional practice or business for which he or she is licensed.” This section can be broadly used if the Board sees confusion around naming and which entity is responsible for what. Last, if the management company branches beyond California, it could face similar issues in other states. We do not know how these states would regarding licensing a trade name to a physician or professional medical corporation. Our Bottom Line on Licensing the MSO Name to the Physician The practice of branding the physician’s medical clinic or medical practice within the medi-spa with the same name as the MSO is, as we’ve indicated, common in the industry yet legally risky. We prefer that the MSO and medical practice have different names and, depending on who we represent, we want the branding value to stay with the client. Typically, we represent the MSO and in such case, the MSO wants to drive the branding. Notwithstanding the corporate practice of medicine, the MSO wants to drive the value, and sees the physician as ancillary to the value drive. From a corporate practice of medicine standpoint, the name of the physician (or the name of the physician and his or her professional medical corporation) must be “on the door” of the medical spa and included in the advertising. Patients must know that they are going to be seeing a licensed medical doctor (or someone properly supervised by the MD) for medical services. The management company can “co-brand”—i.e., can also have its name on the door and in the marketing materials.
July 1, 2018
Healthcare
MSO Gets Light Enforcement Touch by California Appellate Court Reviewing Management Services Agreement Legal Issues
MSO Compliance Worries Clients desiring to create MSOs or operate them in legally compliant ways often worry about enforcement efforts under the corporate practice of medicine and anti-kickback rules, and related legal rules that can create traps for the unwary. The kinds of healthcare business seeking healthcare legal advice and MSO compliance in the past year have included: A high-profile, plastic surgeon in charge of a highly profitable cosmetic and aesthetic medicine The physician decided that he would like to open a new revenue stream, by creating an MSO, alongside his lucrative practice. However, the physician was unsure about how to create value in the MSO, so it could later be sold for a high multiple.Unlike the medical practice, which could only sold to another physician (or MD majority owner in a professional medical corporation), the MSO could be sold to anyone, including a layperson.Unlike the plastic surgery practice, the MSO would attract investors.And, the physician hoped to build value in the MSO and have the branding successes and marketing dollars go to benefit the MSO. More typically, non-physician investors and entrepreneurs seeking to create a branding and marketing success. The venture folks behind the idea have access to capital, and an intelligent way to capture and bring potential patients to the medical practice. Chiropractors or acupuncturists wanting to create a multidisciplinary healthcare care, such as a holistic health care or center for integrative medicine, or simply a collaboration with practicing physicians. RNs, NPs, or PAs seeking to create a medical spa or model of care that integrates esthetic treatments with aesthetic medicine treatments. We’ve written extensively about MSO Legal Issues in many prior posts. See, for example: Kickbacks, Fee-Splitting, Corporate Practice of Medicine, Stark, MSOs: Guiding Healthcare Ventures through the Maze Corporate Practice of Medicine on Steroids: How Your MSO and Professional Medical Corporation Could Work Together Without Courting Legal Disaster Can an MSO control physicians given corporate practice of medicine? Is it fee-splitting for medical doctors to share revenues with non-medical business owners? One of the questions that comes up again and again is a variation of: How likely is it that the MSO will get in legal trouble? Legal Jeopardy: From Fines to Criminal Penalties Make no mistake about it: penalties for violating the anti-kickback laws are serious. Criminal penalties are possible. The Government provides a Roadmap for New Physicians: A Guide to Fraud and Abuse Laws, in which it warns: …[I]t is crucial to understand these laws not only because following them is the right thing to do, but also because violating them could result in criminal penalties, civil fines, exclusion from the Federal health care programs, or loss of your medical license from your State medical board. Among other things, the Roadmap explains the federal anti-kickback statute (AKS) as follows: The AKS is a criminal law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. In some industries, it is acceptable to reward those who refer business to you. However, in the Federal health care programs, paying for referrals is a crime. The statute covers the payers of kickbacks-those who offer or pay remuneration- as well as the recipients of kickbacks-those who solicit or receive remuneration. Each party’s intent is a key element of their liability under the AKS. A few days ago, I was on the phone with a new client that owned a healthcare business. The client was describing a complicated scheme involving physician equity in an MSO, a “point system,” and what essentially sounded like paying the physicians for every patient referral. With every detail the client reported, my legal Spidey-sense tingled. The client reported that many potential investors were excited by this model, and had received assurances from various salespeople for the investment vehicle that they had a found a “workaround” to the anti-kickback statute. The client then asked, “what’s the best way to do this and not get caught.” I was tempted to jokingly say: “Use a leather briefcase with small, unmarked bills.” Instead, I assured them that it wasn’t my job to “get around” laws (and I also advised that they get a legal opinion from the MSO’s lawyer that we could seriously and rigorously evaluate). Much of the time, reviewing fee-splitting and anti-kickback rules requires a rigorous evaluation of the model, to see whether the self-referral and kickback prohibitions are triggered (usually, both federal and state), and if so, whether there are applicable safe harbors and exceptions. Enforcement Varies Having said that the penalties can be serious, it’s also important to note that enforcement priorities vary. Sometimes there can be “technical” violations of the statutes yet enforcement will be light or the arrangement might be regarded as creating a low risk of fraud and abuse. One can find this attitude expressed in many OIG advisory opinions regarding the anti-kickback laws. Very often, investigation, enforcement and penalties arise from a “perfect storm” of negative facts and circumstances. See, for example, our prior post: Corporate practice challenges medical management (MSO) organizations in New York AG action In this state enforcement action, the enforcement triggers included: Extensive Consumer Complaints: There were over 300 consumer complaints to the AG about consumer experiences, including: “quality of care, billing practices, misleading advertising, upselling of medical services and products the consumers felt were unnecessary, and unclear or incomplete terms for the financing of dental care.” Extensive MSO Control: The MSO “did not merely provide arms-length, back-end business and administrative support to independent dental practices,” but rather “developed what amounts to a chain of dental practices technically owned by individual dentists but which, in violation of New York law, were subject to extensive control by” the MSO. Profit-Sharing; A Shared Trade Name: The control “included sharing individual clinic profits with the management company and the marketing by the management company under” a shared trade name. Control over Care via Banking Arrangements: The MSO “exercised undue control over the clinic’s finances by controlling substantially all of the dental practices’ bank accounts through a single consolidated account to which the clinic owners themselves did not have access.” MSO Revenue Based on Percentage Gross Profit: The MSO took a percentage of each dental office’s monthly gross profit — “an arrangement prohibited under New York law.” Over-broad non-compete and non-solicitation: The MSO “also subjected the dental practices to non-competition and non-solicitation agreements that effectively prevent the practices from competing with any other dental practice affiliated with” the MSO, regardless of location. And that brings us to Epic Medical Management v. Paquette, a recent California appellate court decision. An Epic MSO Enforcement Case In Epic, there was a dispute between an MD and a medical management company, Epic Medical Management, LLC, with which the physician had contracted to supply non-medical management services to his practice. According to the Court: The doctor and the management company had a falling out and agreed to terminate their contract. The management company believed it was due additional fees under the agreement; the doctor believed the management company had under-performed its duties under the contract and owed him money. Here are some of the key elements of the Management Services Agreement in dispute in the case: Pursuant to the agreement, the doctor engaged the management company “to provide management services as are reasonably necessary and appropriate for the management of the non-medical aspects of [the doctor’s] medical practice.” Among other things, the management company was required to lease office space to the doctor, lease to him all equipment he deemed reasonably necessary and appropriate, provide support services, provide non-physician personnel, establish and implement a marketing plan, conduct billing and collections, and perform accounting services. The doctor was responsible for providing medical services. The management company was required to provide non-physician personnel, including nursing staff, but the physician was responsible for training and supervising the nurses. Significantly: As to compensation, the contract stated the parties agreed that “it will be impracticable to ascertain and segregate all of the exact costs and expenses that will be incurred by [the management company] in performance of the [m]anagement [s]ervices. However, it is the intent of the parties that the compensation paid to [the management company] provides a reasonable return, considering the investment and risk taken by [the management company] and the value of the [p]remises, [l]eased [e]quipment and other [m]anagement [s]ervices provided by [the management company] hereunder.” The agreement then provided, “For each month that [the management company] provides the [m]anagement [s]ervices . . . , [the doctor] shall pay to [the management company] a management fee equal to one hundred twenty percent (120%) of the aggregate costs [the management company] incurs in providing the [m]anagement [s]ervices . . . in that month but not to exceed fifty percent (50%) of the Collected Professional Revenues plus twenty five percent (25%) of the Collected Surgical Revenues . . . .” A subsequent provision defined “Collected Revenues” to mean the total received by the practice, less any refunds paid and bad-debt write-offs. The contract also included an arbitration clause and a prevailing party attorney’s fee clause. According to the Court’s recitation of the background facts, the management company never charged, and the doctor never paid, a fee based on 120 percent of the management company’s costs. Instead, the management company charged, and the doctor paid, a fee calculated as 50 percent of office medical services, 25 percent of surgical services, and 75 percent of pharmaceutical expenses. In arbitration, the arbitration concluded that the physician, not the management company, had breached the agreement; and also that the physician had to keep paying management fees accrued during the term of the Management Services Agreement. The physician’s argument was that, “because some of the fees were paid for the management company’s marketing services, the payments constituted an illegal kickback scheme for referred patients.” The physician noted that some members of the MSO, who were physicians, referred patients to the physician. The physician’s argument was based not on the federal AKS statute, but rather on the California equivalent, California Business and Professions Code section 650 (section 650). The arbitrator “concluded that any such violation was ‘technical’ and did not impact the award.” Let’s jump to the appellate court decision. Here the physician also argued that the Management Services Agreement essentially violated the prohibition against the corporate practice of medicine, by referring patients to the physician, and by using the 50-25-75 method of calculating fees. The appellate decision focuses a great deal on whether the arbitrator exceeded her powers. However, the relevant portion for us is the Court’s review of the Management Services Agreement under California Business & Professions Code 650 and California’s prohibition against the corporate practice of medicine. The appellate Court stated: Referral patients were a small percentage of the patients seen while the doctor and management company were operating pursuant to the agreement. The agreement was not a referral agreement, but one for management services, of which referrals played only an incidental part. This seems to suggest that the Court finds any violation of anti-kickback rules as “incidental” and even (according to the arbitrator) “technical.” It’s difficult to completely parse this part of the opinion, as the Court focuses so much on procedural issues such as the standard of review that applies to the arbitrator’s opinion. However, one read is that the Court takes a very light enforcement stance with respect to violations that have often been considered very weighty, under relevant California law and applicable California Attorney General opinions. The Court also looks to Business & Professions Code, Section 650(b), which allows arrangements otherwise prohibited by 650(a), if at fair market value, commercially reasonable, and not influenced by the volume or value of referrals. Here the Court’s view is important: it says that 650(b) allowed the arrangement, which included “payment to a management company for management services based on a percentage of revenue – as long as the consideration is commensurate with the value of the services furnished (and facilities and equipment leased).” The Court noted: Given this flexibility in section 650, there is no absolute prohibition on consideration being paid a management company – even one which occasionally refers patients. Again, note the Court’s emphasis on “occasional” referrals of patients. The Court takes pains to go through a history of judicial opinions in California, interpreting Business & Professions Code 650. And then the Court restates 650 very narrowly: Thus, the only basis on which the contract between the doctor and the management company could be found illegal is if a finding were made that the consideration was not commensurate with the services rendered and facilities and equipment provided As to the 50-25-75 method, the Court found no violation, so long as the numbers represented a “rough correlation” to what the management company was entitled to collect under the Management Services Agreement. The Court also found no corporate practice of medicine violation, since the Management Services Agreement showed “a strict delineation between the medical elements of the practice which the doctor controls, and the non-medical elements which the doctor has retained the management company to handle.” Does Epic Change the Enforcement Landscape Our reading of Epic suggests several lessons: A “cost-plus” arrangement by which the MSO charges the physician or medical group, is not necessarily suspect, and can be significant, so long as reflective of the fair market value of the MSO services (and/or space leased). The liberal allowance of 650(b) is at least as important as the prohibition in 650(a). The physician here emphasized the familiar, twin evils of prohibited kickbacks and fee-splitting, and corporate practice of medicine. The appellate Court essentially threw sand in the face of those arguments. As a practical matter, physicians who breach their Management Services Agreements, hoping to persuade courts or arbitrators that the agreements contain illegal arrangements, may find the legal argument much more uphill than in the past. Previously, physicians might more successfully argue that an illegal contract violates public policy and is unenforceable; but as noted, the Court resisted the argument as to illegality. The Court seemingly admits that prohibited (aka illegal) referrals were involved here, but calls these “occasional” and “incidental.” The Court limits the specter of corporate practice of medicine violations, to situations in which the management company (MSO) actually has the power to interfere with, and interferes with, clinical decision-making. Reading Epic, the rules haven’t changed, but the courts’ emphasis has shifted, from the prohibition in Business & Professions Code 650(a) to the allowance in Section 650(b). Cases and Attorney General Opinions prior to Epic emphasized the public policy dangers of violations of California Business & Professions Code 650 (i.e., 650(a)). Epic emphasizes the legislative history that led to enactment of 650(b), and even restates 650 so as to say that the “only” basis on which the Management Services Agreement could be void is if the management company (MSO) did not receive fair market value for its services. In that sense, Epic changes the landscape. It is not from the highest court in California, nor is the decision binding on other states – nor does the decision express views of anti-kickback rules based on federal law. Nonetheless, as an expression of a more liberal view of MSOs and their arrangements with physician and medical groups, Epic is a sea change in regulatory policy.
May 15, 2018
Healthcare
FDA Dietary Supplement Labeling Requirements: Comply or Die
FDA labeling is one of the most important regulatory requirements for dietary supplements in that it provides the consumer the necessary information on the product. Indeed, ensuring that all information concerning that particular dietary supplement is in compliance with FDA labeling requirements, may be difficult and often very onerous. As a matter of fact, labeling errors may result in FDA enforcement action which could tarnish your company’s reputation and business. To begin with, it is important to understand the meaning of Dietary Supplements. What are Dietary Supplements? Dietary supplements are “food” as defined in the Federal Food, Drug, and Cosmetic Act (FD&C Act)1. In general, a foreign or domestic facility that manufactures, processes, packs, or holds human food for consumption in the United States has to register with FDA under section 415 of the FD&C Act2 and is subject to the requirements related to preventive controls of the Current Good Manufacturing Practice3, Hazard Analysis Critical Control Point (HACCP is a management system in which food safety is addressed through the analysis and control of biological, chemical, and physical hazards from raw material production, procurement and handling, to manufacturing, distribution and consumption of the finished product)4, and Risk-Based Preventive Controls for Human Food rule.5 In more simple terms, dietary supplements are defined, in part, as products (other than tobacco) intended to supplement the diet that bear or contain one or more of the following dietary ingredients: A vitamin; A mineral; An herb or other botanical; An amino acid; A dietary substance for use by man to supplement the diet by increasing the total dietary intake; or A concentrate, metabolite, constituent, extract, or a combination of any ingredient mentioned above.6 Furthermore, dietary supplements are products intended for ingestion, are not represented for use as a conventional food or as a sole item of a meal or the diet, and are labelled as dietary supplements. Now that we have briefly explained the meaning of a dietary supplement, let’s move on to explore the main labeling requirements to insert on your product. Why is labeling important and what information is needed on the Principal Display Panel (PDP)? Proper labeling is an important aspect of putting the dietary supplement on the market. Moreover, labeling gives the consumer the correct information to make an informed decision of whether or not to purchase that particular dietary supplement. The following are five main labeling statements required to be displayed on the PDP: the statement of identity (name of the dietary supplement);7 the net quantity of contents statement (amount of the dietary supplement);8 the nutrition labeling;9 the ingredient list;10 and the name and place of business of the manufacturer, packer, or distributor.11 The above statements must be placed either on the principal display panel or on the information panel. In order to clarify, the PDP is that part of the package that the consumer is most likely to see, and you’ll find the above information there.12The statement of identity and the net quantity of contents statement must also be placed on the PDP.13 A product cannot include any other information, therefore only the essential information is presented on the PDP and can then be directly communicated to consumers. When creating a PDP label, the type style is as important as the information included so the label is easily readable. What is the Statement of Identity? A statement of identity is used to recognize a common name which describes a single item and this must be placed on the PDP. Within the statement of identity, there are multiple requirements for identifying dietary supplements. These include: use of the term “dietary supplement” or, manufacturers can replace the word “dietary” and use an ingredient name in its place. For example, “calcium supplement” or “vitamin B12 supplement” are common supplements seen on the shelves of stores. The statement of identity must be one of the most important features on the PDP and its bold type size must be more prominent than other features on the front panel of the label, located parallel to the base of the package. What is the Net Quantity of Contents? The net quantity of contents is defined as the amount of supplement in the container or package and can be expressed either in weight, measure, numerical or in both. If a net quantity is being defined in weight, it must be expressed in the metric or the US customary system. The weight is defined as the weight of the supplement itself. The weight of the container isn’t included in this measurement, except in cases where the supplement is designed to deliver results under pressure. The net quantity of contents must be located on the product label as a distinct item on the PDP, parallel with the base of the container. What is the Supplement Facts Panel? The “Supplement Facts” panel, the ingredient list, and the name and place of business of the manufacturer, packer, or distributor must be placed on the information panel.14 The required information on a Supplement Facts label includes: Serving size information Names and quantities of each ingredient Total calories, calories from fat, total fat, saturated fat, cholesterol, sodium, total carbohydrate, dietary fiber, sugars, protein, vitamin A, vitamin C, calcium and iron Dietary ingredients with no daily value must be listed by common name Amount per serving (this can be worded as: amount per capsule, packet, per 2 tablets, etc.) Percent daily value must be declared on all dietary ingredients This information panel is located immediately to the right of the principal display panel as the product is displayed to the consumer. The information panel may be any adjacent panel when the top of a container is the PDP.15 What to put in the ingredient list? Any compound used in the manufacture of a dietary supplement is considered an ingredient. An ingredient statement is needed unless the product ingredients are listed under the supplement facts label. Ingredients are required to be listed in descending order of prominence by weight. Ingredient listings should also include the use of spices, natural and artificial flavors. What other information is required? The street address must be listed if it is not listed in a current city directory or telephone book, the city or town, the state, and zip code. The address of the principal place of business in lieu of the actual address must be listed accordingly. What is the required format on a Dietary Supplement Label? It is a requirement to use a print or type size that is prominent, conspicuous and easy to read. The letters must be at least one-sixteenth (1/16) inch in height based on the lower case letter “o,” and not be more than three times as high as they are wide. The lettering must contrast sufficiently (it does not need to be black and white) with the background so as to be easy to read.16 Unless excepted by law, the Tariff Act requires that every article of foreign origin (or its container) imported into the United States conspicuously indicate the English name of the country of origin of the article.17 Do I need to put Warning Statements as well? Dietary supplements must also include a warning statement on their packaging. This statement must be placed prominently on the information panel located on the product’s immediate container. By way of example: “WARNING: accidental overdose of iron-containing products is a leading cause of fatal poisoning in children under 6. Keep this product out of reach of children. In case of accidental overdose, call a doctor or poison control center immediately.” FDA labeling requirements may be difficult to decipher however if you keep these five (5) labeling statements in mind, it could help you avoid the numerous FDA hurdles. 1) the statement of identity (name of the dietary supplement), 2) the net quantity of contents statement (amount of the dietary supplement), 3) the nutrition labeling, 4) the ingredient list, and 5) the name and place of business of the manufacturer, packer, or distributor. Always ask yourself: Does this dietary supplement contain enough information for me to purchase it? Be sure to contact an experienced FDA lawyer who understands the ins and outs of dietary supplement labeling. FDA can take a variety of enforcement measures, not limited to warning letters. It’s a jungle out there—or as some say, comply or die. Well, on the bright side, beef up your compliance and mitigate enforcement risk. 1 Source accessed 06/09/2017. 2 Ibid no. 8. 3Sourrce 4 Source accessed 06/09/2017 5Source accessed 06/09/2017 6 21 U.S.C. 321 7 21 CFR 101.3(a), 8 21 CFR 101.105(a), 9 21 CFR 101.36 10 CFR 101.4(a)(1) 11 21 CFR 101.5 12 21 CFR 101.2(b) and (d), 21 CFR 101.9(j)(13) and (j)(17), 21 CFR 101.36(g), (i)(2) and (i)(5) 13 21 CFR 101.1, 21 CFR 101.3(a) and 21 CFR 101.105(a) 14 21 CFR 101.2(b) and (d), 101.36(i)(2)(iii) and (i)(5), 101.5, 101.9(j)(13)(i)(A) and (j)(17). If such information does not appear on the principal display panel, except that if space is insufficient, you may use the special provisions on the “Supplement Facts” panel in 21 CFR 101.36(i)(2)(iii) and (i)(5). See questions 46 and 56 in Chapter IV for more details. 15 21 CFR 101.5 16 21 CFR 101.2(c) and (f), 21 CFR 101.15, and 21 CFR 101.105(h) 17 Section 304, Tariff Act of 1930, as amended (19 U.S.C. 304)
May 1, 2018
Healthcare
Is Health Coaching Legal aka Can You Function as a “Health Coach” and Avoid Medical Licensing or Board Discipline?
Physicians, chiropractors, and other healthcare licensees often want to function as “health coaches” and avoid thorny laws. Can they? Thou Shalt and Thou Shalt Not If you think about how the law is structure, statutes often come in two basic varieties: Thou Shalt (something the law obligates you to do) Thou Shalt Not (something the law forbids you from doing) There is also: Thou Mayest (something you’re allowed to do) In law school, my Criminal Law professor used to analogize to the Garden of Eden: thou mayest eat any fruit from the garden—provided, however (as we typically say in legal contracts) that thou shalt not (or “TSN” as he would say) eat from the Tree of Life. And violating the TSN carried a harsh penalty—in this case, not simply an FDA or heavenly warning letter; but actual enforcement (in this case, expulsion). The forbidden fruit was, simply put, taken off the market. Much of what you will find in healthcare and FDA law is in the form of Thou Shalt Not. For example, Thou Shalt Not: Engage in unlicensed practice of medicine Engage in unlicensed practice of psychology Commit violations in terms of false advertising, or advertise in any manner that is false or deceptive or misleading in any respect Make disease claims for cosmetics or dietary supplements Prescribe controlled substances to a patient who lives in a state where you are not licensed as a an MD Overreach as an MSO (management services organization or MSO) and engage in the corporate practice of medicine (CPM or CPOM) Get paid or pay for referrals of the healthcare business, either where healthcare services are reimbursable by Medicare, or otherwise (under state law) On the other hand, Thou Shalt: Have a healthcare license before practicing “medicine,” “psychology,” or other such professions, and read the statutes, regulations and cases so you don’t intrude on boundaries of practice. Practice in an evidence-based way so that you are mindful of the standard of care. Provide sufficient informed consent to the patient. And Thou Mayest: In some States (such as California, Minnesota, and Rhode Island), explicitly provide healthcare services under a legal safe harbor (in CA, known as “SB577), so long as you do not practice “medicine” or another licensed profession, and make certain disclosures. Market dietary supplements—so long as you only make structure/function claims, and your claims are substantiated by competent and reliable scientific evidence. Market cosmetics—so long as, you make only cosmetics claims, and your claims are substantiated by competent and reliable scientific evidence. Get paid a commercially reasonable management fee, at fair market value, for management and marketing services to a medical practice. Provide telehealth or telemedicine services, so long as certain legal rules are respected—for example, typically you must have a license in the remote state as well as the home state; and must abide by standard of care, informed consent, privacy and security, and other legal requirements. And probably thou shouldest hire a healthcare lawyer (hint hint) who can give you superb and unparalleled legal advice on these nuances of healthcare and FDA law. Now, let’s drill down into health coaching. Is Health Coaching Legal or Illegal Healthcare practices and businesses typically formulate their questions to our healthcare lawyers in a couple of yes/no, black and white ways that do not advance their cause. For example, is (health coaching, or substitute any given practice), legal or illegal? The answer, as Rodney Dangerfield said to a 27-part question in Back to School, is “42.” As healthcare lawyers, we would never advocate or encourage clients to do any illegal activity, obviously. Let’s be clear. Some activities are clearly illegal. Robbing a bank. The statutory definition of “robbery” is clear and there is no ambiguity here. There’s nothing gray about it—we’ve all seen the movies. Is running a stop sign, illegal? Yes. Have you done it? Probably. Would we tell you that it is “ok,” because enforcement is light? No. Read this blog’s lips: do not run a stop sign. Even if no one is looking. The other day, one healthcare client proposed a healthcare compensation arrangement that was very clearly a violation of Stark and anti-kickback law. We counseled the client again and again that what they were proposing would likely bring enforcement crashing down, and there were no “creative solutions” to this particular proposal. The client kept insisting and said: “we understand you are lawyers who have creative solutions and know how to get around the law.” That was a misperception, not a compliment. To the quote the not-so-great Richard M. Nixon, “let me make one thing perfectly clear.” We do not get around the legal rules. We do not specialize in workarounds. This isn’t football, where you shake off the tackle and run into the million-dollar end zone. We can think through creative business solutions, and we can advise clients on enforcement risk. For example, if you read OIG (Office of the Inspector General) advisory opinions on federal anti-kickback law, some situations are so-called “technical” violations of anti-kickback law; however, the OIG deems the risk of fraud and abuse low, and finds that there are some safeguards in the proposed compensation arrangement; and as such, OIG advises that it likely will not proceed with enforcement. This all has to be read carefully, as these kinds of situations can be very fact-specific. We can advise on risks of enforcement and safeguard in the same way that OIG can opine on these. So, back to healthcare coaching. Is it a Thou Shalt, Thou Shalt Not, or Thou Mayest? If not legal or illegal, what kind of legal advice can one give? The Big Yellow Most healthcare ventures carry some risk of regulatory enforcement. The rules are tough, and the market is innovative. It’s that simple. In the warp and woof and actual practice and legal advice, there is typically an algorithm that involves something like: The extent to which the proposed arrangement will likely trigger enforcement scrutiny because the rules are strict; The extent to which the proposed arrangement will likely trigger enforcement scrutiny because the business model is innovative, and legal rules are slower to adapt (as happens so often, for example, in telemedicine; mobile apps; and other technological developments, where the law is catching up in spurts); The extent to which the practice or business owners are willing to take measured and informed risks; The extent to which good and creative legal advice can build in safeguards to mitigate enforcement risk. Every situation is different. Put all these together, and the risk of enforcement can vary. There are very few, if any, statutes (as mentioned) that say: “Thou mayest coach clients on their health.” Why? Go back to medical licensing laws, and you’ll see that most of these go back to the 1880’s. The idea was that there was a way to practice “medicine;” that involved “diagnosis” and “treatment” (which was basically defined as anything that would help people with a disease, ailment, illness, or condition), and that required a license. It took decades and decades for other practitioners, such as chiropractors, to gain licensure; and there is a legal patchwork among states for practitioners such as acupuncturists and naturopathic physicians. Nurses, of course, are largely dependent on physician supervision or at least collaboration in many states; and physician assistants and medical assistants must have physician supervision as defined under state law. Medical licensing laws are TSN statutes. There is an absolute prohibition. Corporate practice of medicine extends the prohibition to corporations and business entities. The idea of health coaching is to find a wedge in the law, so to speak, where one can practice without running afoul of these TSN prohibitions. It’s a carve-out from the prohibition, as opposed to an activity that is explicitly allowed by law. See for example: Health Coaching and Telemedicine Are you wanting to move your medical practice or other clinical healthcare practice into more of an coaching service? Worried about telemedicine laws and unlicensed practice rules? Wanting to […] Physician health coaching raises telemedicine issues Physician health coaching raises telemedicine issues, as it’s challenging (but not impossible) for medical doctors (like any professional) to remove the professional hat. Below. Health Coaching Online Ventures Some of our healthcare clients are individuals who want to launch a health coaching practice—for example, it could be a person who does not have a healthcare license but wants to do Reiki, nutritional counseling, or something else; or a physician who wants to function as a health coach in a state where the physician is not licensed (or online). Others are business that want to operate a health coaching arm One of our business clients was relying on a physician who had his medical license suspended, and wanted to operate as a “health coach” in the interim. Sometimes we may advise that the MD, chiropractor, or other healthcare licensee have a prominent asterisk disclaiming their license and role and clarifying—so that the marketing is clear—that they are functioning in a non-licensed, healthcare coaching role. Sometimes we will advise that the physician, chiropractor or other healthcare licensee (or non-licensed individual) who wants to function as health coach, in fact stay away from activities that could put them back in the licensed realm, such as: Reviewing and interpreting lab tests Reviewing and interpreting genetic data Making treatment plans based on lab tests, genetic data, medical questionnaires, health history, or other information Ironically, individuals can get their own lab tests, genetic data, and other information, and make their own treatment decisions based on all of this material; but when this is given by the “health coach,” then can be risk of charges of: Unlicensed practice of medicine Unlicensed practice of psychology Unlicensed practice of nutrition or dietetics Unlicensed practice of genetics counseling Unlicensed practice of other professions Licensure is a big deal, and the State takes it seriously. It’s important to read the statutes, regulations, cases, and the Boards’ policy statements to understand the legal boundaries. Only then can someone craft a “health coaching” practice or business that doesn’t waive the red flag at enforcement authorities. “Health coaching” is a term lots of practitioners want to use. But remember that there are few, if any, laws that expressly allow someone to set themselves up as a “health coach.” Licensing laws control, and enforcement priorities shift from state to state.
March 22, 2018
Healthcare
Does Healthcare Law Favor or Smash Integrated Healthcare Practices Between Medical Doctors and Chiropractors?
Many aspects of healthcare are now becoming integrated. Medical practices that used to specialize are now trying to broaden their services by contracting with other medical providers who provide related services. So are chiropractors. Medical practices can be integrated by combining medical specialties such as orthopedic care with psychological care or pain management care with rheumatology care. Practices can also integrate by combining medical specialties with complementary or alternative care. For example, combining pain management with acupuncture care. The medical practice / chiropractic care combination is a particularly good model for examining which laws regulate how this combination can and cannot work. Many chiropractors use pain management doctors because chiropractors can’t give steroid injections while pain management doctors can. Many pain management doctors work with chiropractors because patients often see a chiropractor first. The chiropractors thus become a good source of referrals for the pain management doctors. Integrated arrangements may split the administrative duties or may allow one practice to assume the administrative duties for both practices – for the patients who use both medical services. Before starting any practice with a chiropractor; a pain management doctor orthopedist, or any other doctor, or buying any practice, you should review the legal dangers with an experienced medical business regulation attorney. Violations of the applicable federal and state laws can result in substantial fines, criminal charges, civil damages, and loss or suspension of a medical license. Improper combined practices can result in disciplinary actions from state medical boards and licensing authorities. For example, medical doctors have a broader authority to conduct a diagnosis than does a chiropractor. LEGAL RISKS ARISE IN INTERDISCIPLINARY MD-DC PRACTICE, CHALLENGING INTEGRATIVE MEDICINE MODEL When medical doctors collaborate with other licensed healthcare providers (such as chiropractors) in a multidisciplinary, clinical care or integrative medicine setting, legal risks can arise that […] Federal legal restriction Integrated chiropractic offices must follow the Stark Law, the Anti-Kickback Statute (AKS), the False Claims Act, the Health Insurance Portability and Accountability Act (HIPAA) and other relevant federal laws. Some laws only apply if Medicare or Medicaid are involved. Others apply to a broad range of government services. States also have their own laws and regulations that need to be reviewed with experienced medical regulation attorneys in the respective states. The key concern in the review of every financial or medical transaction between a medical clinic and a chiropractor is NOT what is in the best interest of the medical practice or the chiropractor. They key concern is what is in the best interest of the patient. Anti-Kickback Statute The federal Anti-Kickback Statute (AKS) is a federal criminal law that forbids exchanging or offering to exchange anything of monetary value to obtain getting referrals of any federal government health care business. Conviction of even one charge ca result in five years in jail and $25,000 in fines and exclusion from the right to participate in any federal healthcare program (not just Medicare or Medicaid which is all the Stark statutes cover). Civil damages may also be assessed including treble damages for each violation. ANTI-KICKBACK, FEE-SPLITTING & STARK Fraud and abuse issues permeate healthcare regulatory concerns. Our health care law attorneys regularly counsel clients on compliance with Federal and State anti-kickback statutes. Our lawyers […] The Safe Harbor Regulations. Safe Harbor is a way that some transactions can be protected. This means that the U.S. Department of Health and Human Services (US DHHS) and the Office of Inspector General (OIG) won’t enforce the Anti-Kickback Statute if medical providers and chiropractors engage in activity these federal agencies have said is OK to do. Medical practices, chiropractors, and medical practice/chiropractor combinations can seek an advisory opinion about whether their operation/transactions qualify for safe harbor protection. For example, one transaction that can possibly qualify for safe harbor is the agreement by the doctor to refer a case to the chiropractor in return for an agreement by the chiropractor to refer the patient back to the original doctor. Provided that fees aren’t split and there’s no other financial arrangement, this type of transaction could be legal. There are many other transactions that can qualify for the safe harbor which change periodically. The safe harbor regulations, by year, are posted on the OIG website. An experienced chiropractor medical practice lawyer can explain when you should seek an advisory opinion and what the exact request should include. The Stark Law Stark Law, named after it’s enactor, California Congressman Peter Stark, is the federal law(s) that prohibit a referral of patient who is on Medicare or Medicaid by a doctor to an entity that provides designated health services (DHS) – if the doctor has a financial interest in the DHS. This type of arrangement (also known as self-referral) creates a conflict of interest. Doctors with a stake in another health service will be likely to refer their patient to that health service even though other health providers may offer better care. On the surface, an arrangement by a physician to refer patients to a chiropractor likely violate the Stark Law if the physician has a financial interest in the chiropractor’s practice – or vice versa. Group Practice Exception. As with the Anti-Kickback statute, there are many exceptions that can apply. For example, a chiropractor could lease office space to a pain management doctor if the lease agreement is in writing and is commercially reasonable – or if the chiropractor is an employee of the doctor. The most common exception is called the “Group Practice” exception. This exception applies if there are: More than one doctor. Multiple doctors (such as a chiropractor and an orthopedist) who have formed a professional corporation, foundation, nonprofit corporation, partnership, or similar legal entity A shared enterprise. The doctors who are members of the group share their offices and equipment and provide their normal range of medical services to the DHS A unified practice. The doctors share decisions about the billing, budgets, and finances and makes decisions for the chiropractor/medical clinic integrated combination – as a whole. Chiropractic and medical services should be provided under a group billing number and a single taxpayer ID number. Other conditions your lawyer who understand medical laws and restrictions can explain. The group practice rules generally don’t apply to independent contractors. The chiropractor and other doctor(s) might even share profits if there are five or more doctors; the combined practice is formed logically by seniority, specialty, or location; and the profits are divided equally and compose just a fraction of their overall income. Productivity arrangements may also be legal. Consult an experienced medical clinic/chiropractic lawyer to see how to qualify for the group practice exception. Note, however, that the arrangement also must meet state-law requirements such as, for example, prohibitions against corporate practice of medicine; and also, for example, in California – the Moscone-Knox Professional Corporation Act and the way it specifies how clinicians from different disciplines (i.e., MD, DC) can be co-shareholders in a professional corporation. ANTI-KICKBACK, FEE-SPLITTING & STARK Fraud and abuse issues permeate healthcare regulatory concerns. Our health care law attorneys regularly counsel clients on compliance with Federal and State anti-kickback statutes. Our lawyers […] The False Claims Act This law prohibits doctors from presenting false claims to the government for payment of medical bills. False claims include overbilling and billing for services that were never performed. The chiropractor/medical clinic combination can create the risk of false claims since the health providers often bill at different rates and provide different services. Additional legal concerns for the medical practice/chiropractic care relationship Some of the underlying issues that must also be resolved in chiropractic/medical provider relationships are: Responsibility. Determining which doctor is ultimately responsible for the patient’s care and treatment Outside referrals. Reviewing when referrals to outside specialists must be made Diagnostic tests. Analyzing what tests are required Control. Deciding who has the authority to hire and fire staff Who can perform treatment. Determining which tasks can be done by nurse practitioners Doctors who work with chiropractors may be allowed to be compensated for giving consultations provided the compensation is fair and reasonable and is not based on referrals or the number of patients treated. The providers also need to make sure they comply with HIPAA which governs the privacy of electronic medical records. CAN YOU MAKE HIPAA PRIVACY & SECURITY EASY FOR A SMALL DOCTOR’S OFFICE OR OTHER PRACTICE? Making HIPAA compliance easy is like trying to catch a firefly in your hand. How the practice is legally structured? Most states try to balance the priority that medical businesses should provide services to the community (the common good) versus making a profit. There are restrictions on when medical practices can incorporate and whether they can provide professional medical services. Corporations that provide medical services must be professional medical corporations. States laws need to be reviewed to determine if a chiropractic corporation can hire a medical doctor. The reverse, a professional medical corporation hiring a chiropractor, is more likely to be approved. There are many different types of corporations. Medical practices need to know which types of corporations they can form and which ones they can’t. For example, California does not allow LLCs (Limited Liability Corporations) for professional services that require a license, certification, or registration. Business formation alternatives to a corporation include a partnership arrangement which requires a written document, a nonprofit, a foundation, and a sole-proprietorship. BUSINESS FORMATION (PARTNERSHIP, CORPORATION, LLC) Choice of Entity: Corporation vs. Partnership vs. LLC We advise entrepreneurs and start-up businesses on the best legal structure to form their enterprise. We will advise on the choice of […] Practical solutions to creating a chiropractic/medical clinic integrated practice Some of the ways chiropractors and doctors can work together without violating federal or state law may include (depending on review by respected medical business lawyers) are: Leasing. If a chiropractor leases space to a pain management doctor or a medical practice for commercially reasonable rates Hiring. If the medical practice employs the chiropractor Administrative work. If the chiropractor does administrative work for the medical clinic or marketing services for a flat rate marketing amount Using the management services organization (MSO) model. Here, the chiropractor acts a manger for the professional medical corporation. The chiropractor earns a fair market fee. The management agreement is written down in an MSO agreement. Chiropractors and Physicians Should Review Their Working Relationship with an Experienced Integrative Medical Practice Lawyer Doctors and chiropractors should review their contracts, referral arrangements, and business arrangements before they start working together. There are many laws, regulations, and policies that need to be reviewed to avoid criminal, civil, and disciplinary penalties.
March 15, 2018
Healthcare
Exceptions to the Stark Law Prohibition of Medical Referrals
The Stark Law governs what types of referrals doctors can make if they bill for Medicare and Medicaid. The presumption is that that referrals made by a doctor to a designated health service are not legal if the doctor has a financial interest in a designated health service. The presumption also applies to immediate family members of the referring doctor. A designated health service is generally a health facility that provides clinical tests, therapy, medical equipment, hospital services, or home-health services. Medical practices who improperly refer work can be denied payment, face substantial civil penalties for violating Stark, and lose their right to bill Medicare/Medicaid. Fortunately, Stark Law does allow referrals – if it can be shown the financial interest meets an approved exception. Some Stark Law approved exceptions are related to just compensation. Other exceptions are related to just ownership and investment. Many exceptions are related to all three – compensation, ownerships, and investment. QUICK SUMMARY OF FEDERAL “STARK” SELF-REFERRAL & ANTI-KICKBACK LAW AND CALIFORNIA SELF-REFERRAL AND FEE-SPLITTING PROHIBITIONS Here is a quick summary of federal self-referral (“Stark law”) and anti-kickback law, and California self-referral and anti-kickback / fee-splitting rules. The best course of action for any medical practice is to consult with an experienced Stark Law medical practice lawyer. The attorney will review your business structure, the way you make referrals, and how your medical operations work. The attorney can then advise you whether you risk being charged with noncompliance with Stark. The lawyer can suggest various ways you can lessen the risk of noncompliance by showing your practice qualifies for an approved exception. If you have been charged with a Stark violation, a respected Stark lawyer can help you argue any meritorious defenses. Showing your practice is on the exception list is one such meritorious defense. General exception requirements All exceptions, whatever the type of financial interest: Must comply with the regulations of the Centers for Medicare & Medicaid Services (CMS) and the Stark Must comply with the Anti-Kickback statute and any other relevant state and federal laws. Generally, apply only if the amount and volume of the referrals are not excessive. Some exceptions require that the doctor be a member of a “group practice.” A group practice is a complicated term that has many requirements. In short, it requires that at least five doctors work together for the common good of the practice. Your Stark Law medical practice exception lawyer can explain whether your practice is a group practice. ANTI-KICKBACK, FEE-SPLITTING & STARK Fraud and abuse issues permeate healthcare regulatory concerns. Our health care law attorneys regularly counsel clients on compliance with Federal and State anti-kickback statutes. Our lawyers […] Stark Law referral exceptions that are related to compensation, ownership, and investment Some of exceptions that can benefit medical practices are: Physician services. Referrals are permissible if the medical services are: Performed by a doctor who is a member of the group practice Performed by a doctor under the supervision of a doctor who is a member of the group practice In-Office Ancillary Services. Referrals are generally acceptable if the following conditions apply: Who performs the services. The services are achieved by: The referring physician or A doctor who is a member of the same practice group as the referring doctor or Someone who is supervised by the referring doctor or someone in the referring doctor’s practice group Where the services are performed. The services are done: In the same location the treating doctor: Normally performs his/her practice or The patient who is getting the service usually gets medical help from the referring doctor or someone in the group. Clinical laboratory services. In a building that the referring doctor’s practice group exclusively uses for all or some of the group’s clinical laboratory services. Non-clinical laboratory services. In a building the group practice of the referring doctor uses for some or all its services – other than the clinical laboratory services How the services are billed. The billing to Medicare/Medicaid used an approved billing number Services Furnished by an Organization to Enrollees. Doctors can make referrals to organizations that provide prepaid health services to enrollees. Prepaid health plans include: Approved HMOs, Approved CMPs (Competitive Medical Plans), Plans approved by the Centers for Medicare & Medicaid Services Other plans identified in the Stark Law statute This section applies to organizations and entities that contract with the organization. Academic Medical Centers. A doctor who has a financial relationship with an academic medical center can make referrals to that center if: The doctor is “bona fide” employee of the medical center Has a valid state license in the state where the medical center is located Is a member of the facility’s faculty Provides clinical teaching services at the center and is paid for providing those services The academic medical center meets the Stark Law criteria for approval All conditions must be met for the exception to apply. Implants furnished by an ASC. An ASC is an Ambulatory Surgery Center. Acceptable implants include: Cochlear implants (for hearing) Intraocular implants (for eyes) Prosthetic devices that are implanted Other approved implants The implant procedure must be done at the ASC by the referring doctor or a physician who belongs to the referring doctor’s medical group. Eyeglasses and Contact Lenses after the patient has cataract surgery. This exception does require that Medicare approved the eyeglasses or contact lenses. EPO (Erythropoietin) and other prescription drugs for dialysis patients who need outpatient treatment. Referrals must be for specified drugs (preapproved) that are given in an end-stage renal disease (ERSD) facility. Preventive services. Vaccines, immunizations, and screening tests are generally allowable Stark exceptions provided they aren’t given too often. The tests must be covered by Medicare. Intra-family rural referrals. Additionally, some referrals in rural areas are allowed if the services are for an immediate family member. To quality, there can’t be any nearby facilities or people that can provide the same service. Stark Law compensation exceptions that are related to just compensation arrangements Our Stark law attorneys acceptable forms of compensation may include: Rental of office space. Doctors can lease office space to lessees if the lease is in writing, the term is at least one year, the lease is commercially reasonable, and other conditions are met. Equipment rental. Like office rentals, equipment leases are acceptable forms of compensation if the lease is commercially reasonable, is in writing, lasts for a year or more, and other Stark Law conditions are met. Bona fide employee relationship. An employer can pay a physician or family member: If the doctor/family member has a true bona fide employment relationship with that employer, The compensation is fair It’s clear what services are required to earn the pay. For example, serving as a department chair or performing specific administrative duties. Other factors are met Some productivity bonuses may also be acceptable. Personal service arrangement. A doctor can also receive compensation if he/she is an independent contractor, instead of an employee. The conditions that must be met are similar to those for the bona fide employee relationship exception. Doctor incentive plan. Incentive plans are generally acceptable provided they don’t limit necessary medical services to those who are eligible. Physician recruitment. Hospitals need to spend money to attract the top medical talent. Compensation that the hospital pays a doctor to persuade the doctor to work for the hospital is an acceptable if certain conditions are met including: The agreement is in writing The agreement does not require that the doctor refer patients to the hospital The amount of the inducement is not related to the value or volume of any referrals The doctor can obtain staff privileges at other hospitals Charitable contributions. Charitable donations by a doctor or immediate member of the doctor’s family may be acceptable if the charity is an approved IRS tax-exempt charity. As with other exceptions, the donation can’t be based on the value or volume of referrals. It also can’t violate the Anti-Kickback statutes. Nonmonetary compensation. Referrals from a doctor to a designated health service are allowable if the compensation isn’t monetary – cash, check, money, etc. The compensation should be services or items that have small value – $300 or less. It can’t be solicited by the doctor or his/her staff. For example, it may be Ok for the doctor or staff to receive birthday presents or holiday presents. Fair Market Value Compensation. Some referrals are OK if several compensation basics are met: There is an agreement in writing that defines when and how compensation will be paid The amount of compensation to be paid is clear There is a timetable for services The transaction is commercially reasonable The services are legal This exception is a broad catch-all exception. It is often used when the other exceptions don’t apply Medical staff incidental benefits. Hospitals can provide non-cash benefits to their medical staff provided: The benefit is provided at the hospital For all members of the medical staff The benefit is comparable to benefits given at other hospitals The value of the benefit is less than $25 Other conditions are met An experienced Stark Law exception attorney can explain what your medical practice needs to do to comply with these exceptions. Other compensation exceptions There are many other exceptions set forth in the Stark Law statutes. These exceptions cover the following compensation areas: Risk-sharing arrangements Compliance training Indirect compensation arrangements Obstetrical malpractice insurance subsidies Professional courtesy Retention payments in underserved areas Community-wide health information systems Electronic prescribing items and services Electronic health records items and services Assistance to compensate a non-physician practitioner Timeshare arrangements Certain individual and group practice arrangements with hospitals may also be acceptable. Stark Law exceptions related to just ownership or investment interests The following ownership interests or investment interests may also be acceptable: An interest in publicly traded securities that are traded on standard exchanges such as the New York Stock Exchange and were publicly available An interest in mutual funds covered by the IRS rules if certain time and financial conditions are met An interest in certain providers such as rural providers, hospitals located in Puerto Rico, and hospitals that meet specific criteria. DO ONLINE COUPONS FOR DISCOUNTS TO PHYSICIAN AND OTHER CLINICIAN SERVICES VIOLATES STARK, ANTI-KICKBACK AND FEE-SPLITTING LAWS? Many online ventures want to know whether Stark, anti-kickback, and fee-splitting laws are violated by business arrangements that offer online coupons or Web-based coupons to customers. Make an appointment with a trusted California Stark Law exception attorney today There are many Stark Law exceptions that can benefit your medical practice. Learn what those exceptions are and how to implement them.
January 15, 2018
Healthcare
MedSpa: Physician Supervision of RNs—Do You Need It?
There can be a lot of confusion in the industry—and medical spa treatment by RNs under physician supervision is an enforcement hot bottom. How Much Treatment Can RNs Do in a Medical Spa? While every state is different, we’ll start here with California. The most helpful resources are The Medical Board of California (MBC), FAQs – Cosmetic Treatments, and MBC, The Bottom Line: The Business of Medicine—Medical Spas. In Cosmetic Treatments, Question 1 says: “Physicians may use lasers or intense pulse light devices. In addition, physician assistants and registered nurses (not licensed vocational nurses) may perform these treatments under a physician’s supervision. Unlicensed medical assistants, licensed vocational nurses, cosmetologists, electrologists, or estheticians may not legally perform these treatments under any circumstance, nor may registered nurses or physician assistants perform them independently, without supervision.” Question 2 says: “Physicians may inject Botox, or they may direct registered nurses, licensed vocational nurses, or physician assistants to perform the injection under their supervision. No unlicensed persons, such as medical assistants, may inject Botox.” As to fillers, MBC states in Bottom Line that “the use of prescriptive medical devices and injections for cosmetic reasons is the practice of medicine…. There is a tendency for the public, and some in the profession, to view laser treatments, Botox and cosmetic filler injections as cosmetic rather than medical treatments. The use of prescriptive drugs and devices, however, is the practice of medicine, and the same laws and regulations apply to these types of treatments as those driven by medical necessity. There are no separate laws governing these procedures, and physicians will be held to the same standard as they are for their routine medical practices.” Question 6 of Cosmetic Treatments addresses microdermabrasion—if “it’s a medical treatment that penetrates to deeper levels of the epidermis,” then it “must be performed by a physician, or by a registered nurse or physician assistant under supervision.” Physician Supervision and Standardized Procedures for Nurses With respect to supervision, in Bottom Line MBC states: “While current law allows the delegation of laser treatments and injections to the above mentioned licensees, the law requires supervision by the physician. In the current environment, many have operated under the opinion that since the nursing regulations are broadly written, nurses may perform anything anywhere with essentially no supervision as long as there are “standardized procedures” or “delegation of services” documents on file. MBC also states: “Standardized procedures for nurses allow nurses to perform procedures while the physician is not on-site; however, they do not absolve physicians of their supervision responsibilities. Nor does the law allow nurses to set up a practice in a salon, hire a physician supervisor, or perform medical procedures independently. The law does not contain a legal definition of supervision, and therefore, absent a legal definition, the plain English definition applies. “Supervision” is defined as the act of supervising, which is to oversee, to direct, to have charge, to inspect, to provide guidance and evaluation.” MBC provides the following example: “As an example, the regulations for “standardized procedures guidelines” require physicians to be responsible for ensuring the experience, training, and education requirements for performance of the delegated function – and this must be documented. The regulations require that a method of initial and continuing evaluation of the nurses’ competence be established.” (emphasis added) Regarding your physical presence as the supervising physician, MBC in Bottom Line states: “When functioning under “standardized procedures,” physicians need not be present in the facility when the procedures are being performed. The facility, however, must be a medical setting. Regulations require that the location be an “organized healthcare system,” which is not a salon, spa, or other facility not under the control of the physician.” (emphasis added) Thus, if you are in a setting other than your own office, you should rent at fair market value and have exclusive control of the medical space during the time you are using it. As well: “The guidelines further require the standardized procedures to describe the circumstances under which the registered nurse is to immediately communicate with a patient’s physician concerning the patient’s condition. While there is no actual mileage limit relating to supervision, this requirement certainly means that the physician must be immediately reachable and able to provide guidance in the event of an emergency or the need for a higher level of care that must be provided by the physician. Physicians must be within a geographical distance that enables them to effectively provide supervision and support when needed or upon request.” 16 CCR 1364.50 states: “Whenever an elective cosmetic procedure involving the use of a laser or intense pulse light device is performed by a licensed health care provider acting within the scope of his or her license, a physician with relevant training and expertise shall be immediately available to the provider. For the purposes of this section, “immediately available” means contactable by electronic or telephonic means without delay, interruptible, and able to furnish appropriate assistance and direction throughout the performance of the procedure and to inform the patient of provisions for post procedure care. Such provisions shall be contained in the licensed health care provider’s standardized procedures or protocols.” (emphasis added) See also Board of Registered Nursing, Standardized Procedure Guidelines. The Good Faith Exam What is a good enough for a good faith exam in a medical spa or similar healthcare venture, and when do you need it? MBC states in Bottom Line: “Further, it is the responsibility of the physician to examine the patient before delegating a task to a registered nurse.” However, a nurse practitioner (NP) “may be delegated the task of providing the appropriate prior examination and ordering the drug or prescriptive device for the patient, if acting under standardized procedures.” MBC clarifies: “An appropriate prior examination is required where prescriptive drugs and devices will be used, and this examination may not be delegated to registered nurses. After performing the examination, the supervising physician may delegate a procedure that utilizes a prescriptive device to a nurse working under standardized procedures.” Videoconference Exam Regarding the “appropriate prior examination,” California law generally holds physicians to the same standard of care whether the patient encounter is in-person or via telehealth (e.g., videoconferencing), and requires informed consent, documentation in the medical record, compliance with privacy and security laws, and other adherence to law. (See Bus. & Prof. Code 2290.5; CMB, Practicing Medicine Through Telehealth Technology). However, CMB indicates that an in-person examinations for prescribing will “not only enhance the opportunity to confirm if a patient needs the identified medication or to rule out other medical conditions, but ensures the patient is advised of alternative treatment options and is aware of potential side effects.” (See CMB, Internet Prescribing – Information for Physicians; FAQs – Internet Prescribing and Practicing; Internet Prescribing—Information for Consumers). Although Business & Professions Code section 2242.1 only speaks to “an appropriate prior examination and medical indication therefor,” CMB has made its policy clear that the exam should be in-person, and “continues to investigate cases” that raise enforcement scrutiny. (Note 2242.1(a) states: “(a) No person or entity may prescribe, dispense, or furnish, or cause to be prescribed, dispensed, or furnished, dangerous drugs or dangerous devices, as defined in Section 4022, on the Internet for delivery to any person in this state, without an appropriate prior examination and medical indication, except as authorized by Section 2242.” 2242(b) has a limited 72-hour supply exception). On its webpage describing telemedicine, the California Medical Board (CMB) appears to default to the standard of care as the test as to whether telemedicine is permissible; however, on its webpage concerning Internet prescribing, CMB states that the law prohibits prescribing, without an “appropriate prior examination,” notwithstanding that standard of care may be satisfied or that it might be considered within the range of acceptable professional practice by peers not to have an in person exam (for example, in some tele-dermatology). On this page, CMB cites California Business & Professions Code, Section 2242. Notably, as of October 11, 2019, the California legislature amended and liberalized Section 2242 via AB 1264, to provide that an appropriate prior examination does not require a synchronous interaction between the patient and the licensee and can be achieved through the use of telehealth, as specified, provided that the licensee complies with the appropriate standard of care. Thus, 2242 now provides: “Prescribing, dispensing, or furnishing dangerous drugs as defined in Section 4022 without an appropriate prior examination and a medical indication, constitutes unprofessional conduct. An appropriate prior examination does not require a synchronous interaction between the patient and the licensee and can be achieved through the use of telehealth, including, but not limited to, a self-screening tool or a questionnaire, provided that the licensee complies with the appropriate standard of care.” Cal. Bus. And Professions Code § 2242. Yet even so, there are also standard of care concerns, as noted in a 2019 disciplinary action by the Medical Board of California entitled, In re Richard J. Holmes, M.D Operating Your Medi-Spa in a Legally Compliant Way Healthcare compliance is complex and there are multiple elements to a good compliance programs. Also, there are different kinds of healthcare ventures that require special attention to structure. For example, there are compliance similarities and differences between and among healthcare ventures such as: Medical spas Telemedicine, telepsychology, teledermatology, telehealth, telepsychiatry Mobile health and fitness apps or software with a health advice component Other online and mobile / virtual healthcare businesses Here are some basics for the brick-and-mortar medical spa, at least in California: Procedures: An aesthetic RN can inject Botox or fillers, or perform laser treatment or medical microdermabrasion under your medical supervision. Standardized Procedures: You should have standardized procedures in place for the RNs. These standardized procedures should comply with all the requirements of California law.We noted above MBC’s example of “ensuring the experience, training, and education requirements for the performance of the delegated function”—and documenting the same, as well as evaluating the RN’s competence on an ongoing basis. Supervision: Be sure the supervision is real and not token. As noted, MBC wants you “to oversee, to direct, to have charge, to inspect, to provide guidance and evaluation.”MBC also wants you, the physician, to be “knowledgeable and competent in the procedure being delegated” and “capable of performing it.” This does not require board certification to perform the cosmetic procedure, but it does require “sufficient knowledge and training in the procedures being performed.”Further, you must be “immediately reachable to provide guidance in the event of an emergency or the need for a higher level of care that must be provided by the physician,” and within a “geographical distance” that allows you to provide appropriate supervision and support upon request. If you are using an elective cosmetic procedure involving the use of a laser or intense pulse light, you must be “immediately available” to the provider—which means “contactable by electronic or telephonic means without delay, interruptible, and able to furnish appropriate assistance and direction throughout the performance of the procedure and to inform the patient of provisions for post procedure care.” Further, you must place such provisions in the licensed health care provider’s standardized procedures or protocols.Your name (or that of your professional medical corporation), not the RN’s, must show in advertisements about the treatments. No “medical director”: You should not be “medical director” for the medi-spa (see Q4 of Cosmetic Treatments) but should operate under your medical practice or professional medical corporation. Control of medical space: As noted above, if you are in a setting other than your own office, you should rent at fair market value and have exclusive control of the medical space during the time you are using it. Appropriate prior examination: An RN may not be delegated the appropriate prior examination. A nurse practitioner (NP) may be delegated the task of providing the appropriate prior examination and ordering the drug or prescriptive device for the patient, if acting under standardized procedures.Videoconference: Regarding the “appropriate prior examination,” California law generally holds physicians to the same standard of care whether the patient encounter is in-person or via telehealth. We recommend that physician see the patient in-person prior to prescribing. Among other things, CMB will want to be sure that there was a valid medical indication for the prescription, and the in-person exam can potentially bolster the record of such. We can discuss the nuances with you if you would like. Some Additional compliance points—record, documentation, standard of care, informed consent: As we discussed, the patients belong to you and are your responsibility as the physician. You are held to the standard of care and have to follow all the usual legal and regulatory requirements such as, for example, a robust informed consent process and documentation (see CMB, Medical Spas—What You Need to Know).
December 8, 2017
Healthcare
Prompt pay, cash discounts, dual fees legal for healthcare providers (physicians, chiropractors, acupuncturists)? (Part 2)
Are prompt pay, cash discounts, dual fees legal? In this Part 2, let’s focus on differential payment schemes. When physicians, chiropractors, acupuncturists, and other healthcare providers provide prompt pay discounts to patients, or cash pay discounts to non-insured patients, are these legal? California’s allowance for prompt pay and cash pay The legal rules differ by state. California law, for example, allows healthcare providers to charge a prompt payment discount. Business & Professions Code, Section 657 provides: (b) To encourage the prompt payment of health or medical care claims, health care providers are hereby expressly authorized to grant discounts in health or medical care claims when payment is made promptly within time limits prescribed by the health care providers or institutions rendering the service or treatment. (c) Notwithstanding any provision in any health care service plan contract or insurance contract to the contrary, health care providers are hereby expressly authorized to grant discounts for health or medical care provided to any patient the health care provider has reasonable cause to believe is not eligible for, or is not entitled to, insurance reimbursement, coverage under the Medi-Cal program, or coverage by a health care service plan for the health or medical care provided. Any discounted fee granted pursuant to this section shall not be deemed to be the health care provider’s usual, customary, or reasonable fee for any other purposes, including, but not limited to, any health care service plan contract or insurance contract. We mentioned in our prior blog post on Prompt Pay, Cash Pay & Dual Fees that it is straight-forward when a statute tells you in plain language what is allowed. Here, Business & Professions Code 657(b) allows healthcare providers and institutions to “grant discounts in health or medical care claims when payment is made promptly within time limits prescribed by” the healthcare provider or institution (hospital, clinic, etc.). So the prompt pay discount is expressly allowed. Business & Professions Code 657(c) allows healthcare providers to “grant discounts for health or medical care provided to any patient the health care provider has reasonable cause to believe is not eligible for, or is not entitled to, insurance reimbursement … or coverage.” So the cash pay discount is allowed for non-insured patients. The statute is even so clear as to say that the discount “shall not be deemed to be the health care provider’s usual, customary, or reasonable fee for any other purposes, including, but not limited to, any health care service plan contract or insurance contract.” So there can be no argument that the discount is somehow insurance fraud. Contrast New York Contrast this with the somewhat intricate discussion of one of New York’s enforcement authorities, below. Really, what they are saying is that New York does not have a clear allowance like California, and therefore the provider who engages in such a practice is at risk. This is a good example of state-by-state variations. The variation also shows how the language of the statute can either be unambiguous in either allowing or prohibiting something, or ambiguous in leaving things up to the enforcement authorities. New York’s more somber approach One physician asked about the legality of charging non-insured patients in New York a lower rate for the same service. bottom line is that the practice seems risky, as expressed by the Office of General Counsel (“OGC”) of the New York Department of Financial Services (“NYDFS”), which regulates insurance in New York. Insurance Fraud Concerns In a 2000 opinion entitled, Chiropractic Group Office, OGC asked: 2) May a chiropractic group charge its uninsured patients a lower rate than it charges its insured patients for the same services? 3) May a chiropractic group charge its patients who pay by cash lower rates than it charges patients who pay by credit card for the same services? OGC concluded: 2) A chiropractic group that charges its uninsured patients lower rates than it charges its insured patients for the same services may be in violation of N.Y. Penal Law § 176.05 (McKinney 1999). 3) A chiropractic group that charges patients who pay by cash lower rates than it charges patients who pay by credit card for the same services may be in violation of N.Y. Penal Law § 176.05 (McKinney 1999). OGC explained: If the insurer is paying the chiropractic group a percentage of the usual and customary fee, then the waiving of co-payment fees on a regular basis and the charging of lower rates to non-insureds, or to patients who pay by cash, may be construed as insurance fraud because these practices may suggest that the chiropractic group’s ususal and customary fee is not being accurately reported to the insurer. When a rate discount is provided, the question arises as to whether the discounted rate is actually the service provider’s usual and customary charge, making the non-discounted rate an inflated rate. Thus, waiving co-payment amounts and charging higher rates to insureds than to non-insureds, or to those who pay by credit card, for the same services may constitute insurance fraud under N.Y. Penal Law § 176.05(2) (McKinney 1999). OGC expressed its views again in 2007 in Fees charged by a chiropractor; insurance fraud? However, OGC’s positive take on the practice, was limited to a situation involving a non-participating provider. OGC stated: Question Presented: If a chiropractor were to charge a lower fee for services to “non-insurance” patients – that is, patients without insurance or whose contractual benefits under an insurance policy have been exhausted – than to patients whose cost of services is covered by insurance, could the chiropractor’s conduct alone constitute insurance fraud? Conclusion: No. If a chiropractor charges a lower fee to non-insurance patients who pay cash, that activity would not constitute insurance fraud, because neither the chiropractor nor the insured would submit any claim for services to an insurer, self-insurer, purported insurer, or any agent thereof. However, if a chiropractor submits a claim to an insurer for an insured patient, or issues a bill to an insured patient for services knowing that the bill will be presented to the insurer, then the chiropractor would be wise to fully disclose to the insurer that it charges non-insurance patients who pay cash a lower fee. Note the sentence we have bolded above. The background facts included: The inquirer proposes to charge a patient without insurance who pays cash a lower fee for services than an insured patient. The scenarios presented assume that the inquirer would be a “non-participating” provider vis-à-vis any insurer involved, and would have no contractual relationship with the insurer. OGC further explained: The inquirer proposes to charge a non-insurance patient who pays cash a lower fee for chiropractic services than he charges an insured patient. With respect to non-insurance patients, neither the chiropractor nor the patient submits any claim for chiropractic services to an insurer, self-insurer, purported insurer, or any agent thereof. Accordingly, in processing such a claim, there is no insurance act involved, fraudulent or otherwise. This part seems, in one sense, tautological—i.e., there is no insurance fraud where no bill is submitted to any insurer. But note the next sentence (which we bold): However, if a chiropractor submits a claim to an insurer for an insured patient, or issues a bill to an insured patient for services knowing that the bill will be presented to the insurer, then the chiropractor runs the risk of being charged with a fraudulent insurance act if the chiropractor were to mislead the insurer by, for example, failing to disclose that he charges non-insurance patients a lower fee for the same services he provides to insured patients. Thus, the prudent chiropractor should fully disclose to the insurer that it charges non-insurance patients who pay cash a lower fee. Note that there are two messages here. First, OGC warns that “the chiropractor runs the risk of being charged with a fraudulent insurance act.” Second, OGC cuts back on this warning, by saying that “the prudent chiropractor should fully disclose to the insurer that it charges non-insurance patients who pay cash a lower fee.” This seems to suggest an allowance, and best practices, but may be ‘cold comfort,’ given the warning of the risk. According to the OCG opinion, New York Education Law also contains various prohibitions, although the Department of Education in this case referred the matter to OCG. Participating provider concerns, kickback issues There are additional legal risks beyond those of insurance fraud as outlined by OGC above. One online article raises another issue: the contractual relationship of the participating practitioner, with the insurer: “the terms of that contract may limit the Practice’s discretion to charge lower fees to different categories of patients.” Another article, Cash Discounts for Patients: Navigating the Legal Minefield, suggests that legal challenges include: “Medicare reimbursement limitations, state anti-kickback laws, the anti-beneficiary inducement provision of the Health Insurance Portability and Accountability Act (“HIPAA”), the Medicare exclusion provision that relates to Medicare and non-Medicare charges, and state insurance anti-discrimination provisions.” Of course, the article includes under “cash discounts,” waivers of out of network penalties. Even so, the article suggests that particularly with a Medicare-covered service, “the effect of this discount typically will be to take the actual charge below the Medicare fee allowable.” The article further cites prohibitions in state anti-kickback laws against inducing patient referrals; anti-discrimination laws; and clauses in participating provider insurance contracts that require a provider to give the lowest price it has offered to anyone else automatically to the private insurance company, regardless of what the insurer would otherwise pay. Some Best Practices If a healthcare provider does make a business judgment to charge non-insureds a lesser charge, the healthcare provider should at the least be sure to disclose this to your insurer(s); that the usual and customary charge is clear; and that any cash discount has a logical basis or can readily be explained in way that creates an argument against potential kickback concerns.
June 14, 2017
Healthcare
Prompt pay, cash discounts, dual fees legal for healthcare providers (physicians, chiropractors, acupuncturists)?
Are prompt pay, cash discounts, dual fees legal? There are lots of questions and many different variations. Let’s explore a few, focusing on the idea of providing differential services to a population of patients. Superbills and Codes Recently a chiropractor called us with the following scenario: The chiropractor is not contracted with any insurance and not “in network” anywhere The chiropractor will provide “corrective care” to a car accident victim and submit a claim to an injured patient’s health insurance provider. The chiropractor wants to provide superbills, yet not get caught giving wrong codes for treatments. The superbill contains a diagnosis and procedure code. Here it would be good to implement some basic ‘best practices.’ For example: Be sure the superbill accurately reflects the healthcare services that were performed, and the usual and customary charges for such services. Have a billing and coding expert verify that all the right procedure codes are in place. Be sure all accounting is accurate with respect to patient funds. That leads to the next arena, which is that the chiropractor wanted differential prices for different services. Dual Fees This is very common – healthcare providers thinking of their services in terms of diagnostic and therapeutic services on one hand, and healthcare services aimed at holistic health on the other. The chiropractor had read that “dual fees” are problematic, but want to charge: One price for “corrective care” A lower price for “wellness care” So often these questions fall in the gray zone. There may be legal rules that apply, but one must search and figure out which ones could come back and bite. For example, in many states, there are statutes prohibiting “discrimination” among categories of patients. This means that a physician or chiropractor cannot stratify patients by “type” of service—only by diagnostic or therapeutic category according to accepted procedure codes. Some Best Practices & the Concierge Medicine Model Some best practices here and for the earlier scenario would be: Use recognized billing codes for each healthcare service. Use Evaluation & Management (E&M) codes to designate level of complexity of the procedure. Use the more complex codes for more complex “corrective” situations. Provide patient with a statement of financial responsibility to sign, by which the patient undertakes to pay for services if no insurance is involved or no insurance kicks in. Have a clear patient agreement which sets out the scope of services. One possibility is that the physician or chiropractor might create a hybrid practice. One portion of the practice will be insurance-based or fee for service; the other will be a concierge, wellness plan that will involve payment for a bundle of services. See our earlier posts such as: · LEGAL REVIEW OF CONCIERGE MEDICINE CONTRACTS IS NEEDED · HOW TO ROCK CONCIERGE MEDICINE LAWS · NEW YORK CONCIERGE MEDICINE LAW ARCHIVES · HOW MEDICARE.GOV HELPS WITH LEGAL REVIEW OF CONCIERGE MEDICINE Potential Legal Red Flags Note several potential legal red flags here with having two different levels of service: Discrimination: Charging different amounts to different patients for the same service would probably raise discrimination and other legal red flags. Malpractice & standard of care: Another question the practitioner should address is whether, when providing “wellness only care,” the standard of care for “corrective” or regular care would apply—i.e., whether it could be considered malpractice if the practitioner failed to make in inquiry or perform care that would have been done in the ‘regular’ practice. Kickback issues: Bundling and giving discounts can create anti-kickback concerns (e.g., “pay for 9 sessions, and the 10th is free!”). See: Concierge medicine – is packaging legal services legal. Auto-renewal laws: Many state statutes require specific disclosures whenever there is a charge that will beautomatically renewed periodically (say, every month). The legal parameters can be straight-forward where there is a clear statute that obviously applies to a simple situation. The analysis is more complex when there are multiple legal rules involved; the practice develops a hybrid model; and the legal terrain consists of risks that must be decoded and interpreted. In this situation, consult an experienced healthcare to navigate the regulatory landscape. Click here to see Part 2 of this Post. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
June 7, 2017
Healthcare
Physician Advertising of Medical Services: Avoiding 5 Legal Traps
When medical doctors advertise their professional medical services (including online advertising) they can easily run afoul of legal and regulatory traps. Watch out for these 7 legal traps in physician advertising, and understand possible ways to navigate important legal restrictions. 1. Physician Advertising must be Truthful & Non-Misleading The key here is that anything a medical doctor posts in print or online that could be considered “advertising” must be “truthful” and “non-misleading.” No deception, period. The First Amendment protects commercial speech. However, states can regulate deceptive advertising. 2. Watch out for advertising that the law specifically considers “deceptive.” While every state has its own laws, in California the relevant statute is Business & Professions Code, Section 651. Section 651 prohibits not only physicians, but any person licensed under Division 2 (for example, also acupuncturists, dentists, nurses, chiropractors, psychologists, social workers, and others) from: false, fraudulent, misleading, or deceptive statement, claim, or image for the purpose of or likely to induce, directly or indirectly, the rendering of professional services or furnishing of products in connection with the professional practice or business for which he or she is licensed. false, fraudulent, misleading or deceptive advertising. Under 651(j), the California Attorney General can commence legal proceedings to enjoin physician advertisements that violate the law. Section 651(b) contains a long list of statements, claims, or images that could be considered false, fraudulent, misleading, or deceptive, such as one that: (1) Contains a misrepresentation of fact. (2) Is likely to mislead or deceive because of a failure to disclose material facts. (3) (A) Is intended or is likely to create false or unjustified expectations of favorable results, including the use of any photograph or other image that does not accurately depict the results of the procedure being advertised or that has been altered in any manner from the image of the actual subject depicted in the photograph or image. (B) Use of any photograph or other image of a model without clearly stating in a prominent location in easily readable type the fact that the photograph or image is of a model… (C) Use of any photograph or other image of an actual patient that depicts or purports to depict the results of any procedure, or presents before and after views of a patient, without specifying in a prominent location in easily readable type size what procedures were performed on that patient is a violation of subdivision (a). Any before and after views (i) shall be comparable in presentation so that the results are not distorted by favorable poses, lighting, or other features of presentation, and (ii) shall contain a statement that the same before and after results may not occur for all patients. (4) Relates to fees, other than a standard consultation fee or a range of fees for specific types of services, without fully and specifically disclosing all variables and other material factors. (5) Contains other representations or implications that in reasonable probability will cause an ordinarily prudent person to misunderstand or be deceived. (6) Makes a claim either of professional superiority or of performing services in a superior manner, unless that claim is relevant to the service being performed and can be substantiated with objective scientific evidence. (7) Makes a scientific claim that cannot be substantiated by reliable, peer reviewed, published scientific studies. (8) Includes any statement, endorsement, or testimonial that is likely to mislead or deceive because of a failure to disclose material facts. Section 651 also contains rules about: advertising prices disclosing compensation given for publicity using letterhead Violation can be a misdemeanor. Section 651 goes on to list the items that can legitimated be advertised, such as the name of the school where physician graduated. The California Code of Regulations (16 CCR 1363) supplements the above prohibitions by stating that physician advertising must not promote excessive or unnecessary medical services. 3. Get a Fictitious Name Permit if practicing under a name different than the physician’s own name. In California, Business & Professions Code Section 2272 states: Any advertising of the practice of medicine in which the licensee fails to use his or her own name or approved fictitious name constitutes unprofessional conduct. See our earlier post, The Strange World of the California Medical Board Fictitious Name Permit. There are some exceptions, such as medical doctors in a group practice where the professional medical corporation has a fictitious name permit. In some states, there might be a simple DBA or other regulatory requirement by the local medical board. 4. Follow the rules for “board certification” claims. States can have different rules. This can have particular implications for physicians practicing integrative medicine, functional medicine, or anti-aging medicine. In California, Business & Professions Code §651(h)(5) limits advertising statements as to board certification or eligibility. Physicians may include statements that they are certified or eligible for certification by a private or public board or parent association (including multidisciplinary boards or associations) only if that board or association is among those listed or with credentials in the statute. There are additional rules in the California Code of Regulations (governing advertising a non-ABMS specialty board certification if approved by the Medical Board of California). The Medical Board of California advises consumers in, Can I find out if my doctor is board certified: Physicians can identify their practice specialty on their Medical Board profile and that information IS available through the Breeze Online License Lookup. You can also obtain this information by contacting the physician’s office directly, reviewing the physician’s and/or medical group’s website, or by contacting the local medical society if the physician is a member. Most physicians have a practice specialty, which is the area of medicine they have received additional training in, but not all physicians have medical specialty certification. Medical specialty certification is a voluntary process granted by a member board of the American Board of Medical Specialties (ABMS), a private organization, or other equivalent board. Board certification is not required by the Medical Board for a physician to practice. Please use the links below to access the ABMS website and other boards recognized by the Medical Board of California and learn more about board certification and whether your doctor is board certified. American Board of Medical Specialties American Board of Facial Plastic and Reconstructive Surgery American Board of Pain Medicine American Board of Sleep Medicine American Board of Spine Surgery On the same page, the medical board addresses advertising about “specialization:” Physicians can identify their practice specialty on their Medical Board profile and that information is available through the Breeze Online License Lookup. You can also obtain this information by either contacting the physician’s office directly, reviewing the physician’s and/or medical group’s website, or by contacting the local medical society if the physician is a member. Most physicians have a practice specialty, which is the area of medicine they have received additional training in, but not all physicians have medical specialty certification. Medical specialty certification is a voluntary process granted by a member board of the American Board of Medical Specialties (ABMS), a private organization, or other equivalent board. Board certification is not required by the Medical Board for a physician to practice. (See question below on board certification). 5. Watch out for violations involving physician “discounts” “Discounts” on medical services are often considered kickbacks and can violate not only federal law but also state law (such as in California, Business & Professions Code Section 650). Section 650(a) states: the offer, delivery, receipt, or acceptance by any person licensed under this division or the Chiropractic Initiative Act of any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for referring patients, clients, or customers to any person, irrespective of any membership, proprietary interest, or coownership in or with any person to whom these patients, clients, or customers are referred is unlawful. States vary on whether discounts can be given for cash payment by the insured patient. In California, Business & Professions Code 657 states: Notwithstanding any provision in any health care service plan contract or insurance contract to the contrary, health care providers are hereby expressly authorized to grant discounts for health or medical care provided to any patient the health care provider has reasonable cause to believe is not eligible for, or is not entitled to, insurance reimbursement, coverage under the Medi-Cal program, or coverage by a health care service plan for the health or medical care provided. Any discounted fee granted pursuant to this section shall not be deemed to be the health care provider’s usual, customary, or reasonable fee for any other purposes, including, but not limited to, any health care service plan contract or insurance contract. Back to Section 651, for a moment: it says that price advertising may not include “statements or advertisements of bait, discount, premiums, gifts, or any statements of a similar nature.” MSO Arrangements Because of these varied rules governing physician advertising, in our management services organization (MSO) agreements, we typically insert a provision that any physician advertising done by the MSO must be in conformity with state law. This is to set the boundaries straight right in the MSO agreement, and also provide protective language to create an arguable defense for the physician with respect to compliance around advertising law.
May 8, 2017
Healthcare
Independent contractor physician – kickback or compensation?
If you’re a successful physician, chiropractor, acupuncturist, or other licensed healthcare provider, and you want to provide overflow patients to another practitioner you hire, is it a kickback if you pay that second practitioner as an independent contractor? Are payments to an independent contractor physician a kickback? Kickback Basics Let’s review some kickback basics, to start. Stark (or self-referral) arises when the physician refers patients to an entity in which the physician has a financial interest (for example, the physician refers patients to a clinical lab that the physician owns). Stark only involves certain “designated health services.” For example, the physician refers the patient to a clinical lab that the physician owns. That does not sound like the situation here, where the physician simply refers to another doc in the physician’s office. Kickbacks can arise in a variety of contexts; a key definition is that if compensation depends on value or volume of referrals, as opposed to for the work itself, then there is a kickback. If there is a self-referral problem, then you must find an exception. On the other hand, if there is a kickback problem, then the arrangement is not necessarily illegal, but we look to a safe harbor and see if there is a fit, and evaluate the arrangement as a whole. Employee and Personal Services Arrangement Safe Harbors The safe harbors that one uses with respect to anti-kickback prohibitions, in this kind of situation of overflow patients, typically involve either: (1) A bona fide employee (i.e., the employer can pay the employee a salary, yet profit from the employee’s services), or (2) if an independent contractor, a personal services arrangement, in which the aggregate compensation is set in advance (as opposed to being a percentage of collections). A kickback issue potentially can arise when the independent contractor physician is paid on a net collections basis, which means that essentially, compensation varies by value or volume of patients. Although potentially, the independent contractor agreement can be drafted so that compensation is based on a percentage of gross collections and it becomes clear that the independent contractor is paying a fee for management and administrative services. For this reason, we typically prefer to use the MSO model. The MSO model is very clean. The MSO (management services organization) provides management and administrative services, and in exchange collects a fee. The physician either wears two hats – clinician and MSO – or, preferably, has a professional medical corporation for the clinical role, and creates a separate corporation or LLC to serve as the MSO. See our prior posts: · CORPORATE PRACTICE OF MEDICINE & ANTI-KICKBACK / FEE-SPLITTING RULES … · IS IT FEE-SPLITTING TO SHARE REVENUES WITH MEDICAL DOCTORS? · FEE-SPLITTING 101 FOR MEDICAL DOCTORS, CHIROPRACTORS, ACUPUNCTURISTS … · CREATING LEGALLY SUCCESSFUL, MULTIDISCIPLINARY HEALTH CARE PRACTICES … The MSO model tries to use to the personal services and management safe harbor. Under California law, the equivalent is the more amorphous, Business & Professions Code Section 650(b). The Independent Contractor Arrangement—Kickback? The independent contractor arrangement is very common, and we’ve reviewed many such agreements. It is somewhat problematic as mentioned above but very pervasive. From an anti-kickback perspective, the key is that the net collections reflect fair market value (FMV) for the services the independent contractor physicians provide, and that the balance (which gets retained by the hiring physician) also represent fair market value for the services that the hiring physician provides back to the independent contractor doctor. For example, these services could involve overhead, staffing, a medical assistant, and space. These are essentially MSO functions, only here they are provided by the hiring physician or his professional medical enterprise. If the independent contractor is being underpaid for his medical services and the hiring physician is being overpaid, then a regulator could argue that the differential against fair market value, represents an illegal inducement or compensation for the hiring physician to refer patients to the independent contractor physician—and is therefore an illegal kickback. Conversely, if the independent contractor is being overpaid for his medical services and the hiring physician is being underpaid, then a regulator could argue that the differential against fair market value, represents an illegal inducement or compensation for the independent contractor refer patients to the hiring physician—and is therefore an illegal kickback. Note that the risks are exacerbated in a multidisciplinary clinical center where, for example, you have an MD and a chiropractor (DC), acupuncturist (LAc), physical therapist (PT), or other provider. Payment based on gross collections is not uncommon in arrangements between a hiring physician and the MD who is hired. If other healthcare providers are involved such as DC, LAc, or PT, this could be seen as an illegal joint venture or a scheme, or, a kickback arrangement in which the MD leverages off other providers by paying for referrals received or paying for referrals being given. This is why, in the multi-disciplinary center, collaborative clinical center, integrative medicine center, or center that includes say an MD and a DC collaborating on pain management, the MSO model is, in our view preferable. Medical Marketing Services Where marketing services for medical practices are involved, we recommend that those services be explicitly called out in the agreement (or in a separate marketing services agreement), and be designated for a flat fee. The reason is that marketing services can generate enforcement scrutiny on kickback grounds. This is different than management services such as rental of space and the all the admin functions that the underlying practice provides. Important Independent Contractor Provisions It is important that both sides have legal review of the independent contract provisions themselves to be sure nothing vital is missing. For example: There should be a provision about the timing for paying the independent contract physician, as well as timing for billing and collection from the patient – and what will happen if the hiring physician neglects to perform these functions. Failure to specify these details in writing can lead to collections disputes, and litigation. Who is responsible for whose negligence? What if the hiring physician makes billing errors? Some thought should be given to indemnification. The agreement should be readable. The more readable the agreement, the less likely to generate litigation in case of a later disagreement. Non-competition language may or may not be enforceable, depending on the state. Certainly both parties should pay attention to related provisions, such as prohibitions against solicitation and those safeguarding confidentiality (trade secret provisions). The MSO is almost always a more compliant solution, or at least one that is well recognized and often stands up well against enforcement scrutiny.
May 3, 2017
Healthcare
The strange world of the California medical board Fictitious Name Permit
The strange world of the California medical board Fictitious Name Permit inhabits one of those arcane places in healthcare law that many physician clients wonder about. Here’s everything you wanted to know about the California medical board Fictitious Name Permit, and weren’t afraid to ask. The significance of the fictitious name permit One reason this byzantine byway matters is because medical boards sometimes get up in arms about too much perceived intrusion by the medical management company (MSO) into the practice of “medicine.” And the name of the MSO, as well as the name of the physician practice, medical spa, telemedicine company, mobile medical app, or device manufacturer can raise legal challenges on the ground of public confusion between the non-physician venture on one hand, and the medical doctor on the other. Somehow, this asserted public confusion and decision-making around name equates to “too much control” which then means medical board investigation and possible allegations of non-compliant or illegal practice. So buckle your belts for a quick regulatory ride. Corporate Practice of Medicine The corporate practice of medicine doctrine imposes strict rules on contractual arrangements between physicians and non-physicians. One of the purposes of the corporate practice of medicine doctrine is to separate medical from business decision-making. Under this doctrine, neither non-physicians nor lay corporations (corporations that are not medical professional corporations) may contract to provide medical services. Nor may they contract with a physician to have the physician provide medical services, either as an employee or an independent contractor. In addition, California law places limits on the activities of non-medical corporations managing health care practices. Other states may have similar limits. New York, for example, has a strong corporate practice of medicine doctrine and requires clear separation of professional from non-clinical, management or medical services activities. For this reason, laypersons often form a management company (or medical services organization) that contracts with a professional medical corporation to provide administrative and management services. As discussed elsewhere on this blog, such a structure can help alleviate concerns regarding: anti-kickback fee-splitting Stark and self-referral laws so long as properly structured and with relevant exceptions and safe harbors to the relevant laws and regulations in mind. MSOs can often serve as billing and collecting agents for a medical practice. However, medical boards are closely watching the MSO structure, as they are increasingly concerned that physicians will abuse such contractual arrangements and create disguised kickbacks, where laypersons are in fact exercising too much control over clinical practice by virtue of the decision-making inherent in the model. For this reason, it is critical to have any business model reviewed by an attorney experienced in Stark, self-referral, anti-kickback, fee-splitting, and corporate practice of medicine laws. As well, healthcare legal counsel should be able to provide guidance on the differences between a corporation, an LLC (limited liability), and a professional corporation, as well as on rules regarding naming conventions and licensing of names and other intellectual property. This might be a recap for some of you, but it’s relevant to the fictitious name permit when the underlying venture (non-medical) and the physician clinical component share a name. Although it’s a common industry practice – more and more these days – some enforcement authorities can interpret this as too much intrusion by the non-physician venture into medical train. Perception is reality, and it sometimes depends on who is in charge of the investigation and enforcement decision. One strategy suggestion we offer management companies is that they include the name “management” in their corporate name. At the very least, this clarifies that the company is an MSO, hopefully warding off inquiries based entirely on misperception. Of course there’s more to legal strategy than this but we want to at least start by making a dent in the regulator’s mental world. The strange world of the Professional Medical Corporation Closely related to the fictitious name permit (FNP) process is the arcane world of the professional medical corporation (PMC). Every state has laws governing formation of professional corporations. There can be subtle differences among states which an experienced attorney can point out, as statutes and regulations can be highly detailed and nuanced. In California, the Moscone-Knox Professional Corporation Act regulates professional corporations, including the professional medical corporation (“professional medical corporation”). For those who want legal citations, see Calif. Corp. Code §§13400-13410. Section 13404 requires the Articles to specify that the corporation is a professional corporation within the meaning of the statute. See also 16 CCR §1343 (Requirements for Professional Corporations), which is a citation to the California Code of Regulations. Under Section 13401.5(a) of the Moscone-Knox Professional Corporation Act, certain enumerated, licensed health care professionals other than physicians may be “shareholders, officers, directors, or professional employees” of the professional medical corporation, so long as the sum of shares these non-physician, licensed professionals own does not exceed 49% of the total. In addition, Section 13406(a) provides that only a licensed person in the jurisdiction may be issued shares in the professional corporation. For a professional medical corporation, the list includes: licensed doctors of podiatric medicine licensed psychologists, registered nurses licensed optometrists, licensed marriage and family therapists licensed social workers licensed physician assistants licensed chiropractors licensed acupuncturists naturopathic doctors. In each case, the physician or physicians must own 51% or more of the total shares. California Labor Code section 3209.3 defines “physician” to include “physicians and surgeons holding an M.D. or D.O. degree.” “’Professional services’ means any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act.” Calif. Corp. Code §13401(a). “’Licensed person’ means any natural person who is duly licensed under the provisions of the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act to render the same professional services as are or will be rendered by the professional corporation or foreign professional corporation of which he or she is or intends to become, an officer, director, shareholder, or employee.” Id. §13401(d). With regard to employees, although Section 13401.5(a) refers to “professional employees,” which implies licensed health care professionals, Section 13405 provides that the professional corporation may render professional services through employees who are licensed persons, and may employ “persons not so licensed;” the latter “shall “not render any professional services rendered or to be rendered by that corporation in this state.” In other words, in the case of a professional medical corporation, such employees would have to be limited to non-clinical tasks, so as to respect the corporate practice of medicine doctrine. Section 13405 further states that a professional corporation may render services outside California, “but only through employees who are licensed to render the same professional services in the jurisdiction in which the person practices.” There are additional laws governing a telemedicine presence. Section 13408.5 provides that no professional corporation may be formed to cause any violation of law, including rules and regulations relating to “fee splitting, kickbacks, or other similar practices by physicians and surgeons or psychologists, including, but not limited to, Section 650 or subdivision (e) of Section 2960 of the Business and Professions Code. The California medical board Fictitious Name Permit The California medical board Fictitious Name Permit is really a regulated version of the good old-fashioned dba that the physician acquires after forming the professional medical corporation. California currently has a number of rules apply to naming a professional medical corporation and applying for a fictitious name, including these: “A professional corporation may adopt any name permitted by a law expressly applicable to the profession in which such corporation is engaged or by a rule or regulation of the governmental agency regulating such profession.” “The use of any fictitious, false, or assumed name, or any name other than his or her own by a licensee either alone, in conjunction with a partnership or group, or as the name of a professional corporation, in any public communication, advertisement, sign, or announcement of his or her practice without a fictitious-name permit obtained pursuant to Section 2415 constitutes unprofessional conduct.” “Any physician and surgeon or any doctor of podiatric medicine, as the case may be, who as a sole proprietor, or in a partnership, group, or professional corporation, desires to practice under any name that would otherwise be a violation of Section 2285 may practice under that name if the proprietor, partnership, group, or corporation obtains and maintains in current status a fictitious-name permit issued by the Division of Licensing, or, in the case of doctors of podiatric medicine, the California Board of Podiatric Medicine, under the provisions of this section.” “Unless a fictitious name permit is obtained, the name of a professional medical corporation shall be restricted to the name or surname of one or more of the present prospective or former shareholders who are physicians or podiatrists, as the case may be, for a medical or podiatry corporation.” “When the applicant uses any fictitious, false or assumed name or any name other than the name or surname of one or more of the present, prospective or former shareholders, or any other words or names in addition to those of the shareholders, it shall obtain a permit pursuant to Section 2415 of the code.” “No licensed person shall render professional services using a fictitious, false or assumed name or any name other than his or her own unless and until a fictitious name permit has been issued by the division.” “A group or clinic containing both a corporate and noncorporate entity or a partnership of corporations shall not use wording or abbreviations denoting corporate existence.” “The division shall not issue a fictitious name permit for a name-style which (1) May be a violation of Section 17500 of the [Business & Professions C]ode; (2) Is so similar to a name currently authorized as to be deceptive, misleading or subject to confusion.” “(a) The purpose of a fictitious name is to allow an individual, a partnership, a group, or a professional corporation to use a name in advertising and in practice other than his or her own personal family name. (b) No licensed person shall render professional services using a fictitious, false, or assumed name or any name other than his or her own unless and until a fictitious name permit has been issued by the Board. (c) A fictitious name permit may be suspended or revoked for failure to comply with the provisions of Code Section 2415 and this article or may be revoked after the individual license has been revoked.” In terms of naming style: (a) Any fictitious name shall contain the designation “medical group,” “medical clinic,” “medical corporation,” “medical associates,” “medical center,” or “medical office.” Such designation shall be contiguous in the name style and not separated by intervening words. This requirement also applies to those applicants who are sole practitioners. (b) A group or clinic containing both a corporate and non-corporate entity or a partnership of corporations shall not use wording or abbreviations denoting corporate existence. When a professional corporation is an applicant, it shall use in its fictitious name style one of the word(s) or abbreviation(s) denoting corporate existence as required by these regulations. (c) The Board shall not issue a fictitious name permit for a name style which is false or misleading or which is so similar to a name previously authorized in the same geographical area as to be deceptive, misleading, or subject an individual consumer to confusion with a previously permitted fictitious name. (d) The use of word(s) or abbreviation(s) following a licensed person’s name denoting affiliation with a professional medical society or association shall not create a fictitious name; however, the use of any word(s) or abbreviation(s) which denotes a particular specialty in medical practice which is advertised or disseminated in public in connection with that practice shall require a fictitious name permit. The California Medical Board describes some of the above legal rules on its webpage for FNPs. The Board states that a fictitious name permit is not needed if only the name or surname (last name) of the physician or podiatrist is used, followed by Medical Doctor, M.D., Podiatrist, Doctor of Podiatric Medicine, D.P.M., Medical Corporation, Medical Corp., Podiatry Corporation, Podiatry Corp., Professional Corporation, Prof. Corp., Corporation, Corp., Incorporated or Inc. Examples: “John Doe Medical Corporation” or “John Doe, M.D. Inc.” would not require a fictitious name permit as long as John Doe matches the legal name on the physician’s medical license. The Board also notes that as long as the names are different from each other, and separate applications are filed there is no limit as to how many fictitious name permits a physician or professional medical corporation may be issued. It is not clear that in actual practice and enforcement, boards are entirely congruent with the naming conventions and other rules that are promulgated. It is important to get legal advice from an attorney familiar with legal rules applicable to multi-disciplinary practices, and who advise on business models that involve both physicians and non-physicians, and analyze corporate practice of medicine, Stark and self-referral, anti-kickback and fee-splitting, and laws applicable to professional corporations.
December 15, 2016
Healthcare
When leaving a medical practice, can you take patient records?
When leaving a medical practice, can you take patient records? A tale of woe: physician former employee accused of theft of Trade Secrets We’ve seen a litigation battle where a departing physician wrote to his former patients, proudly announcing his new practice location — and then was sued by his aggrieved former employer for misappropriation (theft) of trade secrets. The litigation was vicious and costly for the defending physician. It lasted a long time, and sucked the life out of his new venture. One of the key questions turned out to be whether the departing physician merely fulfilled his duty to not abandon patients, or, went beyond and actively solicited them. There were also questions as to who “owned” patients he had brought to the practice, what files he was able to access, and what were the expectations of confidentiality. As well, the letter he wrote to patients of the practice he was leaving, was carefully read for evidence of intent. This might have been avoided had the two worked out, in advance, what they would do if the employment relationship soured. A joint notification letter could have been pre-agreed and placed in the employment contract. The Bottom Line: Watch Your Liability Exposure Healthcare law is highly regulated, and there are always enforcement authorities ready to nip at your heels even if you escape a lawsuit. Here, for example, HIPAA requires patient authorization, so even if you don’t have an angry former employer trying to sue you for theft of trade secrets, you also have to satisfy the regulators by honoring your privacy and security obligations. It Matters How You Leave a Medical Practice When we advise clients with respect to taking patient records, charts, lists, or databases with them on departing a practice, we are sensitive to the nuances of the outgoing physician’s departure. For example, a physician might: Close a medical practice and retire Sell a medical practice to a purchasing physician or medical group Leave a medical practice where a management company (medical services organization, MSO) or telemedicine company plans to continue marketing to the patients, and/or to try to “swap in” another medical doctor without running afoul of corporate practice of medicine rules In all these scenarios, there are HIPAA privacy and security concerns, issues under state law, medical ethical considerations, and other legal exposure (such as we’ve seen: in some cases, risks of trade secret litigation). Transfer of Patient Records During Sale of Medical Practice The transfer of medical records might be done as part of a sale from the Outgoing MD to the Incoming MD. In this case, normally the sale document will contain provisions for safe-keeping and/or transfer of the patient’s medical records, so that, among other things, the Incoming MD can access records on-site for those patients who will be under the Incoming MD’s care, and the Outgoing MD can retain records in case patients request access pursuant to HIPAA, or as otherwise needed. Sometimes the selling and purchasing physician will mutually designate a custodian for the practice’s medical records, and then that custodian will sign a business associate agreement under which the custodian agrees to comply with HIPAA. With regard to records retention by the Outgoing MD, HIPAA requires retaining policies and procedures, including patient authorizations (discussed further below), for six years (45 CFR 164.530(j)(2)); as well, there are California statutes requiring retention of medical records; and there are reasons for the Outgoing Physician to retain a copy of medical records for review in case of a negligence action. Transfer of Records Where MD Leaves a Practice Location to an MSO Where the Outgoing MD leaves a practice location, and in lieu of a sale from Outgoing MD to Incoming MD, there is only a management services organization (“MSO”) or, physician assistant (“PA”) remaining at the practice location (awaiting the arrival on the Incoming MD), this is a difficult situation. We have counseled clients in this situation, where the remaining MSO or PA desires to build the practice by bringing in another physician. However, the MSO or PA cannot practice medicine. Also, state laws usually prohibit general corporations and LLCs from practicing medicine (this is unlawful corporate practice of medicine). For example, the California Medical Board states in its webpage on Corporate Practice of Medicine: “Ownership is an indicator of control of a patient’s medical records, including determining the contents thereof, and should be retained by a California licensed physician.” This suggests that any impression that the MSO or PA is in charge of medical records creates enforcement peril. Navigating HIPAA waters for MSO or telemedicine company (or app, where the app founders have created an LLC, for example, and contract with doctors) in these situations is somewhat tricky. Among other things, the management agreement between the MSO and the professional medical corporation has to carefully specify who owns the medical records, who has access to them, and what happens if and when the relationship dissolves. We do careful drafting in these situations. We turn from these issues to questions of patient notification and patient authorization which are central to regulatory authorities in any scenario. Patient Notification A physician terminating a physician-patient relationship must give notice to the patients; otherwise, there is patient abandonment. The California Medical Board (“CMB”), in Closing Your Medical Practice, provides guidance to physicians regarding the “closure of or departure from a medical practice office.” To ensure “a smooth transition from the current physician to the new treating physician,” and, to reduce liability of patient abandonment while ensuring a “minimum of disruption in continuity of care,” CMB suggests that the Outgoing MD “notify patients sufficiently in advance.” Specifically, without defining what “sufficiently in advance” means, CMB recommends the following: The Outgoing MD should send patients a letter explaining the change in practice, including the final date of the Outgoing MD’s practice. “The California Medical Association (CMA) recommends, if possible, that letters be sent by certified mail, return receipt requested, and that a copy of the letter with the return receipt be kept. To inform inactive patients or those who have moved away, the CMA also recommends placing an advertisement in a local newspaper.” Patients must be advised (presumably in the letter) “as to where their medical records will be stored including how they may access them. To facilitate the transfer of medical records to the new treating physician, an authorization form should be included in the letter.” Patients should be transitioned to another healthcare provider, which can be the Incoming MD (either the physician who is taking over the practice, or, another physician whom the Outgoing MD can recommend). CMB does not define “active” nor “inactive” patients. The AMA defines active patients at least those patients who have been seen by the physician within the past two years, as well as patient who have chronic or complicated conditions. Other associations such as the Oregon Medical Association define “active” patients as those patients who have been seen by the physician within the past 3 years. Patient Authorization In addition to patient notification, we typically recommend that the Outgoing MD have patients sign an authorization form, in which the patient authorizes the release of his or her medical records to either the Incoming MD, or to a physician of the patient’s choice. This is because of what HIPAA requires, and also because of state law (below, we look briefly at California law). The next part is a little technical. Before we get to it, we note that in 2015, the New York Attorney General announced a settlement under HIPAA with the University of Rochester Medical Center arising out of the Center’s release of patient lists to a formerly employed nurse practitioner (NP): The settlement, reached with University of Rochester Medical Center (“URMC”), requires the medical center to train its workforce on policies and procedures related to protected patient health information, notify the Attorney General of future breaches, and pay a $15,000 penalty… The settlement is in response to a data breach that occurred in the spring of 2015, when a URMC nurse practitioner gave a list containing 3,403 patient names, addresses, and diagnoses to her future employer, Greater Rochester Neurology (“GRN”), without first obtaining authorization from the patients. On April 21, 2015, GRN used the information to mail letters to the patients on the list informing them that the nurse practitioner would be joining the practice and advising them of how to switch to GRN. URMC learned of the breach three days later, when calls began coming in from patients who were upset about the letter. The nurse practitioner was subsequently terminated, notification letters were sent to the affected patients, and the media was alerted The settlement, among other things, requires the Center to annually certify to the New York Attorney General for the next three years that it has implemented HIPAA training. With the state AG getting in on regulatory enforcement, the perils of not paying attention to compliance rules regarding medical records have increased. Notably, this case involved disclosure to a nurse practitioner, not a physician. HIPAA and Disclosure of Patient Records How does HIPAA come into play for the departing clinician? Here is some detail for HIPAA afficionados. If HIPAA applies, then, we start with 45 CFR 164.508(a)(1), which states that except as otherwise permitted or required, a covered entity (i.e., an MD) “may not use or disclose protected health information [("PHI")] without an authorization that is valid under this section.” The authorization must contain the core elements and requirement statements specified in 45 CFR 165.508(c) and must be in plain language, and a copy must be provided to the patient. However, 45 CFR 164.506 provides that, except with respect to uses or disclosures that require an authorization under 164.508(a)(2)-(4), a covered entity may use or disclose PHI without an authorization, for the purposes of “treatment, payment, or health care operations as set forth in paragraph [164.506](c) of this section, provided that such use or disclosure is consistent with other applicable requirements of this subpart.” (Subsections (2)-(4) deal, respectively, with psychotherapy notes; marketing; and sale of PHI as defined in 164.501. Sale of PHI involves remuneration (164.502(a)(5)(ii)) and does not include treatment and payment purposes pursuant to 164.506(a).) “Treatment means the provision, coordination, or management of health care and related services by one or more health care providers, including the coordination or management of health care by a health care provider with a third party; consultation between health care providers relating to a patient; or the referral of a patient for health care from one health care provider to another.” 45 CFR 164.501 Section 164.506(c) further provides: (1) A covered entity may use or disclose protected health information for its own treatment, payment, or health care operations. (2) A covered entity may disclose protected health information for treatment activities of a health care provider…. (4) A covered entity may disclose protected health information to another covered entity for health care operations activities of the entity that receives the information, if each entity either has or had a relationship with the individual who is the subject of the protected health information being requested, the protected health information pertains to such relationship, and the disclosure is: (i) For a purpose listed in paragraph (1) or (2) of the definition of health care operations; or (ii) For the purpose of health care fraud and abuse detection or compliance. (5) A covered entity that participates in an organized health care arrangement may disclose protected health information about an individual to other participants in the organized health care arrangement for any health care operations activities of the organized health care arrangement. This is a bit ambiguous with respect to transfer of medical records to the Outgoing MD. To the extent the Outgoing MD is not in the same “organized healthcare arrangement” as the Incoming MD, (5) would not apply, and, most likely, (1) and (4) would not apply either. This would mean that disclosure, without a new patient authorization, would not be allowed. The question is whether 164.506(c)(2) would allow disclosure without a new patient authorization, by the Outgoing MD to the Incoming MD—i.e., whether the Incoming MD would be considered a “healthcare provider.” Consistent with the view that such disclosure would be allowed, the U.S. Department of Health and Human Services (“HHS”) offers this guidance: Question: Does a physician need a patient’s written authorization to send a copy of the patient’s medical record to a specialist or other health care provider who will treat the patient? Answer: No. The HIPAA Privacy Rule permits a health care provider to disclose protected health information about an individual, without the individual’s authorization, to another health care provider for that provider’s treatment of the individual. See 45 CFR 164.506 and the definition of “treatment” at 45 CFR 164.501. However, 45 CFR 164.506 speaks to use or disclosure of PHI by the covered entity for treatment. This may not necessarily mean, someone in the position of the Outgoing MD (i.e., may not mean, just any covered entity; presumably the Outgoing MD cannot simply transfer patient records, willy-nilly, to any MD, anywhere). Our brief review of HIPAA leads us to recommend getting a patient authorization executed for transfer of patient medical records (or copies thereof) to the Incoming MD. California Law Even when HIPAA applies, state law (here we’ll look at California law) must be considered if it is more stringent than HIPAA; and even when HIPAA does not apply, California law must be considered. Under California Civil Code, Section 56.10(a), which is part of the California Medical Information Act (“CMIA”), a healthcare provider “shall not disclose medical information regarding a patient … without first obtaining an authorization,” with several limited exceptions. One of the exceptions is disclosure to “providers of health care … or other health care professionals or facilities” for purposes of diagnosis or treatment of the patient.” (Cal. Civ. Code, Section 56.10(c)(1)). Whether or not Section 56.10(c)(1) would allow the Outgoing MD to transfer a patient’s medical records to the Incoming MD without patient authorization, CMB’s position in Closing Your Medical Practice appears to be that an authorization is required. Further, Section 56.11 provides that any person or entity who wishes to obtain “medical information,” other than a person or entity authorized to receive medical information” pursuant to 56.10(b) or (c), “shall obtain a valid authorization for the release of this information.” Section 56.11 then sets forth requirements for the authorization, including that it must be handwritten by the person who signs it, or in at least 14-point type. Upon demand by the patient or person who signed the authorization, the healthcare provider must furnish a true copy of the authorization (Section 56.12). Leaving a Medical Group or Practice or Employment situation? Closing a Practice? Questions? Call us. As you can see, the rules are quite complicated. Tales of woe come from not paying attention to the many arcane rules that can, apparently, trip up even an established medical center that probably has an advanced legal team. Whether you’re a telemedicine company, a medical management services organization, or a departing physician, nurse, or physician assistant, be cautious before you up and away with patient records. Get legal counsel before departure — and ideally, get legal counsel before you join that medical group or facility.
October 7, 2016
Healthcare
Can chiropractors legally practice functional medicine?
Functional medicine is rapidly gaining traction (pardon the pun) among chiropractors, but can chiropractors legally practice functional medicine? Let’s look at definitions of functional medicine as well as scope of practice issues faced by non-MD healthcare practitioners. Functional Medicine Practice More and more physicians are leaving primary care and opening a specialized medical practice in functional medicine. Meanwhile other professionals–such as chiropractors, and even psychologists–are looking to functional medicine as a way to help patients (and also develop new revenues lines and avenues of professional satisfaction). What is “functional” medicine? According to the Institute for Functional Medicine: Functional medicine addresses the underlying causes of disease, using a systems-oriented approach and engaging both patient and practitioner in a therapeutic partnership. It is an evolution in the practice of medicine that better addresses the healthcare needs of the 21st century. By shifting the traditional disease-centered focus of medical practice to a more patient-centered approach, functional medicine addresses the whole person, not just an isolated set of symptoms. Functional medicine practitioners spend time with their patients, listening to their histories and looking at the interactions among genetic, environmental, and lifestyle factors that can influence long-term health and complex, chronic disease. In this way, functional medicine supports the unique expression of health and vitality for each individual. This sounds a lot like integrative medicine, with its emphasis on a systems-oriented approach, therapeutic partnership, patient-centered approach, the whole person and not just symptoms, unique expression of health and vitality. More specifically, though, the above definition of functional medicine emphasizes “the interactions among genetic, environmental, and lifestyle factors that can influence long-term health and complex, chronic disease.” Whether or not patients understand the emphasis and branding of functional medicine, functional medicine is increasingly popular among clinicians. Medical Malpractice and Medical Board Discipline Our law firm recently conducted a website review for a physician opening a functional medicine practice. This physician already had her consent forms prepared by another healthcare attorney, but she wanted to be sure her website didn’t unduly expose her to risk of medical malpractice or medical board discipline. One of the issues with online marketing is that practitioners (and companies) can make aggressive therapeutic claims that run afoul of various legal rules (for dietary supplements companies, FDA and FTC rules; but for practitioners, rules governing advertising, laws against unfair business practices, or whatever else plaintiff lawyer trolls or aggressive boards can find in an investigation). For years, from a risk management perspective, we’ve emphasized using two defenses to medical negligence: assumption of risk by the patient (within reason) respectable minority In one version of assumption of risk, the patient and physician contract for a different style of medicine than the usual community approach. This is not necessarily a deviation from standard of care–simply a different therapeutic approach. As to the “respectable minority,” no one knows exactly what is considered “respectable” or why it rhymes with bespectacled; but with the gathering popularity of functional medicine among more and more sizable physician segments, one can argue that the respectable minority is present. Some of the decision points we discussed with our functional medicine physician included: disclaiming primary care and agreeing with the patient to enter into a specialist medical role requiring the patient to designate a primary care physician of record using clear consent forms to document a robust informed consent process following some of the ground rules laid out by the Federation of State Medical Boards in its Guidelines on Use of Complementary and Alternative Medical Therapies by Physicians using evidence-based approaches and documenting the literature supporting therapeutic approaches evaluating safety and efficacy of chosen therapies and selecting the ones with the best benefit/risk ratio Negligence can lead to both a malpractice lawsuit and medical board discipline, so reviewing the website for claims and language, as well as paying attention to the other risk management strategies, is critical. For more information, see our post, 4 Legal Tips for Setting Up a Functional Medicine Practice. Practice of Functional “Medicine” by Chiropractors, Psychologists, and Other Practitioners There’s an inherent problem when non-medical doctors advertise and practice functional medicine, in that the word “medicine” is included and only medical doctors (and DOs) can practice “medicine.” Analyzing scope of practice in detail is important. For example, we reviewed some law in Texas about chiropractic scope of practice and found an Attorney General Opinion from 2000, which asked: Does the Chiropractic Practice Act, as amended in 1999, permit doctors of chiropractic to order and receive the results of diagnostic testing from licensed medical laboratories, including urinalysis, arthritis panel, urine count, glucose tolerance test male-female endocrine profile, standard blood profile (CBC with differential) and pregnancy testing? The AG likes to ask yes/no questions in this way. We also reviewed the statutory definition of chiropractic: … the science and art of locating and removing interference with nerve transmission and nerve function. A chiropractic physician diagnoses and treats neuromuscular and musculoskeletal conditions through physical agent modalities and manipulative therapies. The adjustment, manipulation or treatment shall be directed toward restoring and maintaining the normal neuromuscular and musculoskeletal function and health of the patient. A chiropractic physician will also make appropriate health referrals for conditions that may not be treated by physical agent modalities and manipulative therapies. Patient care shall be conducted with due regard for nutrition, environment, hygiene, sanitation and rehabilitation designed to assist in the restoration and maintenance of the patient’s health. Nothing in this chapter shall be construed to authorize the chiropractic physician to practice any branch of medicine osteopathy, as defined in chapters 6 and 9 of this title, or surgery, including venipuncture or the prescribing of medication, acupuncture being the exception. We added some bold for emphasis. Here, the statute is clear, and as we’ll discuss below, the AG read it straight. A Narrower Scope of Practice No matter what the state, almost always the additional caveat exists, prohibiting the chiropractor (or other non-MD) from practicing “medicine.” Put simply: If it ain’t chiropractic, it’s medicine! The reason is that medical doctors have unlimited licensure to diagnose and treat disease, whereas other practitioners have limited licensure as defined by their scope of practice, which is inherently narrower. As the AG opinion put it, citing a Texas court: the field of chiropractic [is] limited to the treatment of those illnesses and diseases of the human body which doctors of chiropractic reasonably believe can be aided by the manual manipulation of the spine. On the other hand, the field of doctors of medicine covers all human illnesses and diseases and their diagnosis, treatment and prevention. The ground is clear: chiropractors, limited; on the other hand, medicine, covers all human illnesses and diseases and their diagnosis, treatment and prevention. If you want to change this, Option A is: lobby legislatures to change the rules of the regulatory landscape for medicine and chiropractic so that the whole limited/unlimited licensure concept bubbles away. Or option B: Buy a time machine Go back to the 1800s and challenge the AMA’s political dominance and influence over health care legislation; or create an alternate timeline in which the ACA (American Chiropractic Association) is ascendant. Note: I am in the middle of Terminator Genisys so Option B seems plausible. The Texas AG concluded that Texas law “did not change the established principles regarding the scope of chiropractic practice with regard to diagnostic testing so as to permit doctors of chiropractic to order and receive the results of diagnostic testing from licensed medical laboratories, including urinalysis, arthritis panel, urine count, glucose tolerance test,male-female endocrine profile, standard blood profile (CBC with differential) and pregnancy testing.” The AG did bat the question to legislative lobbying: We think additional legislation is required before chiropractors may order and receive from licensed medical laboratories the results of the diagnostic tests. Re-Brand I do have another suggestion, in case there’s a run on time machines and stock is temporarily out. That is: re-brand. The legal definition of medicine is typically broad and historically, chiropractors, acupuncturists, massage therapists, naturopathic physicians, and other practitioners have had to battle in the state legislatures for their own licensure or for exemptions and carve-outs, enabling them to practice. It you are a chiropractor practicing functional medicine, then in addition to having your attorney review scope of practice issues relevant to your practice, you might rebrand what you’re doing as functional health, not medicine. Language means a lot to regulators and enforcement authorities. As lawyers, we’re wordsmiths. Attention to language is what we do. Many times, what’s required is to titrate marketing vs. compliance. Neither is all-or-nothing. The more aggressive the marketing, the greater the risk of regulatory enforcement; conversely, the tighter and more thoroughly the compliance, the less room for edgy marketing. Legal compliance is really about understanding the rules and playing the edge so that 21st business models can have the right legal boundaries under rule systems that essentially arose in prior centuries. In the case of FDA law for dietary supplements, cosmetics and medical devices, we only have to go back to the 20th century, but for medical licensure we’re in the late 19th.
August 22, 2016
Healthcare
Is Your Medical Assistant Practicing Medicine Illegally?
Is your medical assistant practicing medicine illegally? Understand the difference between medical assistance and medical practice. Don’t Confuse the Roles of the MD and the MA What happens when the MD and MA work together so seamlessly that patients can misunderstand who’s who? What if one of the “patients” is an undercover medical board investigator? Consider this practice scenario. Dr. Barbara is a licensed medical doctor (MD), and her best friend Gina is a non-licensed medical assistant (MA). Gina studied medicine in Germany, got her license and practiced there, but she is not licensed anywhere in the U.S. However, she is very knowledgeable, and good with patients. Gina is particular good with patients who have stomach upset. Barbara has her palpate these patients to assess where there might be some gastrointestinal disorder requiring treatment or referral to a specialist. Gina also gives patients nutritional advice when she accompanies Dr. Barbara on rounds. Dr. Barbara usually nods her head, and once in a while will make her own comments on the dietary supplements Gina recommends. Gina is expert in homeopathy as well and may recommend various homeopathic remedies that are commonly available at the local dietary supplement store, pharmacy, or holistic grocery store. Dr. Barbara wants to know if she is following the rules (in California) for her medical assistants. Watch The Perils of “Unlicensed Practice” of “Medicine” Let’s start with the definition of “practicing medicine.” This varies by state, but there are many commonalities. California’s definition of “practicing medicine” in California Business and Professions Code Section 2052(a) is typical of many: any person who practices or attempts to practice, or who advertises or holds himself or herself out as practicing, any system or mode of treating the sick or afflicted in this state, or who diagnoses, treats, operates for, or prescribes for any ailment, blemish, deformity, disease, disfigurement, disorder, injury, or other physical or mental condition of any person. Violation can result in a fine of up to $10,000, imprisonment in a county jail of up to a year, or both. Know The Safe Harbor for Non-Licensed Practitioners In a minority of states, the legislature has provided a safe harbor for non-licensed practitioners to offer services, so long as they are not “practicing medicine” or another licensed profession (such as, for example, psychology). In California, this legal shelf is known as “SB 577,” after Senate Bill 577. SB 577 is codified into the provisions of Sections 2053.5 and 2053.6 of the California Business and Professions Code. Referencing the prohibitions against “practicing medicine” in Sections 2051 and 2052, Section 2053.5 provides: (a) Notwithstanding any other provision of law, a person who complies with the requirements of Section 2053.6 shall not be in violation of Section 2051 or 2052 unless that person does any of the following: (1) Conducts surgery or any other procedure on another person that punctures the skin or harmfully invades the body. (2) Administers or prescribes X-ray radiation to another person. (3) Prescribes or administers legend drugs or controlled substances to another person. (4) Recommends the discontinuance of legend drugs or controlled substances prescribed by an appropriately licensed practitioner. (5) Willfully diagnoses and treats a physical or mental condition of any person under circumstances or conditions that cause or create a risk of great bodily harm, serious physical or mental illness, or death. (6) Sets fractures. (7) Treats lacerations or abrasions through electrotherapy. (8) Holds out, states, indicates, advertises, or implies to a client or prospective client that he or she is a physician, a surgeon, or a physician and surgeon. (b) A person who advertises any services that are not unlawful under Section 2051 or 2052 pursuant to subdivision (a) shall disclose in the advertisement that he or she is not licensed by the state as a healing arts practitioner. Section 2053.6 provides: (a) A person who provides services pursuant to Section 2053.5 that are not unlawful under Section 2051 or 2052 shall, prior to providing those services, do the following: (1) Disclose to the client in a written statement using plain language the following information: (A) That he or she is not a licensed physician. (B) That the treatment is alternative or complementary to healing arts services licensed by the state. (C) That the services to be provided are not licensed by the state. (D) The nature of the services to be provided. (E) The theory of treatment upon which the services are based. (F) His or her educational, training, experience, and other qualifications regarding the services to be provided. (2) Obtain a written acknowledgment from the client stating that he or she has been provided with the information described in paragraph (1). The client shall be provided with a copy of the written acknowledgement, which shall be maintained by the person providing the service for three years. (b) The information required by subdivision (a) shall be provided in a language that the client understands. This basically references the SB 577 Disclosure (or Consent) that a non-licensed practitioner provides for the client. Last, 2053.6(c) provides that the statutes does not: (1) Affect the scope of practice of licensed physicians and surgeons. (2) Limit the right of any person to seek relief for negligence or any other civil remedy against a person providing services subject to the requirements of this section. Although this legal shelf exists, and provides some legal umbrella for non-licensed practitioners, this is still subject to other statutory prohibitions, such as the prohibition against unlicensed practice of medicine. Under the Legal Rules about Nutritional Advice Certain titles are protected by licensing statutes and cannot be used without the license. In some states, only a person with designated training can offer nutritional advice as this is reserved for licensed healthcare practitioners. In California, the law allows persons to give “nutritional advice” or “advice concerning proper nutrition,” so long as such individuals do not practice medicine (i.e., do not violate B&P 2052), and “post in an easily visible and prominent place the following statement in his or her place of business: NOTICE State law allows any person to provide nutritional advice or give advice concerning proper nutrition—which is the giving of advice as to the role of food and food ingredients, including dietary supplements. This state law does NOT confer authority to practice medicine or to undertake the diagnosis, prevention, treatment, or cure of any disease, pain, deformity, injury, or physical or mental condition and specifically does not authorize any person other than one who is a licensed health practitioner to state that any product might cure any disease, disorder, or condition. The notice required “shall not be smaller than 81/2 inches by 11 inches and shall be legibly printed with lettering no smaller than1/2 inch in length, except the lettering of the word “NOTICE” shall not be smaller than 1 inch in length.” Our healthcare law team usually also includes such a notice in the SB 577 disclosure (as well as other provisions aimed to reduce legal risk for the practitioner). Understand the Legal Rules about Medical Assistants There is a fair amount of statutory verbiage around what medical assistants can and can’t do. In California, there are: Statutes Regulations Interpretations or discussions by the California Medical Board The relevant statutes are California Business & Professions Code Sections 2069 through 2071. Section 2069 provides in part (we’ve added bold below). (a) (1) Notwithstanding any other law, a medical assistant may administer medication only by intradermal, subcutaneous, or intramuscular injections and perform skin tests and additional technical supportive services upon the specific authorization and supervision of a licensed physician and surgeon or a licensed podiatrist. A medical assistant may also perform all these tasks and services upon the specific authorization of a physician assistant, a nurse practitioner, or a certified nurse-midwife. (2) The supervising physician and surgeon may, at his or her discretion, in consultation with the nurse practitioner, certified nurse-midwife, or physician assistant, provide written instructions to be followed by a medical assistant in the performance of tasks or supportive services….. (b) As used in this section and Sections 2070 and 2071, the following definitions apply: (1) “Medical assistant” means a person who may be unlicensed, who performs basic administrative, clerical, and technical supportive services in compliance with this section and Section 2070 for a licensed physician and surgeon or a licensed podiatrist, or group thereof, for a medical or podiatry corporation, for a physician assistant, a nurse practitioner, or a certified nurse-midwife as provided in subdivision (a), or for a health care service plan, who is at least 18 years of age, and who has had at least the minimum amount of hours of appropriate training pursuant to standards established by the board. The medical assistant shall be issued a certificate by the training institution or instructor indicating satisfactory completion of the required training. A copy of the certificate shall be retained as a record by each employer of the medical assistant. (2) “Specific authorization” means a specific written order prepared by the supervising physician and surgeon or the supervising podiatrist, or the physician assistant, the nurse practitioner, or the certified nurse-midwife as provided in subdivision (a), authorizing the procedures to be performed on a patient, which shall be placed in the patient’s medical record, or a standing order prepared by the supervising physician and surgeon or the supervising podiatrist, or the physician assistant, the nurse practitioner, or the certified nurse-midwife as provided in subdivision (a), authorizing the procedures to be performed, the duration of which shall be consistent with accepted medical practice. A notation of the standing order shall be placed on the patient’s medical record. (3) “Supervision” means the supervision of procedures authorized by this section by the following practitioners, within the scope of their respective practices, who shall be physically present in the treatment facility during the performance of those procedures: (A) A licensed physician and surgeon. (B) A licensed podiatrist. (C) A physician assistant, nurse practitioner, or certified nurse-midwife as provided in subdivision (a). (4) (A) “Technical supportive services” means simple routine medical tasks and procedures that may be safely performed by a medical assistant who has limited training and who functions under the supervision of a licensed physician and surgeon or a licensed podiatrist, or a physician assistant, a nurse practitioner, or a certified nurse-midwife as provided in subdivision (a)…. (c) Nothing in this section shall be construed as authorizing any of the following: (1) The licensure of medical assistants. (2) The administration of local anesthetic agents by a medical assistant. (3) The board to adopt any regulations that violate the prohibitions on diagnosis or treatment in Section 2052. (4) A medical assistant to perform any clinical laboratory test or examination for which he or she is not authorized by Chapter 3 (commencing with Section 1200)…. Section 2070 provides that “a medical assistant may perform venipuncture or skin puncture for the purposes of withdrawing blood upon specific authorization and under the supervision of a licensed physician and surgeon or a licensed podiatrist, or a physician assistant, a nurse practitioner, or a nurse-midwife as provided in subdivision (a) of Section 2069, if prior thereto the medical assistant has had at least the minimum amount of hours of appropriate training pursuant to standards established by the Division of Licensing. The medical assistant shall be issued a certificate by the training institution or instructor indicating satisfactory completion of the training required. A copy of the certificate shall be retained as a record by each employer of the medical assistant.” Section 2071 provides for the California Medical Board to adopt and administer “regulations that establish standards for technical supportive services that may be performed by a medical assistant.” As for regulations, look to the California Code of Regulation (CCR) Title 16 (Professional and Vocational Regulations), Division 13 (Medical Board of California), Chapter 3 (Affiliated Healing Arts), Article 2 (Medical Assistants), Section 1366-1366.4. These supplement what is said in the statutes. The Medical Board Hotly Enforces Violations Involving Medical Assistants IF you want to know what your medical assistant can and can’t do, it’s best to consult an attorney, who can work through the statutes and regulations and advise you as to what is allowed. You can get a sense by seeing what the California Medical Board says on its website. The warnings are fairly stern. First, the California Medical Board warns against medical assistants practicing beyond their scope of training: Medical assistants are unlicensed, and may only perform basic administrative, clerical and technical supportive services as permitted by law. An unlicensed person may not diagnose or treat or perform any task that is invasive or requires assessment. The responsibility for the appropriate use of unlicensed persons in health care delivery rests with the physician…. (emphasis added) Under the law, “technical supportive services” are simple, routine medical tasks and procedures that may be safely performed by a medical assistant who has limited training and who functions under the supervision of a licensed physician, podiatrist, physician assistant, nurse practitioner, or nurse midwife. “Supervision” is defined to require the licensed physician, podiatrist, physician assistant, nurse practitioner, or nurse midwife to be physically present in the treatment facility during the performance of those procedures…. (emphasis added) Medical assistants are not allowed to perform such invasive procedures as: placing the needle or starting and disconnecting the infusion tube of an IV. administering medications or injections into the IV line. charting the pupillary responses. inserting a urine catheter. independently performing telephone triage. injecting collagen. using lasers to remove hair, wrinkles, scars, moles or other blemishes. administering chemotherapy. Medical assistants may not interpret the results of skin tests, although they may measure and describe the test reaction and make a record in the patient’s chart. In summary, medical assistants are not licensed, and it is not legal to use them to replace highly trained, licensed professionals. The medical assistant is present to assist and perform basic supportive services in the physician’s office. (emphasis added) Those duties must be appropriate with the medical assistant’s required training. On its FAQ page for Medical Assistants, the California Medical Board outlines a number of common MA practices that are either legal or illegal. For example: Are medical assistants allowed to take a patient’s blood pressure? Yes. Medical assistants are allowed to take the necessary information to prepare a patient for the physician’s or podiatrist’s visit. This information may include taking the patient’s height, weight, temperature, blood pressure and noting the information on the patient’s chart. Are medical assistants allowed to perform telephone triage? No. Medical assistants are not allowed to independently perform telephone triage as they are not legally authorized to interpret data or diagnose symptoms. Can medical assistants call in refills to a pharmacy? Yes. Under the direct supervision of the physician or podiatrist, a medical assistant may call in routine refills that are exact and have no changes in the dosage levels. The refill must be documented in the patient’s chart as a standing order, patient specific. Medical assistants may not call in new prescriptions or any prescriptions that have changes. The physician should view carefully his or her decision to allow medical assistants to perform this task, as the authority to prescribe or refill prescriptions is only granted to licensed physicians and surgeons, podiatrists, or those individuals authorized by law to do so. The California Medical Board is particularly concerned about improper use of medical assistants in medical spas. The Board has a webpage, Frequently Asked Questions—Cosmetic Treatments, in which it has the following What is the penalty if I get caught using or helping an unlicensed person to perform medical treatment? The law provides a number of sanctions, ranging from license discipline to criminal prosecution, for aiding and abetting the unlicensed practice of medicine. Physicians could be charged with aiding and abetting unlicensed practice, and the employee could be charged with unlicensed practice. The Board is clear that its enforcement posture here is strong. Clarifying Roles Should Help In our practice scenario above, Dr. Barbara the MD and Gina the MA have to be very clear about their practice roles. Even though Gina may have been a licensed medical doctor in Germany, that license does not allow her to practice “medicine” in the U.S. She cannot diagnose or treat. She can only provide “technical, supportive” and other designated services as outlined in the medical assistant laws and regulation. (In California, look to the regulations for a list of additional technical supportive services). Gina should not be palpating patients; this sounds like a diagnostic function that should be left to the medical doctor. As well, Gina’s homeopathic recommendations could be construed as the practice of medicine. Even though the remedies might be commonly available, homeopathic medicine is a medical art. A handful of states designate licensure for homeopathy physicians; and homeopathy may be within the scope of practice of some licensed practitioners; but to the extent it involves diagnosis and treatment, it could be seen as the practice of medicine. Nutritional advice is separate from the medical assistant function. This might require an SB 577 disclosure with the required disclosure for nutritional practice (if in California), or other documentation depending on state law. Many physicians assume that someone like Gina can practice “under” their licensure. This is a false concept. There is licensed practice, allied health practice under physician supervision (or independent), and complementary and alternative medical practice (licensed or non-licensed). The fact that Dr. Barbara nods her head doesn’t mean that Gina is not giving medical advice. The California Medical Board makes clear that the physician is responsible for appropriate use of medical assistants. If the use is inappropriate, the physician could be aiding and abetting unlicensed medical practice, and prosecuted and/or disciplined accordingly. Both clinical practitioners and patients have to be clear about the professional roles and boundaries of clinical staff within the medical practice. Ask your healthcare lawyer if you have any questions about who can do what, within the medical center, clinical or group.
August 1, 2016
Healthcare
How Can A Healthcare Clinical Practice Bonus Its Staff, Employees, & Marketing Personnel Without Trigger Fee-Splitting and Anti-Kickback Issues?
Healthcare bonuses raise fee-splitting and antikickback issues; is there a workaround” A California-based chiropractic clinic visited our law office to find out whether its compensation and bonus plans potentially violated anti-kickback and fee-splitting laws, and whether we could recommend more compliant arrangements. The compensation and bonus plans in place at the clinic were for clinician employees, independent contractor staff, the case manager, and the marketing manager. The chiropractic clinic treated each of these differently, and asked about very specific arrangements. Bonuses and Anti-Kicback/Fee-Splitting Rules The compensation arrangement the chiropractic clinic was implementing prior to the consult, is fairly common in the healthcare industry. It was a bonus structure in use not only by chiropractors, but also by physicians (MDs, DOs, and NDs), acupuncturists, veterinarians, and others. In a nutshell, the bonuses involved a “per-patient reward.” Before we get to this, let’s look at some of the other glaring fee-splitting and anti-kickback issues. Discounts and Rewards Many healthcare practices offer freebies. Under federal law, there is a de minimus exception for very small ticket items. For example, most dentists give patients a free toothbrush and toothpaste after the visit. Good idea–keep brushing! If the physician, chiropractic, or acupuncture practice (or integrative care center) does not submit claims to Medicare and Medicaid, then federal anti-kickback law is not implicated. So we’re left with state law. Most states, though, have their own statutory prohibition against kickbacks and fee-splitting, and many will follow federal law and overlook a minimal, small-ticket gift to the patient. Usually, the state-level anti-kickback and fee-splitting prohibition contains very broad language, such as forbidding the receipt or delivery of any discount, rebate, kickback, or compensation as an inducement to refer a patient. Here, the chiropractic clinic was organized as a professional chiropractic corporation (PC). The chiropractic PC does not take insurance, but is a cash-only practice. It employs a front desk person for scheduling, a case manager, and a marketing manager. Like many clinics, this one offers patients prepaid “packages” of healthcare services.Patients get “corrective plans” or “relief care plans” (or some similarly named “plan”) which involves a bundle of services. Although it is not uncommon to bundle, for example, an exam plus treatment, offering various packages with more discounts the more the patient purchases, raises several regulatory challenges. First, as noted in Packaging Medical Services: Is It a Legal Concierge Medicine Arrangement, or an Illegal Kickback: The notion of a prepaid, discounted services definitely raises regulatory questions. For example, an arrangement involving the initial prepayment or periodic payment in exchange for discounted medical or dental services is different than the practice of granting discounts for payment in cash. Although both practices are common in the industry, the former could be seen by the Department of Managed Health Care Services in California (as one example) to fall within the Knox-Keene Act, while the latter is expressly allowed under California law. The discounted services could be seen to fall within the statutory sweep of one who “provides, administers or otherwise arranges for the provision of health care services.” Second: In general, the legal risk is that enforcement authorities may choose to view the packaging medical or other health care services, as an illegal inducement for to refer the patient. If your healthcare venture involves a clinic, and the idea is to package, for example, one medical visit and one chiropractic visit, then enforcement authorities could argue that you are creating an unlawful inducement for the medical doctor to refer to the chiropractor, and the reverse; the more referrals within the clinic, the more that the clinic owners and practitioners financially benefit from the incentive given to the patient. Discounts for cash services are another matter. They are often permitted by law, as the differential is explainable as interest. Discounts other than cash problematic Per-Patient Bonuses: Legal or Illegal In general, “per patient” compensation raises enforcement scrutiny. It’s simply against the letter and spirit of the law in most cases to reward a staff member for the number of patients they corral into a clinic. Remember that compensation arrangements for marketing can get heavily scrutinized by regulatory authorities. Of course, a practitioner can be compensated for productivity. And a practitioner can ask a patient to come to another office that the practitioner runs (for example, Doctor’s San Francisco as opposed to Burlingame office) and this is not necessarily a “referral.” Sometimes, though, it’s difficult to tell whether the compensation is for productivity as opposed to being for the referral. Scrutinize arrangements carefully, with appropriate legal advice. For example, here are some of the chiropractic clinic’s practices, that struck us as likely to raise enforcement scrutiny: bonus staff based on the number of patients they steer to the healthcare clinic bonus practitioner based on number of packages “closed” (sold to patients) bonus marketing director for number of new patients brought in during marketing person’s tenure bonus front desk person for total revenue of “packages” purchased during front desk person’s working hours All of these different variations suggest a per-patient reward or inducement for referring the patient for more services. Note that many states contain anti-kickback provisions which apply not only to practitioner licensees (physicians, chiropractors, acupuncturists, nurses, psychologists, dentists, clinical social workers, and others) but to any person who induces a referral based on volume or value of patients referred. For example, California law prohibits steering patients to physicians for a fee. A More Compliant Way to Bonus As we’ve said, regulators do not like to see practitioners or staff rewarded for the “volume or value of patient referrals.” This is why we nix most of the ideas above. However, both practitioners and staff can get paid for productivity. The difference is that a bonus for production reflects effort, whereas a bonus for the volume (number of patients) or value of (e.g., revenue generation related to) patients is a reward for referring the patient. One solution is to use KPI, key performance indicators of productivity. For example, KPI for a marketing manager might include: Hours worked Number of patients seen at the clinic this year as opposed to last Measurable increase in patient loyalty Increase in market share in target market Effectiveness in resolving patient complaints Measurable overall increase in patient satisfaction Measurable increase in patient engagement as documented by patient participation in social media mentioning healthcare center or its practitioners Patient loyalty as measured by metrics of patients maintaining appointments. Note that the second factor, number of patients seen, is the same as volume of patients. However, now this is simply one factor among many, and as such, is being used as a surrogate endpoint for performance and productivity. Because we felt our chiropractic clinic was over-complicating the problem by trying to create micro-distinctions among the various bonus structures, we recommended implementing one overarching system. This bonus system would have clear KPI metrics. At least, we recommended one set of KPI for practitioners (targeted and tailored to metrics of practitioner productivity) and a second, slightly variant one for staff (keyed to staff performance). Caveats As with other regulatory and compliance matters, we cannot guarantee that a given arrangement will free a healthcare practice from regulatory scrutiny. Physicians, chiropractors, psychologists, and other clinicians and healthcare executives get in legal trouble for a variety of reasons. Sometimes a complaint based on one issue, will bring about a regulatory investigation and then once all the other arrangements are scrutinized, enforcement authorities will “throw in the kitchen sink.” Arrangements that might have otherwise looked acceptable are viewed with greater skepticism or even hostility. This is why it’s important to get nuanced legal advice on a spectrum of compliance fronts. HIPAA Compliance Our chiropractors expressed concern about HIPAA compliance: as a cash-based practice, do they even have to bother? The short answer is: technically, no; practically, yes. If they do not transmit patient billing information electronically, they are not under HIPAA; but they would subject to state law that mirrors HIPAA in terms of requiring safeguarding the privacy and security of patient information. State laws and regulations usually do not contain the dizzying, byzantine rules of HIPAA, but they do generally require that healthcare practitioners and practices maintain reasonable privacy and security safeguards. HIPAA is a default gold standard for this requirement. However, if practices want a less burdensome solution, it can be crafted. Some of the basics that we recommend are: A Notice of Privacy Practices (NPP) for patients Policies regarding EMR – electronic medical record/chart A Security Risk Assessment, identifying potential IT security leaks Implementation of reasonable security measures, scaled to the institution, with an explanation of why these were chosen and others (such as, for example, encryption) are not Appointment of a Privacy Official Conclusion How Can A Healthcare Clinical Practice Bonus Its Staff, Employees, & Marketing Personnel Without Trigger Fee-Splitting and Anti-Kickback Issues? Healthcare is a regulated enterprise, plain and simple. So compensation and bonus arrangements that might be creative and rewarding in other settings, have to undergo careful legal review in the health and wellness setting. KPI offer a useful tool; however, the metrics must be carefully thought through, to ensure they will not be viewed as a kickback in disguise.
May 1, 2016
Healthcare
Are physician online dietary supplement sales, kickbacks or fee-splitting?
Are physician online dietary supplement sales, kickbacks or fee-splitting? The Challenge of Physician Online Dietary Supplement Sales Can physicians, chiropractors, acupuncturists, and other healthcare licensees create a legally defensible contractual arrangement with a dietary supplement manufacturer, in which the healthcare clinician receives a discount, rebate, or commission when referring a patient for online purchase of the manufacturer’s dietary supplements? Let’s take Singularity Supplements, a fictional dietary supplement manufacturer, and Dr. Bob, a physician who wants to sign up for Singularity’s rebate program. Singularity Supplements comes to our law office with an online program for licensed healthcare practitioners. The practitioner gets his or her own webpage which is doubly branded for the practitioner and for Singularity Supplements. This means that once Dr. Bob signs up, whenever Dr. Bob sends a patient to Dr. Bob’s Singularity Supplements website and the patient purchases supplements recommended by Dr. Bob, Singularity Supplements gives Dr. Bob a 25% rebate on the total retail purchase. Dr. Bob can then either pocket the 25%, or give it back to the patient. Either way, Singularity Supplements ships the dietary supplements to the patient and sends the check to Dr. Bob (or makes a direct deposit in his account). This is a very common arrangement in the dietary supplements industry; but is it legal? Self-Referral, Anti-Kickback, & Fee-Splitting Issues We talk a lot about self-referral, anti-kickback, and fee-splitting on this blog. While there are federal prohibitions against self-referral (“Stark”) and kickbacks, in general we are only looking at state law, because by and large, sales of dietary supplements are not reimbursed by Medicare or Medicare. Every state has its own statutes and regulations, but there are some commonalities. In general: Fee-splitting refers to a situation in which a physician literally splits his or her fee with a non-physician. For example, the doctor gets $100 for a visit and gives you $50 for referring the patient. Self-referral refers to a situation in which the physician refers the patient, for another healthcare service in which the physician has a financial interest. For example, your doctor sends you for lab tests where he or she owns the laboratory. Some types of self-referral (usually for what are known as “designated health services” or DHS) are prohibited, whereas others are allowed but require a disclosure of financial interest by the physician. There are both federal and state law prohibitions that vary in significant detail as to what activities and what streams of payment are a violation. A kickback refers to a situation where the physician pays, or receives, compensation in exchange for a referral. In the fee-splitting scenario, for example, the physician is paying for the referral. This can be a federal violation where federal payment is involved, and a violation of state statutes, which also vary in significant detail. Some state statutes speak to “brokering” or “steering” patients. In addition to these rules, some states have: Prohibitions against “patient brokering” (for example, Florida), or against “steering” patients to medical centers for a profit Prohibitions against exploiting patients for financial gain (for example, in Michigan, promotion for personal gain of an unnecessary service). Some states limit the prohibition explicitly to medical services, not goods; others, to “medical” goods but not services; and others, to goods and services reimbursed by private insurance. Some states extend their prohibitions to all licensed healthcare practitioners, whereas others only speak to violations by medical doctors. AMA and Federation of State Medical Boards Weigh in Against Physician Conflicts of Interest The AMA and Federation of State Medical Boards generally do not approve of in-office sales by physicians of health products. In Opinion 8.063 (Sale of Health-Related Products from Physicians’ Office), the American Medical Association wrote: In-office sale of health-related products by physicians presents a financial conflict of interest, risks placing undue pressure on the patient, and threatens to erode patient trust and undermine the primary obligation of physicians to serve the interests of their patients before their own. The AMA warned that physicians “should not sell any health-related products whose claims of benefit lack scientific validity.” Further, due to the “risk of exploitation,” AMA noted that physicians should: Limit sales to products that serve the immediate and pressing needs of their patients. Distribute other health-related products to their patients free of charge or at cost, in order to make useful products readily available to their patients. Disclose fully the nature of their financial arrangement with a manufacturer or supplier to sell health-related products. Disclosure includes informing patients of financial interests as well as about the availability of the product or other equivalent products elsewhere. Not participate in exclusive distributorships of health-related products which are available only through physicians’ offices. The AMA noted that such guidelines also apply to sales through websites. The Federation of State Medical Boards (FSMB), in its Model Guidelines for the Use of Complementary and Alternative Therapies in Medical Practice, also addresses sale of goods from physician offices. FSMB similarly warns about the “potential for patient exploitation” and states that “physicians should not sell … health-related products or engage in exclusive distributorships and/or personal branding.” Further, physicians should “provide a disclosure statement with the sale of any goods, informing patients of their financial interest.” The Somewhat Concerning Case of Charell v. Gonzales In this case, a New York trial court reviewed a jury verdict of negligence against a physician who incorporated nutritional advice into cancer care. The court also reviewed the jury’s punitive damages award to see if it was appropriate. The court concluded that the punitive damages were justified because the physician’s: practice of prescribing nutrition as a cure was designed to enable companies in which he had a financial interest to sell product. While there was evidence offered by the defendant to the contrary, the jury was entitled to find that defendant’s intent in dealing with plaintiff was motivated by greed and that he was reckless in his care of her. As it turns out, the appellate court vacated the award for punitive damages after finding that defendant’s conduct was neither grossly dishonest, or indifferent to patient care. Are Physician Dietary Supplement Sales Covered by Insurance The Charell case is concerning to practitioners who have a financial stake in sales of supplements, because here the financial stake allowed the Court to label the physician not only negligent, but worse–“motivated by greed” and “reckless.” Punitive damages are designed to punish the defendant, and thus are different from damages for negligence, which are only meant to be compensatory. As well, a physician’s medical malpractice insurance may not necessarily cover punitive damages — or even nutritional recommendations or those involving dietary supplements. If in doubt, it’s best to check in writing with your insurance carrier. The Side Telemedicine Issue If Dr. Bob makes his recommendations to his patient while the patient is out of the state in which Dr. Bob’s practice (i.e., Dr. Bob is in the “home” state in this scenario, and his patient is in the “remote” state), then Dr. Bob might be viewed as practicing in the “remote” state. While some states provide allowances for temporary consultations while the patient is visiting the remote state, other more aggressive states might conclude that in recommending dietary supplements to a patient who is traveling through or located in a remote state, Dr. Bob is “prescribing” in the remote state. Typically, prescribing without an in-person, good faith exam, is unlawful. Standard of Care Concern If dietary supplements and nutritional therapies are not widely accepted as the (or part of the) course of treatment, there is a risk that enforcement authorities could find a standard of care violation. As Charell suggests, the legal ante gets upped if the practitioner also made a profit off a therapeutic recommendation that was non-standard or outside conventional medical bounds. Some On-Point Legal Authority California has an Attorney General opinion from 2001, that provides some sense as to how a clinician’s financial interest in dietary supplements could be perceived. IIn this situation (Op.Atty.Gen. No. 00-1002 (February 1, 2001), 2001 WL 117913), the Attorney General found that chiropractors are prohibited, under the terms of Business and Professions Code section 650, from participating in an Internet marketing plan in which they agree to promote the naturopathic products of an Internet company and to refer their patients to the company’s website in exchange for fees of 20 percent of the price of the products purchased by their patients from the company’s website. There is a temptation to dismiss this opinion as reflective of the early, wild West days of the Internet. However, it’s still resonating out there, unless and until the AG offers a different view. Some Suggestions The AMA and FSMB opinions make clear that they expect physicians to follow certain guidelines, including these: Physicians have a burden to justify the scientific and medical validity of their recommendations for dietary supplements. Physicians should fully disclose their financial interest in arrangements with dietary supplement manufacturers. Physicians risk malpractice liability, and medical board discipline, when they run afoul of these kinds of parameters. There are also state rules prohibiting kickbacks and fee-splitting to consider. These can also impact dietary supplement manufacturers and distributors who create and promote these kinds of programs. These laws can be very broad yet tough. For example, California Business and Professions Code, Section 650(a), prohibits a physician from receiving any “rebate” or “commission” as “compensation for referring patients…to any person.” Similarly, in New York, a physician may not receive any rebate or commission “in connection with the furnishing of professional care or service.” This prohibition is amplified by prohibitions on: (1) promoting the sale of services or goods for financial gain; (2) receiving any fee in exchange for “the referral of a patient;” (3) permitting any person to share in the fee for professional services; or (4) ordering unwarranted treatment. New Jersey limited a physician’s markup to cost plus 10% to cover administrative expense. This was changed by Assembly Bill 4133. Self-referral laws are often less critical, because they frequently focus only on certain designated health services set out in the governing statute — for example, referrals to clinical laboratories or for physical therapy; dietary supplements usually are not included. However, such statutes may require that physicians disclose their financial interest in the supplements when directing the patient to a website where the clinician makes a profit. One option that a Singularity Supplements might consider is to restructure its program as follows. Dr. Bob purchases, say, $100 retail worth of dietary supplements from Singularity Supplements at a wholesale price of $60, which is 40% off the retail price. Singularity Supplements charges Dr. Bob 25% of the retail price ($25) for the Website platform, and for the fulfillment / drop-ship / back-office function. Since Dr. Bob has bought $100 worth at a wholesale price of $60, and has paid $25 for platform and back-office services, he effectively earns $35. The argument to enforcement authorities would be that the $35, rather than being a kickback from Singularity Supplements to Dr. Bob for referring the patient, in fact represents the difference between wholesale and retail, less the admin charges at fair market value. Those charges have to be at fair market value (FMV). (And in New Jersey, the total profit to Dr. Bob cannot exceed $10.) Ideally, this can be worked out so that Dr. Bob does not have to purchase physical inventory, and so that the patient’s payment flows first through Dr. Bob’s account and then from Dr. Bob’s account to Singularity Supplements, as otherwise it appears as if Singularity Supplements is paying Dr. Bob a commission. Dr. Bob should disclose his financial interest at the time he sends the patient to the co-branded Webpage for purchase of supplements.
March 31, 2016
Healthcare
Is practicing hypnotherapy legal in California?
Is practicing hypnotherapy legal in California? That all depends on what the practitioner is doing and claiming. Are Hypnotherapists Licensed The first thing to understand is the different between licensure and scope of practice. You’re either a licensed healthcare practitioner or non-licensed. If licensed, you’re either: A physician (MD or DO). You have “unlimited licensure.” This means you can offer whatever therapies are appropriate to prevent and treat disease — subject to concerns about professional standards of care (i.e., don’t be negligent) and medical board discipline (ditto; and don’t commit fraud). An Allied Health Professional (such as clinical psychologist, nurse or nurse practitioner, or dentist). Your licensure is limited to the scope of practice set forth in your licensing statute, or by your board’s regulations (and sometimes interpreted by case law). You cannot diagnose and treat disease, generally speaking. You can use the accepted tools of your profession to do the things your licensure allows; this may or may not require physician supervision, depending on whether you are an independent or a dependent healthcare professional. A Complementary and Alternative Medicine Practitioner (such as a chiropractor, an acupuncturist, or a massage therapist). As with allied health practitioners, your licensure is limited to your scope of practice. For example, as a chiropractor, you can manipulate the spine; but can you do colonic irrigation? It depends on your state; this may require legal research. Similarly, as an acupuncturist, can you order X-rays or recommend herbs? Again, it depends. In California, there is no separate licensing category called “hypnotherapist.” Rather, as in most states, hypnotherapy would be considered a modality that would be part of the scope of practice of a specific profession. For example, physicians may employ medical hypnosis; dentists, dental hypnosis; and clinical psychologists, clinical hypnotherapy. California Addresses Hypnosis (hypnotherapy) California Business & Professions Code Section 2908 addresses hypnosis: Nothing in this chapter shall be construed to prevent qualified members of other recognized professional groups licensed to practice in the State of California, such as, but not limited to, physicians, clinical social workers, educational psychologists, marriage and family therapists, optometrists, psychiatric technicians, or registered nurses, or attorneys admitted to the California State Bar, or persons utilizing hypnotic techniques by referral from persons licensed to practice medicine, dentistry or psychology, or persons utilizing hypnotic techniques which offer avocational or vocational self-improvement and do not offer therapy for emotional or mental disorders, or duly ordained members of the recognized clergy, or duly ordained religious practitioners from doing work of a psychological nature consistent with the laws governing their respective professions, provided they do not hold themselves out to the public by any title or description of services incorporating the words “psychological,” “psychologist,” “psychology,””psychometrist,” “psychometrics,” or “psychometry,” or that they do not state or imply that they are licensed to practice psychology;except that persons licensed under Article 5 (commencing with Section 4986) of Chapter 13 of Division 2 may hold themselves out to the public as licensed educational psychologists. Note: attorneys can use hypnosis. (You are getting sleepy … in a moment you will pick up the phone and call our law firm…..) Let’s break this down. California law does not prohibit: licensed professionals from practicing hypnosis (for example, physicians, clinical social workers, educational psychologists….) persons using “hypnotic techniques” when referred by doctors, dentists or psychologists persons from using “hypnotic techniques” for “avocational or vocational self-improvement” so long as they do not offer therapy for emotional or mental disorders duly ordained members of the recognized clergy, or duly ordained religious practitioners from “doing work of a psychological nature consistent with the laws governing their respective professions” provided that these individuals: do not hold themselves out to the public by any title or description of services incorporating the words “psychological,” “psychologist,” “psychology,””psychometrist,” “psychometrics,” or “psychometry” do not state or imply that they are licensed to practice psychology This is a variation on title licensure: essentially, individuals listed in the statute, can use hypnotic techniques for the purposes and within the limitations identified in the statute, so long as they do not use the “psychologist” title or reference practice of psychology. Although the drafting and language are not the clearest, the main concern here seems to be to prohibit non-psychologists from using hypnosis for “emotional or mental disorders,” since those are considered the province of the licensed psychologist. Suggestions If you’re a licensed provider, make sure that hypnosis would be considered within your scope of practice. From a regulatory standpoint, one sanction for violating these rules could be prosecution of unlicensed of psychology. To stay on the safer side, avoid referencing mental or emotional disorders. In general, it’s safer to talk about things like: relaxation and balance goals and goal-setting habits (as long as we’re talking about improving habits, and not about some obsessive-compulsive habit or some other indicator of what could be considered, mental pathology) performance (again, steering clear of psychological conditions that can be impediments to improved performance) Also, if you’re in California and non-licensed, we recommend an SB 577 disclosure / consent form to provide services under the umbrella of law. My Voice Will Go With You Sure, the legal rules can be scary. I wrote in Future Medicine that the laws were initially written from the perspective of preventing fraud. We are talking about licensing laws, not about the Bill of Rights. They were not necessarily written from an evolved consciousness with the intention to promote transformation of human potential. Professional licensure has largely been acknowledged to be a political process, rife with turf battles. Having said that, my journey as a healthcare lawyer began with my own study of Ericksonian hypnotherapy – a long time ago and in a galaxy far, far away. (Well, actually it was New York City). I’m a big believer in the power of the unconscious mind, and in the importance of personal and societal healing. As a lawyer, I set my clients straight about the legal boundaries, so they can practice in a way that is mindful of our existing legal framework. Understanding your legal risk, and implementing good risk mitigation strategies, both are important in protecting your professional services from legal jeopardy.
August 1, 2015
Healthcare
If your medical device requires FDA 510k clearance but you put it on the market without a 510k, what happens?
If your medical device requires FDA 510k clearance but you put it on the market without a 510k, what happens?Many clients have asked us: do we have a medical device? Do we need to submit a 510k? What happens if we don’t file a 510k submission? Can we fly under the FDA radar? Bob has a new consumer product, consisting of an antenna and a receiver, which “beam information at the quantum level” to sync patients’ brainwaves and help patients heal. Anecdotally, the product has been wildly successful. Bob has 50 distributors across the country, and consumer testimonials about remarkable results, from reversing hearing loss to recovering from neurological conditions. Must Bob file a 510k? To properly advise Bob, we have to go back to the definition of a medical device, review classification of devices, talk about the intended use doctrine and labeling, and let Bob know about FDA’s enforcement options. Medical Device Definition The first question is whether you have a medical device. Look to the definition. A medical device is: an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component, part, or accessory, which is – (1) recognized in the official National Formulary, or the United States Pharmacopeia, or any supplement to them, (2) intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease in man or other animals, or (3) intended to affect the structure or any function of the body of man or other animals, and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of its primary intended purposes. One of the keys here is whether the intended use of the product is for diagnosis or treatment of disease. Remember that FDA has announced it will be more hands-off if you have a low-risk, general wellness product. The product must be intended for only general wellness use, and must present a very low risk to users’ safety. For example: exercise equipment, audio recordings, video games, software programs, and other products commonly available from retailers — again, provided the intended use is not to diagnose or treat cancer, obesity, diabetes, hypertension, migraines, or any other disease or condition. General wellness can include: maintaining or encouraging a general state of health or a healthy activity, or, associating the role of healthy lifestyle with helping to reduce the risk or impact of certain chronic diseases or conditions. For example, claims can be made about weight management, physical fitness, stress management or relaxation, sleep management, or even enhancing flow of qi. Sometimes it can be difficult to determine whether the intended use is diagnostic or treatment-oriented, as opposed to something else such as “general wellness.” In such cases, it’s best to contact FDA lawyers who can advise on whether you have a regulated medical device. 510k v PMA The next step is regulatory classification. Class I devices typically are exempt from premarket review requirements. Class II devices usually require a 510k, while Class III devices usually require a PMA. The 510k has a lower regulatory burden than the PMA, in that the 510k must demonstrate that the medical device is substantially equivalent to a legally marketed “predicate device.” This boils down to the new medical device having either the same technological characteristics as the predicate device (including appropriate clinical or scientific data, if deemed necessary by FDA), or, having different technological characteristics but essentially being as safe and effective. The PMA is not a comparative submission, but rather must demonstrate that the medical device is safe and effective in and of itself. During research and development of a new device, or of a new use for an existing device, manufacturers collect safety and effectiveness data to support their PMA or 510k by, among other things, conducting clinical trials. Before starting the clinical trial, the manufacturer must obtain an approved investigational device exemption (IDE). OTC Medical Device vs. Prescription Medical Device OTC medical devices must include in their labeling, “adequate directions for use” which inform the layperson how to use the device safely and for the purposes for which it is intended. This includes intended use; quantity of dose; frequency, duration, time. route or method, of application or administration; and preparation for use. Prescription medical devices need not have adequate directions for use on the label. Prescription devices must be prescribed under the supervision of a licensed practitioner, and the label must include: “Rx only” or “Caution: Federal law restricts this device to sale by or on the order of ” (physician, dentist, veterinarian, etc.). Adulteration and Misbranding The federal Food, Drug & Cosmetic Act (FDCA) prohibits adulteration and misbranding. A device is adulterated if there is something wrong with it that makes it unsafe and/or ineffective. For example, the device was made under unsanitary conditions or did not comply with the requirement for PMA approval. A device is misbranded if there is something wrong with its labeling that could lead to unsafe or ineffective use. This includes false or misleading advertising, inadequate instructions for use, or failure to obtain the required 510k clearance. As well, a device that requires 510k clearance but lacks such clearance is considered by operation of law to be a Class III device that requires a PMA, and therefore is also adulterated. (21 USC 513(f)(1)). And, a device that is “about to be significantly changed or modified in design, components, method of manufacture, or intended use” (21 C.F.R. § 807.81(a)(3)) requires a 510k. Significant changes include: (1) a change or modification of the device that could significantly affect the safety or effectiveness of the device; or (2) a major change or modification in the intended use of the device. The bottom line is that failing to submit a PMA or 510k when required for a medical device, is illegal and can trigger FDA enforcement action. Penalties What can FDA do? Civil monetary penalties (CMPs) have a maximum penalty of $15,000 per violation, not to exceed $1 million for all violations in a single proceeding. FDA can issue prior warnings before more serious enforcement. Prior warnings can include: FDA warning letter FDA civil suit, administrative action, or other regulatory correspondence Notification by other state, municipal, or federal agencies involving the same or similar violations FDA-483 (list of inspectional observations) provided by an FDA investigator at the conclusion of an inspection Discussion of objectionable conditions by FDA investigator with firm, as documented in the 483 Verbal notification from FDA to top management Written or oral advisory communication by FDA Industry meetings during which FDA discusses violations, if firm’s attendance is documented FDA’s current policy is that will usually provide prior warning before taking more serious enforcement action, but there are exceptions–notably, patient harm. FDA has a matrix for CMP fees, and will look at factors including: Nature of violations Circumstances Extent of violations Gravity (including patient harm) Ability to pay Effect on continued business History of prior violations Degree of culpability Other factors “as justice may require” In its Guidance for FDA Staff, Civil Money Penalty Policy, FDA states that civil monetary penalty (CMP) cases “should serve to eliminate the profit from violative activity and/or to provide non-compliant firms with the financial incentive to correct violations.” When a firm markets a device without required 510k clearance, the Guidance states, FDA usually documents prior warning of the violation, before imposing CMP, unless the violations represent a danger to health or are egregious in nature. Further, persons who are repeat violators (including those that fluctuate between being ‘out of compliance’ and ‘in compliance’ from one inspection to the next) may be good candidates for CMP action. FDA may also impose CMP for promotion and advertising violations, failure of sponsors to meet IDE reporting requirements, or failure of clinical investigators to submit completed case reports. Interestingly, the Guidance states that where in the past, FDA has used seizure or injunction for low-risk devices, FDA now will likely impose civil monetary penalties. In cases where there has been fraud or other criminal activities, FDA’s Office of Criminal Investigation (OCI) may investigate. Should the investigation reveal evidence of criminal activity, FDA would work with the Department of Justice for possible prosecution of those involved. For misdemeanor violations, the government need not show criminal intent. An FDCA misdemeanor may be punished by a maximum of year in prison and a fine of $100,000 for an individual, $200,000 for a corporation. Felonies involve violations where there was “intent to defraud or mislead,” or a repeat offense. Company officers can be held personally (criminally) responsible in both criminal prosecution and monetary proceedings. Back to Bob One item that’s critical in Bob’s marketing is that he targets his product toward patients with a variety of named conditions. FDA can easily search for these terms online and find Bob’s products. Bob has to be careful not to make diagnostic or therapeutic claims for his products. He should monitor the testimonials his company posts, or LIKES on social media, as these too could indicate a diagnostic or therapeutic intended use. If Bob has a medical device, we will need to find out whether it is Class I, II or III. We’ll need to know more about Bob’s product. He may have a biofeedback device (21 CFR 882.5050): “an instrument that provides a visual or auditory signal corresponding to the status of one or more of a patient’s physiological parameters (e.g., brain alpha wave activity, muscle activity, skin temperature, etc.) so that he patient can control voluntarily these physiological parameters.” FDA regulates a biofeedback device as a Class II device if it is a prescription battery-powered device that is indicated for relaxation training and muscle reeducation. Otherwise, the device may be Class III. When Bob talks about brainwave optimization he may be indicating a different mechanism and intended use than when he talks about “quantum” effects. Bob may or may not have a general wellness, low-risk medical device. As well, Bob must have substantiation for the claims he makes regarding efficacy. If Bob does not have competent and reliable scientific evidence, he may find himself at the butt of enforcement action by FTC as well as FDA, and, sued by private plaintiffs as well. Overall, Bob will need legal advice by FDA lawyers experienced with medical device regulation, to properly assess what he has. One thing is for sure: unless Bob nefariously beams his quantum device so that regulators will say, “these droids are not worth your trouble,” he’ll be on FDA’s radar – it’s no surprise that the Agency has Internet access too, and can easily find Bob’s website and all the claims he makes about his consumer product. With radar ubiquitous, flying under is no longer an option. Also, if Bob wants to have a realistic exit strategy, he should pay close attention to regulatory strategy, compliance, and documentation. M&A due diligence will uncover any holes in Bob’s FDA legal strategy. Our FDA lawyers have counseled ventures and entrepreneurs like Bob as to their medical device, FDA obligations. Particularly given our interest in complementary and alternative medical therapies and holistic health, we’ve been interested in FDA legal issues long before FDA issued its guidance on general wellness products.
July 22, 2015
Healthcare
Does your concierge medicine advertising create legal jeopardy and liability?
Advertising and marketing are two areas that concierge medicine practices frequently neglect when assessing liability risk. But legal jeopardy can arise from advertising and marketing claims on your website or in your brochures, patient handouts, and other marketing materials–whether you have an integrative medicine clinic, functional medicine practice, anti-aging medicine group, concierge or retail medicine practice, or even a conventional medical or surgical practice. The large medical malpractice verdict against MDVIP is a case in point. The Malpractice Verdict Against MDVIP That MDVIP, one of the nation’s leading concierge medical management companies, could be held liable for the negligence of one of its physician clients, came as shocking news. MDVIP has experienced skyrocketing success in promoting concierge medicine in the U.S. MDVIP has focused on preventative medicine and wellness, and profited by providing quick access to physicians and “exceptional care,” in exchange for an annual membership fee. For this promise, MDVIP got socked with an $8.5 million malpractice liability verdict in Florida. The verdict resulted from the negligence of a physician contracted with MDVIP, who had been sued for misdiagnosing a patient, resulting in amputation of the patient’s leg. To be sure, MDVIP did not actually provide the care nor did it supervise the physician’s care. So why should MDVIP be held liable? Potential MSO Liability for Managing and Marketing Patient Care In one sense, MDVIP is acting like any medical services organization (MSO) in managing and marketing patient care–albeit in the specialized arena of concierge medicine. An MSO (or any organization that manages and markets physician or other clinical services) can face several legal risks, particularly in states that have a strong corporate practice of medicine law, and in all states due to fee-splitting and anti-kickback concerns. See, for example: Corporate Practice of Medicine & Anti-Kickback / Fee-Splitting Rules: Deep Down the Regulatory Rabbit Hole Fee-Splitting 101 for Medical Doctors, Chiropractors, Acupuncturists, and Others Is it Fee-Splitting for Medical Doctors to Share Revenues with Non-Medical Business Owners Are You Handling Licensing, Corporate Practice of Medicine, Fee-Splitting, Standard of Care, Informed Consent, HIPAA (privacy & security), Scope of Practice, Liability, Advertising, Contract, & FDA Issues in Your Telemedicine Venture Let’s be clear that liability for negligence can come in two basic forms: direct and vicarious. Direct Liability vs. Vicarious Liability for Medical Negligence For example, when a physician is negligent by misdiagnosing the patient (as happened in the MDVIP case), the physician is directly liable for his or her conduct. This is direct liability. A person can be directly liable in several ways, including: a negligent act or omission negligent failure to supervise, if the person has legal authority of supervision (for example, MD over RN) other, related negligent failures — for example, negligent credentialing if the person has undertaken legal responsibility to vet the provider (for example, hospital’s failure to vet physician when giving hospital privileges) A person can also be vicariously liable for someone else’s conduct. Vicarious liability can arise in various ways; perhaps the most surprising is that there is an “apparent agency” (in other words, A is negligent but B is held liable because the arrangement makes it appear as though A was B’s agent). In one sense, we can look at the MDVIP verdict as a version of vicarious liability, in which liability is transferred up the chain to another party who was not “directly” negligent (by act or omission). Because MDVIP did nothing, as far as we can tell, that resulted in the leg amputation. All MDVIP did was contract with the physician. MDVIP had nothing to do with the clinical care itself–nor could it, as MDVIP is not a professional medical corporation. Whether or not MDVIP is involved, vicarious liability is a concern in any medical practice–conventional, functional, anti-aging, integrative, concierge, or otherwise; and broadly speaking, vicarious liability can affect other healthcare professionals as well as those managing and marketing the practice. Of course, management companies are not often the targets of medical malpractice lawsuits; nor, for example, is a physician typically liable for referring to a chiropractor (or the reverse). But here are some of the ways vicarious liability can arise: all providers could be held vicariously liable for negligence of their colleagues–particularly if they share clinical approaches and consult among one another within an integrative clinical care setting those who are organizing, arranging, or marketing the services could be seen as vicariously liable for the negligence of the clinicians, because they could be seen as agents for the practitioners the organizers, arrangers, marketers, could be seen to be making implied promises about the quality of care or level of competence of the practitioners (this is a variation on negligent credentialing) The bottom line is that MDVIP was held responsible for promising “exceptional care,” and a misdiagnosis that results in leg amputation is obviously not “exceptional care.” New Awareness of Potential Liability Risks When Promoting Concierge Medicine Awareness of potential liability risks can lead to better risk management–and hopefully, lower risk (and improved patient care as a downstream result). In Concierge Medicine Firm Found Liable for Doctor’s Negligence, Kaiser Health News reports: Industry experts say the ruling is significant because it shows concierge companies can be held liable for the care provided by their contracted doctors. The companies typically argue they do not actually provide care but merely act as brokers between doctors and patients…. [O]ne of the plaintiff’s attorneys, said the verdict will push MDVIP and similar companies to scrutinize doctors more carefully before they affiliate with them because they may be liable for the doctors’ actions. Such companies will also be more cautious about advertising that they offer better care. Unfortunately for such companies, by taking more care to vet physicians, they will run into the risk of liability for negligent credentialing, if their vetting efforts fail to prevent a doctor’s negligence. While MDVIP lookalike companies will be more cautious in vetting clinicians as well as in their marketing, negligent credentialing and other liability theories are not the only source of risk. Plaintiffs’ lawyers no doubt now will look to many different legal theories to get the MDVIPs and MSOs of the world on the hook, including: direct liability / negligent credentialing vicarious liability / apparent agency federal advertising law (FTC prohibition on false, misleading, and deceptive advertising) consumer protection laws, including state advertising law and statutes such as, in California, Business & Professions Code Section 17200 (prohibiting unfair competition) Risk Management for Concierge Medical Practices Concierge medicine practices will still have to monitor other legal and liability issues, such as being careful not to violate federal law if the physician remains Medicare par or non-par (but not opted out). See, for example: How Medicare.gov helps with legal review of concierge medicine services Concierge v. Direct Primary Care: Legal Issues Packaging Medical Services – Is it a Legal Concierge Arrangement, or An Illegal Kickback? Concierge Medicine (Legal Issues) These legal and regulatory issues can be tackled, but this requires an overall vision of the various potential rocks in shallow waters–the different sources of liability that should be reckoned with and, ideally, mitigated. Conclusion Some say medicine is dead; but the reality is that it is morphing into different forms. Today, “concierge” practice, retail medicine, boutique medicine, hybrid models, direct primary care, cash-only practices, VIP care, executive physicals, personalized medicine; tomorrow, mobile medical apps, wellness care through your integrative care clinical team or via your latest wearable health tech tracking technology; after that, nanotechnology and your personal wearable or cloud robot. The forms of delivery of wellness and health care keep changing–as do the business models and legal strategies for delivering these new forms of care. We still have these relatively archaic pillars of jurisprudence that have been handed down from time immemorial (unless anyone remembers Hammurabi). Companies and counsel who represent them, must stay adept and deploy risk management strategies as the market keeps changing.
March 18, 2015
Healthcare
How can you organize a Massachusetts medical spa or integrative care center legally without fee-splitting?
Unlike California, which provides clear guidance regarding legal and enforcement hot buttons for medical spas and integrative care clinics, Massachusetts law requires more digging. As with New York and other states’ laws, Massachusetts does not offer us the clearest picture of medical spa or integrative medicine compliance legal obligations. For example, suppose you have a chiropractor who wants to start an integrative care center in Massachusetts, New York, California, Texas, Michigan, Oregon, Arizona, New Jersey, or any other state. The chiropractor wants to give the medical doctor an incentive to cross-refer, yet not run afoul of anti-kickback rules (which prohibit giving something of value in exchange for a referral). Is there a more lawful or compliant way to create incentives within the business structure between the D.C., the M.D., and their respective entities – and should they form LLCs or professional corporations? The chiropractor knows something about corporate practice of medicine, fee-splitting / anti-kickback prohibitions, and similar rules, but wonders whether the integrative care clinic will be difficult because it is a D.C. and not an M.D. who proposes to organize the clinic. There’s the rub, indeed. In this situation, there are several areas of law to track. These include: Corporate practice of medicine concerns, as mentioned. Massachusuetts has an informal policy prohibiting undue intrusion from management companies, medical service organizations (MSOs) and others into clinical medical care. In other words, there is a strong prohibition against corporate practice of medicine. Law of professional organizations. Physicians can form professional medical corporations, and chiropractors can form professional chiropractic corporations, per Masachusetts General Law, Chapter 156a. However, the corporate practice of medicine is likely still a bar against a chiropractor hiring an MD into a professional chiropractic corporation. Kickback and fee-splitting prohibitions. For example, Chapter 175H of Massachusetts General Law deals with False Health Claims. Section 2 (false statements on applications for coverage and claims; failure to disclose) provides: Any person who (1) knowingly and willfully makes or causes to be made any false statement or representation of a material fact in any application for a payment of a health care benefit;[1] or (2) knowingly and willfully presents or causes to be presented an application for a health care benefit containing any false statement or representation of a material fact; or (3) knowingly and willfully makes or causes to be made any false statement or representation of a material fact for use in determining rights to a health care benefit, including whether goods or services were medically necessary in accordance with professionally accepted standards; or (4) having knowledge of the occurrence of any event affecting his initial or continued right to any health care benefit, conceals or fails to disclose such an event with an intent to fraudulently secure such benefit either in a greater amount than is due or when no such benefit is due; or (5) having knowledge of the occurrence of any event affecting the health care benefit of any other individual in whose behalf he has made or presented an application for such benefit, or in whose behalf he is receiving any health care benefit, conceals or fails to disclose such an event with an intent to fraudulently secure such benefit either in a greater amount than is due or when no such benefit is due, shall be punished by a fine of not more than ten thousand dollars, or by imprisonment in a jail or house of correction for not more than two and one-half years or in the state prison for not more than five years, or by both such fine and imprisonment, and may be held liable in a civil action under section seven. Notwithstanding the foregoing, a person who is not a provider of services for which a health care benefit may be paid shall not be subject to prosecution hereunder for any statement or representation which such person makes without fraudulent intent. Section 3(a) (solicitation, improper inducement to use goods, facilities, services, or products covered by insurance) provides: Any person who solicits or receives any remuneration, directly or indirectly, overtly or covertly, in cash or in kind in return for purchasing, leasing, ordering or arranging for or recommending purchasing, leasing, or ordering of any good, facility, service, or item for which payment is or may be made in whole or in part by a health care insurer, or any person who offers or pays any remuneration, including any bribe or rebate, except as provided in subsection (b), directly or indirectly, overtly or covertly, in cash or in kind to induce any person to purchase, lease, order or arrange for or recommend purchasing, leasing or ordering of any good, facility, service, or item for which payment is or may be made in whole or in part by a health care insurer, shall be punished by a fine of not more than ten thousand dollars, or by imprisonment in a jail or house of correction for not more than two and one-half years or in the state prison for not more than five years, or by both such fine and imprisonment, and may be held liable in a civil action under section seven. The authority to prosecute offenses under this chapter rests with the Attorney General’s Office (section 5); penalties, as noted, include fines and imprisonment, as well as civil liabilities such as restitution (sections 2, 5, 7). Chapter 175H does not set forth any statutory exceptions (other than those set forth in section 3(b) which relate to retail pharmacies) Fee-splitting prohibitions are alive and well in Massachusetts. What are some options for the chiropractor, acupuncturist, or other non-MD healthcare service provider? Rent space only. Create a “medical mall” in which the integrative care center is basically a storefront with independent practices. The problem is that rentals only do not provide sufficient incentive to the physician who believes they can do better without the chiropractor or non-MD provider. Create a management company (MSO) and consider giving the MD a stake in the MSO. The issue is that this creates a conflict of interest for the physician, may require disclosure to the patient and the medical board, and requires that the MD do something specific to earn the management company stake. Create a professional chiropractic corporation. One challenge here is that the corporate practice of medicine doctrine makes it difficult to manage an MD-drive integrative care clinic or multidisciplinary clinical enterprise. Provide management / MSO services to a professional medical corporation. This can be financially advantageous if the MSO charges well (but at fair market value) for management and marketing services; but, this structure can give a lot of power to the MD president of the professional medical corporation. These are just some of the potential configurations. There are pros and cons to the various alternatives. And, there are enforcement risks depending on how strongly a given state cares about corporate practice of medicine or takes fee-splitting seriously enough to routinely investigate multi-disciplinary practices. The main challenge here is that we have chiropractor-driven integrative care (in the integrative clinic scenario) and layperson-driven medical spa services (in the medical spa scenario). Once a licensed healthcare provider or non-licensee is at the top of the chain – and not the MD – then corporate practice of medicine and fee-splitting rules create issues. Our healthcare & FDA lawyers track health care and FDA legal developments so we can counsel our clients on their compliance legal obligations.
March 9, 2015
Healthcare
Do acupuncturists have to comply with HIPAA when they share an electronic medical record?
Whether HIPAA applies to acupuncturists who share a medical record, is one of those arcane questions our healthcare lawyers get. The answer isn’t all that easy to obtain. Like many healthcare & FDA legal issues, this HIPAA question is a fun treasure hunt through the legal rules. HIPAA itself is really a statute, under which the U.S. Secretary of Health and Human Services has promulgated at least five regulations, of which only the first two (Privacy and Security) are the ones we normally care about. Before we even start, there’s a preemption rule to tackle: HIPAA will supersede relevant state law, unless state law is found to be more stringent. HIPAA does not preempt state requirements related to reporting of disease, child abuse, birth and death, or that authorize public health surveillance or public health investigation or intervention. Let’s move past preemption now. HIPAA regulates electronic data exchange of health care information. The relevant provisions of HIPAA, known as the “Administrative Simplification” provisions, essentially amend the federal Social Security Act’s Medicare and Medicaid provisions. HIPAA is intended to protect the privacy of patients’ protected health information (“PHI”). PHI means individually identifiable health information that is transmitted by electronic media, maintained in electronic media, or transmitted or maintained in any other form or medium (whether electronic or hardcopy). PHI is a subset of the individual’s health information; identifiable health information means health information (including demographic information) that identifies the individual, or with respect to which there is a reasonable basis to believe the information can be used to identify the individual. HIPAA requires covered entities to: Provide information, in writing, to patients about their privacy rights and how their information will be used. Develop policies, procedures, and systems to protect patient privacy and patients’ ability to access, addend and amend their records. Train staff on these procedures. Appoint a “privacy officer” to ensure privacy procedures are developed, adopted, and followed. Appoint a “security officer” to ensure security procedures are developed, adopted, and followed. Secure patient records that contain PHI from individuals who should not see them. Account for specified disclosures of PHI. Establish a complaint mechanism for privacy concerns. Establish and enforce a system of sanctions for employees who violate privacy policies and procedures. Notify patients and government agencies in the event of a breach, where required. Typically, health care plans subject to HIPAA will have a compliance plan, including a compliance manual with a full set of policies, procedures and forms. HIPAA only applies to the following types of covered entities (for the moment, we’re omitting business associates and their subcontractors): (1) a health plan; (2) a health care clearinghouse; (3) A health care provider who transmits any health information in electron form in connection with a transaction referred to in section 1173(a)(1). Here, “262” refers to the section of HIPAA, and “1173” to the section being inserted into the Social Security Act; HIPAA is, as noted, codified in Title 42 of the U.S.C. Under HIPAA, the term “health care provider” includes: “a provider of services (as defined in section 1861(u)), a provider of medical or other health services (as defined in section 1861(s)), and any other person furnishing health care services or supplies.” Next, under section 1861(u), the term “provider of services” means a “hospital, critical access hospital, skilled nursing facility, comprehensive outpatient rehabilitation facility, home health agency, hospice program, or … a fund.” The term “medical or other health services” has a lengthy definition, which includes: (1) physicians’ services; (2) services and supplies furnished as a “incident to a physician’s professional service;” (3) diagnostic X-ray tests …. (6) durable medical equipment; (7) ambulance service; and other services which do not appear to apply to services an acupuncturist might furnish The catch-all, “any other person furnishing health care services or supplies” is not limited to medical services or physicians. It would appear to encompass services by an acupuncturist. This conclusion is bolstered by the definition of “health care” under the HIPAA regulation Health care means care, services, or supplies related to the health of an individual. Health care includes, but is not limited to, the following: (1) Preventive, diagnostic, therapeutic, rehabilitative, maintenance, or palliative care, and counseling, service, assessment, or procedure with respect to the physical or mental condition, or functional status, of an individual or that affects the structure or function of the body; and (2) Sale or dispensing of a drug, device, equipment, or other item in accordance with a prescription. Further, the U.S. Department of Health & Human Services (“HHS”), on its webpage dedicated to Health Information Privacy, states that a “health care provider” includes: doctors, clinics, psychologists, dentists, chiropractors, nursing homes, pharmacies, and others (but only if they transmit any information in an electronic form in connection with a transaction for which HHS has adopted a standard (see b. below)). The list suggests that other providers, such as acupuncturists, would be included. HHS also provides an easy-to-use question and answer decision tool to determine whether one is a covered entity. This links to a decision chart on the website for the Centers for Medicare & Medicaid Services. The first question is: “does the person, business, or agency furnish, bill or receive payment for, health care in the normal course of business.” It does sound as though acupuncturists would be considered healthcare providers subject to HIPAA. However, HIPAA only applies to a “health care provider who transmits any health information in electronic form in connection with a transaction referred to in section 1173(a)(1).” This statutory section requires HHS to adopt (1) …. standards for transactions, and data elements for such transactions, to enable health information to be exchanged electronically, that are appropriate for— (A) the financial and administrative transactions described in paragraph (2); and (B) other financial and administrative transactions determined appropriate by the Secretary, consistent with the goals of improving the operation of the health care system and reducing administrative costs. (2) TRANSACTIONS.–The transactions referred to in paragraph (1)(A) are transactions with respect to the following: (A) Health claims or equivalent encounter information. (B) Health claims attachments. (C) Enrollment and disenrollment in a health plan. (D) Eligibility for a health plan. (E) Health care payment and remittance advice. (F) Health plan premium payments. (G) First report of injury. (H) Health claim status. (I) Referral certification and authorization. Under the HIPAA regulations, transaction means the transmission of information between two parties to carry out financial or administrative activities related to health care. It includes the following types of information transmissions: (1) Health care claims or equivalent encounter information. (2) Health care payment and remittance advice. (3) Coordination of benefits. (4) Health care claim status. (5) Enrollment and disenrollment in a health plan. (6) Eligibility for a health plan. (7) Health plan premium payments. (8) Referral certification and authorization. (9) First report of injury. (10) Health claims attachments. (11) Other transactions that the Secretary may prescribe by regulation. Of these, the question is whether sharing patient medical information in-office via an EHR constitutes “health claims or equivalent encounter information. HIPAA regulations define “health claims or equivalent encounter information” as either of the following: (a) A request to obtain payment, and the necessary accompanying information from a health care provider to a health plan, for health care. (b) If there is no direct claim, because the reimbursement contract is based on a mechanism other than charges or reimbursement rates for specific services, the transaction is the transmission of encounter information for the purpose of reporting health care. So, the scenario of acupuncturists sharing an EHR in and of itself does not appear to trigger HIPAA compliance necessarily. The short form of this is that we typically look to whether providers electronically transmit patient health information for insurance reimbursement. This isn’t legal advice, per se – it’s a journey through the regulatory treasure hunt. Our HIPAA attorneys track privacy and security legal developments, as we counsel our clients on their compliance legal obligations.
February 7, 2015
Healthcare
Is it fee-splitting for medical doctors to share revenues with non-medical business owners?
”I provide medical (or acupuncture, chiropractic, osteopathic, massage) services on an hourly basis and get paid a percentage of revenues in return.” Is that fee-splitting? The fee-splitting question is a typical one that clients bring to our firm. The client may be the venture owner / entrepreneur, the medical director for a medical group, or a practitioner who is a medical doctor or osteopathic physician, or a chiropractor, acupuncturist, homeopath, massage therapist, or other clinical care provider. The answer to the fee-splitting question depends both on the kind of provider, and on state law – and the other underlying circumstances, such as whether the healthcare provider is an employee or independent contractor. For example, some statutes do not apply fee-splitting prohibitions to massage therapists, but do apply the prohibitions to medical doctors, chiropractors, and acupuncturists. It’s important to read the rules carefully and apply them to the facts. Let’s first talk about federal Stark and anti-kickback legal rules. Federal Law – Stark, Anti-Kickback Law Let’s assume for now that the provider is a healthcare licensee and that no Medicare or Medicaid reimbursement is involved. If the healthcare provider submits claims for reimbursement to Medicare or Medicaid (or in California, Medi-Cal), then our healthcare lawyers would do a Stark and anti-kickback analysis under federal law. (See Federal Self-Referral (Stark) and Anti-Kickback Analysis for Integrative Care Center, for a summary of federal self-referral and anti-kickback law, and its application in particular to integrative medicine). We would first analyze compensation arrangements. We would look, among other things, to: Corporate practice of medicine and unlicensed medical practice concerns. Scope of practice rules for each practitioner. State laws prohibiting kickbacks, fee-splitting, self-referral, and exploitation of patients for financial gain. If Medicare or Medicaid are not involved, then we look only to state law. Let’s look at New York for a sample of what’s in store under state law. Corporate Practice of Medicine Some states have a “weak” corporate practice of medicine rule. This means they typically prohibit non-clinicians from practicing medicine or intruding into clinical practice. But they do not prohibit laypersons from employing physicians, so long as the layperson has no actual control over the practice of medicine. By contrast, New York State has a “strong” corporate practice of medicine prohibition. (See New York’s Strong Corporate Practice of Medicine Requires a Professional Corporation for Professional Services). Laypersons cannot hire physicians, period (with very limited exceptions). Under this rule, medical service organizations (MSOs) must be structured properly as they can blur the distinction between professional judgment and administrative services. California, Texas, and various other states similar have a strong corporate practice of medicine legal prohibition. In New York, a corollary of this strong corporate practice of medicine, is the rule requiring separation of activities between professional medical corporations and general business corporations. All professional services can only be offered within a professional service corporation (“PC”), or a professional limited liability company (“PLLC”). Business services have to be performed with a simple LLC or general business corporation, but the MSO cannot perform professional services. So, for example, who hires the nurse? The professional medical corporation. Who hires the front desk person? The general corporation. Can the MSO handle the payroll for the nurse, physician assistant, and other clinical providers? The MSO can administer payroll, but it cannot be the employer, as the employer has supervisory responsibilities and clinical control over dependent practitioners’ activities. Scope of Practice The next issue is legally authorized scope of practice; scope of practice rules require that non-medical practitioners (such as licensed acupuncturists) remain within the practice boundaries specified by their licensed statute, as clarified by any subsequent regulations promulgated by the state acupuncture board. See, for example, Legal Rules Restrict Scope of Practice Boundaries in Acupuncture. Practicing beyond the scope of practice can: Put the healthcare practitioner at risk of unlicensed practice of medicine. Put the organization at risk of aiding and abetting unlicensed practice of medicine. Both are criminal violations. Additional risks include professional discipline, and, vicarious liability for the negligence of others. Two things our healthcare lawyers do, in addition to researching the legally authorized scope of practice for each clinician, are: Draft contract language that limits the clinician’s activities to appropriate practice boundaries. Implement a strong credentialing scheme before hiring. This helps reduce risk of vicarious liability—liability for the actions of others. Note that this can at the same time create a risk of liability for negligent credentialing should patient injury ensue, so there are pros and cons to being a directory only an organization that credentials providers. Self-Referral and Fee-Splitting New York has several rules addressing self-referral and kickbacks / fee-splitting. It’s worth citing some of these specifically, because they provide a more extensive web of regulation than exist in many states. New York State Education Law, Section 6509-a Within Title VIII, the general provisions of Article 130 are applicable to all the health care professions. (See NYS Health Care Provider Licensing Laws Spell Out Who Can Practice). This is important, because we’ll want to know which clinical care practitioners are within the regulatory umbrella. Subarticle 3 (Section 6509 of NYS Education Law) contains a list of activities that constitute professional misconduct. Professional misconduct includes such conduct as: Practicing the profession fraudulently, beyond its authorized scope, with gross incompetence, with gross negligence on a particular occasion or negligence or incompetence on more than one occasion. Permitting, aiding or abetting an unlicensed person to perform activities requiring a license. Committing unprofessional conduct, as defined by the Board of Regents in its Note that these definitions pick up the ideas articulated earlier about scope of practice and unlicensed practice. Section 6509-a of NYS Education Law contains the following additional definition of professional misconduct: That any person subject to the above enumerated articles, has directly or indirectly requested, received or participated in the division, transference, assignment, rebate, splitting or refunding of a fee for, or has directly requested, received or profited by means of a credit or other valuable consideration as a commission, discount or gratuity in connection with the furnishing of professional care, or service… Here note the language, “directly or indirectly.” Clients sometimes ask, “does it matter if the money goes first to X and then Y?” The money could flow through a hole in the Earth to China, but “directly or indirectly” is pretty clear. Also, Section 6509-a applies to some of the licensed health care professionals under Title VIII (including chiropractors, nurses, and physical therapists), but the list does not include providers such acupuncturists (see Group 6509 to Kickback Prohibition Under State Law). Again, it’s important to see who is included and who is not included. However, there still could be fee-splitting provisions in the licensing laws governing the professions not covered by 6509-a. Further, such professionals would likely be covered the Rules of the Board of Regents (below). This is why it’s important to have your healthcare lawyers look at all the rules that could potentially apply to a fee-splitting question. Just because one rule doesn’t apply, does not mean there aren’t others (if you follow both double negatives; put another way, there are lots of rules that could conceivably apply!). Even though 6509-a does not, by its terms, apply to acupuncturists, 6509-a does have an exception that becomes important in light of other provisions of law covered further below: Nothing contained in this section shall prohibit such persons from practicing as partners, in groups or as a professional corporation or as a university faculty practice corporation nor from pooling fees and moneys received, either by the partnerships, professional corporations, university faculty practice corporations or groups by the individual members thereof, for professional services furnished by any individual professional member, or employee of such partnership, corporation or group, nor shall the professionals constituting the partnerships, corporations or groups be prohibited from sharing, dividing or apportioning the fees and moneys received by them or by the partnership, corporation or group in accordance with a partnership or other agreement…. We will describe the “group” exception in more detail later. Kickbacks, Fee-Splitting, and Exploitation of Patients (Rule 29b-1 of the Rules of the Board of Regents) Unlike 6509-a, Section 29.1b applies to “any profession licensed, certified or registered” under Title VIII. This is big. Each of those professions is included. Section 29.1b contains three different prohibitions: Exercising undue influence on the patient or client, including the promotion of the sale of services, goods, appliances or drugs in such manner as to exploit the patient or client for the financial gain of the practitioner or of a third party. Directly or indirectly offering, giving, soliciting, or receiving or agreeing to receive, any fee or other consideration to or from a third party for the referral of a patient or client or in connection with the performance of professional services; Permitting any person to share in the fees for professional services, other than: a partner, employee, associate in a professional firm or corporation, professional subcontractor or consultant authorized to practice the same profession, or a legally authorized trainee practicing under the supervision of a licensed practitioner. This prohibition shall include any arrangement or agreement whereby the amount received in payment for furnishing space, facilities, equipment or personnel services used by a professional licensee constitutes a percentage of, or is otherwise dependent upon, the income or receipts of the licensee from such practice….. These rules are a handful. First, exploiting patients is prohibited, but what does that mean? Does selling dietary supplements in-office constitute exploiting patients for financial gain? Second, there is the language again about “directly or indirectly” agreeing to give or receive a fee in exchange for a referral. Third is a powerful prohibition against “permitting any person to share in the fees for professional services.” This expresses a strong disfavor for any percentage-based arrangement. Whereas in California, an MSO can accept a percentage of gross revenues of the medical practice at fair market value, in exchange for designated management services (Business & Professions Code Section 650(b)), in New York, the above rule appears to prohibit percentage-based MSO fees. The rule contains an exception for a partner, employee, associate in a professional firm or corporation, professional subcontractor or consultant authorized to practice the same profession, to share fees. Again, California Business & Professions Code Section 650(b), provides a fair market value safe harbor to the anti-kickback and fee-splitting prohibition in California Business & Professions Code Section 650(a). New York appears to knock out this potential safe harbor with a broader prohibition against revenue shares, except where a partner, employee, associate is concerned. And, even with a partner, employee, associate, we also have to think about New York’s Rule 29.2a-7, which prohibits “ordering excessive tests, treatment, or use of treatment facilities not warranted by the condition of the patient.” One never knows how enforcement authorities will view a given arrangement. The goal is to create as defensible a position as possible. Self-Referral (NYS Public Health Law Section 238-a; NYCRR) NYS Public Health Law Section 238-a prohibits referral of certain designated health services to an entity (or an immediate family member) with which the practitioner has a financial relationship. Those services include: clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services. The rule contains a complicated number of exceptions (including for a group practice, and for a lease at fair market value for over a year). (See Mini-Stark Statute Addresses Self-Referral Issues). The prohibition in 238-a is a New York State version of Stark. (That’s mini-Stark, not mini-Me). However, the so-called designated health care services must be involved, for the rule to be triggered in the first place. In addition to 238-a, Part 34, Chapter II, the Administrative Rules and Regulations of the NYS Codes, Rules & Regulations (“NYCRR”), Title 10, deals with Health Care Practitioner Referrals (as well as Laboratory Business Practices, among other topics). (See Health Care Referrals for Designated Health Services Raise State Law Issues). So here is yet one more legal rule to reckon with. Section 34-1.5 (Disclosure: other health or health related items or services) provides that: (a) With respect to referrals for health or health related items or services other than clinical laboratory services, pharmacy services, radiation therapy services, or x-ray or imaging services, and except as provided in subdivision (c) of this section, a practitioner may not make a referral to a health care provider for the furnishing of health or health related items or services where such practitioner or immediate family member of such practitioner has any of the following financial relationships without disclosing to the patient such financial relationship (emphasis added): (1) an ownership or investment interest with such health care provider; or (2) a compensation arrangement with such health care provider which is in excess of fair market value, or which provides for compensation that varies directly or indirectly based on the volume or value of any referrals of business between the parties. (b) The disclosure shall provide notice of any such financial relationship and shall also inform the patient of his or her right to utilize a specifically identified alternative health care provider if any such provider is reasonably available, and shall be in the form specified in section 34-1.6 of this Subpart. Such form shall also be posted prominently in the practitioner’s office. (emphasis added) …. (d) A practitioner shall maintain documentation of each instance of disclosure to a patient pursuant to this section. Section 34-1.6 provides a sample disclosure form (See Sample Disclosure Form for Self-Referrals). The answer doesn’t stop with an analysis of the earlier fee-splitting rules. More New York Anti-Kickback and Fee-Splitting Law One thing that can be helpful in interpreting this maze of legal rules, is to look for court cases interpreting the self-referral, anti-kickback, and fee-splitting rules. Fortunately, New York has a number of cases. In these cases, New York courts frequently invoke § 6509-a, Rule 29.1b, and §238-a together, making it difficult to determine the contours of the “group” exception and the limits of permissible arrangements (See Do Percentage-based, Revenue-sharing arrangements Between a Clinic and its Health Care Practitioners Violate Stark, Antikickback and Fee-splitting Laws?) Moreover, New York courts are rather mixed in their assessment as whether different percentage-based arrangements fall within relevant legal boundaries, or are prohibited by the various statutes and rules referenced above. On balance, the courts disfavor revenue-sharing arrangements involving MSO services for medical groups and practices. For example, New York courts have found a variety of fee-splitting arrangements to violate § 6509-a. Cases include: Sachs, Toffler—arrangements in which dentists remitted a percentage of revenues to landlords. Katz—arrangement wherein MD would pay technicians a percentage of test fees. Bell—arrangement whereby dentist paid a non-dentist a commission to garner patients. LoMagno—fee-splitting arrangement. Necula—payment by radiologist of a percentage of receipts for billing services. Splitting fees between clinicians and MSOs were explicitly disapproved and disallowed in several cases: Calendar—remission by physicians of a percentage of their gross earnings to a corporation constituted both illegal fee-splitting and the corporate practice of medicine. Mukendi—sharing of a percentage of net receivables or of collected receivables from a clinic, and the clinic was illegal. This may somewhat shocking to the person who wants to create a medical spa, for example, and revenue share with physicians based on the argument that “everyone is doing it.” As noted, the rules themselves are drafted broadly, suggesting any percentage-based payment creates some potential enforcement risk, even if the practice is defensible in theory. Some portion of “everyone” gets investigated by undercover agents posing as patients (while collecting evidence). “Mall Model” vs. “Center Model” and MSO Arrangements Every situation has to be analyzed separately to see how it meets the symphony of legal rules about self-referral, kickbacks and fee-splitting, Percentage-based, revenue share arrangements in the healthcare environment often require a detailed written analysis. In New York, some of the more useful exceptions are: Revenue-sharing arrangements in a properly constituted “group,” as defined by relevant rules, and embodied in appropriate contract language; and Compensation to an employee that reflects (and does not grossly exceed) fair market value for services actually rendered. A properly constituted “group” in New York has to meet not only legal rules governing self-referral, kickbacks and fee-splitting, but also corporate practice of medicine concerns. So, for example, the group: Requires an appropriate entity (i.e., corporation/PC, LLC/PLLC or partnership/PLLP with bylaws or other appropriate agreement binding the shareholders, members or partners). Cannot include non-professionals (non-clinicians) (per Okere). Can include licensed professionals (who can also be employees) (per Rubin). Can allow revenue-sharing among its members, assuming the above argument succeeds; but cannot share revenues with the MSO. Further, under the corporate practice of medicine doctrine, as we’ve read the rules at one point, the “group:” Can include practitioners from different disciplines, subject to the caveat that the corporate practice of medicine doctrine requires that professions of medicine, dentistry, veterinary medicine, licensed clinical social work, mental health counseling, psychoanalysis, creative arts therapy, or marriage and family therapy be placed in their own professional corporations. The “group” entity may not serve as a management services corporation. With many of our clients who are seeking to implement a revenue-sharing arrangement between their centers and practitioners, we sometimes recommend the “Mall Model” or the “Center” models as possible ways to structure compensation without running afoul of relevant kickback and fee-splitting rules. Of course, as noted, there is never any guarantee that a proposed arrangement will not be investigated or subject to enforcement action; nonetheless, we have attempted to design structures that take account of legal roadblocks and attempt to create a flow of payments that respect existing legal rules. In a nutshell, in the Mall Model, the flow of payments is from the patient to the practice for health care services, and from the practice to the Clinic for management, administrative and marketing services. The argument is that this does not involve kickbacks or fee-splitting, because there is no unearned fee going to either the practitioner or the Clinic in exchange for patient referrals. The Mall Model is preferred in a strong corporate practice of medicine state such as New York or California. In the mall model, the lease should be a separate written contract. Lease payments will have to be for the market value of the lease, and not be tied to the volume of patients the practitioner sees or refers to the Clinic. However, in order to accommodate ramp-up time in the practice, the lease can establish a rising amortization payment over time. In addition: The practitioner is an independent contractor, with independent medical (or other professional) judgment, to see its own patients at the Clinic. The medical records are owned and maintained by the practitioner, although the practitioner can give the Clinic a right to a copy of those records. The practitioner pays the Clinic a monthly management or administrative fee. The patient makes payment out to the practice. The Clinic can serve as the billing and collecting agent for the practice, and be authorized to: deposit payments directly into the practitioner’s account for services rendered to the patient by the practitioner; and withdraw its administrative or management fee from the account it maintains for the practitioner. In the Center Model, the flow of payments is from the patient to the Clinic for health care services, and from the Clinic to the practitioner for services rendered to the patient. The argument is that this does not involve kickbacks or fee-splitting, because there is no unearned fee going to either the practitioner or the Clinic in exchange for patient referrals. But this argument is more difficult in a strong corporate practice of medicine state. Among other things, the agreement between Clinic and practitioner specifies that: The practitioner is an independent contractor, with independent medical (or other professional) judgment, to see the Clinic’s patients. If the state has a strong corporate practice of medicine doctrine and the practitioner is a medical doctor, then the medical records should be owned and maintained by the practitioner, although the practitioner can give the Clinic a right to a copy of those records. Otherwise records can be shared among practitioners or a central (i.e., electronic) record can be created, with each having the right to contemporaneous access and copies upon termination. Patients should be required to execute a consent authorizing access by multiple caregivers within the Clinic. The Clinic can serve as the billing and collecting agent for the practice (or farm this out to a third-party MSO or medical billing & collections service). The patient makes payment out to the Clinic. The Clinic pays the practitioner, typically a flat fee such as $X per Botox injection, $Y per hour of medical services, or $Z per month. To avoid the appearance of a kickback, it is better if the payment from the Clinic to the practitioner is a flat fee and not a percentage, because regulators can always view a percentage-based arrangement as suspiciously looking like a kickback (or in addition, in states prohibiting fee-splitting, like a fee split). The argument that can be made to try to defend a revenue-sharing arrangement is that the percentage fee is earned by the practitioner’s production. If the percentage also reflect referrals by the practitioner to other health care providers within the Clinic, this can potentially involve a second level of kickback and fee-splitting analysis, and one must look to “group practice,” “ancillary services,” and other potential exceptions and safe harbors. In either case, there could be an MSO that contracts with the professional corporation to act for it as a management service organization, which can provide claims management, accounting, marketing, and other management services, and even hold assets. For example: an MSO would provide office space through leasing arrangements to the group, as well as front desk, patient scheduling, claims submission and collections, accounting, marketing, and other non-clinical services. Conclusion The combination of fee-splitting prohibitions and the corporate practice of medicine rule can be daunting to the entrepreneur in the health care industry who wants to own and operate an enterprise that involves medical diagnosis and treatment—whether it’s a medical group, medical spa, or even a mobile medical app or Web-based platform that provides telehealth or other online or mobile healthcare services. Our healthcare lawyers can craft ways to handle these imposing legal rules, but this requires creativity and savvy, and a strong working knowledge of all the various law and regulations, and how they work together.
January 8, 2015
Page 43 of 44
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