Tag: healthcare

Buying, Selling, and Investing in Telehealth Companies: Navigating Structural and Compliance Issues

A multi-part series highlighting the unique health regulatory aspects of Telemedicine mergers and acquisitions, and financing transactions

Investors in the telehealth space and buyers and sellers of telehealth companies need to account for a set of health regulatory considerations that are unique to deals in this sector. As all parties to potential telehealth transactions analyze their long term role in the telehealth marketplace, two of the central issues to any transaction are compliance and structure – both in terms of structuring the telehealth transaction itself and due diligence issues that arise related to a target’s structure.

The COVID-19 pandemic, combined with strained health care staffing and provider availability, have accelerated the growth of the telehealth, and start-ups and traditional health systems alike are competing for access to patient populations in the telehealth space. However, as we adjust to life with COVID-19 as the norm, the expiration of the federal Public Health Emergency (PHE) looms, and the national economy contracts, we expect that the remainder of 2022 and into 2023 will see consolidation as the telehealth market begins to saturate and the long-term viability of certain platforms are tested. Telehealth companies, health systems, pharma companies and investors are all in potential positions to take advantage of this consolidation in a ripening M&A sector (while startups in the telehealth space continue to seek venture and institutional capital).

This is the first post in a series highlighting the unique health regulatory aspects of telehealth transactions. Future installments of this series are expected to cover licensure and regulatory approvals, compliance / clinical delivery models, and future market developments.

Telehealth Transaction Structure Considerations

The structure of any given telehealth transaction will largely depend on the business of the telehealth organization at play, but also will depend on the acquirer / investor. Regardless of whether a party is buying, selling or investing in a telehealth company, structuring the transaction appropriately will be important for all parties involved. While a standard stock purchase, asset purchase or merger may make sense for many of these transactions, we have also seen a proliferation of, affiliation arrangements, joint ventures (JV), alliances and partnerships.  These varieties of affiliation transactions can be a good choice for health systems that are not necessarily looking to manage or develop an existing platform, but instead are looking to leverage their patient populations and resources to partner with an existing technology platform. An affiliation or JV is more popular for telehealth companies operating purely as a technology platform (with no core business involving clinical services being provided). For parties in the traditional healthcare provider sector that provide clinical services, an affiliation or JV, which is easier to unwind or terminate than a traditional M&A transaction, can allow the parties to “test the waters” in a new, combined business venture. The affiliation or JV can take a variety of forms, including technology licensing agreements; the creation of a new entity to house the telehealth mission, which then has contractual arrangements with the both the JV parties; and exclusivity arrangements relating to use of the technology and access to patient populations.

While an affiliation or JV offers flexibility, can minimize the need for a large upfront investment, and can be an attractive alternative to a more permanent purchase or sale, there can be increased regulatory risk. Entrepreneurs, investors, and providers considering any such arrangement should bear in mind that in the wake of the COVID-19 pandemic and proliferation of telehealth, the Office of Inspector General of the Department of Health and Human Services (HHS-OIG) has expressed a heightened interest in investigating so called “telefraud” and recently issued a special fraud alert regarding suspect arrangements, discussed in this prior post. Further, the OIG’s guidance on contractual joint ventures that would run afoul of the federal Anti-Kickback Statute (AKS) should be front of mind and parties should strive to structure any affiliation or JV in a manner that meets or approximates an AKS safe harbor.

Target Telehealth Company Structure Compliance

Where telehealth companies are providing clinical services, and are not purely technology platforms, structuring and transaction diligence should focus on whether the target is operating in compliance with corporate practice of medicine (CPOM) laws. The CPOM doctrine is intended to maintain the independence of physician decision-making and reduce a “profits over people” mentality, and prevent physician employment by a lay-owned corporation unless an exception applies. Most states that have adopted CPOM impose similar restrictions on other types of clinical professionals, such as nurses, physical therapists, social workers, and psychologists. Telehealth companies often attempt to utilize a so-called “friendly PC” structure to comply with CPOM, whereby an investor-owned management services organization (“MSO”) affiliates with a physician-owned professional corporation (or other type of professional entity) (a “PC”) through a series of contractual agreements that foster a close working relationship between the MSO, PC, and PC owner and whereby the MSO provides management services, and sometimes start-up financing. The overall arrangement is intended to allow the MSO to handle the management side of the PC’s operations without impeding the professional judgment of the PC or the medical practice of its physicians and the PC owner.

CPOM Compliance Considerations and Diligence for Telehealth Companies

A sophisticated buyer will want to confirm that the target’s friendly PC structure is not only formally established, but is also operationalized properly and in a manner that minimizes fraud and abuse risk. If CPOM compliance gaps are identified in diligence this may, at worst, tank the deal and, at best, cause unexpected delays in the transaction timeline, as restructuring may be required or advisable. The buyer may also request additional deal concessions, such as a purchase price reduction and special indemnification coverage (with potentially a higher liability limit and an escrow as security). Accordingly, a telehealth company anticipating a sale or fund raise would be well served to engage in a self-audit to identify any CPOM compliance issues and undertake necessary corrective actions prior to the commencement of a transaction process.

Below are nine key questions with respect to CPOM compliance and related fraud and abuse issues that a buyer/investor in a telehealth transaction should examine carefully (and that the target should be prepared to answer):

  1. Does target have a PC that is properly incorporated or foreign qualified in all states where clinical services are provided (based on the location of the patient)?
  2. Does the PC owner (and any directors and officers of the PC, to the extent different from the PC owner) have a medical license in all states where the PC conducts business (to the extent in-state licensure is required)? To the extent the PC has multiple physician owners and directors/officers, are all such individuals licensed as required under applicable state law?
  3. Does the PC(s) have its own federal employer identification number, bank account (including double lockbox arrangement if enrolled in federal healthcare programs), and Medicare/Medicaid enrollments?
  4. Does the PC owner exercise meaningful oversight and control over the governance and clinical activities of the PC? Does the PC owner have background and expertise relevant to the business (e.g., a cardiologist would not have appropriate experience to be the PC owner of a PC that provides telemental health services)?
  5. Are the physicians and other professionals providing clinical services for the business employed or contracted through a PC (rather than the MSO)? Employment or independent contractor agreements should be reviewed, as well as W-2s, and payroll accounts.
  6. Is the PC properly contracted with customers (to the extent services are provided on a B2B basis) and payors?
  7. Do the contractual agreements between the MSO and PC respect the independent clinical judgment of the PC owner and PC physicians and otherwise comply with state CPOM laws.
  8. Do the financial arrangements between the MSO, PC, and PC owner comply with AKS, the federal Stark Law, and corollary state laws and fee-splitting prohibitions, to the extent applicable?
  9. Is the PC owner or any other physician performing clinical services for the PC an equity holder in the MSO? If so, are these equity interests tied to volume/value of referrals to the PC or MSO (i.e., if the MSO provides ancillary services such as lab or prescription drugs) or could equity interests be construed as an improper incentive to generate healthcare business (e.g., warrants that can only be exercised upon attainment of certain volume)?

Telehealth companies considering a sale or financing transaction, and potential buyers and investors, would be well served to spend time on the front end of a potential transaction assessing the above issues to determine potential risk areas that could impact deal terms or necessitate any friendly PC structuring.

Article By Hannah E. Zaitlin, Mitchell D. Lindstrom, David S. Sanders, and Natasha Allen of Foley & Lardner LLP

For more health law legal news, click here to visit the National Law Review.

© 2022 Foley & Lardner LLP

Feds Announce More Aggressive Enforcement of Poor Performing Nursing Homes

In February of 2022, during his State of the Union Address, President Biden announced an action plan to improve the safety and quality of care in the nation’s nursing homes.[i] On October 21, 2022, Centers for Medicare and Medicaid Services (CMS) announced new requirements to help with oversight of facilities selected to the Special Focus Facilities (SFF) Program.[ii]

The SFF Program was created to help and oversee the poorest performing nursing homes in the country and improve nursing homes that have a history of noncompliance.  The goal is to improve safety and quality of care. The facilities selected for the SFF Program must be inspected no less than once every six months and if severe enforcement is needed, it is at the discretion of the state surveyors. The main objective for the SFF Program is for facilities to show exponential improvement, graduate from the program, and then maintain compliance and better quality of care and safety.

The new CMS requirements, outlined below, are aimed at facilities that continuously fail to improve and remain in the SFF Program for a prolonged period of time. Health and Human Services Secretary Xavier Becerra stated, “Let us be clear: we are cracking down on enforcement of our nation’s poorest-performing nursing homes. As President Biden directed, we are increasing scrutiny and taking aggressive action to ensure everyone living in nursing homes gets the high-quality care they deserve. We are demanding better because our seniors deserve better.”

CMS announced the following revisions to the SFF Program:

  • Effective immediately, CMS will use escalating penalties for violations for deficiencies cited at the same level in subsequent surveys. This can include possible discretionary termination from Medicare and/or Medicaid funding for facilities that are cited with immediate jeopardy deficiencies on any two surveys while participating the in the SFF Program.
  • CMS will consider facilities’ efforts to improve when considering discretionary termination from Medicare and/or Medicaid programs.
  • CMS will impose more severe escalating enforcement remedies for SFF Program facilities for noncompliance and no effort to improve performance.
  • Increased requirements that nursing homes in the SFF Program must meet to graduate from the SFF Program.
  • For three years after graduation from the SFF Program, CMS will ensure nursing homes consistently maintain compliance with safety requirements by continuing to closely monitor these facilities.
  • CMS is offering more support resources to facilities selected for the SFF Program.

Additionally, the Biden administration released a fact sheet with the steps they are taking to in improve the quality of nursing homes. [iii] Some of the steps mentioned include more resources to support union jobs in nursing home care, establishing minimum staffing requirements, incentivizing quality performance through Medicare and Medicaid funding, and enhanced efforts to prevent fraud and abuse.

  1. https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/28/…
  2. https://www.cms.gov/files/document/qso-23-01-nh.pdf
  3. https://www.whitehouse.gov/briefing-room/statements-releases/2022/10/21/…

Article By Thomas W. Hess, Kelly A. Leahy, Sydney N. Pahren, and Bryan L. Cockroft of Dinsmore & Shohl LLP

For more health law and managed care legal news, click here to visit the National Law Review.

© 2022 Dinsmore & Shohl LLP. All rights reserved.

Fair Market Value Defensibility Analysis: Why is It Different from a Fair Market Value Opinion?

Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. Compensation arrangements that are required to be representative of fair market value under Stark/AKS include employment, independent contractor, medical directorships, exclusive service arrangements, call coverage, quality reviews, medical staff officer stipends, etc.

Many consulting firms provide fair market value opinions relying extensively on the application of benchmark data. Based upon CMS’s statements in the Stark Law Final Rules, although application of benchmark data is a resource that can be utilized, fair market value can and should include the application of market/service area issues (i.e., deficiency of specialty) or physician-specific issues (i.e., expertise, productivity).

Commercial reasonableness is a separate concept from fair market value under Stark/AKS. Commercial reasonableness also entails whether the application of benchmark/market factors are defensible.

When analyzing the defensibility of compensation arrangements, it is important to view fair market value and commercial reasonableness as if advocating the facts and circumstances of the proposed compensation arrangement before a governmental entity (i.e., CMS, OIG, DOJ). When an attorney is rendering a fair market value defensibility analysis, not only will the analysis be protected under the attorney-client privilege, but the analysis will also include references and attachments to all of the applicable documentation and relevant information in case the compensation arrangement is ever required to be defended.

Article By Bob Wade of Nelson Mullins

For more healthcare legal news, click here to visit the National Law Review.

Copyright ©2022 Nelson Mullins Riley & Scarborough LLP

4 Frequently Asked Questions About MSO Investigations and 3 Defense Strategies

In the last decade, Management Services Organizations, or MSOs, became popular service providers and investment tools for the medical and health care field. Unfortunately, the way some MSOs are structured, they can violate several important laws against healthcare fraud, like the Stark Law or the Anti-Kickback Statute.

Because this is such a novel issue in the medical field, lots of healthcare providers have questions about it. Some want to know how they can defend themselves if they get accused of wrongdoing for their activity with an MSO.

Dr. Nick Oberheiden is an MSO investigation lawyer at Oberheiden P.C. Here are some questions that he frequently gets asked and a few defense strategies that can help.

FAQs About MSO Investigations

1. What are MSOs?

An MSO is a company that provides administrative services to medical professionals. They can help healthcare providers with their:

  • Human resources
  • Operations
  • Coding and billing services
  • Office space management
  • Compliance
  • Contract management

Healthcare companies can either contract with an MSO to provide these services or can outright sell the administrative wing of their practice to an MSO so they can focus on the medical side of their business.

2. Why are MSOs Problematic?

MSO arrangements can become legally problematic when they act as an investment tool for medical professionals. Physicians could buy an ownership stake in an MSO that provided services to, say, a pharmacy. Those physicians could then begin referring patients to that same pharmacy.

In theory, that referral is going to a company – the pharmacy – that neither the physician nor his or her immediate family members have a financial interest in. In reality, though, the distinction gets blurred if the MSO – and therefore the physician – makes money off the referral. This can arguably amount to a kickback, which is unlawful.

3. Is Law Enforcement Actually Looking Into MSOs?

Yes, the justice department or the U.S. Department of Justice (DOJ) has recently begun investigating MSOs that appears to be a medium for illegal kickbacks from one healthcare provider to a referring physician.

Together with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), the DOJ has taken the position that MSOs that are only indirectly recouping physicians for referrals is enough to violate anti-kickback laws. In one case, the agencies are pursuing False Claims Act (31 U.S.C. § 3729) violations in addition to violations of the Stark Law (42 U.S.C. § 1395nn) and the Anti-Kickback Statute (42 U.S.C. § 1320a-7b).

However, not all MSOs have come under the scrutiny of federal law enforcement. The DOJ has not declared a blanket rule that all MSOs are unlawful. Instead, it is only targeting those that show the signs of potential healthcare fraud.

4. What are the Potential Penalties for Investing in the Wrong MSO?

At this stage, it is hard to tell. MSOs are still a new development, and we are only seeing the very first charges getting filed against physicians who invest in the “wrong” MSOs. Courts have not yet ruled whether MSOs can facilitate a kickback or amount to a false claim.

If courts do go along with the DOJ’s interpretation of the law, then physicians can face steep penalties for sending business to another healthcare facility that contracts with an MSO that they own or invest in.

The Anti-Kickback Statute is a criminal law that carries up to five years in prison for a conviction, as well as fines of up to $25,000 and program exclusion. The Stark Law is a civil law that, while it does not carry criminal sanctions or jail time, does impose:

  • Denial of payments provided
  • Disgorgement of ill-gotten gains
  • Civil penalties of up to $15,000 for each violation
  • Treble damages
  • Program exclusion

Defense Strategies for Investigations into Your MSO

If you do have an ownership stake in an MSO and are concerned about a potential investigation, or if you are interested in investing in one of these new companies and want to do it right, there are several things that you can do. While every case is unique, here are three defense strategies and compliance procedures that MSO investigation attorney Dr. Nick Oberheiden often recommends considering.

1. Look for Signs That an MSO is Problematic

Not all MSOs are attracting the attention of federal law enforcement. Instead, it is the ones that do not comply with the requirements of anti-kickback statutes and illegal referrals.

Some signs that an MSO is lacking in that department include:

  • A lack of a compliance officer in the company
  • No training regarding important laws like HIPAA, the Stark Law, or the Anti-Kickback Statute
  • The MSO is paid on a percentage basis, rather than through a flat fee (payments should be at fair market value rates)
  • The MSO charges unreasonably high service fees
  • There are incentives for investing physicians to refer clients to the company

All of these are strong signs that the MSO is at risk of civil or even criminal action for healthcare fraud and illegal referrals. Unfortunately, many of these signs also give an investing physician the power to increase his or her return on the investment – a feature that makes the investment seem especially lucrative.

2. Tighten Up the Compliance

If you are invested in an MSO and suddenly see proof that it was too good to be true, you are not powerless. You are a partial owner, after all. You can push the company to tighten up its compliance with anti-kickback laws. In the best cases, this can successfully protect you and avoid scrutiny from law enforcement. Even if it does not, though, it can reduce the restitution that you can be made to pay, and the efforts to fix the MSO can be used to show your good intentions.

3. Stress the Distance Between an MSO’s Ownership and Its Clients

At this point, we still have not seen whether law enforcement’s interpretation of the law will get adopted by a court. Until we know for sure that an indirect payment is enough for anti-kickback liability, a strong defense should be that the MSO’s ownership was too far removed from the MSO’s clients to amount to a violation of the law.

As Dr. Nick Oberheiden, an MSO investigation attorney at Oberheiden P.C., says, “The law is still very much in flux at this point. Kickbacks are generally seen to be direct payments for referrals, and the whole point of the MSO investment opportunity was to avoid that exact setup.”

Article By Dr. Nick Oberheiden of Oberheiden P.C.

For more healthcare and health investigations legal news, click here to visit the National Law Review.

Oberheiden P.C. © 2022

It’s Time To Review Your Online Patient-User Interface: DOJ Issues New Federal Guidance on Telemedicine and Civil Rights Protections

As online digital health services continue to enjoy broader use and appeal, federal regulators are concerned some telemedicine online patient-user interfaces fail to accommodate persons with disabilities and limited English proficiency. Such failures in “product design” can violate federal civil rights laws and the Americans with Disabilities Act (ADA), according to new policy guidance jointly issued by the U.S. Department of Health and Human Services (HHS) and Department of Justice (DOJ).

The document, Nondiscrimination in Telehealth, is specifically directed to companies offering telemedicine services and instructs such covered entities to immediately take specific steps to comply with the various “accessibility duties” under federal civil rights laws. The guidance focuses on ensuring accessibility for two populations of users: 1) people with disabilities and 2) people with Limited English Proficiency (LEP).

Who is Subject to these Rules?

The guidance refers to “covered entities” subject to these rules. Under the rules, “covered entities” are any health programs and activities receiving federal financial assistance (in addition to programs and activities administered by either a federal executive agency or an entity created by Title I of the Affordable Care Act). While the guidance does not define what constitutes “receiving federal financial assistance”, HHS has historically held that providers who receive federal dollars solely under traditional Medicare Part B were not covered entities. However, a recently-proposed rule suggests HHS will significantly expand the scope of covered entities, and soon. Telemedicine providers should be prepared to comply with these federal laws.

People with Disabilities

The guidance explains that no person with a disability shall – because of the disability – be excluded from participation in or be denied the benefits of the services, programs, or activities of a covered entity, or otherwise be subjected to discrimination by a covered entity. The requirements in the guidance is supported by several federal laws, including the Americans With Disabilities Act, the Affordable Care Act Section 1557, and the Rehabilitation Act Section 504.

Applying these federal civil rights protections to telemedicine services, the guidance states companies must make reasonable changes to their policies, practices, or procedures in order to provide “additional support to patients when needed before, during, and after a virtual visit.”

DOJ and HHS provided the following as examples of such “additional support” obligations:

  • A dermatology practice that typically limits telehealth appointments to 30 minutes may need to schedule a longer appointment for a patient who needs additional time to communicate because of their disability.

  • A doctor’s office that does not allow anyone but the patient to attend telehealth appointments would have to make reasonable changes to that policy to allow a person with a disability to bring a support person and/or family member to the appointment where needed to meaningfully access the health care appointment.

  • A mental health provider who uses telehealth to provide remote counseling to individuals may need to ensure that the telehealth platform it uses can support effective real-time captioning for a patient who is hard of hearing. The provider may not require patients to bring their own real-time captioner.

  • A sports medicine practice that uses videos to show patients how to do physical therapy exercises may need to make sure that the videos have audio descriptions for patients with visual disabilities.

People with LEP

The second area of the guidance is protections for LEP individuals under Title VI of the Civil Rights Act of 1964 (Title VI). Under Title VI, no person shall be discriminated against or excluded from participation in or be denied the benefits of services, programs, or activities receiving federal financial assistance on the basis of race, color, or national origin.

For telemedicine services, the guidance states that the prohibition against national origin discrimination extends to LEP persons. Namely, telemedicine companies must take reasonable steps to ensure meaningful access for LEP persons. Such “meaningful access” includes providing information about the availability of telehealth services, the process for scheduling telehealth appointments, and the appointment itself. In many instances, HHS states, language assistance services are necessary to provide meaningful access and comply with federal law.

These language assistance services can include such measures as oral language assistance performed by a qualified interpreter; in-language communication with a bilingual employee; or written translation of documents performed by a qualified translator

DOJ and HHS provided the following as examples of such “meaningful access” obligations:

  • In emails to patients or social media postings about the opportunity to schedule telehealth appointments, a federally assisted health care provider includes a short non-English statement that explains to LEP persons how to obtain, in a language they understand, the information contained in the email or social media posting.

  • An OBGYN who receives federal financial assistance and legally provides reproductive health services, using telehealth to provide remote appointments to patients, provides a qualified language interpreter for an LEP patient. The provider makes sure that their telehealth platform allows the interpreter to join the session. Due to issues of confidentiality and potential conflicts of interest (such as in matters involving domestic violence) providers should avoid relying on patients to bring their own interpreter.

What if Making These Changes is Expensive?

While not directly addressed in the guidance, the cost for implementing accessibility measures generally falls on the company itself. Federal ADA regulations prohibit charging patients extra for the cost of providing American Sign Language (ASL) interpreters or similar accommodations. In fact, a covered entity may be required to provide an ASL interpreter even if the cost of the interpreter is greater than the fee received for the telemedicine service itself. With respect to LEP interpreters, HHS issued separate guidance stating it is not sufficient to use “low-quality video remote interpreting services” or “rely on unqualified staff” as translators.

However, companies are not required to offer an aid or service that results in either an undue burden on the company or requires a fundamental alteration in the nature of the services offered by the company. This is an important counterbalance in the law. Yet, the threshold for what constitutes an “undue burden” on a company or a “fundamental alteration” to the nature of the services is not bright line and requires a fact-specific assessment under the legal requirements.

Conclusion

Telemedicine companies subject to the guidance should heed the government’s warning and look inward on patient-facing elements. The first step is to simply have the website and app platform reviewed (most particularly the patient online user interface) by a qualified third party to determine if its design and features are sufficiently accessible for people with disabilities, as well as LEP persons. That time is also a prudent opportunity to review the user interface to confirm it complies with state telemedicine practice standards, e-commerce rules, electronic signatures or click-sign laws, and privacy/security requirements. Because these laws have undergone rapid and extensive changes during the Public Health Emergency, it is recommended to conduct these assessments on a periodic/annual basis.

If a company believes the expense of making these product design changes to ensure accessibility would be prohibitively expensive, it should check with experienced advisors to determine if the changes would constitute an “undue burden” or “fundamental alteration.” Otherwise, federal guidance is clear that refusing to make reasonable changes can be a violation of federal civil rights laws.

Article By Kate L. Pamperin, Larry S. Perlman, and Nathaniel M. Lacktman of Foley & Lardner LLP

For more health and telemedicine legal news, click here to visit the National Law Review.

© 2022 Foley & Lardner LLP

Medical Staff Leaders: 10 Things Your Lawyers Want You to Know

Whether you are new to medical staff leadership or have served in the past and have been called to serve again, there are times when you will need to consult a lawyer who specializes in medical staff matters. While there is nothing simple about medical staff affairs, there are some basic guidelines and protections that your lawyers would like you to know that will make your term easier and make you more effective.

Understand that hospitals and medical staffs are highly regulated organizations with a myriad of laws and standards that must be followed. As a medical staff leader, advisor or medical staff professional, you are leading and advising the professionals responsible for practitioner competence and conduct within the organization. Medical staff law has evolved from the lawyer in the office who would return your call in a week, or fax you a letter, to a specialty area where your lawyer is your partner and there to assist in all aspects of medical staff affairs.

We hope you will benefit from and find the following 10 recommendations make your term or role more informed and manageable.

10. Keep Your Governance Documents Up to Date and Reflective of Actual Practice.

We don’t suggest you must read every page of your governance documents, but you should be sure you know where to look and how to use them. Governance documents include the medical staff bylaws, credentialing manual, hearing plan, rules and regulations, policies and other documents approved by the medical staff and designed to set and guide medical staff processes. Too often we have found the documents will conflict or are missing critical passages. Your medical staff bylaws or medical staff governance committee can be one of the strongest committees in the organization. This is the committee that will annually review the documents and make sure they are internally consistent, reflect actual practice and are relevant to your organization’s practice and clinical services. Remember the medical staff bylaws set the overall guiding principles for the medical staff organization. All other governance documents flow from the foundation of the medical staff bylaws and must be consistent with their principles and mission. Undoubtedly, there will be some inconsistencies but look at those inconsistencies as opportunities to reexamine the principles and consider what is best for your organization. All governance documents should be reviewed in the context of the laws and regulations that require these documents. State and federal laws and regulations set out the basic requirements for the contents of the documents, as do many of the accreditation standards. It is far better to review and revise your governance documents regularly, rather than learn they are deficient during an unannounced survey or regulatory proceeding.

9. Use Your Committees Effectively.

There are two types of committees: those with authority to act and those that are advisory. The committees with authority are generally the Medical Executive Committee (“MEC”) and clinical department committees. All other committees are advisory to the MEC. Advisory committees can develop and recommend policies, rules and clinical practices. Authoritative committees approve policies and rules, take disciplinary action and make recommendations to the MEC. The MEC is the final medical staff authority that submits recommendations for final approval to the governing body. Knowing which committees to use and when is key to leadership success.

8. Know the Scope of Your Authority.

As a leader, you are an agent of the medical staff and the spokesperson for the committee/ department you chair. There are times when you will need to act without the benefit of input from your committee/department. Medical staff bylaws will generally identify the circumstances under which you can act alone and when your action(s) will need to be ratified by the committee. As the chair, you are acting on behalf of the committee/ department between meetings. Do what is needed when needed, within the scope of your authority, but report your actions to the committee/department on a regular basis and be sure your actions are properly recorded in the appropriate minutes. If summary or urgent action is needed, do not hesitate to call a special meeting. You are better off to have the protection of a committee action than to be acting alone or without ratification.

7. Know the Peer Review Protections of HCQIA, Your State and Organization.

Many, if not most, of your actions and the actions of your committees will be covered by federal, state and organizational protections. The Healthcare Quality Improvement Act (“HCQIA”) provides protection from liability for members of a professional review body/ medical staff, who take a professional review action (a) in the reasonable belief the action was in furtherance of quality health care, (b) after a reasonable effort to obtain the facts, (c) after adequate notice and hearing and (d) in the reasonable belief that the action was warranted by the facts. In addition to this federal protection, many states have laws that similarly protect peer review participants, and often, your organization will have an indemnification policy or provision that further protects you and your committee members from damages. Remind your committee participants and members on a regular basis of these protections and that they were specifically designed to encourage peer review by allowing free discussions aimed at improving patient care.

6. Know Your Reporting Obligations.

The National Practitioner Data Bank (“NPDB”) defines the circumstances under which a physician or dentist must be reported. Those include (a) when a professional review action adversely affects their clinical privileges for 30 days or longer or (b) when a physician surrenders clinical privileges while under investigation or in exchange for not conducting an investigation. The failure to report when required to do so can result in the loss of immunities under HCQIA for up to three years, along with a monetary fine. There are many nuances to reporting to the NPDB and we recommend you consult a medical staff attorney who can assist with identifying when to report and what to say. Additionally, each state may have reporting requirements for professional review actions to the state licensing board that exceed the NPDB’s requirements. The state licensing board may also have defined penalties for failure to report. In one state, the knowing failure of a physician leader to report a practitioner to the state licensing board can be considered unprofessional conduct, which can subject the physician leader to state board action.

5. Understand Confidentiality and Peer Review Privilege Protections.

A best practice at the beginning of each meeting is to remind committee members of the importance of maintaining confidentiality. State peer review privileges and protections are often dependent on maintaining confidentiality of the records and proceedings. The failure to maintain confidentiality can act as a waiver of the privilege and permit the introduction of confidential peer review documents and testimony in litigation in the future. Peer review privileges and protections are designed to promote candor in the peer review process. This permits free discussion and identification of opportunities to improve patient care. Without confidentiality and the corresponding privileges and protections, committee members would be reluctant to analyze and frankly discuss areas for improvement in a peer’s clinical care. Obtain information about your state’s peer review privilege and protections and fully understand the circumstances that may cause a waiver, which would permit confidential peer review information to be discussed in open court and stifle important, free-flowing discussion of quality of care at peer review meetings.

4. Know Your Options.

Every professional competence or conduct situation you face will be different. A sound guideline to generally follow is selecting the least restrictive action that will protect patients. Keep in mind that the goal of all peer review is education and remediation. For example, if a practitioner is having complications with robotic surgery, evaluate whether the complications are the result of technical skill, which can be remediated with more practice, or if the complications are the result of poor clinical judgment, which reaches into all areas of performance. In the first case, proctoring, monitoring or an additional educational course may correct the problem. But with the second, the cause of poor judgment is more challenging and may require a further workup, including a fitness for duty evaluation, retrospective review of cases, or an external expert review. Work with your committee and medical staff lawyer to identify all the facts and options to address the problem that has been brought to your attention. In some cases, it may be appropriate to have the issue addressed by the individual’s department or interdisciplinary peer review committee, but in others, the nature of the problem may require the immediate attention of the MEC. In some cases, a discrete referral to your organization’s well-being committee may be appropriate. Regardless, each matter must be carefully and thoughtfully analyzed in light of all the available facts. Then, with all appropriate actions on the table, an informed determination may be made.

3. Act When Indicated but Don’t Shortcut the Process.

. The law and your medical staff bylaws provide for the ability to take emergency action against a practitioner’s privileges when there is a concern of imminent threat to patients or others. What constitutes an “imminent” threat or danger is often the source of hours of discussion and analysis by medical staff lawyers throughout the country. Your legal team is invaluable in working through the facts of a given matter and determining whether a decision for summary suspension is legally sound. If there is a circumstance where emergency intervention via summary suspension is necessary to avoid patient harm after an initial evaluation of the matter, do not hesitate! Take the action to summarily suspend and remove an errant practitioner from the bedside. Afterward, there is time to re-examine the basis for the action and analyze whether continued suspension is necessary to protect patients or others. At that time, it is important to call on your MEC and legal team for their analysis and determination of whether the summary suspension should be upheld.

There are also times when summary suspension will be considered prospectively to address a chronic problem that is rising to an acute stage. The practitioner whose disruptive, bullying and retaliatory conduct has been tolerated may have reached a level where the cumulative effect creates the potential for patient harm because staff, for example, are afraid to call the physician at night about a patient’s health condition, seek clarification of an order, or question whether a procedure is being done on the right side or on the correct patient. Following the medical staff bylaws investigation process will allow for a careful analysis of the reported conduct, which will provide a solid framework for later defense, should it be necessary. That process will almost always involve a committee evaluation of the facts, interview of the practitioner, and a determination of the appropriate next steps. Each of these steps, if followed, will support the action when later scrutinized by a court or jury.

2. Do What is Right for the Patients.

Always put the patients first. There may be procedural missteps during a disciplinary process as the healthcare organization balances the need to protect patients with providing a practitioner due process. However, if the peer review being conducted is based in the foundation of improving patient care and patient safety, courts will generally consider the health care organization’s goals before making a determination that would go against the organization and potentially place patients in harm’s way.

1. Utilize Internal or External Counsel to Navigate Medical Staff Law so You Can Focus on Improving Patient Care.

I (Erin) was asked recently what possible motivation there would be for a physician to enter leadership in a medical staff organization if their role consisted solely of consulting with a medical staff lawyer. In response, I reminded this physician that medical staff leadership and medical staff lawyers work together on challenging matters and daily operations with the lawyer recommending limitations and guardrails and advising on how to avoid legal missteps and pitfalls. This advice from the lawyer enables the leader to focus on monitoring the business of the organization and improving patient care.

Final Take-Aways

Our medical staff organizations need people who are willing to serve as leaders during challenging times when caregivers are stretched thin, suffering burnout and subjected to daily difficulties that can be demoralizing. Strong leaders who are reassured of their legal protections can perform their leadership responsibilities without fear of reprisal when following the advice of their legal counsel. We encourage you to reach out and make your lawyer an integral part of your team so that they can understand your organization and business and provide you the best available advice that will reassure you and other leaders in the organization of the legal protections and immunities.

Article By Erin L. Muellenberg and Sherri T. Alexander of Polsinelli PC

For more healthcare legal news, click here to visit the National Law Review.

© Polsinelli PC, Polsinelli LLP in California

Do I Have to Sign Over All My Assets when I Enter a Long-Term Care Facility?

I get asked some version of this question fairly frequently. I generally reassure clients that most facilities simply require you to pay month-to-month, and you can leave at any time. Now I may have to change my response, as news broke this week that a New Jersey woman allegedly had all her assets stolen by the very entity she trusted to care for her.

The woman entered a facility for a short-term rehab stay with every intention of returning home. Apparently the facility thought otherwise, as they enlisted a financial company to “assist” the woman in liquidating her assets to pay for her facility care and spend down to apply for Medicaid. I and other elder lawyers, along with several consumer protection agencies in the state, have long warned consumers about nonlawyer Medicaid advisors. These entities work closely with the nursing home industry, often having the same ownership and leadership. In this case, the POA is both an officer with the facility and the principal of the Medicaid advisor company that was hired to make the resident Medicaid eligible without her knowledge.

Some facilities require or coerce residents to hire these Medicaid advisors to prepare Medicaid applications for them. Unfortunately, they are not lawyers, and their allegiance is clearly to the facilities and not the residents or their families. Therefore, they fail to advise residents of opportunities to protect assets or income. Even worse, in many cases they failed to complete or submit the application or did so in a negligent manner, resulting in the application being denied. But unlike when an attorney messes up, there is no recourse for families, as these entities do not carry malpractice insurance. Sometimes the Medicaid advisor will simply close up shop and disappear – only to resurface later with a different organization.

There have been prior reports of facilities and the Medicaid advisors they work with requiring residents to sign POAs and even accessing resident accounts through questionable means. These latest allegations, however, bring this situation to a new level. It is alleged that the resident was forced to sign a POA when she did not have the capacity to do so due to medications she was prescribed. It was further alleged that Future Care Consultants liquidated the resident’s assets without her knowledge, and the funds were not returned when she left the facility. The family also alleges they were prevented from visiting or communicating with the resident.

The allegations are reminiscent of the movie I Care a Lot, which I have previously criticized as being completely unrealistic. However, in recent months, I have had clients report they were threatened by facilities if they used the services of an attorney. It is essential that consumers know their rights. You cannot be required to sign a POA. You cannot be forced to hire anyone to file your Medicaid application. And you cannot be prevented from using an attorney if you wish to do so.

Article By Shana Siegel of Norris McLaughlin P.A.

For more family law legal news, click here to visit the National Law Review.

©2022 Norris McLaughlin P.A., All Rights Reserved

CareDx v. Natera – The Broad Road to Patent Ineligibility

In CareDx v Natera, Appeal No. 2022-1027, (Fed. Cir., July 18, 2022), a three judge panel of Judges Lourie, Bryson and Hughes, affirmed the district court’s finding that the claims of U. S. patent nos. 8703652, 9845497 and 10329607 are invalid for failing to survive the Alice/Mayo test for patent eligibility. I subtitled this post using Mathew 7:13-14: “Enter through the narrow gate. For wide is the gate and broad is the road, that leads to destruction.” The appeal to the Federal Circuit, which I wrote about on October 15, 2021, never got on the narrow road that leads to viable diagnostic claims. It may not have been possible to overcome the obstacles that blocked the road, but CareDx managed to hit them all, and ended up with three invalid patents on natural phenomena.

The claims were directed to a method for detecting transplant rejection or organ failure by isolating and genotyping a sample from the subject who received the donation, quantifying the cfDNA, and diagnosing the transplant status for an increase in donor cfDNA over time. An increase indicates possible transplant failure.

Judge Lourie summarized the claims, some of which are more than a page long, this way:

“Here, as in Ariosa, the claims boil down to collecting a bodily sample, analyzing the cfDNA  using conventional techniques, including PCR, identifying naturally occurring DNA from the donor organ, and then using the natural correlation between heightened cfDNA levels and transplant health, to identify a potential rejection, none of which was inventive. The claims here are equally as ineligible as those in Ariosa.”

Let’s take a quick look at how CareDx got onto the broad road. CareRx hoped to avoid Ariosa by arguing that it was doing more than just measuring a biomarker correlated to an existing phenomenon. Problem 1 is that CareDx did not discover the correlation; it just improved on it (or did it?). Louie writes:

“CareDx argues that the patents’ claims are directed not to natural phenomena, but to improved laboratory techniques. CareDx contends that the ‘claimed advance’ is an ‘improved, human-designed method for measuring increases in donor cfDNA in a recipient’s body to identify organ rejection.’ … In particular, CareDx identifies the use of digital PCR, NGS, and selective amplification to more accurately measure the donor SNPs of cfDNA transplant recipients. However, CareDx does not actually claim any improvements in laboratory techniques … Furthermore the specification admits that the laboratory techniques disclosed in the claims require only conventional techniques and off-the-shelf technology.”

In fact, CareDx had at least one claim in the ‘497 patent that recites that the assay detects the donor-specific circulating cfDNA from the organ transplant when the donor-specific circulating cfDNA [makes] up at least 0.3% of the total circulating cfDNA in the biological sample. I presume that this claim limitation was put into the claim so that “improvement”  could be argued, but the limitation is not mentioned in the opinion.

Let’s look at a few other things CareDx encountered on its broad road to legal destruction. The panel looked at every step of the method in isolation. In other words, once CareDx argued “improvement” it was forced to admit that the specification disclosed that all those analytical techniques, such as PCR, NGS and “selective amplification”, would be considered as conventional in the art. CareDx might have relied on some of the decisions finding patent eligibility where physical equipment was necessarily involved, such as XL LLC v. Trans Ova Genetics or Illumina v Ariosa.

The finding of conventionality of individual steps permitted the court and the panel to effectively rule that the method was directed to a natural product, since the devices used to carry it out were given no weight. Therefore, the patents failed to pass Step 1 of Mayo/Alice. Could it have been argued, if that was the case, that the equipment used to carry out the method was arranged in a novel sequence? (Also, is someone going to argue that PCR involves replicating small amounts of DNA to afford useful amounts? – This is accomplished by the hand of man.)

These are minor thoughts, CareDX should left the word “diagnostic” out of the claims and the specification. This is certainly no more of a diagnostic test than the Mayo range-finding step was. It is presently clear that in the life sciences, recognition of the utility of a naturally occurring correlation is not enough to avoid patent ineligibility. Of course, and this is cold comfort to CareDx, would it have helped to get this method into the safe harbor of methods of medical treatment? In other words, the first step could recite the actual transplantation step and/or the final step of the process could recite some sort of medical intervention. Narrower claims might have returned CareDx to the narrow path of patent life.

Article By Warren Woessner of Schwegman, Lundberg & Woessner, P.A.

For more intellectual property legal news, click here to visit the National Law Review.

© 2022 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

U.S. Supreme Court Agrees with HHS Payment Methodology for Disproportionate Share Hospitals

The fight about how Medicare compensates disproportionate share hospitals (“DSH”) is one of the longest-running reimbursement disputes of recent years, and it has generated copious work for judges around the country.  In a 5-4 decision, the U.S. Supreme Court settled one piece of the conflict:  the counting of “Medicare-entitled” patients in the Medicare fraction of the “disproportionate-patient percentage.”  Becerra v. Empire Health Found., 597 U.S. ___ (2022) (slip op.).  The Supreme Court concluded that the proper calculation, under the statute, counts “individuals ‘entitled to [Medicare] benefits[,]’ . . . regardless of whether they are receiving Medicare payments” for certain services.  Id. (slip op., at 18) (emphasis added).

DSH payments are made to hospitals with a large low-income patient mix.  “The mark-up reflects that low-income individuals are often more expensive to treat than higher income ones, even for the same medical conditions.”  Id. (slip op., at 3).  The federal government thus gives hospitals a financial boost for treating a “disproportionate share” of the indigent population.

The DHS payment depends on a hospital’s “disproportionate-patient percentage,” which is basically the sum of two fractions: the Medicare fraction, which reflects what portion of the Medicare patients were low-income; and the Medicaid fraction, which reflects what portion of the non-Medicare patients were on Medicaid.  Historically, HHS calculated the Medicare fraction by including only patients actually receiving certain Medicare benefits for their care.  In 2004, however, HHS changed course and issued a new rule.  It counted, in the Medicare fraction, all patients who were eligible for Medicare benefits generally (essentially, over 65 or disabled), even if particular benefits were not actually being paid.  For most providers, that change resulted in a pay cut.

The new rule sparked several lawsuits.  Hospitals challenged HHS’s policy based on the authorizing statutory language.  These hospitals essentially argued in favor of the old methodology.  Appeals led to a circuit split, with the Sixth and D.C. Circuits agreeing with HHS, and the Ninth Circuit ruling that HHS had misread the statute.

The Supreme Court has now resolved the issue.  The majority opinion, authored by Justice Kagan, sided with HHS.  The majority concluded that, based on the statutory language, “individuals ‘entitled to [Medicare] benefits’ are all those qualifying for the program, regardless of whether they are receiving Medicare payments for part or all of a hospital stay.”  Id. (slip op., at 18).  The majority also explained that if “entitlement to benefits” bore the meaning suggested by the hospital, “Medicare beneficiaries would lose important rights and protections . . . [and a] patient could lose his ability to enroll in other Medicare programs whenever he lacked a right to [certain] payments for hospital care.”  Id. (slip op., at 11).

Justice Kavanaugh dissented, joined by Chief Justice Roberts and Justices Gorsuch and Alito.  The dissent argued that those lacking certain Medicare coverage should be excluded from HHS’s formula, based on “the most fundamental principle of statutory interpretation: Read the statute.”  Id. (Kavanaugh, J., dissenting) (slip op., at 2).  According to the dissent, the majority’s ruling will also restrict hospitals’ ability to provide care to underprivileged communities.  “HHS’s misreading of the statute has significant real-world effects: It financially harms hospitals that serve low-income patients, thereby hamstringing those hospitals’ ability to provide needed care to low-income communities.”  Id. (slip op., at 4).

There was one point of agreement among the majority and dissenting justices: the complexity of the statutory language for DSH payments.  Echoing the thoughts often held by healthcare advisors, Justice Kagan found the statutory formula to be “a mouthful” and “a lot to digest.”  Id. (majority opinion) (slip op., at 4).  And in his dissent, Justice Kavanaugh called the statute “mind-numbingly complex,” and resorted to an interpretation that he found “straightforward and commonsensical”: that patients cannot be “simultaneously entitled and disentitled” to Medicare benefits.  Id. (Kavanaugh, J., dissenting) (slip op., at 1, 3).

Article By Jeffrey DeBeer and Keith Bradley of Squire Patton Boggs (US) LLP

For more Supreme Court and litigation legal news, click here to visit the National Law Review.

© Copyright 2022 Squire Patton Boggs (US) LLP

Update: In Opioid Liability Ruling for Doctors, SCOTUS Deals Blow to DOJ

On June 27, 2022, the United States Supreme Court ruled that doctors who act in subjective good faith in prescribing controlled substances to their patients cannot be convicted under the Controlled Substance Act (“CSA”).  The Court’s decision will have broad implications for physicians and patients alike.  Practitioners who sincerely and honestly believe – even if mistakenly – that their prescriptions are within the usual course of professional practice will be shielded from criminal liability.

The ruling stemmed from the convictions of Dr. Xiulu Ruan and Dr. Shakeel Kahn for unlawfully prescribing opioid painkillers.  At their trials, the district courts rejected any consideration of good faith and instructed the members of the jury that the doctors could be convicted if they prescribed opioids outside the recognized standards of medical practice. The Tenth and Eleventh Circuits affirmed the instructions.  Drs. Ruan and Kahn were sentenced to 21 and 25 years in prison, respectively.

The Court vacated the decisions of the courts of appeals and sent the cases back for further review.

The question before the court concerned the state of mind that the Government must prove to convict a doctor of violating the CSA.  Justice Breyer framed the issue: “To prove that a doctor’s dispensation of drugs via prescription falls within the statute’s prohibition and outside the authorization exception, is it sufficient for the Government to prove that a prescription was in fact not authorized, or must the Government prove that the doctor knew or intended that the prescription was unauthorized?”

The doctors urged the Court to adopt a subjective good-faith standard that would protect practitioners from criminal prosecution if they sincerely and honestly believed their prescriptions were within the usual course of professional practice.  The Government argued for an objective, good-faith standard based on the hypothetical “reasonable” doctor.  The Court took it one step further.

Justice Breyer delivered the opinion of the Court.  He said that for purposes of a criminal conviction under the CSA, “the Government must prove beyond a reasonable doubt that the defendant knowingly or intentionally acted in an unauthorized manner.”  To hold otherwise “would turn a defendant’s criminal liability on the mental state of a hypothetical ‘reasonable’ doctor” and “reduce culpability on the all-important element of the crime to negligence,” he explained.  The Court has “long been reluctant to infer that a negligence standard was intended in criminal statutes,” wrote Justice Breyer.

Justice Samuel Alito wrote a concurring opinion, which Justice Clarence Thomas joined and Justice Amy Coney Barrett joined in part.  Although Justice Alito would vacate the judgments below and remand for further proceedings, he would hold that the “except as authorized” clause of the CSA creates an affirmative defense that defendant doctors must prove by a preponderance of the evidence.

The Court’s decision will protect patient access to prescriptions written in good faith.  However, for the government, the Court’s decision means prosecutors face an uphill battle in charging, much less convicting, physicians under the CSA.  Indeed, the Court’s decision may have a chilling effect on the recent surge in DOJ prosecutions of medical practitioners and pain clinics.

Article By Lindsay K. Gerdes and Madeline R. Pinto of Dinsmore & Shohl LLP

For more litigation legal news, click here to visit the National Law Review.

© 2022 Dinsmore & Shohl LLP. All rights reserved.