SZD Health Law Scan : Health Care Lawyers & Attorneys : Schottenstein Zox & Dunn Law Firm : Strategic Planning, Managed Care, Insurance : Columbus, Cleveland, Cincinnati, Central Ohio

Legal and accounting departments for charitable and nonprofit organizations might be overwhelmed by the scope of the revised (2008) form 990. If you are like me, digesting information—one page at a time—is helpful in advancing permanent knowledge retention. Over the next few months, I will post on various sections of the 2008 form 990. In doing so, I make two promises to you:

• Our focus will be on the 2008 form 990, not on prior form 990s, not on historical perspectives, and not on related areas of law or regulation.
• Our focus will be on disclosures and requirements most pertinent to legal departments or counsel for section 501(c)(3) organizations.

This post is on written policy and documentation disclosures under 2008 form 990 part VI, section B related to Governance, Management, and Disclosure. In completing the form 990, you should also always review the instructions applicable to each section. In this section of the 2008 form 990, the I.R.S. inquires as to whether the organization has adopted written policies or documentation regarding:

• Conflicts of Interest. 2008 form 990 asks whether at the end of the organization’s tax year, the organization had a written conflict of interest policy. If yes, the form 990 asks whether officers, directors or trustees, and key employees are required to disclose annually interests that could give rise to conflicts, and whether the organization regularly and consistently monitors and enforces compliance with the policy.
• Whistleblowers. 2008 form 990 asks whether, as of the last day of the organization’s tax year, the organization had a written whistleblower policy.
• Document Retention and Destruction. 2008 form 990 asks whether, as of the last day of the organization’s tax year, the organization had a written document retention and destruction policy.
• Executive Compensation. 2008 form 990 asks whether the processes for determining certain executives' compensation include a review and approval by independent persons, comparability data, and contemporaneous substantiation (documentation and recordkeeping) of the deliberations and decision.
• Joint Venture Arrangements. 2008 form 990 asks whether the organization invested in, contributed assets to, or participated in a joint venture arrangement or similar arrangement with a taxable entity during the year. If yes, the form 990 asks whether the organization has adopted a written policy or procedure requiring the organization to evaluate its participation in joint venture arrangements under applicable federal tax law, and has taken steps to safeguard the organization’s exempt status with respect to such arrangements.

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President Obama’s 2010 Budget includes historic commitments to health care reform and a down payment on the principle that every American should have quality, affordable health care. The Budget provides $76.8 billion in support of the missions of the U.S. Department of Health and Human Services (“HHS”). This Budget is in addition to President Obama’s decision to reauthorize the Children’s Health Insurance Program by providing health care to 11 million children, including 4 million previously uninsured children and the funding provided under the American Recovery and Reinvestment Act. 

Below are some significant highlights from the 2010 Budget Blueprint:

• Invest $630 billion of reserve funds over 10 years to finance a fundamental reform of the Nation’s health care system to bring down costs and expand coverage. The Budget also calls for an effort beyond this down payment in order to put the Nation on a path to health insurance coverage for all Americans. 
• Invest over $6 billion within the National Institutes of Health (NIH) to support cancer research as part of the Administration’s multi-year commitment to double cancer research funding. This initiative is built upon the $10 billion already provided in the Recovery Act.
• Accelerate the adoption of health information technology by building upon the $19 billion investment under the Recovery Act. The Recovery Act offers physicians and hospitals participating in the Medicare program temporary incentive payments starting in 2011 for using a certified electronic health record (EHR), followed by financial penalties starting in 2015 for failure to use such a system. It also offers incentive payments to Medicaid providers, including physicians and children’s hospitals, to assist with the purchase, implementation and use of certified EHR technology. These incentives are expected to result in a dramatic increase in the percentage of health care providers using health IT within five years.
• Dedicate additional resources that will initially be targeted to improving oversight and program integrity activities for the Medicare Prescription Drug Program (Part D), Medicare Advantage and Medicaid Program. These resources will enable the CMS to identify excessive payments and establish new processes for correcting problems.
• Strengthen the Medicare program by encouraging high quality and efficient care and reducing excessive Medicare payments.
• Invest $330 million to address the shortage of health care providers in certain areas, by expanding loan repayment programs from physicians, nurses, and dentists who agree to practice in medically underserved areas.
• Invest over $4 billion for the Indian Health Service to support and expand the provision of health care services and public health programs for the American Indians and Alaska Natives.
• Builds upon the down payment made in the Recovery Act for the President’s “Zero to Five Plan” for early childhood education and development and creates a new Nurse Home Visitation program for first-time low-income mothers and mothers-to-be.

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Any health insurance company or health insuring corporation (“HIC”) doing business in the State of Ohio must report significant changes to their provider networks to the Ohio Department of Insurance, according to the Insurance Bulletin 2009-01 issued by the Ohio Department of Insurance on January 20, 2009.

More specifically, the Bulletin requires that at least fifteen (15) days prior to contacting policyholders about the expiration of a contract with a hospital or major physician group, health insurers and HICs must provide to the Department’s Office of Risk Assessment a written submission including the following: (1) the process and procedures by which subscribers or insureds and any affected participating providers will be notified of any impending contract termination and resulting changes in the health plan provider network, including providing to the Department copies of written or electronic communications, such as letters to be sent to subscribers or insureds and any affected participating providers notifying them of the impending change in network; (2) the options and rights, including all continuity of care provisions, to be provided to subscribers or insureds; and (3) all company contacts for information and assistance, including telephone numbers and e-mail addresses, to be provided to subscribers or insureds and any affected participating providers.

“Major physician group” means a physician group that provides services to a large population of the health insurer's or HIC’s membership in a specific geographic area and/or that receives a substantial portion of its reimbursement from the health insurer or HIC.   

Health insurers and HICs may comply with this Bulletin by annually submitting the documentation described above and subsequently providing the required 15 day notice, including written confirmation that the documentation previously filed will be sent to subscribers or insureds and any affected participating providers. 

Before the Bulletin, insurers and HICs were not required to notify the Department of any change to its provider network and often shift the burden of notifying policyholders of termination of provider agreements onto participating providers. Providers find it impossible to comply with such requirements because they do not necessarily know who the policyholders are. Also, complying with such requirement means higher administrative costs to providers. Providers often do not have the staff or software to handle such tasks.

The Bulletin has changed such practices. It not only requires health insurers and HICs to notify the Department of termination of a hospital or major physician group, but expressly requires that the insurers and HICs notify subscribers and insureds and participating providers impacted by the change of provider networks. Also, the Bulletin is not limited to just termination, but also expiration of provider agreements. 

However, the Bulletin fell short of some necessary clarity. Despite the definition of “major physician group,” it is not clear whether any particular physician group falls within the definition as a health insurer and HIC would not know for sure whether any particular group has received a substantial portion of its reimbursement from the health insurer or HIC.

Further, the Bulletin excludes Medicaid managed care plans (in addition to supplemental or specialty health care services only providers), but not Medicare managed care plans. So, it is unclear whether any insurer or HIC that offers Medicare managed care plans will be required to comply with the Bulletin.

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On March 4, 2009, in Wyeth v. Levine, No. 06-1249, the United States Supreme Court upheld, by a 6-3 vote, the Vermont Supreme Court's holding in favor of a patient who argued that the Food and Drug Administration's (FDA) approval of a pharmaceutical drug's label warnings did not impliedly preempt state failure-to-warn claims.

The Plaintiff, Diana Levine, sued Wyeth, the manufacturer of a drug that a physician's assistant had incorrectly administered causing gangrene to develop in her arm. While the drug's label contained warnings about certain techniques related to the methods of administration, the physician's assistant had used an FDA-approved method. Levine asserted state failure-to-warn claims arguing that the FDA-approved label warnings inadequately warned about the dangers associated with the particular method the physician's assistant had used. A Vermont state court denied Wyeth's motion for summary judgment asserting that federal law preempted the state law claims, and a jury found for Levine. After the Vermont Supreme Court affirmed, the United States Supreme Court granted Wyeth's petition for certiorari.

Writing for the majority, Justice John Paul Stevens rejected Wyeth's two major arguments. Wyeth first argued that the state claims were preempted because it was impossible for a drug manufacturer to comply with both the state law and the federal labeling duties. Wyeth claimed that only the FDA could change the labels. However, Stevens concluded that the "changes being effected" (CBE) regulation provided Wyeth with the means to satisfy both the state and federal duties because the CBE regulations permitted Wyeth to unilaterally add a stronger warning about IV-push administration without prior FDA approval.

Wyeth also argued that compliance with a state-law duty to provide a stronger warning about IV-push administration would obstruct the purposes and objectives of federal drug labeling regulation, which Wyeth unsuccessfully argued, was to leave such decisions to the FDA, an "expert agency." However, Stevens focused on the lack of a federal remedy for consumers harmed by inadequate warnings and the lack of an express preemption provision. He then concluded, "Evidently, [Congress] determined that widely available state rights of action provided appropriate relief for injured consumers."

In rejecting Wyeth's second argument, Stevens dismissed similar Bush Administration arguments from the FDA and the Department of Justice (DOJ). In addressing the FDA's claim of preemption in its 2006 preamble, which the Court saw as "revers[ing] the FDA's own longstanding position, Stevens wrote that the claim "does not merit deference" because it lacked "thoroughness, consistency, and persuasiveness." Likewise, in a footnote, Stevens dismissed the DOJ's amicus brief as "similarly undeserving of deference." Instead, he deferred to tradition: "it appears that the FDA traditionally regarded state law as a complementary form of drug regulation."

Writing for the dissent, Justice Samuel Alito argued that juries are "ill-equipped" to perform the FDA's role in deciding whether a prescription drug's label is adequate. Additionally, while Alito also did not defer to the FDA's 2006 preamble, he did defer to the FDA's labeling decisions. He argued that the only relevant question was whether the "State had upset the regulatory balance struck by the federal agency." As precedent for this proposition, Alito looked to the Court's decision in Geier v. American Honda Motor Co., 529 U. S. 861 (2000), which he concluded "compels" the preemption of state law in the present case. There, the Department of Transportation (DOT) had permitted car manufacturers to choose from a "menu" of passive restraints in cars. As a result, a plaintiff's state law claim against a car manufacturer for not choosing a certain passive restraint was preempted because it would upset the balance of DOT's regulatory scheme. Alito analogized this menu of passive restraints to the drug label's options for methods of administration. As in Geier, where DOT concluded that the menu options were safe, so too the FDA had decided, through its labeling decisions, that the drug label's options were safe and Levine's state law claims should be preempted.

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