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

On Feb. 1, the U.S. District Court in Cleveland issued a significant decision concerning the disclosure of medical information in response to a grand jury subpoena.

The grand jury subpoena was issued to the Cleveland Clinic as part of a criminal investigation of James Turk for carrying a concealed weapon. The Cleveland Clinic complied with the subpoena and supplied the records to a police detective as instructed by the subpoena. As a result of the criminal investigation, Turk was charged with various offenses. A jury eventually acquitted him of one charge and the other charges were dismissed. Turk then filed a lawsuit in federal court against the police and various other defendants, including the Cleveland Clinic. The lawsuit alleged the defendants violated his rights in connection with the criminal investigation.

Regarding his medical records, Turk claimed the Cleveland Clinic violated his privacy rights by releasing privileged medical records in response to the grand jury subpoena. The clinic argued the claim should be dismissed because the clinic was responding to a grand jury subpoena. The clinic argued that Ohio courts do not extend the physician-patient privilege to records subpoenaed by the grand jury because the disclosure to the grand jury is not a public disclosure. The clinic also argued that the disclosure was required because there is a countervailing interest in investigating criminal activity.

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Presenters:
Stephen Kleinman, Schottenstein Zox and Dunn, Partner, Health Care Practice Group
Robert Cochran, Schottenstein Zox and Dunn, Of Counsel, Health Care Practice Group

The Patient Protection and Affordable Care Act (PPAC) is anticipated to expand insurance coverage to 32 million people. As a result, the specific legislative changes discussed in this podcast will impact millions of Americans and the way health insurance companies do business. Listen as Steve and Bob discuss these changes.

This podcast is part of the Law Firm Alliance – 2010 Health Care Reform podcast series, which can be accessed in its entirety by clicking here.

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The Centers for Medicare and Medicaid (CMS) released its annual report on national health spending. According to the CMS press release, 2008 had the "the slowest rate of growth since [CMS] started officially tracking expenditures in 1960." The rate slowed to 4.4 percent down from 6.0 percent in 2007.

However, despite the decelerated growth, health spending's share of the gross domestic product increased from 15.9 percent in 2007 to 16.2 percent in 2008.

CMS also reports the following statistics:

• Hospital spending in 2008 grew 4.5 percent to $718.4 billion, compared to 5.9 percent in 2007, the slowest rate of increase since 1998. 
• Physician and clinical services’ spending increased 5.0 percent in 2008, a deceleration from 5.8 percent in 2007. 
• Retail prescription drug spending growth also decelerated to 3.2 percent in 2008 as per capita use of prescription medications declined slightly, mainly due to impacts of the recession, a low number of new product introductions, and safety and efficacy concerns.
• Spending growth for both nursing home and home health services decelerated in 2008.   For nursing homes, spending grew 4.6 percent in 2008 compared to 5.8 percent in 2007. 
• Total health care spending by public programs, such as Medicare and Medicaid, grew 6.5 percent in 2008, the same rate as in 2007. 
• Health care spending by private sources of funds grew only 2.6 percent in 2008 compared to 5.6 percent in 2007. 
• Private health insurance premiums grew 3.1 percent in 2008, a deceleration from 4.4 percent in 2007.

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On November 19, 2009, the House of Representatives passed the Medicare Physician Payment Reform Act of 2009 ("H.R. 3961"). The bill reforms the Medicare physician payment formula, called the Sustainable Growth Rate ("SGR"). Under the current formula, Medicare payment rates for physicians' services will be cut by about 21 percent in 2010 and additional cuts would occur annually.

The Congressional Budget Office ("CBO") summarized H.R. 3961's changes to the SGR as follows:

• The update for 2010 would be the percentage increase in the Medicare economic index (MEI), which is 1.2 percent, as specified in the final rule.
• Beginning in 2011, there would be separate target growth rates and conversion factor updates for two categories of service: evaluation, management, and preventive services, and all other services.
• The new SGR formula would take into account spending for each category of service since 2009 or—beginning in 2014—for the past five years. (The current SGR formula takes into account spending since 1996.)
• Finally, only physician services, and not other services provided incident to the physician visit (such as laboratory services), would be counted in each category.

As noted above, consistent with the Centers for Medicare and Medicaid final rule for the 2010 physician fee schedule (publication date: November 25, 2009), H.R. 3961 amends 42 U.S.C. 1395w–4(d)(4)(A) to eliminate the discretion of the Secretary of the Department of Health and Human Services to include physician-administered drugs within the definition of "physicians' services" for the purposes of SGR calculations. Physicians' services are currently defined to include:

"other items and services (such as clinical diagnostic laboratory tests and radiology services), specified by the Secretary, that are commonly performed or furnished by a physician or in a physician's office, but does not include services furnished to a Medicare+Choice plan enrollee." (emphasis added)

Under the proposed definition, such services would be defined to include only:

"other items and services for which payment under this part is made under the fee schedule under this section, for services for practitioners described in section 1842(b)(18)(C) on a basis related to such fee schedule, or for services described in section 1861(p) (other than such services when furnished in the facility of a provider of services), but does not include services furnished to a Medicare+Choice plan enrollee." (emphasis added)

The CBO estimated that H.R. 3961 would increase physician payments over the next 10 years by about $195 billion.

H.R. 3961 was received in the Senate on November 20, 2009.

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On November 18, 2009, the Senate released a draft health insurance reform bill, entitled the "Patient Protection and Affordable Care Act."  Like the House bill, the Senate's bill proposes to establish Exchanges, or marketplaces for individuals to shop for insurance when insurance is not available through their employers. The bill contains a public option (referred to in the Senate's bill as the "community health insurance option") but differs from the House bill in that it permits states to "opt out" or prohibit that state's Exchange from offering a community health insurance option.  This bill will expand Medicaid coverage for those people earning less than 133% of the federal poverty line and will provide subsidies for the purchase of health insurance for people earning less than 400% of the FPL.

The Senate's bill stops short of the House's proposed ban on public health insurance options providing coverage of abortion services but it does prohibit the use of federal funds for abortion services.

To pay for some of the costs of the bill, the bill proposes an excise tax on high cost employer-sponsored health coverage (i.e., plans worth $8,500 for individuals and $23,000 for families).  The bill also proposes a tax on elective cosmetic surgeries and an increased hospital insurance tax on high-income taxpayers that would increase the Medicare deduction from 1.45% to 1.95% for incomes over $200,000 for individuals and $250,000 for couples.

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The American Hospital Association released a helpful Recovery Audit Contractor Program Update dated October 5, 2009. There is a password required.

The report is also available on the Ohio Hospital Asssociation website as well.

A few highlights:

• To date, CMS has approved only automated audits, which rely on software analysis to find technical errors such as coding errors.
• CMS has delayed approval of complex audits, including medical necessity reviews, in order to finalize processes and policies related to requesting and auditing medical records.
• DRG and coding validations are likely to begin in November 2009 at the earliest, with medical necessity reviews delayed until 2010.AHA has made available to all hospitals a free claim-level Excel tool to assist in tracking RAC audits.

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The Senate Finance Committee has approved its health care reform legislation, entitled "America's Healthy Future Act." This legislation will now have to be merged with the version approved by the Senate Committee on Health, Education, Labor and Pensions (the "HELP Committee").

The two bills share many common concepts, such as penalties for individuals who fail to obtain health insurance, expansion of Medicare and requirements for insurance plans that, for example, include prohibitions on exclusions for pre-existing conditions.

However, the Finance Committee's version differs from the HELP Committee's in some significant ways. First, the Finance Committee's version does not establish a government-run health insurance plan, commonly referred to as a "public option," that would compete in the health insurance exchanges with private health insurance plans. Second, it does not mandate employers to provide health insurance. Third, it proposes different methods for financing the cost of the legislation. For example, the Finance Committee's version proposes assessing fees on pharmaceutical manufacturing companies ($2.3 billion), medical device manufacturers ($4 billion), health insurance providers ($6 billion), and clinical laboratories ($750 million).

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CGI Technologies and Solutions, Inc. is the RAC contractor for Region B, which includes Ohio.  Provider outreach started in September and, according to CGI's website, will be done by the end of September.  CGI is already operational in Indiana, Michigan, and Minnesota, so expect RAC audits to start in Ohio before the end of the year.  CGI's RAC website is located at racb.cgi.com/Default.aspx

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Senate Finance Committee Chairman Max Baucus has been reported as circulating to members of the committee a document entitled "Framework for Comprehensive Health Reform."

The Framework represents "many of the policies" discussed by the committee but is "not a final product . . . and does not include everything that might be in the [Chairman's Mark]." It most notably does not include a public insurance option. Rather, it proposes a Consumer Operated and Orientated Plan (CO-OP) program to create nonprofit, member-run health insurance companies that service individuals in one or more states.

Also, it does not propose an employer mandate. However, as discussed below, while there is no employer mandate, certain employers may be fined for not providing health insurance coverage.

Some other highlights of the document include:

• Penalizing US citizens and legal residents who fail to obtain health insurance coverage up to $3,800 per year.
• Fining employers with more than 50 full-time employees (30 hours and above) that do not offer health insurance coverage to their employees up to $400 annually for each employee who receives a tax credit for health insurance through an exchange.
• Establishing state-based exchanges to assist individuals and small groups to more easily compare health insurance plan benefits and premium costs for four benefit options that would be available.
• Permitting health insurance premiums to vary based on only four factors: tobacco use, age, family composition and geographic differences.
• Prohibiting health insurance plans in the individual market from excluding coverage for pre-existing health conditions or rescinding health coverage.
• Levying an excise tax of 35% on insurance companies and insurance administrators for any health insurance plan that is above $8,000 for singles and $21,000 for family plans.
• Assessing fees that would be generally allocated by market share on pharmaceutical manufacturing companies ($2.3 billion), medical device manufacturers ($4 billion), health insurance providers ($6 billion), and clinical laboratories ($750 million).
• Permitting states to form "health care choice compacts" between two or more states to allow the purchase of non-group health insurance across state lines.
• Expanding Medicaid coverage to include individuals who are not currently eligible (e.g., non-elderly individuals (childless adults) at or below 133% of poverty).
• Reducing a state's allotment for Medicaid Disproportionate Share Hospital Payments by 50% once the number of uninsured individuals in the state is reduced by 50%.

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The Settlement Agreement between the Department of Justice and Covenant Medical Center of Waterloo, Iowa is now available. On August 25, 2009, DOJ announced Covenant agreed to pay the United States $4.5 million to resolve allegations that it violated the False Claims Act. The government accused Covenant of submitting false claims to Medicare by having financial relationships with five physicians that violated the Stark Law. The government alleged that Covenant violated the Stark Law by paying commercially unreasonable compensation, far above market value, to five employed physicians. According to the government, these physicians were among the highest paid hospital-employed physicians not just in Iowa, but in the entire United States.

In the Settlement Agreement, the government claimed Covenant paid compensation to five physician employees that exceeded the fair market value of the services provided by those physicians.  Covenant denied the allegations of wrongful conduct and claimed the compensation paid was consistent with the fair market value of the services provided by the physicians.  The Settlement Agreement did not have any other details concerning the compensation. 

The Settlement Agreement is here www.szdhealthlawscan.com/uploads/file/Settlement Agreement (H1627730).PDF

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On August 25, 2009, the Department of Justice announced Covenant Medical Center in Waterloo, Iowa agreed to pay the United States $4.5 million to resolve allegations that it violated the False Claims Act. The settlement resolves allegations that Covenant submitted false claims to Medicare by having financial relationships with five physicians that violated the Stark Law. The government alleged that Covenant violated the Stark Law by paying commercially unreasonable compensation, far above market value, to five employed physicians. According to the government, these physicians were among the highest paid hospital-employed physicians not just in Iowa, but in the entire United States.

Covenant issued a press release denying any wrongdoing or illegal conduct. Covenant maintained the physician compensation was consistent with the approved compensation plan, was based on work personally performed by the physicians, and reflected their exceptionally high level or productivity. Covenant said it made a business decision to settle to avoid the uncertainty of litigation, disruption, and high expense associated with protracted litigation with the government. 

An article in the Des Moines Register on May 26, 2005 provides some information about the compensation. The paper reported that Covenant paid one orthopedic surgeon more than $2.1 million and a second orthopedic surgeon more than $1 million. A gastroenterologist was paid nearly $2.1 million. These figures were for the budget year ending in June 2003. 

DOJ's press release is here www.justice.gov/opa/pr/2009/August/09-civ-849.html

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The community benefit standard is the most common test applied by the IRS to determine whether a hospital, clinic, or other healthcare provider is operated to promote health in a manner that services a charitable purpose and, accordingly, merits tax-exempt status. The new form 990, introduced by the IRS in December 2007, has significant implications for the determination of community benefit as reported to the IRS. In response to these IRS changes, the Catholic Health Association (CHA) released the 2008 Edition of A Guide to Planning and Reporting Community Benefit, which discusses various forms of community benefit, including community health education. As part of its discussion on community health education, CHA’s Guide identifies health law topics for consumers, such as the American Health Lawyers Association’s (AHLA) Public Information Series (Series), as a recognizable form of community benefit.

AHLA has compiled a new Community Benefit Toolkit to explain how healthcare providers can share these publications within their local communities to promote community health education and advance community health improvement. Healthcare organizations can co-brand the Series’ publications to share with their local communities either electronically as a .pdf or reproduce the publications in hard copy at no cost. The distribution of these publications to consumers and healthcare professionals will provide healthcare organizations with additional community benefit to list on their IRS Form 990 Reports and thus may assist in meeting their community benefit obligations. As healthcare providers allocate scare resources to further their missions, the sharing of these publications is a cost-effective means of providing tangible value to local communities.

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On June 15, 2009, the American Medical Association (AMA) approved new guidelines for physicians on responding to breaches of patients' electronic medical records (EMR).

According to the AMA Council on Ethical and Judicial Affairs (CEJA) in its report, CEJA Report 3-A-09, these guidelines are intended to fill an important gap in the AMA's policy, which, until now, did not "address physicians' ethical responsibilities in the event the security of electronic records is breached and patient data are inappropriately accessed." The CEJA identified the need for the guidelines particularly in light of the newly enacted American Recovery and Reinvestment Act of 2009 (ARRA), which amended the Health Insurance Portability and Accountability Act of 1996 (HIPAA) to mandate that patients be notified in the event of certain breaches of their medical records.

As adopted, the guidelines state:

"When there is reason to believe that patients’ confidentiality has been compromised by a breach of the electronic medical record, physicians should:

1. Ensure that patients are promptly informed about the breach and potential for harm, either by disclosing directly (when the physician has administrative responsibility for the EMR), participating in efforts by the practice or health care institution to disclose, or ensuring that the practice or institution takes appropriate action to disclose.
2. Follow ethically appropriate procedures for disclosure, which should at minimum include: 
   1. carrying out the disclosure in a private setting and within a time frame that provides patients ample opportunity to take steps to minimize potential adverse consequences; and
   2. describing what information was breached; how the breach happened; what the consequences may be; what corrective actions have been taken by the physician, practice, or institution; and what steps patients themselves might take to minimize adverse consequences.
3. Support responses to security breaches that place the interests of patients above those of the physician, medical practice, or institution.
4. To the extent possible, provide information to patients to enable them to mitigate potential adverse consequences of inappropriate disclosure of their personal health information, such as credit monitoring services or identity theft hotline."

Now, physicians and other health care providers who intend to establish policies to address responses to breaches of their patients' EMR must not only take into account the above AMA guidelines and the recent amendments to HIPAA but they also must remember to consult the applicable laws of their own state.

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On June 16, 2009, the Centers for Medicare & Medicaid Services (CMS) released a fact sheet on the Medicare and Medicaid Health Information Technology: Title IV of the American Recovery and Reinvestment Act (ARRA). The fact sheet details the Medicare and Medicaid incentive payments for meaningful users of electronic health information (EHR). In addition to the summary of ARRA, the fact sheet contains a section on Frequently Asked Questions about the incentive payments.

According to this fact sheet, CMS expects to publish a proposed rule to define "meaningful use" of EHR and to establish the criteria for the incentive payments by late 2009.

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On June 16, 2009, the Health Information Technology (HIT) Policy Committee held a meeting to begin defining the "meaningful use" of electronic health records (EHR). Under the American Recovery and Reinvestment Act (ARRA), only "meaningful EHR users" will be eligible to receive Medicare and Medicaid incentive payments for adopting EHRs. The ARRA broadly defines a meaningful EHR user as one who demonstrates (1) the meaningful use of certified EHR; (2) the electronic exchange of health information to improve quality of health care; and (3) the submission on clinical quality and other measures using certified EHR technology.

The HIT Policy Committee developed a "Meaningful Use Matrix" that establishes proposed objectives that hospitals and physicians would have to meet to receive the incentive payments. The committee believes that this matrix "represents a set of objectives and care processes that . . . should inform the ultimate definition of meaningful use."

The Office of the National Coordinator for Health Information Technology (ONC) is now seeking public comments on the HIT Policy Committee's recommendations through Friday, June 26, 2009. The Centers for Medicare & Medicaid Services expects to publish a proposed rule to define "meaningful use" of EHR and to establish the criteria for the incentive payments by late 2009.

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On April 8, 2009, President Obama signed an executive order establishing a White House Office of Health Reform (OHR) that will spearhead the Obama Administration's policy agenda for health care. The principal functions of the OHR include providing leadership for and coordinating the development of the Administration's agenda; working with Congress, various executive departments and agencies, and State, local and community policymakers and public officials; and monitoring the implementation of the agenda.  If requested by the OHR Director, executive departments and agencies are required to designate a liaison to work with the OHR.

The executive order also requires the Secretary of Health and Human Services to establish its own Office of Health Reform within the Department of Health and Human Services to coordinate closely with its White House counterpart.

President Obama has appointed Nancy Ann Min DeParle as the first Director of the OHR. During the Clinton Administration, DeParle served as the Associate Director for Health and Personnel at the White House Office of Management and Budget and as the Administrator of the Health Care Financing Administration, which is now the Centers for Medicare and Medicaid. Before joining the Clinton Administration, she served as the Tennessee Commissioner of Human Services and worked as a lawyer for a law firm in Tennessee. Since leaving the Clinton Administration, DeParle is reported to have served on the board of directors of various medical device companies, such as Boston Scientific and MedCo.

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We invite you to learn more about developing successful Hospital-Physician relationships by reviewing a recent article and case study by Great Boards. Or, feel free to visit www.greatboards.org/newsletter to preview the full Spring 2009 newsletter and case studies.

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We recommend to our health care audience a thoughtful article by our colleague in Labor and Employment, Felix C. Wade, entitled The Employee Free Choice Act - Effective Planning for Hospitals.

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Extending its string of positive advisory opinions involving gainsharing arrangements, over the past few months the OIG has issued three new, favorable gainsharing opinions. While the three gainsharing arrangements reviewed by the OIG in the recent opinions bear striking similarities to gainsharing arrangements that received favorable treatment in the past, there are some differences that suggest a broadening of the type of gainsharing arrangements that will receive OIG approval.

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The OIG recently released a report that was critical of the oversight and enforcement by CMS with respect to the HIPAA Security Rule. The report included the following remarks: “CMS had taken limited actions to ensure that covered entities adequately implement the HIPAA Security Rule. These actions had not provided effective oversight or encouraged enforcement of the HIPAA Security Rule by covered entities.” The report notes that CMS primarily relied on complaints to identify non-compliant covered entities that it might investigate and recommends that CMS establish policies and procedures for conducting HIPAA Security Rule compliance reviews of covered entities.

The report raises an interesting topic that should receive more scrutiny in upcoming years: Resource allocation for enforcement of Federal health care laws and regulations. OIG indicates that CMS could be more effective in its oversight and enforcement of the HIPAA Security Rule by conducting compliance reviews. But, this begs the question: Why did CMS not conduct compliance reviews during the period under review?

If the answer is that CMS allocated significant resources to compliance reviews and simply failed to execute, then a critique on this failure may be justified. But, if CMS chose not to engage in compliance reviews during the period under review, relying on other (perhaps, less expensive) methods of enforcement and allocating resources to achieve other objectives on its agenda, than the assessment should focus on the decision not to allocate significant resources to compliance reviews.

And, if this latter statement is true, that CMS chose not to allocate significant resources to compliance reviews during the period in question, to analyze this decision, one should look at the opportunity cost of compliance reviews, i.e., the CMS projects that could have been given less attention in order to direct more resources to compliance reviews.

CMS’s response to the report is marked by its disagreement with OIG’s conclusions on the complaint-driven enforcement process. Is CMS saying, with the hand we are dealt, we believe our complaint-driven enforcement model is appropriate?

In reviewing performance, the reviewer should consider the resources available to the performer. Allocation of Federal government resources, already a topic of mainstream discussion, will continue to be dissected heavily in upcoming years given the capital that has been infused into the economy and the likelihood for increased dedication of resources to regulation of the financial industries. Of course, how this resource allocation will affect enforcement in the health care industry remains to be determined.

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In the latest in a long line of cases in Ohio and elsewhere involving uninsured patients who sued hospitals alleging excessive and unconscionable charges, on September 30, 2008, the Court of Appeals of Ohio, Sixth Appellate District, issued a Decision and Judgment in Firelands Regional Medical Center v. Jennifer R. Jeavons, 2008-Ohio-5031, affirming the trial court’s dismissal of the defendant’s counterclaims.

The case started as a simple collection matter.  Firelands Regional Medical Center (“FRMC”) brought a claim against an uninsured patient seeking compensation for services rendered on three separate dates of service.  Thereafter, FRMC amended its claim to add two additional dates of services and sought a total of $2,878.96, plus interest.

In response to FRMC’s complaint, the defendant admitted she received services but claimed that the rates charged were “far in excess of the reasonable, usual and customary rates for the services rendered.”  The defendant also filed a purported “class-action counterclaim” alleging that she is a member of a class of uninsured patients that received care at FRMC from 1989 to present that were all charged excessive rates by FRMC.  The claims alleged in the counterclaim include: (1) declaratory and injunctive relief claims; (2) breach of contract; (3) unjust enrichment; (4) breach of duty of good faith and fair dealing; and (5) violations of the Ohio Consumer Sales Practices Act (“OCSPA”).

The trial court granted FRMC’s Motion to Dismiss.  On appeal, defendant raised two assignments of error asserting that the trial court improperly dismissed the counterclaim and improperly denied defendant’s motion for reconsideration of the same.

With respect to the breach of contract claim, the defendant alleged on appeal that FRMC engaged in an anticipatory breach of the contract when it filled in the price term of the contract with an unreasonable sum.  The Court of Appeals rejected this argument and refused to engage in any determination of what constitutes a reasonable fee.  Citing the decision of the United States Third Circuit Court of Appeals in DiCarlo v. St. Mary Hosp. (3rd Cir 2008, 530 F.3d 255), the court stated “[A] Court could not possibly determine a “reasonable charge” for hospital services without wading into the entire structure of providing hospital care and the means of dealing with hospital solvency.”  In addition to rejecting the idea that a court could or should determine what constitutes a reasonable charge for hospital services, the court also noted that defendant never offered any evidence regarding what she considered a reasonable charge. 

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Advisory Opinion 08-10, posted by the OIG on August 26, addresses a proposal for a physician group practice to provide space, equipment and personnel to another physician group practice through a block lease, and concludes that there is a "significant risk" that the arrangement would be an improper contractual joint venture that would reward the leasing group for referrals.

The opinion addresses a block lease of space, personnel  and equipment from oncologists to urologists for IMRT, combined with use of contracted radiologists to supervise the procedures.   The urologists bill all payers for the services, including Medicare.  The  OIG's rationale is that of its 2003 contractual joint venture advisory bulletin, but it is notable that in the arrangement discussed in this Advisory Opinion, the blocks of time are fixed, as is the compensation, and there is a one-year term.  Thus, although the OIG refuses to address the question, it appears that all of the components may have been designed to satisfy a safe harbor.  The OIG doesn't address the safe harbor issue because the remuneration it is concerned about is the opportunity for the urologists to make a profit.  The OIG emphasizes that the oncology group is agreeing to provide services it could provide in its own right for less than the available reimbursement. 

A key point that may distinguish this from many physician block leases is that the urologists do not participate in performing the IMRT, but contract out substantially all the services, including the professional services.   The opinion states that the urologists contract with individual radiologists (who also provide services to the oncologists) to supervise the IMRT procedures.  Thus, the OIG goes on to note that the urologists commit little financial, capital or human resources. 

Like the recent changes to the Stark Law regulations, this opinion provides indication of continually increasing government scrutiny of physician ventures.

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On July 29, 2008, the U.S. Complaint in Intervention was filed in the U.S. District Court for the Southern District of Ohio alleging a kickback scheme among The Christ Hospital and certain cardiology groups.  The complaint  arises out of a qui tam action brought in 2003, in which the government intervened in March.  It alleges that The Christ Hospital allocated reading panel time at the hospital's "Heart Station" diagnostic testing facility among cardiologists based on their relative percentage of referrals and revenues generated from certain coronary arterial bypass graph (CABG) and catheterization procedures. 

No direct payment from the hospital to the cardiologists is alleged.  Rather, the kickback is alleged to arise from the "lucrative assignment" to the Heart Station panel.  This assignment is described as lucrative both because of the reimbursement the cardiologists received for their personal services in providing the test interpretations and because of opportunities the panel time afforded for obtaining new patients. 

The tie between the referrals to the hospital and amount of panel time allocated to the cardiologists is stunningly clear as alleged in the complaint.  Specifically, the hospital is alleged to have allocated panel time in direct proportion to referrals and revenues generated - if a cardiology group generated 70% of the CABG and cath revenues, it was allocated 70% of the panel time.  Worksheets filed as exhibits to the complaint are offered as illustrations of this calculation method.  The complaint asserts that cardiologists who failed to generate sufficient revenues were not given panel time regardless of their qualifications.

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As this writer discussed in more detail in a recent presentation, the law governing hospital programs to align physician incentives to improve quality and reduce costs continues to evolve.  Most recently, the Centers for Medicare and Medicaid Services (“CMS”) proposed a new exception under the Stark Law for “incentive payment” programs to improve quality and “shared savings” programs in the calendar year 2009 Medicare Physician Fee Schedule proposed rule.

CMS acknowledges that the new exception it proposes is narrow, and indicates that while it seeks to provide flexibility, new exceptions must be crafted in a way that avoids any risk of program or patient abuse. CMS specifically notes concerns that the programs not be used to disguise payments for referrals or compromise quality in order to increase profits. As a result, the proposed regulation includes 16 numbered paragraphs with conditions for satisfying the exception, and additional requirements discussed in the preamble without regulatory text.

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The Department of Justice (DOJ) announced on April 24, 2008 that the parent of Memorial Health University Medical Center agreed to pay over $5 million to settle allegations that it violated the Stark Law in connection with its payment of compensation to physicians employed by its affiliate, Georgia Eye Institute. Memorial also entered into a Certification of Compliance Agreement with the Department of Health and Human Services Office of Inspector General. Memorial denied all allegations, and the settlement agreement specifies that it is not an admission of wrongdoing.

The qui tam complaint filed by Dr. Ryan Boland alleged both overpayment for acquisition of the physician practices and excessive compensation, but the DOJ press release only references the compensation issues. According to the initial complaint, some ophthalmologists were paid as much as $500,000 in compensation, and the relator believed there were emails indicating teaching stipend/indigent care payments were actually disguised payments for surgical referrals. The complaint alleges that the hospital formed a nonprofit ophthalmology practice and after transitioning compensation within the practice to a productivity model, provided the practice with teaching/indigent support payments that were funneled to a small number of the doctors in order to retain them. These doctors allegedly received compensation that was in excess of fair market value and that was not commercially reasonable because it did not take into account which doctors performed the teaching and indigent care services.

This settlement should serve as a reminder to hospitals pursuing physician employment strategies to carefully review their compensation methodologies, including the manner in which compensation is allocated among individual physicians in an affiliated practice. To comply with the Stark Law, employed physicians’ compensation must be consistent with fair market value and may not take into account the volume or value of referrals made by the physician. The arrangement with the employed physicians also must be commercially reasonable.

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A recent story from Healthcare IT News presents an interesting intersection between the managed care and health information technology areas.  New Jersey's Horizon Blue Cross is apparently providing funding for electronic medical record implementation in network hospitals.  

For those of you thinking on a national scale, EMRs for eight hospitals may be a relatively small step, but one that may foreshadow more intriguing possibilities.  After all, who else has as much to gain from, and is in a better position to support electronic health information exchange, as the payors?  Not to mention the impact that a program like that could have on payor contract negotiations.

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Recent confirmation of the premise that labeling a document "peer review" does not automatically invoke the peer review privilege came via the Ohio 12th District Court of Appeals, which affirmed a trial court decision ordering the production of hospital EKG discrepancy reports.

Per hospital procedures, cardiologists overread emergency room physician EKG readings.  A discrepancy report was completed whenever the cardiologist's interpretation differed from the emergency room physician.  The defendants argued that the discrepancy reports were peer review documents and non-discoverable, based on Ohio Revised Code Section 2305.253, Incident or risk management report not admissible or discoverable; and Ohio Revised Code Section 2305.252, Confidentiality of proceedings and records within scope of peer review committee of health care entity.

Critical to the Court's finding that the trial court did not abuse its discretion in ordering production of the reports was evidence in the record that the reports were used for patient care.  The Court also cited a lack of evidence that the reports were actually examined by a peer review committee at the hospital.  And, the Court noted that the reports were not "incident or risk management reports" since the purpose of the forms is not to record a patient injury occurring at the hospital.

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The Fourth District Court of Appeals in Ohio recently released an opinion indicating that the trial court erred by refusing to grant a motion to quash a grand jury subpoena requesting medical records from a physician.  The grand jury had issued a subpoena ordering the physician to produce the medical records of over 50 patients.

The case is instructive regarding application of the physician-patient privilege to grand jury subpoenas in Ohio.  Under Federal privacy regulations, a covered entity may disclose protected health information without a "HIPAA-compliant" authorization in compliance with and as limited by the relevant requirements of a grand jury subpoena.  See 45 C.F.R. 164.512(f)(1)(ii)(B).  However, an Ohio court has recognized that the state law physician-patient privilege is more stringent than the Federal privacy regulations.  See Grove v. Northeast Ohio Nephrology Assoc., 2005-Ohio-6914, Paragraphs 18-23.

The Ohio Supreme Court has stated that in the absence of a prior authorization, a physician or hospital is privileged to disclose confidential medical information in those special situations where disclosure is made in accordance with a statutory mandate or common law duty, or where disclosure is necessary to protect or further a countervailing interest that outweighs the patient's interest in confidentiality.  Biddle v. Warren Gen. Hosp., 1999-Ohio-115 (syllabus).

In this case, the Court found no statutory exception to the physician-patient privilege.  In addition, the Court refused to "judicially create a public policy exception to the privilege statute for grand jury subpoenas."  Physicians and hospitals should be aware of this opinion (and its analysis) when responding to grand jury subpoenas requesting medical records.

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