Physician Law : Pennsylvania Health Law Lawyer & Attorney : Fox Rothschild LLP : serving Philadelphia, Pittsburgh, Allentown, Erie, Upper Darby Twp

Over the last several years, hospitals have been acquiring specialty physician practices in response to a number of market forces.  However, these types of acquisitions are not new to the American health care system and those who have been around long enough know that these arrangements can and badly.  In my experience, one of the primary reasons that these combinations fail is that traditional hospital/physician practice acquisition/employment transactions tend to focus on short-term concerns and protections and as a result fail to build a strong foundation for a long-term successful relationship.  Under a typical acquisition/employment model, the physician is engaged for the sole purpose of providing clinical services and is insulated from input into the management and operations of the post-acquisition practice.  This has the effect of removing the physician from one of the key areas where they can provide significant value:  participation in operational cost savings.   

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Today I am focusing on the self-referral ban under the federal Stark laws. In particular, a recent case – Fresenius Medical Care Holdings, Inc. v. Tucker (Dkt. No. 4:03-cv-00411-SPM-GRJ (Jan. 10, 2013, 11^th Cir.)) – discussed the interplay between those laws and a State’s attempt to impose more stringent requirements. 

The court first focused on two exceptions to the Stark laws’ ban on physician self-referrals. These exemptions concern clinical lab services for end-stage renal disease (ESRD), as well as certain lab services performed by a company with stockholder equity in excess of $75 million. 

A Florida statute subsequently narrowed these exemptions, and that statutory change impacted a Florida business’ ability to make referrals. 

The plaintiff argued that Congress had crafted the Stark laws’ exemptions in order to benefit Medicare and Medicaid recipients and, as such, intended to provided explicit benefits. That argument was rejected. 

The circuit court found that federal law permitted State laws to be more stringent, and that this was such a situation. Moreover, the court was not convinced that the plaintiff’s business was stifled by the State rules and, instead, found that the impact to the business was marginal. 

It remains to be seen whether or not this ruling will encourage States to enact more stringent restrictions and make it even more difficult for businesses to comply with a non-uniform set of rules.

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Now that the new year is upon us, today’s post will look at the Department of Health and Human Services’ Office of Inspector General (OIG), in particular, OIG’s priorities for 2013.   According to OIG’s Fiscal Year 2013 Work Plan, it will be focusing upon a number of topics of interest – including some items not addressed last year.

OIG’s planned reviews of Medicare Part A and Part B will include:

● Billing patterns for nursing home stays.

● Accreditation of medical equipment suppliers, with a particular focus on quality standards.

● Claims submitted by medical equipment suppliers for lower limb prosthetics, power mobility devices and vacuum erection systems.

● Replacement of medical equipment, especially the frequency and necessity of that replacement.

● Independent physical therapists’ claims and whether the claims are reasonable, medically necessary and properly documented.

● Billing for electrodiagnostic testing.

● Ensuring that payments are not made for alien beneficiaries who were unlawfully present in the United States.

● Reviewing payments for Part A and Part B services to avoid claims starting after a beneficiary has died. 

 

Special attention should be paid to these areas in the coming year given OIG's additional scrutiny.

 

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Finding it increasingly difficult to remain profitable in private practice, many physicians are turning to hospital employment to avoid the economic realities of running a small business. However, as a recent article in the New York Times illustrates (see "A Hospital War Reflects a Bind for Doctors"), physicians should bear in mind that even under hospital employment, economic pressures -- though perhaps different from those in private practice -- will continue to exist.

Few hospital-owned physician practices are actually profitable after payment of practice overhead and physician compensation. Although hospitals typically receive economic benefit from ongoing physician referrals for hospital services, under federal law, hospitals are not supposed to take these dollars into consideration when establishing physician compensation.  Moreover, Hospital employers may lose sight of the intangible contributions of employed physicians when they are compelled to provide a regular financial subsidy to their captive physician practices.  It is critical, therefore when establishing physician employment arrangements with hospitals to reach clarity on the economic expectations on both sides of the transaction and build adequate protections for both parties into the employment agreement. Key elements of such an understanding will include productivity expectations, budgeting and staffing considerations and appropriate incentives for continuing or improved performance.

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If you're like most physicians, you have probably given some recent thought to selling your practice or merging with one or more other groups.  If you are part of a group practice, it's quite possible that all members of the group might not agree on a single course of action.  Keep in mind that even if your corporate agreements say that "majority rules", dissenting shareholders may have certain rights under state law, including the right to fair value for their shares in the practice.  For an idea of what can happen if these dissenter's rights are ignored, have a look at this recent article on Indystar.com.

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As administrative burdens and costs associated with the practice of medicine continue to grow, many physicians are wondering out loud whether now is the time to make the leap to cash-only concierge medicine.  In its purest form, concierge medicine is a model where patients pay a recurring cash fee (e.g., monthly or annual) for expedited/enhanced access to medical and wellness care.  There are many possible variations on this concept ranging from a cash fee-for-service model to a hybrid model where the physician accepts cash for some services (non-covered) and bills insurance for others. 

While the concept may sound incredibly tempting, physicians are advised to proceed with caution.  To be sure, there are a host of legal considerations - most of which have to do with Medicare and commercial insurance contractual issues.  These are particularly tricky in a hybrid model where the distinction between covered and non-covered services is critical. 

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According to a a major study published in the Archives of Internal Medicine this week, almost half of physicians surveyed (over 7,000 physicians were surveyed), reported at least one symptom of burnout.  As a recent article in the Atlantic points out, although physician burnout may not be news to most physicians who are living with the realities of shrinking reimbursements, growing costs and increasing administrative burdens, the general public may not have a real understanding of what this means for them.  Given the financial and time investment required to become a physician, the health care reform debate likely scared a lot of folks away from attending medical school already. 

For the public, fewer physicians surely means less access to care.  More people may have insurance coverage under the Affordable Care Act but insurance coverage will do little to address the impending access problem.  Interestingly enough, however, this shortage is likely to have a silver lining for physicians who choose to stay in practice:  short supply means higher demand and higher demand is likely to mean increased reimbursement.  In other words, those hearty souls who elect to continue to brave the storm of medical practice over the next couple of years will likely be able to demand higher reimbursement rates for their services.  In fact, some doctors may find that patients are willing to pay cash to avoid waiting for care.  Stay tuned - the pendulum may be swinging back before you know it.

 

 

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By Randy Schauer, Esquire

Is your office OSHA (Occupational Safety and Health Administration) compliant?  Few physicians realize that OSHA violations can result in significant penalties.  Fox attorneys recently advised a medical practice cited by OSHA after an inspection of one of its offices. In defending the citation, we asked the OSHA inspector what actions had precipitated the inspection as there had been no injuries, employee reports or other typical triggers for an OSHA inspection. He learned the inspection came about as a result of a “Local Emphasis Program” by the Philadelphia OSHA office.
 

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Do you have a succession plan for your medical practice? In my experience, too many physicians wait until close to retirement age to begin developing a plan to transition out of practice. Given the volatility of the healthcare market, you should certainly not assume that there will be a ready and willing buyer for your practice if and when you decide to slow down or retire.

If your local hospital, or another practice or physician in your community is not interested in purchasing your practice, you could be out of luck. Without someone to take over the practice, your only option is to close your doors and liquidate your assets. If you're lucky, you may find a local physician who will take custody of your medical records, but if not, you will need to pay to store these to the extent required by law.
 

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Even if you are not considering selling your medical practice now, there are good reasons to maintain it in a condition to be sold.  For one thing,  healthcare reimbursement is subject to huge swings. Physician reimbursement in governmental payor programs continues to be a political football and, depending which side of the line the ball lands on, profitable medical practices could become significantly less profitable overnight.  In addition, as other practices sell and merge, the referral landscape can also change quickly.  If your practice depends on the referrals stream of a large primary care practice and that practice sells to the local hospital, for example. selling your practice to the same hospital may be a necessary alignment strategy.  You also never know when the right opportunity may present itself, but if and when it does, you should be ready.  Finally, running a tight ship is always a good business. 

What does it mean to keep your practice in a condition to be sold?  Have a look at this timely article in Physicians Money Digest.

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In this second installment of critical physician employment agreement considerations (see the first installment "Defining the Scope of Practice"), I want to briefly discuss term and termination provisions.  Signing an employment agreement always involves a leap of faith to some degree since it is very difficult to predict (and capture in a written agreement) exactly what the work experience will be like. 

I have counseled many physicians over the years who negotiated excellent contracts only to learn that they hated the work environment once they actually started the job.  Similarly, practices may find that the candidate they thought was perfect during the interview process doesn't actually work out so well in "practice".  It is critical therefore when negotiating an employment agreement that both parties clearly understand how long of a commitment each is making and how the agreement can be terminated if things don't work out.

Most physician employment agreements are terminable “for cause” and “without cause”. For-cause termination generally means that a party to the agreement can terminate the agreement – usually immediately – if the other party breaches or violates the agreement in some way. The employment agreement should clearly spell out each of the causes for which the employment can be terminated.  The causes for termination should be objective and reasonably within the employed physician's control but not so restrictive as to leave the employer without recourse if some unexpected behavioral or performance issue arises.

Common causes for termination may include loss or suspension of license or medical staff privileges, failure to obtain or maintain managed care participation, failure to obtain or maintain board certification, commission or conviction of a crime, or patient safety related issues, attendance issues or poor productivity.

Commonly physician employment agreements can also be terminated without cause which means that either party can terminate the agreement at any time – usually upon a certain number of days notice – without having to identify any specific reason for the termination.  Without-cause termination can be a scary proposition for many physicians but it is not all bad. This type of termination provision can offer protection for both parties since, in the absence of a without-cause provision, each party is obligated to abide by the terms of the agreement for the entire term unless they are able to find cause for termination or are willing to breach the contract (and potentially be sued for breach). 

When one or the other party feels "trapped" in an undesirable employment relationship, bad things tend to happen. While there is a risk that the agreement may be terminated at any time, when both parties to the arrangement are happy, that risk is generally low.

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More and more physicians are considering hospital employment as an alternative to private practice.  Whether you are considering becoming a hospital employee or joining a private group practice, however, there are a number of considerations that should be taken into account when structuring your employment agreement.  In the coming days and weeks, I hope to blog about some of these important issues -- the first of which is defining the scope of employment.

As professionals, full-time employed physicians are generally expected to work the hours and provide the services required to ensure the prompt and necessary care of practice or hospital patients. This does not mean however that the employment agreement cannot provide at least the general parameters of the employment commitment including the type of services the physician will be required to render, where he or she will be required to work, the normal work hours and the physician's on-call obligations. For example, if you are being hired to work or concentrate in a specific subspecialty, the employment agreement should state that fact. You do not want to show up for employment as an electrophysiologist and find out that you will be expected to practice general cardiology.

Similarly, if the employer has multiple service sites, unless you’re willing to rotate among those sites or be assigned to sites in your employer’s discretion, consider specifying your primary practice location in the employment agreement so that you cannot be reassigned without your prior consent. Also, the agreement should specify when you will be required to work. If the expectation is that you will work office hours on the weekend, you should know this upfront.

Finally, if you will have on-call responsibilities, you should try to have the agreement specify your maximum on-call obligations or at least that call will be shared equally among the similarly-situated physicians in the practice.
 

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Well, another interesting article this week regarding the exodus of physicians from private practice.  This time, it's the Philadelphia Inquirer reporting on "Why Heart Doctors are Leaving Private Practice"  Only time will tell if this a merely a fad or a real change in the way healthcare will be delivered going forward.  We have seen this "trend" before, however, and it didn't really work out that well for many physicians or hospitals. 

In my experience, those transactions that are based upon each party's short-term gains/protection are unlikely to take hold for the long-term.  Striking a deal that works adequately for an initial three-year employment term is not that difficult.  The real trick is in building a model that will last well beyond the first three or six years.  If the employment model (think "goverance and compensation") doesn't foster and reward collaborative success, employed physicians end-up feeling disenfranchised, and unfortunately disenfranchised employees usually don't care that much about the success of their employer.   There is certainly an opportunity for forward-thinking physicians and hospitals to use the current climate as a catalyst to build a truly integrated delivery model but it will require both parties to check some heavy baggage at the door.  

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There's an interesting piece in the Miami Herald today regarding hospitals once again acquiring physician practices. The article raises some good questions regarding the motivations underlying this growing (recurring) trend and suggests that it might be more about control than preparing for a "reformed" health care system. The article also questions whether hospitals will be any more successful this go-round in managing the acquired practices than they were in previous attempts.

I frequently represent both hospitals and physicians in practice acquisition transactions. In my experience, only a handful of hospitals and health systems have a true plan for how they will integrate the practices they are acquiring in a manner that will improve the delivery of healthcare. To be sure, how best to integrate providers to improve care is not an easy question to answer. I find, however, that the "smart" hospitals and health systems are willing to acknowledge that physicians should be involved in the development process and that they (the hospitals) do not necessarily have all the answers for how best to accomplish that goal.

If you are considering selling your practice to a hospital, or you are a hospital looking to integrate the physicians in a thoughtful way, consider whether it makes sense to begin the process with a dialogue about where each party envisions the relationship to be several years in the future. If you can reach consensus on where you want to end up, you can then structure a transaction which is specifically designed to get you there.
 

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A recent article on CNNMoney discusses the not-so-new news story about the financial struggles of private medical practices. However, buried within the article is an important financial issue that many physicians overlook: collection of patient balances. According to one of the experts cited in the article, private practices lose 10% to 15% of their profits in uncollected patient balance revenue.

I've worked with many medical practices over the years on dealing with this issue and understand why physicians are reluctant to pursue aggressive patient balance collection efforts. Perhaps chief among their concerns is that physicians are afraid unhappy patients will sue or file a complaint with the Board of Medicine. Given the ease with which patients can file complaints with medical boards or, even more easily, post negative feedback on the Internet, this line of thinking is not without merit. However, having strong collection policies and making your patients aware of them upfront can go a long way to improving your bottom line and improving your patient relationships. Here are a couple of tips for developing collections policies within your practice:

• It should be a standing policy that, with only an occasional exception, patients should pay their balances at the time of service. When staff send follow-up appointment reminders, they should also remind patients to bring payment at the time of service or they will need to be rescheduled. Obviously, exceptions may need to be made to this policy where a patient's health may be jeopardized by a delay in being seen.
• Office staff who deal with patients at scheduling and check out should be trained on the collections policies so that they know what to tell patients and what procedures they must follow to ensure payment.
• Patients should be made aware of the practice's collection policies. It's a good idea to post notices your office regarding collections policies. That way patients know what is expected of them and can't claim ignorance.
• If you use a collections agency, be sure you have a clear understanding with the agency regarding the procedures they will use to collect patient balances. Among other things, you should review and approve the language in collection letters to be sure that the language is professional and not overly harsh.
• Be sure to check applicable law and your third-party payors contracts to be sure your collection policies are compliant. 

 

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Many physicians I work with are talking about the possibility of new payment models such as bundled payments, episode-of-care payments and Accountable Care Organization (ACO) payment models. However, few medical practices have given much thought to how such payment models might actually work for them. Many physicians are still mired in the "fee-for-service" mindset and "productivity" is still a key buzzword among physician partners in most private practices. But, as evidenced by a recent article published by AISHealth, these new payment models (which could be fantastic opportunities for the right practices) are closer than you might think. According to the AISHealth article, Horizon Blue Cross Blue Shield of New Jersey is set to begin a pilot program with five orthopedic practices for bundled total-joint replacement payments.

The payors in your market may not yet be ready to start offering these types of payment programs, but the smart money will on those practices that have given some thought to what payors are looking for and how they would respond if the opportunities are presented. Even smarter money will bet on the practices that have figured out how they can save payors money and are actively seeking to create alternative payment opportunities with their payors. If you haven't already done so, consider establishing a physician committee within your practice to begin exploring ways in which you might take advantage of these coming opportunities. They will be here before you know it.
 

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My physician clients often ask me for advice on how best to negotiate with managed care payers for improved reimbursement. My advice is typically the same: if you want them to pay you more than your competitors, you have to offer them something more than your competitors do. Simply being good at what you do is not enough. You have to be better than the competition because just like you, the competition is undoubtedly asking for more money too.

And, being better alone is also not enough. In order to get the payers to take notice, you must be able to demonstrate that you are better. This means that you need to be able to show them that your services are either of a higher quality, are more convenient or less expensive than the competition. Consider a recent article published by Amednews.com which cites a growing interest by third-party payors in driving down the “unit” cost of a health care visit. According to the article, payers are beginning to recognize that the number of patient visits is not the only driver of cost and that savings can be found in pushing down the cost of each one of those visits.

Unfortunately, many physicians have no idea of their "per unit" visit costs, and if you don't know what your costs are, it's pretty hard to try to manage them. The first step in negotiating managed care contracts, therefore, really should be to take a hard look at your practice, the services you offer, the cost of those services and what you do better (or should be doing better) than your competition. With that information in hand, you can develop a presentation for your important payers which demonstrates why your practice is deserving of special consideration.
 

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Have you or your practice been the subject of a negative online review? If not, there's a pretty good chance that you might be in the future. Online physician rating websites are proliferating and it is becoming increasingly common for disgruntled patients to vent their frustrations on the World Wide Web. Even worse is the fact that many of these websites permit anonymous posting, so you may not even know who your detractor is. It's finally, case law generally exempts rating websites from liability provided they are only facilitating publication of the personal opinions of posters. None of this however means that you must take a negative online review lying down. In fact, given that a physician's reputation is one of his or her most valuable professional assets, I would encourage you to proactively protect your online reputation. Here are a few things you can do:

• Regularly (at least monthly) do an online search of your name and your practice's name to see if comments have been posted. Some search engines allow you to set up an "alert" to notify you by e-mail if your name appears in a search.
• If you know who the poster is, consider calling them and trying to work through their concerns to see if they would be willing to retract their online comment.
• Review the website's “terms of use” to see if the posting is in compliance them. Some websites prohibit posters from personally naming or attacking an individual physician or claiming malpractice on the part of a physician. If you believe a posting does not conform to the terms of use, there is typically a mechanism to report the posting and often the website will remove a noncompliant posting.
• If you have patients with positive things to say about you or your practice, encourage them to post positive comments on one or more of the available rating websites. Not only does this counter any negative comments but it can also push negative comments further down in the list so that they are less prominent.
• Consider involving legal counsel to advise you on your options. Sometimes a well drafted letter from an attorney to either the website or the poster is enough to encourage them to take down the posting.

 

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One of the common struggles I often come across in private medical practices is what to do when a senior physician wants to go part-time. In busy practices, this issue can be emotionally charged and I have even seen it lead to practice breakups.

Some practices simply take the position that either you work full-time, carry a full patient load, do surgery and take full on-call duties or there is no place for you in the practice. This can be a big mistake, especially if the senior physician seeking part-time status has a large patient or referring physician following.

In my experience, the key to successfully handling a physician’s transition to part-time status is having a clear documented policy in place well before the issue even arises. This takes the emotion out of the process and gives everyone fair notice of what to expect if and when they seek part-time status. Some of the key considerations that should go into a part-time policy are as follows:

• If the physician seeking part-time status is a shareholder or owner in the practice, consider whether going to part-time status should automatically require sale of his or her ownership interest back to the practice. Remember that being an owner in a business carries with it a lot of financial responsibility. Someone who is only part-time and eventually looking to move on to full retirement may be unwilling to accept these financial risks.

• The policy should spell out clearly the options for going to part-time status (e.g., no call, one last day in the office per week etc.), as well as the financial implications associated with that decision. The policy should address what will happen with the physician’s salary, bonus participation, benefits and other practice expenses such as malpractice insurance.

• The policy should spell out clearly that part-time status is of limited duration. Physicians should not have the expectation that they can drop to part-time status indefinitely; otherwise you could end up with a practice of all part-time physicians. Part-time status for senior physicians should be used as an interim step in the transition to full retirement. It is generally advisable to make termination of part-time status automatic at the end of a defined period of time so that the practice’s governing body is not forced to make a politically charged decision to either terminate part-time status or allow it to continue.

• Finally, it is critical to the success of any part-time policy that it be implemented consistently. While there can be some flexibility in implementation to account for practice needs at any given time, applying the policy in a discriminatory manner can create legal exposure for the practice and also undermine the policy’s effectiveness.

 

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Even after many years of working with physicians, I am still surprised by the poor record-keeping habits of private practices.  I'm not talking about medical record documentation -- that's a whole other issue.  What I'm talking about is business records -- and more particularly legal agreements.  When a physician client contacts me with a problem, very often it involves some contractual relationship such as a managed contract, employment agreement, service agreement or lease.  Of course, my first request is that they send me a copy of the signed agreement underlying the relationship.  Amazingly, more often than not I am told that they don't know where the signed agreement is or they send me an unsigned draft or an expired agreement.

I have written previously on this blog that legal contracts serve a number of very important purposes.  Of course, without a signed agreement in place, any "contract dispute" will by default be a he said/she said battle -- and the outcome is usually anyone's guess.  Moreover, how can you know if you or the other party is meeting your or their obligations under an agreement if you don't have a copy of the agreement for reference?  Finally, a number of healthcare laws (think Stark) require that certain agreements be in writing, signed by the parties and in effect (i.e., not expired).  If you don't know where your agreements are, you probably don't know if they are still in effect.  

If the above description applies to your practice, now's a great time to begin collecting your agreements and reviewing them to be sure they are compliant and in effect.  Put them in a safe place and keep a list of expiration dates handy so that you address renewals on a timely basis.  If you can't find agreements (e.g., managed care contracts), consider contacting the other party and asking them to send you another copy.  If they can't find one either, it's a good idea to sign a new one.  Also, one of the important functions your attorney can do for you is keep legal documents either in your minute book or your client file so that if you lose your copy, another copy is just a phone call away.  Of course, your attorney's file will only be complete if you remember to send your signed contracts to him or her!

 

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The results of a comprehensive study published this week in the New England Journal of Medicine (NEJM) confirms that physicians’ fears of being sued for malpractice are not irrational. According to the article, “Malpractice Risk According to Physician Specialty”, most physician will be sued for malpractice at least once in their careers. Interestingly, however, only about 22% of malpractice cases annually result in a settlement or other payout.

Low-risk specialists including psychiatrists, pediatricians, family practitioners, and dermatologists have a 75% chance on average of being sued during their careers but high risk surgery specialists -- thoracic cardiovascular surgery, neurosurgery, general surgery, orthopaedic, and plastic surgery – face a 99% chance of being sued. However, the study, which also looked at the average size of payouts, suggests that the likelihood of being sued is not necessarily related to the size of payouts. For example, the average payout in pediatric cases was $520,923 but was only $344,811 in neurosurgery cases.

The threat of a malpractice lawsuit (as opposed to Medicare/payor overpayment liability which I contend is much more likely and not an insured risk!) is a perennial bogeyman for most physicians. The NEJM article is a must read for any physician who wants to see what’s really hiding under the bed -- you might find that it's really not so scary.
 

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These are uncertain times for physicians. Under the looming threat of major Medicare reimbursement cuts, rising administrative costs and an increasingly complex regulatory environment, many of the physicians I speak to feel paralyzed in their professional lives. They are afraid to make capital investments in equipment or technology or recruit new physicians to expand their practices for fear that the government or third party payors may pull the rug out from under them. Physicians are desperate to change their situation but unable to see a clear path forward.
If you share the above sentiments, consider that one of the best ways to overcome the anxiety associated with the present uncertainties in medicine is to develop a strategic plan for your practice. Developing a strategic plan requires that you take a hard look at where your medical practice is today and that you give real thought to where you want your practice to be in the future.

At a very basic level, a strategic plan should answer the following three questions:
1. Where are you now?
2. Where do you want to be?
3. How will you get there?

The more specific you can be in answering these questions, the more successful you are likely to be in developing and implementing your strategic plan. Moreover, a strategic plan need not necessarily be set in stone. Rather, you may find it necessary to modify your plan from time to time and, in fact, you should revisit the plan on a regular basis to see how you’re doing. A medical practice strategic plan should address at least the following key issues:

1. Geographic service area;
2. Scope of clinical services;
3. Physician staffing;
4. A managed care strategy; and
5. Strategic relationships and referral sources.

There are certainly many unknowns in the practice of medicine today. One thing we know for sure however is that successful businesses evolve and you cannot get anywhere standing still. If you have never done strategic planning in your practice, consider picking a weekend in the next six months to meet with your partners for this purpose. Meet somewhere away from your practice where you can devote a significant block of uninterrupted time solely to developing a strategic plan. There are plenty of resources available online to help guide you in your efforts and, if you are still not sure how best to proceed, consider engaging a professional who regularly deals with medical practice development to help lead your strategic planning session.
 

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I frequently have the opportunity to speak with young physicians finishing their residencies and fellowships. One of the questions that often comes up is whether an informal “handshake” deal is sufficient or if a formal written employment agreement is necessary in order to secure a job. Typically this question is prompted by a situation where a physician already in practice tells the young physician that they will have a job and that they need not worry about the contract. What this tells me is that many physicians are still under the mistaken impression that formal legal contracts are merely an unnecessary formality and this misunderstanding is being perpetuated by many “experienced” physicians.

Of course, if the parties to a verbal arrangement keep their word, no formal written contract would be needed. Unfortunately, however, what this somewhat naive line of thinking fails to recognize is that contracts are for when people don’t keep their word. Ideally, once a contract is signed, it can be put in a drawer and hopefully will not need to be looked at again. However, contracts are for the rainy day when everyone is not getting along and perhaps the practice isn’t making as much money as everyone thought it would. As is often said in business, plan for the worst but hope for the best and the same applies to contracts -- whether they be for employment arrangements, joint ventures, medical directorships or the purchase or lease of real estate or equipment. Contracts should be drafted with the “worst case” scenario in mind so that if things don’t work out, the parties have a clear path to resolution even if that means dissolving the relationship.
 

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It's clear that hospitals and health systems are once again acquiring physician practices in an effort to stabilize their referral networks. However, according to a recent article in the Washington Post, health systems are not the only buyers looking to get into the doctor business. Apparently, a number of large health insurance companies, including United Health Group, are quietly acquiring physician practices and building employed physician networks as a means of further managing the care they pay for. According to the article, other insurers including Humana and Wellpoint as well as Highmark in Pennsylvania which recently struck a deal to acquire West Penn Allegheny Health System, are expanding beyond just payment for health care services and looking to get into the delivery side as well.

What all of this means for the broader physician marketplace remains to be seen. Presumably, these insurers will be targeting practices that meet a specific profile including those that see a large number of their covered beneficiaries. However, because acquisition of key physician practices in a given market can change referral patterns overnight, the entry into the market of another potential buyer of physician practices could heat up competition for the bigger or better performing practices in specific markets.

For physicians, of course, aligning with the wrong player could have devastating consequences for the ongoing viability of their practices. However, on the upside, because many health insurers are for profit and do not benefit from physician referrals in the same way that hospitals and health systems do, some of the financial and legal constraints which limit the purchase and compensation terms that a not-for-profit hospital can offer a physician may not apply to insurers acquiring practices.

Clearly, for all players in the health care market, particularly physicians, this is a development worth keeping an eye on.
 

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Perhaps as an indicator that provider agreement negotiations between Highmark, Inc. and University of Pittsburgh Medical Center (UPMC) have stalled, a recent article in the Pittsburgh Business Times suggests that the UPMC physicians could be out-of-network with Highmark as early as next summer unless a new agreement is reached. Though it is not unusual for high-stakes managed care contracts to get negotiated – at least in part – in the public forum through various media releases and the like, it seems early for this kind of news from the UPMC/Highmark negotiations. According to the article, the existing contract won’t expire until the summer of 2012. Nevertheless, this news release may portend an interesting showdown to come. Stay tuned.

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We spend a great deal of time on this blog recounting stories of physicians and other providers who have run afoul of the various federal and state abuse laws applicable to the practice of medicine.  However, in my travels in working with physicians and group practices, it is apparent that many physicians still lack a basic understanding of the complex legal and regulatory framework within which they practice every day.  Many physicians operate under the mistaken belief that their greatest area of legal exposure is professional (malpractice) liability.  But, unlike fraud and abuse exposure, most physicians carry significant insurance against catastrophic malpractice claims.  Too few physicians appreciate the fact that running afoul of Medicare billing and coding requirements or entering into an arrangement which is a violation of the federal stark or anti-kickback statutes could result in significant overpayments which must be refunded to the Medicare program or even worse, massive civil money penalties or false claims liability.
 

Continue Reading...

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In case you thought that you didn’t need to pay much attention to complying with the HIPAA Privacy Rule, a Notice of Final Determination issued by the Office of Civil Rights (OCR) of the Department of Health and Human Services this month should get your attention. OCR has issued its first civil money penalty for a Privacy Rule violation. And, perhaps even more noteworthy is the fact that the penalty is in excess of $4.3 million!

According to OCR, the penalty has been imposed on Cignet Health, a health care company based in Maryland, for failing to provide patients with copies of the medical records on a time basis as required by HIPAA.
 

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On May 20, we presented a free Webinar to physicians and other interested parties regarding practical tips and key legal issues to be considered in selling a medical practice to a hospital.  if you weren't able to attend and are still interested in listening, you can listen to the recorded webinar by clicking here.

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If you are one of the many doctors in private practice thinking about selling your medical practice, consider signing up for our free one-hour Webinar "Selling Your Medical Practice to a Hospital: Legal and Practical Considerations".  The Webinar, which will be held Thursday, May 20, 2010
from 12 - 1 p.m. EST will address important legal and practical considerations in selling your practice to a hospital and structuring a livable employment employment arrangement.   

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According to a Federal Trade Commission (FTC) press release, the FTC is once again delaying the "Red Flag Rule" identity theft enforcement date.  In its current form, the Red Flag Rule could apply to many physician practices.  The new enforcement date is June 1, 2010.  For more information on the Rule, click here.

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Citing lingering confusion over to whom the identity theft rules apply, the FTC announced yesterday that it is delaying the Red Flags Rule compliance date for a third time.  The compliance date, which was August 1, is now November 1, 2009.  The FTC intends to use the additional time to further educate industry about the rules and specifically to whom they apply.  For more information about the new deadline, see the article in the Wall Street Journal. 

More information about the Red Flags Rule can be found on the FTC Website.

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On Nov. 9, 2007, The Federal Trade Commission (FTC) created the Red Flags Rule requiring creditors to develop and implement written identity theft prevention programs within their organizations. The rule defines a “Creditor” any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal or continuation of credit. Because physicians do not generally collect payment in full at the time of service, The FTC has informally indicated that the Red Flag Rule requirements will likely apply to physician practices. Although some physician advocate groups such as the AMA have challenged this assertion, at present the FTC has not exempted physicians from the definition of Creditors. The compliance date in the regulations was originally November 1, 2008 but has been extended to August 1, 2009. Accordingly, physicians need to begin familiarizing themselves with the Red Flag Rule and should plan on becoming compliant by August 1.

Among other things, the Red Flag Rule requires “Creditors” to implement a written identity theft prevention program which includes reasonable policies and procedures to: (i) identify relevant red flags and incorporate those red flags into the program; (ii) detect red flags that have been incorporated into the program; (iii) respond appropriately to any red flags that are detected to prevent and mitigate identity theft; and (iv) ensure the program is updated periodically to reflect changes in the risks of identity theft. Although the regulations are fairly complex, implementing a workable program should not be overly burdensome for most practices. As the Red Flag Rule compliance date approaches, we at Fox Rothschild LLP will be developing cost effective resources to assist practices in developing compliant identity theft prevention programs. In the meantime, if you have questions regarding the Rule, please contact us here. 
 

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Major Medicare fraud and false claims settlements against large providers and pharmaceutical and device companies are reported in the news on a regular basis these days.  Unfortunately this trend may lead many physicians to believe that their billing and collection activities are under the radar of federal and state enforcement authorities.  According to an article in the Scranton Times-Tribune, when it comes to Medicare fraud, size doesn't matter. 

According to the article, a Scranton podiatrist was sentenced this week to two years of probation and ordered to pay $23,266 in restitution for submitting false claims to Medicare.  What is significant about this case is that the podiatrist reportedly only received between $10,000 and $30,000 in improper payments from the Medicare program.  So, if you still think your practice is too small to get noticed, think again. 

The prospect of developing a full-blown fraud and abuse compliance plan may seem overwhelming for many physicians but a compliance plan is really the only "insurance" you can put in place to help minimize legal exposure from improper billing.  Consider starting small.  An annual coding and documentation audit with the help of a health care attorney and billing consultant is hands-down one of the best things you can do from a compliance standpoint and it need not be expensive.  Most importantly, however, when if comes to compliance, doing something is far better than doing nothing.  For more information on developing a cost effective compliance plan, see the article "Compliance Planning on a Shoestring Budget"www.physiciansnews.com/law/1107rodriguez.html.

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Without a doubt, times are tough for physicians in private practice. Operating costs continue to rise at a staggering pace and reimbursements are simply not keeping up. Recruiting and retaining physician talent continues to be a challenge and as the regulatory landscape continues to change and become more complex, compliance is becoming ever-more important. On top of all of this, it is apparent that impending health care reform is going to place much greater emphasis on technology, quality and efficiency than ever before. With all of these challenges, many physicians are understandably considering whether selling their practice to a hospital makes sense.

Continue Reading...

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It's pretty clear that the good old days of detailing prescribing physicians with freebies are gone.  Lavish golf trips and expensive meals have gone the way of the dinosaurs (for the most part), and it looks like even more change is likely to come.  The Wisconsin Medical Society and it's 12,000 plus members have sworn off pharmaceutical freebies altogether.  The WMS has adopted an ethical policy prohibiting its members from accepting "gifts from any provider of products that they prescribe to their patients such as personal items, office supplies, food, travel and time costs, or payment for participation in online CME."  This is yet another indication of the shift away from traditional pharmaceutical detailing and we should likely not be surprised to see other medical societies and physician groups following the WMS' lead. 

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It is no secret that the federal government is very interested in the connection between gifts and other remuneration from drug and device manufacturers and physician decision-making when it comes to ordering those items.  At least one Senator has gone so far as to introduce legislation which would require disclosure of these financial relationships.  According to a recent article in the Baltimore Sun, some doctors are voluntarily refusing to accept gifts from industry. 

While the legal ramifications of accepting remuneration from industry for goods and services covered by federal payor programs are quite severe under the federal anti-kickback statute, the line between what will be tolerated (e.g., low cost meals coupled with an educational program) and what will land a physician in hot water has become blurred.  This confusion is likley due, at least in part, to the pharmaceutical and device industries' efforts to self-police through their own codes of conduct which permit conduct not expressly permitted under the anti-kickback statute. 

As the Baltimore Sun article illustrates, some doctors are beginning to recognize that even if a compensation arrangement with industry is permissible -- or at least tolerated -- under federal law, there may still be negative consequences to particpating.  In particular, the public may be left with the perception -- right or wrong -- that a doctor with industry ties has a conflict of interest.  The legal implications are no doubt important, but doctors should remember that how something will look on the front page of the newspaper may be just as important.

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Canadian researchers may have solved the looming physician shortage crisis -- at least as it would apply to the administration of  surgical anesthesia.  According to an article in the Canadian Press, scientists at McGill University in Montreal have developed a software system that administers anesthesia during surgery.  Not possible you say?  According to the article, the system has been successfully tested and actually performed better than its human counterparts in some respects.  The researchers at McGill are quick to point out in the article that the machine will not replace human anesthesiologists but there are undoubtedly more than a few managed care and hospital executives rooting for this technology.

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According to a recent online Wall Street Journal article, Walgreen Co. is taking definitive steps to expand further into the workplace health center arena. Specifically, Walgreen has announced its plans to acquire two worksite health-center companies in an effort to build its business as a manager of on-site health centers at large companies. The work-site health centers are in addition to Walgreen’s in store clinics.  According to the WSJ article, once the deals are completed, Walgreen will have more than 500 worksite and retail health centers in 40 states. Walgreen’s announcement further confirms the growing trend by big box and national chain stores (e.g., Walmart) to try to reach health care consumers where they work and shop instead of making consumers seek out health care providers.

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According to an article in the New York Times, Aetna will soon begin offering a new service to help enable patients to research their own specific medical conditions. Specifically, Aetna’s SmartSource Service will allow patients to link online research with their own medical records and claims data.  While a better patient educated patient population holds hope for cutting down on unnecessary medical expenses, there is also the possibility that patients will use this kind of service to exercise self-help rather than seeking professional care. Nevertheless, Aetna’s move is a sign of the times and Aetna is not the only one delving into this arena. According to the Times article, other companies like Google and Microsoft have similar plans. Physicians should begin preparing to deal with patients who are better educated about their own health care conditions than ever before.

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More not-so-good news for Pennsylvania: according to an article in the Times Tribune, Pennsylvania Medical Society officials are predicting a shortage of physicians in Pennsylvania in the foreseeable future.  Citing the Society's recently released demographic report (See The State of Medicine in Pennsylvania), the article suggests that Pennsylvania could be short 10,000 doctors within 10 years.  Pennsylvania's physician population is aging, with a large percentage of physicians approaching retirement age.  According to the article, 50% of Pennsylvania's physicians are over the age of 50.

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According to an article in the Los Angeles Times, a dispute is brewing in California over what one insurer is calling an “outreach effort” but others are calling an attempt to pit physicians against their patients. Specifically, Blue Cross of California has sent letters to physicians with a copy of patient insurance coverage applications, asking the physicians to identify patients who had pre-existing conditions at the time insurance coverage was extended to them. Presumably Blue Cross of California would use the information to rescind coverage for patients deemed to have pre-existing conditions. While Blue Cross of California says physician participation in the survey is voluntary, many physicians are concerned that enlisting physicians as moles in the effort could cause patients to withhold critical clinical information from their physicians. While HIPAA would likely permit the disclosure of this information, physicians considering making such disclosures should also check their participation contracts carefully to determine whether they have any duty to provide the data to an insurer.

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Several month ago I posted an entry on this Blog about a lawsuit the New York Attorney General was threatening to file to prevent United Healthcare from ranking its participating physicians.  Well, according to an article on USAToday.com, CIGNA and the Attorney General have reached a settlement in a similar case.  While CIGNA will move forward with its public ranking system, it has agreed to do the rankings on factors other than cost alone and to make available to the public details of how the ranking is performed including the relative weight placed on various cost and non-cost factors.   

Clearly physician ranking systems are the waive of the future.  How much weight patients will actually place on these systems remains to be seen but physicians should monitor these developments closely and gain a firm understanding of how these systems will apply to their practices.  

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Just when physicians thought it was safe to start investing in electronic medical records systems, Microsoft may be changing the ground rules altogether.  On October 4, 2007, Microsoft took a giant leap into the health information arena by announcing the launch of it's new web site "HealthVault".  According to the web site, HealthVault will serve as a secure electronic repository for where patients can "collect, store, and share" their health information with their physicians and other treating providers.   Data accuracy and privacy issues aside, a national shared electronic health record may not be so far off!

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More and more payors are instituting rating systems for their participating physicians and at least one state attorney general has taken issue with the practice.  According to a recent article on CNNMoney.com, the New York Attorney General has threatened an injunction against United Healthcare if it implements a physician rating system in New York.   The Attorney General has apparently cited a number of concerns with the rating system, including that the rating data may be faulty and that patients may choose doctors based on cost rather than quality. 

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According to a recent article in the Naples Dailey News (Here), hospitals across the Country are facing a shortage when it comes to specialty physician coverage for the emergency room.   Fifty-five percent of hospitals surveyed by the American Hospital Association have experienced a coverage shortage and a third compensate physicians for ER coverage.  Specialty areas of particular concern include orthopedics and neurosurgery.

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Details continue to emerge over the terror attacks in Great Britain allegedly carried out by a group of physicians.  According to a recent article (See Foreign Doctors in U.S. Concerned After British Terror Plot Implicates Physicians), foreign physicians practicing in the U.S. are concerned over what the fallout on our shores might be.   While there have yet to be any formal changes to U.S. immigration policy regarding foreign physicians, we are advising our physician practice clients who employ foreign-born physicians (as well as foreign-born physician clients) to consider having an audit of their physician immigration status performed as well as to consider instituting training on immigration issues for key management and hiring personnel.

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According to an article today in the Greenwich Post (found here), a box full of paperwork containing patient information, including names and contact information, was found in a dumpster outside of a medical office building.  Not only that, the good citizen who found the box decided the most appropriate course of action was to turn it over to the Greenwich Post!  The HIPAA privacy rules may not be making the headlines they did a few years ago, but they are very much still in effect.  Failing to abide by the rules when it comes to the disclosure of protected health information can result in substantial fines, so don't forget to revisit you HIPAA compliance policy from time to time.

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According to a Walmart spokesperson, Walmart foresees opening more than 6,000 in-store medical clinics over the next five (5) years.  Walmart already has 75 clinics in 12 states and envisions that the clinics could serve as the basis for a national electronic medical record platform.  The clinics, which will likely accept walk-in patients and have extended hours, will almost certainly present a new and unique challange to existing primary care practices in Walmart's markets. 

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For any number of reasons longtime (and sometimes not-so-longtime) medical practice partners may decide that they can no practice together.  Diverging practice styles and patterns, unexpected health problems, and mounting economic and administrative burdens are only a few examples of issues that can drive a wedge between practice colleagues.  Unfortunately, as with many small businesses, dissolving a medical practice can be fraught with emotion -- in addition to a host of legal and ethical considerations.  The following article from Physician's News Digest discusses some the issues likely to arise in a medical practice split-up and offers suggestions for addressing them. www.physiciansnews.com/law/1004.html 

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