7/1/2009
YEAR
IN
REVIEW
2008
Beth Schermer Jack Schroder
Phoenix Atlanta
First, Let’s Check Out
Some of the Year’s More
Interesting Stories
1
7/1/2009
Did You Know…?
• The U.S. spends $270 million a year to
operate a toll-free line for Medicare patients?
• Callers were put on hold an average of 16
minutes, and only half got through to a real
person?
• And 90% of those who got through received
the wrong answers to their questions?
Report, Senate Special Comm. On Aging
July 2008
“They need a kick in the backside.”
3
Sen. Gordon Smith, Ranking Republican
New Remedy for Patient Dumping?
L.A. CITY ATTORNEY SUES
TWO HOSPITALS,
CHARGES PATIENTS
DUMPED ON SKID ROW
BNA Health Law Reporter
July 5, 2007
• Several LA hospitals sued under state Unfair Business
Practices Act
• At least 3 hospitals have settled; fines over $1M each
4
2
7/1/2009
“And Now, the Rest of the Story”
ALLEGED SCHEME
INVOLVED HOMELESS
New York Times
August 10, 2008
• Investigators later discovered many of these allegedly
“dumped” patients were actually recruited by hospitals
in a huge Medicare/Medicaid fraud scheme
• Vans arrived each morning, offered homeless cash to
receive little or no care at hospitals
• Hospital CEO indicted, 3 hospitals raided, one guilty
plea so far 5
Do the Math!!
NINE PATIENTS MADE
NEARLY 2,700 ER VISITS
IN TEXAS
Associated Press
April 1, 2009
• Study covered 6 years of ER visits in Austin, TX
• That’s 50 ER visits/year per patient, or approx. one
ER visit by each patient every week! 6
• Total cost to taxpayers: $3 million
3
7/1/2009
Did You Know…?
• Nearly one fifth of patients are readmitted to the
hospital within a month of discharge?
• These unplanned returns cost $17B annually?
• The Obama administration plans to lower
payments to hospitals with high numbers of
patients who are
readmitted?
New England J. of Med.
April 2, 2009
This Stuff Makes a Difference!
According to one recent study:
• The relative risk of mortality for bypass surgery at a
“bottom tier” hospital is 4 times greater than that of
a “top-tier” hospital?
• 75% of deaths from bypass surgery at “bottom tier”
hospitals could be avoided if they improved their
performance to the average “top tier” hospital?
Archives of Internal Medicine
November 24, 2008
8
4
7/1/2009
This Stuff Makes a Difference!
Based on a study of 41M discharges at 5,000
hospitals between 2005-07:
• Patients have on average a 27% lower
chance of dying at the nation’s top 5%
hospitals
• If all hospitals had performed at the same
level, 152,666 lives may have been saved
Healthgrades Hospital Quality and Clinical Excellence Study
“http://www.healthgrades.com”
9
This Stuff Makes a Difference!
• When computers replace paper, patient mortality
drops 15% during hospitalization
• And hospitals using computerized orders post
55% lower death rates in heat bypass surgeries
Archives of Internal Medicine
January 26, 2009
• Wrong site surgery occurs three times each day in
the U.S. alone
Washington Post
July 22, 2008
10
5
7/1/2009
Scary Headline of the Year
Doctor Dozed During
Surgery, Report
Says
Boston Globe, March 26 2009
• Procedure lasted 7 hours; normally takes 90 minutes
• OR nurse called Surg. Dept. twice, but no action taken
• Patient suffered complications; case settled
• Doctor fired by hospital; license temporarily suspended 11
Angie’s List Goes Medical –
And Some Docs Fight Back
Docs Seek Gag
Orders to Stop
Patients’ Reviews Associated Press Online
March 4, 2009
• Many physicians are now asking patients to sign waivers agreeing
to refrain from posting online comments about the physician
• Some have used waivers to get websites to remove negative
comments 12
6
7/1/2009
Startling Headline of the Year
Health Benefits Inspire
Rush to Marry, Divorce
New York Times
August 13, 2008
• According to a poll by Kaiser Family Found., 7% said
someone in their household had married in the past year to
gain access to health insurance.
• A minister at a Kentucky wedding chapel says 10% of couples
cite health insurance as the reason for tying the knot.
13
“For today’s couples, ‘in sickness and in health’
may seem less a lover’s troth than an actuarial
contract. They marry for better or worse, for richer
or poorer, for co-pays and deductibles.”
**********************************
“What happened to our country? I don’t remember
growing up like this.”
NYT, 8/13/2008
14
7
7/1/2009
Healthy Headline of the Year
Heavy People to Feel
Lighter Wallets with
Alabama Surcharge
Associated Press, August 22, 2008
• Overweight Alabama state employees will begin paying
$25/month for health insurance that is otherwise free
• They already pay a surcharge if they smoke 15
Bizarre Story of the Year
“World’s Strangest Restaurants”
The Clinic, Singapore
• A molecular gastronomy restaurant with
hospital theme
• Chefs “operate” on dishes in simulated
operating room
• Meals served on stainless steel surgical tables
• Diners sit in wheelchairs
Source: Travel & Leisure
October, 2008
16
8
7/1/2009
Healthcare Hero of the Year
Pamela Davis
CEO, Edward Hospital
Naperville, Ill.
• Was told her CON would only be granted if she hired a certain
contractor & investment firm
• Went to FBI in 2003 & wore a wire for 8 months
• Led to eventual indictment of Illinois Gov. Rod Blagojevich
"I believe society is a better place if each of us as individuals tries to be a
good citizen. And that means more than simply following the rules. But if
I in fact see something that is not right or corrupt, I do feel that it is my
responsibly to stand up and really work to try and correct those issues." 17
Discovery of the
Year
9
7/1/2009
Health Care Reform
Health Care Reform, Anyone?
In the beginning…
Obama Asks Nation for
Input on Reforming
Health System
Washington Post, 12/8/08
20
10
7/1/2009
Health Care Reform
The first and last point of agreement?
At House Party on
Health Care, the
Diagnosis Is It’s Broken
NYTimes, 12/23/08
21
Health Care Reform
By way of economic stimulus
Relief Seen for
Jobless and States in
Health Care Plan
NYTimes, 1/27/09
22
11
7/1/2009
American Recovery
and Reinvestment Act
ARRA: the health care reform kick-start?
• Increased FMAP funding
• Premium assistance for COBRA Benefits: 65% subsidy for
continuation premiums
• Broadband Technology Opportunities Act: $4.35B for grants and
initiatives for broadband education, access, support, equipment
• Research: Grant funding ($220M) and construction of science
research facilities ($180M)
• CHC funding to support new sites and increase services ($500M)
• Section 330 public health center renovation, construction and
equipment ($1.5B)
• Funding to address professional workforce shortage ($500M)
• Prevention and wellness fund to support clinical and community
based practices addressing chronic disease ($650M)
• And the Health Information Technology for Economic and Clinical
Health Act (HITECH)….
23
Health Care Reform
Obama Makes Health
Reform Office Official
Washington Post, 4/8/09
24
12
7/1/2009
Health Care Reform
Obama Calls for
Urgency in Passing
Health-Care Bill
WSJournal, 5/13/09
25
Health Care Reform
So there’s a plan…
Democrats Agree on a
Health Plan; Now Comes
the Hard Part
NYTimes, 4/1/09
26
13
7/1/2009
Health Care Reform
Maybe another….
Medicare System
Overhaul Proposed by
Two Senators
NYTimes, 4/30/09
27
Health Care Reform
Actually several…
Congress’
Conservatives Offer
Health Proposal
NYTimes, 5/19/09
28
14
7/1/2009
Health Care Reform
We need a scorecard…
Schumer Offers Middle
Ground on Health Care
NYTimes, 5/5/09
• Baucus and Grassley detail Medicare reform
proposal
• Former Senators Baker, Daschle and Dole
prepare Bipartisan Policy Center reform plan
29
Industry Pledges to
Control Health Care Costs
NYTimes, 5/11/09
30
15
7/1/2009
Health Care Reform
What I really meant was…
Health Care Leaders Say
Obama Overstated Their
Promise to Control
Costs
NYTimes, 5/15/09
31
Health Care Reform
Let me start this over…
Antitrust Laws a
Hurdle to Health
Care Overhaul
NYTimes, 5/27/09
32
16
7/1/2009
Health Care Reform
(And no sharing answers…)
Medical Providers Get
“Homework” to Find
Savings
Washington Post, 4/29/09
33
Health Care Reform
Suddenly, this isn’t academic…
Trims to Medicare,
Medicaid Are Proposed
to Help Fund Reform
Washington Post, 6/14/09
• $1T to $1.6T costs
• $313B cuts to Medicare, Medicaid 34
• CBO: spending reductions require “fundamental change”
17
7/1/2009
Health Care Reform
The great debate: public plan?
Health Care Hits Snag in
Senate
WSJournal, 5/16/09
Senators Push for Delay of Public Health-Care
Option
Bloomberg.com, 5/19/09
35
Health Care Reform
The tax issue continues…
Tax Proposals Draw Critics in
Talks on Financing Health
Insurance
NYTimes, 5/21/09
Unions Target Wyden in Anti-Tax Push
TheHill.com, 5/19/09
President Pivots on Taxing Benefits
Washington Post, 6/3/09
36
18
7/1/2009
Health Care Reform
And we haven’t even started on mandates…
A Move Toward
Requiring Health
Coverage
Washington Post, 6/4/09
37
Health Care Reform
Let’s just take two aspirin…
Health Care, a
Lesson in Pain
NYTimes, 5/13/09
38
19
7/1/2009
Health Care Reform
Democracy can be so exhausting sometimes…
China Announces
Subsidies for Health
Care
NYTimes, 1/22/09
• $123B to establish universal health care for 1.3B people
• High savings rate to provide for medical expenses; effort
to stimulate spending 39
Now, For Some of the
Top Legal
Developments
20
7/1/2009
Fraud and
Abuse/Stark Law
Stark Law 2008-2009
An avalanche of rulemaking…
• 2009 IPPS Final Rule: 73 Fed. Reg. 48343
(Aug. 19, 2008)
• 2009 IPPS Final Rule correction notice: 73
Fed. Reg. 57541 (Oct. 3, 2008)
• 2009 Physician Fee Schedule: 73 Fed.
Reg. 69726 (Nov. 19, 2008)
42
21
7/1/2009
Stark Issues: 2009 IPPS
• Period of Disallowance
• Alternative Method for Compliance
• Under Arrangements (Definition of Entity)
• Physician Stand in the Shoes (SITS)
• Percentage Compensation Arrangements
• Per-click leases
• Obstetrical Malpractice Insurance Subsidies
• Ownership or Investment in Retirement Plans
• Burden of Proof
…and clarification on amending agreements
43
Stark Issues: 2009 IPPS
1. Period of Disallowance
• Effective Date: 10/1/08 (but existing policy per preamble)
• Begins: at the time financial relationship fails to satisfy requirements
of applicable exception
• Ends: no later than
– Noncompliance unrelated to compensation: Date when financial
relationship satisfies all requirements of applicable exception
– Noncompliance due to payment of excess compensation: Date on which
all excess compensation is returned by party that received it to the party that
paid it and the financial relationship satisfies all requirements of applicable
exception
– Noncompliance due to payment of compensation that is insufficient to
satisfy requirements of applicable exception: Date on which all add’l
required comp is paid by party that owes it to party to which it is owed and
financial relationship satisfies all requirements of applicable exception 44
22
7/1/2009
Stark Issues: 2009 IPPS
2. Alternative Method for Compliance with
Signature Requirements
• Effective Date10/1/08
– “Grace period”:
• 90 consecutive calendar days for inadvertent
noncompliance with a signature requirement
• 30 consecutive calendar days for knowing noncompliance
with a signature requirement
– Compensation arrangement must satisfy all other
requirements of an applicable exception
– Clock begins running at start of the compensation
arrangement
• Does not matter whether referrals have been made or
compensation has actually been paid
45
Stark Issues: 2009 IPPS
3. Services Provided “Under Arrangements” (Revised
Definition of “Entity”)
• Effective Date: 10/1/09
– Before 10/1/09: person or entity furnished DHS if it was the
person/entity to which CMS made payment for the DHS
• Revised “entity” definition ( 411.351): a person or entity
§
“furnishes” DHS if it is:
–The person or entity that performs the DHS; or
–The person or entity that presents claim for M/C benefits for the DHS
–When an entity performs DHS & another bills, both are DHS entities
• Eff. 10/1/09 physician owners of entity providing DHS under
arrangements may have ownership interest in a DHS entity
• See Colorado Heart Inst. LLC v. Johnson, No. 08-1626
(RMC)(D.D.C. 4/20/09)(Dismissing physician challenge for lack of
jurisdiction) 46
23
7/1/2009
Stark Issues: 2009 IPPS
4. Physician “stand in the shoes” (SITS)
• Effective date: 10/1/08
– Policy: A physician is deemed to stand in the shoes of
his or her physician organization if the physician has an
ownership or investment interest in the physician
organization.
– Exception: A physician whose ownership or investment
interest is titular only is not required to stand in the
shoes of the physician organization.
– Why? Simplicity in analyzing compensation
relationships between DHS entity and physician
organization
47
Stark Issues: 2009 IPPS
5. Percentage-based Compensation Formulae
• Effective Date: 10/1/09
– Amends four comp exceptions: office space and
equipment leases; fmv compensation; indirect
compensation
– Rental charges for rental of office space or equipment
may not be determined using a formula based on—
• A percentage of revenue raised, earned, billed, collected,
or otherwise attributable to services performed or
business generated in the space; or
• A percentage of revenue raised, earned, billed, collected,
or otherwise attributable to services performed on or
business generated through the use of equipment.
48
24
7/1/2009
Stark Issues: 2009 IPPS
6. Unit of Service (“Per-click”) Payments in
Lease Arrangements
• Effective Date: 10/1/09
– Amends four compensation exceptions: office space
and equipment leases; fmv compensation; indirect
compensation arrangements
– Rental charges for the rental of office space or
equipment may not be determined using a formula
based on—
• Per-unit of service rental charges, to the extent that
such charges reflect services provided to patients
referred by the lessor to the lessee.
• Includes both physician & DHS entity as lessor
49
Stark Issues: 2009 IPPS
Amending Agreements
• Previous position: Amending lease charges or financial
terms of personal services agreement would not meet “set in
advance” requirement
• New position: Amendments are permitted if:
– Meets all requirements of applicable exception
– Amended charges or other comp determined before
amendment implemented
– Formula for amended charges, comp does not take into
account volume or value of referrals, other business
generated
– Amended charges or comp remains in place at least 1
year from date of amendment
50
25
7/1/2009
Fraud and Abuse/Stark
Shared Savings/P4P
– OIG Adv.Op. 08-21 (12/8/08)(Hospital sharing %
savings with cardiology and radiology groups
from cardiac cath cost-savings measures)
– OIG Adv.Op. 08-15 (10/14/08)(Hospital sharing
% savings with cardiologists from 30 cardiac cath
cost-saving measures)
– OIG Adv.Op. 08-09 (8/7/08)(Med center sharing
% savings with orthopedic surgeon groups and
neurosurgeon group from surgeons’ use of cost
reduction measures in spine fusion procedures)
51
Fraud and Abuse/Stark
Shared Savings/P4P (con’t)
• Cost saving measures
– Specific measures; based on credible medical evidence that measures
will not harm patient care
– Floors beyond which no savings accrue to drs
• Payments
– Based on procedures for all patients; subject to cap for procedures
reimbursed by federal programs
– No payment relating to increased referrals for federal patients; tracking
of referral practices
– Each group’s payment calculated separately
– Groups pay physicians on per capita basis
• Patient safety and choice
– Dr determine patient need; ongoing access to other supplies and
devices
– Notice and transparency
• Limited duration; rebasing after first year 52
26
7/1/2009
Fraud and Abuse/Stark
P4P: OIG Adv.Op. 08-16 (10/14/08)
• Background
– Insurer bonus comp to hospital for meeting quality and
efficiency standards; up to 4% of annual base comp
– Standards
• 6 conditions/procedures for all patients
• Targets from The Joint Commission quality measures manual
– Hospital quality agreement with physician entity
• Fund distribution: FMV % negotiated each year; annual cap;
distributed on per capita basis to drs
• Referrals & cherry picking: No increase in payment due to
increase in referrals; termination of drs who significantly increase
referrals to hospital
• Care reduction: Insurer and hospital monitoring to protect against
reductions in care; notice to patients
• Limited term: Three year term
53
Fraud and Abuse/Stark
Proposed Stark Exception: Incentive
Payment and Shared Savings Programs
• Proposed 2009 Physician Fee Schedule, 73
Fed.Reg. 38502 (7/7/08):
– Exception for incentive payment & shared savings
programs
– Payment by hospital to med staff member or qualified
physician organization under agreement
– 16 criteria
• 2009 Physician Fee Schedule, 73 Fed. Reg. 69726
(11/19/08)
– Reopens comment period for 90 days; requests
comments on 55 questions
54
27
7/1/2009
Fraud and Abuse: Enforcement
Not-so-creative inducement award…
HOSPITAL DRUG
ABU$E
NYPost 1/5/09
• Alleged $50M Medicaid drug scam through drug–
treatment programs, kickbacks for referrals, admitting
patients without drug problems, luring street people to
program with beer…
55
Fraud and Abuse: Enforcement
“Recession” is not a compliance strategy…
Medicaid Fraud Increasing
Throughout State, But
Economy Forcing Cutbacks in
Investigations
Naples Daily News, 1/5/09
56
28
7/1/2009
Fraud and Abuse: Enforcement
Health-Care Fraud to
Be Targeted
Washington Post, 5/21/09
“The Health Care Fraud Prevention and Enforcement Action Team will
be composed of senior-level officials at the Justice Department and
HHS. The group will use electronic claims data, as well as the threat of
federal prosecution, to look for unusual billing problems.”
57
Fraud & Abuse/Stark: Enforcement
Focus on Physicians
Prosecutors Plan
Crackdown on Doctors
Who Accept Kickbacks
NYT 3/4/09
58
29
7/1/2009
Fraud & Abuse/Stark
Medical Devices & Physicians
• Medtronic Whistleblower Case:
– Claims against 100 physicians, alleging AKS violations by
physicians causing Medicare to pay for unnecessary
medical devices & procedures
• Accepting consulting fees when no services performed,
accepting consulting fees for more than fmv for
services
• Accepting royalties for patents when not actual inventor
• Accepting improper gifts, excessive travel
• Accepting consulting comp based business generated
– Claims that physicians induced false claims by
encouraging off-label use of the Medtronic product
• Stryker DOJ criminal division subpoenas on false
IRB approvals, off label promotions
59
Fraud and Abuse/Stark: Enforcement
OIG Provider Self-Disclosure Protocol (SDP)
OIG Open Letter, 3/24/09
• Limits submissions to matters involving a
colorable anti-kickback claim
• Minimum settlement amount of $50,000
• How to report, remedy Stark violations
that do not involve a colorable anti-
kickback claim?
http://www.oig.hhs.gov/fraud/selfdisclosure.asp
60
30
7/1/2009
Fraud and Abuse/Stark: Enforcement
OIG Provider Self-Disclosure Protocol (SDP)
OIG Open Letter, 3/24/08
“… will no longer accept disclosure of a matter
that involves only liability under the physician
self-referral law in the absence of a colorable
anti-kickback statute violation. We will continue
to accept providers into the SDP when the
disclosed conduct involves colorable violations
of the anti-kickback statute, whether or not it
also involves colorable violations of the
physician self-referral law.” (emphasis added)
61
Fraud and Abuse/Stark: Enforcement
• Federal Acquisition Regulation (FAR) self
disclosure requirements (73 Fed.Reg. 67064
(11/12/08)
– Mandatory disclosure when entity has “credible evidence”
of significant overpayments or legal violations such as
FCA violations
– Compliance requirements: internal investigation, good
faith decision on credible evidence, document review
– Application: federal contractors subject to FAR
• Contractors providing services to TriCare, Federal
Employees Health Benefit Program, VA drug
purchasing programs;
• Ambiguity: not all healthcare arrangements governed 62
31
7/1/2009
Fraud and Abuse/Stark: Enforcement
Settlements and CIAs:
• Self Disclosure: Transaction Due Diligence
– Condell Health Network Settlement: $36M (Voluntary self disclosure
from transaction due diligence; 2002-07 below market leases,
improper loans, dr payment w/out written agreements)
• Medicaid:
– WellCare Health Plans: DPA, $80M restitution & civil forfeiture
– Alleged fraud on Florida Medicaid program; inflated expenditure info
on Medicaid and Health Kids programs
• Hospice
– SouthernCare Inc: $24M (Alleged false admissions)
• Corporate Integrity Agreements
– Increased obligations on board compliance oversight
• Eli Lilly (1/09), Caphalon, Inc. (9/08) CIAs
– Nursing home quality of care improvements under CIAs, Nursing
63
Home Corps Under Quality of Care CIAs, OIG, 4/09)
False Claims/Qui
Tam
32
7/1/2009
False Claims
Fraud Enforcement and Recovery Act of 2009
FCA Amendment (31 USC 3729)
• Improper retention of gov’t overpayments
– FCA violation if entity “knowingly and improperly avoids or decreases
an obligation to pay money to the U.S.”
– Including obligation based on an “established duty…arising from…the
retention of any overpayment”
• Claims for gov’t funds
– FCA liability for false, fraudulent claim for gov’t money or property
regardless of whether claim is presented to gov’t or defendant
specifically intended to defraud gov’t
– Expands to contractors, gov’t funds through intermediaries
• Reverses Allison Engine Co. v. U.S. (128 S.Ct. 2133, 2008) and
U.S. ex rel. Totten v. Bombardier Corp. (380 F.3d 488, D.C. Cir
2004) 65
False Claims
Fraud Enforcement and Recovery Act of 2009
• Other provisions:
– Retaliation: bar on retaliation expanded from employees
to include contractors, agents
– Expanded SOL for gov’t intervention; gov’t complaint
treated as filed on date of relator’s original complaint
– CID and investigation: Expanded authority to issue CIDs
and share documents with qui tam relators
• Impact:
– Stark liability; compliance and repayment obligation
– Downstream receipt of gov’t funds subject to FCA; funds
used or spent on gov’t behalf or for gov’t program
66
33
7/1/2009
False Claims: New Cases
• U.S. ex rel. Kosenske v. Carlisle HMA Inc, 554
F.3d 88 (3d Cir.1/21/09)
– Exclusive anesthesia arrangement between group and
hospital; later established pain management services at
separate hospital clinic
– Reverses MSJ granted to hospital and remands
• Value of exclusive contracts to physicians
• Arrangement triggered Stark and AKS; provision of pain
management services at clinic did not fit exception or safe harbor
• Provision of free office space, equipment, staff at clinic
• Not adequately contemplated in initial agreement; no amendment
• No arms-length negotiation to validate fmv; no concurrent
negotiations; negotiations alone would not confirm fmv
67
False Claims: New Cases
• Kosenske v. Carlisle HMA Inc, (con’t)
– Narrowing the view of fair market value:
“…there were no arm’s length negotiations that could vouch
for the fair match of service and compensation that the
whole statutory scheme is designed to assure…First, as a
factual matter, negotiations in 2002 could not possibly
reflect the fair market value of consideration given and
received more than six years later under materially different
circumstances. Second, as a legal matter, a negotiated
agreement between interested parties does not “by
definition” reflect fair market value.”
– Exclusive contracts—require physician payment for
space, benefit?
• But see 1989 OIG memorandum on arrangements between
hospitals and hospital based physicians
http://oig.hhs.gov/oei/reports/oei-09-89-00330.pdf
68
34
7/1/2009
False Claims: New Cases
• U.S. ex rel. Eisenstein v. City of N.Y.,
2009 WL 1576570, 556 U.S.___(6/8/09)
– FCA qui tam case based on NY City fees
against nonresident workers; no gov’t
intervention; complaint dismissed
– If government declines to intervene in qui tam
case, it is not “party” to the action
– Relator must file appeal within 30 days;
extended 60 day period under Rule 4(a)
(when U.S….“is a party”) does not apply
69
False Claims: New Cases
• U.S. ex rel. Smart v. Christus Health, No. 05-287,
2009 WL 151590 (S.D. Tex. 1/22/09)
• Qui tam jurisdiction: “based upon public disclosure of allegations
or transactions in a criminal, civil, or administrative hearing,” only
if the relator is “original source of the information”
• District Court: When a qui tam action is “supported by” public
disclosure, it is “based upon” the public disclosure, even if
relator has direct & independent knowledge of underlying
allegations
• Circuit split: see United States ex rel. Siller v. Becton Dickinson
& Co., 21 F.3d 1339, (4th Cir. 1994)(Qui tam action “based
upon” public disclosure if derived from the public disclosure; if
relator has direct and independent knowledge of underlying
allegations, suit does not derive the public disclosure)
70
35
7/1/2009
False Claims: New Cases
• U.S. ex rel. K&R Ltd. Partnership v. Mass.
Housing Finance Agency, 530 F.3d 980 (D.C. Cir.
2008)
– FCA claims based on ambiguous mortgage note; no
“reckless disregard” when defendant’s interpretation of
provision was in good faith and objectively reasonable
• U.S. ex rel. Conner v. Salinas Regional Health
Center, 543 F.3d 1211 (10th Cir. 2008)
– Cost report certification of compliance does not render all
claims false for FCA; payment not expressly conditioned
on perfect compliance with specific law
71
False Claims: New Cases
• U.S. ex rel. Kennedy v. Aventis Pharmaceuticals, Inc., ., __ F. Supp.
2d __, 2009 WL 1066285 (N.D. Ill. 4/20/09)
• Qui tam off-label pharma marketing claims; sufficient allegation of
false claim hospitals allegedly including non-reimbursable charges
on cost reports that could increase outlier payments
• U.S. ex rel. Grubbs. v. Kanneganti, __F.3d__, 2009 WL 930071 (5th
Cir. 4/8/09)
• Particularity standard met based on details of scheme to submit false
claims plus reliable indicators that claims were filed; actual claims
details not required (but see Clausen v. Laboratory Corp of Am. 11th Cir.)
• U.S. ex rel. Baker v. Rehab. Specialists of Livingston County, Inc.,
2008 WL 3834106 (E.D. Mich. 8/13/08)
• Whether rehab company knowingly filed false Medicare cost reports
question of law for jury; allegations that company acted with
deliberate ignorance, reckless disregard by failing to supervise
comptroller who left financial records in “state of rubble”, filed report
72
36
7/1/2009
Criminal
Criminal
DOJ Corporate Charging Guidelines
• Revisions to Principles of Federal Prosecution of
Business Organizations (8/28/08)
• Credit for “cooperation”
– Prior guidance: fed prosecutors could request disclosure of non-
factual attorney-client privileged communications and work
product
– Revised guidance: credit for cooperation will not depend on
corporate waiver of atty-client privilege or work product but on
disclosure of relevant facts
• Prosecutors cannot request non-factual atty-client privileged
communications or work product
– Except: Crime Fraud Exception; Advise of Counsel Defense
• Corporations that disclose relevant facts may receive credit for
cooperation, regardless of waiver atty-client privilege or work product
protection; corporations that do not disclose relevant facts may not
receive credit
74
37
7/1/2009
Criminal
DOJ Corporate Charging Guidelines
• DOJ Corporate Charging Guidelines
(con’t)
– Prosecutors will not consider advancement of legal
fees
– Participation in joint defense agreement alone will not
make a corporation ineligible for cooperation credit
– Prosecutors may not consider whether a corporation
has sanctioned or retained culpable employees in
evaluating cooperation credit for corporation.
– Potential benefit of effective compliance program in
hospital prosecution decisions
75
Criminal
DOJ Corporate Charging Guidelines
• United States v. Stein, 541 F.3d 130 (2nd Cir., 2008)
– Upholding dismissal of charges against 13 former KPMG
partners & employees
– District Court: KPMG pressured by the Justice
Department to stop advancing legal defense fees to
targeted employees in order to avoid indictment of the
company; determination of “cooperation” under charging
guidelines
– Court of Appeals: In limiting advancement of fees to
employees, KPMG acted on behalf of the Justice
Department and therefore was a state actor; employees
deprived of Sixth Amendment right to counsel
76
38
7/1/2009
Credentialing
A “BIG” Reversal
Poliner v. Texas Hlth. Sys., 537 F.3d 368 (5th Cir. 2008)
• Plaintiff’s cardiac cath privileges restricted less than 29 days
pending completion of investigation; ultimately terminated
• Trial court only granted partial summary judgment
– Ultimate suspension of privileges entitled to HCQIA
immunity
– But questions of fact prevented S/J on temporary
abeyance since not sure it was voluntary
• Jury returned verdict of $90M actual and $110M punitive
damages; reduced to $33M by trial court
• On appeal 5th Cir. reversed, finding HCQIA immunity applied
to both initial abeyance and ultimate termination of privileges
78
39
7/1/2009
Poliner v. Texas Hlth. Sys. (cont’d)
Important rulings by 5th Circuit
• HCQIA doesn’t require conclusions of reviewers to be correct,
and their good or bad faith is irrelevant
• Compliance with bylaws not required for immunity
• Reviewers’ belief that temporary restriction would further
quality health care was “objectively reasonable” under facts
available to them at the time
“To allow an attack years later upon the ultimate ‘truth’ of
judgments made by peer reviewers supported by objective
evidence would drain all meaning from the statute. The
congressional grant of immunity accepts that few physicians
would be willing to serve on peer review committees under
such a threat…” 79
More HCQIA Immunity Cases
Crafton v. River West Med. Ctr., 2008 WL 4764337 (La. App.
10/31/08)
• Summary judgment for hosp. based on HCQIA’s rebuttable
presumption of immunity
• OK that hearing officer at fair hearing was also MEC’s atty.
Burrowes v. Northside Hosp., 671 S.E.2d 176 (Ga. App. 2008)
• Summary judgment granted even though physician claimed
some errors in the evidence presented against him
• Medical staff based its decision “on totality of the evidence
and not any individual issue”
Moore v. Williamsburg Reg’l Hosp., 560 F.3d 166 (4th Cir.
2009)
• Hosp. suspended dr. under investigation for sexual abuse of
child in his custody
• HCQIA immunity protects actions based on conduct outside 80
hospital if it could affect treatment in the hospital
40
7/1/2009
More HCQIA Immunity Cases
Isaiah v. WHMS Braddock Hosp., 2008 WL 2952765 (D. Md.
7/25/08)
• Actual showing of mistake or breach of standard not req’d;
only a reas. belief that action would advance quality care
• Precautionary suspension need not be based on “currently
identifiable patient whose health may be jeopardized”; only a
“reasonable belief that danger may result to a patient”
Stratienko v. Chattanooga-Hamilton Cnty. Hosp.
Auth., 2009 WL 736007 (E.D.Tenn. 3/17/09)
• Physician summarily suspended 90 minutes after “shoving
incident” with another physician in break room
• After denying hospital S/J in ’08, court granted doctors S/J
– Physician who provided info to MEC immune under HCQIA
– No due process claims bec. no permanent loss of ability to practice 81
– Antitrust claims barred by “state action”, even as to unemployed MDs
HCQIA Immunity -- Denied
Peper v. St.Mary’s Hosp., 2008 WL 5173628 (Colo.App. 12/11/08)
• Hosp. revoked plaintiff’s provisional status without hearing
– Med. Staff bylaws did not provide for hearing for provisional members
• Court denied HCQIA immunity
– Plaintiff’s HCQIA rights to notice & hearing not waived by bylaws
“[C]ompliance with hospital bylaws does not show compliance
with the HCQIA. ”
Cole v. St. James Healthcare, 199 P.3d 810 (Mont. 2008).
• Hospital demoted physician from active to consulting staff
without notice or hearing
• Court ruled hospital breached bylaws by changing his status
without prior notice or opportunity to appeal
– Found irreparable harm based on “substantial risk” hospital would file
Databank report, which was “a ‘scarlet letter' that could permanently
harm a physician's professional reputation” 82
41
7/1/2009
HCQIA Immunity -- Denied
Hussein v. Duncan Reg’l Hosp., 2009 WL 1212278 (W.D.Okla.
5/1/09)
• Locum tenens doctor leaves hosp. after 2 days, never returns
• Hosp. files NPD report saying he “deserted the hospital”
• Ct. granted partial S/J to doctor, finding no HCQIA immunity
because hosp. never provided notice or opportunity to be
heard prior to filing NPD report
• However, filing of NPD report didn’t constitute intentional
infliction of emotional distress
83
Summary Suspensions – A Judicial Quagmire
Chudacoff v. Univ. Med. Ctr. Of S. Nev., 2009 WL
1097380 (D. Nev. 4/8/09)
• Dr’s priv. suspended, employment terminated & NPD report
filed before any notice of charges or opportunity to be heard
– Lawsuit filed while hearing progressed; at hearing, his atty. not
allowed to participate & new charges added w/o notice
– Hearing panel disagrees with suspension; MEC later suspends
based on new charges & holds hearing with 3 hours notice to
physician
– Board orders MEC to reconsider decision to file NPD report &
awards dr. $10,000 to pay for costs of his appeal
• Ct. denied HCQIA immunity & granted doctor partial S/J
“It is not sufficient for the physician to be told, after the
fact, that a review action has been taken against him
84
already.”
42
7/1/2009
Summary Suspensions – A Judicial Quagmire
Ritten v. Lapeer Reg’l Med.Ctr., 2009 WL 648517 (E.D.Mich.
3/11/09)
• Hosp. CEO summarily suspends plaintiff’s privileges; MEC
recommends proctoring instead; Board reinstates suspension
– Followed by lengthy appeal process; suspension upheld
• Court granted HCQIA immunity to final decision, but not to
initial temporary summary suspension
– HCQIA only protects “professional review actions” taken by a
“professional review body”; decision by CEO alone doesn’t qualify
– Issue of fact whether CEO’s motive for suspension was in retaliation
for plaintiff’s refusal to transfer patient rather than quality of care
– Other harmful facts:
• CEO suspended before expert’s analysis of records was complete
• MEC voted later to rescind suspension
• Plaintiff not invited to attend Bd. meeting which upheld temp. suspen.
Note: Court’s ruling on EMTALA retaliation claim, discussed on later slide 85
Summary Suspensions – A Judicial Quagmire
Wahi v. Charleston Area Med.Ctr., 2009 WL 962310 (4th Cir.
4/10/09)
• Ct. affirmed HCQIA immunity, even though suspension
imposed & NPD report filed w/o hearing, because physician
was provided “fair procedures under the circumstances”
– Relied on 11112(c), HCQIA provision allowing summary susp.
§
w/o prior notice or hearing
• Filing NPD report can’t constitute “state action” for §1983
• Fact that NPD report is confidential does not prevent hosp.
disclosing fact that data bank report was filed
Abu-Hatab v. Blunt Mem’l Hosp., 2009 WL 921126 (E.D.Tenn.
4/2/09)
• Privileges suspended, then revoked for disruptiveness
• HCQIA immunity applied; summary judgment granted 86
– Initial suspension warranted; refusal to respond to nurses’ pages
43
7/1/2009
Economic Credentialing
Murphy v. Baptist Health, #CV 2004-2002 (Ark.Cir.Ct. 2/27/09)
• Trial ct. permanently enjoined hospital’s economic
credentialing policy prohibiting ownership in competing hosp.
• Policy tortiously interfered with physician-patient relationship
– Hosp. knew policy would exclude drs. from major provider network
• Violated Arkansas public policy
– Patients have right to choose their physicians
– Public policy favors competition & specialty hospitals
– Hospital’s justifications were pretextual; no evidence they had
analyzed referral patterns or effect new hosp. had on its viability
– Policy was overbroad, covering doctors who didn’t even refer pts. to
competing hosp. they owned
• Violated state deceptive trade practices law
– “Affronts the sense of justice, decency and reasonableness”
– Impinges on important public policies w/o adequate justification
87
Peer Review – Procedural Issues
Smith v. Selma Comm. Hosp., 80 Cal.Rptr.3d 745 (Cal. Ct.
App. 2008)
• Hospital may not rely solely on peer review findings of
another hospital if there is evidence to question the reliability
of those prior proceedings
Nasim v. Los Robles Reg’l Med. Ctr., 82 Cal.Rptr.3d 58
(Cal. Ct. App. 2008)
• Hospital cannot revoke privileges pursuant to retroactive
application of board-certification requirement
– Rule required bd. certif. within 2 years of training, which had already
passed by the time plaintiff could take exam
• Had hospital given plaintiff reas. opportunity to comply,
result would have been different
88
44
7/1/2009
Did You Know…?
• In the 20 years since the National Practitioner Data
Bank was established, almost one-half of U.S.
hospitals have never reported a single disciplinary
action?
• The average number of NPDB reports has been
only 650 annually?
– This is 1/8th the volume estimated by the government
and about 1/16th of the healthcare industry’s own
estimate
Report by Public Citizen
May 27, 2009
Available at: http://www.citizen.org/documents/1873.pdf
89
Data Bank Reporting
When is an “Investigation” Over?
Doe v. Leavitt, 552 F.3d 75 (1st Cir. 2009).
• Physician investigated for threatening a nurse; voluntarily
relinquished privileges after ad hoc comm. report & MEC
recommendation
• Physician challenged hospital’s Data Bank report, saying
“investigation” ended once ad hoc comm. presented its
report to MEC; thus, he didn’t resign “while under investig.”
• Court upheld HHS ruling and held “investigation ends only
when a health care entity's decisionmaking authority either
takes a final action or formally closes the investigation.
“Congress did not intend to construct an easily accessible escape
hatch that would permit beleaguered physicians to elude the
reach of the HCQIA's reporting requirement.”
90
45
7/1/2009
Attorneys Fees
Fees Awarded
Adeduntan v. Hosp. Auth. Clarke Cnty., 2008 WL 2986275
(M.D. Ga. 7/31/08)
• Under bylaws, physicians agreed to pay attorneys fees
incurred by hosp. & others in defending unsuccessful suits
• Court ruled plaintiff must pay defendants’ fees; amount to be
determined later
Fees Denied
Stratienko v. Chattanooga-Hamilton Cnty. Hosp.
Auth., 2009 WL 1471453 (E.D.Tenn. 5/27/09)
• After granting HCQIA immunity, court denied attys. fees
• “Plaintiff's conduct, though aggressive and pugnacious, did not
rise to such an egregious level” to award attorneys fees 91
“First, Let’s Kill the Lawyers”
Wilkey v. Hull, 598 F.Supp.2d 823 (S.D.Ohio 2009)
• Physician sued attorney who represented MEC
against him in peer review action
– Claimed attorney fraudulently concealed favorable report
of external reviewer
• Court granted summary judgment to attorney
– Physician not in privity with lawyer
– No evidence of malice
– Barred by statute of limitation
92
46
7/1/2009
“Now Children, Let’s Behave”
Narotzky v. Bd. of Trustees Mem. Hosp. of Natrona
Cnty., #08-CV-27-B (D. Wyo. 5/11/09)
• 3 neurosurgeons resigned following protracted contractual &
peer review disputes
– claimed constructive discharge due to “hostile work environment”
• Ct. granted S/J to hosp. finding resignations were voluntary
– No evidence hosp. ever asked them to resign or leave
– Surgeons had several other alternatives to resolve their issues
– They had applied to other hospitals prior to resigning
“[T]he disputes between the parties in this case, the incidents that
occurred and numerous e-mails, letters, and interaction presented
to this Court as evidence, more accurately typify the bickering of
children than the mature negotiations and communications between
world-class neurosurgeons and intelligent hospital administrators…
93
Managed Care
47
7/1/2009
Payors Fight Back
Horizon BC/BS of New Jersey v. IJKG, #ESX-C-125-09
(N.J.Super.Ct., filed 5/14/09)
Horizon BC/BS of New Jersey v. Newton Mem’l Hosp., #ESX-
C-141-09 (N.J.Super.Ct., filed 5/28/09)
• Insurer alleges fraud by two out-of-network hospitals for
improperly removing pt. incentives to use in-network hospitals
• Alleged fraudulent activity by defendant hospitals:
– Waived copayments, deductibles & other expenses
patients normally have to pay to use non-network hospitals
– Simultaneously raised their charges significantly, thereby
increasing amount owed by insurer, which pays based on
their stated charges
– Submitted claims based on misleading “charges”
containing items hospitals never intend to collect 95
Payors Fight Back
“Balance Billing”
Prospect Med. Grp. v. Northridge Emerg. Med. Grp.,
198 P.3d 86 (Cal. 2009)
• Emergency room physicians may not “balance bill”
HMO pts.
• Cal. statute bans providers who contract with a health
plan from balance billing the plan’s enrollees for any
amount not paid by the plan
“…[B]illing disputes over emergency medical care must be
resolved solely between the emergency room doctors, who are
entitled to a reasonable payment for their services, and the
HMO, which is obligated to make that payment…A patient who
is a member of an HMO may not be injected into the dispute.”
96
48
7/1/2009
Low-Hanging Fruit
Health Net
New Jersey (August 2008)
• Paid $39 million to resolve charges that it underpaid N.J.
physicians for out-of-network services for more than a decade
• This figure does not include $800,000 it paid in ‘02 in
restitution for underpayments made from July ‘01 – Oct. ’02
California
• September 2008: Settled dispute over policy rescissions
– $3.6 million fine; indep. 3d party review future cancellations
– Reinstate 1000 rescinded patients; pay $14M of their
outstanding medical expenses
• May 2009: Paid $1.95M to settle class action suit by hosps.
over unpaid bills of cancelled patients
97
Low-Hanging Fruit
Amerigroup
• Former employee filed whistleblower suit,
claiming company discouraged pregnant
women and others with expensive conditions
from enrolling in Medicaid
• 2006: Chicago jury found them liable for $48
million, and judge raised total damages to
$334 million
• August 2008: Amerigroup finally settled
claim for $225 million 98
49
7/1/2009
Low-Hanging Fruit
Healthfirst
September 2008
• NY’s largest Medicaid HMO pays $35 million
settlement over its practice of compensating
employees based on number of people they
enrolled in program
– Contract with state prohibited such practice
• Executive VP/COO indicted for insurance
fraud for concealing practice from govt
99
Low-Hanging Fruit
United
December 2008
• In the long-running investigation into its “backdating”
scandal, the SEC settled with United’s former general
counsel, who must:
– disgorge $1.4M & pay a $575,000 penalty
– pay $630,000 to settle private lawsuits
– serve a 5-year ban from serving as an officer or director
– accept an Anti-fraud injunction
– Agree to 3-year suspension from practicing law before the
agency
• SEC declined to charge the company bec. of its
cooperation
• Meanwhile, federal & state courts approved the
SEC’s $468M settlement with United’s former CEO 100
50
7/1/2009
Low-Hanging Fruit
Ingenix
2008:
• NY Atty. Gen. claimed major payors used systematic fraud to
cheat patients & non-network doctors
• Payors had all used data from Ingenix, a wholly-owned
subsidiary of one payor, to determine “reasonable & customary”
fees for non-network providers
– Estimated underpayments in NY alone as much as 28%
Jan.-Feb. 2009:
• Numerous NY payors settled by paying over $90M+ to
establish an independent nonprofit company to replace Ingenix
• United agreed to pay $350M to settle class action by AMA
alleging violations of RICO, ERISA and antitrust laws
– Court approval delayed because 2 law firms representing class
plaintiffs can’t agree whether settlement amount accurately
101
reflects actual damages
Low-Hanging Fruit
WellCare
May 2009:
• Settled criminal Medicaid fraud charges for $80M
– Deferred prosecution agreement with indep. monitor for 3
years
• WellCare used a "phantom" subsidiary to fraudulently inflate
its true and actual expenses for patients' treatment
• CMS said WellCare had generated more complaints about
access to treatment and drugs and other administrative
issues than almost any other contractor
Source:
http://floridahealthnews.org/files/1/File/WellCare%20charges%20by
%20US%20Atty.pdf
102
51
7/1/2009
Cases of Interest
Riverview Health Inst. LLC v. Medical Mut. of Ohio,
2008 WL 4449482 (S.D. Ohio 9/30/08)
• Out-of-network providers alleged payor illegally denied
or reduced payments for services
• Court dismissed all of plaintiffs’ claims
– RICO claims “reverse-preempted” by McCarran-Ferguson
Act, which leaves ins. regulation to the states
– ERISA claims dismissed for failure to exhaust
– Estoppel claim failed because the anti-assignment language
at issue was clear and unambiguous
– Ct. declined to exercise supplemental jurisdiction over state
law claims 103
Cases of Interest
Cook v. Med. Savings Ins. Co., 287 F.
App’x 657 (10th Cir. 2008).
• Affirmed $1.1 million verdict for fraud, finding
ins. co. had misrepresented scope & nature of
coverage
• Policy promised to pay most common charge
by 2/3 of area’s providers, but in actuality only
paid 30-40% of charges
104
52
7/1/2009
Cases of Interest
Spectrum Hlth. v. Good Samaritan, 2008 WL 5216025
(W.D.Mich. 12/11/08)
• Payor claimed provider’s rates not “reas. & customary”
– Relied on average wholesale and list prices
• Court: plan required charges to be compared to those of similar
retail providers, not wholesale
Children’s Hosp. of Phila. v. Horizon NJ Health, 2008
WL 4330311 (E.D.Pa. 9/22/08)
• Pa. hosp. sued New Jersey M’caid HMO, alleging violation of
pts’ cnstl. rights by steering them to other network hospitals
located in NJ
• Court denied HMO’s motion to dismiss §1983 claims
• Because senior state officials encouraged HMO
‘to keep New Jersey Medicaid dollars in New Jersey’ 105
FDA/Pharma
53
7/1/2009
FDA/Pharma
No Mug? Drug Makers Cut
Out Goodies for Doctors
NYT, 12/30/08
107
FDA/Pharma
• PhRMA Revised Code on Interactions with
Healthcare Professionals (7/08; eff. 1/09)
– Prohibits distribution of non-educational items to
healthcare providers and staff
– No restaurant meals—but some in-office meals ok with
presentations
– New disclosure requirements for providers setting
formularies or serving as speakers, consultants
• On the heels of AdvaMed Code of Ethics
revisions (eff. 7/1/09)
108
54
7/1/2009
FDA/Pharma
Pfizer Changes Its
Funding of CME in the US
Business Wire (7/11/08)
• Eliminates direct funding for CME provided by medical
education and communication companies; new CME
criteria; competitive grant review and public reporting
• Other developments:
– Eli Lilly, Merck and GSK plan to disclose physician
payments via online registry
109
FDA/Pharma
• Proposed Physician Payments Sunshine Act
– Requires website posting of payments to physicians from drug or
device manufacturers of $100 or more a year
– Requires drug & device companies not publicly traded to disclose
ownership interests held by physicians or immediate family members
• State activity:
– Massachusetts: Final rules require pharma & device companies to:
• Adopt & follow marketing code of conduct
• Comply with limits on meals, gift, speaker and consulting arrangements
with physicians
• Annually report sales, marketing expenses, payments over $50 to drs
– Vermont:
• Disclosure of all payments by pharma, drug companies to provider with
prescribing authority; bans free meals
• Additional measures adopted 6/8/09 eliminating “trade secret exemption”
and toughening restrictions; bans travel, entertainment, other gifts 110
55
7/1/2009
FDA/Pharma
• Ely Lilly: $1.4B
– Plead guilty to criminal FDA violations; alleged off-label Zyprexa
promotion
– Includes $800 million to resolve four qui tam by former sales
representatives & $515M criminal fine; CIA
• Quest Diagnostics: $302M
– Civil, criminal claims of marketing, selling inaccurate test kits
• Aventis: $95.5M
– Allegedly misreported drug prices to reduce Medicaid rebate
obligations
• Pfizer: $89M
– Bextra and Celebrex marketing; consumer & insurer claims
• Bayer HealthCare: $97.5M
– Alleged cash-for-patient scheme, paying suppliers to convert patients
to Bayer products 111
FDA/Pharma
Pre-Emption
• Wyeth v. Levine, 129 S. Ct. 1187 (3/4/09)
– No federal preemption of state failure to warm laws
involving labeling of FDA approved prescription drugs
– Plaintiff lost arm to gangrene after intravenous arterial
injection; claimed negligent failure to warn of risks
– Wyeth defense: FDA approved label so no state liability
– S.Ct.: Wyeth could have revised label; no express
preemption under federal provision
– Distinguished express preemption in Riegel v. Medtronic
• S.Ct. vacates and remands 3rd Cir. Cases: Colacicco v. Apotex
and Penn. Employees Benefit Trust Fund v. Zeneca
112
56
7/1/2009
FDA/Pharma
Preemption
• Ebel v. Eli Lilly & Co., 2009 WL 837325, (5th Cir. 3/30/09)
– Failure to warn not proximate cause of suicide; applies learned
intermediary doctrine to Texas products liability drug case
• Riley v. Cordis Corp., --- F. Supp. 2d ---, 2009 WL
1606650 (D. Minn. 6/5/09).(D. Minn. 6/5/09)
– State claims against med device maker for failure to warn, negligent
misrepresentation, in off-label use preempted by FDCA
• U.S. v. Farinella, 558 F.3d 695, (7th Cir. 3/12/09)
– Alleged food misbranding by altering “best use by” date on label
– FDA must provide evidence of meaning of representations in
labeling; cannot rely on own informal interpretation
• Bruesewitz v. Wyeth labs, 561 F.3d 233 (3rd Cir. 3/27/09)
– National Childhood Vaccine Injury Act expressly preempts design
defect claims against manufacturer 113
FDA/Pharma
• U.S. et al., ex rel. Polansky v. Pfiser, 2009 WL
1456582 (E.D.N.Y. (5/22/09)
– Dismissal of FCA off-label promotion case based implied
certification; no specific allegations physicians mislead
by marketing or of affirmative misrepresentations of
indications for approved use drug
• U.S. v. Harkonen, 2009 WL 1578712 (N.D.Cal.
6/4/09)
– Criminal wire fraud and misbranding charges based on
alleged off label promotion; press release
constitutes “labeling” under FDCA; no 1st
Amendment protection
114
57
7/1/2009
Pharma Data-Mining Takes a Hit
• IMS Health v. Ayotte, 550 F.3d 42 (1st Cir. 11/18/08)
– Upheld N.H. law banning sale of prescription data, which drug
companies used to determine individual physicians’ prescribing patterns
– Drug companies alleged the law restricted free speech; privacy
advocates claimed it reduced health care costs
– Ruling validates similar laws in Maine & VT; bills pending in AZ.,IL.,MD.,
MN., WA. & WV.
“[T]he societal benefits flowing from the prohibited transactions
pale in comparison to the negative externalities produced.”
• IMS Health Inc. v. Sorrell, 2009 WL1098474 (D.Vt.
4/23/09), injunction pending appeal denied, 2009 WL 1587327
(D. Vt. June 5, 2009)
– Upheld Vermont law prohibiting pharmacies, other entities from selling or
using prescriber-identifiable information unless prescriber “opts in”;
– Ct: Public purpose to contain costs and protect public interest
outweighed marketing use; decision limited to prescriber-identifiable data
115
FDA/Pharma
Longstanding Battles…Resolved…Or Not
• Settlement of class action suits against drug wholesalers
and McKesson for alleged fraudulent mark up of AWP
(3/17/09)
– First DataBank, Inc. and Medi-Span to pay $2.7M to settlement fund
and roll back wholesale average price
– McKesson $350M settlement 11/2008
– Appeal by National Association of Chain Drug Stores and the Food
Marketing Institute
• Pharmaceutical Care Management Ass’n v. D.C. 605 F.
Supp.2d 77 (D.D.C. Mar. 19, 2009)
– DC law imposing fiduciary duties and disclosure requirements
preempted by ERISA
116
58
7/1/2009
Research
Research
Harvard Medical
School in Ethics
Quandary
New York Times, 3/3/09
• Univ. of Wisconsin-Madison to post signs at clinics advising
patients of possible drug company contributions for research
or consulting 118
59
7/1/2009
Research
• IOM, “Conflict of Interest in Medical Research,
Education and Practice” (4/27/09)
– Recommendations:
• All institutions engaged in medical research, education and practice
to establish COI policy
• Focus on physician, researcher disclosure to institutions of industry
relationships; standardize disclosures
• National program for pharma, med device and biotech companies to
publicly report payments
• Researchers not conduct human subject research if they have
financial interest in research outcome
• AMCs to prohibit receipt of industry gifts & benefits for students,
faculty, residents, fellows
119
Research
OIG Report: “FDA Oversight of Clinical
Investigators’ Financial Relationships” (1/09)
• 42% of FDA marketing applications were missing
financial information to be submitted by drug and
device makers
• In 31% of applications to market drugs and medical
devices, agency did not document review of any
financial information
120
60
7/1/2009
Research
Obama OKs
Embryonic Stem Cell
Research
LA Times, 3/9/09
• NIH draft guidelines for federal funding of embryonic
stem cell research, 74 Fed.Reg. 18578 (4/23/09)
121
Research
House Panel Hearing,
GAO Probe Target IRBs,
OHRP
FDA News, 3/27/09
• GAO sting operation: bogus medical company seeking IRB approval
for fake device; 1 IRB approved, 2 denied
• FDA warning letter to Coast IRB; IRB voluntarily suspended new
clinical trial oversight
122
61
7/1/2009
Research
• Guidance on participation in and withdrawal
from human subjects research
– Office for Human Research Protections, 73
Fed.Reg.72804 (12/1/008)
http://www.hhs.gov/ohrp/requests/200811guidance.ht
ml)
– FDA, 73 Fed.Reg.7807 (2/1/09)
http://www.fda.gov/oc/gcp/guidance.html)
• Investigators can continue to analyze previously collected
data about research participant even after subject has
withdrawn from study
• OHRP: new data extractions from previously collected
specimens barred after subject leaves study 123
E-Health Info
& HIPAA
62
7/1/2009
Electronic Health Information
Significantly Fewer Hospitals
Have Implemented EHR
Systems Than Previously
Estimated
New England Journal of Medicine(3/26/09)
• 1.5% implemented facility wide comprehensive systems
• 8%-11% at least one unit with basic EHI
• Cost as major barrier 125
American Recovery
and Reinvestment Act: HITECH
Health Information Technology for Economic and Clinical
Health Act (HITECH)
• ONCHIT: process for EHR standards setting and
certification process; funds HITECH implementation
• Funding to Strengthen HIT Infrastructure: Regional HIT
infrastructure per ONCHIT strategic plan ($300M)
• Multidisciplinary Centers for Health Care Information
Enterprise Integration: Research & tech development
($2B)
• HIT Implementation Grants:
– Funding for regional centers for technical assistance; 50% of the
capital, annual operating and maintenance funds
– Matching fund grants to states or state-designed entities to expand
HIEs and use of electronic health information
– Loans to states, tribes for purchase of EHR tech for information
exchanges; 20% match of nonfederal funds
– Demonstration projects grants to integrate EHR into clinical 126
education of health professionals.
63
7/1/2009
ARRA: HITECH
• Medicare Incentives for Hospitals to be
“Meaningful Users” of EHR
– Incentive for inpatient PPS for hospitals that are
“meaningful users” of certified EHR systems
• Additional payment based formula; flat fee of $2M plus
discharge amount and Medicare %
• Payments start in 2011; phase down over four years
• Penalties for non-meaningful users starting in 2015
– Meaningful Use Workgroup recommendations
to HIT Policy Committee, 6/16/09
127
ARRA: HITECH
• HIPAA Privacy and Security Rules: HIPAA
Privacy and Security Standards for BAs
– Security: Direct application of specific administrative,
physical, technical safeguards, policies and
documentation provisions to business associates
– Privacy: BA contractual obligations—plus new privacy
requirements—now enforceable by gov’t against BAs
– HIEs and RHIOs as BAs: Expansion of BA definition to
include entities with access to PHI on regular basis
– Criminal and civil penalties apply directly to BAs
– Basic requirements effective 2/17/10
128
64
7/1/2009
ARRA: HITECH
• HIPAA Security Breach Reporting
Requirement
– A covered entity that accesses, maintains,
retains, modifies, records, stores, destroys, or
otherwise holds, uses, or discloses…
– Unsecured protected health information…
– Must notify each individual whose unsecured
protected health information has been, or is
reasonably believed by the covered entity to
have been, accessed, acquired, or disclosed as
a result of such breach 129
ARRA: HITECH
HIPAA Security Breach Reporting Requirement
• Unsecured protected health information:
– PHI that is not secured through HHS approved
technology or methodology
– HHS Guidance & request for comments: 74 Fed.Reg.
19006 (4/27/09)—safe harbors for encryption
• Specified processes tested by National Institute of Standards and
Technology (NIST)
• PHI stored on paper, film or hard copy has been destroyed so it
cannot be read or retrieved
– If covered entity or BA complies with HHS guidance, then
information is not “unsecured PHI” and breach not be
reportable
• Guidance effective upon issuance 130
65
7/1/2009
ARRA: HITECH
HIPAA Security Breach Reporting Requirement
• Notification requirements:
– Individuals notified: Covered entities must notify each
individual whose unsecured PHI has been, or is
reasonably believed to have been, accessed or disclosed
as result of breach
– Timing: Notification “without unreasonable delay”, but not
later than 60 days from discovery of the breach (unless
law enforcement requests delay)
– Manner and form of notice:
• First-class mail (or email if specified by an individual); if
insufficient contact info, must provide “substitute form of notice”
• If more than 10 individuals affected, must place conspicuous Web
site posting or notice in major print/broadcast media
131
ARRA: HITECH
• HIPAA Security Breach Reporting Requirement
• Notification requirements (con’t)
– Additional disclosure:
• If more than 500 residents of state involved, entity must provide notice to
“prominent media outlets” and immediate notice to HHS
• If fewer than 500 residents involved, entity must log the breach and
disclose to HHS in annual report.
– Content of notice: Description of event, unsecured PHI
involved, steps for individuals to protect themselves,
description investigation, mitigation and prevention of further
breaches, contact information
– BAs: Not required to provide notice of breach, but must notify
covered entity of breach and identification of each individual
132
66
7/1/2009
ARRA: HITECH
HIPAA Security Breach Reporting Requirement
• HHS and FTC to issue interim final regulations within 180 days,
or by August 15, 2009
• FTC proposed rules on health breach notification: 74
Fed.Reg.17914 (4/20/09)
– Notification triggered by acquisition of unsecured PHI without
authorization
– Presumption that unauthorized persons acquired PHI if they have
access; rebutted with “reliable evidence showing that th information was
not or could not reasonably have been acquired”
– Notice “without unreasonable delay” but no more than 60 days
133
ARRA: HITECH
• HIPAA Penalties
– Criminal penalties: Individuals who without authorization obtain, disclose
individually identifiable health information maintained by HIPAA covered entity
• Individual doesn’t need to be a HIPAA CE to be subject to the criminal penalties
• Effective February 16, 2010
– Civil penalties expanded:
• CMPs to fund enforcement through OCR
• Increased CMPs from $100 up to $50k per penalty (up to $1.5M/ year for all
violations of identical provision) based on tiered system
• Enforcement authority granted to state AGs
• Requires HHS audits of covered entities and BAs
• Effective immediately
• And new provisions on:
• Individual request on PHI disclosure to plans, minimum necessary determination,
individual access to PHI in electronic health records
• Accounting for disclosures
• No payment for PHI without written authorization, subject to exceptions for public health,
research and other activities
• Marketing restrictions; enforceable opt-out for PHI use for in fundraising
134
67
7/1/2009
New Enforcement Initiatives:
Electronic Health Records
• Identity Theft Enforcement &
Restitution Act of 2008
– Felony to damage 10 or more protected computers
(during any one-year period) used by or for the
federal government or a financial institution
– Directs U.S. Sentencing Commission to review
guidelines, consider increased penalties for those
convicted of identity theft, computer fraud, illegal
wiretapping, breaking into computer systems.
135
Electronic Health Information
The exemption is in the mail…
• IRS: RHIO determinations letters issued
– CalRHIO, CareSpark, Vermont Information
Technology Leader approved for exempt status
– FAQs:
• Notes ARRA: RHIO importance in delivering health
care, reducing costs; lessen gov’t burdens
• Reviewing pending apps; case by case for exemption
– http://www.irs.gov/charities/charitable/article/0,,i
d=206129,00.html
136
68
7/1/2009
Electronic Health Information
Wal-Mart Plans to
Market Digital Health
Records System
NYT 3/11/09
137
More Flexibility from OCR
• If the patient is not present or is incapacitated, a health care
provider may share the patient’s information with family, friends,
or others as long as the health care provider determines,
based on professional judgment, that it is in the best interest
of the patient.
• If the caller states that he or she is a family member or friend of
the patient, or is involved in the patient’s care or payment for
care, then HIPAA doesn’t require proof of identity in this case.
• A health care provider is not required by HIPAA to share a
patient’s information when the patient is not present or is
incapacitated, and can choose to wait until the patient has an
opportunity to agree to the disclosure.
Source: Office for Civil Rights Guide (9/16/08) 138
“http://www.hhs.gov/ocr/hipaa/provider_ffg.pdf”
69
7/1/2009
Get Ready for More Enforcement
OIG Report Critical Of
CMS’ Oversight Of
HIPAA Security
Compliance
OIG Report A-04-07-05064
October 27, 2008
“CMS needs to become more proactive in overseeing
and enforcing implementation of the HIPAA Security Rule”
139
Get Ready for More Enforcement
HHS Cracks Down: Provider to
pay $100,000 in HIPAA penalties
over lost laptops
Healthcare IT News
July 17, 2008
• Involved security breach of laptops, backup tapes & disks
containing PHI of 386,000+ persons
• Payment called a “resolution amount,” not a civil penalty
• Provider also required to follow detailed corrective action plan
140
70
7/1/2009
Get Ready for More Enforcement
HIPAA Criminal Prosecution of Note
U.S. v. Brown, #1:09-CR-20442-KMM (S.D.Fla.,
indictment 5/26/09)
• Medical records administrator at Florida hospital
charged with stealing patient records
• Used personal information in records to obtain
patients’ credit card numbers
141
“Practice What You Preach!”
“CVS/pharmacy wants you to know that nothing is
more central to our operations than maintaining the
privacy of your health information.”
• Several states reported finding patients’ prescription
& other personal info in dumpsters behind CVS
stores
• First-ever joint investigation by HHS (for HIPAA
violations) and FTC (for deceptive business
practices)
• CVS agreed to pay $2.25M “resolution amount” to
implement a stronger privacy correction plan &
independent audits for next 20 years 142
71
7/1/2009
Hacker of the Year
Hackers Break Into
Virginia Health
Professions Database,
Demand Ransom
Washington Post, 5/4/09
143
Somebody REALLY Screwed Up!!
Maria Shriver’s Medical
Records Leaked
Calif. First Lady Among 30 Big-Name
Patients Who Had Files Breached At
UCLA Medical Center
CBS News.com
April 7, 2008
The result: Calif. Senate Bill 541
• Expanded administrative penalties
to hosps. for unauthorized release
of patient medical information
• Fines up to $250,000 per event 144
72
7/1/2009
Somebody REALLY Screwed Up!!
$250,000 fine for
privacy breach
in octuplet case
Modern Healthcare Daily Dose
May 15, 2009 Nadya
Suleman
• 23 hospital staff peeked at octuplet mother’s records
without proper authorization
• 1 fired, 14 resign under pressure & 8 disciplined
• Cal. Dept. of Public Health fines hospital $250,000
under new privacy law
• Staff still subject to penalties & loss of licenses 145
Cases of Interest
Moreland v. Austin, 670 S.E.2d 68 (Ga. 2008)
• To obtain ex parte interview, defense counsel must comply
with §164.512(e) and get either valid authorization, protective
order, or provide notice and opportunity to object
• But, counsel can talk with physician as long as not intended to
elicit PHI
Holman v. Rasak, 761 N.W.2d 391 (Mich. App. 2008), appeal granted
(5/7/09)
• Ex parte interviews OK if consistent with protective order
Hageman v. Southwest Gen.Hlth.Ctr., 893 N.E.2d 153 (Ohio
2008)
• Attorney who lawfully obtains med. record but then discloses it
to third person in unconnected litigation can be liable 146
73
7/1/2009
EMTALA
EMTALA Jury Verdicts
Hospital Wins
Smithson v. Tenet Hlth. Sys., 2008 WL 4544365 (E.D.La.
10/10/08)
• Ct. ruled jury verdict in favor of hosp. was supported by evid.
• Plaintiff had no evidence how other patients with similar
injuries were treated by hosp.
Hospital Loses
Thomas v. St. Joseph, 2008 WL 5102119 (Ky. App. 12/5/08)
• Patient discharged from ER twice, died next day of peritonitis
• Jury awarded $25,000 actual damages & $1.5 million punitives
• Ct. awarded new trial on punitives bec. no evid. hosp. ratified
the negligent actions of its employees
148
74
7/1/2009
EMTALA Jury Verdicts
Hospital Loses (cont’d)
Heimlicher v. Steele, 2009 WL 1361164 (N.D.Iowa 5/14/09)
• $1.7 million verdict after labor pt. was transferred 100 mi.
away in inclement weather while condition deteriorated
• Hosp. couldn’t rely on ER doc’s certification approving transfer
because he “signed the form without actually deliberating and
weighing the medical risks and benefits of the transfer”
– Not all “risks” of transfer were identified on the form, and alleged
“benefit” of transfer was equally available at transferring hospital
– Plus, ER doc was a hospital agent, not an independent contractor
• Verdict amount excessive because jury didn’t include amount
saved by not having to raise the child
– Court ordered either a decrease of verdict by $160,000 or a new trial on
damages issue 149
“Bad Facts Make Bad Law…”
Scruggs v. Danville Reg’l, 2008 WL 4168645 (W.D.Va. 9/5/08)
• 11 hour wait between nurse triage and physical exam
• Hospital’s motion to dismiss denied
St. Joseph’s v. OIG, Civil Remedies Div., #CR1895 (1/30/09)
• After 3 hr. wait in ER, patient died of heart attack
• Hospital’s defense: “He would have died anyway.”
• HHS Appeals Bd. imposed maximum $50,000 fine
Bode v. Parkview Hlth.Sys., 2009 WL 790199 (N.D.Ind. 3/23/09)
• Hosp. violated its own policies by not taking patient’s blood
pressure and vital signs
• 6 year old patient died of dehydration
• Court denied hospital’s motion for summary judgment
150
75
7/1/2009
“…Unless You Admit Them”
Vazquez-Rivera v. Hosp. Episcopal San Lucas,
2009 WL 1545881 (D.P.R. 5/28/09)
• Pregnant patient left unattended in ER for several hours
• Told she would be admitted to maternity ward under care
of her regular obstetrician
• But MD never saw her & she was left unattended
overnight; suffered a miscarriage next morning
• Subsequent surgery left her sterile
OUCH!!
OUCH
• Court found no EMTALA violation
• Since patient was eventually admitted to maternity ward,
the hospital’s potential liability under EMTALA was terminated
151
EMTALA’s Anti-Retaliation Clause
Ritten v. Lapeer Reg’l Med.Ctr., 2009 WL 648517 (E.D.Mich.
3/11/09)
Note: Court’s ruling on HCQIA immunity discussed on earlier slide
• Physician alleged he was suspended by CEO in retaliation for
refusal to transfer an unstabilized pt. with an emerg. condition
• Court refused to grant S/J on this anti-retaliation claim:
– 42 USC §1395dd(i) prohibits hosp. from penalizing a
physician bec. (s)he refuses to authorize transfer of pt. with
emergency medical condition who hasn’t been stabilized
– Fact that pt. had been admitted to labor & delivery unit
doesn’t matter
– Disputed facts whether pt. was stabilized
“Under the EMTALA, Plaintiff was protected against retaliation for refusing
to authorize the transfer of a patient who, in his medical judgment, was
suffering from an emergency medical condition that had not been stabilized.” 152
76
7/1/2009
Procedural Issues
Southard v. United Reg’l, 2008 WL 5049299 (N.D.Tex. 11/26/08)
• Experts could not opine whether hospital violated EMTALA,
since that was ultimate legal issue
• But they could testify whether hosp. followed own procedures
and whether examination was sufficient to determine EMC
Moses v. Providence Hosp., 561 F.3d 573 (6th Cir. 2009)
• Patient released from hospital, murders wife the next day
• Estate of murdered wife sues, includes an EMTALA claim
• Court rules non-patient third parties may sue under EMTALA
if they suffered direct personal harm due to violation
– Statute says “any individual who suffers personal harm”
153
may sue
Regulatory Developments
New Regulations [73 Fed.Reg. 48434 (8/19/08)]
• 42 CFR 489.24(j)(2)(iii) permits hospitals to
participate in a formal Community Call Plan
– Under §489.20(r)(2) on-call list can contain
physicians from other participating hosp. staffs
• Under §489.24(f)(2), a hospital with specialized
capabilities does NOT have to accept a transfer of
a patient who has already been admitted to the
hospital requesting the transfer, even if the patient
remains unstabilized
See also: CMS explanatory memo at:
“http://www.cms.hhs.gov/SurveyCertificationGenInfo/downloads/SCLette
r09-26.pdf” 154
77
7/1/2009
Employment
Employment
• ADA Amendments of 2008 (9/25/08)(Eff. 1/1/09)
– Reverse impact of S. Ct. ADA interpretations narrowing
scope of law
– Expands definition of “disability” and those covered
• Broadens interpretation of “a physical or mental impairment that
‘substantially limits one or more major life activities’”; lists major
life activities
• Broadens protection to individuals “regarded as” disabled
regardless of whether impairment limits a major life activity
• Mitigating measures no longer considered in determining
qualification as disabled; episodic impairment covered if
substantially limits major life activity
– Reasonable accommodation required only for disabled
employees, not those regarded as disabled 156
78
7/1/2009
Employment
• FMLA revisions, 73 Fed.Reg.67935
(11/17/08)(eff. 1/16/09)
– New military leave provisions; employee
handling non-medical exigencies from family
member’s active duty service, caring for injured
family member
– New employer and employee notice
requirements
– Guidance on “serious health condition”
– Employer contact with employee’s provider to
authenticate medical certification 157
Employment
• Lilly Ledbetter Fair Pay Act (1/28/09)
– Reverses 2009 Supreme Court case denying
equal pay claim on grounds that it had to be
filed within 180 days of date that employer
first paid plaintiff less than her male peers
– Legislation “restarts” six month clock to file
claim every time employee receives paycheck
• Consistent with interpretation before Ledbetter
Supreme Court decision
158
79
7/1/2009
Employment
• Crawford v. Metropolitan Gov’t of Nashville &
Davidson County, 129 S. Ct. 846 (1/26/09)
– Employee disclosed alleged inappropriate behavior
by supervisor during internal investigation; later fired
and filed retaliation suit
– Employee’s disclosure was “opposition” to
discrimination; Title VII extends to discrimination
based on opposition to sexual discrimination
– Concern: extension of opposition claim to less formal
conduct, conversations
159
Employment
• FAR Amendments:
– Federal contractors and subs to use E-Verify
– To be effective 6/30/09; DOJ seeking delay until 9/8/09
• HHS “Conscience Rules”, 73 Fed.Reg.
78072 (12/19/08)
– No use of HHS funds to support “morally coercive or
discriminatory practices or policies in violation of federal
laws”
– HHS proposes rollback
160
80
7/1/2009
Employment
Two Unions, Once Bitter
Rivals, Will Now Work
Together
AP 3/19/09
• SEIU and California Nurses Association to work together
to unionize hospital workers and seek universal health
coverage
161
Employment
• Ysura et. al. v. Pocatello Education
Association, 129 S. Ct. 1093, 2/24/09
– Upholds Idaho law permitting public employees to
authorize payroll deductions for general union dues,
but prohibits deductions for union political activities
– No infringement of 1st Amendment when applied to
local gov’t; no obligation for gov’t to subsidize speech
– Public employees free to engage in speech; state law
addresses payment check-off only
• On the horizon? Employee Free Choice Act
162
81
7/1/2009
Records &
Discovery
Peer Review Privilege
Records/Items Privileged
Jadwin v. County of Kern, 2008 WL 2916386 (E.D.Cal.
7/28/08)
• State law privilege didn’t apply to federal case, but
HIPAA right of privacy did require limiting disclosure
of some information in peer review records
Roy v. City of Harriman, 2008 WL 2579192 (Tenn.App.
6/30/08)
• Even though peer review report was leaked to
affected physician, privilege prevented him from
using it as evidence in defamation suit against
author of report 164
82
7/1/2009
Peer Review Privilege
Records/Items Privileged
Anderson v. Rush-Copley Med. Ctr., 894 N.E.2d 827 (Ill. App.
8/14/08)
• Med. journals gathered by peer review comm. & its “action
plan” are privileged, but not actual changes made as result of
action plan
Guzman v. Mem. Hermann Hosp., 2009 WL 427268 (S.D.Tex.
2/20/09)
• Because peer review documents were only relevant to state
law malpractice claim and not to EMTALA claim, state law
privilege blocked discovery
Roby v. Fairfield Nursing Ctr., 2009 WL 794667 (Ala. 3/27/09)
• Incident reports privileged; not kept in ordinary course of
business 165
Peer Review Privilege
Records/Items Not Privileged
Giusti v. Akron Gen. Med. Ctr., 896 N.E.2d 769 (OhioApp.
2008)
• Treating physician’s subsequent conversation with ED chief
about patient not privileged because no evidence peer review
comm. ever initiated any review of case at issue
Powell v. Community Hlth. Sys., 2009 WL 17850 (Tenn.App.
1/2/09), appeal granted (4/27/09)
• Infectious disease nurse conducted study at direction of peer
review comm.; used info gathered as part of normal job duties
• Ct. ruled underlying info compiled by her was not privileged
166
83
7/1/2009
Pt. Safety & Quality Improvement Act
Final Regulations, 42 CFR §3.10, et seq.(11/21/08)
• Creates uniform federal privilege allowing providers to share
patient safety data both within and across states
• Protects information sent to “patient safety organizations”
– Allows for privileged incident reporting system, provided it’s
structured properly
• Final regs expand privilege to include patient safety information
created but not yet reported to a PSO
– Provider can later undesignate info if it is determined not to
be reportable
Schlegel v. Kaiser Found. Hlth.Plan, 2009 WL 4570619 (E.D.
Cal. 10/10/08)
• Reports of peer review comm. are not privileged under Act
– Reports never sent to PSO; peer review comm. not a PSO 167
Liability
84
7/1/2009
The Next Asbestos?
Hospital Infections: Preventable
and Unacceptable
Wall Street Journal
August 14, 2008
“Until recently, infection was considered an unavoidable
risk. But now there is proof that nearly all hospital
infections are avoidable when doctors and staff clean their
hands and rigorously practice proper hygiene and other
preventive measures.
Hospital infections will cause the next wave of class-action
lawsuits, bigger than the litigation over asbestos.” 169
Ostensible Agency
Farlow v. Harris Meth. Ft. Worth Hosp., 2009 WL 1371411
(Tex. App. 5/7/09)
• Hospital not liable for negligence of on-call ENT, even though:
– Recruitment contract provided financial assistance to ENT, and
required him to engage in fulltime medical practice in area and maintain
medical staff privileges
– Hospital provided equipment for his surgery, scheduled the procedures
& employed assisting nurses
– Hospital’s advertising campaign implied he worked for hospital
• Court ruled he was not apparent agent of hospital
– Contract provisions were for purpose of ensuring ENT could financially
continue to practice in area & be available for on-call service
– Hospital and physician billed separately for their services
– Admission forms affirmatively stated MDs were indep. contractors
170
85
7/1/2009
Negligence Per Se
Iacangelo v. Georgetown Univ., 595 F.Supp.2d 87
(D.D.C. 2009)
• Physician used non-FDA approved medical devices during
treatment; patient now catatonic
• Plaintiff claimed FDA Act prohibited use of unapproved
devices & violation of statute constituted negligence per se
• Court found Act’s provisions did not embody a substantive
standard of care but rather an administrative requirement to
approve devices before use
• Also, no evidence that breach of FDA approval requirement
proximately caused injuries
171
Consumer Protection Laws
Steele v. Extendicare Hlth. Svcs., 2009 WL 799682
(W.D.Wash. 3/24/09)
• Nursing home was sued under state consumer
protection law for alleged false advertising
– Ads said nursing home would meet the residents’ needs
– Also failed to disclose prior history of licensure violations
• Court granted summary judgment to nursing home
1. Personal injuries not compensable under state consumer law,
and plaintiffs failed to show any loss to business or property
2. No evidence the advertising played any role in plaintiffs’
decision to stay in nursing home, so no causation
3. Satisfied duty to disclose by making regulatory history
available to general public as req’d by federal & state law
172
86
7/1/2009
Got Your Interpreters Handy?
Boyer v. Tift Cnty. Hosp. Auth., 2008 WL 2986283 (M.D.Ga.
7/31/08)
• Deaf patient sued hospital for failure to timely provide certified
interpreter until one month after her admission
• Fact that her adult children could act as interpreters did not
comply with ADA and Rehab. Act
– They weren’t always available at every interaction with
patient’s physicians doctors and nurses
• Hospital’s motion for summary judgment denied as to:
– Claims under ADA and Rehab. Act
– Claim for intentional infliction of emotional distress arising
from procedure without her informed consent due to lack of
interpreter
173
Tax
87
7/1/2009
Tax
• IRS Exempt Organizations Hospital
Compliance Project Final Report (2/12/09)
– 2006 survey of 500 hospitals
– Executive compensation:
• High compensation (average CEO: $490k; median $377K)
• Broad reliance on Rebuttable Presumption of
Reasonableness
• Concerns that presumption may preclude investigations of
alleged excess compensation
– Community benefit:
• Wide diversity in community benefit provided by hospitals
• High population hospitals had greatest average % of revenue
spent for community benefit; median % of revenue for
community benefit increased with hospital size
175
Tax
Community Benefit Standard
• Senate Finance Committee Proposal
– Minimum annual level of charitable patient care
• Possible exception for sole/critical hospitals and hospitals
with independent basis for exemption (research, education)
– Regular community needs analysis
– No refusal of service based on ability to pay
– Procedures for collection actions
– Senate Fin. Comm., “Financing Comprehensive
Health Care Reform: Proposed Health System
Savings and Revenue Options”
(5/20/09)(http://finance.senate.gov)
176
88
7/1/2009
Tax
• Form 990 final instructions (8/19/09)
– Schedule H clarified—to be completed by org that operates at least
one facility that is recognized by state as a hospital
– Physician clinics and SNFs eligible for treatment as “subsidized
health service”
– Definition of “key employee” narrowed
– Clarification on compensation reporting: “reportable compensation”
and “other compensation”
– Test for “interested party” to determine independence of governing
body voting member
– Exemption of reporting refunding bonds that refund pre-2003 bonds
– FAQs on 990:
“Only in health care is so much attention focused on
instructions to a tax form.”
Michael Peregrine
177
Tax
• Verret v. U.S. 2009 WL 483962 (5th Cir. 2/26/09)
– Upholds IRS imposition of penalties against chairman
of exempt hospital board for failure to pay to IRS
payroll taxes withheld (IRC §6672(e))
– Board chair was “responsible person” under statute:
• 26 years service on board
• Involvement in hospital activities; acting in administrative
capacity
• Signed 990s for many years, signatory on hospital accounts
• Vendor to hospital
178
89
7/1/2009
Tax
• Vision Service Plan v. U.S., 265 Fed. Appx. 650 (9th Cir.
1/30/08), cert. denied, 129 S.Ct. 898 (2009).
– Affirmation of appellate court denial of tax exempt status to social
welfare organization; not primarily engaged in promoting common good
& general welfare
• Provena eternal: Provena Covenant Medical Center v. Dept.
of Rev., 894 N.E.2d 452 (Ill. App. Ct. 8/26/08)
– App.ct. overturns trial ct. decision upholding property tax exemption;
appeal pending
• And see:
– Davis Memorial Hospital v. West Virginia Tax Comm’r, No. 33862
(W.Va. 10/14/08)(Nonprofit hospital does not qualify for state sales and
use tax exemption because less than half its support contributions,
grants, gifts)
– Hunterdon Med.Ctr v. Readington Township, N.J. No. A-17-07,
(7/14/08)(Remand on refusal of property tax exemption for offsite 179
hospital PT services)
Tax
Residents Covered by Student Exemption to
FICA?
• Mayo Foundation v. U.S., 2009 WL 1635761 (8th Cir.
6/12/09)
– Medical residents not within FICA student exception
– 2005 regulation defining student exception upheld; person with
regular work week of 40+ hours not considered a student
• Impact on pending cases
• Earlier decisions: residents not per se ineligible
– U.S. v. Detroit Med. Ctr., 557 F.3d 412, (6th Cir. 2/26/09); Univ. of
Chicago Hosps. v. U.S., 545 F.3d 564 (7th Cir. 9/23/08); U.S. v.
Partners Healthcare Sys., Inc., 591 F. Supp. 2d 116 (D. Mass.
(9/30/08); U.S. v. Memorial Sloan Kettering Cancer Ctr., 563 F.3d
19 (2nd Cir. 3/25/09)
180
90
7/1/2009
Payment
Payment
Is that coal in the MA stocking?
Uncle Sam, Secret
Medicare Shopper
WSJ, 12/5/08
182
91
7/1/2009
Payment
Pushing More Doctors
to Ditch the
Prescription Pad
AP 12/15/08
183
Payment
• 2009 MPFS and Medicare Improvements for
Patients and Providers Act of 2008
– Provided for 1.1% Medicare increase for
physicians in place of cut under statutory
formula
– E-prescribing incentives
• 2% incentive for practitioners using qualified e-
prescribing 2009 to 2013; 2% cut to those who don’t
adopt e-prescribing by 2012
– Physician Quality Reporting Initiative
• Continues 2% incentive payment for reporting
• Additional reporting measures 184
92
7/1/2009
Payment
• CMS “bundled payment” demonstration
project (1/06/09)
– Medicare Acute Care Episode (ACE) Demonstration
– Hospital based: sites in Texas, Oklahoma, Colorado
and NM
– Global payment for hospital and physician services
for inpatient episodes
• Select orthopedic and cardiovascular inpatient procedures
• Focus on coordination of care, aligned incentives
185
Payment
Never Events
• 2009 IPPS: 73 Fed. Reg. 48434 (Aug. 19, 2008):
– Finalizes set of hospital acquired conditions for no payment of additional
costs, including surgical site infections following certain elective procedures,
poor control of blood sugar levels
• Medicaid: CMS letter state programs to adopt never events
practices and non-payment policies
• Private insurers follow suit…
• 3 NCD letters on nonpayment for wrong surgeries (1/15/09)
– Wrong site, wrong body part, wrong patient
• Adverse Events in Hospitals: State Reporting Systems
(OIG Report, 12/08)
– 26 states with reporting systems; state variations make data unsuitable for
national trend analysis 186
93
7/1/2009
Payment
Medicare Advantage and Part D
Other Medicare Rules
Programs
• Medicaid provider taxes: partial
• Final Marketing Rule, 73
delay in rule on hold harmless
Fed.Reg.54208 (9/18/08); Modified,
provisions to 6/30/10 (74 Fed.
73 Fed.Reg. 67406 (11/14/08)
Reg. 21230 (5/6/09))
• Draft Medicare Marketing Guidelines
• Medicare physician enrollment
• Special Needs Plans Interim Final period (MPFS, 73 Fed.Reg.69726
Rule, 73 Fed.Reg.54226 (9/18/08) (11/19/08))
• Final MA/Part D Rules, 74 Fed.Reg – Retroactive billing period
1493 (1/12/09) shorted to from 27 months to
– MSA information requirements, 30 days
pricing requirements • Medicare Secondary Payor, 42
• Covered Part D Drugs & Formulary U.S.C. 1395y(b)(7)&(8)
Rules, 74 Fed.Reg.2881 (1/16/09) – New reporting requirements
for insurance plans, self
insured hospitals
187
Update On Payment
• Anti-Markup: 2009 Physician Fee Schedule 73 Fed. Reg.
69726 (Nov. 19, 2008)
Alt 1: If physician supervising TC or PC performs “substantially all”
(at least 75%) of his professional services for the billing physician
or supplier, anti-mark-up rule does not apply
Alt 2: Modified site of service—TC supervised and conducted in
same office as billing physician and PC performed in same office
as billing physician not subject to rule
– “Office of billing physician” = same building where the ordering physician
performs substantially the full range of patient care services that the ordering
physician generally provides; supervising physician must be owner, employee
or independent contractor and physician supervising PC must be employee or
independent contractor
– No separate anti-markup rule for purchased tests from outside suppliers
188
94
7/1/2009
Payment
Medicaid Rate Freezes and Cuts
• Mission Hospital Regional Medical Center, et al. v. Sandra
Shewry, 163 Cal. App.4th 460 (11/19/08)
• Independent Living Center of Southern California, Inc. v.
Sandra Shewry, WL 3891211 (C.D.Cal. 8/18/08)
• California Pharmacists Ass’n v. Maxwell-Jolly, __F.3d__,
2009 WL 975458 (9th Cir. 4/6/09)
– Preliminary injunction granted preventing state from implementing Medi-Cal
pharmacy payment cuts
– Claim: Federal law requires that Medi-Cal rate changes must take into account
efficiency, economy, quality of care and effect on providers’ costs
• But see Equal Access for El Paso Inc. v. Hawkins, 562 F.3d
724 (5th Cir. 3/12/09)
– “Reasonable promptness provision” under 42 USC 1396a(a)(8) applies only to
payment for services, not provision
189
Antitrust
95
7/1/2009
Clinical Integration
Tristate Health Partners, FTC Advisory Opin. (4/13/09), at
http://www.ftc.gov/os/closings/staff/090413tristateaoletter.pdf
• FTC’s latest views on sufficient “clinical integration” to allow
joint negotiating & contracting with payers
• Unique challenges:
– PHO contained 64% of county’s physicians & its only hospital
– Some MDs objected PHO would monopolize private insured pts.
– Largest customer: hospital’s employee benefit plan
• Major components of clinical integration noted by FTC:
– Closed physician panel; broad participation in program’s operation
– Use of IT & EHRs to develop practice protocols & coordinate care
– Physicians evaluate treatment, address deficiencies & impose
sanctions
– $2500 entrance fee plus commitment to devote significant time &
expertise 191
Tristate Health Partners (cont’d)
• Other important features
– Physicians agreed in advance to participate in all PHO contracts
– In-network referral policy
– Non-exclusive – payers and provider members allowed to
contract individually
– Only non-physician staff saw physician prices; physicians only
saw cost data
• Major conclusions:
1. Program has potential to improve quality & reduce cost
2. Joint contracting necessary to achieve its efficiency benefits
3. Program unlikely to increase participants’ existing market power
192
96
7/1/2009
State Attorney General Actions
Memorial Hermann,
Texas AG reach
Antitrust deal
Modern Healthcare Daily Dose
January 26, 2009
• Hospital system allegedly threatened to drop its contract with
one payor after learning payor had signed contract with
competing physician-owned hospital
• Also threatened another payor to raise rates if it signed
contract with same competitor
• Agreed to five-year injunction prohibiting certain contracting
practices; paid $700,000 toward AG’s costs of investigation
193
State Attorney General Actions
Partners, Insurer Under Scrutiny
AG seeks details on agreement;
Possible collusion over prices cited
Boston Globe
January 23, 2009
• “Most favored nations” agreement between state’s largest
ins. co. & largest provider system
– Never written because attys feared it was legally risky
– BC/BS paid Partners hospitals 30% higher fees
– Partners used this to seek higher rates from other payors
194
97
7/1/2009
Nurse Wages Suits
• Nurses file antitrust class actions in 6 cities
• Allege hospitals exchanged nurse compensation
data in order to depress nurses’ wages
Albany, NY
• One hosp. settled class action suit for $1.25M
Detroit, MI
• 7-hospital system settled for $13.6M
• Several other hospitals remain as defendants
195
It Won’t Be Quiet Long!
OBAMA TAKES TOUGHER
ANTITRUST LINE
New York Times
May 12, 2009
AHA URGES INCREASED
SCRUTINY OF HEALTH-PLAN
MERGERS
Modern Healthcare Daily Dose
May 12, 2009 196
98
7/1/2009
Accreditation and
Regulation
Accreditation and Regulation
New Hospital Accreditation
Program Offers Hospitals
More Choices
AHA Quality Advisor
(10/7/08)
• Det Norske Veritas (DNV) approved as accreditation body
• Integrates M/C CoPs and ISO 9001 QM system
• Joins The Joint Commission and AOA as only voluntary accrediting
bodies
198
99
7/1/2009
Accreditation & Regulation
Joint Commission “Sentinel Event Alert” on
Disruptive Behavior (July 9, 2008)
• “All intimidating and disruptive behaviors are unprofessional
and should not be tolerated.”
– Foster medical errors, increase costs & cause qualified
clinicians to leave the hospital
• “Organizations that fail to address unprofessional behavior
through formal systems are indirectly promoting it.”
– Staff perceive that powerful, revenue-generating physicians
are “left off the hook” for inappropriate behavior
• Eff. 1/1/09, hospitals must:
– Adopt code of conduct defining disruptive behaviors
– Implement a process for managing inappropriate behavior
199
Accreditation and Regulation
“Red Flag” Rules
• FTC final identity theft “red flag” rules and guidelines (72
Fed.Reg.63718, 11/9/07)
– Requires financial institutions, creditors holding consumer or “covered
accounts” to develop identity theft prevention programs; eff. Nov. 1, 2008
– FTC: possible application to hospitals, healthcare providers—if provider
regularly arranges for credit or enters into deferred payment
arrangements
• Written procedures to identify red flags for possible identity theft;
detect red flags; respond to prevent & mitigate; program updates; bd
ok of initial written policy.
– FTC: delay implementation to May 1, 2009; 2nd delay to August 1,
2009; template for low risk entities
200
100
7/1/2009
Accreditation and Regulation
Other regulations and programs…
• Reduction of hospital readmissions
• Care Transitions Project pilot project; 14 sites; QIO leadership in
each participating area
• Physician supervision requirements for therapeutic
hospital outpatient services, 73 Fed.Reg. 68502, 68702
(11/8/08)
• 2009 IPPS “clarification”: direct supervision required for “incident
to” services in hospital outpatient dept, on or off campus
• Proposed rescission of Medicaid final rule on hospital
outpatient services, 74 Fed.Reg.21230 (5/6/09); would
reinstate definition of “outpatient hospital services”
before 2009 IPPS
201
101