The Louisiana Legislature has adopted House Concurrent Resolution No. 185, authored by Representative Tim Burns.  The resolution urges and requests that the Department of Health and Hospitals and the Deptartment of Insurance, in consultation with the Louisiana State Licensing Board for Contractors, investigate the health risks associated with living in homes that contain drywall imported from China, study the potential homeowners insurance coverage issues, including triggers, endorsements, and exclusions to policies that are related to drywall imported from China, and determine whether such material should be identified as a substandard, unsafe building material.  The resolution goes on to request a report of the findings and recommendations of this study to the legislature prior to the convening of the 2010 regular session.

A copy of the enrolled version of the resolution can be seen here: Download file

In this day and age, everyone communicates by e-mail, on a laptop, desktop, Blackberry or other electronic device. But what about communication between a physician and a patient?  

Is this permissible? Acceptable under existing law and practice? Recommended?

Obviously, any form of communication between a physician and a patient is allowed. So, if you wish to discuss with a patient their history, your impressions, diagnosis, prognosis or other issues relating to evaluation and treatment, you may. However, this form of communication carries with it certain special rules and requirements. Which leads us to our second question.

Acceptable?

Any communication by a physician with a patient should be documented. In the olden days, this may have involved a small spiral notebook with entries made from phone calls received at home and later placed in the patient’s office chart. Now, in the era of electronic communication, the initial consideration is how will this “e-mail” be stored or maintained. Will a copy of the e-mail be printed and placed in the patient’s chart? Will electronic folders for each individual patient be created? Will a dedicated hard drive and back-up system be implemented? There are any number of alternatives in this regard. The bottom line is that an e-mail from the physician to a patient which relates, in any material way, to treatment should be available for review by others involved in the patient’s care and preserved as a contemporaneous documentation of the physician’s evaluation/thought process.

Perhaps, more importantly is that under existing law, in legal cases and in the potential for litigation, there is a duty to preserve electronic data. Accordingly, in the event a physician elects to communicate electronically with a patient, to any degree, about treatment, and that treatment becomes the subject of a medical malpractice claim or lawsuit, then there is an underlying duty to preserve such electronic communications that may have relevance to the litigation. Even more problematic is that this duty to preserve electronic data arises at the time a physician has some “notice” of the potential for a malpractice claim to be filed. Under those circumstances, the physician would have a duty to place a “legal hold” on any electronic data that was created in connection with the patient’s care and treatment. For example, if test results were communicated electronically to a patient, then these e-mails documenting the lab results being sent to the patient would need to be preserved. If the electronic communication was sent by other staff members in a physician’s office, then the physician or office administrator, under existing rules, should notify all such involved parties of the responsibility to preserve the electronic data, known as a “legal hold”.

In the extreme, in a situation in which the physician was unable to locate and produce electronic data upon which that physician relied for the appropriateness of the medical treatment at issue, then there could be evidentiary presumptions against the physician for failing to preserve the electronic data. There also are sanctions for mishandling discovery of electronic data which can be significant. These can involve monetary fines, and even adverse inferences in instructions to juries. Additionally, reconstruction or recovery of electronic data can be expensive and time-consuming.

Recommended?

Electronic medical records systems will continue to develop. The future is electronic medical records and the future is now. However, until these systems are developed and become more of a generally accepted manner of medical practice, it is recommended that electronic communication with patients be kept to a minimum or not employed, unless and until the physician or physician group has a complete system in place to store, save, back-up and search all electronic data related to patient communications. At the very least, the physician or practice manager should consult with information technology and support personnel to best manage this potential exposure.
 

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “ARRA”), the comprehensive economic stimulus package. Among its other provisions, the ARRA includes an extension of the right to elect COBRA coverage, a reduction in COBRA premiums for eligible participants, and new notice obligations for employers.

Reduction of COBRA Premium: In addition to the opportunity to elect COBRA coverage, the ARRA offers a reduction in COBRA premiums for assistance eligible individuals. Assistance eligible individuals can receive a 65% premium reduction subsidy for the cost of COBRA coverage after February 17, 2009 (the day the ARRA was signed). But the premium reduction ends upon the sooner of: the eligibility for other group coverage or Medicare; after 9 months of receiving the reduction; or when the maximum period of COBRA coverage ends, whichever occurs first. Individuals paying reduced COBRA premiums must also inform their plans if they become eligible for coverage under another group health plan or Medicare.

Assistance eligible individuals are those former employees (and members of their families) who were eligible for COBRA at anytime between September 1, 2008 and December 31, 2009, lost their job due to an involuntary termination, and who elect COBRA coverage. Assistance eligible individuals are required to pay only 35% percent of the COBRA premium. Under the ARRA, once the beneficiary pays his or her 35% of the COBRA premium, the COBRA premium is considered paid. The employer, insurer, or health plan then picks up the remaining 65% of the premium, but is allowed a tax credit against certain employment taxes. The credit can only be taken after the 35% premium has been paid. According to the IRS, if the credit claimed is greater than the tax due, the Secretary of the Treasury will directly reimburse the employer, insurer or plan for the excess. The premium reduction only applies to periods of coverage beginning on or after February 17, 2009.

Additional Notice Obligations: Finally, the ARRA requires employers or plan administrators to provide eligible employees and covered family members with notice regarding the special COBRA-election period on or before April 17, 2009. Notice must also be provided regarding the premium reduction for those who had a COBRA-qualifying event between September 1, 2008 and December 31, 2009. This notice must be sent regardless of whether COBRA coverage was elected.

The Employee Benefits Security Administration is working on guidance regarding the ARRA, and the IRS may be able to provide additional guidance. Also, model notices are expected to be issued.
 

A federal appeals court recently ruled that a lower district court erred in granting summary judgment to a hospital in a whistleblower action under the federal False Claims Act that was based on allegations that the hospital’s arrangement with an anesthesia physician group violated the Stark Law and the Federal Anti-kickback Act.

In United States ex rel. Kosenske v. Carlisle HMA, Inc., No. 07-4616 (3rd Cir. Jan. 21, 2009), the 3rd Circuit Court of Appeals found that a hospital failed to meet the personal services exception to the Stark Law because an earlier anesthesia services agreement between the parties did not cover pain management services provided by the anesthesiology practice as a hospital outpatient clinic. The court also found that the agreement did not reflect fair market value for compensation by the hospital to the anesthesiologists that included free office space, supplies, and support personnel.
 

The hospital and the anesthesia practice had entered into an exclusive anesthesia services agreement in 1992. This agreement provided that the hospital shall offer the anesthesiology practice the opportunity to provide exclusive anesthesiology and pain management services at any new location or facility that the hospital obtains, opens, or operates. In 1998, the hospital built a stand-alone facility containing an outpatient ambulatory surgery center and a pain management clinic (“Pain Clinic”). The court noted that the hospital did not charge the anesthesiology practice rent for the space and equipment, or a fee for the support personnel it provided to the practice when they performed pain management services at the Pain Clinic.

A significant aspect of the court of appeals findings is that the court found that the arrangement between the hospital and the anesthesiology practice created a financial relationship for purposes of the Stark Law. The court noted that the practice received numerous benefits as a result of its relationship with the hospital, including the exclusive right to provide all anesthesia and pain management services, and the receipt of office space, medical equipment and personnel. According to the court, these benefits constituted remuneration in-kind from the hospital to the practice. From the hospital’s perspective, the court noted that a physician performing pain management services in an outpatient facility is in a position to generate substantial business for a hospital through the ordering of tests or procedures at a hospital, lab, or other facility.

Another important aspect in this ruling is the court’s comments that “the Stark Law is based on the recognition that where one party is in a position to generate business for the other, negotiated agreements between such parties are often designed to disguise the payment of non-fair-market-value compensation.” The court’s comments were also based overall on a distinction it made between anesthesia services at the hospital and pain management services at a hospital-owned outpatient clinic.
 

The Office of Inspector General ("OIG") issued Advisory Opinion No. 08-22 on December 8, 2008 regarding a proposed arrangement by a non-profit organization to hire two physicians on a part-time basis to perform endoscopies. The part-time physicians would perform the endoscopies at the offices of the non-profit organization, which was formed to employ physicians.

Each of the physicians also have a separate medical practice, at another location, through which each physician will continue to provide and bill for professional medical services furnished to patients outside of the proposed part-time employment relationship. The non-profit organization certified that the physician part-time employees will be its bona fide 3employees within the meaning of 26 U.S.C. § 3121(d)(2) and that it would pay the physicians a salary based on the fair market value of the professional services that would be personally provided by each physician while employed by the organization.

Based on these certifications, the OIG concluded that the salaries paid to these physicians would not constitute prohibited remuneration under the federal anti-kickback statute and that the proposed part-time employment of these physicians satisfied the criteria of the statutory employment safe harbor to the federal anti-kickback statute in section 1128B(3)(B) and 42 C.F.R. § 1001.952(i).

A copy of this advisory opinion is posted on the OIG’s web site at:
http://oig.hhs.gov/fraud/docs/advisoryopinions/2008/AdvOpn08-22.pdf

On October 1, 2008, the Department of Health and Human Services, Office of Inspector General (OIG) released its 2009 Work Plan. The OIG’s Work Plan describes the initiatives and priorities of the OIG for the 2009 fiscal year. The OIG will address these initiatives through audits, investigations, inspections, and health care industry guidance documents, as well as enforcement action under federal, civil and criminal statutes. The following are some of the important 2009 OIG initiatives for hospitals, physicians, and other health care providers:

• Provider-Based Status for Inpatient and Outpatient Facilities: The OIG will determine the potential impact on both the Medicare program and its beneficiaries of hospitals improperly claiming provider-based status for inpatient and outpatient facilities.

• Hospital Ownership of Physician Practices: The OIG will determine whether hospitals have met the Federal requirements to obtain the provider-based designation and access the impact of the increased cost of Medicare as a result of reimbursement under the Hospital Outpatient Prospective Payment System for physician services and provider-based practices. The OIG will also determine the extent to which hospital-owned physician practices without provider-based designation were improperly received reimbursement under the Hospital Outpatient Prospective Payment System.
 

• Inpatient Rehabilitation Facility Payments: The OIG will determine the extent to which coding errors for claims that should have been paid as transfers have resulted in inpatient rehabilitation facilities submitted improper claims under the Medicare payment system for inpatient rehabilitation facilities.
 

• Critical Access Hospitals: The OIG will determine whether critical access hospitals have met the critical access hospital designation criteria in the Social Security Act and Medicare Conditions of Participation, and whether payments made to critical access hospitals were made in accordance with Medicare requirements.
 

• Medicare Secondary Payor: The OIG will access the effectiveness of current procedures in preventing inappropriate Medicare payments for beneficiaries with other insurance coverage. For example, the OIG will evaluate procedures for identifying and resolving credit balance situations, which occur when payments from Medicare and other insurers exceed the provider’s charges or the allowed amount.

• Reliability of Hospital-Reported Quality Measure Data: The OIG will determine whether hospitals have implemented sufficient controls to ensure that their quality measurement data are valid.
 

• Payments for Diagnostic X-rays in Hospital Emergency Departments: The OIG will determine the appropriateness of payments for diagnostic x-rays and interpretations paid by Medicare Part B for diagnostic x-rays performed in hospital emergency departments.
 

• Serious Medical Errors (“Never Events”): The OIG will review the incidences of and payments for serious medical errors, known as “Never Events,” in the Medicare population. The Tax Relief and Health Care Act of 2006 requires the OIG to conduct a study of Never Events, examining types of events and payments by any party; the extent that which the Medicare Program paid, denied payment, or recouped payment for services furnished in connection with such events; and the extent to which beneficiaries paid for such services.
 

• Financial Status of Hospitals in the New Orleans Area: The OIG will review the financial status of hospitals in the New Orleans area in the aftermath of Hurricane Katrina to access the needs of hospitals and options for policymakers as the area rebuilds its health care infrastructure.

The following are some significant areas for physicians:

• Place of Service Errors: The OIG will determine whether physicians properly coded the places of service on claims for services provided in ambulatory surgical centers and hospital outpatient departments, as compared to services provided in a physician’s office.
 

• Evaluation in Management Services During Global Surgery Periods: The OIG will determine whether industry practices related to the number of evaluation and management services provided during the global surgery period have changed since the global surgery fee concept was developed in 1992. Under the global surgery fee concept, physicians bill a single fee for all of their services usually associated with a surgical procedure and related E&M services provided during the global surgery period.
 

• Outpatient Physical Therapy Services Provided by Independent Therapists: The OIG will review outpatient physical therapy services provided by independent therapists to determine if they are in compliance with Medicare reimbursement regulations.
 

• Medicare Payments for Colonoscopy Services: The OIG will determine whether Medicare payments to physicians for colonoscopy services were properly supported, billed, and paid in accordance with Medicare requirements.
 

• Physicians Medicare Services Performed by Non-Physicians: The OIG will examine the qualifications of non-physician staff in physician offices that perform “incident to” services and access whether these qualifications are consistent with professionally recognized standards of care.
 

• Appropriateness of Medicare Payments for Polysomnography: The OIG will examine the appropriateness of Medicare payments for sleep studies. The OIG will also examine the factors contributing to the rise in Medicare payments for sleep studies and access provider compliance with Federal program requirements.
 

• Geographic Areas with a High Density of Independent Diagnostic Testing Facilities: The OIG will review services and billing patterns in geographic areas with high concentrations of independent diagnostic testing facilities. The IDTF is a facility that performs diagnostic procedures and is independent of a physician’s office or hospital.

• Patterns Related to High Utilization of Ultrasound Services: The OIG will review services and billing patterns in geographic areas with high utilization of ultrasound services paid by Medicare.
• Medicare Billings with Modifier GUI: The OIG will review the appropriateness of provider’s use of Modifier GUI on claims for services that are not covered by Medicare.

The following are some of the OIG investigative initiatives involving other types of providers:

• Medicare Payments for Continuous Positive Airway Pressure Devices: The OIG will review the appropriateness of Medicare Part B payments for continuous positive airway pressure (CPAP) devices.
 

• Medicare Payments for Chemotherapy Drug Administration Services: The OIG will review Medicare payments for chemotherapy drug administration services pursuant to the Social Security Act, § 1832, that occur without corresponding chemotherapy administration drug claims.
 

• Ambulatory Surgical Center Payment System: The OIG will examine changes to the revised ambulatory surgical center payment system and the rate-setting methodology used to calculate ASC payment rates.
 

• Physician Referrals for Home Health Agency Services: The OIG will review Medicare payments for home health claims to identify potential aberrant billing by referring physicians.
 

• Skilled Nursing Facility Consolidated Billing: The OIG will review Medicare Part B claims submitted by suppliers for items, supplies, or services provided to beneficiaries during Part A Medicare-Covered skilled nursing facility stays.

A copy of the OIG Work Plan can be downloaded here.

In May of this year, the United States Court of Appeals for the Fifth Circuit absolved Lakeview Regional Medical Center (“Lakeview”) of any liability, and reversed a damage award against it, in a lawsuit that had been brought against Lakeview and a physician group practice by Kadlec Medical Center, a hospital located in the state of Washington. Kadlec sued Lakeview and a physician practice for over $8 million in damages, on the grounds that Kadlec was forced to settle a malpractice lawsuit due to the negligence of an anesthesiologist who was impaired at the time of the malpractice. Kadlec’s claim was that Lakeview and the physician group practice knew of the physician’s impairment when he was on the medical staff of Lakeview, were asked about his performance before he was credentialed at Kadlec, and did not disclose the prior impairment and disciplinary action that had resulted.

Although a federal jury had found Lakeview 25% at fault for its failure to disclose the physician’s problems while on the medical staff due to his impairment, the Fifth Circuit reversed this finding, on the grounds that under Louisiana law, the hospital did not have a duty to disclose information about the physician. This was because the hospital had no special relationship or pecuniary interest in the transaction. The court made clear, however, that had the hospital decided to voluntarily disclose information even absent a legal duty, then its voluntary disclosure would have created a duty to disclose completely and honestly. Because the hospital did not incur the duty, it had no obligation to provide further information regarding the physician.

The import of this decision is that under Louisiana law there may be a duty to speak if one has a special relationship or a pecuniary interest in the transaction at issue. Even if there is no such special relationship or pecuniary interest, a party who voluntarily chooses to respond to an inquiry assumes a duty to respond accurately and completely.

The Kadlec decision should be read very carefully, as it does not appear to provide a “sword” to use against others under the theory that failure to voluntarily give negative information regarding a physician might result in liability. That is not the import of Kadlec. The import of Kadlec is that when asked, a party who has no duty to speak need not speak at all. If the party has a duty to speak, or if the party voluntarily incurs a duty to speak, then the party must do so in such a way as to not mislead, misrepresent, or give less than all pertinent information. This is all that the Kadlec decision stands for.

The Fifth Circuit decision is Kadlec v. Lakeview Anesthesia Associates, 527 F.3d 412 (5th Cir. 2008).
 

In a report issued September 17, 2008, the GAO commented that the Department of Health and Human Services (HHS) has made substantial strides in devising a national plan for protecting the privacy of patients’ electronic personal health information, but that HHS still needs to do more to ensure key privacy principles are fully addressed. The GAO’s remarks were contained in a report issued to the U.S. Senate Committee on Homeland Security and Governmental Affairs of a follow-up study by the GAO regarding the Office of the National Coordinator of Health IT’s efforts to insure the privacy of electronic personal health information exchange within a nationwide health information network.

The GAO noted that the HHS Office of the National Coordinator for Health IT has continued to develop and implement health IT initiatives related to nationwide health information exchange, which are intended to address key privacy principles and challenges. The following examples of initiatives by the Office of the National Coordinator for Health IT were cited by the GAO:

• The Healthcare Information Technology Standards Panel defined standards for implementing security features and systems that process personal health information.

• The Certification Commission for Healthcare Information Technology defined certification criteria that include privacy protections for both outpatient and inpatient electronic health records.

• State-level initiatives (such as the Health Information Security and Privacy Collaboration and the State Alliance for e-Health) have convened stakeholders to identify and propose solutions for addressing challenges faced by health information exchange organizations and protecting the privacy of electronic health information.

The GAO concluded that while the above initiatives are significant to addressing privacy issues and challenges, they fall short of fully implementing the GAO’s previous recommendations. The GAO commented that HHS specifically had not defined, as part of its approach, a process for ensuring that all privacy principles and challenges will be fully and adequately addressed. A copy of this report, GAO-08-1138, is available on the GAO’s web site at www.gao.gov.
 

In a recent case, the Fifth Circuit emphasized the legislative purpose in the Health Care Quality Improvement Act (HCQIA) to improve the quality of health care by protecting physicians who participate in peer review actions, finding they were entitled to immunity from monetary damages.

In Poliner v. Texas Health Systems, -- F.3d -- (5th Cir. 2008), 2008 WL 2815533, an interventional cardiologist sued Presbyterian Hospital and several physicians for damages related to a restriction of his privileges during a peer review investigation. At trial, the jury found in favor of Dr. Poliner on various claims and awarded nearly $90 million in defamation damages and $110 million in punitive damages. The district court reduced the damages to $33 million, including prejudgment interest.
 

At issue were two peer review actions: a temporary abeyance of privileges and a five month suspension of privileges. Dr. Poliner’s privileges were temporarily restricted for fewer than 29 days to investigate concerns about his handling of several cases. Because several cases raised concerns and criticisms, Dr. Poliner agreed to an abeyance or temporary restriction of his cardiac catheterization lab privileges to allow for an investigation as provided by the Medical Staff Bylaws. He was told that his privileges would be suspended if he did not agree to the abeyance. He later agreed to an extension of the abeyance. An ad hoc committee of cardiologists reviewed 44 of Dr. Poliner’s cases and concluded that, in over half of the cases, Dr. Poliner rendered substandard care. The investigation led to a five month suspension of Dr. Poliner’s cardiac catheterization lab privileges and echocardiography privileges.

The Fifth Circuit reviewed the requirements for immunity under HCQIA. A professional review action must be taken: 1) in the reasonable belief that the action was in furtherance of quality health care; 2) after a reasonable effort to obtain the facts of the matter; 3) after adequate notice and hearing procedures are afforded to the physician involved, or after other procedures as are fair under the circumstances; and 4) in the reasonable belief that the action was warranted by the facts known after such reasonable effort the obtain the facts and after meeting the adequate notice and hearing or other fair procedural requirements.

The Fifth Circuit found both peer review actions met the first requirement—the defendants reasonably believed the action was in furtherance of quality health care. The court noted that HCQIA did not require actual improvement of the quality of health care and did not require that the conclusions reached by the reviewers actually be correct. Nor was the good faith or bad faith of the reviewers relevant. The requirement was met if the reviewers could reasonably conclude, based on the information available to them at the time, that the peer review action would restrict incompetent behavior or would protect patients. Because the ad hoc committee of cardiologists reviewed 44 of Dr. Poliner’s cases and concluded he gave substandard care in more than half the cases, the peer review committee had an objectively reasonable belief that restricting Dr. Poliner’s cath lab privileges during an investigation would further quality health.

As to the second requirement for immunity under HCQIA, the appellate court found the defendants made a reasonable effort to obtain the facts. The cases at issue were reviewed by cardiologists, and several physicians also involved in some of the cases were interviewed, as was Dr. Poliner. The court found nothing to suggest the information obtained was so flawed or deficient as to render the defendants’ reliance on the information unreasonable. Although Dr. Poliner contended there was insufficient information to suggest he posed a present danger to patients, as required by the Medical Staff bylaws, the court noted HCQIA required a reasonable effort to obtain the facts—not a perfect effort. The court also stated that HCQIA immunity was not contingent upon or coextensive with compliance with the by laws. Physicians could still seek injunctive or declaratory relief where the bylaws were violated, but they would not be entitled to monetary damages under HCQIA on that basis.

The appellate court also found the defendants satisfied the third requirement for immunity under HCQIA--the adequate notice and hearing requirements. The court found the defendants imposed the restrictions on Dr. Poliner’s privileges after procedures that were fair to him under the circumstances presented, considering the potential danger to patients. Finally, the appellate court concluded the peer review actions were taken in the reasonable belief that the actions were warranted, based on the facts known after a reasonable effort to obtain those facts.

The protection of immunity from monetary damages afforded when HCQIA requirements are met should serve to reassure physicians involved in peer review actions of adequate protection when they participate in this important process.
 

In the September 20, 2008 issue of the Louisiana Register, the Louisiana State Board of Medical Examiners amending the rules governing dispensation of medications. The amended rules now forbid dispensing physicians from dispensing any controlled substance or drug of concern, unless the physician practices at a governmental facility or a licensed abuse or addiction treatment facility, or is engaged in a regulated clinical research project or investigational study.

The Office of Inspector General issued Advisory Opinion No. 08-10 on August 19, 2008 regarding a proposal for a physician group practice to lease a facility owned by the practice on a part-time basis to other physician groups for the groups to provide certain radiation therapy treatments to their patients. The physician group practice that owns the facility had requested this advisory opinion from the OIG on whether the OIG considers the proposed part-time (i.e., block) leases of the facility to other physician groups would generate prohibited remuneration under the Federal anti-kickback statute. 

In exchange for the space, equipment and services, the urologist groups would pay the physician group owner of the facility space rent, equipment rent, personnel expenses, and communication and administrative expenses. Compensation under the leases would be for fixed amounts set in advance and would not vary with the use of the premises, equipment or services. The physician group owner of the facility had certified to the OIG that the leases would be at fair market value pursuant to a fair market value study prepared by an independent third party. 

Currently, the physician group owner of the facility bills the technical and professional components of IMRT services it provides to Medicare beneficiaries under its billing number. Under the proposed block lease arrangement, the professional and technical components of the IMRT would be billed to Medicare using billing numbers assigned to the urologist groups. The urologist groups would pay the amounts owed under the lease agreements to the physician group owner of the facility, regardless of the number of patients they referred to the facility and regardless of whether the urologist group collected fees for the procedure from Medicare or other payors. 

In analyzing the proposed block lease agreements under the Federal anti-kickback statute, the OIG initially commented that the series of agreements that make up the proposed block lease arrangement are in effect a contractual joint venture between the physician group owner of the facility and the urologist groups. The OIG reiterated its concerns with contractual joint venture arrangements that were described in the OIG Special Advisory Bulletin on contractual joint ventures issued on April 30, 2003. 

The OIG commented that the proposed block lease arrangement would have the same characteristics of the contractual joint venture described in the Special Advisory Bulletin. In the Special Advisory Bulletin, the OIG described a health care provider that contracted out substantially the entire operation of a line of business to a potential competitor in return for a the profits of the business as remuneration for the competitor’s federal program referrals. 

Under the proposed block lease arrangement, the OIG commented that the urologist groups would be expanding into a related line of business, IMRT, which is dependent on referrals from the urologist groups. The urologist groups would not actually participate in performing the IMRT, but would contract out substantially all IMRT operations, including the professional services necessary to provide the IMRT.   An important comment by the OIG was that the urologist group would effectively commit little in the way of financial, capital, or human resources to the IMRT and, accordingly, would assume very little business risk. However, the urologist groups would be in a position to insure the success of the business, not only by referring to the facility for IMRT, but by the choice of IMRT over other available therapies for prostate cancer. 

The OIG also described the following elements of the proposed block lease arrangement that were also present in the suspect contractual joint venture described by the OIG in the Special Advisory Bulletin:

               (1)           The physician group owner of the facility is an established provider of the same services that a urologist group would provide under the proposed block lease arrangements;

               (2)           A urologist group would use the premises, equipment and staff of the physician group practice owner of the facility to provide the same services, IMRT, to its own patient base;

               (3)           The aggregate income to the urologist groups under the proposed arrangement would vary with referrals from the urologist groups to the facility;

               (4)           The physician group owner of the facility (and its radiologists) and the urologist groups would share in the economic benefit of the IMRT.

Based on the aspects of the proposed block lease arrangement, the OIG concluded that they were unable to exclude the possibility that the parties’ contractual relationship is designed to permit the physician group practice to do indirectly what it cannot do directly, which is to pay the urologist groups a share of the profits from the IMRT referrals. The OIG further commented that if the intent of the proposed block lease arrangement were to give the urologist groups remuneration through the IMRT to induce referrals to the physician group owner of the facility, the anti-kickback statute would be violated. 

In summary, this advisory opinion is an example of the OIG concluding that an arrangement may generate illegal remuneration in violation of the anti-kickback statute even though all of the agreements (i.e., lease agreements) that make up the arrangement each individually meet a safe harbor to the anti-kickback statute. The illegal remuneration, in part, in this proposed arrangement is the opportunity to generate a fee and a profit that the physician group owner of the facility would be providing to each of the urologist groups under the proposed block lease arrangements.

On June 10, 2008, Michael O. Leavitt, Secretary of the Department of Health and Human Services (DHHS) announced that Louisiana was one of twelve (12) communities chosen to participate in an Electronic Health Records Medicare Demonstration Project. The project will last five (5) years and will provide physicians with financial incentives to use certified electronic health records (EHRs). Incentive payments for the entire 5-year period may reach $58,000 per physician and $290,000 per practice.  

For more information on the EHR Medicare Demonstration Project, refer to the DHHS Press Release found at

http://www.hhs.gov/news/press/2008pres/06/20080610a.html

In Advisory Opinion No. 08-05, issued February 15, 2008, the OIG concluded that an arrangement whereby a pharmaceutical company placed electronic kiosks in physician offices would not generate prohibited remuneration under the anti-kickback statute. Further, the OIG opined that the arrangement would not violate the federal prohibition against giving anything of value to a Medicare or Medicaid beneficiary that is likely to influence the beneficiary’s selection of a particular provider.

The proposed electronic questionnaires would not mention the manufacturer’s drug products or contain any advertisements or incentives for using the kiosks. Patient names would not be entered into the system, and the questionnaires would contain a privacy statement. The questionnaire would not mention any particular drugs, but would carry a small image of the requesting company’s logo and a copyright notice. Further, participating physicians would not be paid, nor would they pay the requesting company, for hosting the kiosks. The physicians whose waiting rooms would contain the kiosks need not have prescribed any of the requesting company’s drugs. Additionally, participating physicians would not be required to prescribe any such drugs. Finally, sales representatives of the requesting company would not have access to the database created by patient participation in the questionnaire.

The OIG opined that this arrangement would not generate prohibited remuneration under the federal anti-kickback statute, nor would it violate the federal statute prohibiting the giving of anything of value to a Medicare or Medicaid beneficiary to induce the person to use a particular provider of items or services for which the government pays. According to the OIG, the arrangement would not provide prohibited remuneration to the physicians whose waiting rooms would house the kiosks. The OIG found it unlikely that the questionnaires would save any appreciable amount of physician or staff time, and it did not believe that the kiosks would enhance the attractiveness of the participating physicians’ offices such that it would influence the selection of a particular physician by government beneficiary patients.  The OIG also opined that the kiosks would not have remunerative value to the patients because no incentives for using the kiosks would be offered. Additionally, the kiosks, while electronic, would be analogous to the paper brochures that are placed in physician offices at present. However, the OIG mentioned that it might have reached a different result if the kiosks were used to communicate any form of offer of remuneration to patients, such as coupons, gifts or services.

The OIG also noted with approval that the proposed arrangement included safeguards, such as a patient privacy protection, the fact that the names of patients would not be entered into the system, and that sales representatives would not have access to the database created by the questionnaires.

The Louisiana Supreme Court issued its new opinion after a rehearing in Borel v. Young, again affirming the Third Circuit’s ruling and dismissing the lawsuit against late-added physician defendants, but on different grounds. The supreme court’s decision on rehearing solved an apparent dilemma for the plaintiffs created by the original opinion: the plaintiffs were precluded from filing suit until after the medical review panel had rendered an opinion but, in any case, were required to file suit within three years of the alleged medical malpractice. Since the three year period could not be suspended during the pendency of the medical review panel, the plaintiffs faced the possibility that their claims would be barred by the three-year peremptive period before the panel convened to consider their claims.

In the original opinion, the supreme court held that La. R. S. 9:5628 set a one-year prescriptive period and a three-year peremptive period for bringing a medical malpractice claim.    The supreme court held that a claim for medical malpractice was extinguished if brought against a health care provider more than three years after the date of alleged medical malpractice. The three year peremptive period could not be suspended, interrupted, or revoked. On rehearing, the supreme court reaffirmed its prior decision, holding that both periods were prescriptive, subject to suspension, interruption, or revocation.  

Prescription is interrupted against when a lawsuit is filed. However, prescription may be suspended for various reasons. For example, prescription is suspended when a medical review panel request is timely filed and remains suspended for 90 days after notification by certified mail of the medical review panel opinion. Also, prescription may be suspended under the doctrine of contra non valentum, where a plaintiff did not know and could not have reasonably discovered the cause of action. This “discovery rule” allows a plaintiff to file a claim within one year of the date of discovery of the negligent act or omission giving rise to a claim, even if that is more than one year from the date of the alleged negligence. The supreme court, on rehearing, also interpreted La. R. S. 9:5628 as making the discovery rule exception to prescription inapplicable after three years from the date of alleged medical malpractice, thus setting a maximum three year period for a medical malpractice claim to be filed.

In explaining its decision on rehearing, the supreme court stated the filing of an initial request for a medical review panel suspended the running of prescription against all alleged joint or solidary defendants, until 90 days after the notification as required of the medical review panel opinion. This suspension protected plaintiffs who were required to submit their claims to a panel before filing suit. Once the suspension ended, the plaintiffs had any remaining time left in the prescriptive period to file suit against the health care provider defendants named in the request for the medical review panel. The supreme court confirmed that the more specific provisions of the Louisiana Medical Malpractice Act, rather than the general Civil Code provisions, applied regarding the interruption of prescription against jointly liable defendants. Thus, in Borel, the claim against the defendant physicians were prescribed, even though suit was timely filed against another defendant health care provider, because the physicians were not added to the lawsuit for more than three years after the alleged medical malpractice.  Ordinarily, prescription would be interrupted as to all defendants who are jointly or solidarily liable, when a lawsuit is filed against any one of them.

The Borel opinion, on rehearing, seems to have eliminated the bright line rule created in the original opinion that a lawsuit alleging medical malpractice, under all circumstances, must be filed no later than three years after the date of alleged malpractice. However, the opinion on rehearing affirms that the special rules set forth in the Medical Malpractice Act operate to the exclusion of the more general rules related to interruption of prescription and also affirms that the discovery rule, which would otherwise suspend the prescriptive period, ceases to be applicable after three years from the date of the alleged malpractice. Thus, the ultimate result reached is the same as in the original opinion. 

The Centers for Medicare and Medicaid Services (“CMS”) recently issued on June 8, 2008 an advisory opinion in which CMS addressed whether a proposed physician ownership in a diagnostic center complies with the rural provider exception to the Stark Law. CMS concluded that the facts of the proposed physician ownership in the diagnostic center would satisfy the rural provider exception, but CMS also cautioned that meeting the elements of the rural provider exception is an ongoing requirement and must be continuously satisfied during the period of a physician’s ownership interest.

Several physicians who are, or intend to become owners of a diagnostic center (“Diagnostic Center”) which provides various services, including physician consultations and ancillary services such as clinical laboratory and diagnostic radiology services, request this advisory opinion from CMS. Many of the physician owners of the Diagnostic Center have made, and will continue to make, referrals of Medicare patients to the Center for such services.

The physicians certified that all designated health services performed at the Center since its inception have been, and will continue to be, furnished outside a Metropolitan Statistical Area (MSA). Additionally, the requestors certified that, on an annual basis, at least 75% of the designated health services provided at the Diagnostic Center have been, and will continue to be, furnished to individuals residing outside of a MSA.

CMS noted that the rural provider exception applies only to ownership or investment interests in entities that provide designated health services and not to compensation arrangements with such entities. CMS concluded that physicians' ownership in the Diagnostic Center satisfied the rural provider exception of the Stark Law. It is important to note CMS’ emphasis on the fact that the two primary elements of the rural provider exception are ongoing requirements. CMS further noted that if the Diagnostic Center ever fails in the future to maintain compliance with either or both requirements, the rural provider exception would no longer apply.

On April 16, 2008, the Louisiana Third Circuit Court of Appeal upheld a trial judge’s application of a 35% minority discount in determining the fair market value of the interest of a partner withdrawing from a limited liability partnership (LLP). It appears that the Supreme Court has been asked to consider this case, but has not yet made a determination of whether to do so. Accordingly, this decision may or may not be final, and although it did not involve a health care entity, it is instructive for health law purposes.

In the Cannon case, the primary asset was land used in the sale and harvest of timber. One of the three partners wished to withdraw from the LLP, while the other two wished to continue the business. The parties could not agree on a value of the withdrawing partner’s interest. In their legal proceeding, the appellate court cited to Supreme Court case law for deciding that whether to apply a minority interest is within the trial judge’s discretion and should not be disturbed on appeal unless the discretion was abused. This is a deferential standard. The Cannon court also distinguished the facts presented to it from a case of the withdrawal of a partner from a professional firm, where value of his/her interest may consist of accounts receivable and income the withdrawing partner “was able to generate through his skill and personality.” In such a situation, the value of the withdrawer’s interest is “tied to the withdrawing partner’s identity” and would be “more separable from the assets created by the remaining partners.”

Accordingly, in a health care provider case, and in particular in the case of a potential withdrawing physician or other person whose identity could be said to be tied to the accounts receivable and income generated through his/her skill and reputation, the parties would be well served to spell out in their partnership agreement exactly how the fair market value of a withdrawing partner’s (or, for example, LLC member’s) or corporate shareholder’s interest will be determined.

On May 30, 2008, the Centers for Medicare & Medicaid Services (CMS) issued an Advisory Opinion regarding a proposed arrangement under which a hospital system would license a custom software interface for use by the physicians on its medical staffs. The specific question addressed by CMS was whether the provision of the custom software interface by the hospital system to its medical staff physicians would create a compensation arrangement for purposes of implicating the self-referral prohibition of the Stark Law.

Two important aspects of the proposed arrangement are the limited functions and use of the software interface and the costs paid by the hospital system to develop and provide the software to the physicians.

Under the proposed arrangement, the hospital system would pay an IT vendor to develop a software interface customized to a medical staff physician’s existing electronic health record (EHR) software. The hospital system would also purchase licenses to authorize physician practices to use the interface software during the term of the hospital system’s license agreement. A physician practice would only be able to use the software interface to order or communicate the results of tests and procedures furnished by the hospital system and the software could not be used for any purpose other than the ordering or communicating of test results furnished by the hospital system.
CMS noted that in the Stark Law, a “compensation arrangement” is defined as “any arrangement involving any remuneration between a physician (or an immediate family member of such physician) and an entity.” However, this definition of a “compensation arrangement” also provides that certain types of remuneration would not crate a compensation arrangement, which includes “the provision of items, devices, or supplies that are used solely … to order or communicate the results of tests or procedures for such entity.”

CMS concluded in the Advisory Opinion that the license to use the software would not constitute a compensation arrangement under the Stark Law because of the limited use of the interface and the inability of the medical staff physicians to modify the interface functionality or sell, transfer, or assign the interface software. This conclusion was based on the exceptions noted above to the types of remuneration that create a compensation arrangement.

Hospitals should also note that CMS did not analyze the applicability of any Stark Law exception to the proposed arrangement of providing the hospital providing the software interface to physicians, but only, whether the provision met the definition of a “compensation arrangement.”

The Louisiana Supreme Court recently held in Borel v. Young that La. R. S. 9:5826(A) provided for both a one year prescriptive period and a three year peremptive period to file a claim for medical malpractice. The decision in Borel made it clear that a plaintiff had to file suit against a health care provider no later than three years from the date of the alleged act, omission, or negligence giving rise to the claim. Otherwise, the plaintiff’s action would be extinguished, and all rights to pursue the action would be lost. This ruling was favorable to health care providers, as it protected them from stale claims being brought years after the date of the alleged malpractice. However, the Louisiana Supreme Court granted a rehearing of the Borel v. Young case on May 21, and it remains to be seen whether the current ruling will stand or whether it will be modified or vacated.

La. R. S. 9:5826(A) governs the time limitations in which a party may bring a medical malpractice action against a health care provider. To understand the significance of the Borel ruling, one must understand the crucial difference between a prescriptive period and a peremptive period. A prescriptive period designates the deadline by which an action must be brought. However, prescriptive periods can be suspended, interrupted, or renounced by a variety of occurrences. Peremption is defined as a period of time fixed by law for the existence of a right. Unlike a prescriptive period, a peremptive period cannot be renounced, interrupted or suspended. Therefore, the right to bring an action against a health care provider would cease to exist if not timely exercised within three years after the date of the alleged act, omission or negligence.

On September 26, 2007, the Louisiana Second Circuit Court of Appeal upheld the judgment of the First Judicial District Court in Caddo Parish in finding that the noncompetition and nonsolicitation clauses in a contract between a urology clinic and a professional medical corporation ("PMC") were enforceable as to the physician who had formed the PMC. Regional Urology, L.L.C., et al v. David T. Price, M.D. and David T. Price, M.D., A Professional Medical Corporation, 42-789 (La.App. 2^{ndrehearing denied 10/18/07.}  Cir. 9/26/07), 966 So.2d 1087,

The clauses at issue were part of an independent contractor agreement between David Price, M.D., A Professional Medical Corporation (PMC) and Regional Urology, L.L.C. (Regional Urology). Dr. Price was not a named party to the contract in his individual capacity. The contract prevented competition and solicitation by David Price, M.D., PMC for a period of 2 years in Caddo and Bossier Parishes. In addition, the contract provided that it would "apply to any physician who is a Member, any corporation which is Member or any physician's L.L.C. which is a Member of Regional Urology, L.L.C."

The Second Circuit Court of Appeal reasoned that although noncompetition agreements are strongly disfavored in Louisiana, they are allowed when the agreement prohibits the person from competing or soliciting within a specified area for a period of up to 2 years. La. R.S. 23:921(C). The Court also disagreed with Dr. Price's position that he was not personally bound by the provisions, which prevented competition by both the physicians and their physician organizations. The Court recognized that a separate identity for physician organizations is appropriate for taxation, business management and liability protection, but saw no reason to maintain the technical distinction of a separate identity for noncompetition agreements. Thus, the Court found that the noncompetition and nonsolicitation clauses in the contract were enforceable as to Dr. Price, in both his individual and incorporated capacities.

While a majority of Judges ruled to enforce the noncompetition agreement, a dissenting Judge aptly pointed out that the majority decision did not take into account the importance of a person's right to choose his own physician. Access to medical care is an important public policy consideration that is threatened by noncompetition agreements involving physicians. The dissent compared the profession of medicine to that of law and identified both as involving consensual, fiduciary, and trusting relationships between the specialists and clients. According to the dissent, noncompetition agreements with physicians have a negative impact on physician-patient relationships, and, thus, should not be enforced.

On December 4, 2007, Phase III of the Stark Law’s regulations became effective. They include some significant substantive changes, one of which is a change to the professional courtesy exception. This change is likely to have a significant effect on many designated health service (“DHS”) providers, as those entities are defined by the Stark Law. DHS providers that have a professional courtesy policy would be well-served to review it and take appropriate action in light of the new regulations.

In Phase II of the regulations, a professional courtesy exception was created. It permitted a DHS entity to provide free or discounted health care items or services to physicians and their family members if all of the following conditions were met: (1) the courtesy was offered to all physicians on the entity’s bona fide medical staff or in the entity’s local community without regard to the volume or value of referrals or other business generated between the parties; (2) the items and services were of a type routinely provided by the entity; (3) the entity’s professional courtesy policy was in writing and approved in advance by the entity’s governing body; (4) the courtesy was not offered to any federal health program beneficiary unless there was a good faith showing of financial need; (5) if the courtesy included a full or partial waiver of any coinsurance obligation, the entity was to notify the insurer in writing; and (6) the arrangement did not violate the federal Anti-Kickback Statute. Some DHS entities have used this exception to provide professional courtesy to physicians and their family members in the entity’s local community.

Unfortunately, textual changes to the professional courtesy exception and specific, express comments in the discussion of the Phase III regulations have significantly narrowed the exception.   CMS has virtually eliminated all DHS entities, other than hospitals, from being able to use the professional courtesy exception.   The textual change has limited the exception to only those DHS entities that have a bona fide medical staff. In other words, only those entities with a bona fide medical staff may extend professional courtesy to members of its bona fide medical staff or to physician members of the DHS entity’s local community. The change expressly provides that DHS entities that do not have a bona fide medical staff may not rely on the professional courtesy exception. Per the Phase III commentary, CMS apparently considers only hospitals and physician practices/group practices as entities that have a bona fide medical staff. (CMS also has eliminated condition (6) listed above, although this change is not the focus of this article.)