Health Law Ticker

Significant New Law Expands Obligation to Share Peer Review Information and Creates Uncertainty

Mary Powers Antoine — Fri, 27 Jan 2012 11:08:08 -0800

The enactment of Business and Professions Code section 809.08 (AB 655, 2011) was certainly one of the most significant developments in peer review law in the past year. This new law imposes an affirmative obligation to share peer review information between peer review bodies when certain conditions are met. Prior to 2012, sharing of information was completely discretionary; and peer review bodies could refuse to do so when faced with concerns regarding confidentiality and liability exposure. Now, beginning January 1, 2012, a peer review body must respond to the request of another peer review body and produce relevant peer review information about a physician who was subject to peer review for a medical disciplinary cause or reason (when the conditions described below are met).

But when is this obligation triggered? After a formal action has been taken? Following initiation of a formal investigation? Or somewhere in between? Does “medical disciplinary cause or reason” imply that conclusions have been reached? The statutory language is ambiguous and creates uncertainty as to when the disclosure obligation is triggered. A reasonable interpretation is that the obligation arises after a formal disciplinary action which is reportable under Business and Professions Code section 805 has been imposed either summarily or following the physician’s exhaustion or waiver of hearing and appeal rights. This interpretation serves the purpose of the law by facilitating disclosure while at the same time being fair to the physician.

The obligation to disclose peer review information arises if the requesting peer review body does the following:

Pays reasonable processing fees;
Signs a mutually agreeable information sharing agreement (upon request);
Indemnifies the responding peer review body against improper release/disclosure of information;
Maintains the confidentiality of the information received;
Agrees to use the information only for peer review purposes; and
Provides a release signed by the physician which covers the peer review body, its members, and the health care entity (the physician can be required to sign the release).

If these conditions are satisfied, the responding peer review body has the option to provide either (1) a written summary of relevant peer review information or (2) the relevant peer review record. This record and information includes allegations and findings, explanatory or exculpatory information submitted by the physician, any conclusions made, any actions taken, and the reasons for those actions. Importantly, the information shall not identify any person except the physician. In order to comply with the confidentiality obligations imposed by this new statute, every page of any document released must first be redacted to remove the identity of any person except the involved physician. Medical records and other protected health information should not be disclosed.

The new law does provide certain protections to the responding peer review body as well as the physician. The responding peer review body acting in good faith is given protection against civil and criminal liability for providing information to the requesting peer review body. The requesting peer review body must make this peer review information available to the physician in the course of a fair hearing being conducted pursuant to Business and Professions Code section 809.2.

New Law Requires Healthcare Employers to Adopt Measures for Safe Handling of Patients

Nossaman — Wed, 28 Dec 2011 16:47:11 -0800

The post below was authored by Nossaman attorney, George Joseph, who specializes in complex business litigation with emphasis in healthcare and employment law.

Effective January 1, 2012, California Labor Code Section 6403.5 will require that employers operating healthcare facilities adopt various measures designed to reduce injuries incurred by employees who move patients. Requirements include a safe patient handling policy, increased use of powered patient lifting devices, assignment of employees to "lift teams," and appropriate employee training. Employers are also prohibited from retaliating against employees who raise concerns about safe patient handling. A summary of the key provisions of this new law follows.

Background

California Occupational Safety and Health Act of 1973 created the Division of Occupational Safety and Health ("Cal/OSHA"), which "protects workers and the public from safety hazards."
Cal/OSHA currently requires that virtually every employer in California create and implement an Injury and Illness Prevention Program ("IIPP") to improve workplace safety and health. Requirements vary depending on industry.
Injuries to healthcare workers from patient handling (lifting) have been a persistent problem – 36,130 occupational musculoskeletal disorder cases among healthcare workers in 2008.

The Legislation

On October 7, 2011, Gov. Brown signed into law AB 1136, "The Hospital Patient and Healthcare Worker Injury Protection Act," which adds Labor Code Section 6403.5. This new law becomes effective January 1, 2012.
LC 6403.5 imposes new requirements on employers operating healthcare facilities regarding the safe handling of patients.

The New Requirements

An employer that operates a healthcare facility must include within its IIPP a "patient protection and healthcare worker back and musculoskeletal injury prevention plan," which includes a "safe patient handling policy" for all patient care units.
An employer must provide lift teams or other support staff trained in safe lifting techniques in each general acute care hospital.
An employer must provide training to healthcare workers that includes:
The appropriate use of lifting devices and equipment;
The five areas of body exposure: vertical, lateral, bariatric, repositioning, and ambulation;
The use of lifting devices to handle patient safely; and
The registered nurse is responsible for observation and direction of patient lifts and mobilization, and shall participate as necessary.

Key Definitions

"Safe Patient Handling Policy:" Policy requiring replacement of manual lifting and transferring of patients with powered patient transferring devices, lifting devices and lift teams, as appropriate given patient condition, professional judgment and clinical assessment.
"Healthcare Worker:" Lift team member or other staff responsible for assisting in lifting patients. Must be specifically trained to handle patient lifts, repositioning and transfers, using patient transfer, repositioning and lifting devices as appropriate.
"Lift Team:" Hospital employees specifically trained to handle patient lifts, repositioning and transfers, using patient transfer, repositioning and lifting devices as appropriate. May perform other duties as well. Need not hire new staff for lift team unless patient care assignments are compromised.
Since definitions of "healthcare worker" and "lift team" are essentially the same, the best practice is most likely to train all employees who may be involved in moving patients, and designate certain employees as lift team members.

Enforcement and Employee Protection

An Employer may not discipline an employee who refuses to lift, reposition or transfer a patient due to concerns about patient or worker safety or the lack of trained lift team personnel or equipment.
Willful or repeated violations are crimes, and may result in significant penalties under Labor Code Section 6429.

Advice for Employers

Adopt patient protection and healthcare worker back and musculoskeletal injury prevention plan by January 1, 2012.
Ensure that appropriate employees receive the necessary training.
Monitor compliance with the plan.
Be careful about disciplining employees who decline to handle patients due to safety concerns.

How Nossaman Can Help

Nossaman attorneys are available to assist with any questions you may have about this new legislation, including assisting in preparing the required documentation and training.

9th Circuit Applies Functional Test to Who May Be Sued Under ERISA

Nossaman — Thu, 18 Aug 2011 16:20:52 -0800

The below blog post was authored by Nossman ERISA and Employee Benefits attorney, Harley Bjelland:

CYR v. Reliance Standard Life Insurance Company, et al., decided June 22, 2011 by the Ninth Circuit Court of Appeals makes it clear that who may be a defendant in an action for benefits under an ERISA plan will depend upon the status of the person being sued, not whether the person is designated as the Plan, its fiduciaries or as the Plan Administrator.

Laura Cyr (“Cyr”) was an executive with Channel Technologies, Inc. (“CTI”) and was covered by a disability benefits plan (the “Plan”) that was insured by Reliance Standard Life Insurance Company (“Reliance”). CTI was the Plan Administrator of the Plan, but Reliance had the absolute authority and control over what benefits were paid and to whom they were paid.

Cyr was terminated by CTI and filed a claim for disability under the Plan based upon a back condition. Reliance processed the claim and paid Cyr disability benefits based upon her $85,000 per year salary. A year later, Cyr filed an action against CTI claiming gender discrimination based upon unequal pay. CTI and Cyr settled the action and enterred into a settlement where Cyr’s salary was retroactively adjusted to $155,000, effective one week before she was terminated by CTI.

Based upon the settlement, Cyr sought benefits from the Plan based upon the $155,000 salary. Reliance refused to provide the higher benefit and Cyr brought the current action to enforce the higher benefit.

Reliance claimed that only the Plan and CTI, as Plan Administrator, could be sued for benefit claims under Section 1132(a)(1)(B) of ERISA. Section 1132(a)(1)(B) provides that a participant may file a civil action to “recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.”

The Ninth Circuit made it clear that Section 1132(a)(1)(B) has no limitation on who may be sued. CTI and the Plan were both sued as appropriate defendants, but neither one of them had any authority or control over the benefits paid under the Plan. Reliance alone possessed that power and the Court indicated that Reliance was “a logical defendant for an action by Cyr to recover benefits due her under the terms of the plan and to enforce her rights under the terms of the plan.”

The Cyr decision is consistent with the long line of cases that provide responsibility when one has discretionary authority or control over some aspect of an ERISA plan. We note, however, that Cyr is a welfare benefit plan case. Where persons outside the employer have responsibility for oversight and decision making regarding benefits the Ninth Circuit will permit actions against that person under ERISA Section 1132(a)(1)(B). At least in the Ninth Circuit, plaintiffs may now be able to allege causes of action against insurers and possibly other persons that serve in a decision making capacity, even if those persons are not employees of the plan sponsor.

Supreme Court Reaffirms That Summary Plan Documents Do Not Create Benefit Rights Different From Formal Plan Terms

Nossaman — Thu, 18 Aug 2011 15:28:41 -0800

The below blog post was authored by Nossman ERISA and Employee Benefits attorney, Harley Bjelland:

Some pundits are calling CIGNA Corp. v. Amara, et al., decided May 16, 2011 by the United States Supreme Court, a very important case changing the landscape of employee benefits litigation. It has been described as eliminating the requirement that employees prove detrimental reliance on miscommunications about benefit plan terms in order to obtain relief. As a benefits expert, I read the case differently.

A common theme in many employee benefit cases is the existence of a wrong without a remedy. These cases often include circumstance where the plan document provides for a specific benefit, but the summary plan description or some other communication provided by the employer ("Employer Communication") provides for another. Does the employee get the richer benefit even though not provided for in the formal plan document? In most cases the employee gets the benefit promised in the plan document regardless of any contrary language in any Employer Communication.

The typical facts involve an employee reading and relying on a description of a valuable benefit in an Employer Communication and, after relying on the promised benefit, the employee retires. Some cases even involve circumstances where the employee double checks the benefit described in the Employer Communication with an employee in Human Resources. In general, the federal courts have refused to rewrite the terms of a qualified retirement plan to give the richer benefit. The logic behind these decisions is that ERISA consistently encourages employers to communicate benefits to employees in terms the employees can understand and in so doing, perfection is not required. All benefit plans are voluntary and the Supreme Court has consistently held that plain English communication may become extinct if employers are required to insure the precision of all Employer Communications.

CIGNA Corp. v. Amara does not change this legal premise. In CIGNA, the employer sent summary plan descriptions to all employees. The summary document described a greater benefit than actually provided by the terms of the plan itself. The plaintiff sued for the benefit promised in the summary description. The District Court agreed and ordered CIGNA to pay the higher benefit. In a unanimous decision, the Supreme Court reversed and remanded.

Up front, the Supreme Court made it clear that employer communications such as summary plan descriptions cannot amend the actual terms of a qualified retirement plan. The Court stated that employer communications such as a summary plan description, "important as they are, provide communications with beneficiaries about the plan, but their statements do not themselves constitute the terms of the plan." In other words, no Employer Communication can operate to change the benefits promised in a qualified retirement plan.

The remainder of the decision is a lengthy discussion of other types of equitable remedies that might be available to the plaintiff under ERISA Section 502(a)(3). The Supreme Court speculates what a plaintiff might allege in this circumstance and how the District Court sitting in equity should keep an open mind on what remedies might be available. The Court concludes by saying that the District Court has not determined if an appropriate remedy may be imposed and should do so upon remand.

Be careful what you read into CIGNA v. Amara. If anything it re-affirms that while Employer Communications are important and best efforts should be made to produce a writing that is accurate, the benefit promised in the plan will be limited to the document as written. Accidental increases will not be enforced. We note that CIGNA is a retirement benefit case (health benefit plans will have different standards). The case does highlight the need to appropriately communicate benefits and to periodically self audit to determine that these communication documents are properly prepared and distributed.

DMHC Discount Plan Regs: Don't Discount 'Em

Richard Spohn — Thu, 10 Feb 2011 15:58:14 -0800

For 28 years the public-policy-making machine of The Great State of California has struggled and sputtered to decide how to regulate discount fee health plans. These are basically arrangements wherein persons for a fee are granted access to networks of healthcare providers who have agreed to grant discounts off their fees. (This saga is of particular interest to this blogger both because he represented clients in various phases of it, and because he negotiated and prepared the application for the first licensure of a discount fee plan in California.)

Through a stream of Commissioner’s Opinions from the Department of Corporations and the Department of Managed Health Care, informal administrative actions, two AG Opinions, some tangential statutory language, much failed legislation, a burst of celebrated enforcement actions, a few Knox-Keene licensures, formal administrative law adjudications, and proposed regulations, attempts have been made to subject the discount plans to some form of public regulation (see article, “The Birth of a Reg”). While some discount plans have operated honorably, shady others have abused the trust of their members, too often from the more vulnerable categories of society.

In early 2008 the Legislature, weary of years of bills that died, punted the task of getting the discount plans into the administrative state to the Department of Managed Health Care. The Department at the time had already for months been working on a regulation, and after a protracted process of iterative drafts, “stakeholder” consultations, hearings, and engaging the formal procedures of adopting a regulation, in November it brought forth a final text and duly submitted it to the Office of Administrative Law (OAL) for review and approval.

The proposed regimen would comprehensively subject discount plans to licensure and many elements of the Knox-Keene Health Care Service Plan Act of 1975 (H&S section 1340 et seq.), the charter for regulation of HMO’s in California (final reg text). None of the industry “stakeholders” were very happy with the proposed regulation.

But OAL at the last procedural moment declared on December 31, 2010 that it did not like aspects of the regulation presented by the DMHC and rejected it. Paperwork deficiencies, failure to respond to certain public comments submitted in the formal process, and alleged inconsistency with two statutes (B&P section 650, H&S section 445) and two Attorney General’s Opinions construing them (82 Ops.Ca.Atty.Gen 1, 84 Ops.Ca.Atty.Gen 113) were invoked as the grounds for the inconsistency count of the rejection (OAL rejection opinion).

Steeled and dogged after years of pursuit, and deeply invested in the proposed regulations, the Department is finalizing an appeal to OAL. The paperwork glitches and the missing responses will be easily resolved, and the Department is confident it has crafted thoughtful and compelling replies to OAL’s assertion that the proposed regulations are inconsistent with the above Code sections and AG Opinions. The Department is likely to stress the co-existence and compatibility of the Knox-Keene Act with the two Code sections cited, the canonical mandate to try to interpret them to work together, the grounding of the proposed regulations in that Act, and also possibly that the OAL reasoning could be used to assert the invalidity of other health plan licensure frameworks.

The Department has until April 30th to submit its appeal to OAL but is expected to file it in February. If OAL rejects the appeal, an appeal then lies to the Governor’s Office. Whatever the outcomes, sound public policy cries out for a definitive resolution, after all these years.

Nossaman Scores Landmark Medi-Cal Victory

John P. Wagner — Tue, 26 Oct 2010 15:39:08 -0800

In a landmark decision, Nossaman received the final decision in its client’s favor in the longest-running Medi-Cal appeal ever, Sutter Medical Center Sacramento (SMCS) v. Maxwell-Jolly. The case began in August 2002 and the Department issued its final decision in September 2010.

The SMCS decision is of major significance to all California hospitals having Neonatal Intensive Care Units (NICUs) because it distinguishes two significant courts of appeal decisions that had severely limited Medi-Cal reimbursement for the advanced services provided in sophisticated NICUs.

The two decisions, known as Sierra Vista and Kern County, held Medi-Cal did not have to provide the special NICU rate when nurse-staffing ratios were greater than one nurse to two patients (1:1-2). Arguing on behalf of Sutter Medical Center Sacramento, Nossaman demonstrated the SMCS NICU had met requirements entitling it to reimbursement for the special NICU rate for NICU days when the staffing ratio was at one nurse to three or four patients (1:3-4) as well.

Approximately 70 percent of most NICUs days are at the 1:3-4 staffing ratio. As a result, all California hospitals having sophisticated NICUs will benefit from this major clarification of the law.

During the litigation, Nossaman had to overcome numerous hurdles and had to appeal to the Superior Court twice in order to receive a fair hearing. Nossaman even proved that, prior to this litigation, the Department's policy was precisely the same as the legal position Nossaman argued. The Department attempted to hide that policy, and the related "smoking gun" evidence, in order to deny SMCS's appeal. Nossaman's victory amounted to a ringing declaration that the Government cannot disregard its own policies and [like everyone else,] must follow the law.

More information about this landmark victory can be found on the Nossaman website.

The Virginia Court's Ruling on the Health Reform Law

Kurt W. Melchior — Tue, 03 Aug 2010 09:26:06 -0800

Immediately after Congress passed the health care reform bill, the Patient Protection and Affordable Care Act (PPACA), Virginia enacted its own countermeasure, called the Virginia Health Care Freedom Act; and its Republican Attorney General then brought suit to enjoin the Federal government's performance of section 1501 of the PPACA, which requires individuals to pay a "penalty" along with their taxes if they do not purchase health insurance. Virginia claims that this provision is beyond the power of the Federal government to enforce and also contradicts Virginia's own newly enacted law.

The Secretary of Health and Human Services moved to dismiss this complaint for a variety of reasons, many extremely technical and not notable from the general health reform perspective. What is important here is that Congress based its law on extensive findings concerning the effect on interstate commerce of the manner in which individuals obtain health care. The Commerce Clause of the Federal Constitution has served, certainly since the New Deal, as the linchpin for economic regulation and control over much of the country's overall activities. Probably best known of the many cases which have upheld expansive Federal legislation under the Commerce Clause are the cases Wickard v. Filburn (1942), which upheld a fine on a farmer who raised food to feed his own geese, finding this a violation of market controls during World War II, and Gonzales v. Raich (2005) which upheld a Federal prohibition against the growth of marijuana for the grower's home use despite the express authorization of that conduct by the grower's home state. In the Virginia case, the Federal government argued that everyone must at some point in their life receive health care, and that therefore the regulation of health care economics -- by requiring the purchase of health insurance and assessing a "penalty" on those who fail to do so -- lies well within its powers under the Commerce Clause as interpreted by Wickard, Raich and many other cases.

The court denied the Federal government's motion to dismiss, reasoning that not buying health insurance was (at least arguably) not economic activity, and thus beyond Congressional power to address under the Commerce Clause. Without specifically addressing the argument that every human being requires health care at some point in their lives, it held that "this portion of the complaint advances a plausible claim with an arguable legal basis." The case is thus to go to discovery, summary judgment, or trial. As a recent WSJ Legal Blog post notes, "Virginia’s lawsuit is one of several trying to undo the health-care law. Another large one was filed in a Florida federal court by a handful of state attorneys general."

It is somewhat puzzling what evidence the court expects to see: this is not like the recent Proposition 8 case in San Francisco, where the parties attacking the anti-gay marriage amendment have offered evidence of discrimination against gays under the new regime. Can there be evidence that some persons will never require health care in their lifetime? Or what else is this court asking for? Perhaps it is signaling, despite its description of the claim as only "arguable," that it is prepared to uphold Virginia's objections and declare this key part of PPACA unconstitutional?

As someone who learned (and taught) Constitutional law before the so-called Reagan revolution, I consider this a very far fetched idea. But nowadays, who can tell? Certainly, the Supreme Court, which may have to address this issue if the lower courts continue to reason as this judge seems to have done that not obtaining any form of health care throughout one's life is a realistic option, and further that such abstention will be honored as an opt-out from all daily life in the country (all that seems necessary reasoning to uphold Virginia's argument), has turned so far and so ideologically to the right that one cannot say with any assurance that this argument -- silly as it sounds to this writer from the perspective of daily life and national economics -- cannot succeed. Will it all depend on the fifth vote out of nine Supreme Court justices?

But the country which such a decision would depict bears little resemblance to the nation we know -- one nation, one set of commerce, health care without boundaries which thrives on national and even international exchange of medical knowledge, information and services.

We will just have to wait and see.

Medical Foundation Construct Hanging On

Richard Spohn — Fri, 30 Jul 2010 10:31:06 -0800

In a previous musing we wondered whether California medical foundations would “hold”, given cited turbulence and possible over-reaches with the form. They seem to be hanging on just fine at mid-summer. Some developments:

1. A proposed piece of legislation (SB 364) would have required an intense investigation by the Attorney General’s Office and the preparation of a “patient impact report” or a “negative declaration” whenever a non-profit hospital proposed to establish a medical foundation. The review regimen would have required public notices, hearings, comment periods, opportunities for challenges and the like. The measure was sponsored by the medical group that is locked in bitter litigation with the City of Hope Medical Center over the Center’s plans to establish a medical foundation, as referenced in the previous musing. A classical collateral assault maneuver to be sure: sue the ba*tards, regulate ‘em too.

But at a recent legislative hearing the bill was drastically reduced to a “study” bill on, inter alia, the governance structures of medical foundations – but the Task Force that would be set up must find the funds to carry out the study. The California Hospital Association suggests that the focus of the Task Force be shifted to studying options for clinical integration of care delivery, in light of the recent federal reforms. Seasoned legislative veterans caution that counter-attack gambits by the City of Hope Medical Group may crop up in the waning days of the session.

2. Marin General Hospital and the Marin IPA recently announced that they are establishing a medical foundation to deliver care, in the wake of the bitter divorce that terminated Sutter Health’s long-time contract to administer the Hospital. Since Sutter was one of the pioneers to deploy the medical foundation model, across a broad swath of Northern California, there is a certain irony that one upshot of its ouster from Marin County was the emergence of – a medical foundation. A lesson learned from a master.

3. A related development lies in the California Assembly’s passage of SB 726, which would give hospitals in underserved and rural areas the right to hire five doctors, in a nervously narrow exemption from California’s prohibition on the “corporate practice of medicine” (B&P Code Sections 2052, 2400), which prevents hospitals and other “lay” entities from employing doctors. The California Medical Association opposes the bill, warning it will weaken the ban. It is this restriction that gave rise to medical foundations and their increasing popularity, as hospitals and physicians seek to integrate more closely through a tighter alignment of interests, to provide quality care in more efficient delivery modes. While the Legislature frets over such parsimonious permissions, the medical foundation model is moving ahead steadily in the work-around that has been underway for nearly two decades.

Want Money? Show Medicare and Medicaid Meaningful Uses of EHR

John P. Wagner — Wed, 14 Jul 2010 13:25:26 -0800

We are pleased to include here the comments of colleague, Paul Quinn, a Partner in Nossaman's Washington DC office.

Two new final governmental rules implementing the “HITECH Act,” an aspect of the “Obama Stimulus Bill,” now provide financial incentives through Medicare and Medicaid for qualified hospitals and individual healthcare professionals who can demonstrate “meaningful use” of Electronic Health Records (EHR).

One rule, issued by the Centers for Medicare and Medicaid Services (CMS), defines the minimum requirements providers must meet in order to qualify for the payments and the other rule, issued by the Office of the National Coordinator for Health Information Technology (ONC), identifies the standards and certification criteria for the certification of EHR technology.

The amount of financial incentives for hospitals from Medicare and Medicaid is not specifically limited and may run into the millions of dollars. The amount for professionals is limited to $44,000 for Medicare and $63,750 for Medicaid.

For entities seeking approval as an ONC-authorized testing and certification body, the application period has been open since July 1, 2010. For medicare and medicaid providers who become approved to demonstrate meaningful use of EHR, payments may begin to flow as soon as October 2010. As part of the implementation process, HHS is establishing a nation-wide network of Regional Extension Centers to assist providers in adopting and using certified EHR technology in a meaningful way.

A CMS/ONC fact sheet on the rules as well as technical fact sheets on CMS's rule can be found by clicking here. Additionally, a technical fact sheet on ONC’s standards and certification criteria final rule is available here.

Links to rules via Federal Register:

If you would like additional information or assistance in taking advantage of this opportunity please contact Nossaman Partners, Paul Quinn or John Wagner.

Congress Clarifies Law on Overpayment and Refund

John P. Wagner — Wed, 23 Jun 2010 14:32:18 -0800

For some time, the law regarding what a provider was required to do in the event of a Medicare or Medicaid overpayment was unclear. The government took the position a provider was required to disclose the overpayment to the Program and refund it. But there was no statute saying precisely that.

Now, as part of the new Patient Protection and Affordable Care Act (PPACA), i.e., the recent national healthcare reform legislation, Congress has indeed created the statute to say precisely that and to require providers to refund the overpayment within 60 days of the overpayment being identified.

There are many theoretical "angels dancing on top of pins" questions that could be asked about exactly when an overpayment is "identified" and many factual situations may become complicated, but the new law makes it crystal clear that a provider may not keep a known overpayment with the intent of "settling up later," nor may a provider "turn a blind eye" and decline to investigate the facts of a potential overpayment situation.

One dilemma providers face is whether to investigate a potential overpayment through its own staff or by bringing in outside experts such as attorneys and billing and coding experts. The advantage of using a provider's own staff typically is lower investigative costs and a faster completion of the investigation. Bringing in outside experts, although more expensive, generally offers a strong statement of objectivity that may convince the government to accept the refund without further investigation. Also, an outside investigation conducted at the direction of an attorney will be protected against disclosure by the attorney-client privilege and work product doctrine. There is no easy solution. As always, "it all depends on the specific facts."

Will the (Medical) Foundations Hold?

Richard Spohn — Thu, 17 Jun 2010 09:04:20 -0800

Nearly two decades ago, the plucky Palo Alto Medical Clinic won legislation in California that enabled it to align more closely its interests and those of its practicing doctors. It midwived the creation of “medical foundations”, through the passage of what became Health & Safety Code Section 1206(l). It is a terse, tightly packed one-sentence provision that exempts from state licensure as a “clinic”:

A clinic operated by a nonprofit corporation exempt from federal income taxation under paragraph (3) of subsection (c) of Section 501 of the Internal Revenue Code of 1954 ……that conducts medical research and health education and provides health care to its patients through a group of 40 or more physicians and surgeons, who are independent contractors representing not less than 10 board-certified specialties, and not less than two-thirds of whom practice on a full-time basis at the clinic.

Pretty pithy stuff, but it has been the font of that distinctly California phenomenon, the medical foundation. Foundations have gradually emerged over the ensuing years as a robust alternative for some hospitals, health systems and medical groups seeking a closer and more interdependent modus vivendi in the environment of California’s prohibition on the “corporate practice of medicine” (Business & Professions Code Sections 2052, 2400). Simplistically put, in a typical structure a hospital or medical center is the sole corporate “member” of the foundation, which in turn contracts with one or more medical groups to provide services at the hospital, sometimes even acquiring the assets of the medical group(s). Operationalizing this construct is of course enormously challenging, but it can be an effective mechanism for the delivery of quality, cost-contained care.

Such prestigious non-profit entities as the Sutter Health System, Cedars Sinai Medical Center, Catholic Healthcare West, Children’s Hospital Oakland, Scripps Health and others have established or collaborated with foundations as their approach to the integrated “delivery” of healthcare. The foundation movement has generally been institution-specific or geographically limited.

The California Medical Association (CMA), focused on individual doctors, has long groused from the sidelines that foundations are merely a gimmick to evade the California prohibition on the corporate practice of medicine, a charge it has leveled for years also against HMO’s. The California Association of Practice Groups (CAPG), representing doctors in groups, has been more benign towards foundations.

But with the exploding costs of healthcare the attractiveness of the medical foundation model to align interests of quality, affordability and accessibility has grown rapidly. It is even in current vogue touted as a form of “accountable care organization.” However, the yeast is rising. A bitter struggle at the venerable City of Hope in Duarte, CA. over the establishment of a foundation has spilled over into passionate litigation. The Hospital Association of Southern California is proposing a “master medical foundation” to be established by numerous hospitals that would contract with numerous medical groups. That departure of scale has caught the curious eye of no less a purveyor of the scene than The Wall Street Journal. The same consultant/law firm combo that promoted the SoCal master foundation is currently advancing the notion in Northern and Central California. Stanford medical entities are reportedly developing a foundation for non-academic physicians.

A medical-political question will be whether the CMA will stay on the sidelines and behold in grim awe this sudden spurt of foundations, on such a scale, or whether it will finally take up the cudgels in the Legislature or the courts to defend the ban on the corporate practice of medicine. A core interpretive divination will be whether H&S 1206(l) encompasses “master medical foundations.” Lawyers and public policy makers will ruminate about the efficacy of the issue coming to be masticated by the courts.

The current campaign to form huge “master medical foundations”, albeit in the good name of cost-containment, may prove to be what mother warned us about: “too much of a good thing.”

Court of Appeal Chips Away at Constitutional Rights of Professional Licensees

Kurt W. Melchior — Thu, 03 Jun 2010 16:24:00 -0800

Doctors, lawyers, and other professional licensees beware, a recent court of appeal decision creates a low burden of proof for revoking the license of a professional on probation.

A licensed health care provider has a fundamental vested right to her license (Bixby v. Pierno (1971) 4 Cal. 3d 130). Therefore, efforts to deprive her of her license require the licensing authority to prove its case by clear and convincing evidence. (Ettinger v. Board of Medical Quality Assurance (1982) 135 Cal. App. 3d 853, 856.) The Ettinger court clearly explained why it was adopting this heightened standard of proof: “It seems only logical to require a higher standard of proof when dealing with revocation or discipline of a professional licensee as opposed to mere termination of state employment.”

But most disciplinary cases settle, and the standards for settlement are well understood and have even been published: so many years of probation depending on the offense; good behavior; law compliance; regular reports; payment of prosecution costs, etc. But the format of a probationary settlement is also cast in stone: the stipulation will recite that the license is revoked but that the revocation is stayed during the term of probation; and if the licensee successfully completes the probation, the charges will then be dismissed. In other words, the provider’s license – physician, dentist, nurse, whoever – is theoretically revoked, but the revocation is not in force.

It will not be surprising that some licensees will continue to have compliance problems while on probation: all persons may have such problems at one time or another; and most often, people will settle their cases by accepting probation because something in their conduct wasn’t quite right. And people who were in trouble once may have a proclivity for more trouble. So, if there is another charge against a licensee already on probation, more discipline can be expected.

But what will be the standard for proving that new violation? Will it be the same requirement of “clear and convincing evidence,” which the courts have held to be necessary because “a fundamental vested right” is in danger of being lost?

One would think so; but that turns out to be wrong. Dr. Sandarg, a dentist, settled his disciplinary case by accepting standard terms of probation which included a provision that if Sandarg violated any terms of his probation, the Dental Board could set aside its stay order and revoke his license. Sure enough, Sandarg continued to suffer from substance abuse problems. He was found out, and the Dental Board moved to revoke his license according to the terms of the stipulated probation. An Administrative Law Judge found that the Board had proved a violation by the dentist “by a preponderance of the evidence” and that his license should be revoked. The Board then revoked his license. Sandarg appealed on many grounds; but what is of interest here is that he claimed the right to have any revocation based only on the same standard that governs revocation of licenses, i.e., clear and convincing evidence.

The court of appeal made very short shrift of that argument. It cited a general statute which states that “except as otherwise provided by law,” the standard of proof is the preponderance of the evidence: this means that the prevailing side has to be at just a mite more credible than the losing side. But what of the “fundamental vested right” in the license and the “logic[ ]” that in such situations there must be a higher standard of proof, i.e., clear and convincing evidence?

The court answered that question in a short paragraph, pointing out that in criminal cases the standard for conviction is still higher, “beyond a reasonable doubt;” but that proceedings to terminate criminal probation have long been conducted pursuant to the “preponderance of the evidence” standard. That history was good enough for the court. By that simple analogy, it disposed of the claim that “clear and convincing evidence” was required to revoke licensing probation.

I searched for the origin of the rule that criminal probation can be revoked by a simple showing of the preponderance of the evidence, and found that the California Supreme Court had so decided in 1990 (People v. Rodriguez, 51 Cal. 3d 437), but that it reached that result simply by reciting that courts elsewhere had long allowed criminal probation to be revoked on such a slight showing and that 18 other jurisdictions followed that standard. Justice Broussard alone dissented, suggesting that California follow an American Bar Association Standard for Criminal Justice to the effect “that a liberty interest should not be sacrificed simply on the 'preponderance' standard, which is normally applicable only to civil trials. Otherwise, an unfortunate incentive might arise to use the revocation hearing as a substitute for a criminal prosecution with its higher standard of proof.”

That is the last time to my knowledge that anyone – one Justice out of seven – looked at the merits of the rule that one’s liberty can be taken away by a showing that only meets the standard of a mere preponderance of the evidence. Now, that can also be done with a professional license, even though the license constitutes a “vested right” and though courts have said that it is only “logical” that a heightened standard of proof is required to take that license away.

Thus, Constitutional rights can be easily lost. I doubt that the prevailing practice of resolving charges against a professional license by stipulations for revocation stayed, along with probation, will change because of this decision. But in the course of these practices we have all lost a little bit of our freedom.

Peer Review Matter Demonstrates that Health Care Reform Happens Best at the Grass Roots Level

R. Gregory Cochran — Fri, 28 May 2010 06:56:29 -0800

I recently had the pleasure of hearing Atul Gawande, M.D. speak about his views on health care reform, including his simple but profound message that the yeoman’s share of healthcare reform work needs to be done at the community level, rather than at the national or corporate level. I have also recently been interviewing physicians, nurses and technicians who are witnesses in a peer review hearing about the quality of services being provided by one of their colleagues.

Because these physicians’ compensation amounts are determined, to some degree, by the physician’s ability to cut costs, rather than the more traditional fee-for-service model, there is little concern that the physician who is the subject of the peer review matter can allege competition or “turf” battles as a cause of witness bias. Further, to Dr. Gawande’s point, it is clear that this “community” of interventional radiologists, vascular surgeons, neurosurgeons and cardiologists, does a terrific job of deciding amongst them who can provide the most effective and economical care, in large part because they do not compete for those dollars.

This struck me as another example to illustrate Dr. Gawande’s conclusion that local communities and physicians are the ones to determine cost control and healthcare improvement, as he discusses in a recent New Yorker article.

Remedies for Health Care Providers Facing Professional Discipline

Timothy Aspinwall — Tue, 25 May 2010 10:01:13 -0800

A prosecuting attorney who represents professional licensing boards shared with me his view that the decision to file disciplinary charges (PDF) is determined largely by the licensee's past conduct, whereas the degree of discipline is significantly influenced by the remedial measures undertaken by the licensee since the events leading to the disciplinary action.

In my experience, this is true. The sooner a health care professional can take a serious look at and begin to effectively address the issues leading to the board's action, the better off he or she will be. This is appropriate even if the allegations are exaggerated, and even in some cases where the allegations are untrue.

What kinds of remedial measures are appropriate in a given case? The best answer to this is to initiate whatever measures are necessary to assure the licensing board that patient safety will be protected. The highest priority of any health care licensing board is to protect patient safety. So, any problem (or allegation of a problem) that threatens patient safety must be addressed.

Some frequently occurring issues include: allegations of mental health problems, substance abuse problems, deficiencies in clinical skills, and poor medical record keeping - the bane of many health care providers. No one likes to face these issues, especially in the context of professional discipline. There, however, effective remedial measures that can address each of these areas. For example, there are excellent clinical training programs to address questions of clinical proficiency, alcohol and drug abuse treatment programs to assist with addiction problems that are far more common than many like to acknowledge, mental health providers to help deal with the stresses of practice, and the trauma of facing professional discipline, and many others who stand ready to assist a health care professional remain in practice.

No doubt, an investigation or accusation by a licensing board is the beginning of a very stressful time for any professional. My advice, throughout this often arduous process, is to bear in mind the primary purpose for becoming a health care professional - which is to help patients. By taking remedial measures to ensure one's fitness to practice safely, a health care professional can, in the great majority of cases, demonstrate that he or she should be allowed to continue practicing in their chosen profession.

The Exchanges are Coming, the Exchanges are Coming - Help!

Richard Spohn — Mon, 24 May 2010 11:02:03 -0800

Even the most casual observer of the healthcare scene knows that “exchanges” are going to be an important element of the coverage system that is transforming because of the recent federal reform legislation. There will presumably be a public exchange in each state -- an administered and serviced electronic marketplace through which groups, families and individuals will be able to sign up for healthcare coverage. In certain instances this will be subsidized, including through tax credits. The state exchange will likely be the exclusive portal for subsidized programs. It could over time become the dominant venue for purveyors and purchasers of healthcare coverage to interact and transact. If structured properly it could have a positive impact on the quality, cost, accessibility, effectiveness and creativity of healthcare.

An exchange will have multiple and operationally complex responsibilities. It will be linking people together with huge HMO’s, carriers and other kinds of delivery systems. By as-yet undetermined mechanisms it must ensure that the on-going relationships are enrollee-friendly and productive. It must be the central “trusted information source” to help everyone, on all sides of the care equation, to understand and engage in the very new world of care coverage and delivery that is emerging. There are already major, competing bills in the California Legislature to structure a State Exchange, even though the federal law sets January 2014 as the start-up date for state exchanges.

Critical up-front roles of a state exchange will be promoting its coverage opportunities and services to the public and facilitating participation in the exchange marketplace. A state exchange will need all the help it can get with this. A public bureaucracy will not be able to do the job by itself. It must enlist the intimate collaboration of the private sector, of professionals who know and meet the challenges of explaining and enrolling the laity in healthcare coverage. The skill and expertise of brokers need to be enlisted, so-called “navigators” who can get the word out and people in must be signed up. Other entities that today serve as portals to coverage or as private exchanges need to be structured into the processes of the state exchanges as private sector partners in what will be a gargantuan undertaking.

A tattered page should be taken from California’s last experiment with a similar mechanism, the public small-group HIPC of the ‘90’s. Such was the ideology of the day, brokers were banned from participating in its processes, even though the small group market is heavily dependent on their services. The result of so scorning the potential of the private sector was that the HIPC never realized its potential and eventually folded. By contrast, a parallel undertaking of the same timeframe in the private sector, the California Choice Exchange, relied heavily on brokers to recruit and educate small groups and survives to this day. Notably, 44% of the groups who receive their coverage through this exchange had not previously offered coverage to their employees. The private sector made it work then, it must be involved this time.

Much is at stake with the anticipated state exchange, and it better be set up right. A pivotal condition of success will be deploying the expertise of the private sector.

What Medical Staffs Need To Do About Negative Hospital Publicity

Mary Powers Antoine — Fri, 21 May 2010 14:38:57 -0800

How many of us recently read this or a similar headline: “Nine California hospitals fined for medical errors,” Los Angeles Times, May 21, 2010 and immediately searched the article to see which hospitals were involved? You may even be tempted to do it now to refresh your memory on the list of facilities included in the press release issued last month by the California Department of Public Health. The headlines are attention-grabbing for those who work in hospitals as well as the patients and families in the communities served by the hospitals.

Physicians have at least three good reasons to be concerned about the unwelcome attention.

First and foremost is the concern that patients may have been harmed, and whether that harm may recur because of systemic problems in hospital operations. Who might be the next patient to suffer similarly?
Second, the reputation of the physician caring for the patient may be damaged even if the physician was not directly responsible for the errors.
Third, the reputation of all physicians on the Medical Staff of the hospital is impacted when the reputation of the hospital is tarnished.

There are a number of things physicians on the Medical Staff can do when they hear about quality of care problems (including events that don’t make it into news reports).

First, seek accountability within the Medical Staff organization. Ask where and how the Medical Staff’s quality review process failed and how it can be improved. Seek out best practices at other facilities to determine what structural changes may improve quality oversight. Turn the spotlight inward to examine how failings within the Medical Staff organization may have contributed to the problem.

Second, seek accountability within the hospital organization. Is there adequate coordination across lines of authority to address quality issues? Does the hospital’s quality review process effectively dovetail with that of the Medical Staff? Is there a seamless integration of these efforts? What barriers exist that cause duplication of efforts, impede communication of important information and prevent effective problem-solving?

Third, seek personal accountability. Rarely is a single person responsible for causing an untoward event. More often, a coalescence of errors both at a system level and at a personal level contribute to the injury suffered by the patient. That can lead to finger-pointing and avoiding personal responsibility. Every individual who cared for the patient, and every hospital department involved, needs to take a frank and honest look at how their actions contributed to the problem, and accept responsibility for devising a comprehensive solution to avoid recurrence.

When Medical Staff members take a personal and active role in the improvement of quality on a global basis, everyone benefits, including most importantly, the patients.

Current Issues in RAC Audits

John P. Wagner — Wed, 12 May 2010 10:56:33 -0800

The Medicare Recovery Audit Contractors (RAC) audits of hospitals are going into are going into high gear. It is very important for hospitals to review RAC denials immediately as the appeal periods at the various review levels are very short. The RAC auditors are paid on a percentage of the amount of dollars they disallow; they have every incentive to "disallow first, ask questions later." Some of the important issues include:

Date of claim and initial Medicare determination on the claim. RACs may not go back more than three years beyond the date of the initial determination.
Was the RAC claim based on an automated review when it should have been made on a review of medical records?
Inpatient vs. Observation Short Stays. The RACs may contend the care could have been provided at the observation level of care rather than the inpatient level of care. If the RACs are correct, the entire claim is disallowed--the hospital cannot go back and bill at the observation level. Hospitals need to have strong physician documentation. Currently, the initial decisions at the ALJ level are in a state of flux.
Inpatient Rehabilitation Facility (IRF) vs. Skilled Nursing Facility (SNF). Can become "battle of the experts." Important that hospital clinical staff understand the different criteria for IRF versus SNF.
Precedential effect of ALJ and other administrations. As a body of cases begins to develop at the administrative level, it is unclear what effect this will have have regarding RAC denials on similar issues.
When in doubt, appeal! Can lose appeal rights quickly by inaction.

Containing the Collateral Damage

Timothy Aspinwall — Mon, 10 May 2010 09:05:25 -0800

In the unfortunate event that a health care professional faces an accusation from a licensing board, what issues should he or she be thinking about? The answer is - everything!

The implications of professional discipline extend as far as one's professional life. All professional organizational affiliations are likely to be impacted. Therefore, in planning a defense, it is imperative to take into account a broad range of issues, including at least the following:

Medicare/Medi-Cal provider status;
private network provider status;
DEA registration;
professional liability insurance;
specialty board certification;
employment status;
medical staff issues;
tort liability; and
immigration status.

For a full-length discussion of these issues, see my article published in ABA The Health Lawyer entitled, Representing Healthcare Professionals in Disciplinary Actions: Containing the Collateral Damage (PDF). This was written for attorneys representing health care professionals.

This broad range of issues can seem overwhelming. The point to keep in mind, however, is that the touchstone in any disciplinary action is patient safety and professional rehabilitation. To the extent that a health care professional can demonstrate that he or she is fit to practice safely with due regard for the well-being of patients, and that the professional is undergoing appropriate rehabilitation if needed, the prospects for maintaining one's professional status are quite good.

Check my blog again as I address these and other topics in more detail. Your questions and comments are, of course, welcome.

Physician Turned Lawyer - Switch to the Dark Side?

R. Gregory Cochran — Wed, 05 May 2010 10:22:42 -0800

The most frequent question I am asked, in almost every context of my life, is "Why did you change from practicing medicine to practicing law?" Of course, I have an answer to that question that I can recite in my sleep, and depending on my mood, who's asking and how verbose I'm feeling, it varies from simply, "I wanted to combine the two disciplines" to a much longer (and undoubtedly very boring) history of my life and feelings at the time I decided to make the switch.

The truth is that I get great satisfaction in drawing on my medical background in my legal practice. In peer review matters, I understand the clinical issues better than my non-clinicial attorney colleagues. In EMTALA cases, I love putting the medical records next to the confusing regulations and advocating for the client in a way that a non-physician-attorney could only dream of. Even in drafting ordinary hospital-physician business contracts, my understanding of what it means to be on-call and/or to provide medical director services and/or to provide professional services from the physician's perspective adds great value to the services I provide both my physician and hospital clients.

Still, my clients are sometimes leary and make half-serious jokes about my "defection" to the "dark side." There seem to be only two vocations where, if you decide, for whatever reason, not to continue in that vocation, people just don't quite get it: one is being a physician, the other, a priest. Those two paths are often deemed "callings" rather than "careers."

I'd like to put a plug in for the law as being just as noble a vocation as medicine or the priesthood. As a healthcare attorney, I strive to help my clients to provide the best patient care possible by ensuring that they are doing their best to comply with the law and are as minimally distracted by government scrutiny as possible. If my clients think the laws are not conducive to high quality care, I help them to find a way to change the law.

So, for now at least, I will try to keep answering politely whenever I'm asked why I made the switch.