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Louisville Bar Association, Bar Briefs February 2012
Authored by: Lisa English Hinkle
With an economy in recession and health care costs that continue to rise, attorneys are bound to represent physicians, hospitals, nursing homes, physical therapists, chiropractors, nurse practitioners and many other types of health care providers as well as their patients at some time. The current complexity and uncertainty of health law and its regulations are recipes for confusion for all lawyers even those who practice in health law area on a daily basis. The following represents a potpourri of health law topics that are important areas for attorneys to know about regardless of practice area.
Lawyers are business associates under HIPAA
With the enactment of HITECH Act,  many of HIPAA's rules now apply not just to covered entities (health care providers), but also to those who do business with covered entities or provide services to covered entities including lawyers. A business associate is generally defined to be an entity that performs a service or function for or on behalf of a covered entity that involves the use or disclosure of the covered entity's protected health information ("PHI"). Even the most basic covered entity provider will have business associates that include an attorney, an accountant, a billing company, one or more third-party administrators, networks for managed care participation and a malpractice carrier. 45 CFR §1634.314 requires compliant business associate agreements to include obligations that business associates adopt administrative, physical and technical safeguards to protect PHI and to report security breaches to the covered entity and individual. HHS's Office for Civil Rights has published a sample Business Associate Agreement, but the agreement should be tailored to fit individual relationships and to specify the reasons that information is being disclosed to the business associate.
In HITECH, Congress mandated that business associates fully comply with the standards and methods of the Security Rule in the same manner as a covered entity and are subject to the same criminal and civil penalties for violations. For attorneys who use PHI about individuals, the obligation to safeguard the information extends to staff (secretaries) and even those who copy medical records (runners or outsourced entities). For example, if PHI is disclosed to experts, a law firm should require business associate agreements. Law firms should understand the duties imposed by HITECH, provide training to all staff, have current policies and appoint an attorney to answer questions. Just like health care entities, law firms and lawyers can be penalized for security breaches and required to notify the covered entity and the individual about the breach.
Overpayments to health care providers and the 60-day clock
No change under the Health Reform Law  has caused greater disruption and uncertainty for health care providers than the overpayment rule. In 2009, Congress amended the Federal False Claims Act to make clear that entities that improperly retain overpayments from the government are liable under the False Claims Act, which now imposes liability if a person "knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government." Improper was defined to mean the "retention of any overpayment." The Health Care Reform Act went further to create an obligation to refund and report Medicare and Medicaid overpayments by the later of 60 days after the overpayment is identified or 60 days after the date the cost report is due. Failure to return the overpayment now has become an obligation under the False Claims Act. For health care providers, keeping an overpayment longer than 60 days subjects the provider to liability under the False Claims Act. While the rule sounds simple, its application is anything but simple. When does the provider know that an overpayment has been made? Who has knowledge in the organization that an overpayment has been received? When does the 60 days start? Who do you repay and how? These are all questions that require thoughtful consideration and the advice of counsel.
The Stark Law
Any time a business relationship with a physician and another health care provider is created, an attorney should inquire if the relationship creates a financial relationship between the two and whether referrals are made between the parties. The Stark Law  is complicated and seeps into business relationships that may seem very ordinary. The federal statute against physician self-referrals, otherwise known as the Stark Law, prohibits physicians from making referrals for certain services that are reimbursed by Medicare or Medicaid to an entity with which the physician or a member of his/her immediate family has a financial relationship unless covered by an exception. The 11 designated health services ("DHS") include: laboratory services; physical therapy services; occupational therapy services; radiology services including MRI, CT and ultrasound; radiation therapy services and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment and supplies; prosthetics, orthotics, and prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services. If a referral for DHS is prohibited by the Stark Law, then the entity providing the DHS may not bill the patient, Medicare or Medicaid, or any other entity for the services and must refund any payments. Civil monetary penalties of up to $15,000 per claim may be assessed and a penalty of up to $100,000 if a circumvention scheme is found to exist. Even real estate attorneys should recognize that when a hospital leases an office to a physician or a physician practice leases an office to physical therapist, a "Stark" relationship is created, which should be reviewed.
The Health Care Reform Act made it clear that when a claim violates the Stark Law, it also constitutes a violation of the Federal False Claims Act, which makes it easier for prosecutors to pursue both violations in one lawsuit and clears the way for qui tam plaintiffs to use the False Claims Act to bring actions.
The Federal Anti-Kickback Statute
Business transactions that make sense in other industries can constitute violations of the Federal Anti-Kickback Statute in the health care industry. The Federal Anti-Kickback Statute makes it a felony to knowingly and willfully solicit or receive remuneration "in return for referring an individual to a person for the furnishing or arranging for or recommending purchasing, leasing, or ordering any good, facility, service or item for which payment may be made in whole or part under a Federal health care program."  The Anti-Kickback Statute also prohibits a person from knowingly and willfully offering or paying remuneration to any person to induce that person to refer or purchase, lease, order or arrange for or recommend to any person to induce that person to refer, purchase, lease, order or arrange for items or services for which payment may be made by a federal health care program. As a result of the breadth of the statute, Congress has enacted several exceptions over the years for certain financial arrangements that include payments for discounts and to bona fide employees and directed the Secretary to issue safe harbor regulations for certain transactions. There are a wealth of cases and guidance that include Advisory Opinions issued by the OIG as well as Special Fraud Alerts that address the Anti-Kickback Statute and its application.
Accountable Care Organizations or "ACOs"
One of the most prominent components of health care reform is the encouragement of the development of Accountable Care Organizations ("ACO"). While these organizations are not necessarily new, the Health Care Reform Act requires HHS to develop a Medicare shared savings program through ACOs. ACOs are intended to provide a mechanism to encourage accountability for the cost and quality of the care that they deliver and the resulting outcomes to a specified patient population. ACOs are to coordinate and integrate items and services and to invest in processes and systems necessary for high-quality, but cost-efficient delivery of care. Groups of providers, including physicians and hospitals, are encouraged to establish an ACO organization to work with other provider members to manage and coordinate patient care. To be eligible for the savings programs, an ACO must include enough primary care professionals to provide sufficient services for at least 5,000 patients; have a legal structure that allows ACO providers to share savings; be accountable for the quality, costs, and overall care of the Medicare beneficiaries assigned to the ACO; enter into an agreement to participate in the shared savings program for at least three years; and develop a leadership and management structure that includes clinical and administrative systems, among other things. Proposed payment structures allow an ACO to be paid in three different ways with different levels of risk that are exceedingly complicated. The major premise is that by moving from quantity-based health care reimbursement to quality-based reimbursement, costs will be reduced and quality of care improved.
CMS' proposed regulations leave many of the regulatory and legal questions unresolved and have been criticized by both the American Hospital Association and the American Medical Association. Integration of services of competing health care providers and the sharing of financial and clinical information create significant anti-trust, tax, HIPAA, credentialing and contracting issues just for starters. Final regulations that waive the Stark Law, the Anti-Kickback Statute and Civil Monetary Penalty provisions for ACO's may be released in the near future.
Increasing Enforcement of the False Claims Act Through Qui Tam Plaintiffs
For the fiscal year ending September 30, 2010, the federal government reported more than $3 billion in civil settlements and judgments under the False Claims Act, which represents a 25 percent increase over the previous year and the second largest yearly recovery amount ever. Interestingly, these massive recoveries under the FCA are driven by qui tam plaintiffs with the largest number of qui tams ever filed in federal and state courts in 2010. With the Health Care Reform Act's changes making it easier for relatives to initiate cases, false claims actions are described as the fastest growing area of federal litigation. Whether representing the health care provider or the qui tam plaintiff, these cases are difficult to resolve and pose expensive legal challenges for both parties. As the number of cases increases, the parties' use of mediation to broker a settlement is taking on a prominent role and is suggested as a way to avoid costly and expensive litigation.
With the likelihood of qui tam suits increasing, attorneys for providers would be wise to revisit all health care clients' compliance plans to determine if plans are up to date with Health Care Reform Act changes (e.g., how to address overpayments when discovered), if the client is actually carrying out the plan and has a knowledgeable compliance officer, and if regular training of employees is provided. While all health care providers should have a compliance plan, the Health Care Reform Act requires nursing facilities to have a compliance plan by 2012 and gives the Secretary the authority to require other health care providers to do likewise. Attorneys should be involved in developing a compliance plan, training employees, and advising clients about compliance issues.
Hospital Employment of Physicians
Employment of physicians by hospitals and other large organizations has proceeded at warp speed in Kentucky. The reasons tend to be obvious as reimbursement is declining while regulatory requirements for physician practices are increasing. For example, shifting to electronic health records systems is expensive and complicated even when the federal incentives can be paid. It may be much easier for a small physician practice to become part of a system that already has electronic medical record systems and even compliance plans in place. Negotiating the employment agreements and asset acquisitions between hospitals and physicians is complex, particularly when the physician practice owns a building and has significant staff. Documenting fair market value is important for both parties if the transactions are to be compliant with the Anti-Kickback Statute and IRS rules especially when a tax exempt hospital is the employer or purchaser. While the physician attorney's role may typically be viewed as negotiating the best deal possible for the client including the purchase price, these rules impact how much an entity can pay a physician both for salary and for any assets that are purchased. Documenting fair market value is important at the time of the purchase. Likewise, including reasonable unwinding provisions is also recommended. Specifying repurchase prices and methodologies are important for clients as the uncertainty that pervades the health care industry should be addressed at the front end of a transaction.
As the health care industry embarks on a journey thought to increase transparency of health care providers and their compliance with statutory and regulatory mandates all while redesigning a reimbursement system that pays for quality of care rather than the individual services provided to consumers when they are ill or injured, attorneys in every practice area will confront issues about health care. Attorneys must be aware of the complexity of representing health care clients and their patients during this journey toward a new system with its increasing incentives to reduce overpayments and fraud while increasing quality and reducing costs. What a journey we are in for!
Lisa English Hinkle is a partner of McBrayer, McGinnis, Leslie & Kirkland, PLLC. Ms. Hinkle concentrates her practice area in health care law and is located in the firm's Lexington office. She can be reached at firstname.lastname@example.org or at 859-231-8780, ext. 1256.
This article is intended as a summary of newly enacted federal law and does not constitute legal advice.
 42 USCA Section 17921
 Health Care Reform Act or the Patient Protection and Affordable Care Act of 2010 (Pub. Law No 111-148).
 42 USC Section 1395nn.
 42 U.S.C. Section 1320a-7b (b).