Health Care Reform

THE EAGLE HAS LANDED!

Any health law advisory would be remiss without mentioning the passage of the most comprehensive health reform legislation since the enactment of the Medicare and Medicaid program and perhaps even more significant than those programs. The Patient Protection Affordable Care Act was signed by the President on March 23, 2010. Then the Health Care and Education and Reconciliation Act of 2010 was signed into law on March 31, 2010. These sweeping reforms involve so many laws and areas of our healthcare system that it is impossible to discuss them in any one article, so this overview is only intended to give you some perspective on key areas. Subsequent articles in this advisory and future advisories will address specific issues. The reform legislation can be categorized into the following areas:

• Insurance Reforms and Exchanges. This area has perhaps received the most publicity; it is the individual and employer mandates for health insurance beginning January 1, 2014 and the establishment of state-based American Health Benefit Exchanges from which individuals and small businesses may purchase coverage. These changes do not go as far as the hotly debated public option but provide significant new mandates placed on insurance companies, employers and health plans.
• Public Coverage Programs. There are major changes to Medicare and Medicaid. One of the most public is the change to the Medicare Part D "donut hole". In addition, there is the development of a voluntary long term care insurance program that is referred to as "CLASS". Employers or employees will be able to contribute to this program through payroll deductions, similarly to the way they contribute to the Medicare program.
• Delivery System Reforms. Perhaps the changes that will make the most substantive differences, which have had the least attention, are the changes that will modify the way healthcare is delivered. Expect to hear about medical homes, accountable care organizations, collaborative care organizations, value based payments which are payments based on outcomes, episode groupers which combine separate but clinically related items and services into an episode of care for an individual, and bundled payments. Many of these reforms will be initiated through pilot programs, will most likely lead to additional legislation, and hopefully innovation in the healthcare system to provide more seamless, better quality of care to patients.
• Provider and Plan Payment Changes. Payment changes include an emphasis on primary care. Further notable is the prohibition against pre-existing coverage limitations. This prohibition starts for children as early as September 23, 2010. In addition, there are limitations on an insurance company's ability to terminate an insured once he or she is enrolled in the program for reasons other than fraud, non-payment, or termination of the plan.
• Fraud and Abuse. There are 32 new provisions that impact the enforcement of fraud and abuse laws. The provisions include limitations on Stark law exceptions, making a person who violates the anti-kickback statute liable without knowledge of, or specific intent to violate the anti-kickback statute, enhance penalties for non-compliance, new investigative powers, and mandatory compliance program requirements. Further, there are increased transparency requirements for healthcare providers such as providing notice to patients of physician ownership and hospitals' charges for items and services.
• Prevention and Wellness. The law will require all plans to offer an essential health benefits package. Exchange plans and Medicare plans must have certain preventive services. There is the establishment of a $15 billion Prevention and Public Health Fund to fund prevention, wellness and public health activities between FY 2010-2019. In particular, these funds will finance a newly established Community Transformation Grant Program to disseminate evidence based community preventive health activities.
• Financing. Many provisions have been passed to fund the expansion of services discussed above. But perhaps the most public part of the financing package is the tax on tanning salons!

As you can see, it will take months for those of us working in the healthcare area to understand all the ramifications of this health reform legislation and years for many parts of it to be implemented. This is a regulators' employment security bill because there will be an extraordinary amount of regulation issued to expand on the items in the health reform legislation.

Hang onto your hat! Working in the healthcare system has never been crazier!

The author may be contacted at ebrennan@dsda.com

Physician Disclosure

TENTH CIRCUIT ALLOWS INFORMED CONSENT CLAIM WHERE PHYSICIAN GIVES PATIENT FALSE ANSWERS TO QUESTIONS CONCERNING BACKGROUND AND EXPERIENCE

The U.S. Court of Appeals for the Tenth Circuit recently issued a decision that may have an overarching impact on suits against physicians for lack of informed consent. Miller v. Bender addressed a situation where a physician affirmatively gave false statements to direct patient questions concerning the physician's track record with certain medical procedures, whether the physician had ever been sued, whether he ever had medical licensure problems, and whether he had consulted the patient's previous surgeon. Applying Wyoming law, the Tenth Circuit held that while a physician does not have an affirmative duty to disclose "physician specific" information, he must answer truthfully when asked direct questions seeking concrete verifiable facts.

The patient claimed that had she known about the doctor's previous negative experiences with the procedures and lawsuits, she would not have allowed him to perform the procedure on her. The physician claimed that Wyoming's informed consent doctrine, known as the "professional standard," only imposes an affirmative duty upon physicians to fully disclose to the patients any serious risks involved in a procedure which the reasonable practitioner of like training would disclose in the same or similar circumstances. The physician claimed that because he was under no duty to divulge the information in the first place, the patient's informed consent cannot be challenged. The physician also argued that there was no proof his misrepresentations caused the patient an increased risk of injury. The court ultimately determined that the "professional standard" for informed consent does not allow a physic ian to give untruthful answers to direct questions asked by a patient related to the contemplated procedure.

The court's holding was very narrow, however, and only applies to misrepresentations about "physician-specific information in direct response" to patient questions about "concrete verifiable facts in the course of obtaining patient consent." It would not apply to the "doctor's subjective opinion or judgment as to the quality of his performance or abilities," such as "how good of a surgeon are you?"

Additionally, whether the misrepresentations cause increased risk of injury was held to be a question for a jury and the court remanded the case to the trial court to determine that issue.

The author may be contacted at jbullard@dsda.com

Antitrust

AT THE FOUR CORNERS OF ANTITRUST CHANGE

The antitrust laws and the healthcare industry have never been a comfortable fit. Hospitals and clinics and nursing homes do not operate or compete like widget manufacturers or giant corporations. When doctors or hospitals collude to deny competitors the right to compete and the consumer is hurt, there is antitrust injury and antitrust law will apply. But, antitrust laws are designed to protect competition, not individual competitors. Unlike many non-medical industries, even monopolist doctors and hospitals usually don't have the power to fix prices or reduce quality or input, which are absolutely necessary to show antitrust injury. In the healthcare industry, prices are usually determined by Medicare or by health insurers, so anti-competitive behavior may hurt individual physicians or providers, but may not adversely impact the consumer.

This was demonstrated in the recent Tenth Circuit Court of Appeals decision Four Corners Nephrology Associates, P.C. vs. Mercy Medical Center of Durango, 582 F.3d 1216, in which a Durango, Colorado hospital brought in a new physician to compete directly against a nephrology clinic operating in the market, and then closed the department, taking away the privileges of the competing physician. The competitor was based in Farmington, N.M., some 90 minutes away from Durango. By Mercy's actions, the competing nephrologist claimed to be effectively shut out of the Durango market since he could no longer admit patients to the only local hospital.

The nephrologist sued, claiming that Mercy used its monopoly over inpatient services to compete unfairly against him in the market. Citing recent U.S. Supreme Court antitrust decisions involving Trinko and Verizon, the Tenth Circuit said Mercy is not required to make its facilities available to its competitor. Mercy made a business investment to bring in the new physician, and it is entitled to protect its investment by closing the department and denying privileges to the competitor.

To demonstrate that the consumer was not injured by Mercy's action, the Court pointed out that there was no evidence that Mercy gained power to raise prices or reduce output and that there were now two nephrologists competing in the marketplace, all of which showed no harm to competition. The actions taken by Mercy, the Court said, were economically justified, being necessary to protect the fledgling practice of its new physician against the entrenched competitor.

These are hard economic times for healthcare providers. There are a myriad of regulatory, insurance-related and accreditation hoops that providers have to jump thorough to survive. But the Tenth Circuit is telling us that making your facilities available to your competitors is not one of those hoops. If you have a question about an action you are about to take or which is being taken by a competitor, take time to discuss the action with your attorney. The answer may be different than you thought it would be.

The author may be contacted at mlewis@dsda.com

Stark Law

Notice Requirements for Stark In-Office Ancillary Services Exception

The healthcare reform legislation amends the in-office ancillary service exception to the limitation on physician referral law, commonly known as the Stark law. The law generally prohibits physicians from referring patients to an entity in which the physician has a financial relationship for certain health services known as "designated health services" under the stark law unless the arrangement is covered by an exception. The in-office ancillary service exception generally allowed a physician to refer a patient for a service to be performed in the same group practice as the referring physician, as long as certain billing and location requirements were met.

The amendments require physicians to provide a patient with additional information when a physician makes a referral under the in-office ancillary services exception. The amended statute states that at the time of the referral, the physician must inform the patient that the patient may obtain the referred services from somewhere other than the group practice and must provide the patient with a list of providers who furnish such services near the patient's home.

The amendment states that the disclosure requirement applies to referrals for magnetic resonance imaging, computed tomography, positron emission tomography, and any other designated health services the Secretary of the Department of Health and Human Services ("DHHS") may determine to be appropriate.

The amendment states that its effective date is January 1, 2010. Accordingly, it is recommended that physicians who refer patients "in-office" for magnetic resonance imaging, computed tomography, positron emission tomography provide the notice immediately. DHHS is expected to issue regulations providing more specific requirements and adding more types of services for which the notification requirements will apply.

The author may be contacted at hvelandia@dsda.com

What's New

AnnouncementS

COBRA SUBSIDY EXPIRED MARCH 31

The COBRA subsidy had been extended to include persons involuntarily terminated through March 31, 2010. See article here.

There was much debate as to whether another extension would be signed. It was not. The measure to extend the COBRA subsidy to employees terminated after March 31, 2010, never made it to a vote. Employees terminated after March 31, 2010, will remain eligible for COBRA (as applicable) but will not be eligible for the 65% government subsidy.

Dates to Remember

Calendar of notable events

April 22, 2010

The 2010 Employer's Legal Resources Workshop will be held at Tulsa's Doubletree at Warren Place. Contact kbrightmire@dsda.com for more information.

April 22, 2010

Kristen L. Brightmire will be co-presenting with Rick Simpson and Julie Callahan of Mid-Continent Casualty Company on electronic record retention at TAHRA's April Learning Lab entitled The Paperless HR Department. For more information, click here.

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