Health Care Law Professor Edward P. Richards LSU Law Center

Institutional Issues

3 Charitable Hospitals What is the social bargain behind charitable status of hospitals? What is competitive advantage of being a charitable hospital? What issues does this raise during a conversion to a for-profit hospital? Charitable immunity for torts and its demise

4 Who Benefits in Charitable Organizations? Who stands in the shoes of shareholders in overseeing the mission of charitable organizations? What is surplus? What is the inurnment problem? How do you decide if there is an inurnment problem? What are the constraints on joint ventures between charitable and for-profit organizations?

5 Charitable Purpose What is charitable purpose? Is a bigger better hospital a proper charitable purpose? Is more surplus? What are ways to measure community service? What should the IRS or state tax agencies look at in determining charitable purpose?

6 EMTALA How does EMTALA work? Who does it apply to? Is EMTALA a medical malpractice law? What is emergency care under EMTALA? Why does this pose a problem for chronic disease management? What are the government remedies for violations? What are the private remedies for violation? What incentives does EMTALA give hospitals in poor neighborhoods?

7 How does EMTALA Benefit Specialty Hospitals? What is the quality justification for specialty hospitals? What is the cost justification? How does EMTALA affect their economics in LA? What is the impact on community hospitals? What problems does this cause for health care in the community?

8 Theories of Tort Liability for Health Care Institutions Direct negligence Vicarious liability Employee? Control theories Ostensible agency Implied agency Apparent agency

9 ERISA What is ERISA? Why was health insurance included in ERISA? What competitive advantages does an ERISA qualified health plan have? Who regulates the plans - state or the feds? Affects on liability for medical necessity decisions? About coverage decisions, i.e., does the plan have to pay for things like experimental care? How do you tell the difference between a coverage decision and a medical necessity decision?

10 ERISA and Health Care Reform How does ERISA affect state efforts to create statewide access to health care? What was the Maryland Wal-Mart bill? Why did it run afoul of ERISA? What things can a state do that are not a problem for ERISA? What state actions will run afoul of ERISA Think about California and Massachusetts

11 Discrimination Law How does the ADA affect health care providers? What other discrimination laws do health care providers have to worry about? Explore the issues posed by an HIV or hepatitis B infected health care provider Explore the issues posed by an HIV or hepatitis B infected patient

12 Staff Privileges and Hospital–Physician Contracts What is the effect of removing a physician from the hospital medical staff? National Practitioner Database issues? Practice issues? What are the due process rights for physicians? Private hospitals? Public (government) hospitals? What legal claims might a physician make for improper termination? How did Congress limit these claims? Why did Congress limit these claims?

13 Labor and Employment What is employment at will? What is the NLRB? What can unionized physicians do that independent contractor physicians cannot do? Who can form a union? What is a bargaining unit? Why do hospitals hate unions? Discuss the limitations of whistleblower laws

Fraud and Abuse Are You Cheating the Government?

15 Conditions of Participation (COP) The contract between the providers and CMS If you do not comply with the COP you can be denied payment or excluded from the program If you knowingly violate the provisions of COP it can be grounds for false claims and criminal prosecution

16 What does the government care about? 1) Cost 2) Cost 3) Cost 4) Cost 5) Utilization (medical necessity) 6) Quality

17 Cost This is controlled directly The feds decide what they want to pay What are the constraints on pricing?

18 Utilization (Medical Necessity) What are the issues we have seen on medical necessity? Is the treatment needed? Is it experimental? Is it effective? Is it covered by the policy What are the political constraints on the government in setting utilization rules?

19 Quality Does the government care about quality? What about when quality and cost collide? Should patients have a right to cheaper, lower quality care? Does the federal government directly control quality? States? JCAHO?

20 Fraud Issues Was the care delivered at all? Durable medical equipment scams Billing for more care that was actually delivered Was the care necessary? Was the care unbundled? (Charging separately for care that should be one charge) Where kickbacks paid?

21 Related Laws General government contracting laws Mail and wire fraud RICO False Claims Act Statutory penalties - $5-11,000 per claim Treble damages (whichever is higher) Qui tam - private enforcement

22 Coding CPT codes - AMA Some are time based Others are work-based You get paid more for doing more It does not matter how long you take Levels 1-5 Is it better to see a lot of patients or do a lot to each you see?

23 Why use Codes? Uniform billing for all claims Equalize billing across specialties Provide incentives for more comprehensive care Allows computerized payment Allows tracking of medical information derived from claims forms

24 Upcoding Anything that increases the payment for the encounter Can be legal Optimizing coding Can be illegal Work that was not do, or work that was not properly documented Misstating the patient's medical condition

25 US v. Krizek, 111 F.3d 934 (D.C. Cir. 1997) The judge thinks the doc is a good guy Criticizes the crazy reimbursement system Let the doc put on evidence of standard billing practices to refute fraud charges Thinks the law is crazy because the feds can assess $81,000,000 in penalties

26 What did Krizek do wrong? Did he actually treat the patients? Was his treatment medically necessary? What were the issues in billing? Billed for minute time code for everyone Who did this What was the justification? Did the doc know?

27 Doc's Defense He really did spend the time, he just did not spend it all on the patient Lots of stuff you do in the office as part of the care

28 "Scienter" - What does the prosecutor have to show the Doc knew? Intent to defraud? Knowing that the claim is wrong but submitting it anyway? Why does the statute specifically say that there is no need to prove intent to defraud? What is the doc's certification problem?

29 District Court Ruling Found liability on the days when there were more than 12 codes for 50 minutes Thought that the doc was liable, but an unfortunate system

30 Appeals Court Makes it clear that reckless ignorance is wrong and grounds for liability under the Act Is not sympathetic to the doc's claimed slipshod accounting

31 Is Bad Care Fraud? What would make bad care fraudulent? What are you certifying when you bill for care?

32 Whistleblower Provisions Only protection if you bring suit Not a good protection Health care is a vindictive business Whistleblowers and folks who are not team players get screwed

33 Interesting Issues Bribes by device and drug companies Oncologists can make millions on the drugs they administer - should you care? PATH audits (medical schools) HCA/Tenant Health Care

34 Qui Tam Standing in the shoes of the government 15-20% Feds can march in May not apply to claims against states

Understanding Self-Referral Laws

36 Physicians as Fiduciaries Model Penal Code Informed consent law General principles Knowledge differential Power differential

37 Fiduciary Obligations The physician acts as purchasing agent for the patient Self-referral laws target incentives that encourage the physician to make certain decisions contrary to the patient's interests Order unnecessary care or tests Choose providers based on criteria other than the best interests of the patient

38 Why Does the Federal Government Care? They claim to care about quality FTC undermines this with talk about the right to buy cheap, crummy care They care a lot about costs Unnecessary care is wasted money and bad for the patient It is assumed that if a kickback is necessary, the care is either worse or more expensive

39 Problems with the Federal Bias The feds are only concerned with incentives to order more care or to steer care They do not care if there are incentives to deny care Big issue with HMOS and other structured plans Underlines the problem with consumer directed care

40 The General Self-Referral Laws There is broad statutory authority banning deals that create incentives to refer business These deals have to be analyzed to map out the cash flow to determine what incentives the physicians see

41 The Lease Scam Hospitals often own professional buildings Physicians in the professional are more likely to admit patients to the hospital Proximity Shared services Is the hospital providing incentives for physicians to be in their professional building? How do you put a fair market value on proximity?

42 The Recruitment Scam The hospital sees that there is a need for physicians with specific skills in the community The hospital recruits a physician with a relocation package Moving expenses Salary support for a period of time Does any of this obligate the physician to refer to that hospital? What if it is the only hospital in the community?

43 The Lab Scam There is a huge amount of money in medical lab tests Hence my skepticism about the real causes of defensive medicine Is the lab providing incentives to the physician? Direct kickbacks Subsidized services, like renting space in the physician's office Gifts - trips to the fishing camp

44 The Hospital Investment Scam Hospital wants to increase the flow of surgical patients Hospital sets up surgical suite as a separate corporation and sells surgeons shares Earnings are based on the capital contribution What is the impact of a admitting patients on the physician's return on investment?

45 The Practice Purchase Scam Hospital buys the physician's practice Hires the physicians to deliver care in the new hospital practice Is this really a sale or just a kickback scheme? How was the business valued? What are the terms for payment? Is any of the payment contingent on referrals?

46 The Stark Law Approach Stark has a list of 11 defined services Any deals that influence the ordering of these services are banned There are a series of safe harbors for transactions that are not thought to be abusive

47 Philosophy of Stark Simplify the law by clearly outlining the forbidden areas Create safe harbors that can be used as models

48 Problems with Stark Too much money in the forbidden areas Doc and hospitals go the extra yard to game the system Spotty to non-existent enforcement No clear boundaries Puts complying entities at a completive disadvantage

49 Exceptions to Stark Physician controlled ancillary services If the doc runs the lab and it is part of the practice, it is not covered by Stark What is the incentive? Is it even worse than for an outside lab?

50 Analyzing Stark Transactions Is it a covered service? Does it met the ancillary service exception? Is there any financial linkage between the provider and the referring doc?

51 The Integrated Provider Exception Integrated providers provide both medical and hospital and other services It is OK to tell employees where to refer patients You cannot pay employees a bonus for referrals, but they can share in the profits (gain share) Does this exception make any sense? Does it just provide a way for hospitals to avoid self-referral laws by buying physician's practices?

Antitrust

53 Fundamental Assumptions Competition is good Big is not bad Monopoly practices are bad People should be allowed to buy whatever quality they want The market will provide whatever is necessary

54 Market Organization Vertical markets Horizontal markets What is the market for services? Rural markets with limited providers Urban markets Are there specialized services?

55 Monopoly Power - What one Competitor Does What does monopoly power allow? Unilateral anticompetitive actions Tying

56 Joint Action Any time competitors make agreements that affect competition there is an antitrust question Professional standards can be anti-competitive vehicles Why are docs such a problem? Are labor unions an alternative?

57 Penalties Federal prosecution Criminal fines Prison time Civil enforcement by the FTC Fines Treble Damages Private enforcement Treble damages and attorney's fees

58 Per Se v. Rule of Reason Violations Per se violations only require proof of the violation, not the market power of the competitors or the effectiveness of the action Rule of reason violations require detailed market analysis The defendant is well on the way to winning if the court decides it is rule of reason

59 The Professional Standards Defense Is it a defense that the restraints improve patient care? Why does the FTC not care about quality? What are other controls on quality? Can you do group action through a professional organization? Is JCAHO an illegal conspiracy?

60 Per Se Violations Through Joint Action Group boycott Wilk - Chiropractor Indiana Federation of Dentists Market division agreements Price fixing

61 The Advertising Cases Lawyer advertising First case was advertising lower prices Then any truthful advertising Physicians Followed the lawyer cases

62 Physician Staff Privileges Cases How can staff privileges become an antitrust issue? Is peer review among competitors always an antitrust issue? How could the staff avoid this claim? What did the feds do to protect peer review? Federal Health Care Quality Improvement Act

63 How do Antitrust Issues Change with Health Care Consolidation? What can large group practices do that individual docs cannot do? How about hospitals buying physician practices? How does this affect competition?