1. fosterswift.com Legal Issues for the Medical Professional HFMA Western Michigan Mindi M. Johnson, Esq. September 16, 2015

2. HFMA Western Michigan September 16, 2015 Slide 2  2015, Foster Swift Collins & Smith, PC. Overview What we will cover: General legal issues involved in operating a medical practice Health care compliance issues Unique issues arising in health care transactions

3. HFMA Western Michigan September 16, 2015 Slide 3  2015, Foster Swift Collins & Smith, PC. General Legal Issues Employment/Human Resources Contracts Policies and Procedures Benefits and Compensation Litigation Corporate Matters

4. HFMA Western Michigan September 16, 2015 Slide 4  2015, Foster Swift Collins & Smith, PC. General Issues: Employment & HR Who makes up your workforce? W-2 Employees 1099 Contractors Leased Employees What difference does it make? Taxes, benefits, insurance Control Fraud & Abuse

5. HFMA Western Michigan September 16, 2015 Slide 5  2015, Foster Swift Collins & Smith, PC. General Issues: Contracts What agreements should you have with workforce members? Employment Non-competition/ Non-Solicitation What agreements should you have with suppliers and affiliates? Business Associate Confidentiality

6. HFMA Western Michigan September 16, 2015 Slide 6  2015, Foster Swift Collins & Smith, PC. General Issues: Contracts What are the important provisions in such agreements? Identity of Parties Term/Termination Compensation/Fair Market Value No requirement for referrals Confidentiality Notice/Assignment Change of Control Signatures

7. HFMA Western Michigan September 16, 2015 Slide 7  2015, Foster Swift Collins & Smith, PC. General Issues: Policies & Procedures Employee Handbook Equal Employment Opportunity Anti-Harassment Discipline Corporate Compliance Plan Legal Requirements Complaint Resolution System Assessment features

8. HFMA Western Michigan September 16, 2015 Slide 8  2015, Foster Swift Collins & Smith, PC. General Issues: Benefits & Compensation Compensation Physician Incentives Retirement Plans Testing Requirements Reporting and Disclosure Requirements Health and Welfare Plans

9. HFMA Western Michigan September 16, 2015 Slide 9  2015, Foster Swift Collins & Smith, PC. General Issues: Litigation Causes of Action Discrimination/Harassment Contract Disputes Malpractice Non-competition Prevention and Defense Insurance Documentation

10. HFMA Western Michigan September 16, 2015 Slide 10  2015, Foster Swift Collins & Smith, PC. General Issues: Corporate Matters State of Michigan Annual Reports Tax Returns and Benefit Plan Filings Board Meetings/Minutes Internal audits

11. HFMA Western Michigan September 16, 2015 Slide 11  2015, Foster Swift Collins & Smith, PC. Health Care Issues Importance HIPAA Fraud & Abuse Anti-Kickback Statute Stark Law False Claims Act Regulatory/Licensing Corporate Practice of Medicine

12. HFMA Western Michigan September 16, 2015 Slide 12  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Importance HIPAA Privacy/Security Enforcement Penalties: Criminal prosecution and civil monetary penalties Since 2003, the Office of Civil Rights has received over 118,900 HIPAA complaints. It has resolved 94% of those cases. The most common type of covered entity required to take corrective action is private practices. The most common compliance issues are: Impermissible uses and disclosures of PHI; Lack of safeguards of PHI; Lack of patient access to PHI; Lack of administrative safeguards of e-PHI; and Use or disclosure of more than the minimum necessary PHI.

13. HFMA Western Michigan September 16, 2015 Slide 13  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Importance Fraud & Abuse Monetary Penalties During FY 2014, the federal government won or negotiated over $2.3B in health care fraud judgments and settlements. It also attained additional administrative receipts that produced a total return of approximately $3.3B to the government or private persons. Since 1997, over $27.8B has been returned.

14. HFMA Western Michigan September 16, 2015 Slide 14  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Importance Fraud & Abuse Enforcement (FY 2014) Department of Justice prosecutors filed criminal charges in 496 cases involving 805 defendants. 734 defendants were convicted of health care fraud related crimes. DOJ opened 782 new civil health care fraud investigations and had 957 civil health care fraud matters pending at the end of the fiscal year. Office of Inspector General investigations resulted in 867 criminal actions and 529 civil actions. OIG excluded 4,017 individuals and entities.

15. HFMA Western Michigan September 16, 2015 Slide 15  2015, Foster Swift Collins & Smith, PC. Health Care Issues: HIPAA Privacy Rule: Establishes standards for the protection of PHI and gives patients rights concerning their PHI. Security Rule: Specifies important safeguards for the protection of the confidentiality, integrity and availability of e-PHI. Breach Notification Rule: Requires covered entities to notify affected individuals, HHS and the media, if applicable, concerning a breach of unsecured PHI.

16. HFMA Western Michigan September 16, 2015 Slide 16  2015, Foster Swift Collins & Smith, PC. Health Care Issues: HIPAA Who must comply with HIPAA? Covered Entities Business Associates

17. HFMA Western Michigan September 16, 2015 Slide 17  2015, Foster Swift Collins & Smith, PC. Health Care Issues: HIPAA Civil Monetary Penalties: Violations where it was not known or would not become known through the exercise of reasonable diligence: $100 per violation/ $25,000 annual cap Violations due to reasonable cause: $1,000 per violation/ $100,000 annual cap Violations due to willful neglect that are corrected within 30 days: $10,000 per violation/ $250,000 annual cap Violations due to willful neglect that are not corrected within 30 days: $50,000 per violation/ $1,500,000 annual cap

18. HFMA Western Michigan September 16, 2015 Slide 18  2015, Foster Swift Collins & Smith, PC. Health Care Issues: HIPAA Criminal Penalties: A person who knowingly obtains or discloses individually identifiable health information in violation of the Privacy Rule may face a criminal penalty of up to $50,000 and up to one-year imprisonment If the wrongful conduct involves false pretenses, penalties increase to $100,000 and up to five years' imprisonment If the wrongful conduct involves the intent to sell, transfer or use identifiable health information for commercial advantage, personal gain or malicious harm, penalties increase to $250,000 and up to 10 years' imprisonment

19. HFMA Western Michigan September 16, 2015 Slide 19  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Anti-Kickback Basic prohibition: The Anti-Kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. "Remuneration" includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. One Purpose Test: The statute covers arrangements where 1 purpose of the remuneration was to obtain money for referrals or to induce referrals.

20. HFMA Western Michigan September 16, 2015 Slide 20  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Anti-Kickback Penalties: Felony punishable by a maximum fine of $25,000, imprisonment up to five years, or both, civil monetary penalties of up to $50,000 per violation and civil assessment of up to three times the amount of the kickback.

21. HFMA Western Michigan September 16, 2015 Slide 21  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Anti-Kickback Safe Harbors are practices, defined by federal regulation, that are not subject to the Anti-Kickback statute because such practices would be unlikely to result in fraud or abuse. The safe harbors set forth conditions that, if met, assure entities involved of not being prosecuted or sanctioned for the arrangement if it precisely meets all of the conditions set forth in the safe harbor. Most often used safe harbors: Space/Equipment Rentals Personal Services and Management Contracts Employees Failure to satisfy a safe harbor does not automatically mean the arrangement violates the Anti-Kickback statute. Instead, the OIG must conduct an analysis of whether there is a risk for fraud and abuse. Intent is a key element of liability.

22. HFMA Western Michigan September 16, 2015 Slide 22  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Anti-Kickback Michigan Equivalents: Medicaid False Claims Act, MCL 400.604: A person who solicits, offers, or receives a kickback or bribe in connection with the furnishing of goods or services for which payment is or may be made in whole or in part pursuant to [the Medicaid program], who makes or receives the payment, or who receives a rebate of a fee or charge for referring an individual to another person for the furnishing of such goods and services is guilty of a felony, punishable by imprisonment for not more than 4 years, or by a fine of not more than $30,000.00, or both.

23. HFMA Western Michigan September 16, 2015 Slide 23  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Anti-Kickback Health Care False Claims Act, MCL 752.1004: A person who solicits, offers, pays, or receives a kickback or bribe in connection with the furnishing of goods or services for which payment is or may be made in whole or in part by a health care corporation or health care insurer, or who receives a rebate of a fee or charge for referring an individual to another person for the furnishing of health care benefits, is guilty of a felony, punishable by imprisonment for not more than 4 years, or by a fine of not more than $50,000.00, or both.

24. HFMA Western Michigan September 16, 2015 Slide 24  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Stark Basic prohibition: The physician self- referral statute prohibits: A physician from making referrals for certain designated health services ("DHS") payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship unless an exception applies; and The DHS entity from presenting or causing to be presented claims to Medicare for those referred services

25. HFMA Western Michigan September 16, 2015 Slide 25  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Stark DHS Clinical laboratory services Physical therapy services Occupational therapy services Certain radiology services Radiation therapy services and supplies DME and supplies Parenteral and enteral nutrients, equipment and supplies Prosthetics, orthotics and prosthetic devices and supplies Home health services Outpatient prescription drugs Inpatient and outpatient hospital services Outpatient speech-language pathology services

26. HFMA Western Michigan September 16, 2015 Slide 26  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Stark Penalties: Denial of payment, refund of payment, imposition of a $15,000 per service civil monetary penalty, program exclusion for knowing violations and civil assessments of up to three times the amount claimed.

27. HFMA Western Michigan September 16, 2015 Slide 27  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Stark Exceptions: The law establishes a number of specific exceptions for financial relationships that do not pose a risk of abuse. Failure to meet an exception results in a violation of the law and subjects the arrangement to prosecution. Common Exceptions: In-Office Ancillary Services Rental of office space or equipment Bona fide employee relationship Personal Services

28. HFMA Western Michigan September 16, 2015 Slide 28  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Stark Michigan equivalent: Public Health Code: Disciplinary action may be taken against a licensee for unprofessional conduct, which may include: A referral by a physician for a designated health service that violates the self-referral law. Refusing to accept a reasonable proportion of patients eligible for Medicaid and refusing to accept payment from Medicaid or Medicare as payment in full for a service for which the physician refers the individual and in which the physician has a financial interest. A requirement by a licensee other than a physician that an individual purchase or secure a drug, device, treatment, procedure, or service from another person, place, facility, or business in which the licensee has a financial interest.

29. HFMA Western Michigan September 16, 2015 Slide 29  2015, Foster Swift Collins & Smith, PC. Health Care Issues: False Claims Basic prohibition: The False Claims Act is violated by any person who, among other things: Knowingly presents, or causes to be presented, to the United States Government a false or fraudulent claim for payment or approval; Knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; Conspires to defraud the Government by getting a false or fraudulent claim paid or approved by the Government; or Knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government. Affordable Care Act 60 Day Rule: Imposes FCA liability for failure to report and refund an overpayment within 60 days of identification.

30. HFMA Western Michigan September 16, 2015 Slide 30  2015, Foster Swift Collins & Smith, PC. Health Care Issues: False Claims Penalties: Civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act Qui Tam Relators Who they are: private parties who may bring a False Claims Act action on behalf of the United States. Benefit: Qui Tam Relators may share in a percentage of the proceeds recovered (15%-30 %). Protection: Relators may not be discharged, demoted, suspended, threatened, harassed or discriminated against as a result of their involvement in an action under the False Claims Act.

31. HFMA Western Michigan September 16, 2015 Slide 31  2015, Foster Swift Collins & Smith, PC. Health Care Issues: False Claims Michigan Equivalents: Medicaid False Claims Act A person shall not make or present a claim for Medicaid benefits, knowing the claim to be false A person shall not make or present a claim for Medicaid benefits that he or she knows falsely represents that the goods or services were medically necessary A person shall not knowingly make, use, or cause to be made or used a false record or statement to conceal, avoid, or decrease an obligation to pay the state pertaining to a claim for Medicaid benefits A person who violates this section is guilty of a felony punishable by imprisonment for not more than 4 years or a fine of not more than $50,000.00, or both

32. HFMA Western Michigan September 16, 2015 Slide 32  2015, Foster Swift Collins & Smith, PC. Health Care Issues: False Claims Health Care False Claims Act: A person shall not enter into an agreement, combination, or conspiracy to defraud a health care corporation or health care insurer by making or presenting a false claim for payment of health care benefits. A person who violates this section is guilty of a felony, punishable by imprisonment for not more than 10 years, or by a fine of not more than $50,000.00, or both. Public Health Code: Disciplinary action may be taken against a licensee for unethical business practices, which may include fraud or deceit in obtaining or attempting to obtain third party reimbursement.

33. HFMA Western Michigan September 16, 2015 Slide 33  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Regulatory & Licensing Medicare Conditions of Participation State Administrative Rules Licensing Rules

34. HFMA Western Michigan September 16, 2015 Slide 34  2015, Foster Swift Collins & Smith, PC. Health Care Issues: Corporate Practice of Medicine Shareholder Licensure Requirement Employment of Physicians Nonprofit exception Management agreement concerns

35. HFMA Western Michigan September 16, 2015 Slide 35  2015, Foster Swift Collins & Smith, PC. Transactional Issues: Initial Considerations Types of Transactions Timeline/Documents Notices Due Diligence Integration

36. HFMA Western Michigan September 16, 2015 Slide 36  2015, Foster Swift Collins & Smith, PC. Transactional Issues: Initial Considerations Trending increase in health care mergers/acquisitions Reasons Affordable Care Act Economies of Scale Strategic considerations Succession planning Relationships are key

37. HFMA Western Michigan September 16, 2015 Slide 37  2015, Foster Swift Collins & Smith, PC. Transactional Issues: Types of Transactions Mergers Asset Deals Stock Deals Which transaction should be pursued? Desire for all assets Assumption of all liabilities Tax consequences Regulatory Notices Goals of the parties

38. HFMA Western Michigan September 16, 2015 Slide 38  2015, Foster Swift Collins & Smith, PC. Transactional Issues: Timeline/Documents Discussions – Letter of Intent Investigation – Due Diligence Reports Negotiation – Purchase Agreement Resolution of Conditions – Closing

39. HFMA Western Michigan September 16, 2015 Slide 39  2015, Foster Swift Collins & Smith, PC. Transactional Issues: Notices Pre-Closing v. Post-Closing Licensing Agencies Contractual Consents Employees General Public

40. HFMA Western Michigan September 16, 2015 Slide 40  2015, Foster Swift Collins & Smith, PC. Transactional Issues: Due Diligence Concerns General Due Diligence Checklist Material Agreements Physician Agreements Professional Advisory Committee Minutes Surveys/Plans of Correction Compliance Logs Self-Reports Litigation

41. HFMA Western Michigan September 16, 2015 Slide 41  2015, Foster Swift Collins & Smith, PC. Transactional Issues: Integration Staffing Locations HR Teams Benefits Branding

42. HFMA Western Michigan September 16, 2015 Slide 42  2015, Foster Swift Collins & Smith, PC. Questions? Mindi M. Johnson 1700 E. Beltline NE, Suite 200 Grand Rapids, MI 49525 (616) 726-2252 mjohnson@fosterswift.com

43. HFMA Western Michigan September 16, 2015 Slide 43  2015, Foster Swift Collins & Smith, PC. Disclaimer This presentation highlights specific areas of law. This communication is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation. The date of this presentation September 16, 2015. The law is subject to change after that date.