Healthcare Law Attorneys - Oberheiden P.C.
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Healthcare Law Attorneys

Renowned Healthcare Law Attorneys

Our Healthcare Defense Team represents pharmacies, national hospital chains, national toxicology groups, spinal hardware and implant companies, individual medical providers as well as talented healthcare entrepreneurs.

Healthcare Compliance

Healthcare compliance is a tricky matter. Next to the atomic industry, no industry in the United States is as heavily regulated, monitored, and enforced as the national healthcare industry. With healthcare monies in excess of $15 billion, it is no surprise that Many healthcare service or marketing contract

In stark contrast to the sophistication of enforcement stands the level of naivety and unpreparedness observable throughout the industry. To this day, it is a widespread—and often fatal— misconception to believe that laconically adding some boilerplate sentences into a service contract (“The parties intend to comply with all laws” or “The fees in this contract reflect fair market value”) produces effective protection against regulatory investigation. In fact, our direct negotiations with the Department of Human and Health Services, the Office of Inspector General, and other healthcare enforcement specialists show that healthcare compliance requires careful planning and skillful drafting.

Making sure physicians and business owners successfully stand regulatory investigations is what we do every day.

Business Formation & Service Contracts

The first step of owning a successful business is the business’ proper formation. Beside the rather trivial filing of incorporation, we advise clients from different industries of how to best set up their business from an asset protection, personal liability, and tax perspective.

Those clients that already find themselves as members of LLCs, a P.A., or other business forms, we recommend to reevaluate their set up to avoid running afoul of the stringent corporate rules such as the prohibition against the corporate practice of medicine.

Often our Firm is asked to draft or review healthcare typical contracts. Among the most frequently requested and prepared contracts are:

  • Healthcare Service Contracts
  • Employment Contracts
  • Marketing Contracts
  • Purchase Contracts
  • Investment Contracts
  • Partnership Contracts

Ancillary Revenue: Physicians as Investors

The reality of shrinking reimbursements forces physicians to secure ancillary revenue. According to the Report of the Council on Ethical and Judicial Affairs, CEJA Report 1-I-08, AMA, physicians are allowed to participate in the open market as long as the patient care is not infringed:

“Physicians may lawfully enter into a variety of commercial and other relationships that can benefit both their patients and their own financial situation, including ownership or investment interests in specialty facilities or services.”

Nonetheless, some state legislators consider physician investments incompatible with the traditional ethos of serving the community as a healer. Because significant differences exist with respect to permissible and non-permissible physician investments, we recommend to have experienced lawyers review and advise on Private Placement Memoranda and other investment opportunities.

Our paperwork has proven to serve both, the entrepreneurial mindset of successful physicians as well as the laws regulating such activities. We have provided advice to hundreds of medical entities and providers.

Recent Advice to Physician-Investors Includes:

  • Physician Ownership in Surgery Center
  • Physician Ownership in Toxicology Laboratory
  • Physician Ownership in Pharmacy
  • Physician Ownership in Radiology Center
  • Physician Ownership in Device & Implant Company

Self-Referral Laws

Under what circumstances can physicians have a financial interest such as ownership in an entity to which those physicians refer patients? May a physician refer patients to an X-ray facility that this physician partially owns? Can surgeons make money on their physical therapy referrals? More generally, when can physicians financially benefit from their referrals?

The answer, as so often, depends. Not just State laws vary widely in their application. For example, Arizona’s self-referral law applies only to medical doctors and surgeons, while California’s Stark laws include all healing arts. Another common distinction is the type of service or activity contemplated. For example, Montana’s self-referral law specifically prohibits medical practitioners from owning pharmacies, but Montana law does not, for example, prohibit physicians to own surgery centers, implant companies, or clinical laboratories.

Designated health services (DHS) in this context include clinical laboratory services, physical and occupational therapy, radiology services, durable medical equipment and supplies prosthetics, orthotics and prosthetic devices and supplies, home health services, outpatient prescription drugs, inpatient and outpatient hospital services.

A “financial relationship” can consist of a direct or indirect ownership or investment interest in, or a compensation arrangement with, a DHS Entity. A “direct” financial relationship exists if remuneration passes between a referring physician and the DHS Entity without any intervening persons or entities. By contrast, an “indirect” financial relationship consists of an unbroken chain of either ownership and investment interests or compensation arrangements between the referring physician and the DHS Entity.

By way of simplification, three types of self-referral standards can be distinguished.

Category 1 Category 2 Category 3
No or very minor state law prohibition against physician self-referrals. Some restrictions, but overall similar to federal law. Strong restrictions.
Representative States:
  • Alabama
  • Arkansas
  • Nebraska
Representative States:
  • Georgia
  • Louisiana
  • Texas
Representative States:
  • California
  • New Jersey
  • Nevada

Solid knowledge about self-referral restrictions helps both the physician and the business partner to effectively target those states with low or no self-referral restrictions. Literally every day, our Firm advises physicians and healthcare companies across the country to find optimal solutions to their self-referral concerns.

Our Proven Self-Referral Analysis Includes:

  • The exact contours of self-referral restrictions
  • Proven loopholes without circumventing the law
  • Proper documentation to protect all parties
  • Professional disclosure protocols to facility and patients

Anti-kickback Issues

The Federal Anti-Kickback Statute makes it a felony to knowingly and willfully offer, pay, solicit, or receive remuneration, directly or indirectly, in order to induce business that is reimbursable under any federal healthcare program, cf. 42 U.S.C. § 1320a-7b(b).

Violations of the Anti-Kickback Statute are among the most common allegations in governmental investigations and physician disciplinary proceedings and board actions. Violations of the Anti-Kickback Statute require two elements: For a violation, remuneration between the parties and illegal intent.

Renumeration Requirement

Remuneration includes virtually anything of value. Thus, once any form of remuneration such as gifts, rebates, cash, donations, or consulting fees are offered between parties, the Anti-Kickback Statute is implied. In fact, courts have taken an extremely broad interpretation of its scope, holding that the statute may be violated if merely one purpose of a payment arrangement is to induce referrals. U.S. v. Greber, 760 F.2d 68 (3rd Cir. 1985).

Because literally any form of payment or financial benefit to a physician constitutes “Remuneration” and thus opens the scope of the Anti-Kickback Statute, it is critical to disprove to the government and its agencies the existence of bad intent behind the remuneration.

Intent Requirement

As stated, an illegal intent to induce or reward referrals or to purchase, lease, order, or arrange for, or recommend the purchasing, leasing, or ordering of any good, facility, or service that may be paid for by a government healthcare program must co-exist with remuneration.

Importantly, under the new Patient Protection and Affordable Care Act (PPACA), the government is no longer required to show that a defendant specifically knew that the behavior was unlawful. See, United States v. Mathur, 2012 WL 4742833 (D. Nev. 2012). Thus, a person does no longer need not have actual knowledge of the Anti-Kickback Statute or a specific intent to commit a violation of the Anti-Kickback Law anymore. See, 42 U.S.C. 1320a-7b(h). The purpose of the PPACA was to lower the intent standard to make it easier for the government to prove illegal intent. Whether or not intent actually existed is left to judge or jury, see U.S. v. Bradford Regional Medical Center, W.D. Pennsylvania).

In light of these highly practical changes, it is imperative that the parties demonstrate clear and good intent since any form of knowledge and awareness of a wrongdoing can now be held against the parties.

Safe Harbors

The Anti-kickback statute contains several so-called safe harbors whereby arrangements that appear to violate the Anti-Kickback Statute on its face would be exempt from sanction because the arrangements do not violate the spirit of the law after all. Put differently, the satisfaction of a safe harbor demonstrates “good intent.

The U.S. Department of Health and Human Services (“HHS”) has promulgated a number of “safe harbor” regulations that outline lawful business arrangements between physicians and non-physicians. While strict compliance with a safe harbor provides comfort that an arrangement will not violate the law, compliance with the safe harbors is optional and failure to fit within a safe harbor does not per se mean an arrangement is illegal.

Recognized Safe Harbors Include:

  • Space rental agreements
  • Equipment rental contracts
  • Personal services and management contracts
  • Referral services
  • Compensation to legitimate employees
  • Group purchasing organizations
  • Price reductions offered to health plans
  • Ambulatory surgical centers
  • Electronic health records items and service

Among the most frequently used safe harbor provisions is the so-called safe harbor that allows physicians to make investments in facilities to which these physicians refer their patients. This so-called small investment safe harbor protects the return on an investment made to an investor as long as various standards are met. One such standard limits the investment to that no more than 40% of the value of each class of investment interests may be held by investors who are in a position to make or influence referrals to, or furnish items or services to, the entity and a requirement that not more than 40% of the entity’s gross revenues related to the furnishing of healthcare items and services come from referrals or business otherwise generated by investors, See 42 C.F.R. § 1001.952(a)(2). Another standard requires that the terms on which an investment interest is offered to a passive investor who is in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity must be no different from the terms offered to other passive investors.

Routinely, we advise clients from all parts of the healthcare industry on how to construct a business arrangement within the constraints of safe harbor provisions.

We Demonstrate

  • How to meet Safe Harbor requirements
  • How to evaluate fair market value
  • How to avoid personal liability
  • How to set up a corporate compliance program
  • How to meet the Intent Requirement

Physician Distributorships (PODs)

One of the current hot topics in healthcare discussions are physician owned distributorships, often referred to as “PODs.” The Office of Inspector General (OIG) has expressed concerns about physician-owned joint ventures, although it has also issued a regulatory “Safe Harbor” to permit limited physician ownership of joint ventures. In the 2012 OIG Work Plan, for example, the OIG identified physician-owned distributorships of orthopaedic devices, particularly spine devices, as an area of concern. More recently, the OIG issued a Special Alert calling certain physician owned distributorships “inherently suspect”.

Consequently, these joint ventures, which initially will derive most of their revenues from Physician-Investors’ referrals, may result in some risk under the Anti-Kickback Statute. However, we have developed forward-looking recommendations to our clients that may significantly mitigate exposure and risk.

Our Firm represents both, physicians as well as POD organizing and managing business owners in a variety of states and different settings. Those spine and orthopeadic surgeons that contemplate joining a POD or would like experienced counsel to analyze and review their current POD organization should contact our Firm for a free initial consultation.

HIPAA Compliance

If one can speak of a “trend” in contemporary healthcare enforcement, investigations for breaches and violations of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) would certainly take a prominent place.

State and federal governments have drastically increased the monitoring and enforcement of deviations from the national standards that HIPAA and its state equivalent laws aim at establishing. The hectic nature of most clinics makes it easy for the government to identify and prove the accidental sharing of medical information with unauthorized parties. In light of this climate, it is important for clinic owners and staff to know the exact contours and boundaries when dealing with and exchanging sensitive health information.

The practice of our Firm shows a paradox. Virtually every healthcare provider is aware of the existence of HIPPA. Nonetheless, only little effort is spent on establishing some simple mechanisms that protect the physician and the clinic against HIPAA breaches and liability resulting from there. More so, most clinics, we find, our not adequately prepared to meet the high standards that the government expects to be in place. Notably, HIPAA violations are felonies and punishable by severe monetary penalties or even imprisonment.

Our HIPAA Compliance Manual Includes:

  • Provide Appropriate Paperwork
  • Create Disclosure Protocols
  • Advise on Business Associate Agreements
  • Explore Permitted Use Practice
  • Provide Mandatory HIPAA Compliance Training to Staff
  • Monitor Legal Changes

Benefits of a Compliance Program

In light of the severe penalties for HIPAA breaches and, more generally, violations of healthcare regulations, it is highly advisable for physicians and clinic owners to create a line of defense against the government. Clearly, the most recognized and the simplest way to protect is to enact a compliance program.

What are the advantages of a Corporate Compliance Program? Virtually all parties in litigation or before OIG claim that they did not have a bad intent. They know that if the underlying purpose of the arrangement between physicians and healthcare entities is simply to induce or reward referrals or business, the arrangement is likely unlawful. However, these parties almost never have anything to substantiate their position. Why would the government believe them if they have no document, no records, and no policy in place that supports their good intent theory?

From our dealings with senior OIG officers we have learned firsthand the impact a compliance program has on a positive case resolution. When it comes to compliance, nothing beats a corporate compliance program. Our compliance programs consist of five components:

  • Teaching
  • Implementing
  • Documenting
  • Monitoring
  • Enforcement

A compliance program is not a carte blanche that invites reckless behavior. However, the existence of a legitimate compliance program creates as very strong indication of good intent. OIG understands that the parties actually cared. A construction of criminal intent is then almost impossible.

When our Firm is called to establish compliance programs, we first assess the situation and evaluate the missing pieces. Then, the actual program begins by teaching all staff, employees and management alike, the fundamentals of compliance for their respective industry. We outline the rules and make sure that management implements them. All seminars and changes are properly documented and then continuously monitored. Depending on the arrangement with the client, we occasionally also assist in enforcing the rules by providing on site compliance officers or contact personnel. Often, such staff consists of former OIG or FBI agents thus rendering the compliance program utmost credibility.

Thus, compliance is not a lottery, but an act of careful planning.

Our Firm has the documents and success rates to navigate you and your company before and during healthcare investigations. Contact us today.

Not all attorneys of Oberheiden, P.C. are licensed in California and nothing contained in here is meant to constitute the unauthorized practice of law.

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