Friday, August 31, 2007

BLS Survey Finds 60% Of Private Employers Offered Health Insurance To Their Employees In March 2007; Physicians Hourly Pay Ranking Increased

[Source: Health Lawyers Weekly, August 31, 2007]

Sixty percent of private employers offered health insurance to their employees in March 2007 and more employees had access to health insurance plans (71%) than to retirement plans (61%), according to a new report released August 22 by the Bureau of Labor Statistics (BLS).

The report, National Compensation Survey: Employee Benefits in Private Industry in the United States, March 2007, presents data collected from the survey on the incidence and key provisions of these and other employee benefit plans by a variety of employer and employee characteristics and for various geographic areas.

Among the key findings in the report are the following:
  • Firms employing fewer than 100 employees were less likely to offer medical care plans (59%) than larger firms (93%).
  • Firms employing fewer than 100 employees also were less likely to offer retirement plans (approximately 45%) than larger firms (approximately 85%).
  • Of the 71% of employees in private industry that had access to medical care plans, 52% participated in a plan.
  • Of the 61% of employees in private industry that had access to retirement plans, 51% participated in at least one type of retirement plan (20% in defined benefits plans, 43% in defined contribution plans, and some employees participating in both types).
  • Employee contributions for medical care premiums averaged $81.37 per month for single coverage and $312.78 per month for family coverage.
  • Employer premiums for medical care plans averaged $293.25 a month per participant for single coverage and $664.04 for family coverage; on average, employers paid 81% of that premium for single coverage and 71% of the premium for family coverage.

In addition to presenting data on access to and participation in benefit plans, the report also includes tables and charts summarizing data on other employee benefits.

BLS also released August 29 an unrelated analysis based on data from its National Compensation Survey that found that twelve of twenty occupations with the highest hourly pay in 1997 remained in the top twenty in 2005, and of those twelve, physicians had the largest upward change in ranking, moving from twelfth place in 1997 to fourth place in 2005.

The analysis, Changes in Occupational Ranking and Hourly Earnings, 1997-2005, also said the median percentage change in hourly pay for these twelve occupations was 32%, with a percentage increase of 63.6% for physicians.

Read BLS’ report on employee benefits in private industry.

Read BLS' occupational ranking and hourly earnings analysis.

Tennessee Supreme Court Finds Physician Did Not Anticipatorily Breach Noncompete Provision

[Source: Health Lawyers Weekly, August 31, 2007]

A physician did not anticipatorily repudiate a noncompete covenant in her employment contract with a medical practice when she expressed an ongoing desire to exercise the agreement’s buy-out option, the Tennessee Supreme Court ruled August 20.

Plaintiff Val Y. Vogt, M.D., a urogynecologist, entered into an employment agreement with UT Medical Group, Inc. (UTMG), a not-for-profit organization in which faculty members of the University of Tennessee Medical School practice medicine privately.

The agreement included a noncompete provision that restricted Vogt from practicing within a 150-mile radius of Shelby County, Tennessee for one year. The provision also provided a "buy-out" provision that would allow Vogt to practice in the restricted area.

Vogt eventually informed UTMG’s chief medical officer that she planned to resign her position on March 12, 2004. In a subsequent follow-up email, Vogt indicated that she planned “to engage in the practice of medicine locally” and wished to discuss the buy-out option.

When the parties failed to reach an agreement on the buy-out amount, UTMG sued Vogt claiming she had committed an anticipatory breach of the agreement and seeking declaratory and injunctive relief.

Several physicians who were going to practice with Vogt intervened in the action, alleging UTMG unlawfully restrained trade and unlawfully interfered with the medical treatment of their patients, among other things.

The intervenors eventually settled with UTMG, which prevented them from practicing with Vogt until March 12, 2005.

Vogt, who consistently had sought to exercise the buy-out option, then informed the court that she was not going to practice medicine in Shelby County and instead had found employment far outside the restricted area in Indianapolis, Indiana.

The trial court dismissed UTMG’s suit, finding it failed to present a continuing controversy. The appeals court reversed, holding the trial court should have allowed UTMG more time for discovery.

The Tennessee Supreme Court reversed, holding Vogt did not commit an anticipatory repudiation of the agreement and therefore no justiciable controversy was ever before the trial court.

UTMG based its anticipatory repudiation claim on Vogt’s email correspondence indicating she planned to practice medicine locally and evidence that she had leased office space.
The high court found neither of these pieces of evidence demonstrated an anticipatory contract breach.

In the email, as well as throughout subsequent dealings, Vogt indicated her desire to exercise the buy-out option, as specifically allowed under the contract, the high court noted.
According to the high court, the lease only showed that Vogt was considering practicing medicine in the restricted area and must also be considered in light of her ongoing intentions to pursue the buy-out option.

Because Vogt did not commit an anticipatory breach, UTMG failed to present a justiciable controversy.

UT Med. Group, Inc. v. Vogt, No. W2005-00256-SC-R11-CV (Tenn. Aug. 20, 2007).

Wednesday, August 29, 2007

CMS Posts Revision to Stark Law

[Sources: Health and Life Sciences Daily, August 28, 2007]

Modern Healthcare (8/28, Blesch) reports that the CMS "has posted to its Web site the long and anxiously awaited final rule that interprets the Stark law prohibitions and exceptions governing referrals that physicians make to entities in which they have a financial stake." In its summary, the CMS writes, "In general, in response to public comments, in this Phase 3 final rule, we have reduced the regulatory burden on the healthcare industry." Modern Healthcare continues, "Healthcare lawyers scrutinized the 516-page document (pdf) as soon as it appeared. ... One hot spot is the fate of what for six years has been a fairly broad exception for indirect compensation, which protects arrangements in which payment flows to a professional corporation rather than directly to physicians." Under Phase 3, "many arrangements that used to be considered indirect will be looked at as direct, making it much more difficult to structure them as safe under Stark. The section pertaining to indirect compensation includes a grandfather clause that allows the terms of current contracts to play out before they would have to be restructured."

Update from Health Lawyers Weekly (here)

TN Definitions: Nurses vs. Physician Assistants

A “physician assistant” is an individual who renders diagnostic or therapeutic services that constitute the practice of medicine and that, but for the provisions of Tenn. Code Ann. §§ 63-6-204 and 63-9-113, could only be performed by a licensed physician. Tenn. Code Ann. § 63-19-102(5). A “certified nurse practitioner” is a registered nurse who is certified by the Board of Nursing pursuant to Tenn. Code Ann. §§ 63-7-123 and 63-7-207(14), and who has been issued a certificate of fitness by the Board of Nursing. Tenn. Comp. R. & Regs. 0880-6-.01(1). An “advanced practice nurse” is a registered nurse with a master’s degree or higher in a nursing specialty and national specialty certification as a nurse practitioner, nurse anesthetist, nurse midwife, or clinical nurse specialist. Tenn. Code Ann. § 63-7-126(a).

Readings on the Regulation of Nonphysician Providers

For a comprehensive analysis of the legal issues relating to nonphysician providers, see Lori B. Andrews, The Shadow Health Care System: Regulation of Alternative Health Care Providers, 32 Hous. L. Rev. 1273 (1996).

Readings on Telemedicine

For an analysis of the Federation of State Medical Boards' Model Act to Regulate the Practice of Medicine Across State Lines (1996) and telemedicine in general, see

Center for Telemedicine Law, Telemedicine and Interstate Licensure: Findings and Recommendations of the CTL Licensure Taks Force 73 N.D.L.Rev. 109 (1997);

Alison M. Sulentic, Crossing Borders: The Licensure of Interstate Telemedicine Practitioners, 25 J. Legis. 1 (1999).

Saturday, August 25, 2007

Amanda Lynn DeWald, and husband, Thomas B. DeWald v. HCA Health Services of Tennessee, Inc., d/b/a Stonecrest Medical Center, and Adrian Lamballe

Amanda Lynn DeWald, and husband, Thomas B. DeWald v. HCA Health Services of Tennessee, Inc., d/b/a Stonecrest Medical Center, and Adrian Lamballe - M2006-02369-COA-R9-CV View Rutherford County - This Tenn. R. App. P. 9 interlocutory appeal concerns a hospital’s liability for the alleged negligence of a radiologist with staff privileges at the hospital, based upon the theory of apparent agency. The trial court overruled the hospital’s motion for summary judgment on the issue of apparent agency, but granted the hospital permission to appeal pursuant to Tenn. R. App. P. 9. Because the steps taken by the hospital to disavow that the radiologist was an agent of the hospital were sufficient to preclude the plaintiffs’ claims based on apparent agency, we reverse the trial court’s order denying summary judgment.

In Re: Estate of Jewell B. Green v. Carthage General Hospital, Inc.

In Re: Estate of Jewell B. Green v. Carthage General Hospital, Inc. - M2006-01489-COA-R3-CV VIew Smith County - A hospital filed a claim for unpaid services provided to decedent. The decedent’s estate filed an exception asserting, inter alia, that the claim was void because it was filed by a nonlawyer officer or employee of the nonprofit corporation hospital. The trial court struck the claim, finding it void. We hold the filing of a claim by a nonlawyer is not the unauthorized practice of law because it does not require the professional judgment of a lawyer. Accordingly, we reverse the trial court.

Jeffrey R. McMahan vs. Sevier County

Jeffrey R. McMahan vs. Sevier County, et al - E2005-02028-COA-R3-CV ViewSevier County - The plaintiff’s complaint was filed April 20, 2004. In its present posture, this medical malpractice case involves the claim of the plaintiff, Jeffrey R. McMahan, that his left leg had to be amputated as a result of the malpractice of John D. Watson, M.D.; Southeastern Emergency Physicians, Inc. (“SEP”); Fort Sanders Regional Medical Center (“Ft. Sanders Knoxville”); and Fort Sanders Sevier Medical Center (“Ft. Sanders Sevier”). Each of these defendants filed a motion to dismiss. The two sides filed material in support of their respective positions, after which the trial court heard oral argument. Later, the court entered an order dismissing the plaintiff’s complaint. The sole issue is whether the defendants are entitled to summary judgment based upon their claim that the plaintiff’s complaint was filed outside the period of the applicable statute of limitations. We hold that the material relied upon by the defendants fails to establish the absence of a genuine issue of material fact as to whether the plaintiff “discover[ed], or in the exercise of reasonable care and diligence for his own health and welfare, should have discovered the resulting injury,” see Teeters v. Currey, 518 S.W.2d 512, 517 (Tenn. 1974), more than one year before the date of filing of the original complaint. Accordingly, we vacate the trial court’s grant of summary judgment and remand for further proceedings.

Thursday, August 16, 2007

Study indicates that prescription-drug ads may spur positive changes in health behavior

[Source: Health and Life Sciences Law Daily, August 14, 2007]

In the Wall Street Journal (8/13) Health Blog, Jacob Goldstein reported, "Those ads for prescription medicines may be doing some unexpected good. A recent study suggests some direct-to-consumer drug ads may spur people to change their health behavior for the better, even if they never buy what the drug companies are selling." Goldstein continued, "While health-boosting side effects may help consumers, we can't figure out whether this is good news for the drug industry." In a study to be published in a forthcoming issue of the Journal of Political Economy, Alan Mathios of Cornell University "found that people who read more magazine ads for nicotine gums and patches (sold to help smokers quit) were more likely to actually quit than people who read fewer of the ads." This finding "held true whether or not the people bought the advertised products."

FDA considers expanding compassionate-use exemptions for experimental drugs

[Source: Health and Life Sciences Law Daily, August 14, 2007]

Congressional Quarterly (8/13, Adams) reported that advocates for "terminally ill patients seeking treatments not yet approved by the Food and Drug Administration argue that a recent court ruling may amount to a virtual death sentence for some of their number." In that decision, the U.S. Court of Appeals for the District of Columbia "found that the Abigail Alliance for Better Access to Developmental Drugs had no legal basis to overlook FDA strictures on drugs not yet approved for the market." CQ continued, "FDA Commissioner Andrew von Eschenbach says that the agency is now considering expanding its policy on compassionate-use exemptions. ... Meanwhile, the FDA continues to crack down on cancer patients looking for alternative treatments beyond its regulatory reach. Earlier this summer, FDA officials forced Web sites to stop selling a chemical known as dichloroacetate that is not approved for treatment but that a Canadian researcher believes can mitigate -- and possibly cure -- the spread of lung and breast cancer without harming normal cells."

Abigail Alliance members call for Congress to pass the Access Act. In a commentary appearing in the Wall Street Journal (8/14, A17), Ronald Trowbridge and Steven Walker, both with the Abigail Alliance, write, "Last week, the full D.C. Circuit Court of Appeals reversed an earlier decision by its own three-judge panel and ruled 8-2 against a dying patient's right to pursue life by taking investigational -- but as yet FDA-unapproved -- drugs." They continue, "The FDA responded to our lawsuit by proposing 'new' regulations governing access to investigational drugs. They propose to change nothing." The two men conclude, "We will appeal the decision in Abigail Alliance v. Eschenbach (pdf) to the Supreme Court, and agree with only one thing in the majority opinion. Congress should pass our pending legislation, called the Access Act (pdf), now. It should be added to the FDA reauthorization bill headed for a vote in September. This is massive human tragedy, made even worse by the fact that it didn't and doesn't have to be this way. Looking at FDA automatons and the D.C. Circuit Court brings to mind T. S. Eliot's question, 'Where is the wisdom we have lost in knowledge?'"

Related Materials:
- S.1956 ("Access Act")
- See this post relating to the case mentioned above: "D.C. appeals court rules terminally ill lack constitutional right to experimental medicines"

Wednesday, August 8, 2007

Medicare Won’t Pay Hospitals To Remedy Mistakes

[Source: Wall Street Journal: Health Blog, posted by Theo Francis, August 8, 2007]

In one of the darker ironies in American health care, hospitals are often paid extra to treat the problems that arise when they make mistakes. Starting late next year, Medicare won’t pay for treatment for some conditions associated with screw-ups.

Under a little-noticed new rulebook that came down last week, Medicare will return the bill unpaid for care to solve these problems:
  • Bed-sores
  • Two kinds of catheter-associated infections
  • Air embolism, or bubbles of air or gas entering the bloodstream during medical procedures
  • Mediastinitis (infection of the area between the lungs) after coronary bypass surgery
  • Giving patients the wrong blood type
  • Leaving objects inside surgery patients
  • In-hospital falls

The government estimates its direct savings at about $20 million a year, and Medicare has said hospitals can’t turn around and stick patients with the tab. Other insurers are likely to follow suit, and hospitals may well do a better job for all patients, not just those on Medicare, say some advocates of the new rules.

Report: Hospitals Employing Physicians in Greater Numbers

Merritt, Hawkins & Associates

(NewsRx.com) -- A growing number of hospitals are employing physicians, according to a new report tracking physician recruiting trends.

The 2007 Review of Physician Recruiting Incentives, prepared by Merritt, Hawkins & Associates, a national physician search and consulting firm, examines over 3,000 recruiting assignments the firm conducted from April 1, 2006 to March 31, 2007. Hospitals offered employment to physicians in 43 percent of the searches the firm conducted during that time, up from just 23 percent the prior year and 19 percent the year before that. Traditionally, executives with the firm note, physicians have practiced as independent contractors or as employees of medical groups that are physician owned. The growing number of hospitals employing physicians signals a shift in this traditional practice paradigm.

"Physicians have long prized their independence," observes Joseph Hawkins, chief executive officer of Merritt, Hawkins & Associates. "But today they are more willing to exchange independence for the security and convenience of hospital employment."

According to Hawkins, physicians are accepting employed positions with hospitals in order to avoid the hassles of private practice, which include high malpractice premiums and struggles for reimbursement. Younger physicians in particular, he notes, are less willing to "hang up a shingle" and practice on their own. Hospitals, which went through a phase of employing mostly primary care physicians in the 1990s, are employing both primary care doctors and specialists today. Employment helps secure physician loyalty to hospitals, Hawkins says, and reduces direct competition between physicians and hospitals for medical procedures and tests.

Merritt, Hawkins & Associates' 2007 Review of Physician Recruiting Incentives also reflects a steady increase in demand for primary care physicians, including general internists, family practitioners and pediatricians. The number of searches the firm conducted for general internists increased by 120 percent from 2003 to 2007. Searches for family practitioners increased by 84 percent in the same time frame while searches for pediatricians increased by 21 percent. Hawkins attributes openings in primary care to the fact that fewer medical students are choosing to practice family medicine and internal medicine, diminishing supply. Meanwhile, a growing and aging population is driving up demand for medical services performed by primary care doctors.

The report indicates that the financial incentives offered to recruit physicians continue to increase, reflecting robust demand for doctors in most specialties. Specialties seeing the greatest increase in income offers over the past year according to the report include urologists, otolaryngologists, cardiologists, orthopedic surgeons, emergency medicine physicians and family practitioners. The report also shows that signing bonuses have become a standard incentive offered in 72 percent of the searches Merritt, Hawkins & Associates conducted last year, up from 46 percent two years ago. Signing bonuses can range from as little as $5,000 to as much as $100,000, the report shows.

Merritt, Hawkins & Associates' 2007 Review of Physician Recruitment Incentives represents the 14th annual report the firm has completed tracking physician recruiting trends. The report may be viewed online by visiting the firm's Web site, www.merritthawkins.com.

Generics may help curb rising costs of prescription drugs

[Source: Health and Life Sciences Daily, August 8, 2007]

On its front page, the New York Times (8/8, A1, Saul) reports, "A quiet coup is taking place in American medicine cabinets." Although the "nation currently spends $275 billion a year on prescription medicines," analysts forecast that within the five years, Americans will see "a golden era for generic drugs, as patents begin to expire on brand-name medications with more than $60 billion in combined annual sales. That will open the door to copycats that may be 30 percent to 80 percent cheaper." Laizer Kornwasser, an executive for Medco Health Solutions, which manages prescription drug plans, says that America is "just in the beginning of the tidal wave" of generic drugs. While some experts worry that the brand-name companies are suffering "from a systemic decline in productivity," Caroline Loew, senior vice president for scientific and regulatory affairs for the Pharmaceutical Research and Manufacturers of America, said that she didn't think the group "would support the contention that there's a lull" in innovation because of the generics. She said, "The companies are tackling diseases that are extremely complex. The biological mechanisms are very poorly understood. By definition, that sort of science, which is very much emerging science, is going to take longer." The Times notes, "One way the pharmaceutical industry is working to counter the generic trend is through its own generic subsidiaries and contracts for the production of company authorized generics."

See here for additional information from the Wall Street Journal.

D.C. appeals court rules terminally ill lack constitutional right to experimental medicines

[Source: Health and Life Sciences Daily, August 8, 2007]

The New York Times (8/8, A12, Pollack) reports, "A federal appeals court ruled yesterday that patients with terminal illnesses do not have a constitutional right to use medicines that have not yet won regulatory approval. The 8-to-2 decision by the Court of Appeals for the District of Columbia Circuit came in a closely watched and emotional case that pitted desperate patients willing to try unproven, even risky, therapies against those arguing that drugs should be proved safe and effective before they are made available." The case was filed against the FDA "in 2003 by the Abigail Alliance for Better Access to Developmental Drugs," which "argued that forcing patients to wait years for a drug to go through the process of clinical trials deprived dying patients of their right to self-defense, and violated the Fifth Amendment clause stating that people cannot be deprived of life, liberty or property without due process of law." Judge Thomas B. Griffith, writing for the majority, said that "a right to experimental drugs was not deeply rooted in the nation's history and tradition."

The Wall Street Journal /AP (8/8, D2) notes that Judge Griffith also said, "Terminally ill patients desperately need curative treatments," but "their deaths can certainly be hastened by the use of a potentially toxic drug with no proven therapeutic benefit."

The Los Angeles Times (8/8, Savage) adds, "Julie Zawisza, an FDA spokeswoman, said the agency was pleased with the ruling because it upheld the agency's 'role in facilitating appropriate treatment access to investigational therapies while at the same time protecting the public at large by requiring that drugs are proven to be safe and effective before they may be marketed to U.S. consumers.'" She also "said that 'on a limited basis,' some patients and their doctors were permitted to obtain new drugs that were in clinical trials."

On its Web site, USA Today (8/8, Winter) reports, "In a stinging dissent, Judge Judith Rogers called the ruling 'startling.' She said courts have established the right 'to marry, to fornicate, to have children, to control the education and upbringing of children, to perform varied sexual acts in private, and to control one's own body even if it results in one's own death or the death of a fetus. ... But the right to try to save one's life is left out in the cold despite its textual anchor in the right to life." Rogers was joined by Chief Judge Douglas H. Ginsburg.

Bloomberg (8/8, Larson) reports that Frank Burroughs, Abigail Alliance president, said, "The Abigail Alliance is dumbfounded that most of the justices tragically missed the merits of the case." He continued, "We are going to appeal to the Supreme Court." During the past six years, the Abigail Alliance has pushed "for early access to 16 drugs for cancer and other life-threatening illnesses," and each drug "eventually won FDA approval, including ImClone Systems Inc.'s colon cancer drug Erbitux (cetuximab), Novartis AG's leukemia medicine Gleevec (imatinib), and Bayer AG's kidney cancer treatment Nexavar (sorafenib)." The problem, Burroughs said, is that the "FDA and Congress get on the safety issue soap box, and they forget about the people who have a very different risk-benefit perspective."

The case is Abigail Alliance for Better Access to Developmental Drugs, et al. v. U.S. Food and Drug Administration, et al (pdf).

Tuesday, August 7, 2007

Consumer Reports rates HMOs, PPOs

[Source: Health and Life Sciences Law Daily, August 7, 2007]

The Hartford Courant (8/7, Levick) reports that Consumer Reports ranked HMOs and PPOs based on a survey of its readers. The Courant writes, "The national rankings of 'preferred provider' plans, known as 'PPOs,' show companies that are major players in Connecticut haven't budged much in the rankings since the magazine's last report in 2005. There wasn't much movement in rankings of HMOs either in the September issue of the magazine, expected to hit newsstands today -- well in advance of the fall enrollment season." The Courant reports that "Anthem Blue Cross and Blue Shield in Connecticut, which came in second in the previous rankings of PPOs, topped the new rankings of 46 PPOs with an overall reader satisfaction score of 83." Connecticut PPOs offered by Aetna were rated 73 overall, and Cigna was rated at 72.

In its summary of the ratings, Consumer Reports (Sept. 2007) writes, "Only 67 percent of our readers said they were completely or very satisfied with their plan; that's up slightly from our total in our 2004 survey of HMOs and PPOs (64 percent). That rate is only average compared with what we've found when we've done consumer satisfaction surveys of other services. ... Why isn't satisfaction with HMOs and PPOs higher? Problems getting an appointment to see a doctor were reported by 10 percent of our readers, 21 percent had to deal with billing errors, 25 percent said they had a problem with their primary-care provider, and 36 percent who called a plan representative for assistance said they had trouble getting the help they needed." In a summary of its methodology, Consumer Reports (Sept. 2007) writes, "A nationally representative on-line survey of 2,905 respondents between the ages of 18 and 64 was designed by Consumer Reports and fielded by Knowledge Networks in May 2007. The sample excluded U.S. residents covered by Medicare or Medicaid. For the full sample, the sampling error was 2.43 percent at the 95 percent confidence level."

Consumer Reports examines growth in healthcare costs. Separately, the magazine examines the broader issue of health insurance and healthcare costs. In an overview, Consumer Reports (Sept. 2007) writes, "From escalating medical debt to postponed retirement, our exclusive national survey of working-age adults shows the depth of jitters even for those lucky enough to have insurance through their jobs or families."

In another story, Consumer Reports (Sept. 2007) reviews the growth in healthcare costs despite the advent of managed care, writing, "Back in the 1990s, employers and insurance companies embraced the idea that 'managed care' could simultaneously save money and improve quality. Employees were put into HMOs, which in turn used their burgeoning membership numbers to force doctors and hospitals to cut their prices or lose access to patients." Consumer Reports also highlights pushback from patients and doctors, noting that breast-cancer patients "sued and got some state legislatures to pass laws requiring health plans to cover $80,000 bone-marrow transplants," and "doctors and hospitals joined forces and, in many cases, successfully pushed back against managed care's demands for deep discounts to their fees."

In a third story, Consumer Reports (Sept. 2007) criticizes Medicare Advantage programs, noting that now, "about 20 percent of Medicare beneficiaries nationwide find themselves right back at square one: poring over confusing HMO rules, being restricted to certain doctors and hospitals, and coping with unanticipated high co-pays and deductibles."

Finally, Consumer Reports (Sept. 2007) examines the growth of medical bills among the insured, writing: "Between 2001 and 2005, the percentage of middle-income families -- those who earn between $40,000 and $80,000 for a family of four -- who had job-based health coverage dropped four percentage points. Half lost benefits because their employers dropped health insurance altogether or quit offering dependent coverage." However, "15 percent gave up their employer-based insurance because they could no longer afford the premiums."

Monday, August 6, 2007

Overview of Medicaid Law

Medicaid is a medical assitance program jointly financed by state and federal governments for low income individuals and is embodied in 42 U.S.C. §1396 et seq. It was first enacted in 1965 as an amendment to the Social Security Act of 1935. Today, Medicaid is a major social welfare program and is administered by the Centers for Medicare and Medicaid Services (CMS).

Among the services that Medicaid covers are: in-patient hospital services, out-patient hospital services, laboratory and x-ray services, skilled nursing home services, physicians' services, physical therapy, hospice care, and rehabilitative services. Patients are restricted when selecting who will take care of their needs by selecting from pre-approved physicians and other providers of medical care. Because physicians are not fully reimbursed for services provided to Medicaid patients, many of them limit the number of Medicaid patients they see.

Federal law dictates that states may not reduce other welfare benefits people receive when they become eligible for Medicaid. Also, states may not impose citizenship or residency requirements other than requiring that an applicant be a resident of the state. Neither the age of the applicant nor the fact that he or she works are restrictions to receiving Medicaid.

Since its inception, the program has been plagued by fraud from both health care providers and patients. To curb these, Congress passed a law in 1996 making persons criminally liable for committing fraud in order to become eligible for medical assistance. (See 42 U.S.C.§§ 1320a-7b).

Pharmaceutical Product Commercialization

Increasing R&D costs, generic competition and fragile pipelines make the successful launch of new drugs critically important for pharmaceutical and biotechnology companies. Optimal resource allocation for the commercial development of emerging brands, however, continues to challenge companies across both sectors. This paper profiles one brand’s marketing expenditures and team headcounts throughout commercialization.
View Whitepaper

[Source: FierceBiotech]

The Difference with Biologics: The Scientific, Legal and Regulatory Challenges of Any Follow-On Biologics Scheme

The paper details the legal and regulatory implications of the many important differences between biologics and traditional “small molecule” drugs.
View Whitepaper

[Source: FierceBiotech]

Healthcare Regulation Overview

Regulation plays a major role in the healthcare industry and healthcare insurance coverage. Through various regulatory bodies, the Department of Health and Human Services (HHS) protects the public from a number of health risks and provides programs for public health and welfare. Together, these regulatory agencies protect and regulate public health at every level.

Healthcare

The Centers for Medicare and Medicaid (CMS), founded in 1965, oversee most of the regulations related directly to the healthcare system. CMS provides government-subsidized medical coverage through a number of programs:
  • Medicare for the elderly and disabled
  • Medicaid for lower-income individuals and families
  • State Children’s Health Insurance Program (SCHIP) for health insurance coverage for children under 19

CMS is also responsible for ensuring compliance to the Health Insurance Portability and Accountability Act (HIPAA). HIPPA is a major piece of healthcare regulation instituted to improve the efficiency and effectiveness of the healthcare system – to “cut the fat” while at the same time protecting patients and providing better medical care.

The Agency for Healthcare Research and Quality (AHRQ) is another agency that falls under the auspices of HHS. It conducts research aimed at improving the quality of healthcare, reducing its costs, and addressing patient safety and medical errors.

Non-profit organizations serving as watchdogs and accreditation institutions for healthcare in America:

  • The Joint Commission on Accreditation of Healthcare Organizations (JCAHO) is an NPO focused on ensuring that healthcare organization provide quality care. JCAHO employs a system in which healthcare organizations are examined and then given a score between 1-100, with higher scores being better. These scores are important to healthcare organizations as they are a factor in reimbursement from Medicare.
  • The National Committee for Quality Assurance (NCQA) is an NPO that ensures the quality of America’s managed care plans. It was established in 1991 to provide standard, objective information about HMOs.

Other Public Health Regulation

In addition to the CMS programs, the HHS has many regulatory departments that oversee other forms of public health regulation.

  • The Centers for Disease Control and Prevention (CDC) in Atlanta, GA, examines public health and warns of possible health threats from infectious diseases. The CDC monitors birth defects, disabilities, diseases and conditions, emergency preparedness and response, environmental health, genetics and genomics, health promotion, injury and violence, travelers’ health, vaccines and immunizations and workplace safety and health.
  • The Food and Drug Administration (FDA) is the federal regulatory agency responsible for the controlling the safety and effectiveness of the country’s drug supply for both humans and animals. The FDA regulates food safety, cosmetics, feed supply for animals, dietary supplements, biologics and the national blood supply, medical devices, food additives, product recalls, and restaurant inspection.
  • The United States Agency for Toxic Substances and Disease Registry (ATSDR) monitors and regulates the effects of hazardous materals on public health. The ATSDR responds to hazardous materal threats, educates the public on hazmat risks, and involves community members and organizations to encourage participation in ATSDR’s activities.

[Source: FierceHealthcare]

Tennessee Educates MDs on Drug-Fraud Law

Tennessee's Office of the Inspector General wants to be sure medical professionals know about new legislation designed to reduce TennCare drug fraud. So the state OIG just sent out letters to more than 30,000 doctors, pharmacists and nurses educating them on the details of a new law designed to cut down on patient "doctor shopping" (visiting multiple doctors to get similar or the same medications from each). The state's OIG was created three years ago specifically to root out and prosecute fraud against TennCare. Since its inception in February 2005, the office has arrested 460 individuals for TennCare fraud, has collected more than $700,000 in restitution, and avoided more than $75 million in costs.

To learn more about the new law:
- read this Memphis Business Journal item

[From Memphis Business Journal, July 25, 2007]
The letters advise physicians and others that it is a Class E felony for a person to "willingly go to different providers, with the intent to deceive, in search of a controlled substance without disclosing to the provider they have already received one from another provider within a 30-day period, and either the clinical visit or the controlled substance was paid for by TennCare."

[Source: FierceHealthcare, July 27, 2007]

Sunday, August 5, 2007

Regulatory Authority Checklist for Restructuring Health Care Facilities

[Source: Pozgar, George, Legal Aspects of Health Care Administration, 7th ed.]

In considering restructuring, the following regulatory authority checklist may be helpful

Not-for-profit corporitions:
  • not-for profit corporation law
  • Internal Revenue Code (exemption and taxpayer identification number)
  • state and local tax laws on exemptions (including real property)
  • attorney general or similar charitable registration requirements
  • bylaws, organization minutes, and minutes of first governing body meeting
  • bank account

For-profit corporations:

  • business corporation law
  • taxpayer identification number
  • bylaws, organization minutes, minutes of first governing body meeting, and issuance of stock
  • bank account

Hospitals:

  • reimbursement regulations
  • certificate of need regulations
  • governing body bylaws and relationship to additional corporations
  • fraud and abuse laws, rules, and regulations

Saturday, August 4, 2007

Notes on Corporate Negligence of Hospitals

[Source: Pozgar, George D., Legal Aspects of Health Care Administration, 7th ed., 1999]

There are duties that the hospital (as a corporate entity) owes to the general public and to its patients. These duties arise from statutes, regulations, principles of law developed by the courts, and the interal operating rules of the organization.

"Corporate negligence is a doctrine under which the hospital is liable if it fails to uphold the proper standard of care owed the patient, which is to ensure the patient's safety and well-being while at the hospital. This theory of liability creates a nondelegeable duty which the hospital owes directly to the patient. Therefore, an injured party does not have to rely on and establish the negligence of a third party." Thompson v. Nason Hospital, 591 A.2d 703, 707 (Pa. 1991).

The Pennsylvania Supreme Court in Thompson recognized several nondelegable duties owed by hospitals to patients, such as the duty to:
  • use reasonable care in the maintenance of safe and adequate facilities and equipment
  • select and retain only competent physicians
  • oversee all persons who practice medicine within its wall as to patient care
  • formulate, adopt, and enforce adequate rules and policies to ensure quality care for its patients

A benchmark case in the health care field, which has had a major impact on the liability of health care organizations, was decided in 1965 in Darling v. Charleston Community Memorial Hospital, 211 N.E.2d 253 (Ill. 1965). The court here enunciated a corporate negligence doctrine under which hospitals have a duty to provide adequately trained medical and nursing staff. A hospital is responsible, for establishing policies and procedures for monitoring the quality of medicine practiced within the hospital.

Among other things, the Darling case indicates the importance of instituting effective credentialing and continuing medical evaluation and review programs for all members of a professional staff.

The Supreme Court of Arizona in Fridena v. Evans, 622 P.2d 463 (Ariz. 1980), affirmed that the hospital could be held liable for the negligent supervision of a physician where it has actual or constructive knowledge of the procedures carried on within the hospital.

The hospital generally owes a duty to ensure the competency of its medical staff and to evaluate the quality of medical treatment rendered on its premises.

Compliance Guidelines for Pharmaceutical Industry

See generally, Health Care Compliance Association (HCCA)
See also, HCCA Compliance Certification Examination

OIG Compliance Program Guidance for Pharmaceutical Manufacturers - a set of guidelines that pharmaceutical manufacturers should consider when developing and implementing a compliance program or evaluating an existing one. For those manufacturers with an existing compliance program, this guidance may serve as a benchmark or comparison against which to measure ongoing efforts.

PhRMA Code on Interactions with Health Professionals - this Code addresses interactions with
respect to marketed products and related pre-launch activities. It does not address relationships with clinical investigators relating to pre-approval studies.

AdvaMed's Code of Ethics - discusses relationships in which health care professionals work with the medical technology industry as advisors, researchers, students, and teachers to bring innovation to patients and the practice of medicine.

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[Source: HCCA Compliance Information]

Brief overview of health care complianceThe move by many in the health care industry to develop corporate compliance programs came after passage of the Health Insurance Portability and Accountability Act of 1996. This Act gives the Department of Health and Human Services’ Office of Inspector General and the U. S. Department of Justice more investigational funding and authority to increase penalties for health care fraud and abuse. Using these and other enforcement tools the government continues to investigate health care institutions across the U. S. searching for violations of the False Claims Act and other federal laws.

To protect their institutions from liability, health care providers are implementing corporate compliance programs using the seven elements outlined in the U. S. Sentencing Guidelines for Organizations and appointing corporate compliance officers to develop, implement, and manage them.

While law does not require an organization to meet the Guidelines seven elements of a compliance program, these elements provide the backbone of a well-designed compliance program. An organization that is found guilty of violating federal criminal laws and has a compliance program in accord with the Guidelines, may reduce assessed penalties by up to 70% against the fines that the law requires.

The U. S. Sentencing Commission was created by Congress in 1984 to promulgate the U. S. Sentencing Guidelines for Organizations and the U. S. Sentencing Guidelines for Individuals to increase sentencing uniformity for those found guilty of violating federal laws. To encourage good corporate citizenship, the Commission outlined a punishment structure based on the culpability of the organization and the seriousness of the crime.

U.S. Sentencing Guidelines Revisions:
Effective Compliance and Ethics Programs
Click here to download the U.S. Sentencing Guidelines revisions regarding an effective compliance and ethics program.

Friday, August 3, 2007

Quiz helps patients ID needed vaccines

The Centers for Disease Control and Prevention has released an online quiz to help adolescents and adults identify the vaccines they may need. The quiz generates a list of recommended vaccines based on the respondent’s gender, age, lifestyle, work and health status, which they can discuss with their health care provider.

Take quiz here.

URAC Releases First Ever Pharmacy Benefit Management Standards

[Source: Health Lawyers Weekly, August 3, 2007]

URAC, an independent accreditor of healthcare management organizations, released July 27 the first-ever voluntary accreditation standards for pharmacy benefit management organizations.
The Pharmacy Benefit Management Accreditation program includes modules for organizational quality, customer service, communications, disclosure of pricing policies, pharmaceutical distribution, drug utilization management, and formulary/pharmacy and therapeutics committee, URAC said in a press release.

“The standards address key areas for any pharmacy benefit organization, but allow for innovation,” said John Jones, RPh, JD, chairman of URAC’s PBM Standards Committee and vice president of professional practice and pharmacy policy at Prescription Solutions. “Clinical rigor, such as the qualifications of staff who make decisions about drugs included in a formulary and how those decisions are made, is one notable area. The standards also seek a very sound operational base and address regulatory compliance issues, such as oversight of information disclosure to consumers, providers and pharmacists.”

“The accreditation program is really focused on making sure organizations do what is right by the consumer, including standards for appeals procedures and making sure they have access to the drugs they need,” Jones added.

The release also noted that the program underwent a rigorous field testing process, with more than 53% of the market participating in the testing.

Read URAC’s press release.

Tennessee Appeals Court Rules Physicians Must Arbitrate Claims Against BlueCross

[Source: Health Lawyers Weekly, Vol. 4, Issue 47]

Two physicians who alleged that a health insurer systematically and arbitrarily denied payments to them and other similarly situated doctors cannot sue, but instead must submit to binding arbitration in accordance with their participating provider agreements, the Court of Appeals of Tennessee ruled November 29.

Zachary Rosenberg, M.D. and Dewayne P. Darby M.D. (plaintiffs) entered into participating provider agreements with BlueCross BlueShield of Tennessee (BCBST). These agreements set forth a dispute resolution process requiring the parties to submit unresolved claims to binding arbitration, in accordance with the Tennessee Uniform Arbitration Act.

Plaintiffs sued BCBST, alleging breach of contract, unfair or deceptive business practices, and other claims based on fourteen different types of allegedly improper conduct, including bundling, downcoding, and physician profiling.

In their complaint, plaintiffs sought relief not only for payments denied them, but also for punitive damages and injunctive relief on behalf of the class of all BCBST participating providers.

BCBST moved to compel arbitration. Plaintiffs opposed, arguing that the arbitration procedure contained in their participating provider agreements was unenforceable because it was cost prohibitive. In particular, plaintiffs argued that the cost of arbitrating the physicians’ small individual claims would be cost prohibitive, so as to deny them a viable remedy.

The trial court rejected that view and ruled plaintiffs failed to demonstrate that the cost of arbitration would be prohibitively more expensive than a judicial forum.

On interlocutory appeal, the Court of Appeals of Tennessee opined, “Seldom has a time-honored rule of common law been so decisively reversed and supplanted by an even stronger statutory mandate to the contrary than is evidenced by the present exalted status of arbitration.”

Reviewing the arbitrability issue de novo, the court cited the U.S. Supreme Court decision in Green Tree Financial v. Randolph, 531 U.S. 79 (2000), as a “starting point,” and conducted a close review of federal and state law concerning the impact of potentially cost-prohibitive arbitration.

The party seeking to avoid arbitration must bear the burden of proving that arbitration is cost prohibitive, the appeals court explained.

In the case at bar, plaintiffs asserted that their claims are of minimal value, even if aggregated over two years. If that were the case, the appeals court reasoned, “it would be easy enough to say on very limited proof that arbitration was cost prohibitive. The complaint, however, asserts no such small claims but rather alleges a pattern of improper and deceptive conduct and business practices,” costing millions of dollars, plus punitive damages, fees, and permanent injunctive relief.

“What might be prohibitive when a $4,000 claim is in issue would certainly not be prohibitive when millions of dollars and vast injunctive relief are actually in issue,” the appeals court determined. Thus, plaintiffs failed to meet their burden of proof.

“A party challenging the arbitration provisions of a contract, particularly when those provisions are clear and unambiguous, faces a figurative tsunami of case law, both federal and state, ever strengthening and reinforcing the favored status of arbitration.”

Because federal and state law strongly favor arbitration, and the participating provider agreement requires all disputes to be subject to binding arbitration, the appeals court agreed with the trial court, which had granted the motion to compel arbitration.

Rosenberg v. BlueCross BlueShield of Tenn., No. M2005-01070-COA-R9-CV (Tenn. Ct. App. Nov. 29, 2006).

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Note:

Tennessee's Uniform Arbitration Act:
Tenn. Code, Title 29, Ch.5, Part 3, §§ 301 to 320

Calif. Supreme Court to consider line between discrimination, physicians' religious freedom.

[Source: Health and Life Sciences Law Daily, August 3, 2007]

USA Today (8/3, Parker) reports, "The California Supreme Court is being asked to answer that question when it hears a legal dispute between a lesbian mom," Guadalupe Benitez, and two doctors "who refused to artificially inseminate her for religious reasons." The high court "is being asked to decide how to accommodate a physician's religious views without violating California's anti-discrimination laws." USA Today notes, "The dispute arose in 2000 after San Diego-area doctors Christine Brody and Douglas Fenton refused to artificially inseminate Benitez." The doctors "say in court papers that they refused to treat Benitez because she is unmarried, not because she is gay." Said to be the first of its kind, the case "is shaping up as one of the most controversial before the court in years. Jill Morrison, legal counsel to the National Women's Law Center, noted that a distinguishing factor of Benitez's case "is that the physicians involved refused to provide a medical procedure to one patient that they readily provide to others." Morrison said, "Usually, providers who object to certain services object to them for everyone: 'I won't provide contraception.' In this case, they don't object to the service, just the patient. You can't pick and choose. You can't say, 'I will perform it for white people, but not for black people.'" Meanwhile, Kenneth Pedroza, the doctors' attorney, "counters that an 'all-or-nothing' rule will drive physicians out of certain specialties." USA Today (8/3, 1A) also notes the number of states that allow healthcare professionals to refuse to provide certain services.

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From USA Today:

Number of states that allow health care professionals to refuse to provide these services:
•46 — abortions
•17 — sterilization
•13 — contraceptives
[Source: Guttmacher Institute]

Physicians, executives indicted for selling prescription drugs via Internet.

[Source: Health and Life Sciences Law Daily, August 3, 2007]

The AP (8/3, Hoffman) reports, "Physicians and executives are among 18 people accused of selling prescription drugs over the Internet to people without any examinations, according to an indictment unsealed Thursday that charges them with federal racketeering." The 313-count indictment denotes "the first time organized-crime statutes designed to combat drug cartels and mafia rings have been used to charge anyone with selling prescription drugs over the Internet." Costa Rica-based AffPower allegedly "took more than 1 million orders for legal pharmaceuticals including diet pills," and "birth control pills" between "August 2004 and June 2006," and "the total value of the drugs sold exceeds $126 million." The indictment also says that doctors "were paid $3 for each order reviewed," and "approved hundreds or even thousands of orders a day." The prescriptions "were then filled through licensed online and brick-and-mortar pharmacies, who received between $5 and $13 for each order."

Thursday, August 2, 2007

Further Notes on the Regulation of Drugs by the FDA

[Source: Peter Baron Hutt, The Transformation of United States Food and Drug Law, J. Ass'n Food & Drug Officials, Sept. 1996, at 1 (reprinted in Law, Medicine, and Medical Technology, Noah et al., at 70 (2002)]

Neither the 1906 Act nor the 1938 Act is self-executing. Both have required FDA to implement very broad and general statutory provisions with more specific operating rules. Thus, FDA has spent the past century determining, and then making public, procedural and substantive policy statements designed to facilitate its administration of the organic statute.

Prior to the 1970s, it was common practice simply to propose a regulation, obtain public comment and then publish a final regulation, without an explanation of the reasons for the proposal or why the changes recommended by the public comment were or were not accepted in the final regulations. FDA pioneered the use of explanatory preambles to both the proposed and the final regulations. These preambles served and continue to serve to this day the purpose of educating FDA employees, the regulated industry and the general public about the importan work of the agency. Today Congress requires all federal agencies to justify their rulemaking.

Under the 1906 Act, any violation constituteed a misdemeanor punishable by a fine, imprisonment or both. Violative products were also subject to seizure. The 1938 Act expanded FDA's enforcement power. In addition to criminal liability and seizure, FDA was authorized to obtain a judicial injunction against any violation of the statute. FDA was also authorized to issue a written administrative notice or warning for minor violations in lieu of formal court proceedings, to conduct factory inspection and to issue publicity and other public information. As the 1938 Act was amended to require premarket approval for regulated products, FDA was able to enforce the statute informally through administrative decisions as part of the approval process rather than by formal court action.

From a policing role under the 1906 Act, FDA gradually undertook the role of sole gatekeeper to the marketplace. For a product subject to premarket approval, no manufacturer may lawfully distribute the product and no member of the public has a right to obtain it unless and until FDA authorizes marketing.

Premarket approval under the 1938 Act includes no mechanism for public accountability. Citizens who wish to obtain a product have no right to participate in the process and no access to judicial review of whatever action is taken by FDA. Even the applicant is precluded from access to the courts until final action is taken on a product application.

FDA Regulations and Dietary Supplements

In 1994, Congress enacted the Dietary Supplement Health and Education Act (DSHEA), Pub. L. No. 103-417, 108 Stat. 4325, in order to limit tha FDA's power to regulate dietary supplements as either food additives or new drugs.

In an enforcement proceeding alleging that a dietary supplement is adulterated, the FDA now shoulders the burden of proving that it "presents a significant or unreasonable risk of illness or injury." 21 U.S.C. § 342(f)(1)(A). A company wishing to sell a supplement containing a "new dietary ingredient" (defined as one not marketed before October 15, 1994) must file a notification with the FDA 75 days prior to market introduction, which would have to demonstrate only that "[t]here is a history of use or other evidence of safety," id. § 350b(a)(2), but, if the agency found the notification inadequate, it could prevent marketing only by initiating formal enforcement proceedings. The term "dietary supplement" means a product "intended to supplement the diet that bears or contains one or more of the following dietary ingredients: (A) a vitamin; (B) a mineral; (C) an herb or other botantical; (D) an amino acid; (E) a dietary substance for use by man to supplement the diet by increasing the total dietary intake; or (F) a concentrate, metabolite, constituent, extract, or combination of any ingredient described" above. Id. § 321 (ff)(1).

A product is regulated according to claims made for it rather than its composition

See S. Rep. No. 73-493, at 2-3 (1934) ("The use to which a product is put will determine the category into which it will fall . . . . The manufacturer of this article, through his representations in connection with its sale, can determine the use to whcih an article is to be put."). The mere presence of a chemically active substance would not satisfy this definition; the intended use of the substance must serve a diagnostic or therapeutic purpose or otherwise affect the structure or function of the body. Conversely, a chemically inert substance can qualify as a drug depending on the claims made for it. Thus, bottled water, which would normally be regulated by FDA as a food (and also by the EPA under a different statute) might be regulated (1) as a drug if labeled as a cure for cancer, (2) as a medical device (accessory) if labeled as a sterilizing agent for surgical instruments, or (3) as a cosmetic if labeled as a skin softener. See Bradley v. United States, 264 F. 79, 81-82 (5th Cir. 1920) (holding that curative claims for mineral water made it a "drug").

The intended use of a product typically is determined by its labeling and any other promotional claims made by the seller. See, e.g., United States v. Article of Drug . . . B-Complex Cholinos Capsules, 362 F.2d 923, 925-26 (3d Cir. 1966) (radio broadcasts); Nature Food Centres, Inc. v. United States, 310 F.2d 67, 70 (1st Cir. 1962) (public lectures); V.E. Irons, Inc. v. United States, 244 F.2d 34, 44 (1st Cir. 1957) (oral representations made by authorized sales distributors).

More controversially, the FDA has suggested that "intended use" may include the seller's subjective intent even if never communicated to consumers, which would mean that promotional claims provide the best but no exclusive evidence of a product's intended use. See Richard M. Cooper, The WLF Case Thus Far, 55 Food & Drug L.J. 477, 485-86 (2000) (criticizing this interpretation); see also Meza v. Southern Cal. Physicians Ins. Exchange, 73 Cal.Rptr.2d 91, 94 (Ct. App. 1998) (concluding that melaleuca oil used by a physician to treat warts qualified as a drug even though the seller made no therapeutic claims).

CMS- Medicare Program; Revised Payment System Policies for Services Furnished in Ambulatory Surgical Centers (ASCs) Beginning in CY 2008 - Final Rule

[72 Fed. Reg. 148, 42470-42626 (Aug. 2, 2007) (42 CFR Parts 410 and 416)]

This final rule revises the Medicare ambulatory surgical center (ASC) payment system to implement certain related provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). This final rule establishes the ASC list of covered surgical procedures, identifies covered ancillary services under the revised ASC payment system, and sets forth the amounts and factors that will be used to determine the ASC payment rates for calendar year (CY) 2008. The changes to the ASC payment system and ratesetting methodology in this final rule are applicable to services furnished on or after January 1, 2008.

CMS - Medicare Program: Proposed Changes to the Hospital Outpatient Prospective Payment System and CY 2008 Payment Rates...

[72 Fed. Reg. 148, 42627-43130 (Aug. 2, 2007) (42 CFR Parts 410, 411, 414 et al.)]

This proposed rule would revise the Medicare hospital outpatient prospective payment system (PPS) to implement applicable statutory requirements and changes arising from our continuing experience with this system. In this proposed rule, we describe the proposed changes to the amounts and factors used to determine the payment rates for Medicare hospital outpatient services paid under the prospective payment system. These changes would be applicable to services furnished on or after January 1, 2008. In addition, this proposed rule would update the revised Medicare ambulatory surgical center (ASC) payment system to implement certain related provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). In this proposed rule, we propose the applicable relative payment weights and amounts for services furnished in ASCs, specific HCPCS codes to which the final policies of the ASC payment system would apply, and other pertinent ratesetting information for the CY 2008 ASC payment system.

These changes would be applicable to services furnished on or after January 1, 2008. In this proposed rule, we also are proposing changes to the policies relating to the necessary provider
designations of critical access hospitals (CAHs) that are being recertified when a CAH enters into a new co-location arrangement with another hospital or CAH or when the CAH creates or acquires an off-campus location.

Further, we are proposing changes to several of the current conditions of participation that hospitals must meet to participate in the Medicare and Medicaid programs to require the completion and documentation in the medical record of medical histories and physical examinations of patients conducted after admission and prior to surgery or a procedure requiring anesthesia services and for postanesthesia evaluations of patients before discharge or transfer from the postanesthesia recovery area.

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Notes:

Prospective reimbursement, especially once adopted by Medicare in 1983, marked an important turning point in regulatory efforts to contain the growth of hospital costs. Medicare's Prospective Payment System (PPS) limits hospital revenues per Medicare patient. Under PPS, hospitals are reimbursed a fixed amount per admission, determined by the patient's diagnostic condition (Diagnostic Related Groups), regardless of the hospital's actual costs. The strategy behind PPS is simple. By limiting revenues, it provides hospitals with strong disincentives to extend lengths of stay and provide unnecessary or marginal care.

Medicare's payment system can be grouped as follows:
  1. Inpatient acute care in short-term hospitals annd psychiatric facilities
  2. Ambulatory care furnished by physicians, hospital outpatient departments, ambulatory surgical centers, and clinical laboratories
  3. Post-acute care furnished by skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, and long-term care hospitals
  4. Dialysis services furnished in outpatient centers and hospice care
  5. Ambulance services and products furnished by durable medical equipment suppliers
  6. Services furnished by private health plans under the Medicare+Choice (M+C) program

DRGs define one of the primary mechanisms for prospective payment. Under PPS, patients are admitted according to their condition under one of 506 applicable DRGs. Each DRG attempts to represent a case type that identifies patients with similar conditions and processes of care.

Each DRG is given a flat payment rate calculated in part on the basis of costs incurred for that DRG nationally. These rates are modified somewhat in practice to account for differences in local wages, urban versus rural location, and other factors such as whether the hospital is a teaching hospital. The rates are flat in the important sense that they are not varied or softened for hospitals that spend more than the rate, or for that matter less.

Electrical Pulses Revive Man Years After Mugging

[Source: WSJ Health Blog, Jacob Goldstein]

A 38-year-old man who had been in a coma-like state for eight years regained consciousness after doctors stuck electrodes deep into his brain and flipped the switch, according to a letter published in the journal Nature

Just hours after the treatment with electrical pulses began last year, the unnamed man opened his eyes and began tracking movement in his room. Over the following months, he regained the ability to speak in short sentences, drink from a cup and comb his hair, the Los Angeles Times reports. “Now he can cry and laugh and say ‘Mommy’ and ‘Pop,’ ” his mother said at a news conference.

The man was severely injured during a mugging, when he was repeatedly kicked in the head. He was left in a minimally conscious state, in which a patient shows occasional signs of awareness but can’t communicate.

In the technique, known as deep brain stimulation and sometimes used on Parkinson’s patients, electrodes are inserted into the thalamus, which controls arousal. Doctors hope this case will be the first in a series of 12 patients to test whether the results can be reproduced. They chose the patient because they believed the arousal system in his thalamus was damaged, but that key areas of the cerebral cortex were undamaged.

U.S. Senate panel votes to allow FDA regulation of tobacco products.

[Source: The Health and Life Sciences Law Daily, August 2, 2007]

The CBS Evening News (8/1, lead story, 2:30, Couric) reported, "A Senate committee today approved legislation that would for the first time regulate the tobacco companies. Despite all the health warnings, more than 45 million Americans still smoke. And, every year more than 400,000 die of smoking-related illnesses. Supporters of the legislation say it would cut those deaths dramatically."

The AP (8/2, Jalonick) reports, "The bill, approved 13-8 by the Health, Education, Labor and Pensions Committee, would give the Food and Drug Administration authority to restrict tobacco advertising, regulate warning labels, and remove hazardous ingredients." The agency would also "be given the authority to set standards for products that tobacco companies advertise as 'reduced risk' products."

The Boston Globe (8/2, Henderson) reports that the legislation, sponsored by Senator Edward M. Kennedy (D-Mass.), "was the result of years of negotiations that forged an unlikely coalition uniting dozens of health groups with the tobacco giant Philip Morris." While the "FDA currently can regulate such nicotine-replacement products as gums and patches," it "lacks regulatory oversight over cigarettes and smokeless tobacco." Sen. Kennedy noted, "With all the provisions we have in the tobacco bill, we have a real opportunity to save a generation of Americans from a lifetime of addiction and certain death." Meanwhile, Wyoming Senator Michael B. Enzi, the highest-ranking Republican on the Senate Health, Education, Labor and Pensions Committee, "denounced the bill as 'fundamentally flawed' and said it merely locks in place Philip Morris's dominant market share." Enzi noted, "If this bill is good for Big Tobacco, how can it be good for public health? ... The fact is it can't. This bill is nothing more than a Marlboro Protection Act." Philip Morris USA, manufacturer of Marlboro, "supports the bill, a stance at odds with industry rivals and companies that manufacture smokeless tobacco." The Wall Street Journal (8/2, A4) also covers the story.

[S. 625 / H.R. 1108]

Sen. Cardin introduces legislation mandating health insurance for all.

[Source: The Health and Life Sciences Law Daily, August 1, 2007]

Modern Healthcare (8/1, Lubeli) reports, "Sen. Benjamin Cardin (D-Md.) has introduced legislation that would require all Americans to enroll in a healthcare insurance plan." Americans lacking coverage "would have to enroll in a 'qualified' plan such as Medicare, Medicaid, the State Children's Health Insurance Program (SCHIP), veterans' healthcare, federal health employee benefits or other state-approved package." Cardin, who is on the Senate Budget Committee, noted, "Today, more than 46 million Americans, including 9 million children, have no healthcare coverage. We all pay the price with either higher premium costs or more expensive medical bills. ... This legislation provides a simple, straight-forward solution that will ensure that all Americans have health insurance." For "individuals below 400% of the federal poverty level, the bill would offer three low-cost coverage options." As for penalties, those "who failed to enroll for any coverage for a continuous period greater than 60 days would be taxed, and the funds collected by this tax would then be used to automatically enroll them in a state-approved plan, according to a summary of the bill."

[S. 1899: A Bill to Require Every American to Have Health Insurance Coverage]

Patient-advocacy group files lawsuit against FDA alleging faulty drug review.

[Source: Health and Life Sciences Law Daily, August 1, 2007]

The Seattle Times (8/1, Gonzalez) reports, "A patient-advocacy group sued U.S. Food and Drug Administration officials Monday for withholding approval" of Dendreon's Provenge (sipuleucel-T) in May. The plaintiffs "say the spurned drug is safe and effective, and claim the denial was the capricious outcome of political infighting within the agency. The lawsuit (pdf), filed by Dublin, Ohio-based nonprofit Care to Live in federal court in Columbus, also accuses the agency of ignoring conflict-of-interest issues with some medical advisers chosen to review the therapy."

BusinessWeek (8/1, Arnst) reports that the lawsuit "marks the latest salvo in an acrimonious campaign to gain access to the Dendreon vaccine after the FDA concluded in May that existing data did not warrant approval." The lawsuit names FDA Commissioner Dr. Andrew von Eschenbach, HHS Secretary Michael Leavitt, and Dr. Richard Pazdur, director of the FDA's Office of Oncology Drug Products. Also named is "Dr. Howard Scher, one of the four members of the FDA advisory panel to vote against recommending Provenge for approval." The "Care To Live suit follows a more sweeping action taken by another patient advocacy group, the Abigail Alliance for Better Access to Developmental Drugs, which is suing for broader access to experimental drugs. That lawsuit is currently being considered by the federal circuit court in Washington, D.C," and if the "Abigail Alliance prevails, it could establish a constitutional right to experimental drugs."

Wednesday, August 1, 2007

Notes on the Regulation of Drugs

[Source: The Economics of Health and Health Care, Folland et al.]

The Food and Drug Admininstration (FDA) approval process for a new drug is costly and time consuming. A new firm will find it difficult to marshal the financial and expert resources needed to go through the process, and especially to have a portfolio of products under development to spread risks. Only one of about 5,000 to 10,000 chemical compounds screened ultimately is approved as a drug, and of those reaching the market stage, only 3 of 10 products ever become profitable. [See PhRMA (2001) and Grabowski and Vernon (1994)]. Not surprisingly, such odds (3 in 50,000 - 100,000 chemical compounds) create formidable deterrence to new drug development, and new pharmaceutical firms often concentrate on generic products.

FDA review has become a lenghty, complex process. Following the discovery stage during whic new chemicals are synthesized, the firm conducts preclinical animal studies involving short-term toxicity and safety tests. The drug firm next must file an application with the FDA to conduct clinical trials. If approved, the trials are conducted in three phases. Phase I begins with small groups of healthy volunteers and focuses on safety and dosage. Phase II trials involve a larger number of subjects, often several hundred who have the targeted condition, and concentrates on the drug's efficacy. Stage III trials usually are conducted on thousands of patients in different settings so that safety and efficacy can be determined more precisely.

If these trials indicate safety and efficacy and the drug's safety is supported by long-term animal studies, the company submits a New Drug Application (NDA) containing all the data and results to the FDA. The FDA review usually takes more than a year. Total development time for a new product stands at about 14 years [in 2004], nearly double the eight-year period in the 1960s. A 2001 estimate placed the average investment for an approved new drug at more than $800 million. See Ceci Connolly, Price Tag for a New Drug, wash. Post, Dec.1, 2001, at A10 (adding that the figure had more than tripled in the space of a decade, largely because of demands for larger and more complex trials). In 1998, analysts estimated that the pharmaceutical industry spent approximately $21 billion on R&D.

In a classic study of the 1962 amendments, Peltzman (1974) found a sharp decline in new product development, especially of innovative drugs, after 1962, as well as higher prices from the decreased competition. The FDA recognized these problems and in the mid-1970s developed policies to accelerate the review of "important" drugs. Dranove and Meltzer (1994) found that important drugs reach the market about three years sooner than other drugs. A 1984 act also eliminated the full range of tests for generic products that were required by the 1962 amendments.

To expedite the review process, 1992 legislation and the Modernization Act of 1997 provide the FDA with additional resources derived from user fees levied on the industry. This has considerably reduced approval times. The 1997 act also includes many other provisions that will result in a major reorganization of the FDA.

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The following was reported in Health and Life Sciences Law Daily, August 1, 2007:

Professor calls for FDA to return to "context-sensitive" regulation of new drugs.

In a commentary in the Wall Street Journal (8/1, A15), Dr. Richard Miller, president and CEO of Pharmacyclics, and adjunct professor of oncology at Stanford University Medical Center, writes, "The most welcome news a cancer patient can hear from their doctor is: 'Your tumor is regressing.'" However, current FDA policies "are discouraging the development of groundbreaking treatments for cancer and other killer diseases, turning the clock back on hard-won regulations put in place in response to the AIDS crisis that allow patients faster access to new drugs." Miller points out GPC Biotech, a company that "withdrew its New Drug Application (NDA) for Satraplatin, a drug to treat prostate cancer," because it was facing FDA rejection. Miller continues, "For patients with life-threatening diseases and their families, the implications of the FDA's recent regressive trend are devastating. It may be acceptable for regulators to be risk-averse when considering drugs for routine or nonserious diseases where alternative therapies exist. But this mindset is simply irrational when it comes to drugs intended to treat patients suffering from deadly diseases." He concludes, "Congress should require the FDA to follow the existing regulations on accelerated approval. Only then will we be able to make the progress we need in the fight against killer diseases like cancer."

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See this posting for further information on the FDA's regulation of drugs

A Look Back at the Rand Health Insurance Experiment (RHIE) in 1982

[Source: The Economics of Health and Health Care, Folland et al.]

The Rand Health Insurance Experiment (RHIE) was one of the largest, randomly controlled economic experiments ever conducted. It was designed to test the effect of alternative health insurance policies on the demand for health care and on the health status of a large and closely watched group of people from all walks of life.

Partial findings of the RHIE:
  • The greater the portion of their health care bill that individuals are required to pay, the less health care they choose to purchase. Duh. But, what is surprising is how much the difference is - the fully insured purchased roughly 40 percent more health care than those who had to pay their own bills.
  • Did this mean that those fully (freely) insured were 40% more healthy? NO! The researchers summarized their findings: "Our results show that the 40 percent increase in services on the free-care plan had little or no effect on health status for the average adult."
  • The effects on children showed a somehwat similar pattern. Children under the cost-sharing plans consumed up to one-third less care. However, the reduction in care was not significantly related to health status measures.

Canadian Healthcare Doesn't Measure Up

[Source: "The Ugly Truth About Canadian Health Care" by David Gratzer, City Journal, Summer 2007]

Complete article here or here.

Socialized medicine has meant rationed care and lack of innovation. Small wonder Canadians are looking to the market.

. . . .

But single-payer systems—confronting dirty hospitals, long waiting lists, and substandard treatment—are starting to crack. . . .Canadian newspapers are now filled with stories of people frustrated by long delays for care:

"vow broken on cancer wait times: most hospitals across canada fail to meet ottawa’s four-week guideline for radiation"

"patients wait as p.e.t. scans used in animal experiments"

"back patients waiting years for treatment: study"

"the doctor is . . . out"

As if a taboo had lifted, government statistics on the health-care system’s problems are suddenly available. In fact, government researchers have provided the best data on the doctor shortage, noting, for example, that more than 1.5 million Ontarians (or 12 percent of that province’s population) can’t find family physicians. Health officials in one Nova Scotia community actually resorted to a lottery to determine who’d get a doctor’s appointment.

. . . .

Rick Baker helps people, and sometimes even saves lives. He describes a man who had a seizure and received a diagnosis of epilepsy. Dissatisfied with the opinion—he had no family history of epilepsy, but he did have constant headaches and nausea, which aren’t usually seen in the disorder—the man requested an MRI. The government told him that the wait would be four and a half months. So he went to Baker, who arranged to have the MRI done within 24 hours—and who, after the test discovered a brain tumor, arranged surgery within a few weeks.

Baker isn’t a neurosurgeon or even a doctor. He’s a medical broker, one member of a private sector that is rushing in to address the inadequacies of Canada’s government care. Canadians pay him to set up surgical procedures, diagnostic tests, and specialist consultations, privately and quickly. “I don’t have a medical background. I just have some common sense,” he explains. “I don’t need to be a doctor for what I do. I’m just expediting care.”

He tells me stories of other people whom his British Columbia–based company, Timely Medical Alternatives, has helped—people like the elderly woman who needed vascular surgery for a major artery in her abdomen and was promised prompt care by one of the most senior bureaucrats in the government, who never called back. “Her doctor told her she’s going to die,” Baker remembers. So Timely got her surgery in a couple of days, in Washington State. Then there was the eight-year-old badly in need of a procedure to help correct her deafness. After watching her surgery get bumped three times, her parents called Timely. She’s now back at school, her hearing partly restored. “The father said, ‘Mr. Baker, my wife and I are in agreement that your star shines the brightest in our heaven,’ ” Baker recalls. “I told that story to a government official. He shrugged. He couldn’t fucking care less.”

Not everyone has kind words for Baker. A woman from a union-sponsored health coalition, writing in a local paper, denounced him for “profiting from people’s misery.” When I bring up the comment, he snaps: “I’m profiting from relieving misery.” Some of the services that Baker brokers almost certainly contravene Canadian law, but governments are loath to stop him. “What I am doing could be construed as civil disobedience,” he says. “There comes a time when people need to lead the government.”

Baker isn’t alone: other private-sector health options are blossoming across Canada, and the government is increasingly turning a blind eye to them, too, despite their often uncertain legal status. Private clinics are opening at a rate of about one a week. Companies like MedCan now offer “corporate medicals” that include an array of diagnostic tests and a referral to Johns Hopkins, if necessary. Insurance firms sell critical-illness insurance, giving policyholders a lump-sum payment in the event of a major diagnosis; since such policyholders could, in theory, spend the money on anything they wanted, medical or not, the system doesn’t count as health insurance and is therefore legal. Testifying to the changing nature of Canadian health care, Baker observes that securing prompt care used to mean a trip south. These days, he says, he’s able to get 80 percent of his clients care in Canada, via the private sector.

Another sign of transformation: Canadian doctors, long silent on the health-care system’s problems, are starting to speak up. Last August, they voted Brian Day president of their national association. A former socialist who counts Fidel Castro as a personal acquaintance, Day has nevertheless become perhaps the most vocal critic of Canadian public health care, having opened his own private surgery center as a remedy for long waiting lists and then challenged the government to shut him down. “This is a country in which dogs can get a hip replacement in under a week,” he fumed to the New York Times, “and in which humans can wait two to three years.”

And now even Canadian governments are looking to the private sector to shrink the waiting lists. Day’s clinic, for instance, handles workers’-compensation cases for employees of both public and private corporations. In British Columbia, private clinics perform roughly 80 percent of government-funded diagnostic testing. In Ontario, where fealty to socialized medicine has always been strong, the government recently hired a private firm to staff a rural hospital’s emergency room.

This privatizing trend is reaching Europe, too. Britain’s government-run health care dates back to the 1940s. Yet the Labour Party—which originally created the National Health Service and used to bristle at the suggestion of private medicine, dismissing it as “Americanization”—now openly favors privatization. Sir William Wells, a senior British health official, recently said: “The big trouble with a state monopoly is that it builds in massive inefficiencies and inward-looking culture.” Last year, the private sector provided about 5 percent of Britain’s nonemergency procedures; Labour aims to triple that percentage by 2008. The Labour government also works to voucherize certain surgeries, offering patients a choice of four providers, at least one private. And in a recent move, the government will contract out some primary care services, perhaps to American firms such as UnitedHealth Group and Kaiser Permanente.

Sweden’s government, after the completion of the latest round of privatizations, will be contracting out some 80 percent of Stockholm’s primary care and 40 percent of its total health services, including one of the city’s largest hospitals. Since the fall of Communism, Slovakia has looked to liberalize its state-run system, introducing co-payments and privatizations. And modest market reforms have begun in Germany: increasing co-pays, enhancing insurance competition, and turning state enterprises over to the private sector (within a decade, only a minority of German hospitals will remain under state control). It’s important to note that change in these countries is slow and gradual—market reforms remain controversial. But if the United States was once the exception for viewing a vibrant private sector in health care as essential, it is so no longer.

Yet even as Stockholm and Saskatoon are percolating with the ideas of Adam Smith, a growing number of prominent Americans are arguing that socialized health care still provides better results for less money. “Americans tend to believe that we have the best health care system in the world,” writes Krugman in the New York Times. “But it isn’t true. We spend far more per person on health care . . . yet rank near the bottom among industrial countries in indicators from life expectancy to infant mortality.”

. . . .

And if we measure a health-care system by how well it serves its sick citizens, American medicine excels. Five-year cancer survival rates bear this out. For leukemia, the American survival rate is almost 50 percent; the European rate is just 35 percent. Esophageal carcinoma: 12 percent in the United States, 6 percent in Europe. The survival rate for prostate cancer is 81.2 percent here, yet 61.7 percent in France and down to 44.3 percent in England—a striking variation.

Clark v. South Central Correctional Facility

Source: 2007 WL 2093693 (July 17, 2007 Tenn.Ct.App.)

Patient brought a medical malpractice action against medical center and nurse. The Law Court, Sullivan County, Richard E. Ladd, J., granted summary judgment in favor of medical center and nurse, and patient appealed. The Court of Appeals, Charles D. Susano, Jr., J., held that statute of limitations began to run on patient's claim no later than the date she called hospital advocate. Affirmed.

Notes:

The discovery rule serves as a shield to a limitations defense only when the medical malpractice plaintiff does not discover or could not have reasonably discovered that he or she had a cause of action. West's T.C.A. § 29-26- 116(a)(2).

A medical malpractice plaintiff need not actually know the specific type of legal claim he or she has in order for the statute of limitations to commence, so long as the plaintiff is aware of facts sufficient to put a reasonable person on notice that he has suffered an injury as a result of wrongful conduct. West's T.C.A. § 29-26-116(a)(2).

It is not required that a medical malpractice plaintiff actually know that the injury constitutes a breach of the appropriate legal standard in order to discover that he has a "right of action"; the plaintiff is deemed to have discovered the right of action if he is aware of facts sufficient to put a reasonable person on notice that he has suffered an injury as a result of wrongful conduct. West's T.C.A. § 29-26-116(a)(2).

It was improper for medical malpractice plaintiff, a lay person, to express an opinion during her deposition on the effect the medications she was taking at the time of the deposition had on her "perception and understanding and [her] mental abilities"; this was a medical opinion.