The Joint Commission reports:
Physicians and medical staff members who have concerns about the safety and quality of care at their hospital may report those concerns with the understanding that retaliatory disciplinary action is prohibited, according to explicit new rules announced today by The Joint Commission. The accreditation participation requirement previously referred generally to hospital staff, although it has always been intended that physicians and medical staff be included as part of ‘Good Faith Participation’ in the accreditation policy.
The revised requirement, which will become effective January 1, 2008, means that accredited hospitals must educate staff and medical staff that any employee or any physician who has concerns about the safety or quality of care provided in the hospital may report these concerns to The Joint Commission. Hospitals also are expected to inform staff and medical staff that no disciplinary action will be taken if concerns are shared with The Joint Commission, and hospitals should demonstrate this commitment by refraining from taking action against employees or physicians who report their concerns to The Joint Commission.
“The Joint Commission policy forbids accredited organizations from taking retaliatory actions against those who report quality of care concerns because it is the obligation of everyone in an organization to make patient well-being the priority,” says William E. Jacott, M.D., special advisor for Professional Relations, The Joint Commission.
Friday, September 28, 2007
Hospital's proposal to compensate physicians for on-call ED coverage does not violate anti-kickback statute
[Source: Health Lawyers Weekly, Sept. 28, 2007]
A medical center’s proposal to compensate physicians for providing on-call coverage does not run afoul of the Anti-Kickback Statute, the Department of Health and Human Services Office of Inspector General (OIG) said in an Advisory Opinion posted September 27.
Faced with a shortage of physicians willing to provide ED on-call coverage, the medical center proposed an arrangement under which it would pay a per diem rate to physicians for each day spent on-call at the ED, except for one and one-half days that each physician must contribute free of charge to the rotation schedule monthly.
Here, OIG found the personal services safe harbor does not apply to the arrangement because the hospital’s payments to physicians are not “set in advance” as required under the safe harbor. Nevertheless, OIG concluded the arrangement “presents a low risk of fraud and abuse,” pointing to the fact that the payments are fair market value for actual services needed and provided, without regard to referrals.
OIG concluded that while the arrangement could potentially generate prohibited remuneration under the Anti-Kickback Statute, it would not impose administrative sanctions on the medical center.
Read full story
Advisory Opinion No. 07-10 (Dep’t of Health and Human Servs. Office of Inspector Gen. Aug. 28, 2007).
A medical center’s proposal to compensate physicians for providing on-call coverage does not run afoul of the Anti-Kickback Statute, the Department of Health and Human Services Office of Inspector General (OIG) said in an Advisory Opinion posted September 27.
Faced with a shortage of physicians willing to provide ED on-call coverage, the medical center proposed an arrangement under which it would pay a per diem rate to physicians for each day spent on-call at the ED, except for one and one-half days that each physician must contribute free of charge to the rotation schedule monthly.
Here, OIG found the personal services safe harbor does not apply to the arrangement because the hospital’s payments to physicians are not “set in advance” as required under the safe harbor. Nevertheless, OIG concluded the arrangement “presents a low risk of fraud and abuse,” pointing to the fact that the payments are fair market value for actual services needed and provided, without regard to referrals.
OIG concluded that while the arrangement could potentially generate prohibited remuneration under the Anti-Kickback Statute, it would not impose administrative sanctions on the medical center.
Read full story
Advisory Opinion No. 07-10 (Dep’t of Health and Human Servs. Office of Inspector Gen. Aug. 28, 2007).
President Bush signs drug-safety bill into law.
[Source: Health and Lifes Sciences Daily, Sept. 28, 2007]
The AP (9/28, Bridges) reports that on Thursday, President Bush signed the Food and Drug Administration Amendments Act of 2007 (H.R. 3580 ), which grants the FDA "broad new powers to ensure the safety of prescription drugs used by millions of Americans." The new law reauthorizes, for five years, "programs to collect fees from drug and medical device manufacturers," with drug companies expected to pay "$393 million, and medical device makers $48 million, in various fees next year." FDA Commissioner Dr. Andrew von Eschenbach noted, "It really represents an important addition to the FDA's authority." The legislation grants the FDA "the power both to require drug companies to do further study on the safety of medicines, if needed, and to mandate new label warnings when problems do appear. The FDA also gains the ability to fine companies to ensure compliance with those two new authorities." Moreover, the new law "requires companies to publicly release results of all clinical trials that show how well their approved drugs performed. Not-yet-approved drugs could be subject to the requirement later." The AP notes, "The FDA was still reviewing the 156-page law and its roughly 200 specific provisions, many with timelines, before deciding how to implement them."
* * * * *
FDALegislativeWatch.com reviews the new bill.
* * * * *
Patent Baristas reviews the new bill.
* * * * *
FDA has yet to determine how quickly it can exercise new authorities created by the FDA Amendments Act of 2007
[Source: FDALegislativeWatch.com]
The question is whether the new authorities "are self-implementing or whether they need clarification in the form of a reg or a guidance," Deputy Commissioner for Policy Randall Lutter said.
If regulations or guidance are necessary, agency use of new tools - such as the ability to order drug companies to make labeling changes, conduct post-approval clinical trials or develop risk evaluation and mitigation strategies - will be delayed as the agency goes through public comment procedures.
Complicating implementation of the statute is its size and scope. "There appears to be at least 200 specific provisions, many of which have timelines that have been identified within the bill itself," Commissioner Andrew von Eschenbach pointed out. An implementation strategy will be evolving during the coming weeks and months, he said.
Continue reading
The AP (9/28, Bridges) reports that on Thursday, President Bush signed the Food and Drug Administration Amendments Act of 2007 (H.R. 3580 ), which grants the FDA "broad new powers to ensure the safety of prescription drugs used by millions of Americans." The new law reauthorizes, for five years, "programs to collect fees from drug and medical device manufacturers," with drug companies expected to pay "$393 million, and medical device makers $48 million, in various fees next year." FDA Commissioner Dr. Andrew von Eschenbach noted, "It really represents an important addition to the FDA's authority." The legislation grants the FDA "the power both to require drug companies to do further study on the safety of medicines, if needed, and to mandate new label warnings when problems do appear. The FDA also gains the ability to fine companies to ensure compliance with those two new authorities." Moreover, the new law "requires companies to publicly release results of all clinical trials that show how well their approved drugs performed. Not-yet-approved drugs could be subject to the requirement later." The AP notes, "The FDA was still reviewing the 156-page law and its roughly 200 specific provisions, many with timelines, before deciding how to implement them."
* * * * *
FDALegislativeWatch.com reviews the new bill.
* * * * *
Patent Baristas reviews the new bill.
* * * * *
FDA has yet to determine how quickly it can exercise new authorities created by the FDA Amendments Act of 2007
[Source: FDALegislativeWatch.com]
The question is whether the new authorities "are self-implementing or whether they need clarification in the form of a reg or a guidance," Deputy Commissioner for Policy Randall Lutter said.
If regulations or guidance are necessary, agency use of new tools - such as the ability to order drug companies to make labeling changes, conduct post-approval clinical trials or develop risk evaluation and mitigation strategies - will be delayed as the agency goes through public comment procedures.
Complicating implementation of the statute is its size and scope. "There appears to be at least 200 specific provisions, many of which have timelines that have been identified within the bill itself," Commissioner Andrew von Eschenbach pointed out. An implementation strategy will be evolving during the coming weeks and months, he said.
Continue reading
FDA encourages drugmakers to study genetics and drug safety.
[Source: Health and Life Sciences Daily, Sept. 28, 2007]
The New York Times (9/27, C3, Pollack) reported, "Seven of the largest pharmaceutical companies have formed a group to develop genetic tests to determine which patients would be at risk from dangerous drug side effects." The FDA has "encouraged" the formation of the group, called "the International Serious Adverse Events Consortium." One of its goals is to determine if, by withholding drugs from patients who have a "genetic risk" for side effects, "it could not only protect the patients," but also "help manufacturers get their drugs approved or avoid having to remove them from the market." The group's first task will be to attempt to "find genetic predictors of two side effects -- serious liver toxicity and Stevens-Johnson syndrome, a rare but potentially fatal blistering of the skin. Both effects are associated with numerous drugs."
The AP (9/27, Johnson) quoted Dr. Janet Woodcock, deputy commissioner for operations at the FDA, as saying, "This is what personalized medicine is really about, finding out for the individual, not just the general population...what their risks are. ... 'Up until now we've been kind of helpless' in dealing with adverse effects." The AP noted, "Reports of such events are on the rise, jumping 150 percent from 1998 to 2005."
According to the Wall Street Journal (9/27, D7, Dooren), "The consortium will collect and combine already existing data on serious liver side effects, tissue samples housed in two Britain-based academic institutions, and information and DNA samples from at least one pharmaceutical firm on Stevens-Johnson Syndrome and a related skin condition known as toxic epidermal necrolysis." Then, "DNA from the individuals with side effects will be compared with DNA from 'control' subjects who didn't have drug side effects to see if there are genetic variations among the two groups." Should the consortium's first two studies prove successful, it will "move to other serious side effects like heart trouble and kidney damage that are linked to several different types of drugs as well as drugs in the same class." The group plans to share data from its studies with the public and agencies like the FDA.
And, the Chicago Tribune (9/27, Japsen) added, "Drug companies and the FDA alike have been under fire for perceived lax monitoring of prescription drugs once they reach the market." The Tribune continued, "The group hopes to reduce an estimated 150,000 deaths and annual costs of more than $100 billion to the U.S. economy from serious adverse events (SAEs) by addressing more safety issues for drugs before they reach the market." Arthur Holden, the consortium's chairman and chief executive, said, "The traditional research model only provides one piece of the puzzle in understanding the genetic variations that could lead to an increased risk of an adverse event. ... The most efficient way to study drug-induced SAEs is to create a global, publicly available 'knowledge base' that will help identify the genetic variations that may predict SAEs."
The New York Times (9/27, C3, Pollack) reported, "Seven of the largest pharmaceutical companies have formed a group to develop genetic tests to determine which patients would be at risk from dangerous drug side effects." The FDA has "encouraged" the formation of the group, called "the International Serious Adverse Events Consortium." One of its goals is to determine if, by withholding drugs from patients who have a "genetic risk" for side effects, "it could not only protect the patients," but also "help manufacturers get their drugs approved or avoid having to remove them from the market." The group's first task will be to attempt to "find genetic predictors of two side effects -- serious liver toxicity and Stevens-Johnson syndrome, a rare but potentially fatal blistering of the skin. Both effects are associated with numerous drugs."
The AP (9/27, Johnson) quoted Dr. Janet Woodcock, deputy commissioner for operations at the FDA, as saying, "This is what personalized medicine is really about, finding out for the individual, not just the general population...what their risks are. ... 'Up until now we've been kind of helpless' in dealing with adverse effects." The AP noted, "Reports of such events are on the rise, jumping 150 percent from 1998 to 2005."
According to the Wall Street Journal (9/27, D7, Dooren), "The consortium will collect and combine already existing data on serious liver side effects, tissue samples housed in two Britain-based academic institutions, and information and DNA samples from at least one pharmaceutical firm on Stevens-Johnson Syndrome and a related skin condition known as toxic epidermal necrolysis." Then, "DNA from the individuals with side effects will be compared with DNA from 'control' subjects who didn't have drug side effects to see if there are genetic variations among the two groups." Should the consortium's first two studies prove successful, it will "move to other serious side effects like heart trouble and kidney damage that are linked to several different types of drugs as well as drugs in the same class." The group plans to share data from its studies with the public and agencies like the FDA.
And, the Chicago Tribune (9/27, Japsen) added, "Drug companies and the FDA alike have been under fire for perceived lax monitoring of prescription drugs once they reach the market." The Tribune continued, "The group hopes to reduce an estimated 150,000 deaths and annual costs of more than $100 billion to the U.S. economy from serious adverse events (SAEs) by addressing more safety issues for drugs before they reach the market." Arthur Holden, the consortium's chairman and chief executive, said, "The traditional research model only provides one piece of the puzzle in understanding the genetic variations that could lead to an increased risk of an adverse event. ... The most efficient way to study drug-induced SAEs is to create a global, publicly available 'knowledge base' that will help identify the genetic variations that may predict SAEs."
Friday, September 21, 2007
CMS Issues Final Rule On “Revisit” User Fees For Healthcare Facilities Cited For Quality Deficiencies
[Source: Health Lawyer's Weekly, Sept. 21, 2007]
The Centers for Medicare and Medicaid Services (CMS) issued this week a final rule establishing user fees for healthcare providers and suppliers cited for deficiencies with federal quality of care requirements that require a “revisit” to ensure appropriate corrective action.
The final rule is effective as of the date of its publication in the Federal Register, which was September 19 (72 Fed. Reg. 53628).
The fees would be assessed for revisits required because of deficiencies cited during initial certification, recertification, or substantiated complaint surveys, CMS said.
continue reading
View the final rule.
The Centers for Medicare and Medicaid Services (CMS) issued this week a final rule establishing user fees for healthcare providers and suppliers cited for deficiencies with federal quality of care requirements that require a “revisit” to ensure appropriate corrective action.
The final rule is effective as of the date of its publication in the Federal Register, which was September 19 (72 Fed. Reg. 53628).
The fees would be assessed for revisits required because of deficiencies cited during initial certification, recertification, or substantiated complaint surveys, CMS said.
continue reading
View the final rule.
California case will test health-insurance rescission.
[Source: Health and Life Science Law Daily, Sept. 21, 2007]
Law.com (9/21, Hirsch) reports that next week, California's 4th District Court of Appeal will hear arguments in the "closely watched" Hailey v. California Physicians' Service (pdf), a case that "challenges Blue Shield of California's practice of rescinding coverage based on inaccuracies in an application." The case centers the issue of "willful misrepresentation" and insurers' ability to rescind an individual's coverage based on inaccurate information in an application. Law.com writes, "Plaintiff attorneys in the field contend that a showing of willful misrepresentation is required before yanking coverage; defense attorneys say the mention of willful misrepresentation does not amount to a prerequisite. ... If the 4th District requires a showing of willful misrepresentation, health insurers will likely find it harder to get cases thrown out early."
Law.com (9/21, Hirsch) reports that next week, California's 4th District Court of Appeal will hear arguments in the "closely watched" Hailey v. California Physicians' Service (pdf), a case that "challenges Blue Shield of California's practice of rescinding coverage based on inaccuracies in an application." The case centers the issue of "willful misrepresentation" and insurers' ability to rescind an individual's coverage based on inaccurate information in an application. Law.com writes, "Plaintiff attorneys in the field contend that a showing of willful misrepresentation is required before yanking coverage; defense attorneys say the mention of willful misrepresentation does not amount to a prerequisite. ... If the 4th District requires a showing of willful misrepresentation, health insurers will likely find it harder to get cases thrown out early."
U.S. Senate approves legislation to overhaul FDA.
[Source: Health and Life Science Law Daily, Sept. 21, 2007]
The AP (9/21, Bridges) reports, "Congress sent President Bush legislation Thursday giving the Food and Drug Administration new powers to ensure the safety of prescription drugs. The Senate passed the FDA bill by voice vote Thursday, a day after the House approved it by an overwhelming margin."
The Wall Street Journal (9/21, A12, Rubenstein, et al.) notes that the bill "increases the fees that drugmakers pay the FDA to review their drugs and allots a portion of the money for the agency to monitor the safety of drugs after they go on the market. It also solidifies the agency's authority to mandate changes to drug labels, require additional safety studies and limit the distribution of medications when safety concerns arise -- powers that have existed informally but haven't always been clearly delineated." The Journal adds, "For the most part, drug companies say they welcome the changes, hoping that with more money and power, the FDA will resolve safety worries more quickly -- and with measured approaches that don't scare the public or entail calling for withdrawal of drugs from the market."
The Los Angeles Times (9/21, Alonso-Zaldivar) writes, "In addition to building a new computerized system to spot drug risks, the bill would strengthen the FDA's enforcement powers and require greater disclosure of private and public clinical research and of agency decision-making. It also would take steps to reduce FDA reliance on outside advisors with financial conflicts of interest, as well as create a new program to review drug-company advertising." However, some experts say implementing the changes may take longer than expected. Mark B. McClellan, FDA commissioner from 2002 to 2004, said, "This is a different way of doing business for FDA, and there are going to be some real challenges in implementing it effectively. ... It's going to shift the focus away from information provided by the drug manufacturers to much broader sources of information in our healthcare system."
* * * * * *
Joe Mantone stated in WSJ Health Blog: "A provision to empower FDA to yank consumer drug ads was stripped from the final version of an FDA bill, which was passed yesterday.But it wasn’t Big Pharma that carried the day on the revision; it was the Gucci-loafered lobbyists for media and advertising firms. The WSJ reports the pharmaceutical lobby had other priorities with the bill. But media and advertising groups were sweating about regulators cutting back on what has become a dependable stream of revenue. In the U.S., drug makers represented the tenth-biggest advertising category in 2006, spending $5.3 billion, or 3.5% of the total $149.6 billion U.S. ad market." Continue reading
* * * * * *
Reauthorized FDA User Fee Bill increases fees for drugs and devices
[Source: Health Lawyers Weekly, Sept. 21, 2007] - Full Text
The Senate passed by unanimous consent September 20 the Food and Drug Administration Amendments Act of 2007 (H.R. 3580), which reauthorizes the prescription drug user fee program through 2012. The bill passed the House September 19 on a motion to suspend the rules.
The compromise bill includes the administration's request for an increase in the total annual user fees collected to $392.8 million for fiscal year 2008, an $87.4 million increase over the current base, according to a bill summary posted on the House Energy and Commerce Committee's website.
In addition, the legislation contains an additional $225 million in user fees that will be collected over five years to be used for drug safety activities and "are intended to supplement and not supplant any other drug safety resources," according to the summary
The legislation also reauthorizes the medical device user fee program and includes enhancements to ensure sound financial footing for the device review program and to the process for pre-market review of device applications.
Under the new bill, medical device companies will pay 31% more in fees in 2008 and 8.5% more each subsequent year through 2012, the summary said. Two new types of fees are set forth in the bill--an annual establishment registration fee and an annual fee for filing periodic reports--which will generate about 50% of the total fee revenue.
. . . .
View the text of H.R. 3580 and a bill summary.
The AP (9/21, Bridges) reports, "Congress sent President Bush legislation Thursday giving the Food and Drug Administration new powers to ensure the safety of prescription drugs. The Senate passed the FDA bill by voice vote Thursday, a day after the House approved it by an overwhelming margin."
The Wall Street Journal (9/21, A12, Rubenstein, et al.) notes that the bill "increases the fees that drugmakers pay the FDA to review their drugs and allots a portion of the money for the agency to monitor the safety of drugs after they go on the market. It also solidifies the agency's authority to mandate changes to drug labels, require additional safety studies and limit the distribution of medications when safety concerns arise -- powers that have existed informally but haven't always been clearly delineated." The Journal adds, "For the most part, drug companies say they welcome the changes, hoping that with more money and power, the FDA will resolve safety worries more quickly -- and with measured approaches that don't scare the public or entail calling for withdrawal of drugs from the market."
The Los Angeles Times (9/21, Alonso-Zaldivar) writes, "In addition to building a new computerized system to spot drug risks, the bill would strengthen the FDA's enforcement powers and require greater disclosure of private and public clinical research and of agency decision-making. It also would take steps to reduce FDA reliance on outside advisors with financial conflicts of interest, as well as create a new program to review drug-company advertising." However, some experts say implementing the changes may take longer than expected. Mark B. McClellan, FDA commissioner from 2002 to 2004, said, "This is a different way of doing business for FDA, and there are going to be some real challenges in implementing it effectively. ... It's going to shift the focus away from information provided by the drug manufacturers to much broader sources of information in our healthcare system."
* * * * * *
Joe Mantone stated in WSJ Health Blog: "A provision to empower FDA to yank consumer drug ads was stripped from the final version of an FDA bill, which was passed yesterday.But it wasn’t Big Pharma that carried the day on the revision; it was the Gucci-loafered lobbyists for media and advertising firms. The WSJ reports the pharmaceutical lobby had other priorities with the bill. But media and advertising groups were sweating about regulators cutting back on what has become a dependable stream of revenue. In the U.S., drug makers represented the tenth-biggest advertising category in 2006, spending $5.3 billion, or 3.5% of the total $149.6 billion U.S. ad market." Continue reading
* * * * * *
Reauthorized FDA User Fee Bill increases fees for drugs and devices
[Source: Health Lawyers Weekly, Sept. 21, 2007] - Full Text
The Senate passed by unanimous consent September 20 the Food and Drug Administration Amendments Act of 2007 (H.R. 3580), which reauthorizes the prescription drug user fee program through 2012. The bill passed the House September 19 on a motion to suspend the rules.
The compromise bill includes the administration's request for an increase in the total annual user fees collected to $392.8 million for fiscal year 2008, an $87.4 million increase over the current base, according to a bill summary posted on the House Energy and Commerce Committee's website.
In addition, the legislation contains an additional $225 million in user fees that will be collected over five years to be used for drug safety activities and "are intended to supplement and not supplant any other drug safety resources," according to the summary
The legislation also reauthorizes the medical device user fee program and includes enhancements to ensure sound financial footing for the device review program and to the process for pre-market review of device applications.
Under the new bill, medical device companies will pay 31% more in fees in 2008 and 8.5% more each subsequent year through 2012, the summary said. Two new types of fees are set forth in the bill--an annual establishment registration fee and an annual fee for filing periodic reports--which will generate about 50% of the total fee revenue.
. . . .
View the text of H.R. 3580 and a bill summary.
Thursday, September 20, 2007
HHS unveils report on personalized healthcare.
[Source: Health and Life Sciences Daily, Sept. 20, 2007]
Modern Healthcare (9/20, DoBias) reports that the HHS "has unveiled a road map that would parlay current health initiatives, such as the use of information technology and evidence-based practices, into a workable system in which scientists and physicians could 'customize' the care they give to an individual based on that person's genetic makeup and other factors." The report, Personalized Health Care: Opportunities, Pathways, Resources (pdf), examines "the preliminary challenges that scientists face when they translate their growing knowledge of the human genome into the everyday practice of medicine."
Government Health IT (9/19, Ferris) noted that at a conference on personalized medicine, Health and Human Services Secretary Mike Leavitt said, "The potential is huge -- for protecting health, for preventing and pre-empting disease and for personalizing treatment according to each person's unique biology." According to the report, "personalized healthcare will support prevention of some illnesses and enable practitioners to avoid making some treatment errors."
Modern Healthcare (9/20, DoBias) reports that the HHS "has unveiled a road map that would parlay current health initiatives, such as the use of information technology and evidence-based practices, into a workable system in which scientists and physicians could 'customize' the care they give to an individual based on that person's genetic makeup and other factors." The report, Personalized Health Care: Opportunities, Pathways, Resources (pdf), examines "the preliminary challenges that scientists face when they translate their growing knowledge of the human genome into the everyday practice of medicine."
Government Health IT (9/19, Ferris) noted that at a conference on personalized medicine, Health and Human Services Secretary Mike Leavitt said, "The potential is huge -- for protecting health, for preventing and pre-empting disease and for personalizing treatment according to each person's unique biology." According to the report, "personalized healthcare will support prevention of some illnesses and enable practitioners to avoid making some treatment errors."
U.S. House passes bill to give FDA more power
[Source: Health and Life Sciences Daily, September 20, 2007]
The CBS Evening News (9/19, lead story, 2:10, Couric) reported, "Congressional negotiators have agreed on an overhaul of the Food and Drug Administration to give it more power to protect us from potentially dangerous food and medications. The bill would give the FDA the power, for the first time ever, to demand studies on the safety of drugs even after they've been approved, and the power to demand changes in drug advertisements."
The New York Times (9/20, A18, Harris) reports that on Wednesday the U.S. House of Representatives voted 405 to 7 to pass H.R. 3580, legislation that "is expected to give federal drug regulators significantly more money and power to ensure the safety of the nation's drug supply." All signs point to a Senate passage on Thursday and President Bush is expected to sign it shortly thereafter. According to the Times, "The legislation was welcomed by both industry and consumer groups, who all found something to trumpet in the mammoth bill."
Congressional Quarterly (9/20, Armstrong) notes, "Under the compromise, drug companies would pay a new user fee totaling some $225 million over five years that would fund FDA drug-safety activities. The FDA would be able to "strictly" regulate direct-to-consumer ads. The agency "would be able to review drug ads and fine companies for false or misleading ads, but it would not be able to ban them, even temporarily." Furthermore, the agency could force drug manufacturers to conduct follow-up safety studies after a drug has been approved," and "would also have the authority to require changes to drug labeling and levy fines for non-compliance."
Bloomberg (9/20, Blum) reports, "Companies that violate FDA orders on labels and studies or certain other requirements could face maximum fines of $250,000 for a single violation and $10 million for multiple failings handled in one proceeding. The top fines are less than the House had previously approved." Bloomberg continues, "The legislation includes a compromise that would place new conflict-of-interest restrictions on participants in advisory panels used by the FDA to review drugs and devices," requiring "the FDA to decrease the number of participants with conflicts by five percent a year. The House had previously approved a limit of one conflict per committee meeting."
The AP (9/20) adds, "Stripped from the bill was a bid by Democrats to limit to three months, from the current six months, in additional patent protection blockbuster drugs can gain if their manufacturers study their use in children. The stripping of even three months of protection from generic competition could spell several hundred million dollars in lost revenue for the makers of drugs with sales that exceed $1 billion a year."
The Wall Street Journal (9/20, A6, Mathews, et al.) reports, "The final bill includes a provision backed by House Democrats that could weaken a key legal defense that pharmaceutical companies have used in plaintiff suits. The debate centered on the question of drug companies' protection against plaintiffs claiming that they were injured by medicines. The Bush administration has backed the idea that FDA-approved drug labels pre-empt state law," and many pharmaceutical companies "have used that as a shield in legal cases, arguing that they weren't required to warn consumers about a potential risk if the FDA determined that the safety issue didn't warrant inclusion in the label." However, the newly passed FDA bill "includes language that could limit that protection, by saying that drug companies have a responsibility to maintain their labels, thus leaving the manufacturers potentially liable if they fail to make changes even without the FDA's explicit approval." Gerie Voss, regulatory counsel for the American Association for Justice, "said it supported the House language because it is 'still putting the onus on the drug companies to let the public know when there is a potential drug hazard.'"
The CBS Evening News (9/19, lead story, 2:10, Couric) reported, "Congressional negotiators have agreed on an overhaul of the Food and Drug Administration to give it more power to protect us from potentially dangerous food and medications. The bill would give the FDA the power, for the first time ever, to demand studies on the safety of drugs even after they've been approved, and the power to demand changes in drug advertisements."
The New York Times (9/20, A18, Harris) reports that on Wednesday the U.S. House of Representatives voted 405 to 7 to pass H.R. 3580, legislation that "is expected to give federal drug regulators significantly more money and power to ensure the safety of the nation's drug supply." All signs point to a Senate passage on Thursday and President Bush is expected to sign it shortly thereafter. According to the Times, "The legislation was welcomed by both industry and consumer groups, who all found something to trumpet in the mammoth bill."
Congressional Quarterly (9/20, Armstrong) notes, "Under the compromise, drug companies would pay a new user fee totaling some $225 million over five years that would fund FDA drug-safety activities. The FDA would be able to "strictly" regulate direct-to-consumer ads. The agency "would be able to review drug ads and fine companies for false or misleading ads, but it would not be able to ban them, even temporarily." Furthermore, the agency could force drug manufacturers to conduct follow-up safety studies after a drug has been approved," and "would also have the authority to require changes to drug labeling and levy fines for non-compliance."
Bloomberg (9/20, Blum) reports, "Companies that violate FDA orders on labels and studies or certain other requirements could face maximum fines of $250,000 for a single violation and $10 million for multiple failings handled in one proceeding. The top fines are less than the House had previously approved." Bloomberg continues, "The legislation includes a compromise that would place new conflict-of-interest restrictions on participants in advisory panels used by the FDA to review drugs and devices," requiring "the FDA to decrease the number of participants with conflicts by five percent a year. The House had previously approved a limit of one conflict per committee meeting."
The AP (9/20) adds, "Stripped from the bill was a bid by Democrats to limit to three months, from the current six months, in additional patent protection blockbuster drugs can gain if their manufacturers study their use in children. The stripping of even three months of protection from generic competition could spell several hundred million dollars in lost revenue for the makers of drugs with sales that exceed $1 billion a year."
The Wall Street Journal (9/20, A6, Mathews, et al.) reports, "The final bill includes a provision backed by House Democrats that could weaken a key legal defense that pharmaceutical companies have used in plaintiff suits. The debate centered on the question of drug companies' protection against plaintiffs claiming that they were injured by medicines. The Bush administration has backed the idea that FDA-approved drug labels pre-empt state law," and many pharmaceutical companies "have used that as a shield in legal cases, arguing that they weren't required to warn consumers about a potential risk if the FDA determined that the safety issue didn't warrant inclusion in the label." However, the newly passed FDA bill "includes language that could limit that protection, by saying that drug companies have a responsibility to maintain their labels, thus leaving the manufacturers potentially liable if they fail to make changes even without the FDA's explicit approval." Gerie Voss, regulatory counsel for the American Association for Justice, "said it supported the House language because it is 'still putting the onus on the drug companies to let the public know when there is a potential drug hazard.'"
Wednesday, September 19, 2007
Update on Follow-on Biologics
In July, the Senate Health, Education, Labor and Pensions HELP Committee gave the thumbs up to the Biologics Price Competition and Innovative Act of 2007 (S. 1695), which lays out a pathway for approving the development of follow-on biologics.
"This Act amends section 351 of the Public Health Service Act to provide for an approval pathway for safe biosimilar and interchangeable biological products (relying in part on the previous approval of a brand product) while preserving the incentives that have fueled the development of these life-saving medicines. "
Draft legislation: Biologics Price Competition and Innovative Act of 2007 (S. 1695)
The New England Journal of Medicine published a good article by Richard Frank, Ph.D., "Regulation of Follow-on Biologics"
DrugResearcher.com ran this piece in July
"This Act amends section 351 of the Public Health Service Act to provide for an approval pathway for safe biosimilar and interchangeable biological products (relying in part on the previous approval of a brand product) while preserving the incentives that have fueled the development of these life-saving medicines. "
Draft legislation: Biologics Price Competition and Innovative Act of 2007 (S. 1695)
The New England Journal of Medicine published a good article by Richard Frank, Ph.D., "Regulation of Follow-on Biologics"
DrugResearcher.com ran this piece in July
House Passes Patent Reform Act of 2007 - Biotechs Express Concerns
On Friday, September 7th, the House passed HR1908 (currently before the Senate, S. 1145)
The bill focuses on minimizing patent litigation by making it harder to claim the infringement of intellectual property and taking away lawsuits' potential rewards. The bill calls for a first-to-file standard, allows post grant reviews, and has a narrower definition of willful infringement.
See Fish & Richardson's presentation overview of the Patent Reform Act of 2007 (reflects recent updates)
Patent Baristas has a nice review of the bill
Biotechnology Industry Organization (BIO) Expresses Disappointment with House Vote on Patent Reform - read press release
* * * * * *
BIO's concerns are as follows:
Inequitable Conduct Reform
S. 1145, while attempting to reform the use of the “inequitable conduct” defense, does exactly the opposite. This judicially-created doctrine allows accused infringers to assert that otherwise-valid patents should be declared unenforceable for reason of “inequitable conduct” – an alleged misrepresentation or failure to disclose information to the patent examiner years earlier. This defense is almost routinely raised in patent litigation. While it rarely succeeds, it is a major driver of the cost, length, and acrimony of patent litigation. The fear of being later accused of inequitable conduct also chills patent applicants from communicating openly and efficiently with patent examiners today, leading the U.S. Patent & Trademark Office (PTO) to call for inequitable conduct reform as a foundational element for improving patent examination quality. The National Academy of Sciences has lamented the abuse of this highly subjective doctrine and called for its elimination or reform; while the U.S. Court of Appeals for the Federal Circuit (the Federal court that hears patent appeals) has deemed inequitable conduct claims an “absolute plague.”
Rather than stemming such costly and lengthy litigation abuse, S. 1145 as reported codifies the most criticized aspects of this doctrine. Specifically, the codified materiality standard is so low that virtually any omission or misstatement could be considered material – a standard specifically rejected by the PTO in 1992 when it revised its own internal administrative rules in this area. Moreover, the legislation fails to affect true reform because it still permits unenforceability even where the misconduct did not impact the granting of the patent. Further, S. 1145 grants a new compulsory licensing remedy that would only incentivize additional attacks on patent owners.
Post- Grant Opposition
S. 1145 creates a new proceeding within the PTO in which third parties are allowed to challenge validly-issued patents administratively instead of having to challenge such patents in court. Under the bill’s provisions, patents can be subjected to serial administrative attacks by competitors, under a lower standard of evidence than would be required in court, throughout the entire patent life. Because patents are the linchpin of biotechnology R&D, the increased uncertainty over the patent’s reliability created by this process will drive investment away from biotech and to other less risky endeavors, harming our industry’s efforts to develop and produce the next generation of products designed to improve global health and the environment.
Apportionment of Damages
The language in S 1145 creates a new regime for awarding damages based upon a “patent’s specific contribution over the prior art.” This new, untested regime systematically undervalues the bulk of inventive work done in biotechnology because it (i) fixes the marketplace value of an invention at the time the invention was made – not when the patent is infringed, and (ii) attempts to set the commercial value of an invention according to its technological advance over preexisting technology, rather than, as under current law, determining a royalty based on the value obtained by the infringer by utilizing the patented invention. This fundamental shift in valuation will make infringement cheaper, and thus incentivize infringement and discourage good faith licensing of inventions. Additionally, the bill would impose arbitrary limits on when the value of the infringing product may be used as the base for calculation of royalties, which will have great impact in fields such as biotechnology where the infringing product sales is often the most appropriate or only base upon which royalties can be assessed.
We believe that patent reform, if done properly, can truly improve the system for all innovators across the spectrum of American industry. There is broad consensus on many of the reforms contained in S. 1145 that will do just that. Unfortunately, by insisting on the controversial provisions described above, the proponents of this legislation are harming efforts to achieve true patent reform. We urge you to oppose S. 1145, and to also oppose bringing the current legislation to the Senate floor before consensus is reached on these controversial issues.
The bill focuses on minimizing patent litigation by making it harder to claim the infringement of intellectual property and taking away lawsuits' potential rewards. The bill calls for a first-to-file standard, allows post grant reviews, and has a narrower definition of willful infringement.
See Fish & Richardson's presentation overview of the Patent Reform Act of 2007 (reflects recent updates)
Patent Baristas has a nice review of the bill
Biotechnology Industry Organization (BIO) Expresses Disappointment with House Vote on Patent Reform - read press release
* * * * * *
BIO's concerns are as follows:
Inequitable Conduct Reform
S. 1145, while attempting to reform the use of the “inequitable conduct” defense, does exactly the opposite. This judicially-created doctrine allows accused infringers to assert that otherwise-valid patents should be declared unenforceable for reason of “inequitable conduct” – an alleged misrepresentation or failure to disclose information to the patent examiner years earlier. This defense is almost routinely raised in patent litigation. While it rarely succeeds, it is a major driver of the cost, length, and acrimony of patent litigation. The fear of being later accused of inequitable conduct also chills patent applicants from communicating openly and efficiently with patent examiners today, leading the U.S. Patent & Trademark Office (PTO) to call for inequitable conduct reform as a foundational element for improving patent examination quality. The National Academy of Sciences has lamented the abuse of this highly subjective doctrine and called for its elimination or reform; while the U.S. Court of Appeals for the Federal Circuit (the Federal court that hears patent appeals) has deemed inequitable conduct claims an “absolute plague.”
Rather than stemming such costly and lengthy litigation abuse, S. 1145 as reported codifies the most criticized aspects of this doctrine. Specifically, the codified materiality standard is so low that virtually any omission or misstatement could be considered material – a standard specifically rejected by the PTO in 1992 when it revised its own internal administrative rules in this area. Moreover, the legislation fails to affect true reform because it still permits unenforceability even where the misconduct did not impact the granting of the patent. Further, S. 1145 grants a new compulsory licensing remedy that would only incentivize additional attacks on patent owners.
Post- Grant Opposition
S. 1145 creates a new proceeding within the PTO in which third parties are allowed to challenge validly-issued patents administratively instead of having to challenge such patents in court. Under the bill’s provisions, patents can be subjected to serial administrative attacks by competitors, under a lower standard of evidence than would be required in court, throughout the entire patent life. Because patents are the linchpin of biotechnology R&D, the increased uncertainty over the patent’s reliability created by this process will drive investment away from biotech and to other less risky endeavors, harming our industry’s efforts to develop and produce the next generation of products designed to improve global health and the environment.
Apportionment of Damages
The language in S 1145 creates a new regime for awarding damages based upon a “patent’s specific contribution over the prior art.” This new, untested regime systematically undervalues the bulk of inventive work done in biotechnology because it (i) fixes the marketplace value of an invention at the time the invention was made – not when the patent is infringed, and (ii) attempts to set the commercial value of an invention according to its technological advance over preexisting technology, rather than, as under current law, determining a royalty based on the value obtained by the infringer by utilizing the patented invention. This fundamental shift in valuation will make infringement cheaper, and thus incentivize infringement and discourage good faith licensing of inventions. Additionally, the bill would impose arbitrary limits on when the value of the infringing product may be used as the base for calculation of royalties, which will have great impact in fields such as biotechnology where the infringing product sales is often the most appropriate or only base upon which royalties can be assessed.
We believe that patent reform, if done properly, can truly improve the system for all innovators across the spectrum of American industry. There is broad consensus on many of the reforms contained in S. 1145 that will do just that. Unfortunately, by insisting on the controversial provisions described above, the proponents of this legislation are harming efforts to achieve true patent reform. We urge you to oppose S. 1145, and to also oppose bringing the current legislation to the Senate floor before consensus is reached on these controversial issues.
Tuesday, September 18, 2007
TN Supreme Court holds that a child born alive has an independent cause of action for failure to obtain informed consent
In, Marissa Miller, a minor, by and through her mother, and next friend, Miranda Miller v. John Dacus, M.D. - M2006-02728-SC-R23-CQ View, the Tennessee Supreme Court held that child born alive does have an independent cause of action for injuries caused by the failure of a physician to obtain informed consent from the child’s mother during labor.
In 2003, the Plaintiff through her mother and next friend brought a medical malpractice suit in federal district court against the obstetrician for injuries sustained by the Plaintiff during her birth in 1993, alleging both medical negligence and lack of informed consent. The district court dismissed the lack of informed consent claim on summary judgment, ruling that a child born alive does not have an independent action for lack of informed consent. On appeal, the United States Court of Appeals for the Sixth Circuit certified two questions of law to this Court.
In 2003, the Plaintiff through her mother and next friend brought a medical malpractice suit in federal district court against the obstetrician for injuries sustained by the Plaintiff during her birth in 1993, alleging both medical negligence and lack of informed consent. The district court dismissed the lack of informed consent claim on summary judgment, ruling that a child born alive does not have an independent action for lack of informed consent. On appeal, the United States Court of Appeals for the Sixth Circuit certified two questions of law to this Court.
- Whether a child born alive has an independent cause of action for injuries allegedly caused by the failure of a physician to obtain informed consent from the child’s mother during labor and delivery.
- If the Answer to Question 1 is ‘Yes,’ whether the minority provision of Tennessee’s legal disability statute, Tenn. Code Ann. § 28-1-106, tolls the medical malpractice statute of repose, Tenn. Code Ann. § 29-26-116(a)(3), as applied to a fetus’s lack of informed consent claim.
TN SC holds that Tennessee Code Annotated section 28-1-106 tolls the three-year statute of repose for the Plaintiff’s lack of informed consent claim because the claim was commenced before December 9, 2005. See Calaway v. Schucker, 193 S.W.3d 509 (Tenn. 2005).
* * * * *
Note: TN's Callaway v. Schucker, 193 S.W.3d 509 (Tenn. 2005), case has held that TN's statute of repose is not tolled by child's minority. The court in Miller applied Callaway prospectively only.
NIH advisory panel says further testing needed to determine gene therapy's role in patient death.
[Source: Health and Life Sciences Law Daily, Sept. 18, 2007]
The Washington Post (918, A4, Weiss) reports that according to a National Institutes of Health panel, "tests on an Illinois woman who died mysteriously in July after getting an experimental gene treatment show no evidence that she was killed directly by the genetically altered viruses she was given" by Targeted Genetics, a Seattle biotechnology company, but "further tests will have to be done to see if the treatment somehow contributed to her death, perhaps by leaving her vulnerable to a runaway fungal infection." The FDA "has placed the experiment on hold, and the case is being watched closely by leaders of other gene-therapy experiments."
The New York Times (9/18, A22, Pollack) notes that the woman, Jolee Mohr, "died on July 24 at the University of Chicago Medical Center, three weeks after trillions of genetically engineered viruses were injected into her right knee as a test of an experimental treatment for rheumatoid arthritis. The type of virus used as a gene carrier has widely been considered safe and is being used in 35 other trials."
The Washington Post (918, A4, Weiss) reports that according to a National Institutes of Health panel, "tests on an Illinois woman who died mysteriously in July after getting an experimental gene treatment show no evidence that she was killed directly by the genetically altered viruses she was given" by Targeted Genetics, a Seattle biotechnology company, but "further tests will have to be done to see if the treatment somehow contributed to her death, perhaps by leaving her vulnerable to a runaway fungal infection." The FDA "has placed the experiment on hold, and the case is being watched closely by leaders of other gene-therapy experiments."
The New York Times (9/18, A22, Pollack) notes that the woman, Jolee Mohr, "died on July 24 at the University of Chicago Medical Center, three weeks after trillions of genetically engineered viruses were injected into her right knee as a test of an experimental treatment for rheumatoid arthritis. The type of virus used as a gene carrier has widely been considered safe and is being used in 35 other trials."
Insurance companies limiting coverage to drugs approved by FDA in order to control costs.
[Source: Health and Life Sciences Daily, Sept. 18, 2007]
The Wall Street Journal (9/18, A1, Anand) reports, "Doctors, particularly oncologists, rely on medicines approved for other diseases to try to save patients for whom all other treatments have failed. But as new medicines come to market at ever-higher prices, insurers are pushing back, limiting coverage of these drugs to only the disease for which they are specifically approved by the Food and Drug Administration -- or for which there is extensive evidence of efficacy in clinical trials." The Journal notes that insurers "have little leverage in negotiating the prices of many specialty drugs because they often extend lives and lack competition." And, according to many insurers, they must "limit use of the most expensive drugs to control healthcare costs, which are surging at a seven percent to eight percent annual rate and continue to outpace inflation." The insurers say it "makes sense" to require "proof that a drug works in a patient's particular disease before doling out tens or hundreds of thousands of dollars." Mohit Ghose, spokesman for America's Health Insurance Plans, an industry trade group, noted, "We're trying to bring new drugs to consumers, but trying to do it with employers getting the best value of every healthcare dollar spent in the system."
The Wall Street Journal (9/18, A1, Anand) reports, "Doctors, particularly oncologists, rely on medicines approved for other diseases to try to save patients for whom all other treatments have failed. But as new medicines come to market at ever-higher prices, insurers are pushing back, limiting coverage of these drugs to only the disease for which they are specifically approved by the Food and Drug Administration -- or for which there is extensive evidence of efficacy in clinical trials." The Journal notes that insurers "have little leverage in negotiating the prices of many specialty drugs because they often extend lives and lack competition." And, according to many insurers, they must "limit use of the most expensive drugs to control healthcare costs, which are surging at a seven percent to eight percent annual rate and continue to outpace inflation." The insurers say it "makes sense" to require "proof that a drug works in a patient's particular disease before doling out tens or hundreds of thousands of dollars." Mohit Ghose, spokesman for America's Health Insurance Plans, an industry trade group, noted, "We're trying to bring new drugs to consumers, but trying to do it with employers getting the best value of every healthcare dollar spent in the system."
CMS report finds states differ widely in spending on healthcare.
[Source: Health and Life Science Daily, September 18, 2007]
The New York Times (9/18, A22, Pear) reports that according to a study appearing in the Web edition of the journal Health Affairs, a huge variation exists "in personal health spending among states, ranging from an average of nearly $6,700 a person in Massachusetts to less than $4,000 in Utah." The study "said that Massachusetts, Maine, New York, Alaska and Connecticut had the highest per capita spending on healthcare in 2004," while the "lowest-spending states were Utah, Arizona, Idaho, New Mexico and Nevada. Per capita spending in Utah was 59 percent of that in Massachusetts." The lead author of the report, Anne B. Martin, an economist at the CMS, "said the reasons for the differences included the age and incomes of the population, the concentration of doctors in a state, the generosity of public programs, the extent of private health-insurance coverage, and the mix of services used by state residents." The AP (9/18, Schmid) notes, "Nationally, per capita health spending increased on average 6.3 percent per year from 1998 to 2004, the report said."
The New York Times (9/18, A22, Pear) reports that according to a study appearing in the Web edition of the journal Health Affairs, a huge variation exists "in personal health spending among states, ranging from an average of nearly $6,700 a person in Massachusetts to less than $4,000 in Utah." The study "said that Massachusetts, Maine, New York, Alaska and Connecticut had the highest per capita spending on healthcare in 2004," while the "lowest-spending states were Utah, Arizona, Idaho, New Mexico and Nevada. Per capita spending in Utah was 59 percent of that in Massachusetts." The lead author of the report, Anne B. Martin, an economist at the CMS, "said the reasons for the differences included the age and incomes of the population, the concentration of doctors in a state, the generosity of public programs, the extent of private health-insurance coverage, and the mix of services used by state residents." The AP (9/18, Schmid) notes, "Nationally, per capita health spending increased on average 6.3 percent per year from 1998 to 2004, the report said."
Monday, September 17, 2007
Health Law Statutes and Regulations
I've recently posted a list of commonly used Health Law Statutes and Regultions here.
New CMS Stark rules expand physician recruiting exception, removes some "bright-line" rules.
[Source: Health and Life Sciences Law Daily, September 17, 2007]
American Medical News (9/24, Glendinning) reports that on August 27, the CMS "unveiled the phase III, or final, version of the prohibitions known informally as the Stark II rules." AMNews continues, "In the final rule, CMS did not make any sweeping changes to the existing prohibitions. It contains no new exceptions for physicians, hospitals and others implementing business and referral arrangements. The agency did, however, revise and clarify the regulatory language in a number of areas in the hope of making compliance less burdensome." The CMS "expanded the physician recruiting exception to make it easier for hospitals to attract physicians to rural or underserved areas." The CMS also removed "some of the 'bright-line' rules under which healthcare entities have been operating, said Gina M. Cavalier, an attorney with Reed Smith in Washington, D.C." For example, the new regulation "eliminates a safe harbor on hourly payments to physicians from the definition of fair market value." AMA Executive Vice President and CEO Michael D. Maves said that the "current self-referral laws are already too complex to be understood without legal assistance and too restrictive to be fair." He continued, "Adding more layers of confusion and regulation serves only to further confound physicians, shift more money to the attorneys that are required to interpret them, and discourage efficient, innovative, quality health care." The Stark II phase III rule "goes into effect in December, though some types of existing contracts are protected by a grandfather clause until the end of the contract term."
American Medical News (9/24, Glendinning) reports that on August 27, the CMS "unveiled the phase III, or final, version of the prohibitions known informally as the Stark II rules." AMNews continues, "In the final rule, CMS did not make any sweeping changes to the existing prohibitions. It contains no new exceptions for physicians, hospitals and others implementing business and referral arrangements. The agency did, however, revise and clarify the regulatory language in a number of areas in the hope of making compliance less burdensome." The CMS "expanded the physician recruiting exception to make it easier for hospitals to attract physicians to rural or underserved areas." The CMS also removed "some of the 'bright-line' rules under which healthcare entities have been operating, said Gina M. Cavalier, an attorney with Reed Smith in Washington, D.C." For example, the new regulation "eliminates a safe harbor on hourly payments to physicians from the definition of fair market value." AMA Executive Vice President and CEO Michael D. Maves said that the "current self-referral laws are already too complex to be understood without legal assistance and too restrictive to be fair." He continued, "Adding more layers of confusion and regulation serves only to further confound physicians, shift more money to the attorneys that are required to interpret them, and discourage efficient, innovative, quality health care." The Stark II phase III rule "goes into effect in December, though some types of existing contracts are protected by a grandfather clause until the end of the contract term."
Genetic Technologies and the Law
Notes on genetic technologies and the law are now available here.
Notes include information relating to the following:
- Access to and disclosure of genetic information: rights, duties, and liabilities
- Legal issues in genetics research involving human subjects
- Commercialization of genetic tests and products
- Clinical applications of genetics: Genetic testing and legal liability
[More notes will be added periodically]
Notes include information relating to the following:
- Access to and disclosure of genetic information: rights, duties, and liabilities
- Legal issues in genetics research involving human subjects
- Commercialization of genetic tests and products
- Clinical applications of genetics: Genetic testing and legal liability
[More notes will be added periodically]
Thursday, September 13, 2007
Tennessee Case Reviews
Covenants Not to Compete
HLD, v. 33, n. 8 (August 2005)]
Tennessee Supreme Court holds covenants not to compete in physician contracts Are unenforceable as a matter of public policy. Such agreements are permissible in two limited circumstances, which themselves include certain restrictions, as specified by state statute--namely, when the employer is a hospital or an affiliate of a hospital, and when the employer is a "faculty practice plan" associated with a medical school. Tenn. Code Ann. § 63-6-204. [Source:
[Murfreesboro Med. Clinic, P.A. v. Udom, No. M2003-00313-SC-S09-CV (Tenn. June 29, 2005). To read the case, go to http://www.tsc.state.tn.us/opinions/tsc/Sc2qtr2005.htm]
* * * * * * *
Causation in Informed Consent Cases
[Source: HLD, v. 28, n. 4 (April 2000)]
Tennessee Supreme Court Adopts Objective Approach to Evaluating Causation in Informed Consent Cases
The Tennessee Supreme Court agreed with the majority of jurisdictions and chose to employ the objective approach in evaluating causation in informed consent cases, finding that the objective approach was consistent with the prevailing standard in negligence cases, appropriately respected a patient's right to self-determination, and provided a realistic, rather than speculative and emotional, framework for a rational resolution of the issue of causation.
Ashe v. Radiation Oncology Assocs., 9 S.W.3d 119 (Tenn. Dec. 27, 1999) (reh'g denied Jan. 7, 2000)
* * * * * * *
Expert Testimony to Establsih Mental Distress in IIED Claims
[Source: HLD, v. 28, n. 2 (February 2000)]
Tennessee Supreme Court Holds That Expert Medical or Scientific Proof of Serious Mental Injury Is Generally Not Required to Maintain Claim for Intentional Infliction of Emotional Distress
Miller v. Willbanks,, No. E1997-00022-SC-R11-CV, 1999 WL 1146559 (Tenn. Nov. 15, 1999)
* * * * * * *
Compliance with HCQIA
[Source: HLD, v. 31, n. 1 (January 2003)]
Tennessee Appeals Court Says Hospital That Complied With HCQIA Requirements Was Not Liable For Monetary Damages To Suspended Physician
Dr. Richard Peyton sued Johnson City Medical Center (Hospital) in state trial court, alleging that the Hospital had improperly revoked his privileges and seeking injunctive relief and monetary damages in the amount of $10 million. The trial court granted partial summary judgment in favor of the Hospital pursuant to the Health Care Quality Improvement Act (Act), 42 U.S.C. § 11101 et seq., a decision that effectively prevented Peyton from receiving monetary damages. Peyton appealed.
The Tennessee Court of Appeals affirmed. As a threshold matter, the appeals court noted the presumption under the Act is that a facility is entitled to immunity from monetary liability under § 11112(a). The appeals court agreed that Peyton had failed to rebut this presumption by failing to show by a preponderance of the evidence that the Hospital did not comply with the Act.
Peyton v. Johnson City Med. Ctr., No. E2001-02477-COA-R3-CV, 2002 WL 31421670 (Tenn. Ct. App. Oct. 29, 2002).
* * * * * * *
Locality Rule - Medical Malpractice
[Source: HLD, v. 30, n. 4 (April 2002)]
Tennessee Appeals Court Upholds Exclusion Of Expert's Testimony Under Locality Rule In Medical Malpractice Action
The appeals court explained that, because Engle did not begin making Tenn Care reviews until almost two years after the alleged malpractice, his testimony did "not meet the language of the statute requiring knowledge at the time of the alleged malpractice." Accordingly, the appeals court affirmed the lower court's judgment.
A concurring opinion commented that "the General Assembly should revise Tenn. Code Ann. § 29-26-115 and bring it in compliance with how physicians are being trained and how health care is being administered to patients in this State."
Henry v. Obstetrics and Gynecology Consultants, P.C., No. E2001-01246-COA-R2-CV, 2002 WL 199723 (Tenn. Ct. App. Feb. 8, 2002).
* * * * * *
Statute of Limitations Tolled by Mental Incapacity
Tennessee High Court Finds Statute Of Limitations In Negligence Action Against Nursing Home Tolled By Deceased Resident’s Mental Incapacity
The applicable one-year statute of limitations for a negligence action filed against a Tennessee nursing home and its owners by a deceased nursing home resident’s son who was the resident’s durable power of attorney at the time the action accrued was tolled by the resident’s mental incapacity, the Tennessee Supreme Court ruled April 24.
The Tennessee high court also held the existence of a durable power of attorney did not affect the tolling of the applicable statute of limitations.
Sullivan ex rel. Wrongful Death Beneficiaries of Sullivan v. Chattanooga Med. Investors, L.P., No. M2004-02264-SC-R11-CV (Tenn. Apr. 24, 2007).
* * * * * *
Institutional Liability for Informed Consent
[Source: HLD, v. 28, n. 6 (June 2000)]
Tennessee Supreme Court Holds That Hospitals Do Not Owe Duty to Obtain Informed Consent of Patient Undergoing Surgery Ordered and Performed by Non-Employee Physician
In a case of first impression in Tennessee, the Tennessee Supreme Court affirmed, holding that Tennessee law generally does not require a hospital "to procure a patient's informed consent to surgical procedures ordered and performed by non-employee doctors." First, the supreme court observed that Centennial was within the purview of the Tennessee Medical Malpractice Act ("Act"), which states that
"In a malpractice action, the plaintiff shall prove by evidence as required by § 29-26-115(b) that the defendant did not supply appropriate information to the patient in obtaining his informed consent (to the procedure out of which plaintiff's claim allegedly arose) in accordance with the recognized standard of acceptable professional practice in the profession and in the specialty, if any, that the defendant practices in the community in which he practices and in similar communities."
Bryant v. HCA Health Servs., No. 96C-1013, 2000 WL 266821 (Tenn. Mar. 13, 2000)
* * * * * *
Hospital Liability for Agent Action
Tennessee Appeals Court Finds Hospital Cannot Be Held Liable For Actions Of Physician It “Disavowed” As Agent In Consent Form
In two separate medical malpractice cases, a hospital took sufficient steps to disavow an agency relationship between itself and the physician alleged to have committed the underlying negligent act thereby precluding plaintiffs’ apparent agency claims, a Tennessee appeals court ruled June 12.
Dewald v. HCA Health Servs. of Tennessee, No. M2006-2369 (Tenn. Ct. App. June 12, 2007).
Boren v. Weeks, No. M2007-628 (Tenn. Ct. App. June 12, 2007).
* * * * * *
Medical Board's Right to Request Patient Records
[Source: HLD - April 2007]
Tennessee Appeals Court Holds Physician May Not Shield Patient Records From Medical Board’s Review
Physicians in Tennessee have no reasonable expectation that they can shield their patients’ records from the regulatory oversight of the state’s medical board, a Tennessee appeals court ruled March 13.
Accordingly, a physician who refused to comply with the board’s lawful request for his patient records was properly subject to discipline, the appeals court found.
Under state law, the Board has the authority to obtain patient records through a written request from healthcare providers being investigated for potential wrong doing. See Tenn. Code Ann. § 63-1-117.
McNiel v. Cooper, No. M2005-01206-COA-R3-CV (Tenn. Ct. App. Mar. 13, 2007).
HLD, v. 33, n. 8 (August 2005)]
Tennessee Supreme Court holds covenants not to compete in physician contracts Are unenforceable as a matter of public policy. Such agreements are permissible in two limited circumstances, which themselves include certain restrictions, as specified by state statute--namely, when the employer is a hospital or an affiliate of a hospital, and when the employer is a "faculty practice plan" associated with a medical school. Tenn. Code Ann. § 63-6-204. [Source:
[Murfreesboro Med. Clinic, P.A. v. Udom, No. M2003-00313-SC-S09-CV (Tenn. June 29, 2005). To read the case, go to http://www.tsc.state.tn.us/opinions/tsc/Sc2qtr2005.htm]
* * * * * * *
Causation in Informed Consent Cases
[Source: HLD, v. 28, n. 4 (April 2000)]
Tennessee Supreme Court Adopts Objective Approach to Evaluating Causation in Informed Consent Cases
The Tennessee Supreme Court agreed with the majority of jurisdictions and chose to employ the objective approach in evaluating causation in informed consent cases, finding that the objective approach was consistent with the prevailing standard in negligence cases, appropriately respected a patient's right to self-determination, and provided a realistic, rather than speculative and emotional, framework for a rational resolution of the issue of causation.
Ashe v. Radiation Oncology Assocs., 9 S.W.3d 119 (Tenn. Dec. 27, 1999) (reh'g denied Jan. 7, 2000)
* * * * * * *
Expert Testimony to Establsih Mental Distress in IIED Claims
[Source: HLD, v. 28, n. 2 (February 2000)]
Tennessee Supreme Court Holds That Expert Medical or Scientific Proof of Serious Mental Injury Is Generally Not Required to Maintain Claim for Intentional Infliction of Emotional Distress
Miller v. Willbanks,, No. E1997-00022-SC-R11-CV, 1999 WL 1146559 (Tenn. Nov. 15, 1999)
* * * * * * *
Compliance with HCQIA
[Source: HLD, v. 31, n. 1 (January 2003)]
Tennessee Appeals Court Says Hospital That Complied With HCQIA Requirements Was Not Liable For Monetary Damages To Suspended Physician
Dr. Richard Peyton sued Johnson City Medical Center (Hospital) in state trial court, alleging that the Hospital had improperly revoked his privileges and seeking injunctive relief and monetary damages in the amount of $10 million. The trial court granted partial summary judgment in favor of the Hospital pursuant to the Health Care Quality Improvement Act (Act), 42 U.S.C. § 11101 et seq., a decision that effectively prevented Peyton from receiving monetary damages. Peyton appealed.
The Tennessee Court of Appeals affirmed. As a threshold matter, the appeals court noted the presumption under the Act is that a facility is entitled to immunity from monetary liability under § 11112(a). The appeals court agreed that Peyton had failed to rebut this presumption by failing to show by a preponderance of the evidence that the Hospital did not comply with the Act.
Peyton v. Johnson City Med. Ctr., No. E2001-02477-COA-R3-CV, 2002 WL 31421670 (Tenn. Ct. App. Oct. 29, 2002).
* * * * * * *
Locality Rule - Medical Malpractice
[Source: HLD, v. 30, n. 4 (April 2002)]
Tennessee Appeals Court Upholds Exclusion Of Expert's Testimony Under Locality Rule In Medical Malpractice Action
The appeals court explained that, because Engle did not begin making Tenn Care reviews until almost two years after the alleged malpractice, his testimony did "not meet the language of the statute requiring knowledge at the time of the alleged malpractice." Accordingly, the appeals court affirmed the lower court's judgment.
A concurring opinion commented that "the General Assembly should revise Tenn. Code Ann. § 29-26-115 and bring it in compliance with how physicians are being trained and how health care is being administered to patients in this State."
Henry v. Obstetrics and Gynecology Consultants, P.C., No. E2001-01246-COA-R2-CV, 2002 WL 199723 (Tenn. Ct. App. Feb. 8, 2002).
* * * * * *
Statute of Limitations Tolled by Mental Incapacity
Tennessee High Court Finds Statute Of Limitations In Negligence Action Against Nursing Home Tolled By Deceased Resident’s Mental Incapacity
The applicable one-year statute of limitations for a negligence action filed against a Tennessee nursing home and its owners by a deceased nursing home resident’s son who was the resident’s durable power of attorney at the time the action accrued was tolled by the resident’s mental incapacity, the Tennessee Supreme Court ruled April 24.
The Tennessee high court also held the existence of a durable power of attorney did not affect the tolling of the applicable statute of limitations.
Sullivan ex rel. Wrongful Death Beneficiaries of Sullivan v. Chattanooga Med. Investors, L.P., No. M2004-02264-SC-R11-CV (Tenn. Apr. 24, 2007).
* * * * * *
Institutional Liability for Informed Consent
[Source: HLD, v. 28, n. 6 (June 2000)]
Tennessee Supreme Court Holds That Hospitals Do Not Owe Duty to Obtain Informed Consent of Patient Undergoing Surgery Ordered and Performed by Non-Employee Physician
In a case of first impression in Tennessee, the Tennessee Supreme Court affirmed, holding that Tennessee law generally does not require a hospital "to procure a patient's informed consent to surgical procedures ordered and performed by non-employee doctors." First, the supreme court observed that Centennial was within the purview of the Tennessee Medical Malpractice Act ("Act"), which states that
"In a malpractice action, the plaintiff shall prove by evidence as required by § 29-26-115(b) that the defendant did not supply appropriate information to the patient in obtaining his informed consent (to the procedure out of which plaintiff's claim allegedly arose) in accordance with the recognized standard of acceptable professional practice in the profession and in the specialty, if any, that the defendant practices in the community in which he practices and in similar communities."
Bryant v. HCA Health Servs., No. 96C-1013, 2000 WL 266821 (Tenn. Mar. 13, 2000)
* * * * * *
Hospital Liability for Agent Action
Tennessee Appeals Court Finds Hospital Cannot Be Held Liable For Actions Of Physician It “Disavowed” As Agent In Consent Form
In two separate medical malpractice cases, a hospital took sufficient steps to disavow an agency relationship between itself and the physician alleged to have committed the underlying negligent act thereby precluding plaintiffs’ apparent agency claims, a Tennessee appeals court ruled June 12.
Dewald v. HCA Health Servs. of Tennessee, No. M2006-2369 (Tenn. Ct. App. June 12, 2007).
Boren v. Weeks, No. M2007-628 (Tenn. Ct. App. June 12, 2007).
* * * * * *
Medical Board's Right to Request Patient Records
[Source: HLD - April 2007]
Tennessee Appeals Court Holds Physician May Not Shield Patient Records From Medical Board’s Review
Physicians in Tennessee have no reasonable expectation that they can shield their patients’ records from the regulatory oversight of the state’s medical board, a Tennessee appeals court ruled March 13.
Accordingly, a physician who refused to comply with the board’s lawful request for his patient records was properly subject to discipline, the appeals court found.
Under state law, the Board has the authority to obtain patient records through a written request from healthcare providers being investigated for potential wrong doing. See Tenn. Code Ann. § 63-1-117.
McNiel v. Cooper, No. M2005-01206-COA-R3-CV (Tenn. Ct. App. Mar. 13, 2007).
Acting CMS administrator vows to introduce more agency transparency.
[Source: Health and Life Sciences Law Daily, September 13, 2007]
Modern Healthcare (9/13, Lubeli) reports that Kerry Weems, acting CMS administrator, "laid out his agenda to reporters and promised to introduce more transparency in the way the CMS does business. Starting at the end of the month, for example, all corrective-action measures between the CMS and Medicare Advantage plans will be made public on the agency's Web site, Weems said." Modern Healthcare notes that Weems "said he would continue to support quality and health information-technology initiatives, and would be issuing a report to Congress soon on value-based purchasing in hospitals. To get the message out on the Medicare Part D drug benefit, his goal is to inform the family members and others who take care of the beneficiaries using Part D, he said."
The Hill (9/13, Young) adds that Weems also vowed "to improve program management and to evaluate the agency's relationships with health plans and other private contractors." Weems said CMS "would seek to refute criticisms that the agency is too close to and too lenient on the private companies with which it does business." He noted, "The tone that I'm trying to set is that CMS needs to make sure that we maintain an arm's-length relationship with our partners."
Modern Healthcare (9/13, Lubeli) reports that Kerry Weems, acting CMS administrator, "laid out his agenda to reporters and promised to introduce more transparency in the way the CMS does business. Starting at the end of the month, for example, all corrective-action measures between the CMS and Medicare Advantage plans will be made public on the agency's Web site, Weems said." Modern Healthcare notes that Weems "said he would continue to support quality and health information-technology initiatives, and would be issuing a report to Congress soon on value-based purchasing in hospitals. To get the message out on the Medicare Part D drug benefit, his goal is to inform the family members and others who take care of the beneficiaries using Part D, he said."
The Hill (9/13, Young) adds that Weems also vowed "to improve program management and to evaluate the agency's relationships with health plans and other private contractors." Weems said CMS "would seek to refute criticisms that the agency is too close to and too lenient on the private companies with which it does business." He noted, "The tone that I'm trying to set is that CMS needs to make sure that we maintain an arm's-length relationship with our partners."
Community Health Systems agrees on settlement in class-action ADA lawsuit.
[Source: Health and Life Sciences Law Daily, September 13, 2007]
The Tucson Explorer News (9/12, Stebbins) reported that "Community Health Systems, parent company of Northwest Medical Center, has reached a settlement with plaintiffs in a class-action lawsuit filed in 2003 involving physical access barriers at Northwest's Oro Valley facilities." Still awaiting approval by the U.S. District Court, Northern District of Texas in Dallas, the settlement "means approximately 280 upgrades at Northwest facilities to bring it into compliance with the Americans with Disabilities Act (ADA), according to John Bosco, the attorney representing Community Health Systems which owns Northwest." Bosco "said upgrades at Northwest would include installation of grab bars in restrooms, Braille room signage, adjustment of drinking fountain heights, coat-hook height adjustments and installation of new door knobs for easier grasping and turning." The lawsuit was "filed by plaintiffs with an advocacy group known as Access Now," against "Triad, which owned Northwest at the time."
The Tucson Explorer News (9/12, Stebbins) reported that "Community Health Systems, parent company of Northwest Medical Center, has reached a settlement with plaintiffs in a class-action lawsuit filed in 2003 involving physical access barriers at Northwest's Oro Valley facilities." Still awaiting approval by the U.S. District Court, Northern District of Texas in Dallas, the settlement "means approximately 280 upgrades at Northwest facilities to bring it into compliance with the Americans with Disabilities Act (ADA), according to John Bosco, the attorney representing Community Health Systems which owns Northwest." Bosco "said upgrades at Northwest would include installation of grab bars in restrooms, Braille room signage, adjustment of drinking fountain heights, coat-hook height adjustments and installation of new door knobs for easier grasping and turning." The lawsuit was "filed by plaintiffs with an advocacy group known as Access Now," against "Triad, which owned Northwest at the time."
Feds Crack Down on Physician ‘Self-Referral’
[Source: WSJ Health Blog, posted by Jacob Goldstein]
Docs make lots of money by investing in medical facilities — like surgery centers and MRI shops — and then sending their patients to them for care. The consultants at McKinsey figure the profit to doctors from this self-dealing runs in the neighborhood of $8 billion a year.
Medicare doesn’t like it, citing overuse, and could soon begin denying payments for many self-referred services, the WSJ reports.
Self-referral arrangements are “corrupting medical decision-making” by creating a financial incentive for doctors to refer patients who don’t really need procedures, according to this recent document from the Centers for Medicare and Medicaid Services.
The document is part of proposed Medicare rules that could go into effect in a few months and would largely target joint ventures between doctors and hospitals. Those deals allow the hospitals to offset some of the revenue they’ve lost as doctors have begun to enter businesses — like high-end medical imaging — that were formerly the sole domain of hospitals. And when the hospital bills for the work, insurance often reimburses at a higher rate than when the work is billed by doctors.
Some defenders of these businesses say they help bring expensive new medical technologies to communities that might not otherwise have them. Critics point to overuse of medical procedures and improper financial relationships. “Self-referral arrangements represent an inherent conflict of interest for referring physician investors,” Jean Mitchell, a health-care economist at Georgetown University who studies doctors’ referral practices, told the WSJ.
Docs make lots of money by investing in medical facilities — like surgery centers and MRI shops — and then sending their patients to them for care. The consultants at McKinsey figure the profit to doctors from this self-dealing runs in the neighborhood of $8 billion a year.
Medicare doesn’t like it, citing overuse, and could soon begin denying payments for many self-referred services, the WSJ reports.
Self-referral arrangements are “corrupting medical decision-making” by creating a financial incentive for doctors to refer patients who don’t really need procedures, according to this recent document from the Centers for Medicare and Medicaid Services.
The document is part of proposed Medicare rules that could go into effect in a few months and would largely target joint ventures between doctors and hospitals. Those deals allow the hospitals to offset some of the revenue they’ve lost as doctors have begun to enter businesses — like high-end medical imaging — that were formerly the sole domain of hospitals. And when the hospital bills for the work, insurance often reimburses at a higher rate than when the work is billed by doctors.
Some defenders of these businesses say they help bring expensive new medical technologies to communities that might not otherwise have them. Critics point to overuse of medical procedures and improper financial relationships. “Self-referral arrangements represent an inherent conflict of interest for referring physician investors,” Jean Mitchell, a health-care economist at Georgetown University who studies doctors’ referral practices, told the WSJ.
Wednesday, September 12, 2007
Society of Hospital Medicine says number of hospitalists has "exploded."
[Source: Health and Lifes Sciences Daily, September 12, 2007]
The Washington Post (9/11, HE1, Baker) reported that "despite resistance from primary-care physicians and fears that the development could erode continuity of care," the number of hospitalists has "exploded" from "a few hundred" in 1997 to 20,000, which is "the fastest growth for any medical specialty in the country," according to the Society of Hospital Medicine. The Post noted that "with hospital reimbursement rates failing to keep up with their costs, many primary-care physicians are being won over and now find the hospitalist arrangement saves them time and money." The Post added that hospitals have "embraced" using hospitalists by "nationally subsidizing $50,000 to $60,000 of the average hospitalist's $169,000 salary" and that managed-care organizations, "such as Kaiser, have established their own hospitalist practices."
The Washington Post (9/11, HE1, Baker) reported that "despite resistance from primary-care physicians and fears that the development could erode continuity of care," the number of hospitalists has "exploded" from "a few hundred" in 1997 to 20,000, which is "the fastest growth for any medical specialty in the country," according to the Society of Hospital Medicine. The Post noted that "with hospital reimbursement rates failing to keep up with their costs, many primary-care physicians are being won over and now find the hospitalist arrangement saves them time and money." The Post added that hospitals have "embraced" using hospitalists by "nationally subsidizing $50,000 to $60,000 of the average hospitalist's $169,000 salary" and that managed-care organizations, "such as Kaiser, have established their own hospitalist practices."
Saturday, September 8, 2007
Notes on "community benefit standard" for tax-exempt status
[Source: "Update: IRS 'Community Benefit' Compliance Check" by Michael Peregrine et al.]
The community benefit standard serves as the principal standard under which most modern-day hospitals derive their tax-exempt status under Code § 501(c)(3).
The community benefit standard was not adopted by federal legislation but, rather, was adopted by the IRS primarily in a 1969 revenue ruling (Rev. Rul. 69-545, discussed below). Satisfaction of the Revenue Ruling 69-545 community benefit standard depends on a demonstration of appropriate facts including, but not limited to, whether the hospital: (1) operates a full-time emergency room that provides treatment regardless of patients' ability to pay; (2) provides non-emergency services to all individuals who are able to pay, including Medicare (and later Medicaid) beneficiaries; (3) has an open medical staff; (4) has a board of directors composed of independent civic leaders drawn from the community; and (5) uses any operational surplus to further the hospital's exempt purposes by improving the quality of patient care and advancing the hospital's medical training, education, and research programs. Outside of Revenue Ruling 69-545, the IRS has identified the following additional factors as evidence of community benefit (1) creation of a new provider of healthcare services; (2) expansion of community health resources; (3) improvement of treatment modalities; (4) reduction in healthcare costs; and (5) improvement in patient convenience and access to physicians. See, e.g., General Counsel Memorandum 39862 (November 21, 1991). The above lists should not be interpreted as being exhaustive, as many other factors could be used to demonstrate community benefit as well.
Notably, the community benefit standard set forth in Revenue Ruling 69-545 imposes no charity care requirements on a tax-exempt hospital other than in an emergency room setting. To the contrary, the ruling specifically recognizes as tax-exempt a hospital that referred all nonemergent charity care cases to the nearby public hospital. This 1969 IRS position with respect to the treatment of non-emergent charity care patients (which is binding precedent on the IRS), however, is in stark contrast to the more recent IRS position taken in Field Service Advice (FSA) 200110030 (February 5, 2001) (which is not precedential). In FSA 200110030 the IRS instructed its agents that when reviewing the tax-exempt status of a hospital, the agents should look critically at the amount of charity care the hospital actually provided. The FSA directs the IRS agents to ask fourteen questions when reviewing the tax-exempt status of a hospital. These questions include: (1) does the hospital have a specific, written plan or policy to provide free or low-cost healthcare services to the poor or indigent; (2) under what circumstances might the hospital deviate (or has the hospital deviated) from its stated policies to provide free or low-cost healthcare services to the poor or indigent; (3) what directives or instructions does the hospital provide to ambulance services about bringing poor or indigent patients to its emergency room; and (4) what documents or agreements does the hospital require poor or indigent patients to sign before receiving care?
This article addresses the IRS's Compliance Questionnaire (read more)
* * * * * * *
[Source: "Current Perspectives on Healthcare GovernanceA Roundtable Discussion Among Experts: Part II", AHLA]
Excerpt:
Mr. Silverman: Mr. Griffith, we see increased scrutiny at the federal level, from Congress and the IRS, focusing on the tax-exempt status of nonprofit hospitals. Are those efforts raising the same kind of issues that are being pressed at the state levels of government?
Mr. Griffith: The proposals and questions have a number of similarities. The law at the federal level for nearly 40 years has been a community benefit standard. A hospital can qualify for exemption if it avoids a profits interest or unreasonable compensation for insiders and it is organized and operated in a manner that provides a benefit to a sufficiently broad segment of the community. Charity care is only one factor that the IRS considers, and it is not a requirement for federal tax exemption. The IRS looks for factors such as oversight from a community board, an open medical staff consistent with the size and nature of the facility, an emergency room open to all (or a needed specialty service), participation in government healthcare programs, charity care, certain medical research activities, community health outreach activities, medical education, contributions to community health organizations, and any other activity that can be demonstrated to be reasonably expected to improve the health of the community. Activities that improve the quality of healthcare, improve access or availability of healthcare, or contain the costs (without compromising quality) of healthcare provide a community benefit.
Mr. Silverman: The IRS seems to have taken steps to enhance monitoring of hospitals.
Mr. Griffith: Yes, with the mailing in 2006 of the community benefit questionnaires to hundreds of hospitals, the IRS served notice that it intends to become more active in monitoring how hospitals are satisfying the community benefit standard. Under the Republican leadership, Congress pushed the IRS to get results quickly and share them with Congress. It remains to be seen how much interest Sen. Baucus, Rep. Rangel, Rep. Stark, and other key Democrats will have in forcing the IRS’ hand on community benefit and other reviews of the nonprofit sector.
Mr. Silverman: There were hearings on Capitol Hill which focused on adherence by hospitals to the community benefit standard.
Mr. Griffith: Yes, that is correct. In part, the hearings were an outgrowth of allegations about billing and collection practices. Hearings were held before the Senate Finance Committee and the House Committee on Ways & Means. Those hearings focused on what hospitals do in return for their exemption, both in terms of adequacy of the current community benefit standard and in terms of what is being done by the IRS to enforce that standard. There has also been a fair amount of attention paid, at least in committee, to executive compensation, conflicts of interest, hospital pricing, and transparency in the governance of the nonprofit sector, including healthcare.
We have seen some reforms in the Pension Protection Act, such as the new prohibition on loans to certain insiders of supporting organizations (which would include many healthcare system parents), increases in potential excise taxes on management for approving excessive compensation packages, and mandated public disclosure of unrelated business income tax returns. We have also seen significant information gathering efforts, including the letters and information requests from Senator Grassley, the Government Accountability Office, and the Congressional Budget Office (the latter two both requested by Rep. Thomas) asking about various community benefit activities, joint ventures, and compensation practices. We may see more activity in this area in the new Congress, though the Democratic win in the mid-term elections may lead to a focus on other issues first in the new Congress, with more being done by the IRS and at the state level. For example, it is unclear as we have this discussion whether the Senate Finance Committee staff report that Senator. Grassley requested after the September 13, 2006 charity care and community benefit hearings will be completed or lead to specific legislation. I would note though that there are no guaranties the issue is going away, and on many points Senators Baucus and Grassley appeared to see eye to eye.
Mr. Silverman: Mr. Griffith, what advice would you give the General Counsel of a nonprofit hospital, and its management, in efforts to avoid and address the threats on the horizon?
Mr. Griffith: I think there are four key steps to consider. First, get your message out early and often. Let the community know about all of the good the hospital does. Second, look at ways to improve how you track and report community benefit. It has to become part of the culture that there are certain basic operational steps that need to be done daily. Third, reexamine your conflict of interest procedures. Independent directors and committees approving transactions can add significant protections. Fourth, take a close look at the role mission fulfillment plays, or should play, in executive compensation. Financial performance is important and supports the mission, but if mission also matters for executive compensation the program is more difficult to criticize.
Mr. Silverman: Mr. Levine, you wanted to make a last point?
Mr. Levine: Yes, I think that the trends we have been talking about are fueled by Congress’ continued focus on fraud and abuse recoveries from hospitals and other providers under the False Claims Act. The healthcare sector remains under the microscope. The role of the board in "good governance" has a much wider reach than was perhaps previously believed, and it is inextricably linked to compliance issues.
The community benefit standard serves as the principal standard under which most modern-day hospitals derive their tax-exempt status under Code § 501(c)(3).
The community benefit standard was not adopted by federal legislation but, rather, was adopted by the IRS primarily in a 1969 revenue ruling (Rev. Rul. 69-545, discussed below). Satisfaction of the Revenue Ruling 69-545 community benefit standard depends on a demonstration of appropriate facts including, but not limited to, whether the hospital: (1) operates a full-time emergency room that provides treatment regardless of patients' ability to pay; (2) provides non-emergency services to all individuals who are able to pay, including Medicare (and later Medicaid) beneficiaries; (3) has an open medical staff; (4) has a board of directors composed of independent civic leaders drawn from the community; and (5) uses any operational surplus to further the hospital's exempt purposes by improving the quality of patient care and advancing the hospital's medical training, education, and research programs. Outside of Revenue Ruling 69-545, the IRS has identified the following additional factors as evidence of community benefit (1) creation of a new provider of healthcare services; (2) expansion of community health resources; (3) improvement of treatment modalities; (4) reduction in healthcare costs; and (5) improvement in patient convenience and access to physicians. See, e.g., General Counsel Memorandum 39862 (November 21, 1991). The above lists should not be interpreted as being exhaustive, as many other factors could be used to demonstrate community benefit as well.
Notably, the community benefit standard set forth in Revenue Ruling 69-545 imposes no charity care requirements on a tax-exempt hospital other than in an emergency room setting. To the contrary, the ruling specifically recognizes as tax-exempt a hospital that referred all nonemergent charity care cases to the nearby public hospital. This 1969 IRS position with respect to the treatment of non-emergent charity care patients (which is binding precedent on the IRS), however, is in stark contrast to the more recent IRS position taken in Field Service Advice (FSA) 200110030 (February 5, 2001) (which is not precedential). In FSA 200110030 the IRS instructed its agents that when reviewing the tax-exempt status of a hospital, the agents should look critically at the amount of charity care the hospital actually provided. The FSA directs the IRS agents to ask fourteen questions when reviewing the tax-exempt status of a hospital. These questions include: (1) does the hospital have a specific, written plan or policy to provide free or low-cost healthcare services to the poor or indigent; (2) under what circumstances might the hospital deviate (or has the hospital deviated) from its stated policies to provide free or low-cost healthcare services to the poor or indigent; (3) what directives or instructions does the hospital provide to ambulance services about bringing poor or indigent patients to its emergency room; and (4) what documents or agreements does the hospital require poor or indigent patients to sign before receiving care?
This article addresses the IRS's Compliance Questionnaire (read more)
* * * * * * *
[Source: "Current Perspectives on Healthcare GovernanceA Roundtable Discussion Among Experts: Part II", AHLA]
Excerpt:
Mr. Silverman: Mr. Griffith, we see increased scrutiny at the federal level, from Congress and the IRS, focusing on the tax-exempt status of nonprofit hospitals. Are those efforts raising the same kind of issues that are being pressed at the state levels of government?
Mr. Griffith: The proposals and questions have a number of similarities. The law at the federal level for nearly 40 years has been a community benefit standard. A hospital can qualify for exemption if it avoids a profits interest or unreasonable compensation for insiders and it is organized and operated in a manner that provides a benefit to a sufficiently broad segment of the community. Charity care is only one factor that the IRS considers, and it is not a requirement for federal tax exemption. The IRS looks for factors such as oversight from a community board, an open medical staff consistent with the size and nature of the facility, an emergency room open to all (or a needed specialty service), participation in government healthcare programs, charity care, certain medical research activities, community health outreach activities, medical education, contributions to community health organizations, and any other activity that can be demonstrated to be reasonably expected to improve the health of the community. Activities that improve the quality of healthcare, improve access or availability of healthcare, or contain the costs (without compromising quality) of healthcare provide a community benefit.
Mr. Silverman: The IRS seems to have taken steps to enhance monitoring of hospitals.
Mr. Griffith: Yes, with the mailing in 2006 of the community benefit questionnaires to hundreds of hospitals, the IRS served notice that it intends to become more active in monitoring how hospitals are satisfying the community benefit standard. Under the Republican leadership, Congress pushed the IRS to get results quickly and share them with Congress. It remains to be seen how much interest Sen. Baucus, Rep. Rangel, Rep. Stark, and other key Democrats will have in forcing the IRS’ hand on community benefit and other reviews of the nonprofit sector.
Mr. Silverman: There were hearings on Capitol Hill which focused on adherence by hospitals to the community benefit standard.
Mr. Griffith: Yes, that is correct. In part, the hearings were an outgrowth of allegations about billing and collection practices. Hearings were held before the Senate Finance Committee and the House Committee on Ways & Means. Those hearings focused on what hospitals do in return for their exemption, both in terms of adequacy of the current community benefit standard and in terms of what is being done by the IRS to enforce that standard. There has also been a fair amount of attention paid, at least in committee, to executive compensation, conflicts of interest, hospital pricing, and transparency in the governance of the nonprofit sector, including healthcare.
We have seen some reforms in the Pension Protection Act, such as the new prohibition on loans to certain insiders of supporting organizations (which would include many healthcare system parents), increases in potential excise taxes on management for approving excessive compensation packages, and mandated public disclosure of unrelated business income tax returns. We have also seen significant information gathering efforts, including the letters and information requests from Senator Grassley, the Government Accountability Office, and the Congressional Budget Office (the latter two both requested by Rep. Thomas) asking about various community benefit activities, joint ventures, and compensation practices. We may see more activity in this area in the new Congress, though the Democratic win in the mid-term elections may lead to a focus on other issues first in the new Congress, with more being done by the IRS and at the state level. For example, it is unclear as we have this discussion whether the Senate Finance Committee staff report that Senator. Grassley requested after the September 13, 2006 charity care and community benefit hearings will be completed or lead to specific legislation. I would note though that there are no guaranties the issue is going away, and on many points Senators Baucus and Grassley appeared to see eye to eye.
Mr. Silverman: Mr. Griffith, what advice would you give the General Counsel of a nonprofit hospital, and its management, in efforts to avoid and address the threats on the horizon?
Mr. Griffith: I think there are four key steps to consider. First, get your message out early and often. Let the community know about all of the good the hospital does. Second, look at ways to improve how you track and report community benefit. It has to become part of the culture that there are certain basic operational steps that need to be done daily. Third, reexamine your conflict of interest procedures. Independent directors and committees approving transactions can add significant protections. Fourth, take a close look at the role mission fulfillment plays, or should play, in executive compensation. Financial performance is important and supports the mission, but if mission also matters for executive compensation the program is more difficult to criticize.
Mr. Silverman: Mr. Levine, you wanted to make a last point?
Mr. Levine: Yes, I think that the trends we have been talking about are fueled by Congress’ continued focus on fraud and abuse recoveries from hospitals and other providers under the False Claims Act. The healthcare sector remains under the microscope. The role of the board in "good governance" has a much wider reach than was perhaps previously believed, and it is inextricably linked to compliance issues.
Important governance issues for healthcare entities
[Source: "Current Perspectives on Healthcare GovernanceA Roundtable Discussion Among Experts: Part II", AHLA]
Excerpt:
Mr. Silverman: Mr. Schwartz, lets focus on today’s governance environment at the state level nationally. What are the most important governance issues you can suggest to a nonprofit board going forward, to steer the organization in ways that would negate, or lessen, negative impacts of any inclination by a state Attorney General to conduct inquiries of governance practices?
Mr. Schwartz: There are several points to make here. It is important to recognize that state Attorneys General take their obligation to oversee the activities of nonprofit organizations very seriously. If they are not convinced that the nonprofit organization’s board of directors/trustees is exercising effective oversight, they are much more likely to conduct their own oversight investigation. As a result, the elements that tend to reassure them that an AG compliance review is not necessary include an engaged, independent board of directors; appropriate board committee oversight over "red flag" issues, including executive compensation and perquisites, travel and entertainment costs, conflicts of interest and related party transactions, and "mission compliance." In addition, institutional transparency with respect to governance can avoid problems based on a misunderstanding of the facts. Moreover, where issues arise, but an organization’s board can demonstrate that it is on top of the problem and dealing properly with it, most state Attorneys General are inclined to rely on the board to do its job and not institute a full compliance review. Where, however, the board’s action does not give the Attorney General comfort that effective oversight has taken place, investigations are much more likely.
Mr. Silverman: Can you recommend for us the types of structures that nonprofit healthcare companies should strive to adopt to ensure more competent governance? Things that immediately come to mind are independent committees and internal controls.
Mr. Schwartz: Well, first and foremost, people count. Having a strong, independent board of directors made up of individuals with diverse skills and backgrounds is the most important factor in good governance. In addition, it is crucial to have appropriate committee structures and compliance programs in place. As you know, in California many large nonprofit organizations are now required to have audit committees made up of wholly independent persons (although California law excludes non-corporate entities such a trusts, hospitals, educational institutions, and religious and governmental entities). Similarly, given the current regulatory focus on executive compensation, perquisites and travel and entertainment, we also strongly recommend independent compensation committees. These committees should have written charters that make clear the extent of their responsibilities; they should have the authority to retain independent outside auditors and consultants; and they should be made up of individuals with sufficient background and financial skills to effectively carry out their responsibilities. Finally, it is important that there be adequate compliance programs and appropriate board oversight of the internal audit function.
Mr. Silverman: Ms. Cornell, from an in-house perspective, what are your thoughts about oversight duties by nonprofit governing bodies.
Ms. Cornell: Stuart, in my view, it is important to note that the board’s oversight of an organization’s compliance program is continuing to take a more central role in board governance obligations. Not only should boards have a structure in place to make sure the organization has an adequate compliance program, but boards must undertake responsibility to make sure the program is alive and well: an active working program. This standard was set in the 1996 decision by the Delaware Chancery Court in the Caremark International case. In that case, the court not only articulated the board’s fiduciary duty to ensure a compliance program is in place, but also noted that failure to reasonably oversee the compliance program could result in liability. At the end of last year, the Delaware Supreme Court in Stone v. Ritter confirmed Caremark and took it to another level, setting forth specific conditions for director oversight. That case, together with the tone set in DOJ’s recent guidelines in the McNulty Memorandum, which also confirms board obligations for compliance program oversight, should provide all of us with a heightened sense of this important governance obligation. DOJ’s latest memorandum, "Principles of Federal Prosecution of Business Organizations" was issued in December, 2006.
Mr. Silverman: Mr. Schwartz, back to you. We hear a lot about the need to guard against conflicts of interest. In your view, what best efforts can a nonprofit healthcare system make to lessen the chance of conflicts of interest arising in the decision-making process? Are there ways to promote independence in decision making?
Mr. Schwartz: Again, transparency and process constitute the first line of defense. Of course, every organization should have a written conflict of interest policy—for both board members and senior management—and detailed disclosure forms so that any potential related party transaction is identified in advance. Moreover, it is crucial that there be a process (preferably computerized) to monitor and insure that any related party transaction is identified in advance. Only in this way can organizations obtain the benefits of the "rebuttable presumption of reasonableness" under the Internal Revenue Code or comply with state statutes like California Corporations Code § 5233. In addition, it is important to recognize that non-financial conflicts of interest exist and, as a result, conflict of interest disclosure forms should be broad enough to cover such relationship conflicts as well. Without such a system, it is not possible to effectively identify and properly "vet" transactions which may create conflict issues.
Mr. Demetriou: The issue of dealing with "non-financial" conflicts of interest is especially difficult. In part there are no legal guidelines to define the scope of these conflicts and thus crafting policies and disclosure forms that will address prospective conflicts present challenges. If the applicable standard for a non-financial conflict is whether the judgment of a director might be impaired due to relationships with another director that are external to the corporation’s affairs, then exploration of possible conflicts could require a very intrusive questionnaire, and certain directors may not respond favorably to the inquires.
Mr. Levine: Nonetheless, the point about seemingly indirect or non-financial conflicts is an important one. A complete conflicts policy should reach: interests in adverse litigation; gifts and gratuities; outside activities ("conflicts of commitment"); nepotism; and use of confidential or proprietary information.
Excerpt:
Mr. Silverman: Mr. Schwartz, lets focus on today’s governance environment at the state level nationally. What are the most important governance issues you can suggest to a nonprofit board going forward, to steer the organization in ways that would negate, or lessen, negative impacts of any inclination by a state Attorney General to conduct inquiries of governance practices?
Mr. Schwartz: There are several points to make here. It is important to recognize that state Attorneys General take their obligation to oversee the activities of nonprofit organizations very seriously. If they are not convinced that the nonprofit organization’s board of directors/trustees is exercising effective oversight, they are much more likely to conduct their own oversight investigation. As a result, the elements that tend to reassure them that an AG compliance review is not necessary include an engaged, independent board of directors; appropriate board committee oversight over "red flag" issues, including executive compensation and perquisites, travel and entertainment costs, conflicts of interest and related party transactions, and "mission compliance." In addition, institutional transparency with respect to governance can avoid problems based on a misunderstanding of the facts. Moreover, where issues arise, but an organization’s board can demonstrate that it is on top of the problem and dealing properly with it, most state Attorneys General are inclined to rely on the board to do its job and not institute a full compliance review. Where, however, the board’s action does not give the Attorney General comfort that effective oversight has taken place, investigations are much more likely.
Mr. Silverman: Can you recommend for us the types of structures that nonprofit healthcare companies should strive to adopt to ensure more competent governance? Things that immediately come to mind are independent committees and internal controls.
Mr. Schwartz: Well, first and foremost, people count. Having a strong, independent board of directors made up of individuals with diverse skills and backgrounds is the most important factor in good governance. In addition, it is crucial to have appropriate committee structures and compliance programs in place. As you know, in California many large nonprofit organizations are now required to have audit committees made up of wholly independent persons (although California law excludes non-corporate entities such a trusts, hospitals, educational institutions, and religious and governmental entities). Similarly, given the current regulatory focus on executive compensation, perquisites and travel and entertainment, we also strongly recommend independent compensation committees. These committees should have written charters that make clear the extent of their responsibilities; they should have the authority to retain independent outside auditors and consultants; and they should be made up of individuals with sufficient background and financial skills to effectively carry out their responsibilities. Finally, it is important that there be adequate compliance programs and appropriate board oversight of the internal audit function.
Mr. Silverman: Ms. Cornell, from an in-house perspective, what are your thoughts about oversight duties by nonprofit governing bodies.
Ms. Cornell: Stuart, in my view, it is important to note that the board’s oversight of an organization’s compliance program is continuing to take a more central role in board governance obligations. Not only should boards have a structure in place to make sure the organization has an adequate compliance program, but boards must undertake responsibility to make sure the program is alive and well: an active working program. This standard was set in the 1996 decision by the Delaware Chancery Court in the Caremark International case. In that case, the court not only articulated the board’s fiduciary duty to ensure a compliance program is in place, but also noted that failure to reasonably oversee the compliance program could result in liability. At the end of last year, the Delaware Supreme Court in Stone v. Ritter confirmed Caremark and took it to another level, setting forth specific conditions for director oversight. That case, together with the tone set in DOJ’s recent guidelines in the McNulty Memorandum, which also confirms board obligations for compliance program oversight, should provide all of us with a heightened sense of this important governance obligation. DOJ’s latest memorandum, "Principles of Federal Prosecution of Business Organizations" was issued in December, 2006.
Mr. Silverman: Mr. Schwartz, back to you. We hear a lot about the need to guard against conflicts of interest. In your view, what best efforts can a nonprofit healthcare system make to lessen the chance of conflicts of interest arising in the decision-making process? Are there ways to promote independence in decision making?
Mr. Schwartz: Again, transparency and process constitute the first line of defense. Of course, every organization should have a written conflict of interest policy—for both board members and senior management—and detailed disclosure forms so that any potential related party transaction is identified in advance. Moreover, it is crucial that there be a process (preferably computerized) to monitor and insure that any related party transaction is identified in advance. Only in this way can organizations obtain the benefits of the "rebuttable presumption of reasonableness" under the Internal Revenue Code or comply with state statutes like California Corporations Code § 5233. In addition, it is important to recognize that non-financial conflicts of interest exist and, as a result, conflict of interest disclosure forms should be broad enough to cover such relationship conflicts as well. Without such a system, it is not possible to effectively identify and properly "vet" transactions which may create conflict issues.
Mr. Demetriou: The issue of dealing with "non-financial" conflicts of interest is especially difficult. In part there are no legal guidelines to define the scope of these conflicts and thus crafting policies and disclosure forms that will address prospective conflicts present challenges. If the applicable standard for a non-financial conflict is whether the judgment of a director might be impaired due to relationships with another director that are external to the corporation’s affairs, then exploration of possible conflicts could require a very intrusive questionnaire, and certain directors may not respond favorably to the inquires.
Mr. Levine: Nonetheless, the point about seemingly indirect or non-financial conflicts is an important one. A complete conflicts policy should reach: interests in adverse litigation; gifts and gratuities; outside activities ("conflicts of commitment"); nepotism; and use of confidential or proprietary information.
Document Retention/Destruction Policy Considerations for Healthcare Entities
[Source: "Current Perspectives on Healthcare Governance: A Roundtable Discussion Among Experts: Part I", AHLA]
Excerpt:
Mr. Silverman: Mr. Levine, what is the most important federal statute that addresses document destruction, and one to keep in mind when a company is designing and implementing its document retention policy?
Mr. Levine: In my view, it is 18 U.S.C § 1519, added to the criminal code by the Sarbanes-Oxley Act of 2002. Any knowing alteration or destruction of material in anticipation or contemplation of any kind of federal matter or proceeding could be obstruction under this law. A criminal investigation need not have started. Indeed, this statute does not require that there be any investigation at all. This covers any civil or administrative agency proceeding too. Moreover, under this statute, it is a crime if you destroy a document "in contemplation" of a possible federal proceeding. This is an incredibly broad statute, the reach of which has not yet been litigated.
Mr. Silverman: What advice would you give to a company to best design, and implement, a document retention policy?
Mr. Levine: Get a policy in place now, before a crisis erupts in the form of a serious internal investigation and/or government inquiry. Think about the substance of the policy, who the point person for document collection will be, how a "document hold" will actually be implemented, which offsite locations and agents with documents will be contacted, how employees will certify that a good faith search for responsive documents has been made, who in IT will be on the response team, and how employees will be trained about all of the above.
The basic parameters of a document integrity policy include the notion that destruction is not a crime when it is part of an ongoing, legitimate document retention/destruction policy – that's what the Supreme Court said in Arthur Andersen.
BUT the company must preserve material when it has reasonable grounds to believe a government inquiry will be coming OR when it learns of facts, which if known to government, would reasonably lead to government inquiry.
Also keep in mind that, of course, NEVER destroy materials for the purpose of having them unavailable for a government inquiry. Finally, remember that similar issues arise in civil matters. A court finding of "spoliation" of evidence can result in large financial sanctions and a jury being allowed to draw an adverse inference against the company.
Mr. Silverman: Ms. Cornell, do you have any thoughts to add to this from an in-house perspective?
Ms. Cornell: Yes, thanks, Stuart. Designing and rolling out a document retention policy in any company is a significant undertaking. Understanding the paper and electronic documents that are filed on site, are stored off site, and exist in electronic files and backup tapes for each and every department in the organization and then setting up schedules for appropriate document destruction (following contractual obligations and state/federal requirements) is a significant challenge. As Ron suggests, a company can destroy documents on an ongoing basis if it is following a legitimate policy. And honestly, companies are setting up these policies not only because of concerns about possible litigation and investigations, but also to reduce the significant costs to maintain and store the volumes of paper and electronic materials. However, to be a real legitimate process that will stand up under scrutiny there must be an ongoing process and commitment to clear out files. And the process must be alive; people must be accountable in the organization. Otherwise, despite best intentions, a decision to clean out files in the absence of a policy and ongoing practice, could be very problematic in the wrong place at the wrong time.
Excerpt:
Mr. Silverman: Mr. Levine, what is the most important federal statute that addresses document destruction, and one to keep in mind when a company is designing and implementing its document retention policy?
Mr. Levine: In my view, it is 18 U.S.C § 1519, added to the criminal code by the Sarbanes-Oxley Act of 2002. Any knowing alteration or destruction of material in anticipation or contemplation of any kind of federal matter or proceeding could be obstruction under this law. A criminal investigation need not have started. Indeed, this statute does not require that there be any investigation at all. This covers any civil or administrative agency proceeding too. Moreover, under this statute, it is a crime if you destroy a document "in contemplation" of a possible federal proceeding. This is an incredibly broad statute, the reach of which has not yet been litigated.
Mr. Silverman: What advice would you give to a company to best design, and implement, a document retention policy?
Mr. Levine: Get a policy in place now, before a crisis erupts in the form of a serious internal investigation and/or government inquiry. Think about the substance of the policy, who the point person for document collection will be, how a "document hold" will actually be implemented, which offsite locations and agents with documents will be contacted, how employees will certify that a good faith search for responsive documents has been made, who in IT will be on the response team, and how employees will be trained about all of the above.
The basic parameters of a document integrity policy include the notion that destruction is not a crime when it is part of an ongoing, legitimate document retention/destruction policy – that's what the Supreme Court said in Arthur Andersen.
BUT the company must preserve material when it has reasonable grounds to believe a government inquiry will be coming OR when it learns of facts, which if known to government, would reasonably lead to government inquiry.
Also keep in mind that, of course, NEVER destroy materials for the purpose of having them unavailable for a government inquiry. Finally, remember that similar issues arise in civil matters. A court finding of "spoliation" of evidence can result in large financial sanctions and a jury being allowed to draw an adverse inference against the company.
Mr. Silverman: Ms. Cornell, do you have any thoughts to add to this from an in-house perspective?
Ms. Cornell: Yes, thanks, Stuart. Designing and rolling out a document retention policy in any company is a significant undertaking. Understanding the paper and electronic documents that are filed on site, are stored off site, and exist in electronic files and backup tapes for each and every department in the organization and then setting up schedules for appropriate document destruction (following contractual obligations and state/federal requirements) is a significant challenge. As Ron suggests, a company can destroy documents on an ongoing basis if it is following a legitimate policy. And honestly, companies are setting up these policies not only because of concerns about possible litigation and investigations, but also to reduce the significant costs to maintain and store the volumes of paper and electronic materials. However, to be a real legitimate process that will stand up under scrutiny there must be an ongoing process and commitment to clear out files. And the process must be alive; people must be accountable in the organization. Otherwise, despite best intentions, a decision to clean out files in the absence of a policy and ongoing practice, could be very problematic in the wrong place at the wrong time.
Important considerations regarding federal prosecution of healthcare entities
[Source: "Current Perspectives on Healthcare Governance: A Roundtable Discussion Among Experts: Part I", AHLA]
Some Department of Justice policies for pursuing criminal charges:
Prior criminal history, rogue employee or pervasive institutional conduct, severity of conduct and victim impact, adequacy of compliance programs, remedial efforts and disciplinary sanctions, self-disclosure and cooperation with the government. These factors are explained in the 2003 DOJ "Thompson Memo" about which there has been much controversy. (That memo can be found at: www.usdoj.gov/dag/cftf/corporate_guidelines.htm.)
Common federal statutes employed:
The conspiracy, mail fraud and wire fraud (under U.S.C. §§ 1341 and 1343), and bank fraud statutes are all old standbys for federal prosecutors. That said, the healthcare fraud statute (18 U.S.C. § 1347), the criminal Health Insurance Portability and Accountability Act disclosure statute (42 U.S.C. § 1320d-6), and the honest services fraud statute (18 U.S.C. § 1346) are apt to be increasingly used.
Criminal violations also can jeopardize tax-exempt status under what is called the "illegality doctrine." Most notably for healthcare organizations, the IRS has used that doctrine (in Couns. Mem. 39,862, Nov. 21, 1991) to warn hospitals that violating the Anti-Kickback Statute is an activity inconsistent with charitable purposes and jeopardizes Section 501(c)(3) tax-exempt status.
What is the most important federal statute that addresses document destruction, and one to keep in mind when a company is designing and implementing its document retention policy? Probably, 18 U.S.C § 1519, added to the criminal code by the Sarbanes-Oxley Act of 2002. Any knowing alteration or destruction of material in anticipation or contemplation of any kind of federal matter or proceeding could be obstruction under this law. A criminal investigation need not have started. Indeed, this statute does not require that there be any investigation at all. This covers any civil or administrative agency proceeding too. Moreover, under this statute, it is a crime if you destroy a document "in contemplation" of a possible federal proceeding. This is an incredibly broad statute, the reach of which has not yet been litigated.
Some Department of Justice policies for pursuing criminal charges:
Prior criminal history, rogue employee or pervasive institutional conduct, severity of conduct and victim impact, adequacy of compliance programs, remedial efforts and disciplinary sanctions, self-disclosure and cooperation with the government. These factors are explained in the 2003 DOJ "Thompson Memo" about which there has been much controversy. (That memo can be found at: www.usdoj.gov/dag/cftf/corporate_guidelines.htm.)
Common federal statutes employed:
The conspiracy, mail fraud and wire fraud (under U.S.C. §§ 1341 and 1343), and bank fraud statutes are all old standbys for federal prosecutors. That said, the healthcare fraud statute (18 U.S.C. § 1347), the criminal Health Insurance Portability and Accountability Act disclosure statute (42 U.S.C. § 1320d-6), and the honest services fraud statute (18 U.S.C. § 1346) are apt to be increasingly used.
Criminal violations also can jeopardize tax-exempt status under what is called the "illegality doctrine." Most notably for healthcare organizations, the IRS has used that doctrine (in Couns. Mem. 39,862, Nov. 21, 1991) to warn hospitals that violating the Anti-Kickback Statute is an activity inconsistent with charitable purposes and jeopardizes Section 501(c)(3) tax-exempt status.
What is the most important federal statute that addresses document destruction, and one to keep in mind when a company is designing and implementing its document retention policy? Probably, 18 U.S.C § 1519, added to the criminal code by the Sarbanes-Oxley Act of 2002. Any knowing alteration or destruction of material in anticipation or contemplation of any kind of federal matter or proceeding could be obstruction under this law. A criminal investigation need not have started. Indeed, this statute does not require that there be any investigation at all. This covers any civil or administrative agency proceeding too. Moreover, under this statute, it is a crime if you destroy a document "in contemplation" of a possible federal proceeding. This is an incredibly broad statute, the reach of which has not yet been litigated.
Important issues to consider when representing nonprofit healthcare clients
Counsel should be current on:
- developments in state charitable trust law, including guidance from the state Attorney General on matters of governance and fiduciary duty;
- federal tax law developments and IRS announcements concerning executive compensation, conflicts of interest, and excess benefit transactions;
- guidance from rating agencies concerning governance for tax exempt bond issuers;
- general developments in the standard of care for directors among nonprofit institutions that are peers of the lawyer's clients; and
- billing and collection practices
For further readings on important considerations in representing nonprofit healthcare clients, see "Current Perspectives on Healthcare Governance: A Roundtable Discussion Among Experts: Part I"
Joint Commission Clarifies Rule Prohibiting Retaliation For Reporting Quality Concerns
[Source: Health Law Weekly, September 7, 2007]
The Joint Commission announced September 6 a revised accreditation participation requirement that explicitly provides that physicians and medical staff may report quality of care concerns with the knowledge that the hospital is prohibited from taking any retaliatory action.
Although the previous requirement referred to general hospital staff, it was always intended that physicians and medical staff be included as part of “Good Faith Participation” in the accreditation policy, the Joint Commission said in a press release.
Under the revised requirement, accredited hospitals must educate staff and medical staff that they can report quality concerns to the Joint Commission and inform them that no retaliatory disciplinary action will be taken by the hospital as a result.
The revised requirement is effective January 1, 2008.
Read the Joint Commission’s press release.
The Joint Commission announced September 6 a revised accreditation participation requirement that explicitly provides that physicians and medical staff may report quality of care concerns with the knowledge that the hospital is prohibited from taking any retaliatory action.
Although the previous requirement referred to general hospital staff, it was always intended that physicians and medical staff be included as part of “Good Faith Participation” in the accreditation policy, the Joint Commission said in a press release.
Under the revised requirement, accredited hospitals must educate staff and medical staff that they can report quality concerns to the Joint Commission and inform them that no retaliatory disciplinary action will be taken by the hospital as a result.
The revised requirement is effective January 1, 2008.
Read the Joint Commission’s press release.
U.S. Court In Massachusetts Certifies RICO Class Action Against Two Companies On Charges Of Fraudulently Marking Up Drug Prices
[Source: Health Lawyers Weekly, September 7, 2007]
The U.S. District Court for the District of Massachusetts certified as a class action August 27 a lawsuit brought on behalf of individual consumers and health plans claiming that McKesson Corporation (McKesson) and First DataBank, Inc. (FDB) violated the Racketeer Influenced and Corrupt Organizations Act (RICO), as well as California state law, by engaging in a scheme to fraudulently “mark up” the average wholesale price (AWP) for numerous prescription drugs.
New England Carpenters Health Benefits Fund v. First DataBank Inc., No. 05-11148-PBS (D. Mass. Aug. 27, 2007).
Read article here
* * * * * *
Notes:
Under Part B, Medicare pays providers for up to 80% of the "allowable cost" of physician-injected drugs. The remaining 20% is paid by the Medicare beneficiary as a "co-payment."
"Allowable cost" was defined by regulations until 1998 as the lesser of a drug's estimated actual acquisition cost or a drug's average wholesale price (AWP). See 42 C.F.R. § 405.517. On January 1, 1998, in response to a directive in the Balanced Budget Act of 1997, the Health Care Financing Administration (now known as the Centers for Medicare and Medicaid Services) amended 42 C.F.R. § 405.517 to redefine the allowable cost as the lower of the actual Medicare billing or 95% of the AWP. Traditionally, AWP is derived from industry sources compiling wholesale drug prices as supplied by manufacturers. No independent verification of the actual AWP was undertaken by Medicare or by the index's publishers.
Thus, by increasing the reported amount of the drug price in sales transactions, a manufacture could increase the AWP for its drug. An increase in AWP creates an increase in the "allowable cost" and, consequently, the reimbursement rate to providers. Providers continue to pay for the drug at low cost while receiving inflated reimbursements. This increased profit or "spread" is a windfall for the provider and creates tremendous incentive to prescribe and administer products from the manufacturer with the most inflated AWP. Manufacturers, recognizing this market advantage tailor their promotional programs to alert providers to this potential, hence the term "marketing the spread."
Since most private sources of healthcare funding—third party payors, including insurers, HMOs, and health plans—have reimbursement structures that also rely on benchmark pricing such as AWP, the marketing against the spread scheme is just as effective when marketing to providers reimbursed by private payors as when marketing to providers reimbursed by the government.
[Source: "Marketing the Spread - What it is and What Are Payors Doing About it?" by Gerald Lawrence]
The U.S. District Court for the District of Massachusetts certified as a class action August 27 a lawsuit brought on behalf of individual consumers and health plans claiming that McKesson Corporation (McKesson) and First DataBank, Inc. (FDB) violated the Racketeer Influenced and Corrupt Organizations Act (RICO), as well as California state law, by engaging in a scheme to fraudulently “mark up” the average wholesale price (AWP) for numerous prescription drugs.
New England Carpenters Health Benefits Fund v. First DataBank Inc., No. 05-11148-PBS (D. Mass. Aug. 27, 2007).
Read article here
* * * * * *
Notes:
Under Part B, Medicare pays providers for up to 80% of the "allowable cost" of physician-injected drugs. The remaining 20% is paid by the Medicare beneficiary as a "co-payment."
"Allowable cost" was defined by regulations until 1998 as the lesser of a drug's estimated actual acquisition cost or a drug's average wholesale price (AWP). See 42 C.F.R. § 405.517. On January 1, 1998, in response to a directive in the Balanced Budget Act of 1997, the Health Care Financing Administration (now known as the Centers for Medicare and Medicaid Services) amended 42 C.F.R. § 405.517 to redefine the allowable cost as the lower of the actual Medicare billing or 95% of the AWP. Traditionally, AWP is derived from industry sources compiling wholesale drug prices as supplied by manufacturers. No independent verification of the actual AWP was undertaken by Medicare or by the index's publishers.
Thus, by increasing the reported amount of the drug price in sales transactions, a manufacture could increase the AWP for its drug. An increase in AWP creates an increase in the "allowable cost" and, consequently, the reimbursement rate to providers. Providers continue to pay for the drug at low cost while receiving inflated reimbursements. This increased profit or "spread" is a windfall for the provider and creates tremendous incentive to prescribe and administer products from the manufacturer with the most inflated AWP. Manufacturers, recognizing this market advantage tailor their promotional programs to alert providers to this potential, hence the term "marketing the spread."
Since most private sources of healthcare funding—third party payors, including insurers, HMOs, and health plans—have reimbursement structures that also rely on benchmark pricing such as AWP, the marketing against the spread scheme is just as effective when marketing to providers reimbursed by private payors as when marketing to providers reimbursed by the government.
[Source: "Marketing the Spread - What it is and What Are Payors Doing About it?" by Gerald Lawrence]
Sunday, September 2, 2007
Health Law Practice Guide
Health Law Practice Guide
American Health Lawyers Association
Can be accessed on Westlaw at Database Identifier: "HTHLPG"
********
Table of Contents:
Health Law Practice Guide
Part I. Operational Issues for Healthcare Facilities
Chapter 1. Professional Rights and Responsibilities
I. INTRODUCTION
II. CREDENTIALLING
III. PROCESS FOR GRANTING MEDICAL STAFF MEMBERSHIP AND CLINICAL PRIVILEGES
IV. DUE PROCESS
V. IMPAIRED PROVIDERS
VI. LICENSURE OF INDIVIDUAL PRACTITIONERS
VII. RIGHT OF NONPHYSICIAN LICENSED PRACTITIONERS TO PRACTICE INDEPENDENTLY
VIII. PEER REVIEW
Appendices
Part II. Patient Care Delivery Issues
Chapter 8. Healthcare Decision-Making, Patient Autonomy, and Professional Responsibility
Chapter 9. Liability for Patient Care
Chapter 10. The HIV-Infected Healthcare Worker
Chapter 11. Bioethics
Chapter 12. Treatment of Mental Health Patients
Chapter 13. Reserve
Part III. Payment Issues
Chapter 14. An Overview of Insurance Payment for Health Care Services and Employee Welfare Benefit Plans
Chapter 15. Medicare Part A Payment: Cost-Based Payments
Chapter 16. Medicare Prospective Payment System for Inpatient Operating Costs
Chapter 17. Medicare Prospective Payment System for Inpatient Hospital Capital Costs
Chapter 18. Medicare Payment for Graduate Medical Education Costs
Chapter 19. Medicare Part B Payment for Nonphysician Services
Chapter 20. Medicare Part B Payment for Physician Services
Chapter 20A. Introduction to Medicare Part D
Chapter 21. Medicaid Payment
Chapter 22. Medicare and Medicaid Administration
Chapter 23. Managed Care Contracting in 2007
Chapter 24. Fraud and Abuse in Payment Programs
Chapter 25. Utilization Management, Quality Improvement, and Practice Guidelines
Part IV. Transactions
Chapter 26. Antitrust in Transactions
Chapter 27. Fraud and Abuse Considerations in Health care Transactions
Chapter 28. Integrated Healthcare Systems
Chapter 29. Capital Finance
Chapter 30. Bankruptcy Proceedings Affecting Health Care
Chapter 31. Tax and Tax Exemption in Transactions
Part V. The Business Environment: Special Legal Concerns
Chapter 32. Hospitals: The Business Environment
Chapter 33. Long-Term Care and the Medicaid Program: Past, Present, and Future
Chapter 34. The Business Environment for HMOs and PPOs-Special Legal Considerations
Chapter 35. Physician Practice Concerns
Chapter 36. Children's Hospitals
Chapter 37. The Business Climate for Home Care
Chapter 38. Outpatient/Ambulatory Services: Legal Concerns in a Fragmented Environment
Chapter 39. Coverage and Reimbursement for New Technologies
American Health Lawyers Association
Can be accessed on Westlaw at Database Identifier: "HTHLPG"
********
Table of Contents:
Health Law Practice Guide
Part I. Operational Issues for Healthcare Facilities
Chapter 1. Professional Rights and Responsibilities
I. INTRODUCTION
II. CREDENTIALLING
III. PROCESS FOR GRANTING MEDICAL STAFF MEMBERSHIP AND CLINICAL PRIVILEGES
IV. DUE PROCESS
V. IMPAIRED PROVIDERS
VI. LICENSURE OF INDIVIDUAL PRACTITIONERS
VII. RIGHT OF NONPHYSICIAN LICENSED PRACTITIONERS TO PRACTICE INDEPENDENTLY
VIII. PEER REVIEW
Appendices
Part II. Patient Care Delivery Issues
Chapter 8. Healthcare Decision-Making, Patient Autonomy, and Professional Responsibility
Chapter 9. Liability for Patient Care
Chapter 10. The HIV-Infected Healthcare Worker
Chapter 11. Bioethics
Chapter 12. Treatment of Mental Health Patients
Chapter 13. Reserve
Part III. Payment Issues
Chapter 14. An Overview of Insurance Payment for Health Care Services and Employee Welfare Benefit Plans
Chapter 15. Medicare Part A Payment: Cost-Based Payments
Chapter 16. Medicare Prospective Payment System for Inpatient Operating Costs
Chapter 17. Medicare Prospective Payment System for Inpatient Hospital Capital Costs
Chapter 18. Medicare Payment for Graduate Medical Education Costs
Chapter 19. Medicare Part B Payment for Nonphysician Services
Chapter 20. Medicare Part B Payment for Physician Services
Chapter 20A. Introduction to Medicare Part D
Chapter 21. Medicaid Payment
Chapter 22. Medicare and Medicaid Administration
Chapter 23. Managed Care Contracting in 2007
Chapter 24. Fraud and Abuse in Payment Programs
Chapter 25. Utilization Management, Quality Improvement, and Practice Guidelines
Part IV. Transactions
Chapter 26. Antitrust in Transactions
Chapter 27. Fraud and Abuse Considerations in Health care Transactions
Chapter 28. Integrated Healthcare Systems
Chapter 29. Capital Finance
Chapter 30. Bankruptcy Proceedings Affecting Health Care
Chapter 31. Tax and Tax Exemption in Transactions
Part V. The Business Environment: Special Legal Concerns
Chapter 32. Hospitals: The Business Environment
Chapter 33. Long-Term Care and the Medicaid Program: Past, Present, and Future
Chapter 34. The Business Environment for HMOs and PPOs-Special Legal Considerations
Chapter 35. Physician Practice Concerns
Chapter 36. Children's Hospitals
Chapter 37. The Business Climate for Home Care
Chapter 38. Outpatient/Ambulatory Services: Legal Concerns in a Fragmented Environment
Chapter 39. Coverage and Reimbursement for New Technologies
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