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New York Health Law

5 Lessons for Health Care Providers from Joan Rivers’ Death

Posted in Audit and Compliance, HIPAA and Privacy, Hospitals and Health Care Facilities, Physicians and Other Licensed Professionals

On November 10, 2014, the US Department of Health and Human Services released its investigation report regarding the death of actress and comedian Joan Rivers.  The report, called a “Statement of Deficiencies and Plan of Correction”, highlights numerous mistakes and violations made by Yorkville Endoscopy, the treating facility where Ms. Rivers died (Ms. Rivers was identified as “Patient #1″).  Health care providers, facility owners, and administrators can learn some basic but important lessons from the report’s findings. 

1. Have appropriate policies and procedures (“P&Ps”) in place as required by your licensing agency and accrediting body.  Yorkville Endoscopy is licensed by the State of New York as an ambulatory surgery center (“ASC”) under Article 28 of the Public Health Law, and accredited by the American Association for Accreditation of Ambulatory Surgery Facilities.  The State regulatory requirements for an ASC are much more rigorous than the requirements for non-licensed outpatient surgery centers in New York.  P&Ps cover issues including clinical practices, patient consents, procedures, anesthesia, billing, provider credentialing, employment and more.  An administrator, compliance officer, or other responsible party may review the regulations and accreditation standards, consult with the accrediting body, legal counsel or a consultant, and can purchase policy manuals from numerous sources.  

2. Follow your own policies and procedures.  The report cites numerous examples of Yorkville Endoscopy failing to follow its own P&Ps.  For example, the staff failed to follow the “Time Out” policy which helps ensure that the correct procedure is being performed; also, one of the physicians performing the procedures was not credentialed by the facility, in violation of the Physician Credentialing P&P. A facility’s P&P manual should not be gathering dust on a shelf in a back office (same goes for the Compliance Manual).  If a particular policy or procedure is not effective, the facility should develop a new policy or procedure that works better.  A facility that consistently follows its own P&Ps exhibits traits of a compliant and quality oriented organization; while this will not prevent accidents or unexpected occurrences, many issues may be avoided.  All staff, including physicians, should be regularly educated on the facility’s P&Ps.

3. Credentialing protects you.  The federal report stated that one of the physicians performing a procedure on Ms. Rivers was not credentialed by the facility.  Credentialing is a fairly simple process that allows a facility to review a provider’s licensure, education and work history, insurance, and past lawsuits or disciplinary actions before allowing them to treat patients.  This enables a facility to determine whether a provider meets facility requirements in general, and often whether they are qualified for specific procedures.  This helps weed out bad providers up front, limits certain procedures to physicians with an appropriate level of training and experience, and allows the facility to have a record of who is providing services under its roof.

4. Keep the cameras away from the patients.  The report notes that one of the physicians took a photograph of Ms. Rivers with his cell phone while she was under sedation during a procedure.  There is no evidence she consented to this photo.  This is a violation of Ms. Rivers’ right to privacy (under HIPAA and State laws), and violated the facility’s own “Cell Phone Policy.”  Taking photos of patients without their consent exposes the individuals and their facilities to liability, and often results in loss of employment for the offending staff.  Facilities should review their photo and video policies, with an eye toward protection of the privacy of patients, staff and guests.

5. Beware of “VIP Medicine”. Accommodating a VIP in certain ways is reasonable and acceptable, but it is not occasion to ignore important policies and procedures.  The investigation states that Ms. Rivers’ medical record did not contain an informed consent for the nasolaryngoscopy, and contained no documentation of her body weight (needed to calculate anesthesia dosages).  Allowing a VIP to enter though a separate door to increase their privacy, keeping their visit private, or using a private room are certainly appropriate.  However, clinical guidelines should be followed regardless of the star power of the patient.  This means they must be subject to the same clinical oversight, undergo the same process for obtaining informed consent for any procedure, and receive the same pre-procedure screening and testing in accordance with good medical practices.

It is unknown whether compliance with any of the above-noted issues would have resulted in a better outcome for Ms. Rivers – sometimes the negative risks discussed during the informed consent process do occur, and sometimes this results in the death of a patient.  What is clear is that inattention to regulations, failing to follow basic policies and procedures, and violating a patient’s rights suggest a facility and providers that fail to place a high value on quality of care and the safety of their patients.

Visiting Nurse Service Settles Some SDNY False Claims Act Allegations, Leaves Others Open As Part Of A “Remaining Investigation”

Posted in Audit and Compliance, Fraud and Abuse and Stark, Insurance and Managed Care, Litigation, Long Term Care, Home Health and DME, Medicaid and Medicare, Physicians and Other Licensed Professionals

An interesting SDNY settlement agreement resolves some False Claims Act allegations, but leaves others for another day.  Visiting Nurse Service of New York (VNS) paid just under $35 million to the United States and New York State to settle allegations that VNS improperly billed Medicaid for 1,740 members whose needs did not qualify for a managed care plan.  The government alleged that these members were improperly referred by social adult day care centers (SADCC), or received services primarily from SADCCs, many of which provided substandard and minimal care.   

In the settlement agreement, VNS admitted that 1,740 Medicaid long term care  program members were referred by SADCCs or used SADCC services, and were not eligible to be members of the plan; and that various SADCCs in the provider network did not provide services that qualified as “personal care services” under the long term care program contract with New York’s Department of Health. 

The settlement agreement has a unique “Remaining Investigation” provision.  Most FCA settlement agreements are designed to settle all claims against the defendants.  The VNS settlement agreement, however, provides that it resolves only part of the United States investigation. Examples of allegations that are part of the “Remaining Investigation” are redacted in the publicly-filed document.  In a provision that could lead to interesting questions of interpretation, VNS agrees  ”to cooperate with the Remaining Investigation,” but without waiving attorney-client or joint defense privileges, work product protections, or factual or legal defenses covering claims the government may bring against VNS.  The issue of whether VNS is satisfying its duty of cooperation under the agreement while maintaining assertions of privilege and factual and legal defenses will be difficult to sort out if it is ever litigated.  The settlement agreement carves out any potential claims against the president of the corporation that administered the managed health care plan, so that individual could be the focus of the “Remaining Investigation.”  In addition, the Court approved keeping the relator’s complaint and the government’s complaint-in-intervention under seal.

During the pendency of the “Remaining Investigation,” VNS agrees to monitor and further revise standards for credentialing SADCCs; only credential SADCCs that have necessary certificates; monitor SADCCs to ensure compliance with credentialing; ensure that SADCCs provide proper personal care services; and prohibit marketing practices directed at enrolling members through SADCCs.

Columbia Pays $9 Million In False Claims Act Case For Mischarging Federal Grant Money

Posted in Audit and Compliance, Fraud and Abuse and Stark, Litigation

Columbia University agreed to pay $9 million this week in settlement of a SDNY False Claims Act case alleging that it had submitted false claims in connection with federal grants funding AIDS and HIV related work.  Columbia was the grant administrator on behalf of ICAP, an entity that received millions of dollars in federal grants for support and services for HIV prevention and treatment.  The government’s complaint alleged that the federal grants at issue required that recipients charge grants only for work actually performed as part of that grant.  It further alleged that Columbia charged for work that was not devoted to the programs that grants funded, and did not have a suitable means of verifying that the employees actually performed the work charged to a particular grant. 

A settlement was approved by the Court earlier this week.  In keeping with the SDNY practice of requiring defendants to stipulate to an agreed statement of facts, Columbia admitted that ICAP allocated salaries and wages of employees among various grants without using a suitable means of verifying whether the charges were based on an employee’s actual effort for that grant. Columbia admitted that certain reports were inaccurate and for a number of years, ICAP mischarged grant agreements for work that was not allocable to them. 

SDNY U.S. Attorney Preet Bharara made clear that the government will target not-for-profits, and a charitable intent will not allow potential defendants to avoid False Claims Act damages.  After praising Columbia for its work combatting AIDS and HIV, Bharara said that “Grantees are required to use federal money for the purpose for which the grant was given and nothing else. … Educational institutions, like everyone else, should be held accountable.”  Federal grant recipients must take care to ensure compliance with all the requirements of their grant agreements, or they could face treble damages and penalties under the False Claims Act. 

 

DOJ Criminal Chief Caldwell Outlines New Joint Criminal-Civil Qui Tam Process

Posted in Fraud and Abuse and Stark, Litigation, Medicaid and Medicare, OMIG and OIG

Leslie Caldwell, DOJ Assistant Attorney General for the Criminal Division, spoke to the qui tam relators’ bar at a Taxpayers Against Fraud conference last month, stating a new DOJ policy for criminal and civil division coordination of qui tam cases, starting with intake. 

Taxpayers Against Fraud is an organization of whistleblowers and their counsel, which seeks to combat fraud against the government.  Caldwell encouraged TAF members to reach out to the criminal division, and its 40 attorney Health Care Fraud unit, in qui tam cases that could potentially involve criminal conduct.  Stating that “qui tam cases are a vital part of the Criminal Division’s future efforts,” she outlined a newly implemented procedure so that all new qui tam cases will be shared by the Civil Division with the Criminal Division as soon as they are filed.  “Those prosecutors then coordinate swiftly with the Civil Division and U.S. Attorney’s Offices about the best ways to proceed in the parallel investigations.”   

Early civil-criminal coordination of qui tam cases has been standard practice for some time in several U.S. Attorney’s Offices, including locally in the Eastern District of New York.  As early as 1997, Attorney General Janet Reno issued a Memorandum on Coordination of Parallel Criminal, Civil and Administrative Proceedings.  In the 1997 Memo, Attorney General Reno recognized the necessity of coordinating criminal, civil and administrative investigative and litigative resources,  stating that “every United States Attorney’s office and each Department Litigating Division should have a system for coordinating the criminal, civil and administrative aspects of all white-collar crime matters within the office.”  In 2012, Attorney General Eric Holder updated this policy in a Memorandum on Coordination of Parallel Criminal, Civil, Regulatory and Administrative Proceedings.   Attorney General Holder stressed that this coordination should operate at all stages of fraud investigations, including intake, investigation and resolution. 

Healthcare providers can expect DOJ to continue to expand its aggressive efforts in combatting healthcare fraud.  DOJ has signaled that it intends to increase its coordination of civil and criminal investigations and remedies for maximum deterrence and collection of healthcare dollars.  Providers facing scrutiny from the government will need to be aware that, behind the scenes, there is likely an organized and coordinated effort that includes civil, criminal, regulatory, and administrative resources.

Dismissal Motions Filed In SDNY Computer Glitch Reverse False Claim Act Case

Posted in Audit and Compliance, Fraud and Abuse and Stark, Hospitals and Health Care Facilities, Litigation, Medicaid and Medicare, OMIG and OIG

When does the 60-day clock start for an identified overpayment of federal funds to become a reverse false claim under amendments to the False Claims Act?  A closely watched SDNY qui tam  case may provide an answer. 

In June, the United States and New York intervened in United States v. Continuum Health Partners, Inc., alleging that defendants had knowingly failed to return overpayments owed to Medicaid arising out of a computer glitch.  Defendants have now filed motions to dismiss the Federal and New York State FCA claims. 

In 2009, the Fraud Enforcement and Recovery Act defined “obligation” in the FCA to include “the retention of an overpayment.”  The following year, in 2010, the Affordable Care Act provided that an overpayment of federal funds must be reported and returned within “60 days after the date on which the overpayment was identified.”  In addition, the ACA amendments provided that the failure to return an overpayment in 60 days constitutes a reverse false claim, subjecting the provider to treble damages and civil penalties under the FCA. 

In their motion to dismiss, Beth Israel Medical Center, St. Luke’s-Roosevelt Hospital Center, and Continuum Health Partners argued that there was never an “obligation” to the Federal government, because there must be a present, existing duty to repay.  Defendants asserted that an overpayment is not “identified” unless it has been confirmed and quantified, and the 60 day period does not start until that occurs.  Defendants referenced the process most providers undertake when they become aware of a potential overpayment, including an internal audit, sampling of claims, consultations with physicians and staff, and factual and legal analysis.  This process ordinarily cannot occur within 60 days of initially becoming aware of a potential overpayment. 

The complaint attached an internal summary, by one of Continuum’s employees, of approximately 900 Medicaid claims, totaling over $1 million, that were potential overpayments.  Defendants stressed that this was not a list of actual overpayments, and in fact only 465 of the claims were paid.  As further analysis was required to determine if the claims did result in overpayments, defendants argued that the summary did not “identify” overpayments, and the complaint therefore did not allege any obligation owed the government under the FCA. 

Defendants also argued that the complaint failed to allege any affirmative act of concealment to prevent an overpayment from being disclosed, and that an overpayment from Medicaid is not an obligation owed to the Federal government under the reverse false claim section of the FCA.  In a separate memorandum seeking to dismiss the state FCA claims, defendants incorporated their Federal FCA arguments and also argued that the state reverse false claim provision was enacted after the alleged conduct, and therefore could not be applied retroactively. 

This case is being closely watched, as it raises significant issues on when the government can assert reverse false claim liability for overpayments.  Significantly, in this case, there is no dispute that the overpayments resulted from a computer glitch and not fraud, and that defendants repaid the overpayment to the government.  The complaint alleges that defendants did not make that payment soon enough.  The government intervened to seek treble damages and civil penalties, signaling that it will be aggressively pursuing cases where providers become aware of overpayments and fail — in the government’s view — to promptly reimburse the government. 

The case is pending before SDNY District Judge Edgardo Ramos, and the government opposition papers are due on October 22.

Shareholder Liability for the Misconduct of Others: What is “Direct Supervision and Control?”

Posted in Audit and Compliance, Corporate and Business, Hospitals and Health Care Facilities, Physicians and Other Licensed Professionals

Physicians often practice through a limited liability entity to shield the physician from practice liabilities. In New York, such entities may take the form of a professional service corporation, professional limited liability company, or professional limited liability partnership. Regardless of the type of entity selected, professionals in New York remain “personally and fully liable and accountable for any negligent or wrongful act or misconduct committed by him or her or by any person under his or her direct supervision and control while rendering professional services on behalf of [the entity],” See NY BCL§1505(a); NY LLCL §1205; N.Y. PTR. LAW § 26(c).

The issue of whether certain alleged tortfeasers were under a physician-shareholder’s “direct supervision and control” was recently presented in Schaefer v. Mackinnon, 117235/09, NYLJ 1202669507383, at *1 (Sup., NY, Decided August 27, 2014). In Schaefer, Plaintiffs Frank Schaefer and his wife, Maria Schaefer, brought a medical malpractice suit against Broadway Cardiopulmonary, P.C. and its four shareholders for injuries Mr. Schaefer sustained during a cardiac stress test. Additional defendants include the alleged tortfeasers, David Mackinnon, M.D., a non-shareholder physician, a medical assistant and a medical technologist, all employees of Broadway Cardiopulmonary, P.C.  According to the record, the test was ordered by Dr. Mackinnon, but Dr. Mackinnon did not interview or examine Mr. Schaefer prior to or during the course of testing. The test was administered by the medical technologist who apparently left the room during testing. Mr. Schaefer passed out and fell resulting in injuries.

The defendant shareholders moved for summary judgment arguing they did not directly supervise or control the alleged tortfeasers during the rendering of professional services as the test was performed by the other named defendants and not the shareholders. Plaintiffs opposed the motion stating the shareholders failed to implement guidelines, controls and procedures for proper and safe testing.

In analyzing the issue, Justice Joan B. Lobis looked to the Appellate Divisions ruling in Wise v. Greenwald, 208 A.D.2d 1141 (3rd Dep’t 1994).

“In Wise, the appellate court considered the liability under Section 1505(a) of the Business Corporation Law of a shareholder of a dental practice, whose employee dentist allegedly negligently extracted Wise’s tooth. Indicia of liability included the shareholder’s hiring responsibilities, setting hours of operation, evaluation of employees, and whether any intermediary supervisor lay between the shareholder and employee whose actions were at issue. Id. at 1142. Applying these factors, the Wise Court affirmed the denial of the shareholder’s motion for summary judgment. Id. at 1143.”

Turning to the case at hand, Justice Lobis looked to the testimony of the defendants finding that

• the four shareholders met at least every two months to discuss practice operations;

• all four shareholders signed the office lease, approved of the imaging machine at issue, and ordered medical and office supplies;

• all four shareholders hired and/or evaluated Dr. Mackinnon and the defendant medical technologist;

• one of the shareholders regularly discussed operational issues and staff scheduling with Dr. Mackinnon;

• the shareholders had the power to terminate employees;

• the medical technologist testified he reported directly to one of the shareholders yet he had not been trained or given procedures to follow in operating the imaging machine, he failed to monitor blood pressure, respiration or pulse before the resting portion of the stress test and he was not instructed to remain in the room with the patient during the equipment’s operation.

Based on the record, Justice Lobis found that genuine issues of material fact remain for a jury to determine whether the shareholders are liable for the actions of other persons at the practice.

Direct supervision and control by a shareholder-physician goes beyond supervision of the professional care provided. Shareholder-physicians who take on administrative oversight  responsibilities can be liable if they fail to properly train and control persons rendering professional services for the practice.

October Jury Trial in EDNY False Claims Act Case

Posted in Fraud and Abuse and Stark, Hospitals and Health Care Facilities, Litigation, Medicaid and Medicare, Physicians and Other Licensed Professionals

False Claims Act cases do not often go to trial, so they are noteworthy when they do.  EDNY Judge John Gleeson has scheduled an FCA jury trial in October, United States ex rel. Ryan v. Lederman.  Earlier this year, the Court granted summary judgment to the government in part and scheduled the remaining issues for trial. 

Dr. Gilbert Lederman was Director of Radiation Oncology at Staten Island University Hospital (“SIUH”), where he performed various radiological procedures, usually for cancer treatment.  One such treatment was stereotactic radiosurgery, a form of radiation therapy that focuses high-power energy on a small area of the body.  Elizabeth Ryan filed a qui tam action in 2004, alleging that Lederman and SIUH had improperly billed the federal government for health services under Medicare, because stereotactic radiosurgery was not “reasonable and necessary.”  The government intervened in 2008.  SIUH had also been a defendant in the case, but settled all claims against it later that year for $25 million. 

Under local medical review policies (“LMRP”), now called “local coverage determinations,” treatment of below the neck diseases such as lung carcinoma with stereotactic radiosurgery was considered “investigational.”  The government alleged, and Lederman did not dispute, that he had submitted claims for at least 300 below-the-neck stereotactic radiosurgeries.   

Summary Judgment Establishes Claims Were False; Knowledge Issue Set For Trial

In its summary judgment decision, the Court first determined that the claims were “false” on two grounds.  Lederman had submitted false claims because the LMRPs excluded coverage for stereotactic surgery performed below the neck.  Lederman argued that the LMPRs provided only guidance, but the Court held that local coverage determinations are mandatory for the areas they cover.  In addition, the Court held that Lederman had misrepresented the procedures performed, because they were not coded as below-the-neck procedures. 

The False Claims Act requires a knowing submission of a false claim, however, so the Court next looked to whether Lederman had acted “knowingly.”   The Court found the government’s case persuasive, but not sufficient for summary judgment, necessitating a trial on that issue. 

With respect to common law claims of payment based on mistake of fact and unjust enrichment, however, there is no knowledge element, so the Court granted summary judgment to the government on those claims. 

The Court scheduled a trial on the issues of: (1) whether Lederman acted with a culpable mental state for FCA liability, and (2) the amount of damages on the government’s common law claims, and possibly also the FCA claims. 

Court Finds Jury Trial Appropriate, Bifurcates Liability and Damages

Recently, Judge Gleeson addressed two procedural issues in advance of trial, Lederman’s request for a jury trial and the bifurcation of liability and damages. 

The relator’s complaint contained a jury demand, but the government’s complaint-in-intervention did not.  Lederman did not demand a jury in answering the government’s complaint.  The Court held that he could rely on the relator’s jury demand, rejecting the government’s argument that, once it intervened, the original complaint ceased to operate and it could not be bound by the relator’s jury demand. 

Earlier this month, the Court decided that it would bifurcate the trial, trying first the issue of Ledermen’s mental state for FCA liability, and then the issue of damages on the common law claims and, if necessary, on the FCA claims.  The jury trial is scheduled for October 20.

Failure To Promptly Return Overpayments Arising From Computer Glitch Leads To False Claims Act Complaint

Posted in Audit and Compliance, Fraud and Abuse and Stark, Litigation, Medicaid and Medicare, OMIG and OIG

At the end of June, the U.S. Attorney’s Office in Manhattan filed a False Claims Act complaint against Beth Israel Medical Center, St. Luke’s-Roosevelt Hospital Center, and Continuum Health Partners, United States v. Continuum Health Partners, Inc., alleging that defendants had knowingly failed to return overpayments owed to Medicaid arising out of a computer glitch. 

In 2010, the Affordable Care Act amended the False Claims Act to provide that overpayments of federal funds must be paid within 60 days after they are identified, and that the failure to timely return an overpayment constitutes a reverse false claim, subjecting a party to liability for three times the amount of the claim and a penalty of between $5,500 and $11,000 for each claim. 

Under the Medicaid regulations applicable to this case, the defendant providers were not permitted to receive additional payments from Medicaid above amounts paid by a managed care organization.  A computer glitch caused defendants to erroneously seek additional payments from Medicaid. 

According to the complaint, defendants became aware of the problem in September 2010, when the State Comptroller identified a small number of improper payments.  A review by defendants in February 2011 revealed a more significant problem, involving approximately 900 claims totaling over $1 million that were wrongly submitted to Medicaid.  Nevertheless, defendants only repaid the small amount of claims identified by the Comptroller. 

The employee who identified the significant overpayment problem was terminated, and later filed the qui tam case in which the government intervened.  The State Comptroller continued to investigate, and defendants made certain payments when they were identified by the Comptroller.  The complaint alleges that defendants dragged their heels on making all the repayments, however, and sought to conceal the true extent of the problem.  Defendants only finished returning the overpayments in 2013, more than two years after they were identified.  In addition, many of the repayments were not made until after June 2012, when the government issued a Civil Investigative Demand to defendants. The government now seeks to recover treble damages and a penalty of up to $11,000 for each claim. 

There is no question that the overpayments in this case resulted from a mistake, a computer glitch.  Nevertheless, this case shows that the government will aggressively seek to recover False Claims Act damages and penalties for the failure to timely return overpayments once they have been identified, even if the original overpayment was due to mistake or inadvertence rather than fraud.  The allegations of this complaint seem particularly egregious, with defendants allegedly being aware of significant overpayments and making only minimal efforts to repay the government.  The law, however, only requires a failure to return an overpayment within sixty days after identification for False Claims Act liability to attach. 

This case highlights a serious problem for providers who become aware that they may have been overpaid on claims to the United States.  In that situation, providers will have to promptly assess whether an overpayment has in fact occurred, and then determine what next steps are in order to avoid False Claims Act liability.  The government can be expected to aggressively prosecute these cases.  In addition, False Claims Act investigations into allegedly improper claims will likely include investigation into whether providers were aware of problems with certain claims, and whether they let more than sixty days lapse before addressing them.

A Refresher on Noncompetes for Health Professionals

Posted in Compensation and Employment, Corporate and Business, Hospitals and Health Care Facilities, Litigation, Physicians and Other Licensed Professionals


A recent article in the New York Times examined the growth of noncompete agreements, noting “Noncompete clauses are now appearing in far-ranging fields beyond the worlds of technology, sales and corporations with tightly held secrets, where the curbs have traditionally been used. From event planners to chefs to investment fund managers to yoga instructors, employees are increasingly required to sign agreements that prohibit them from working for a company’s rivals.”

Health professionals, and especially physicians, have for countless years been required to execute noncompetes and other restrictive covenants as part of their partnership agreements or employment agreements with professional practices, healthcare facilities and institutional providers.  While nothing new, noncompetes and restrictive covenants continue to be an important consideration in any professional partnership or employment situation.

There are certain key points which the parties must carefully consider regardless of which side of the transaction they are on.  New York courts will consider the following when determining the enforceability of a noncompete or restrictive covenant:  (a) the practice/employer’s need to protect legitimate business interests (such as patient lists, payor contracts and payment rates, and the terms of its business arrangements), (b) the individual/employee’s need to earn a living, (c) the public’s need to access the services of physicians and other health professionals, and (d) the reasonability of the time, scope and geographic areas restricted by the agreement. 

Common restrictions include non-solicitation of a practice’s patients and employees for a period of time following separation; prohibition on the practice of medicine (or the individual’s specialty) within a certain mile radius of the office or practice site(s) (or within certain zip codes) for a period of time.  Moonlighting during the term of employment or affiliation may also be restricted.  Parties to these agreements may consider ways to make the restrictions less burdensome, which could include severance payments or full or partial release from the restrictions if the individual is terminated without cause or his/her employment agreement is not renewed.  Commonly, a practice or employer may be entitled to injunctive relief (court order) and liquidated (monetary) damages for violations of the restrictions. 

Employers and employees should recognize that reasonable restrictions are enforceable, but also that litigation over enforceability can be expensive and time-consuming.  The parties to an employment agreement for a cardiologist might recognize that a restriction on practicing cardiology for 6 months within 5 miles from the practice’s offices in Uniondale may be considered reasonable and likely to be enforced, while a restriction on the practice of all medicine for 5 years in the counties of Nassau, Suffolk and Queens may not be considered reasonable; they can negotiate the restrictions accordingly.

Discussion of noncompetes and restrictive covenants should be part of an overall discussion with competent legal counsel regarding potential employment and partnership agreements.  The restrictions should be carefully reviewed and understood before executing agreements, as their impact may be felt by the parties for years after execution of the agreement.

Court of Appeals Upholds Comptroller Audit Of Non-Participating Provider’s Billing Records

Posted in Audit and Compliance, Corporate and Business, Fraud and Abuse and Stark, Hospitals and Health Care Facilities, Insurance and Managed Care, Litigation, OMIG and OIG

medical-record-auditThe New York Court of Appeals decided last week, in Handler v. DiNapoli, that the State Comptroller has the authority to review the billing records of a non-participating provider receiving funds from the State’s primary health benefit plan, even though the payment of state funds is made indirectly. 

New York State provides health insurance to its employees, retirees, and their dependents.  The plan at issue, the Empire Plan, is funded by New York State.  United Healthcare Insurance of New York (United) contracts with the State to process and pay claims by Empire Plan beneficiaries.  United processes and pays the claim, and then the State reimburses United and pays it an administrative fee.  

When non-participating providers provide a service to Empire Plan members, they charge market rates and bill the patient directly.  United reimburses the patient for 80% of the actual fee or the “customary and reasonable charge” for the service, whichever is lower.  The patient must then pay these funds to the provider  and also pay the remaining 20%.  Non-participating providers have a legal duty to collect co-payments from the patients.  

The New York Comptroller sought to examine the billing records of non-participating providers to determine if they had waived Empire Plan member co-payments.  The Court provided an illustration of how failure to collect the co-payment “inflates a claim’s cost and adversely impacts the State’s fisc.”  If a non-participating provider charges $100 for a service, receives $80, and does not collect the $20 co-payment, then the service was provided for $80.  In that case, the State should have only paid $64, and has overpaid by $16. 

The providers gave the Comptroller access to their records upon request.  After auditing a random sampling, the Comptroller concluded that the providers had routinely waived the co-payment, extrapolated the sample amount to the universe of claims, and sought recovery of overpayments of $787,000 in one instance and $900,000 in another.  The providers then filed suit, challenging the Comptroller’s authority to audit their records because they did not receive state funds directly, but rather through United. 

The Court of Appeals upheld the Comptroller’s authority, stating that the fact that a third party is a conduit for the funds does not change the character of the state funds.  The Court found that limiting the Comptroller’s authority would make its task of auditing state funds impossible; there would be no other way to determine whether providers had required a co-payment.  The Court also noted that the providers certainly knew that the payments were state funds and required the collection of co-payments. 

This decision confirms that the Comptroller has wide authority to audit when state funds are at issue, even where the state does not contract with the entity being audited.  Litigants will have to try to fit themselves into some of the areas where the Court states the Comptroller may not act, such as performing the administrative duties of another State agency or overseeing activities that, while financial in nature, have no impact on the state fisc.