This blog post is the second in a series of articles discussing the current state of the law in New York regarding medical marijuana. To read the first post in the series, Medical Marijuana 101: The State of the Law in NY, click here.

One of the biggest questions that people have when discussing medical marijuana in New York is where can patients obtain medical marijuana products.

Before a patient can obtain medical marijuana products, he or she must first be issued a certification for medical marijuana by a practitioner, who is registered with the NYS Department of Health’s Medical Marijuana Program, and obtain a Registry Identification Card. Patients can then use that Registry Identification Card to visit a dispensing facility to obtain medical marijuana products. We’ll dive into the requirements imposed upon patients and certifying physicians in our next post and concentrate today on registered organizations and dispensaries.

Registered organizations are responsible for the manufacturing and dispensing of medical marijuana in New York State. At the time that the medical marijuana program was launched in 2016, New York approved five registered organizations: Columbia Care NY LLC, Etain, LLC, MedMen, Inc. (formerly known as Bloomfield Industries Inc.), PharmaCann LLC and Vireo Health of New York LLC (formerly known as Empire State Health Solutions).

On August 1, 2017, the NYS Department of Health announced that it has licensed five new companies to join the original five: Valley Agriceuticals, LLC, Citiva Medical LLC, PalliaTech NY, LLC, NYCanna LLC and Fiorello Pharmaceutics, Inc.

Valley Agriceuticals and Citiva are authorized to bring dispensaries to Brooklyn, Pallia and NYCanna are expected to open somewhere in Queens, and Fiorello Pharmaceutics is authorized to open a dispensary in Manhattan. Each of the new registered organizations received authority to open dispensing facilities in other delineated areas of New York as well. Under the Compassionate Care Act, each registered organization is authorized to have up to four dispensing facilities, meaning that there could be up to forty dispensing facilities statewide if each registered organization is fully developed.

Registered organizations must manufacture medical marijuana products in an indoor, enclosed, secure facility located in New York State and may only manufacture medical marijuana products in forms approved by the Commissioner of Health. These forms include liquid or oil preparations for metered oromucosal or sublingual administration or administration per tube; metered liquid or oil preparations for vaporization; and capsules for oral administration. Smoking, as of now, is not an approved route of administration. On August 10, 2017, the NYS Department of Health proposed broadening the acceptable forms to include ointments, patches, lozenges and chewable tablets.

A certified patient can go to any dispensing facility of a registered organization in New York. This provides greater options to patients as not every dispensing facility sells the same types of medical marijuana. There are currently two New York State-mandated products for medical marijuana which require set ratios of Delta-9-tetrahydrocannabinol (THC) and cannabidiol (CBD), the two main chemicals used in manufacturing medical marijuana. Those two products must be offered by each registered organization, but a registered organization may also offer other products at the dispensing facility that have varying ratios of THC to CBD. It is expected that other products will be offered over time.

In addition, certified patients who are unable to go to a dispensing facility may designate a caregiver who can go for them. Registered organizations are also permitted to offer delivery services to patients and designated caregivers to help expand access to those who are unable to travel to a dispensing facility.

As you might imagine, dispensing facilities are subject to a number of regulations in order to ensure that patient health is properly protected. Among other requirements, dispensing facilities must (1) have a licensed NYS pharmacist on site to directly supervise the facility when open, (2) not sell items other than medical marijuana products approved by the NYS Department of Health, (3) not allow the consumption of the medical marijuana by the patient at the facility, (4) not allow certified patients or their caregivers to consume any food or beverages at the facility unless necessary for medical reasons, (5) maintain a visitor log, and (6) firmly affix a patient-specific dispensing label approved by the Department of Health that is easily readable and includes a delineated list of items. The regulations allow dispensaries to provide up to a 30-day supply of medical marijuana to a certified patient.

Dispensing facilities, as well as the manufacturing facilities operated by registered organizations, must also meet a number of security regulations. Registered organizations must also provide an electronic report to the NYS Department of Health of all approved medical marijuana products that are dispensed within 24 hours after the medical marijuana was dispensed to the certified patient or designated caregiver.

Now that we have a basic understanding of registered organizations and dispensing facilities, check back soon for Medical Marijuana 103: Patient and Physician Regulations in New York State.

This blog post will be the first in a series of articles discussing the current state of the law in New York regarding medical marijuana.

There’s no denying that one of the hottest topics in health care law these days is the constant evolution of the state of the law as it relates to the use of marijuana. As of the date of this article, 29 states and the District of Columbia authorize the use of medical marijuana and 12 additional states have legislation pending that would likewise authorize the use of medical marijuana. In addition, 10 states and the District of Columbia have adopted more expansive laws legalizing marijuana for recreational use.

In 2014, Governor Andrew Cuomo signed the Compassionate Care Act authorizing the use of medical marijuana in the state of New York. The Medical Marijuana Program created under the Compassionate Care Act officially launched on January 7, 2016. Since its launch the New York State Department of Health (the “DOH”), tasked with regulating the program, has continued to expand the program.

Medical marijuana in New York is currently available to those suffering symptoms caused by eleven severe debilitating or life-threatening condition(s), including, but not limited to, cancer, HIV/AIDs, epilepsy, Parkinson’s disease, Huntington’s disease, chronic pain and multiple sclerosis.

The Commissioner of the DOH has authority to expand the list of conditions that qualify for medical marijuana and has done so in the past, adding chronic pain as a qualifying condition in December 2016. Most recently, in June 2017, a bill to expand New York State’s medical marijuana program to cover sufferers of post-traumatic stress disorder (PTSD) passed both houses of the New York State Legislature. It is expected that Governor Cuomo will receive the bill for consideration later this summer, although he has not yet indicated whether or not he will approve the bill.

Senators in New York have also introduced New York Senate Bill S01747, also known as the “marijuana regulation and taxation act.” The bill seeks to regulate the growth, taxation, and distribution of recreational marijuana in an attempt to generate a new source of revenue for the state.

The bill, among other items, allows for the growing and use of marijuana by persons eighteen years of age or older, the licensure of persons authorized to produce, process and sell marijuana, the levy of an excise tax on certain sales of marijuana and the repeal of certain provisions of the penal law relating to the criminal sale of marijuana. The bill proposes that regulatory oversight would be maintained by the New York State Liquor Authority. On January 6, 2016 the Bill was referred to the Senate Finance Committee and as of the date of the writing of this article remains pending there.

Check back soon for Medical Marijuana 102: Dispensaries where we’ll dive in a little deeper to explain the regulations surrounding how patients in New York can become certified for medical marijuana use and the dispensaries that make that use possible.

On October 2, 2013, New York City Mayor Michael Bloomberg signed into law the Pregnant Workers Fairness Act (the “Act”). The Act, which amends New York City’s Human Rights Law, prohibits employers from discriminating against workers who are pregnant or have a medical condition related to pregnancy or childbirth, and requires employers to provide a reasonable accommodation to such workers if such accommodation is requested. Under New York City law, a reasonable accommodation is any accommodation that can be made that does not cause an employer an undue hardship.

New Protections for Women

The Act supplements existing laws preventing discrimination against pregnant women in the workplace.  The Federal Pregnancy Discrimination Act, passed by Congress in 1978, prohibits employers with 15 or more employees from discriminating against persons on the basis of pregnancy, child-birth or related medical conditions, but does not speak to the provision of reasonable accommodations to such workers. In addition, although some parties have tried to use the Americans with Disabilities Act (“ADA”) to require employers to provide such accommodations, such attempts have been largely unsuccessful because in general the ADA does not apply to pregnant women unless they have a pregnancy-related disability.

The Act is scheduled to take effect 120 days after its enactment. The Act will apply to all employers with four or more employees, which is consistent with other anti-discrimination provisions found in the Human Rights Law.  An individual who believes that he or she has been unlawfully discriminated against on the basis of pregnancy, childbirth, or a related medical condition may bring an action in court for damages, injunctive relief and other appropriate remedies, or make a complaint to the NYC Commission on Human Rights. Remedies that can be instituted upon a finding that an employer has engaged in an unlawful discriminatory practice, include, among others (i) the issuance of an order to the employer to “cease and desist” the unlawful discriminatory practice; (ii) awarding back pay and front pay, or paying compensatory damages; and (iii) the imposition of civil penalties up to $250,000.

Employers are advised to review and update their policies and procedures to comply with the new requirements.  This would also be a good time to review existing policies related to the ADA and reasonable accommodations.

patient entering MRI machineA bill proposed in the US House of Representatives may cause physicians to significantly restructure their practices as they relate to in-office ancillary services (IOAS).

Promoting Integrity in Medicare Act of 2013

The Stark Law is a federal statute which prohibits physicians from making referrals for Medicare-covered designated health services (DHS) to an entity with which the physician or an immediate family member of the physician has a financial relationship with that entity. Several exceptions apply, including one for in-office ancillary services. This exception generally allows a physician to make referrals for DHS within his or her own practice if the physician meets requirements relating to (i) the supervision of services, (ii) the location of services, (iii) the billing of services, (iv) the structure of group practices, and (v) patient disclosures.

On August 1, 2013, Congresswoman Jackie Speier (D-CA), along with Rep. Jim McDermott (D-WA), and Dina Titus (D-NV), introduced HR 2914, the “Promoting Integrity in Medicare Act of 2013” (PIMA), in the House of Representatives. The bill seeks to eliminate the IOAS exception for advanced diagnostic imaging (which includes MRI, PET and CT scans), anatomic pathology, radiation therapy and physical therapy.  The bill also proposes to create new compliance review procedures and increase the penalties under the Stark Law for such prohibited self-referrals.

According to Congresswoman Speier, “[o]ver the years, use of the in-office ancillary services exception has dramatically increased, resulting in increased costs to the Medicare program…Patient convenience and streamlined services are important, but improper use of the exception creates unnecessary costs.”  In support of her bill, Congresswoman Speier cites recent studies performed by the Government Accountability Office (GAO) which found an increase in the use of certain DHS where providers self-refer.  For example, the GAO found that, “for advanced diagnostic imaging, providers who self-referred made 400,000 more referrals for advanced imaging services than they would have if they were not self-referring, at a cost of more than $100 million in 2010.”

Opinions are Divided

As can be expected, the introduction of PIMA has created a divide between those groups who support the bill, such as the American Clinical Laboratory Association and the American College of Radiology, and those that feel that the IOAS exception as it is currently drafted offers the best care to patients.  On August 12, 2013, over thirty national medical groups – including the American Medical Association and the American College of Surgeons – wrote a letter to all members of the U.S. House of Representatives opposing the legislation.  The letter states that “[i]f enacted, [H.R. 2914] would limit access to life-saving services for many patients and stifle new innovative reforms already underway to improve care delivery and quality improvement.  It would raise the costs to Medicare beneficiaries and the Medicare program by driving patients to more costly facilities thereby requiring additional expenditures.” 

New York Health Law Blog will be monitoring the movement of the bill and will post periodic updates.  Farrell Fritz, P.C. attorneys know the intricacies of the Stark Law, and can advise providers on how to structure their practices to comply with the many laws and regulations governing medical practices. 

On May 29, 2013, the US Departments of Health and Human Services, Labor, and Treasury issued final regulations regarding wellness programs under the Patient Protection and Affordable Care Act (the “ACA”).  Wellness programs are programs offered by employers, or directly by insurance companies to their enrollees, to improve health and promote fitness. The ACA, in conjunction with the Health Insurance Portability and Accountability Act of 1996, prohibits discrimination against individuals regarding plan eligibility, benefits or premiums, but makes an exception for wellness programs. Wellness programs such as weight loss programs or smoking cessation programs allow employers to offer certain rewards in return for the employee’s adherence to health promotion and disease prevention.

Participatory Programs

There are two types of wellness programs under the ACA: participatory wellness programs and health-contingent programs.  Participatory wellness programs, which constitute the majority of wellness programs, are those that either do not provide a reward or do not include any conditions for obtaining a reward other than participation in the program. Participatory wellness programs include programs that reimburse employees for all or part of their gym memberships, offer rewards for participating in diagnostic testing programs, and provide a reward to employees for attending monthly, free health education seminars. Participatory wellness programs must be offered to all similar situated individuals, regardless of health status.

Health-contingent Programs

Health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward. Health-contingent wellness programs are divided into two sub-types: activity-only and outcome-based.

Under activity-only wellness programs, an individual is required to perform or complete an activity related to a health factor in order to obtain a reward but isn’t required to attain or maintain a specific health outcome. Examples of activity-only wellness programs include walking, diet or exercise programs. The final regulations implement safeguards so that individuals that are unable to participate in or complete the program’s prescribed activity due to a health factor such as recent surgery or pregnancy are given a reasonable opportunity to qualify for the reward.

In contrast, outcome-based wellness programs require an individual to attain or maintain a specific health outcome in order to obtain a reward. For example, an outcome-based wellness program may offer a reward to an employee that stops smoking or that attains certain results on cholesterol or blood pressure readings. Outcome-based wellness programs generally have a measurement test or screening as part of an initial standard, and individuals who do not meet the initial standard may be offered an educational program or other activity to achieve the same reward.

Program Compliance

To comply with the final regulations, health-contingent wellness programs must: (1) give individuals eligible for the programs the opportunity to qualify for the reward at least once per year; (2) provide rewards that do not exceed, together with the reward for other health-contingent wellness programs with respect to the plan, 30% of the total cost of employee-only coverage under the plan, or 50% to the extent the program is designed to prevent or reduce tobacco use; (3) be reasonably designed to promote health or prevent disease; (4) be uniformly available to all similarly situated individuals and provide a different, reasonable means of qualifying for the reward to those individuals who are unable to participate due to a medical condition; and (5) disclose the availability of a reasonable alternative standard to qualify for the reward in all plan materials describing the terms of a health-contingent wellness program.

The final regulations apply to group health plans with plan years beginning on and after January 1, 2014.  The three Departments anticipate issuing guidance in the future, and may propose modifications to the final regulations as necessary.

The Patient Protection and Affordable Care Act of 2010 (“PPACA” or “Obama Care”) requires, beginning in 2014, that employers with 50 or more full-time employees (“large employers”) offer “affordable” health insurance to its employees. Failure to do so will subject the employer to penalties.

Future blog postings will address the coverage requirements and penalties under PPACA, but to start, what should you be doing in 2013 to determine if the mandate applies to your business?

Defining a “Large Employer”

Whether a business has achieved “large” status under PPACA is measured by calculating the sum of all full-time employees and all FTEs during the prior year (this is why an analysis in 2013 is critical). The number of FTEs is determined by calculating for each month of the prior calendar year (1) the aggregate number of hours worked (excluding any employee exceeding 120 hours) by non-full-time employees (those working less than 30 hours per week) in that month, (2) dividing by 120, (3) adding together the results of (2) for each month and (4) dividing by 12.  Hours worked means hours when an employee is entitled to pay taking into account vacation, sick time etc. Special rules apply to businesses that have irregular vacation periods, such as educational employers, that make determining a monthly calculation more difficult.

More Points to Consider

The mandate applies to for-profit entities, government entities, and tax exempt entities. Affiliated entities under common control will be viewed as one entity in determining whether large employer status applies. Successor employers are considered the same as the predecessor. New employers will be viewed as to whether they reasonably expect to employ at least 50 employees or FTEs during a calendar year.

Note that the common law interpretation of “employer” and “employee” will apply, and an employer’s  classification of independent contractor, consultant or otherwise as opposed to employee will likely receive very close scrutiny . Thus, care should be taken when deciding you are NOT a large employer and therefore exempt from the mandate based on your designation of workers as independent contractors as opposed to employees.

As is evident from the above, there are fairly complicated questions to be answered in determining “large” employer status. If in doubt, seek guidance from your legal expert on the PPACA mandates and/or Labor and Employment Law counsel.

On December 2, 2012, Interfaith Medical Center, Inc. (“Interfaith”) filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Eastern District of New York, becoming the latest New York hospital to fall victim to the current economic downturn.  It remains to be seen whether Interfaith will be able to successfully reorganize in bankruptcy or whether its fate will follow along the lines of Victory Memorial Hospital, Peninsula Hospital Center, St. Vincent’s Catholic Medical Centers and North General Hospital.

Interfaith, which serves the Bedford-Stuyvesant and Crown Heights neighborhoods of Brooklyn, New York, was created in 1983 through the merger of St. John’s Episcopal Medical Center and Brooklyn Jewish Medical Center.  Medicaid cutbacks in 2010, a legacy of long term debt, underfunded pensions and medical malpractice liabilities played roles in Interfaith’s financial deterioration.  On November 28, 2011, the Brooklyn Health System Redesign Work Group issued a report on the strengths and weaknesses of Brooklyn hospitals.  With respect to Interfaith, the report stated that “absent a dramatic change in its operations, Interfaith cannot continue to survive even in the short run.”  According to Interfaith’s bankruptcy filings, the Report further increased Interfaith’s financial pressures.

Interfaith filed for bankruptcy protection listing total assets of $142.4 million and liabilities of $341 million.  The Dormitory Authority of the State of New York is Interfaith’s largest secured creditor,  holding a claim against Interfaith in the approximate amount of $124 million.  Interfaith’s largest unsecured creditors include the Centers for Medicare & Medicaid Services, owed $16.1 million, the Dormitory Authority of the State of New York, owed $12.2 million, and the Interfaith Medical Center Nurses Pension, owed $5.4 million.

Interfaith’s chapter 11 filings indicate that Interfaith is exploring the possibility of a potential affiliation or other relationship with one or more other hospitals.  Further information on Interfaith’s chapter 11 proceeding, including a copy of all court documents filed to date, can be found by clicking here.

   The Health Information Technology for Economic and Clinical Health Act (the “HITECH”) Act of 2009 aims to have all hospitals and physicians use electronic health records (“EHRs”) for all persons in the United States by 2014.  Federal and State financial incentives, electronic billing requirements, and the need for ever-increasing collaboration and sharing of information among providers have lead to a growing embrace of EHRs across the health care system.

   The U.S. Department of Health and Human Services Office of the Inspector General (the “OIG”) recently issued its Work Plan for Fiscal Year 2013.  One of the OIG’s goals for 2013 is to identity fraud and abuse vulnerabilities in EHR systems and to determine how certified EHR systems address those vulnerabilities.

Letters and Surveys Sent By OIG

  The OIG has already begun to implement the Work Plan with respect to its review of EHR systems.  In October 2012, at least ten hospitals received an 18-page, 54-question survey requesting detailed information on their EHR systems.  The survey comes on the heels of a letter that was sent on September 24, 2012 from HHS and the Department of Justice to health care providers indicating that “there are troubling indications that some providers are using [EHR] technology to game the system, possibly to obtain payments to which they are not entitled.”

  It is expected that the responses to the survey will be used by the OIG to prepare a report which will be published during fiscal year 2013.  According to a recent article posted on HealthLeaders Media, some of the questions in the OIG survey include:

  • How diagnoses and procedures are coded (manually, automatically with coding software, or other);
  • User authorization methods (unique user ID, password, tokens, biometrics, public key);
  • Access management (session time-out, minimum password configuration rules, regular changing of passwords, user agreements or contracts to prevent sharing of passwords, or other);
  • Barriers to allowing outside entities access (lack of software or hardware support, insufficient staffing, funding restrictions, performance concerns, privacy concerns, etc.);
  • How physician progress notes are entered into the EHR (free text, via structured templates);
  • Whether narrative nursing notes are directly entered into the EHR or handwritten and scanned into the EHR, and if so, why;
  • Whether patients have access to the EHR, and if so, how.

Steps to Ensure Proper Functioning of an EHR

  There are certain steps that hospitals and physicians can take in order to ensure that their EHR system is functioning properly.  First, considerable time and research should be spent on selecting an EHR vendor to ensure that the EHR system will be a good fit for the practice.  Issues to be addressed should include: What features does the vendor’s system include that competitors may not offer?  What kind of training and support is provided by the vendor and how and when is that support available?  What is the size of the vendor’s customer base and has its software been implemented in similar practices and work environments?  Legal review of acquisition documents, service/support agreements, and hardware or hosting agreements is a key component of the process.

  Second, it is essential that hospitals and physicians receive appropriate training in the use of the system and that sufficient time is allotted for staff education.  Written manuals should be provided to staff members that, along with a detailed guide to the EHR system, include quick, one-page “cheat sheets” for easy reference by users.  Third, hospitals and physician practices should set realistic goals and expectations.  Because it is unlikely that things will go smoothly from the get-go, practitioners should set aside time on a regular basis, as frequently as every 60-90 days, to reevaluate their EHR system and see if improvements or changes should be made to the system or processes.  This will also provide an opportunity to determine if any member of the team needs additional training on the system.

  In light of the OIG’s Work Plan and increasing scrutiny on EHR systems, it is essential that hospitals and physicians take measures to ensure that their EHR systems are working properly and are being use appropriately.

 The New York State Office of the Medicaid Inspector General (“OMIG”) recently finalized regulatory changes to New York State law which relate to the withholding of payments to Medicaid providers when there is a “credible allegation of fraud.”  A credible allegation of fraud is defined as an “allegation that has indicia of reliability and has been verified by the [OMIG], or the Medicaid fraud control unit, or another State agency, or law enforcement organization.”

The changes, which will modify portions of 18 NYCRR 518.7 and 18 NYCRR 518.9, were required as a result of New York’s participation in the Medicaid program under the Affordable Care Act.

Mirror of Federal Requirements

 The changes finalized by the OMIG will mirror federal requirements and will now state that the OMIG “must withhold payments under the program, in whole or in part, when it has determined or has been notified that a provider is the subject of a pending investigation of a credible allegation of fraud unless the [OMIG] finds good cause not to withhold payments” in accordance with applicable federal regulations.

Prior to the finalization of these changes the determination by the OMIG to implement a withhold was discretionary and the OMIG could withhold amounts where it had “reliable information that a provider is involved in fraud or willful misrepresentation involving claims…or has abused the program or has committed an unacceptable practices.”

A Provider’s Rights to Appeal Withholds

The changes also provide a method for providers that are the subject of the withholding to appeal the OMIG’s decision.  Although not entitled to an administrative hearing, the affected provider may, within 30 days of the notice, submit written arguments and documentation that the withhold should be removed.  The OMIG will provide a response to the provider no later than 60 days after receiving such written arguments or documentation.  The OMIG will, in its response, inform the provider of its determination to either affirm, reverse or modify the withhold, either in whole or in part.

Any provider that is affected by the withholding of Medicaid payments by the OMIG should consult with its counsel to determine an appropriate response to the OMIG.

The Centers for Medicare & Medicaid Services (“CMS”) will be penalizing more than 2,000 hospitals nationwide starting in October 2012 under the Hospital Readmission Reduction Program (the “Program”).  A number of New York hospitals were included on the list of hospitals to which CMS will apply the readmission penalty to reimbursements, including Beth Israel Medical Center, John T. Mather Memorial Hospital of Port Jefferson, Lenox Hill Hospital, North Shore University Hospital, St. Francis Hospital and Winthrop-University Hospital.  For the full list of affected hospitals, please click here.

 The Program, established pursuant to section 3025 of the Patient Protection and Affordable Care Act, requires CMS to reduce payments made to inpatient prospective payment system (“IPPS”) hospitals with excess readmissions.  The Program only applies to hospitals that are general, acute care, short-term hospitals or hospitals that are paid under section 1814(b)(3) of the Social Security Act.  For purposes of the Program, a “readmission” will occur when a patient is discharged from an IPPS hospital and then re-admitted to the same or another IPPS hospital within a time period specified by the Secretary of Health and Human Services, such as 30 days, from the date of the first discharge.   

 In order to determine whether a hospital is to be penalized under the Program, CMS will compare the hospital’s actual readmission rate to its expected readmission rate with respect to three conditions – heart attacks, heart failure and pneumonia.  Medicare payments will be reduced for those hospitals whose actual readmission rates are determined to be higher than their  expected readmission rates.  On October 1, 2015, the Secretary of Health and Human Services will include four additional conditions in the Program – chronic obstructive pulmonary disease, coronary artery bypass graft, percutaneous transluminal coronary angioplasty and vascular surgery, as well as additional conditions as the Secretary deems appropriate.

 For the first year of the Program, starting in October 2012 (Federal Fiscal Year 2013), Medicare payment reductions will be capped at a maximum of 1% of net inpatient Medicare payments.  The financial penalties will then increase for each following year before being capped at 3% of the base payment in Federal Fiscal Year 2015.

 All hospitals that are implicated in the Program should develop, or continue developing, comprehensive internal programs by which the hospital can measure and reduce its rate of patient readmissions.