Corporate and Business

According to the 2016 Kaiser/HERT Employer Health Benefits Survey, the average annual premium for employer-sponsored family health insurance coverage in 2016 was $18,142 – representing a 20% increase since 2011 and a 58% increase since 2006.  As the cost of healthcare coverage has continued to rise dramatically, patients are seeing a reduced level of personal care.  The average wait to schedule an appointment with a doctor in the United States is 24 days – up 30% since 2014.  Meanwhile, physicians report that they spend, on average, only 13 to 24 minutes with a patient and of that time, approximately 37% of it is spent on EHR and other administrative tasks.

 

In 2010, the Affordable Care Act imposed a requirement that most Americans have insurance coverage.  But it also identified direct primary care as an acceptable option.  Whereas concierge and direct-pay medicine had once been limited to a very wealthy consumer base, it was suddenly poised to hit the mainstream.  And it can be a win-win for both physicians and consumers – physicians have the potential to devote more time to each patient and less time to paperwork, and consumers can pay for faster, more personalized attention from a physician instead of paying the pricey premiums now charged in the market for traditional insurance coverage.

 

But is concierge medicine right for every physician?

 

  1. Do you want to continue to participate in Medicare? If so, you will still be required to bill Medicare for your concierge patients and will not be able to charge Medicare patients extra for Medicare covered services.  Nor can you charge a membership fee (aka an access fee) that includes extra charges for services Medicare usually covers.  (The exception is if you do not accept assignment, in which case you can charge up to 15% more than the Medicare-approved amount for a Medicare covered services.)  If Medicare usually covers a service but will not pay for it, you must still provide the patient with an ABN.  And even if you do choose to opt out of Medicare, give extreme care to following the proper procedures or you could be subjected to substantial penalties.

 

  1. You still need to price services at fair market value. Even if you opt out of Medicare, providing “free” services because they are included in the access fee could run afoul of state anti-kickback laws.  Obtain advice regarding your state laws before setting your contract, and set a fair market value at which you provide each service.

 

  1. Check with your state to make your concierge/direct-pay contract is in compliance. Some states – including New York and New Jersey – have questioned whether these arrangements are deemed to be the practice of insurance but even where they are not, certain provisions of state insurance law could apply to your contract.

 

  1. Termination of existing patients. You can expect attrition by many, if not most, of your existing patients when transitioning from a traditional practice to a concierge or direct-pay model.  You will need to comply with state laws and ethical rules with regard to finding alternate care.

 

  1. Compliance with HIPAA. To the extent you are not participating in insurance or Medicare, you might not be a “covered entity” under HIPAA; however, there are many state privacy and confidentiality laws that you will still be required to comply with.

 

In some instances, transitioning to a concierge or direct-pay business model could be a win-win for both doctors and patients.  However, there are many legal issues that require careful consideration as you set up your practice.  There are many consulting firms that specialize in planning this transition, and a good attorney can help you avoid any pitfalls and ensure compliance with all applicable laws and regulations.

Consumers often seek online reviews of a business on platforms such as Yelp, CitySearch, Yahoo and Google Plus Pages before purchasing products or services. This includes patients seeking online reviews of a physician or other licensed professional before seeking treatment. Unfortunately, a practice known as “Astroturfing” has developed where businesses attempt to create an impression of widespread support for their services or products, where little such support exists. This practice is now occurring in the health care industry.

On December 2, 2016, New York Attorney General Eric T. Schneiderman announced a $100,000 settlement with the urgent care medical service provider MedRite, LLC, d/b/a Medrite Urgent Care (“Medrite”). According to the announcement, Medrite paid thousands of dollars to internet advertising companies and freelance writers for positive reviews on consumer opinion websites. However, Medrite never required that reviewers visit a Medrite facility or experience Medrite’s services, and Medrite never disclosed that the reviewers were paid for the review.

The announcement cites New York Executive Law §63 (12) and the General Business Law §349 and 350 which prohibit misrepresentation and deceptive acts or practices in the conduct of any business. The announcement further cites the FTC “Guidelines on the use of endorsements and testimonials in advertising” (16 CFR Part 255) which state that it is a deceptive practice to solicit endorsement support for a product or service without disclosing material connections between the endorser and the advertiser sponsor. Medrite never disclosed that the reviewers were paid by the review. Under the settlement, Medrite is prohibited from falsely saying that someone promoting its services is an independent party and it cannot pay an endorser unless the payment is disclosed.

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.


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.

The 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.

Claimants have a private right of action against insurers under New York’s Prompt Pay Law, N.Y. Ins. Law 3224-a, according to the Appellate Division in Maimonides Med. Ctr. v. First United Am. Life Ins. Co., decided earlier this month.
Under the Prompt Pay Law, an insurer must pay undisputed claims within 45 days, and within 30 if electronic submission is received.  The insurer must pay any undisputed portion of a disputed claim within 30 days and notify the policyholder, covered person, or healthcare provider of the reason the insurer is not liable.  The insurer may also request additional information to determine its potential liability.  A violation of the Prompt Pay Law obligates the insurer to pay the full amount of the claim plus 12% interest.
Maimonides Medical Center billed First United American Life Insurance Co. over $19 million for medical services, but First United paid only slightly more that $4 million.  Maimonides sued under the Prompt Pay Law, and First United argued that the statute did not provide a private right of action, but could only be enforce by the Superintendent of Insurance.
The Appellate Division, Second Department held that the claimants including health care providers have a private right of action to sue under the Prompt Pay Law.  The parties did not dispute the first two requirements for finding a private right of action, that plaintiff is one of the class for whose particular benefit the statute was enacted, and that recognition of a private right of action would promote the legislative purpose.  As to the third, the Appellate Division held that a private right of action would be fully consistent with the legislative scheme.  The Court found that the Prompt Pay Law “does impose specific duties upon insurers and creates rights in patients and health care providers, and thus militates in favor of the recognition of an implied private right of action to enforce such rights.”  The Court noted that the legislative history of the statute reflected its purpose in protecting health care providers and patients from late payment, and not as a mechanism for preventing harm to the public in general.
This decision gives health care providers and patients a powerful tool against recalcitrant insurers.  First United will likely seek to bring this issue before the Court of Appeals, and we may see a definitive ruling from New York’s highest court on this important issue.

Farrell Fritz partner Lou Vlahos recently issued an important advisory report addressing the New York Nonprofit Revitalization Act of 2013 (the “Act”). Nonprofit corporations in New York will need to comply with many of the Act’s provisions by July 1, 2014.

Major new requirements include:

-the adoption of conflict of interest and whistleblower policies;

-creation of an audit committee composed of independent directors; and 

-adherence to guidelines regarding related party transactions.  

Many of these provisions turn best governance practices into statutory mandates.

Nonprofits are advised to consult with legal counsel familiar with the Act’s requirements.  New policies may need to be developed, and corporate bylaws may need to be amended, in order to comply with the new law.

Alternatives to the hospital emergency room and primary care doctor’s office are opening in strip malls and other retail locations throughout the country. New York State is no exception. In an effort to provide oversight for these walk-in clinics, New York’s Public Health and Health Planning Council (PHHPC) has recommended regulations for these facilities.

The recommendations would place walk-in clinics into one of four categories:
1. Limited Services Clinics (Retail Clinics);
2. Urgent Care;
3. Hospital-Sponsored Freestanding Emergency Departments; and
4. Non-Hospital Surgery- Ambulatory Surgery Centers and Office-Based Surgery.

The recommendations for each category of walk-in clinic are summarized below:

Limited Services Clinics (Retail Clinics)

• The name, marketing materials and all signage would be required to include the term “Limited Services Clinic.”
• Services would be limited to episodic care related to minor ailments and immunizations.
• Surgical, dental, physical rehabilitation, mental health, substance abuse and birth center services would not be permitted.
• No dispensing of controlled substances would be permitted.
• No services could be administered to children 24 months of age or younger.
• No childhood immunizations to patients under 18 years of age (except influenza) would be permitted.
• Accreditation by a national organization approved by the NYS Department of Health (DOH) would be required.
• The clinic would be required to have a Medical Director at the corporate level who is licensed to practice medicine in New York.

Urgent Care Providers

• Urgent Care would be limited to treatment of acute episodic illness or minor traumas.
• Services required would include:

  • unscheduled, walk-in visits typically with extended hours on weekends and weekdays;
  • Ex-ray and EKG;
  • Laceration repair; and
  • Crash cart supplies and medications

• The term “Urgent Care” would be required in the name and in all signage at the provider site and in all marketing materials. Other commercial terms could still be used in the provider’s name, but would need to include “Urgent Care” (e.g. “FastMed Urgent Care”).
• The word “Emergency” or its variations would not be permitted for urgent care providers unless licensed by New York State as an emergency department.
• Non-article 28 Urgent Care would require accreditation. No CON review required.
• Article 28 Urgent Care not otherwise accredited would be surveyed by DOH.
• Existing Article 28 Hospital or D&TC providers wanting to provide Urgent Care would require a limited review of their operating certificate.
• Private physician practices affiliated with an Article 28 may provide urgent care if they are accredited or become an Article 28 through CON review.
• Establishment of a new Article 28 Hospital or D&TC to provide urgent care services would require CON review.

Freestanding Emergency Departments

• Hospital-sponsored off-campus “emergency department” would be defined as an emergency department that is hospital-owned and geographically removed from the hospital campus.
• PHHPC recommends that the sponsored off-campus emergency department use the name of the Hospital that owns the facility followed by “Satellite Emergency Department”.
• The facility would be subject to the same standards as a hospital-based emergency department regarding training of providers, staffing, and the array of services provided at the facility.
• Establishment of an off-campus emergency department would require full CON review.
• Accreditation would be required.

Non-Hospital Surgery

• No changes are recommended regarding ambulatory surgery.
• New and existing office-based surgery practices would require registration with DOH.
• All physician practices performing procedures utilizing more than minimal sedation would require accreditation and the provision of adverse event reports.

Limited Services Clinics, Urgent Care providers and Hospital-Sponsored Freestanding Emergency Departments would be required to utilize electronic medical records.  Further, these facilities would be required to provide a list of primary care providers to any patient indicating that they do not have a primary care provider. These clinics would also be required to recommend that the patient schedule an initial or annual appointment with a primary care provider and develop policies and procedures to identify and limit repeat encounters with patients.

          In March 2013, the Second Circuit certified to the New York Court of Appeals the issue of whether a medical corporation may be liable for the unauthorized disclosure of medical information, when the employee responsible for the breach was not a physician and was acting outside the scope of her employment (see post).  In Doe v. Guthrie, decided last week, the New York Court of Appeals answered that question in the negative.

The plaintiff in Doe v. Guthrie went to a healthcare clinic to be treated for a sexually transmitted disease.  A nurse at the clinic was the sister-in-law of the plaintiff’s girlfriend, and sent six text messages to her about plaintiff’s medical condition.  The plaintiff learned of the messages and complained to the clinic, which fired the nurse.  The clinic advised plaintiff that his confidential information had been improperly disclosed, and that disciplinary action had been taken.

Plaintiff sued, alleging among other claims the common law breach of fiduciary duty to maintain the confidentiality of personal health information.  The Second Circuit, which determined that the nurse’s actions were neither foreseeable to defendants not within the scope of her employment, certified the question whether there was a cause of action for breach of fiduciary duty of confidentiality without respondeat superior liability.

The New York Court of Appeals stated that a medical corporation is generally not liable for an employee’s tort outside the scope of employment, and refused to impose absolute liability on a medical corporation for an employee’s dissemination of a patient’s confidential medical information.  “A medical corporation’s duty of safekeeping a patient’s confidential medical information is limited to those risks that are reasonably foreseeable and to actions within the scope of employment.”

The Court counseled, however, that a medical corporation can still be liable for its own conduct, including negligent hiring or supervision, failing to establish adequate policies and procedures, and failing to properly train employees in safeguarding confidential information.  This potential liability incentivizes medical corporations to properly safeguard medical information.

The dissent would have recognized a claim against a medical corporation for acts of employees outside the scope of employment.  This view would have unfairly expanded the liability of medical providers, imposing absolute liability for any release of medical information.  The Court’s holding recognizes an appropriate balance, declining to find liability against a provider for employee acts outside the scope of employment, while at the same time recognizing that a provider can be liable for acts within the scope of employment as well as for the provider’s own negligence in maintaining confidential information.

While the medical provider in Doe v. Guthrie was not liable, the decision highlights the need for medical providers to have stringent standards governing the confidentiality of medical information, and to ensure that these standards are clearly communicated to all employees.

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.