On November 1, 2017, the Food and Drug Administration (FDA) published a release concerning its issuance of warning letters to four companies concerning the marketing of products containing cannabidiol (CBD).

CBD is a cannabinoid found in hemp which lacks the psychoactive ingredient THC. Hemp and its derivatives are legal to import to the US and ship from state to state. According to a 2013 review published in the British Journal of Clinical Pharmacology, CBD may help in reducing nausea and vomiting; seizures; psychosis disorders; inflammatory disorders; tumor and cancer cells; and anxiety and depression disorders. CBD can be marketed in a variety of product types, such as oil drops, capsules, and topical lotions. CBD oil is legal in New York State.

The four companies that received warning letters from the FDA — Greenroads Health, Natural Alchemist, That’s Natural! Marketing and Consulting, and Stanley Brothers Social Enterprises LLC — are accused of illegally selling CBD products online that claim to prevent, diagnose, treat, or cure cancer without evidence to support these outcomes. The FDA’s warning letters further provide that the four companies distributed the products with unsubstantiated claims regarding preventing, reversing or curing cancer; killing/inhibiting cancer cells or tumors; or other similar anti-cancer claims. Some of the products were also marketed as an alternative or additional treatment for Alzheimer’s and other serious diseases.

Examples of claims made by these companies include:

  • “CBD makes cancer cells commit ‘suicide’ without killing other cells”
  • “…considering the lack of risks associated with CBD it is an attractive alternative or addition to anyone’s treatment for Alzheimer’s disease.”
  • “Adding CBD oil as part of your daily Alzheimer’s medicine routine has a good chance at delaying the progression of the disease…”

“Substances that contain components of marijuana will be treated like any other products that make unproven claims to shrink cancer tumors. We don’t let companies market products that deliberately prey on sick people with baseless claims that their substance can shrink or cure cancer and we’re not going to look the other way on enforcing these principles when it comes to marijuana-containing products,” said FDA Commissioner Scott Gottlieb, M.D. “There are a growing number of effective therapies for many cancers. When people are allowed to illegally market agents that deliver no established benefit they may steer patients away from products that have proven, anti-tumor effects that could extend lives.”

Each company is being offered fifteen (15) working days after receipt of the warning letter to notify the FDA in writing of the specific steps that it has taken to correct the violations. The FDA letters warn that the company’s failure to correct the violations promptly may result in legal action, including product seizure and injunction.

False Claims Act whistleblowers expose themselves to significant risks by coming forward and asserting claims of fraud against the government. Often, the whistleblowers, called relators under the False Claims Act, would prefer to maintain their anonymity for personal or professional reasons, but their options to do so are limited.

A False Claims Act case is initially filed under seal, and remains under seal while the government investigates. However, once the government either intervenes in the action or declines to intervene, the seal is lifted, and the False Claims Act complaint is publicly filed. The complaint, and the identity of the relator, become public knowledge, even if the relator does not intend to go forward with the case.

In United States ex rel. Nash v. UCB, Inc., SDNY District Judge Thomas Griesa addressed a relator’s multi-pronged effort to remain unknown. The relator alleged that his former employer, UCB, Inc., had defrauded the federal government out of millions of dollars in Medicaid funds. The Government declined to intervene, however, and the relator intended to not proceed and to dismiss the action. The relator feared that his current employer might retaliate against him when it became known that he had filed an FCA case against his former employer. The relator sought to permanently maintain a seal on all documents in the case, or alternatively, to allow use of the pseudonym “John Doe” and to remove any information from the complaint that could reveal his identity.

The Court first noted the “firmly rooted” presumption of public access to judicial documents, which applies to pleadings such as a complaint. As to relator’s fear of retaliation, the Court did not find this risk to outweigh the presumption of public access to judicial documents. Moreover, the Court pointed to the False Claims Act retaliation provision, 31 USC § 3730(h), which protects a relator from discrimination or retaliation based on acts taken under the False Claims Act. The Court determined that this provision would protect against what it considered a “speculative fear” of employment retaliation. The Court denied the application to keep the case under seal.

Next, relator sought to have the complaint filed under a “John Doe” pseudonym, with the elimination of any identifying information. Federal Rule of Civil Procedure 10(a), however, states that “The title of the complaint must name all the parties.” Courts have discretion to allow a pseudonym in special circumstances, where the need for anonymity outweighs prejudice to other parties and the public interest, but the bar is high. Factors courts consider include:

  • Highly sensitive and personal matters
  • Risk of retaliatory physical or mental harm to the party or innocent non-parties
  • Likely severity of alleged harms
  • Particular vulnerability of party to possible harms of disclosure
  • Whether challenge is to Government or private actions
  • Possible mitigation of prejudice by the Court

Judge Griesa found that the relator’s articulated need for anonymity was based on “attenuated and speculative risks of harm,” particularly where the concern was not with the former employer that the relator had sued, but with the current employer that he had not. The Court declined to allow a pseudonym, stating that the public “has a right to know who is using their courts.”

The Court did allow relator’s final request, that references to his current employer be redacted from the filed version of the complaint. The Court found the weight of presumption of public access to the identity of relator’s current employer to be low. Moreover, redactions would not affect the public interest, as the substance of the fraud allegations would be clear from the unredacted portions of the complaint.

Once a case is filed under the False Claims Act, the relator loses control over remaining anonymous. A resort to yet another lawsuit if there is retaliation may provide cold comfort, but the Courts are very reluctant to permit a relator to remain anonymous, even where the government has declined and the case will be dismissed.  Balancing this risk is one of the many considerations for relator and relator’s counsel in commencing a False Claims Act case.

The New York State Department of Labor (the “DOL”) issued an emergency regulation clarifying its minimum-wage rules regarding home care employees. The emergency regulation provides that sleep and meal times for home care aides who work shifts of 24 hours or more are not counted as hours worked. Recently, there has been a ringing dissonance between the DOL and decisions set forth by the New York State Appellate Divisions, First and Second Departments, regarding whether home care workers should be paid for an entire 24-hour shift, including sleep and meal time. In fact, the DOL expressly cited the fact that the emergency regulation is being promulgated in direct reaction to decisions issued by the New York State Appellate Divisions. For reference, the decisions triggering the emergency regulation are: Moreno v. Future Care Health Servs., Inc., 2017 N.Y. App. Div. LEXIS 6462 (2d Dept Sept. 13, 2017); (2d Dep’t Sept. 13, 2017); Andreyeyeva v. New York Health Care, Inc., 2017 N.Y. App. Div. LEXIS 6408 (2d Dep’t Sept. 13, 2017); and Tokhtaman v. Human Care, LLC, 149 A.D.3d 476 (1st Dep’t Apr. 11, 2017).

The above-referenced decisions effectively flipped the New York home care industry on its head, each holding, in sum, that home care workers were entitled to pay for all 24 hours worked, including sleep and meal time. Enter the DOL, on October 5, 2017, who quickly put any remaining ambiguity to rest once and for all stating “that hours worked may exclude meal periods and sleep times for home care aides who work shifts of 24 hours or more”. The DOL reasoned that “[t]his regulation is needed to preserve the status quo, prevent the collapse of the homecare industry, and avoid institutionalizing patients who could be cared for at home, in the face of recent decisions by the State Appellate divisions that treat meal periods and sleep time [as hours worked]”.

The emergency regulation is expected to return the home care industry back to normalcy and prevent home care agencies from ceasing to provide “vital, lifesaving care” to thousands of New Yorkers who depend on it. The DOL explained that this “emergency adoption amends the relevant regulations to codify the Commissioner’s longstanding and consistent interpretations that such meal periods and sleep times do not constitute hours worked for purposes of minimum wage and overtime requirements”. And so, the longstanding rule about sleeping on the job still stands: you won’t get paid for it in New York.

Note:  Special thanks to our law clerk, Nicholas G. Moneta, for his assistance in drafting this blog post.

In our previous post, Medical Marijuana 103: Patient and Practitioner Regulations in New York State, we discussed that patients certified for medical marijuana use can designate up to two caregivers. Caregivers can assist patients who are unable to pick up medical marijuana at a dispensing facility or are unable to administer medical marijuana to themselves properly.

Previously the Medical Marijuana Program only allowed for designated caregivers to be natural persons. On October 5, 2017, however, the New York State Department of Health (“DOH”) issued emergency regulations that expand the definition of caregiver to allow certain facilities to be designated caregivers. By expanding the definition in this way, patients who are located in or reside at certain facilities can designate their facility as their caregiver, thus making it easier for such patients to obtain medical marijuana.

The new regulations define a designated caregiver as either a natural person or a facility. The term “facility” is further defined as, among others, hospitals, adult day care facilities, community mental health residences, and private and public schools. In addition, each division, department, component, floor or other unit of a parent facility may be designated as a “facility” for purposes of being designated a caregiver.

Just like natural persons, facilities will need to register with the DOH in order to be designated a caregiver for purposes of the Medical Marijuana Program. Once registered with the DOH facilities will be authorized to lawfully possess, acquire, deliver, transfer, transport and/or administer medical marijuana to certified patients residing in, or attending, that facility.

The DOH considered alternatives prior to issuing the emergency regulations, stating:

The Department could have chosen to keep the status quo and not allow patients to designate facilities as designated caregivers. The Department could have also allowed certified patients to designate an individual within the facility to be a caregiver. However, these options are not viable since patients in facilities may be cared for by multiple staff members in the course of a day. Certified patients have severe debilitating or life-threatening conditions and the regulatory amendments would help to prevent adverse events associated with abrupt discontinuation of a treatment alternative that may be providing relief for certified patients in these facilities.”

The regulations were published in the New York State Register on October 25, 2017. The DOH will accept comments from the public for a minimum of 45 days following the date of publication. After publication in the Register and receipt of public comment, the agency may either adopt, revise or withdraw the proposal. This change is just one of the latest revisions implemented by the DOH in an attempt to strengthen and expand New York’s struggling Medical Marijuana Program.

Few, if any, in the medical industry are unfamiliar with the federal Anti-Kickback Statute (“AKS”).  Under AKS, those giving or receiving compensation for referrals for items or services reimbursed by the federal healthcare programs are subject to criminal prosecution.  The statute is intended to prevent exploitation of the federal healthcare system, avoid unnecessary inflation of program costs and encourage fair competition in the industry.

AKS prohibits, among other things, the knowing and willful payment or receipt of any form of compensation to induce or reward referrals involving any item or service payable by federal healthcare programs.  “Federal healthcare programs” include more than just Medicare and Medicaid – “any plan or program providing health care benefits, whether directly through insurance or otherwise, that is funded directly, in whole or part, by the United States government (other than the Federal Employees Health Benefits Program), or any state health care program” is included.  This means that remuneration for referrals in connection with items and services that are reimbursable under TRICARE, the Veterans Administration, Federal Employees’ Compensation Act, and block grant programs are all subject to prosecution under AKS.

 

Where items or services are not reimbursable by a federal healthcare program, providers and referring parties are not subject to AKS prosecution.  However, due to an emerging trend in prosecution, the absence of reimbursement from federal healthcare programs should no longer leave providers and referral sources with a sense of security that they cannot be prosecuted for kickback arrangements.

 

Prosecutors are increasingly bringing charges against payers and recipients of remuneration for referrals in the medical arena under the Travel Act.  The Travel Act criminalizes the use of the United States mail and interstate or foreign travel for the purpose of engaging in certain specified criminal acts.  The Travel Act typically enforces two categories of state laws – laws prohibiting commercial bribery (i.e. corrupt dealings to secure an advantage over business competitors) and laws addressing illegal remuneration, including specific provisions regarding improper payments in connection with referral for services.

 

In two very recent high profile cases, prosecutors brought charges against those allegedly involved in kickback schemes under the both AKS and the Travel Act – Biodiagnostic Laboratory Services in New Jersey and Forest Park Medical Center in Texas.  Both cases have resulted in several plea bargains, yet both have charges under AKS and the Travel Act that are still pending.  While no court has directly ruled on the merits of prosecuting kickback schemes for medical services and items under the Travel Act, it is noteworthy that, in the Forest Park Medical Center case, the charges under the Travel Act survived a motion to dismiss at the district court level just last month.

 

All parties involved in referral arrangements for medical items or services should be on heightened alert as a result of this development.  Whereas AKS can only be used to prosecute parties to a kickback arrangement where federal healthcare program funds are at issue, the use of the Travel Act may broaden prosecutors’ reach to the private payor sector, even where federal healthcare programs are not involved.

Trypanophobia—the fear of needles—played a significant role in a case brought against Rite Aid Pharmacy under the Americans with Disabilities Act (ADA). In Stevens v. Rite Aid Corp., the Second Circuit overturned a jury verdict awarding substantial damages to a Rite Aid pharmacist who was terminated after he said he could not perform immunization injections because of a needle phobia.

In 2011, Rite Aid and other large pharmacy chains started requiring pharmacists to perform immunizations to fill an unmet need for vaccinations in the healthcare market. Rite Aid revised its pharmacist job description to include immunizations as one of the essential duties and responsibilities for pharmacists and required that each pharmacist hold a valid immunization permit.

Pharmacist Christopher Stevens asserted that his needle phobia was a disability under the ADA and sought a reasonable accommodation so that he would not have to perform immunizations.  Rite Aid responded that the ADA did not apply to trypanophobia, no reasonable accommodation was required, and he would be fired if he did not complete immunization training. When Stevens advised Rite Aid he could not complete the training, he was terminated for refusing to perform customer immunizations, an essential function of his job.

The Second Circuit first noted that, under the ADA, an employee must be qualified to perform the essential functions of his job, with or without reasonable accommodation. Even viewing all evidence in the light most favorable to Stevens, the Court held that immunization injections were an essential job requirement for Rite Aid pharmacists. The company made a business decision to require pharmacists to perform immunizations, revised its job description to require immunization certification and licensure, and included immunizations in the list of “essential duties and responsibilities” for Rite Aid pharmacists. The Court found jury sympathy for Stevens’s phobia to be understandable, but held that “his inability to perform an essential function of his job as a pharmacist is the only conclusion that could be drawn from the evidence.”

The Court next determined that Stevens had not established that Rite Aid could have provided a reasonable accommodation, emphasizing that the issue was whether a reasonable accommodation would have allowed Stevens to perform the essential function of immunization, not whether he could perform his other non-immunization duties as a pharmacist.

The Second Circuit reversed the judgment in favor of Stevens, holding that performing immunization injections was an essential job requirement, and Stevens presented no evidence of a reasonable accommodation that would have allowed him to do them.

The Stevens case highlights two important points under the ADA. An employer’s written job description including the essential duties and responsibilities of a position can be strong evidence to support an ADA argument concerning the essential functions of the job. Moreover, a reasonable accommodation is directed to allowing the employee to perform the essential functions of the job, not simply finding other things that the employee can do.

This blog post is the last in a series of articles discussing the current state of the law in New York regarding medical marijuana. To read the previous post in the series, Medical Marijuana 105: Marijuana in the Workplace, click here.

Despite its potential, New York’s Medical Marijuana Program is off to a slow start. The Program’s struggle is mostly due to the fact that it is one of the most restrictive medical marijuana programs in the country. For example, medical marijuana offerings are limited to mostly liquids, oils and capsules and only state-certified marijuana patients are allowed to enter the limited number of dispensaries. In September 2017, the NYS Department of Health (“DOH”) announced that it would be issuing new regulations in an effort to bolster the Program. Under the new regulations, patients certified for medical marijuana use will have access to more types of products including lotions, tablets, lozenges, patches and more. In addition, prospective patients and practitioners interested in the medical marijuana program will be able to enter a dispensing facility to speak directly with representatives of registered organizations, learn about products, and get information about the medical marijuana program. The regulations will also allow doctors to take a shorter, two-hour program to become eligible to certify patients for medical marijuana use as opposed to the four-hour program that was originally required.

Since the Program’s inception the DOH has also attempted to expand the reach of the Program by adding new qualifying conditions for medical marijuana use. The addition of chronic pain as a qualifying condition, for example, led to a surge of patients seeking to become certified for medical marijuana use. The DOH announced in August 2017 that the number of certified patients increased by 10,744 (72%) since the addition of chronic pain in late March of this year.

Most recently efforts have been made to allow medical marijuana to be used to treat post-traumatic stress disorder (“PTSD”). Veterans groups in particular have urged Governor Cuomo to allow those with PTSD to use medical marijuana. According to the Department of Veterans Affairs, about eight million adults suffer from PTSD in any given year, including tens of thousands of Afghanistan and Iraq veterans. Somewhere between 11% and 20% of those vets will suffer from it each year. Over 23 states allow medical marijuana use to treat PTSD, including Connecticut, New Jersey and Pennsylvania. It seems likely, especially given New York’s penchant for growing the Program, that Governor Cuomo will pass the bill adding PTSD as a qualifying condition for medical marijuana use.

The DOH is hoping that all of these changes will bolster the Program. That would be welcome news to New York’s registered organizations which are authorized to manufacture and dispense of medical marijuana in New York State. You may recall from our previous article in this series that on August 1, 2017, the DOH announced the licensure of five new companies to act as registered organizations. In April 2017, however, knowing that the DOH was planning to take such action, the New York Medical Cannabis Industry Association sued New York State on behalf of New York’s original registered organizations. The lawsuit aims to stop the DOH from issuing the new licenses and alleges that increasing the number of registered organizations from five to ten will harm the industry because there is not enough demand to meet supply. “The program is still in its infancy, and patient demand is currently too low to support an expansion of the supply market for medical marijuana,” the lawsuit states. “As it is, all five of [the original registered organizations] are sustaining tremendous operating losses, after having made millions of dollars in initial investments.” The five newly-awarded registered organizations filed a motion to dismiss the lawsuit but the Court denied the motion last week. We will continue to monitor the litigation and post updates to the New York Health Law Blog as developments occur.

Thank you for being a part of this series discussing the current state of the law in New York regarding medical marijuana. The medical marijuana field is constantly changing as the program in New York grows and evolves. To stay up to date on all of the developments we invite you to subscribe to the Farrell Fritz New York Health Law Blog.

In the wake of some of the worst storms our country has ever faced, as seen in the devastation caused by Hurricane Harvey, in Texas, Hurricane Irma, in Florida, and now Hurricane Maria, in Puerto Rico and the U.S. Virgin Islands, it is important to understand some of the actions the United States federal government can take to assist victims of Mother Nature. How broad is the federal government’s authority? Who is that authority bestowed upon? Well, one such mechanism is the declaration of a Public Health Emergency by the Secretary of Health and Human Services (“HHS”) under Section 319 of the Public Health Service Act (“PHSA”).

Under Section 319 of the PHSA, the Secretary of HHS is empowered to declare a public health emergency, after consulting with public health officials, when the public is faced with either a (1) disease or disorder; or (2) public health emergency exists, including, but not limited to, an epidemic or bioterrorist attack.  Upon making such a declaration, the Secretary of HHS is authorized and empowered to “take such action as may be appropriate to respond to the public health emergency, including making grants, providing awards for expenses, and entering into contracts and conducting and supporting investigations into the cause, treatment, or prevention of a disease or disorder.” The Secretary’s expanded authority is not perpetual and only remains in effect for 90 days, or until the emergency ceases to exist if sooner than 90 days, with the option of a one-time renewal for an additional 90 days that can be made on the basis of new or the same facts underlying the initial declaration. However, once a declaration, and any renewal, if applicable, is made, the Secretary of HHS must inform the Congress, in writing, within 48 hours.

Practically speaking, what actions can the HHS Secretary take? Some discretionary actions include, but are not limited to: (1) waiving certain prescription and dispensing requirements under the Federal Food, Drug, and Cosmetic Act; (2) waiving or modifying particular requirements under Medicare, Medicaid, the Children’s Health Insurance Program and the Health Insurance Portability and Accountability Act; and (3) appointing temporary personnel for up to one year. These actions, in addition to others, help bring emergency relief to those in need.

On September 19, 2017, now former Secretary of HHS, Tom Price, declared a Public Health Emergency under Section 319 of the PHSA for the benefit of Puerto Rico and the U.S. Virgin Islands following the devastation caused by Hurricane Maria, and stated, in his press release, that “[d]eclaring a public health emergency for Puerto Rico and the U.S. Virgin Islands will aid in the department’s response capabilities – particularly as it relates to ensuring that individuals and families in those territories with Medicare, Medicaid and the Children’s Health Insurance Program (CHIP) maintain access to care.”  While this declaration is limited in scope, the actions authorized thereunder will help start the long recovery for the people who reside in Puerto Rico and the U.S. Virgin Islands.

Please kindly consider how you can get involved to help the people who have been negatively impacted by the devastation caused by Hurricanes Harvey, Irma and Maria.

This blog post is the fifth in a series of articles discussing the current state of the law in New York regarding medical marijuana. To read the latest post in the series, Medical Marijuana 104: Responsibilities of Health Insurers, click here.

As you may recall from our first post in this series, medical marijuana in New York was legalized through the passage of the New York Compassionate Care Act (“CCA”) in 2014. The CCA also created new anti-discrimination protections for medical marijuana users. Namely, the CCA provides that patients who are certified for medical marijuana use shall not be subject to “disciplinary action by a business” for exercising their rights to use medical marijuana. The CCA further provides that being a certified patient is the equivalent of having a disability for purposes of the New York State Human Rights Law (“NYSHRL”).

Together the CCA and NYSHRL provide that New York employers with four or more employees are prohibited from terminating or refusing to employ an individual on the basis of his/her status as a certified medical marijuana patient. In addition, employers must provide reasonable accommodations to certified patients as a result of his or her disability. Accordingly, an employer may be subject to a discrimination claim if it fires or disciplines an employee for lawfully consuming marijuana under the CCA.

The CCA does contain two exceptions to the above general rules. First, the CCA does “not bar the enforcement of [an employer’s] policy prohibiting an employee from performing his or her employment duties while impaired by a controlled substance.” Second, the Act does “not require any person or entity to do any act that would put the person or entity in violation of federal law or cause it to lose a federal contract or funding.”

The Americans with Disabilities Act (“ADA”), which became law in 1990, is a civil rights law that prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public. The purpose of the law is to make sure that people with disabilities have the same rights and opportunities as everyone else.

Marijuana in any form and for any use is illegal at the federal level under the Controlled Substances Act (“CSA”). The ADA provides that a person’s illegal use of drugs is grounds for denying employment or firing from employment. The ADA defines “illegal use of drugs” as follows: “the use of drugs, the possession or distribution of which is unlawful under the Controlled Substances Act. Such term does not include the use of a drug taken under supervision by a licensed health care professional, or other uses authorized by the Controlled Substances Act or other provisions of Federal law.”

For the most parts court have, to date, agreed that, because the CSA does not allow medicinal use of marijuana, a medical professional cannot legally, as a matter of federal law, supervise medical marijuana use so as to bring an employee under the ADA’s protection. See, e.g., James v. City of Costa Mesa, 2010 U.S. Dist. LEXIS 53009, at *8-11 (C.D. Cal. Apr. 30, 2010); Barber v. Gonzales, 2005 U.S. Dist. LEXIS 37411, at *2-5 (E.D. Wash. July 1, 2005); Johnson v. Columbia Falls Aluminum Co., 2009 WL 865308, at *4 (Mont. Mar. 31, 2009).

Case law in this area is developing and uncertainty remains as state laws clash with federal requirements.

In 2015, for example, the Colorado Supreme Court unanimously held that employers may still terminate employees who use medical marijuana – even though medical marijuana use is specifically authorized by the Colorado Constitution and Colorado law protects employees’ lawful off-duty conduct.  The Court held that marijuana use (whether for medicinal or recreational use) remains unlawful under federal law and therefore medical marijuana use cannot be deemed “lawful” under the state’s off-duty conduct law.

On the other hand, the Massachusetts Supreme Judicial Court provided that the plaintiff, a patient who qualified for the medical use of marijuana and had been terminated from her employment because she tested positive for marijuana, could seek a civil remedy against her employer through claims of handicap discrimination in violation of Massachusetts laws.

Similarly, the Superior Court of Rhode Island in 2017 held that an employer’s enforcement of its neutral drug testing policy to deny employment to an applicant because she held a medical marijuana card violated the anti-discrimination provisions of the state medical marijuana law.

In New York, the Taxi & Limousine Commission (“TLC”) filed a petition seeking the revocation of the respondent taxi driver’s TLC Driver License because the driver tested positive for marijuana. New York City’s Office of Administrative Trials & Hearings (“OATH”) disagreed and recommended that the petition be dismissed, finding that revocation solely because of the driver’s status as a certified medical marijuana patient would violate New York City and State laws.  The TLC adopted the OATH decision.

In our next post we’re going to continue our review of important parties that play a role in the medical marijuana industry. To be sure not to miss the article when it comes out we invite you to subscribe to the Farrell Fritz New York Health Law Blog.

In our July 10, 2017 post, Concierge Medicine – Is it for you?, we cautioned that Medicare compliance concerns do not fall away when moving to a concierge or direct-pay model.  HHS has determined that concierge-style agreements are permitted as long as Medicare requirements are not violated.  Unless a physician has opted out of Medicare, the predominant requirement is that an access or membership fee cannot be charged to a Medicare patient for services that are already covered by Medicare.  But how does a concierge physician know where to draw the line?  The relevant authorities have issued very limited guidance in this area.

In March 2004, an OIG Alert was issued reminding Medicare participating providers that they may not charge Medicare patients fees for services already covered by Medicare.  OIG used, as an example, a case involving physician’s charge of $600 for a “Personal Health Care Medical Care Contract” that covered, among other things, coordination of care with other providers, a comprehensive assessment and plan for optimum health, and extra time spent on patient care.  Because some of these services were already reimbursable by Medicare, the physician was found to be in violation of his assignment agreement and was subjected to civil money penalties.  The physician entered into a settlement with OIG and was required to stop offering these contracts.

In 2007, OIG settled another case involving a physician engaged in a concierge-style practice.  There, the physician, who also had not opted out of Medicar, asked his patients to enter into a contract under which the patients paid an annual fee. Under the contract, the patient was to be provided with an annual comprehensive physical examination, coordination of referrals and expedited referrals, if medically necessary, and other service amenities.  The physician was similarly found to have violated the Civil Monetary Penalties Law by receiving additional payment for Medicare-covered services and agreed to pay $106,600 to resolve his liability.

As demonstrated by these settlements, violations of a physician’s assignment agreement results in substantial penalties and exclusion from Medicare and other Federal health care programs.  It would behoove a concierge physician to tailor contracts offered to Medicare patients.  Fees charged under such contracts should relate only to noncovered services and amenities.  For example, fees could relate to additional screenings by the concierge physician that are not covered by Medicare or amenities such as private waiting rooms.

According to the GAO’s 2005 Report on Concierge Care Characteristics and Considerations for Medicare, HHS OIG has not issued more detailed guidance on concierge care because its role is to carry out enforcement, not to make policy.  However, physicians with specific concerns regarding the structure of their concierge care agreements or practices may request an advisory opinion from HHS addressing their concerns.  Advisory opinions are legally binding on HHS and the party so long as the arrangement is consistent with the facts provided when seeking the opinion.

Next week, look for the release of Medical Marijuana 105, the fifth post in a series of posts discussing the current state of law in New York regarding medical marijuana.  To read the latest post in the series, Medical Marijuana 104:  Responsibilities of Health Insurers, click here.