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Unlike most other types of employment arrangements involving physicians, physicians acting as a medical director are compensated purely for the performance of administrative services related to patient care services. That is not to say that a medical director does not play a crucial role in the operation of a health care provider. In fact, the New York State Department of Health recommends, or even requires, medical directors be put in place for certain types of providers, and federal law similarly requires medical directors for certain types of services and facilities.

 

Because medical directors are not performing medical services, many physicians feel comfortable entering into medical directorship with little or no written documentation. However, physicians should proceed with caution when undertaking a medical director role. In particular, medical director arrangements are often scrutinized by the Office of the Inspector General (“OIG”) of the U.S. Department of Health and Human Services to determine whether the arrangement is, in reality, being used as a vehicle to provide remuneration to physicians for patient referrals. For this reason, where the contracting provider participates with federal payors and the physician may refer patients to the contracting provider, the physician should enter into a written medical director agreement that is structured to fall within an exception (or safe harbor) to the federal Stark and anti-kickback statutes.

Most often, the exception used under both Stark and anti-kickback laws will be the “personal services” safe harbor. Although slightly different under each statute, some key elements in complying with the “personal services” safe harbor are as follows:

 

  • Written Agreement: The agreement between the physician and the provider should be in writing, with a term of not less than one year. [1]
  • Duties: The agreement should provide for all of the services which the physician is expected to perform.[2]
  • Commercially Reasonable: The services provided by the medical director should be necessary to the provider and not exceed the amount of services required by the provider. This analysis is focused not only on whether the contracting physician’s services in and of themselves are necessary, but also whether there are other medical directors and whether numerous medical directors are performing duplicative services.[3]
  • Compensation: [4]
    • Fair Market Value – The physician should be paid fair market value for the services provided. To this end, it might be helpful to obtain a fair market value analysis, taking into account the geographic location, the experience of the physician, the certification of the physician, and they type of facility. While having such an analysis is not an absolute defense in an investigation, it is useful to demonstrate that fair market value was analyzed and that the remuneration falls within what was believed to be an acceptable range.
    • Hourly Rate – It is recommended that the medical director be paid on an hourly basis, with such hourly rate being paid at the fair market value rate.
    • Cap on Compensation – it is also recommended that the aggregate compensation a physician can earn for his documented hours be capped, to further ensure reasonableness.[5]
  • Documentation: The physician should keep daily time logs of services performed and the time spent on each service. This shows that the physician is performing real work, for which he or she is being paid fair market value, and also can be used to demonstrate that the services being performed are necessary for the facility.

While it is always best to consult with an experienced professional before entering into medical director arrangement, adhering to the criteria set forth above can offer protection for both the physician and the facility.

[1] 42 CFR 1001.952(d)(1): “The agency agreement is set out in writing and signed by the parties.” 42 CFR 1001.952(d)(4): “The term of the agreement is for not less than one year.” 42 U.S.C. 1395nn(e)(3)(A)(i): “the arrangement is set out in writing, signed by the parties, and specifies the services covered by the arrangement.” 42 U.S.C. 1395nn(e)(3)(A)(iv): “the term of the arrangement is for at least 1 year.”

[2] 42 CFR 1001.952(d)(2): “The agency agreement covers all of the services the agent provides to the principal for the term of the agreement and specifies the services to be provided by the agent.” 42 U.S.C. 1395nn(e)(3)(A)(ii): “the arrangement covers all of the services to be provided by the physician.”

[3] 42 U.S.C. 1395nn(e)(3)(A)(iii): “the aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement.”

[4] 42 CFR 1001.952(d)(5): “The aggregate compensation paid to the agent over the term of the agreement is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs.” 42 U.S.C. 1395nn(e)(3)(A)(v): “the compensation to be paid over the term of the arrangement is set in advance, does not exceed fair market value, and . . . is not determined in a manner that takes into account the volume or value of any referrals of other business generated between the parties.”

[5] In OIG Advisory Opinion No. 01-17 (2001), the OIG said that even though total aggregate compensation over the contract has not be set in advance, the totality of facts and circumstances in the specific circumstances at hand yield a conclusion that there is no significant increase in risk of fraud and abuse – however, this finding was likely due to the presence of a monthly payment cap. In 2003, in Advisory Opinion 03-8, the OIG found that a proposed arrangement does not qualify for protection under the safe harbor because the aggregate compensation paid under a management agreement would not be set in advance.

While there has been discussion of the potential proliferation of telemedicine for quite some time, telemedicine is finally positioned to take off thanks to the latest federal budget. The Bipartisan Budget Act of 2018 incorporated the text of the CHRONIC Care Act,[1] which facilitates Medicare reimbursement for telemedicine services by – among other things – allowing Medicare accountable care organizations to build broader telehealth benefits into Medicare Advantage plans and expand the use of virtual care for stroke and dialysis patients. While many providers are eager to take the leap into telemedicine, there are still some things to look out for:

Not all states have caught up – while the vast a majority of states have enacted legislation mandating private insurers provide some degree of parity of insurance coverage between in-person and telehealth services, at least a dozen states have enacted no such legislation at all.

Beware of Stark, Anti-Kickback and private inurement violations, as telemedicine often involves complex arrangements between physicians and healthcare facilities. To that end, make sure the terms of any compensation arrangement are commercially reasonable and/or consistent with fair market value. And be vigilant when evaluating market data, as pricing may vary widely due to participants coming into a market at low cost for strategic reasons. Market data may also be impacted by accessibility to healthcare services in certain localities. The Office of Inspector General of the Department of Health and Human Services (OIG) has issued Advisory Opinions related to telemedicine compensation arrangements that should be considered when reviewing such arrangements. Additionally, in April of this year OIG issued a report highlighting instances of improper billing for telemedicine services.

One area on which practitioners have particularly set their sights is telemedicine for opioid addiction treatment. However, unlike the popular telemedicine practices of dialysis and stroke treatment, substance abuse treatment via telemedicine has its own set of constraints.

  • Providers of Medication-Assisted Treatment to reduce opioid use disorders have restrictions on the number of patients they may treat at any given time, with a limitation of 30 patients for their first certification year and the opportunity to increase to 100 in the subsequent year upon fulfilment of certain criteria.
  • Additionally, restrictions on a provider’s ability to prescribe certain controlled substances used to treat opioid use disorder over telemedicine exist under both state and federal laws.

In sum, while the CHRONIC Care Act facilitates further foray into the expanding world of telemedicine, there are many pitfalls to be aware of in both ensuring compliance with applicable laws and ensuring the ability to set up a profitable business.  Always consult with an experienced professional before expanding your practice.

[1] The Creating High-Quality Results and Outcomes Necessary to Improve Chronic Care Act.

Spurred in large part by the changing landscape of medicine, more and more medical professionals are seeking to become a part of something bigger. Often, they are under the misassumption that they can set up and run their practice like any other business – until New York State’s strong prohibition of the corporate practice of medicine comes knocking on their door.

 

According to a 1998 report from a meeting of the New York State Board of Regents, “[p]rofessional services can be offered only by a licensed person or an organization otherwise authorized by law.” Under New York State law, this means that professional services can only be offered within a professional service corporation (“PC”) or a professional limited liability company (“PLLC”). Article 15 of the New York Business Corporation Law permits the formation of a professional service corporation only if all shareholders (1) are licensees of one profession (Section 1503) and (2) practice only such profession (Section 1506). The prohibition of the corporate practice of medicine extends beyond medical doctors to include an array of licensed professionals, such as dentists, dental hygienists, optometrists, chiropractors, podiatrists, pharmacy, nursing, ophthalmic dispensing, speech-language pathology, audiology, respiratory therapy (and technology), occupational therapists (and assistants) and physical therapists (and assistants).

One area that is a common pitfall for professionals is the sharing of profits or “fee-splitting.” The prohibition of the corporate practice of medicine, codified in 8 CRR-NY 29.1, prevents professionals from directly or indirectly sharing profits or splitting fees with non-licensed professionals.   Most often this comes up in an arrangement where the PC or PLLC employs a management services organization to run its company in exchange for a percentage of revenue.[1] Such an arrangement runs afoul of the prohibition and, in order to comply, all services that the PC or PLLC receives should be paid at fair market value.

 

A violation of the prohibition on the corporate practice of medicine can result in prosecution, fines and penalties. As articulated by Eric T. Schneiderman, Attorney General of the State of New York, in In the Matter of Aspen Dental Management, Inc. (Assurance No: 15-103), the theory underlying the prohibition is that “medical and dental decisions should be made by licensed providers using their best clinical judgment, and should not be influenced by management companies’ shared interest in potential profits.” In Aspen Dental, the management organization – which was not a professional organization – was required to restructure so that it no longer received percentage of gross profit, no longer employed clinical staff, and no longer had discretion over how the individual offices were run. Moreover, Aspen Dental was required to pay a $450,000 civil penalty and pay an independent monitor to oversee the implementation of the settlement for three years.

 

 

It remains to be seen what, if any, changes are made to the prohibition on the corporate practice of medicine in New York as the world shifts to value based reimbursement; however, for the time being professionals should remain cautious, not only when structuring their corporate entities but also when engaging with outside service providers.

 

[1] Note also that for some providers, fee splitting may result in STARK and anti-kickback violations, among others.

As discussed in our January 5th blog post, the Cole Memorandum was rescinded by Attorney General Jeff Sessions on January 4th of this year.   The Cole Memorandum had served to formally announce the DOJ’s policy that it would not interfere with medicinal marijuana legalized under state law, despite marijuana’s continued illegality for all purposes under federal law. With the rescission of the Cole Memorandum, federal prosecutors are now free to determine to what extent they will enforce federal law against the state-legalized medical marijuana industry.

However, the effect of the change in policy reaches further than to just the cultivators, manufacturers and distributors of medicinal marijuana products. Pursuant to the Controlled Substances Act, not only is it illegal to manufacture, distribute or dispense marijuana for any purpose – but it is also illegal to aid someone in doing so. Therefore, the DOJ is now free to prosecute anyone “aiding” in a medical marijuana business, for example, giving legal advice.

Probably of greater practical concern to attorneys than criminal prosecution is the tremendous amount of uncertainty as to how the change in policy will impact the ethics surrounding the representation of medical marijuana clients. Most, if not all, states have ethical rules that specifically prohibit a lawyer from assisting a client in illegal conduct. These rules do not distinguish between conduct that is illegal under federal law but expressly permitted under state law.

New York Rule of Professional Conduct 1.2 provides that “[a] lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is illegal or fraudulent, except that the lawyer may discuss the legal consequences of any proposed course of conduct with a client.” While it is generally undisputed that an attorney may advise a client about what state law provides – for example, filing requirements – an attorney arguably would be violating the Rules of Professional Conduct by, for example, assisting a client in negotiating a marijuana distribution contract.

Ethics boards in some states, including New York, have used the Cole Memorandum as the decisive factor to conclude that providing legal advice related to legalized medical marijuana businesses does not violate ethics rules. To a lesser extent, some states, including New York, have also relied on the theory that state ethics rules are intended to promote state policy – and by approval of the state medicinal marijuana law, a state has expressed its state policy on the matter, yielding no ethical violation.

It remains to be seen what impact the rescission of the Cole Memorandum will have on the ethics opinions of various states that are based heavily upon the prior policy of federal non-enforcement. For now, we can still find comfort in the Rohrabacher-Blumenauer amendment to the federal budget, which currently continues in effect until February 8 and maintains that federal funds (including those allocated to the DOJ) cannot be used to prevent states from “implementing their own state laws that authorize the use, distribution, possession or cultivation of medical marijuana.”

While marijuana is legal for medical and, in some instances recreational, use under the laws of 29 states plus the District of Columbia, under federal law it remains illegal. Yet, for the last several years, this lingering federal illegality has not seemed to chill entry into the industry – thanks in large part to the Cole Memorandum. On the heels of the January 4 rescission of the Cole Memorandum, as well as two additional memos related to marijuana enforcement policy, all of that might change.

A federal statute, the Controlled Substances Act (the “CSA”) makes it illegal to manufacture, distribute or dispense marijuana for any purpose. Under the CSA, marijuana is a Schedule 1 drug, meaning that under federal law marijuana is believed to have no currently accepted medical use and a high potential for abuse. Moreover, the Schedule 1 classification extends to all elements of the cannabis plant, including extracts and derivatives thereof. No exceptions exist in the CSA for medicinal use or use in states where marijuana has been legalized.

However, in 2013, the U.S. Department of Justice (“DOJ”) issued the Cole Memorandum, which states that its general policy is not to interfere with the medicinal use of marijuana under state law. The Memorandum set forth certain principles underpinning DOJ enforcement of the CSA with respect to marijuana. Although the DOJ said it would continue to prosecute persons or organizations whose conduct interferes with any one or more of these principles, regardless of state law, the memorandum went on to declare that where state law effectively mitigates the concerns of the DOJ, the Department will refrain from prosecution.

Since the change in administration in 2017, there has been an increasing sensitivity to a shift in DOJ policy on enforcing the CSA against “legalized” marijuana businesses. Attorney General Jeff Sessions has publicly discussed his harsh stance on marijuana and the potential for increasing federal enforcement of the federal law regarding marijuana – despite what state law provides. In fact, in May 2017 he sent a letter to certain political leaders advising of his desire to do so.

Sessions has now gone a step further and rescinded the Cole Memorandum, leaving federal prosecutors free to determine to what extent they will enforce the CSA against state-legalized marijuana businesses. A copy of the release can be found here and a copy of the memorandum can be found here.

While likelihood of prosecution will vary from jurisdiction to jurisdiction based upon the position of the particular U.S. Attorney in charge of the district, it is clear that the rescission will have a broader impact than just the potential of prosecution of those involved in the industry. As discussed in our November 27, 2017 post, Cannabis Business? The Impact of Federal Law Might reach Further than You Think, the CSA and federal illegality of marijuana has a far-reaching impact on those setting up or running marijuana businesses that are legal under state law. It is anticipated that the rescission of the Cole Memorandum will, among other things, further impair the ability of those in the marijuana business to obtain leases, financing, and perhaps even legal assistance.

State and federal representatives of several states have already publicized their positions on the January 4 memorandum, with many being unfavorable. It would not be surprising if political leaders mobilized quickly to protect the cannabis industry, which has already injected over $20 billion into the U.S. economy and is expected to increase that number to about $70 billion by 2021. In the short term, those in the industry can continue to find some comfort in the Rohrabacher-Blumenauer amendment to the federal budget, which continues in effect until January 19 and maintains that federal funds cannot be used to prevent states from “implementing their own state laws that authorize the use, distribution, possession or cultivation of medical marijuana.” In the meantime, we will all be waiting with baited breath to see the responses of state and federal leaders.

Everyone involved, or thinking about becoming involved, in the cannabis business is aware of the conflict between the laws of those states legalizing marijuana and the Controlled Substance Act (the “CSA”).  The CSA is a federal law making it illegal to manufacture, distribute or dispense a controlled substance.  For purposes of the CSA, marijuana is classified as a Schedule 1 controlled substance – making it illegal under federal law to be engaged in the marijuana business regardless of what state law provides.

The obvious consequence of this conflict of laws is the potential for federal prosecution for engaging in the marijuana business.  However, the not-so-obvious practical consequences reach further than you might think.  For example,

  • Taxes. Section 280E of the Internal Revenue Code, originally targeted for illegal drug dealers, prohibits cannabis businesses from deducting typical business expenses, such as advertising and rent.
  • Leases.  Most leases have covenants against “illegal activity,” which enables landlords to evict marijuana business tenants.  Moreover, many landlords are unwilling to rent to marijuana businesses, despite their legality under state law, for fear of losing their property in a federal civil asset forfeiture action.
  • Banking. In 2014 the Department of Treasury issued guidance for financial institutions that want to do business with the marijuana industry.  Up until that time, banks were reluctant to deal with the marijuana business due to the Financial Crimes Enforcement Network (FinCEN), which requires banks to investigate their customers and to refrain from negligently or knowingly doing business with bad actors.  Today, banks are safe if they follow some pretty onerous rules.  Many banks choose not do business with the industry rather than comply with the diligence and monitoring requirements set forth by the Department of Treasury.
  • Commercial loans. Commercial loans are difficult to obtain without providing collateral; however, in a marijuana business, banks are not allowed to seize or possess the primary asset of a marijuana business – the marijuana – under federal law. Often a marijuana business will not have many other assets that are valuable enough to act as security for financing.
  • Trademarks. Because marijuana is illegal under the CSA, and because the United States Patent and Trademark Office will not register a mark if the applicant cannot show lawful use of the mark in commerce, it is nearly impossible to secure federal registration of a marijuana-related mark (although marks for ancillary products might be obtained).
  • Federal Water. Many areas in the western United States are served by the Federal Bureau of Reclamation, which manages water and power to farmers.  The Bureau has advised that it will report to the Department of Justice any marijuana farmers who use federal water to irrigate their crops.
  • Bankruptcy. At least two courts have held that marijuana businesses cannot take advantage of federal bankruptcy laws.  The rationale is that, because marijuana is illegal under federal law, granting relief under another provision of federal law for the same activity would be “administering the fruits and instrumentalities of Federal criminal activity.”
  • Access to Federal Courts. If you enter into a contract with a marijuana business and need to sue in federal court, will you be able to?  This question has yet to be answered; however, if the prohibition against bankruptcy relief serves as guidance, the outcome is likely not favorable to marijuana businesses.

It is clear that federal law creates many obstacles to establishing and effectively managing a marijuana business.  Those in the industry should plan carefully and seek legal advice as to how to best mitigate the risks arising from the conflict between state and federal laws.

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.

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 Medicare, 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.

In follow-up to our prior blog post, Concierge Medicine – Is it for you?, we recognize that while a concierge or direct-pay practice might be a good choice for a physician or physician practice group, patients do not necessarily feel the same way.  When patients hear that a medical practice is a “concierge” or “direct-pay” practice, they often think of prohibitively high out of pocket costs.  One way for a concierge or direct-pay practice to be more enticing to patients is to structure its billing methods so patients may be able to obtain reimbursement from their health savings account (HSA) or flexible spending account (FSA) for some of the associated costs.  Generally, access fees will not be reimbursable through either a HSA or FSA.  But costs incurred for qualified medical services actually rendered to the patient may be.  Here are some quick rules of thumb for when HSA and/or FSA reimbursement may be applicable to cover such costs:

 

Fees for Qualified Medical Services:  Any fees charged for qualified medical care (generally defined under the Internal Revenue Code to include the diagnosis, cure, mitigation, treatment or prevention of disease) are generally reimbursable under a HSA or FSA, to the extent not reimbursed by the patient’s insurance.

 

Access Fees or Subscription Fees:  Fees related solely to having access to a physician will not be reimbursable under either a HSA or FSA.  This is because they are not fees for qualified medical services, but rather are more akin to insurance premiums (which are also not reimbursable under a HSA or FSA).  Such non-reimbursable fees would include fees for admission as a patient, monthly retainer fees, fees for a reduced wait time, fees for 24 hour access to a physician, or any other fees not directly related to the rendering of medical services.

 

Prepaid Fees for Qualified Medical Services:  If an access fee or subscription fee includes a prepaid fee for a qualified medical service (for example, the annual fee includes the cost of a comprehensive physical examination), any costs attributable to that medical service that are not reimbursed by insurance may be reimbursable under a HSA or FSA, but not until such time as the service is actually rendered to the patient.

 

In order for patients to be able to take advantage of reimbursement from their HSA or FSA, they must have appropriate supporting documentation for the qualified medical service.  Documentation should include the patient’s name, the date of service, the type of service, and the fair market value charge attributable to just the medical service portion of the patient’s bill.

 

In sum, concierge and direct-pay practices can work for physicians on account of the upfront fees paid by patients.  However, if such fees include prepayment for medical services, it will not only encourage patients to take advantage of preventative care but may also enable them to recoup part of their upfront costs from their HSA or FSA once such services have been rendered.

 

Next week, look for the release of Medical Marijuana 102, a follow-up blog post to Veronique Urban’s Medical Marijuana 101:  The State of the Law in NY.  This will be the second blog post in a series of articles discussing the current state of the law in New York regarding medical marijuana.

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.