Corporate and Business

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 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.

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.

On August 15, 2017, the Secretary of Health and Human Services, Tom Price, issued a press release reporting that almost $105 million dollars will be bestowed upon 1,333 health centers across the United States, including its territories; and Washington D.C. Secretary Price stated “Americans deserve a healthcare system that’s affordable, accessible, of the highest quality, with ample choices, driven by world-leading innovations, and responsive to the needs of the individual patient. Supporting health centers across the country helps achieve that mission.”

According to the Health Resources & Services Administration, also known as HRSA, federally qualified health centers (FQHC) “are community-based and patient-directed organizations that deliver comprehensive, culturally competent, high-quality primary health care services.”  The main function of a health center is to provide health services to underprivileged patients where affordable healthcare is either lacking or nonexistent. Services include, but are not limited to, mental health support, substance abuse aid, dental health and many other services. While there are numerous requirements for an organization to qualify as a FQHC, one interesting qualification is that the organization must elect members of the community to serve on its governing board—ensuring that the community has a role when it comes to its own healthcare.

Even though the concept of a health center may be foreign to many in the United States, health centers play an important role in our society.  HRSA has concluded that, based on data from its Uniform Data System, almost 26 million individuals (which equals 1 in every 12 people living in the United States) depended on a health center for health services in 2016, including more than 330,000 veterans. The study also found that 1 in every 3 people living in poverty relied on a health center in 2016.

Living in a politically toxic climate on the topic of healthcare and its reforms, as we currently do today, brings in a breath of fresh air to see our tax dollars being put to good use. Health centers have served as a unique and beneficial service for the underserved and underprivileged for the last 50 years, and the federal government’s continued support appears to be unwavering.

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.

Effective March 1, 2017, the New York State Department of Financial Services promulgated regulations to help protect against cybercriminals and their efforts to exploit sensitive electronic data. These cybersecurity regulations apply to all individuals and entities that “operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under the Banking Law, the Insurance Law or the Financial Services Law”, with a few exceptions.  This will undoubtedly result in insurance companies and other related healthcare entities, which hold sensitive patient health information, beefing up their internal and external rules and policies.  New York’s proactive stance should be taken with the utmost seriousness seeing that there are more than 400 cyberattacks each day over the internet, or almost 3 every minute.

The United States Congress has enacted a similar law to protect health information, the Health Insurance Portability and Accountability Act (“HIPAA”). However, because HIPAA was enacted and modified years prior to cybersecurity becoming a prominent threat to our society, HIPAA does not provide as much protection to patients’ electronic data as the New York regulations do.  HIPAA does provide important guidelines and safeguards to ensure the integrity and confidentiality of protected health information, but does not elaborate on many of the issues presented in New York’s cybersecurity regulations.

New York’s cybersecurity regulations require all “Covered Entities”, as defined in the regulations, to maintain a cybersecurity program to guard the confidentiality of Nonpublic Information, which includes a risk assessment and a comprehensive cybersecurity policy.  In addition, Covered Entities are now required to designate an individual to serve as the Chief Information Security Officer (“CISO”).  The CISO is tasked with overseeing, implementing and enforcing the Covered Entity’s cybersecurity policy, and is required to report, in writing and at least annually, to the Covered Entity’s Board of Directors or similar governing body.  The CISO’s report must include, as applicable, information on “(1) the confidentiality of Nonpublic Information and the integrity and security of the Covered Entity’s Information Systems; (2) the Covered Entity’s cybersecurity policies and procedures; (3) material cybersecurity risks to the Covered Entity; (4) overall effectiveness of the Covered Entity’s cybersecurity program; and (5) material Cybersecurity Events involving the Covered Entity during the time period addressed by the report.”

Compliance with the cybersecurity regulations will be transitioned over a two-year period with full compliance required by March 1, 2019.

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.