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Health Law Alert
Fall/Winter 2007
From the Chair
You will recall that, as we went to print with our last Health Law Alert, CMS was in the process of issuing the final Stark Phase III regulations. Earlier in the summer, CMS issued a number of proposed amendments to the Stark regulations as part of the 2008 proposed Physician Fee Schedule regulations. This issue of the Health Law Alert includes our summaries of both of these very important developments.
This issue also includes a number of developments which, believe it or not, had nothing to do with the Stark law. This includes an interesting discussion of the antitrust implications of the ongoing dialogue regarding specialty hospitals and other physician-owned facilities. We also report on important things to know about the IRS's new Form 990. With this issue, we also take the liberty of touting two victories won by Ober|Kaler on behalf of our clients — one in the long-fought cardiac device arena, the other for FTC approval of a joint contracting program. You can expect to receive an HLA Special Supplement with our summaries of the OIG advisory opinions issued in 2007, including the first such opinion to provide guidance on hospital payment to physicians for on-call and emergency department coverage.
Click to continue...Stark II, Phase III Final Regulation: Changing the Compliance Landscape
By: Julie E. Kass and William T. Mathias
CMS continues to change the compliance landscape facing pathologists, radiologists, and other physicians as well as hospitals, laboratories, and imaging providers. On September 5, 2007, CMS published the longawaited Phase III final regulation under the Stark physician self-referral law. 72 Fed. Reg. 51,012 (Sept. 5, 2007). The changes are different from (although somewhat related to) the changes in the proposed 2008 Medicare Physician Fee Schedule (MPFS). 72 Fed. Reg. 38,122 (July 12, 2007). While the MPFS changes were only proposed, the Phase III changes are final and become effective December 4, 2007.
Click to continue...2008 Physician Fee Schedule Looks at Physician Self-referral
By: Julie E. Kass and William T. Mathias
Pathologists and other physician specialists as well as hospitals, laboratories, and imaging providers could face significant new regulatory compliance hurdles beginning January 1st if certain rules under the proposed 2008 Medicare Physician Fee Schedule (MPFS) relating to the Stark physician self-referral law and reassignment and anti-markup provision are finalized. 72 Fed. Reg. 38,122 (July 12, 2007). According to CMS, these policy changes are necessary to close loopholes that make Medicare vulnerable to abuse. If implemented, these policy changes would require the renegotiation of thousands of existing arrangements - many of which were carefully structured to comply with CMS's previous guidance. Comments on the proposed 2008 MPFS are due by August 31st. The final 2008 MPFS is due to be published sometime this fall. Any policy changes included in the final 2008 MPFS are expected to be effective January 1, 2008.
Click to continue...Seven Things You Need to Know About the New Form 990
By: Thomas K. Hyatt
In June of this year, the IRS released a discussion draft of its redesigned Form 990. An information return filed by most tax-exempt organizations, the Form 990 is the annual report of exempt organizations with respect to their activities and finances. The use of the form dates back to the 1940’s; however, the existing Form 990 is inadequate to illuminate the inner workings of exempt organizations as desired by the IRS, the public, and exempt organizations themselves. Accordingly, the IRS has launched an extensive effort to redesign the Form 990 to capture relevant information about the modern tax-exempt organization. Make no mistake about it, this redesign is revolutionary. It is intended to provide greater transparency, promote compliance, and lessen the burden on the filing organization. (Two out of three ain’t bad .…) Here are seven things you should know now about the new Form 990 and how it will affect you.
Click to continue...FTC Approves Joint Contracting in Clinical Integration Program
By: Christi J. Braun*
In its September 17, 2007, Advisory Opinion to the Greater Rochester Independent Practice Association, Inc. (GRIPA), the Federal Trade Commission's (FTC) staff concluded that GRIPA's proposed clinical integration program, which included joint negotiation of contracts, would result in substantial integration of its approximately 575 primary and specialty care physicians and generate significant efficiencies through quality improvements and cost savings. Concluding that GRIPA's collective negotiation of payer contract terms would be reasonably necessary to achieving these efficiencies and that GRIPA likely would be unable to exercise market power, the FTC staff stated that it would not recommend a challenge to GRIPA's clinical integration program.
Click to continue...General Hospitals' Responses to Specialty Facilities: Competition or Exclusion? (Part 1)
The conflict between traditional general acute-care inpatient hospitals (general hospitals or hospitals) and competing facilities owned by physicians on the hospital's medical staff (POFs) continues to expand. Notwithstanding CMS's prior moratorium on opening new single- or limited-specialty hospitals (SSHs), these wholly or partially physician-owned facilities have proliferated and thrived. In addition, other types of free-standing outpatient facilities such as diagnostic imaging centers and ambulatory surgery centers (ASCs) were unaffected by the moratorium in the first place.
Click to continue...2nd Circuit Rejects HHS's Investigational Device Coverage Policy
By: Leonard C. Homer
The U.S. Court of Appeals for the Second Circuit found that the Secretary of HHS adopted a Medicare Manual provision in a manner that was arbitrary and capricious in Yale-New Haven Hospital v. Leavitt, 470 F.3d 71. Ober|Kaler obtained this decision as part of collateral litigation challenging the basis for a qui tam action, United States v. The Baylor University Medical Center, 469 F.3d 263, brought against 132 hospitals that had been conducting clinical trials of investigational cardiac devices and billing for their services, notwithstanding a 1986 Medicare Hospital Manual provision that precluded coverage for services involving the use of investigational medical devices. That case was filed under seal and remained so from 1995 until the government intervened in 2002, when both the qui tam litigation (in which Yale was a defendant) and Yale's collateral challenge to the 1986 manual provision that was the basis for the qui tam action proceeded.
Click to continue...Billing for Unused Biologicals
In Medicare Claims Processing Transmittal 1248 (May 25, 2007), CMS states that, beginning July 2007, Medicare may be billed for discarded biologicals, such as vaccines, in the same way that Medicare is billed for unused drugs. Thus, in a case where a physician must discard a single-use package or vial of a drug or biological, Medicare will pay for the amount administered and the amount discarded up to the indicated amount on the vial or package label.
Click to continue...OIG/AHLA's Third Resource Guide Focuses on Health Care Quality
By: Jillian Wilson
The OIG has issued the third in a series of publications that it has co-authored with the American Health Lawyers Association (AHLA) as educational resources for health care boards of directors. Corporate Responsibility and Health Care Quality: A Resource for Health Care Boards of Directors (Sept. 1, 2007). The resource focuses on a board of directors’ fiduciary duty to oversee the quality of health care and patient safety in its institution. The first two publications addressed the unique fiduciary responsibilities of directors of health care organizations in the corporate compliance context. See Corporate Responsibility and Corporate Compliance: A Resource for Health Care Boards of Directors (April 2003); An Integrated Approach to Corporate Compliance: A Resource for Health Care Organization Boards of Directors (July 2004). These three educational resource documents comprise part of the OIG’s quality of care initiative, which, in addition to these resource documents, involves a series of roundtable discussions with industry leaders hosted by the OIG. The first roundtable discussion, co-sponsored by the Health Care Compliance Association (HCCA), will take place in December 2007. It will focus on the Board’s role in overseeing the quality of care provided in long-term care institutions.
Click to continue...Home Care and Child Care Providers May Unionize in Maryland
By: Matthew W. Green, Jr.
Maryland Governor Martin O'Malley recently signed Executive Orders that permit independent home health care providers (IHHCPs) and family child care providers (FCCPs) to unionize. IHHCPs are defined in the Executive Order as "individuals who contract directly with the State through Medicaid-funded programs and who do not work for a private agency." The Order respecting FCCPs makes clear that such workers are not state employees.
Click to continue...Recent SEC Developments
The Securities and Exchange Commission recently adopted amendments to its rules that will be of interest to public companies as well as to privately held companies that issue securities. First, the SEC adopted amendments to Rule 144 under the Securities Act of 1933 that will allow non-affiliates of SEC reporting companies that are current in their reporting obligations to resell their restricted securities after holding such securities for six months (without complying with any of the other Rule 144 requirements) instead of one year, and allow non-affiliates of both reporting and non-reporting companies to freely resell their restricted securities after a one-year holding period (without complying with any of the Rule 144 requirements other than the holding period), as opposed to the current two-year requirement. Affiliates of SEC reporting companies will also be able to resell their restricted securities, in compliance with the rule's current public information, volume and manner of sale, and Form 144 requirements, after a six-month, as opposed to one-year, holding period. The amendments further increase the Form 144 filing threshold from 500 shares or $10,000 to 5,000 shares or $50,000. The proposed tolling provision that would have suspended the Rule 144 holding period while the security holder was engaged in certain hedging transactions was not adopted. The SEC further adopted amendments that eliminate the presumptive underwriter provisions of Rule 145, except with respect to shell companies, and revise the resale provisions of Rule 145(d). The amendments to Rules 144 and 145 will be effective 60 days after their publication in the Federal Register.
Click to continue...DOJ Speaks to Wage Status of Radiology Technologists
By: Neil E. Duke
Should Radiology Technologists (RTs) be classified as overtime-exempt or nonexempt employees by their health care industry employers? That was the question recently posed to the United States Department of Labor (DOL), and the response is certain to clear up ambiguities that previously existed. Before discussing the DOL's answer, please keep these facts in mind regarding the Fair Labor Standards Act (FLSA).
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