Ober|Kaler Health Law Alert - Special Supplement - Winter 2001

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In this Issue

HLA Special Insert - Bush Administration Opens Up HIPAA Privacy Standards to Further Comments

From the Chair

Final HIPAA Privacy Standards

Preemption of State Laws

Overview of the Privacy Standards

Use or Disclosure

Minimum Necessary Uses or Disclosures

Hybrid and Affiliated Entities

De-Identification of Protected Health Information

Disclosures to Business Associates

Notice of Privacy Practices

Other Requirements

HLA Special Insert - Bush Administration Opens Up HIPAA Privacy Standards to Further Comments

In a notice published in the February 28, 2001 Federal Register, the Department of Health and Human Services (HHS) announced an additional comment period on the final rule establishing the HIPAA Privacy Standards. 66 Fed. Reg. 12,378. It is impossible to predict the extent of changes that may result, but HHS indicates that it has received "approximately a thousand inquiries" about the impact and operation of the Privacy Standards on various industry sectors, many of which express "substantial confusion" over how the standards will work and "great concern" over the complexity and workability of the rule. Most importantly, HHS states that "the significance of the Privacy Rule for the health care industry and for society as a whole, and the substantial nature of some concerns that have been raised have led us to conclude that an additional comment period ... is warranted." At the very least, HHS seems to be clearly signaling an open mind as to the need to make compliance less burdensome.

Comments received by March 30, 2001 will be considered.

Separately, HHS "corrected" the effective date for the Privacy Standards, delaying it to April 14, 2001 as a result of an administrative oversight in the rulemaking process. The new compliance date is April 14, 2003. 66 Fed. Reg. 12,433.

From The Chair

Although I have repeated time and again that developments affecting our health law clients come fast and furious, the latest flurry borders on the ridiculous. You should have received our most recent Health Law Alert within the past couple of weeks. Since that publication went to the printer, there have been three major developments worthy of special notice to our clients and friends. The first, HCFA’s publication of the final HIPAA privacy rules, is the subject of this HLA Special Supplement. As in the past, we have attempted not only to report on this development, but to place it in context and to provide guidance so that our clients will understand its import and its potential impact on their operations.

The second development relates to the advisory opinion authority of the OIG and of HCFA. As part of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act, Congress removed the sunset provision from the statutory authority, thus, in effect, making the authority permanent.

On January 5, 2001, the OIG announced that it would immediately begin accepting new requests for advisory opinions. As of this writing, there has been no indication from HCFA as to whether it will begin receiving new requests for advisory opinions under the Stark self-referral law, although we assume that a significant number of requests filed under the original authority have gone unanswered by HCFA.

Finally, on January 4, 2001, the Secretary issued final regulations under Stark II. Actually, the regulations were published in final form with a 60-day comment period and address only a portion of the regulations required under Stark II. This package, referenced as Phase I, addresses the statutory prohibition, significant definitions, and exceptions relating to both ownership and compensation, i.e., physician services and in-office ancillary services. Of particular note, the regulation specifically clarifies when an item or service will be considered a designated health service, including a list of specific CPT codes for a number of the designated health services. The regulation also significantly revises the proposed definition of a group practice.

Further, the regulation creates a number of new exceptions, not contained in the statute, to address academic medical centers, benefits provided to members of a medical staff, and fair market value compensation paid to physicians for their services. In perhaps the most confusing section of the final regulation, the Secretary defines "indirect compensation" and creates an "indirect compensation exception."

Almost certainly you have begun to receive summaries of the final regulation from commercial publications and other law firms. I have been working with representatives from a number of law firms to develop a detailed briefing document for the American Health Lawyers Association. That document is now available. I believe that it will be the most useful summary you will receive and I highly recommend it for your reading.

Instead of creating just one more long summary document, and in keeping with the Health Law Alert’s premise of providing context and guidance, we will begin posting a "Q&A" feature on the Ober|Kaler web page to address specific questions raised by, and in some cases answered by, the January 4th final regulation. We believe that this approach will provide you with the most current information and guidance without cluttering your desk with another lengthy dissertation on the contents of the final regulation.

I believe that the Secretary made an effort in the final regulations to clarify confusion raised by the proposed regulations and to provide the industry with additional flexibility in its efforts to comply with the Stark II law. This effort is no more evident than in the definition of group practice and in the creation of new exceptions. However, not all of our questions were answered and not all of the confusion has been resolved. Additionally, we must await the publication of Phase II before we are provided with additional guidance regarding the other compensation exceptions contained in the Stark law.

As we develop the content and format of our Stark Q&As, we look to our clients and friends for insight into those issues of greatest interest and concern. If you have a question you would like us to address, please email it to Michele Vicente at mvicente@ober.com. To provide ongoing information and guidance to our clients, the Stark Q&As will be updated on at least a bi-weekly basis — so if you have a question that has not been addressed, please do not hesitate to send it to us.

Sandy Teplitzky, Department Chair