Joseph Rugg's Health Law Blog

Constitutionality of Health Care Reform

 Increased Regulatory Scrutiny

 “Doc Fix”

New Alternative Structures in Physician Practices

 Constitutionality

• More than 30 legal challenges have been filed challenging the health care reform law.
• Most cases have focused on the individual mandate to purchase health insurance.
• When the Supreme Court considers this issue in the Spring, some legal scholars believe the court’s four liberal(ish) justices – Justices Ginsberg, Breyer, Sotomayor, and Kagan – will vote to uphold the law.
• But there’s no clear consensus on how the five more conservative justices will rule, especially Justices Kennedy, Alito, and Roberts. 

Increased Regulatory Scrutiny

Health care reform has made health care fraud much more dangerous: 

•  A physician no longer must have direct knowledge that his or her actions constituted a violation to be prosecuted.
• Activities of staff may be more easily attributed to the physician.
• There is new liability for making a false statement or material error on provider applications.
• Keeping an overpayment for longer than 60 days after discovery is now a violation of the False Claims Act.
• Physicians providing diagnostic services like MRI, PET and CT scans must provide information to patients in writing about the other area providers.
• New proposed rule (12/19/11) requires applicable manufacturers of drugs, devices, etc. covered by Medicare, Medicaid, or CHIP to report annually to HHS certain payments/gifts to physicians or teaching hospitals.
• There is a significant increase in targeted health care fraud enforcement efforts by the government’s Health Care Fraud Prevention and Enforcement Action Team (“HEAT”).
• Latest Enforcement Actions:

– 3 Patient Recruiters for Miami HHAs Sentenced to Prison in $25 Million Fraud Scheme (12/14)

–  Philadelphia Doctor Charged With Running Pill Mill (12/14)

–  14 NJ health care providers arrested & charged with taking cash payments for patient referrals (12/12)

• HIPAA Issues

– Since HIPAA was passed, there have been 12,781 cases resolved with corrective action and 484 privacy breach investigations referred to DOJ for possible criminal prosecution.

– Theft or possible loss of laptops and other portable devices – 66% of the material breaches.  Other common violations – improper disposal of PHI (e.g., in trash cans accessible to the public).

– One notorious example:  Massachusetts General Hospital — February 2011 – PHI of 192 patients, including HIV patients, was lost when an employee left files on a subway while commuting to work.  $1M fine plus corrective action.

• Florida law provides similar tools for Florida regulators – imposing possible civil and criminal penalties  (and loss of license) even when no Medicaid or Medicare patients are seen

– Patient Self-Referral Act – like Stark but arguably more expansive, prohibits a physician in Florida from referring patients for the provision of any health services to an entity in which the physician (or a family member) has an investment interest or is an investor unless an exception applies.

– Patient Brokering Law – like the federal anti-kickback statute, prohibits offering, giving, or receiving any form of compensation for the referral of a health care service.

– Ownership and Control of Patient Records – like HIPAA, but more expansive.

– Fee-Splitting – enforced under the Patient Brokering Law and by Professional Boards.

“Doc Fix”

“Doc fix” is a misnomer because it isn’t the docs who are broken. Though they may be if their Medicare reimbursement is actually cut by 27% percent as slated for Jan. 1, 2012.

 The cut is based on the Sustainable Growth Formula (“SGR”), a 1997 payment plan for Medicare. It links physicians’ costs, Medicare enrollment, and the GDP.

Last week, the House passed a payroll tax extension bill which included a two-year “fix” to the formula for Medicare payments to doctors. The Senate doesn’t like the House version and will not pass it.  This week the Senate passed a bipartisan bill which included a “fix,” but the House has rejected it.

Alternative Practice Models

 Health care reform, the “Doc Fix” uncertainty, regulatory concerns, and the economy, are all pushing a realignment of health care providers and providing new incentives for consolidation and other practice models:

• Consolidation of practices – single specialty and multi-specialty
• Hospitals are buying physician practices again (and physicians are selling).
• Physician-Hospital co-management arrangements are being seen in certain hospital departments (e.g., cardiology).
• Joint ventures with hospitals and private companies to set up ASCs
• MSOs buying or managing physician practices, with  physician ownership.
• Electing a non-participating Medicare provider or opting out of Medicare
• Converting to a concierge practice
• Expanding services (e.g., dentists providing Botox)
• There are more practice breakups and departing physicians as a result of financial pressures and differing opinions on how to proceed.