Health Law Perspectives
January 2000
In this issue:
OIG Announces New Safe Harbors Internet Catalyzing Consumer-Driven Changes Child Welfare Provider Liability Issues Emerge Q&A: Employee E-mail Policies OIG Announces New Safe Harbors
The Department of Health and Human Services' Office of Inspector General (OIG) has announced eight new final regulatory "safe harbors", an interim rule on two additional managed care safe harbors and the clarification of existing safe harbors to the federal anti-kickback statute.
The new safe harbors address the following:
Investments in Ambulatory Surgical Centers (ASCs): Protects certain investment interests in four categories of freestanding Medicare-certified ASCs: surgeon-owned ASCs; single-specialty ASCs (e.g., all gastroenterologists); multi-specialty ASCs (e.g., a mix of surgeons and gastroenterologists); and hospital/physician-owned ASCs.
Joint Ventures in Underserved Areas: Permits a higher percentage of physician investors--up to 50 percent--and unlimited revenues from referral source investors.
Practitioner Recruitment in Underserved Areas: Protects recruitment payments made by entities to attract needed physicians and other health care professionals to rural and urban health professional shortage areas (HPSAs), as designated by the Health Resources and Services Administration.
Sales of Physician Practices to Hospitals in Underserved Areas: Protects hospitals in HPSAs that buy and hold the practice of a retiring physician until a new physician can be recruited to replace the retiring one.
Subsidies for Obstetrical Malpractice Insurance in Underserved Areas: Protects a hospital or other en-tity that pays all or part of the malprac-tice insurance premiums for practition-ers engaging in obstetrical practice in HPSAs.
Investments in Group Practices: Protects investments by physicians in their own group practices, if the group practice meets the physician self-referral (Stark) law definition of a group practice. The safe harbor also protects investments in solo practices where the practice is conducted through the solo practitioner's professional corporation or other separate legal entity.
Specialty Referral Arrangements Between Providers: Protects certain arrangements when an individual or entity agrees to refer a patient to another individual or entity for specialty services in return for the party receiving the referral to refer the patient back at a certain time or under certain circumstances.
Cooperative Hospital Services Organizations: Protects cooperative hospital service organizations (CHSOs) that qualify under section 501(e) of the Internal Revenue Code.
The new final rule also clarifies aspects of the original safe harbors for large and small entity investments; space rental; equipment rental; personal services and management contracts; referral services; and discounts. The intent of the clarifications is to make the regulations easier for the industry to understand and apply to particular factual circumstances, according to OIG.
In addition to the final rules, OIG has also released an interim final rule establishing two additional safe harbors for shared-risk arrangements. The first safe harbor protects price reductions between certain defined managed care plans and individuals or entities with whom they contract for the provision of health care items and services, primarily where federal health care programs pay such plans on a capitated basis.
The second safe harbor protects price reductions between certain narrowly defined types of managed care plans and individuals or entities with whom they contract for health care items and services with respect to services reimbursed on a fee-for-service basis by a federal health care program where the arrangement creates substantial risk-sharing.
While the new and clarifying safe harbors provide help in understanding of the OIG's intent, they are still quite narrow and will protect a very limited number of arrangements, according to HLB's analysis. For example, the new physician recruiting exception does not allow specialist physicians to be recruited.
OIG did make broadening changes to the discount safe harbor which, as revised, eliminates the need for fee for service providers to report discounts to the government and also allows them to receive rebates after a purchase, rather than only a discount at the time of the purchase.
While many safe harbor elements are easily applied, they sometimes contain tricky elements, and a case-by-case review is warranted before entering into any arrangement in reliance upon a safe harbor.
For more information, contact Brad Tully at (310) 551-8160 or Bob Lundy at (310) 551-8180.
Internet Catalyzing Consumer-Driven Changes
Armed with increased access to health care information through the Internet, consumers are at the forefront of the evolution of health care. At the same time, health care organizations have an unprecedented opportunity to create efficiencies in administration, and regulators face a barrage of new health care delivery issues, according to health care industry experts participating in a recent seminar on Internet medicine cosponsored by Hooper, Lundy & Bookman and California Health Law Monitor.
Consumers are increasingly driving changes in the health care industry, and the Internet is proving to be a significant catalyst for transformation, said HLB principal Mark Dicks, who organized the seminar. "The industry has undergone radical changes over the last 20 years and the rate of change is accelerating, prompting in a number of significant responses from consumers," Dicks said.
For example, the Internet is serving as both a catalyst to and a means for consumers to self-educate and manage their own care, Dicks said, noting that one of the most significant trends emerging as the Internet expands is the increasing number of patients who know more than their physicians about their medical conditions and modes of treatment.
"This is a very important trend for physicians and institutional providers to examine as it could change the nature of their relationship to the health care consumer in the future," Dicks said, citing a recent survey that found that a significant number of patients would switch to a new physician if they could access their new doctor online.
Dicks said that the best thing a physician can do in this new electronic health care environment is to learn to cooperate with other providers and facilitate the consumers' health care decisions.
"If doctors are smart, they will seek to become facilitators and assume a leadership role in the health care delivery chain," Dicks said. "The advantage of facilitating consumers' decision making is that you are able to keep up with them. There is a huge disadvantage to anyone or any group that is left behind."
Several payors are currently leading the industry in offering opportunities to consumers who use the Internet, Dicks said.
"It's currently a foot race. Whoever gets to consumers first--whether it be payors, physicians or other providers--will forge the bond that will ensure greater longevity as the industry continues to evolve toward an electronic format."
Child Welfare Provider Liability Issues Emerge
The existence of community care providers--especially those providing residential treatment to children--is being threatened by increasingly complex liability issues, according to HLB principal Linda Kollar, who spe-cializes in the representation of behavioral health providers.
"We are seeing a lot of civil litigation aimed at community-based residential treatment facilities and other arenas involving out-of-home care for children," she said, citing a number of contributing factors.
First, Kollar said, neither the state nor the nation have kept pace in the policy arena with changes occurring in the real world. "No national task force has taken on child welfare liability issues since the American Bar Association released a publication on the topic in 1989," she said. "And California is light years behind other states in these child welfare issues because services are delivered county-by-county and there really is no statewide initiative," she said.
"Also, as a result of our current medical environment, children who would have previously been placed in more acute facilities are now becoming the responsibility of community providers," she said.
By handling these increasingly acute cases, community providers are also becoming targets for litigation without the insulation provided to other health providers, Kollar said, noting that yet to be resolved is the issue of whether a cap, such as that provided by MICRA, or insulation from liability that protects other health care providers can be extended to these facilities.
The lack of protection for these providers is threatening the future of their existence, she said.
Kollar was instrumental in establishing the Western Child Welfare Law Center in Pasadena which assists child welfare providers in dealing with the risks of providing services. A nonprofit organization funded by the Casey Family Program of Seattle, the law center offers clients services on legal and accreditation issues and is also developing an advocacy arm.
Kollar noted that the Legislature has begun to look at child welfare services and she said that whether through the courts or the Legislature, the laws governing the liability of these providers must be addressed in the near future in order to ensure their continued viability.
Q&A
Q: Our hospital is presently reviewing its employee e-mail policy. One of the relevant considerations is the possible use of our e-mail correspondence against us in litigation. Can parties who bring suit against the hospital force us to produce e-mail transmissions?
A: Electronic mail, or "e-mail," is considered a "writing" and, as such, is generally discoverable under applicable California law. (See Cal. Code Civ. Pro §§ 2016(b), 2031(a) and Cal. Evid. Code § 250.) Of course, e-mail must satisfy the same requirements as other discoverable items. For example, it must be relevant to the pending action, in the control of the party on whom the demand is made, and not protected by a priv-ilege (e.g. the attorney-client or peer review privilege).
E-mail is different from conventional mail. E-mail conveys information almost instantaneously, and is often used interactively in the workplace. Employees may feel comfortable expressing themselves spontaneously in e-mails without giving regard to the permanent record they may be creating.
An intelligent e-mail policy will reflect an awareness of the most common problem areas for businesses, which are wrongful termination, employment discrimination and sexual harassment suits. E-mail policies should prohibit offensive statements and inappropriate jokes. Further, the company should convey that it is the employee's responsibility to forward inappropriate e-mail they have receive to the human resources department. Any complaints received by the department should be promptly addressed and resolved according to written policies.
Companies should consider the adoption of a system which automatically purges all old, personal or unofficial e-mail communications. However, to avoid the appearance of "spoliation of evidence," only delete e-mails pur-suant to a uniformly enforced company policy and refrain from deleting e-mails that you reasonably suspect may be related to pending or anticipated litigation.
Health care providers have a few e-mail policy concerns which are unique to their field. They must, for example, ensure patient confidentiality and protect against inadvertent waiver of the peer review privilege.
E-mail is a quick, easy and inexpensive means of communicating with coworkers and colleagues. A good e-mail policy can preserve these benefits, while at the same time reduce the risks of costly litigation. For more information on e-mail policy, contact HLB Attorney Jeffrey Hall at (310) 551-8111.
Q&A is a regular feature of Health Law Perspectives. If you have a question you would like addressed in a future column, please send your query to HLB attorney Robert Valencia by e-mail at rvalencia@health-law.com, or send your question to Mr. Valencia at : Hooper, Lundy & Bookman, Inc., 1875 Century Park East, Suite 1600, Los Angeles, CA 90067.
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