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June 2006

Texas Case Provides Sobering Medical Staff Lessons for California

A recent Texas federal district court ruling may have significant impact on medical staff peer review and investigations in California hospitals and other peer review organizations, according to HLB medical staff specialists. (Poliner v. Texas Health Systems, No. 3-00-CV-1007-P (N.D.Tex March 27, 2006))

“This case indeed provides some sobering lessons for California hospitals, independent medical staffs and larger medical groups,” said HLB Attorney Laurence Getzoff. “We believe, however, that California peer reviewentities can largely avoid the types of liability found in Poliner. ”

HLB attorney Cary W. Miller added that, “medical staffs, hospitals and others can avoid the painful outcome of Poliner by carefully following the medical staff peer review bylaws and procedures that are fully in accord with California’s court decisions and statutory rules established in California Business & Professions Code §§805 and 809 et seq.”

In Poliner, a physician sued a hospital and several physician medical staff leaders for violating hospital bylaws, tortious interference with the physician’s business relations, defamation, emotional distress and mental anguish as a result of the alleged “forced abeyance” of his clinical privileges. Apparently, the jury hearing the case in federal district court found that the physician had been threatened with suspension of his hospital clinical privileges unless he agreed to an abeyance of his cardiac catheterization lab privileges, even though the hospital and physician leaders had not yet determined that there was an actual threat to the wellbeing of patients. The jury also found that such “forced abeyance” was the only alternative offered to the physician, despite numerous bylaws provisions indicating that other and more formal procedures should be made available. The jury found that both the hospital and the physician staff leaders refused to discuss the cases in question with the physician and that these leaders advised the physician that he could not consult an attorney prior to agreeing to the forced abeyance of his privileges.

The Poliner jury concluded that the hospital and its medical staff and leaders acted inappropriately in forcing the physician to resign his privileges, and therefore found the hospital liable. On its face, this holding is not surprising. What is surprising about thePoliner jury’s decision, however, is the degree of anger voiced by the jury in awarding the physician $366 million in damages simply to remedy the forced abeyance of some portion of a physician’s clinical privileges at one facility.

“Clearly, the jury was so shocked that a large hospital and medical staff would deviate so markedly from their bylaws and fail to afford some reasonable procedure to a physician that they wished to discipline, that the jury handed down an astronomical measure of damages against the hospital and individual medical staff leaders,” Mr. Getzoff said.

Not surprisingly, the Texas federal district court in which the trial was held upheld the reasoning of the jury verdict in favor of Dr. Poliner, but following various posttrial motions, the court recently indicated that the more than one third of a billion dollar award was not justified on the facts and could not be upheld. The district court instead required the parties involved to enter into mediation to determine a more reasonable damage award. Nevertheless, the Poliner verdict has sent shockwaves across the nation and is plainly frightening to California hospitals and other peer review entities.

The Poliner case is best described as “a cautionary tale of medical staff blunders.” “The hospital and its medical staff leaders made the wrong choice at virtually every stage of the process of seeking to restrict or terminate Dr. Poliner’s privileges,” Mr. Miller said. The jury sent a strong message when it concluded that the hospital and its medical staff violated their own internal procedures, that no semblance of due process was provided and that the hospital and its medical staff flatly refused to even discuss the cases at issue with Dr. Poliner.

Yet, so long as California peer review entities follow reasonable bylaws and well-established tenets of California law, act reasonably, and where necessary act with the advice of experienced medical staff counsel, California hospitals and other peer review entities should be able to avoid the types of liability imposed in the Poliner case.

Examples of such reasonable actions abound, in contrast to what transpired at the Texas hospital involving Dr. Poliner. First, under California law, as opposed to Texas law, it would be highly unlikely that a physician could ever relinquish or abate substantive clinical privileges during an investigation yet not have such action reported under California Business & Professions Code §805.

Second, when California hospitals or other entities and their medical staffs suspect substandard clinical performance by one of their physicians, the medical staff should conduct an appropriate investigation, pursuant to the terms of the medical staff bylaws. The hospital or other organization should assure that such investigation is fair, that it entitles the affected practitioner an opportunity to discuss the cases at issue prior to any formal hearing process (i.e., an “interview”) and permits the practitioner at least to consult an attorney, even if an attorney is not allowed to participate in the proceedings before a medical staff investigating committee or hearing committee.

Third, if a medical staff or a hospital is going to “threaten” a practitioner with suspension of part or all of the practitioner’s privileges, the medical staff and/or hospital should be absolutely certain that the medical staff has investigated the practitioner’s practice and activities and can conclude with reasonable certainty that there is some imminent or critical danger to a patient’s well-being caused by the practitioner’s practice that will justify suspending the practitioner’s privileges for some period of time.

Fourth, there is no substitute for good documentation. Where a practitioner’s practice is deemed to be below standard or tinged with other problems, it is incumbent upon the hospital and the medical staff to document carefully such shortcomings so that appropriate recommendations for disciplinary action, if necessary, can be made.

Finally, California hospitals and their medical staffs should assure that the actions proposed reasonably address the deficiencies noted in the performance of the practitioner under investigation. There is always likely to be some temptation on the part of a hospital, a medical group and/or an independent medical staff to strike a deal, cut potential costs and/or refrain from going through the process laid out in medical staff bylaws and the California Business & Professions Code. However, this is oftentimes not the best or even the most efficient way to proceed in the long run, and the jury’s verdict in Poliner certainly attests to the wisdom of such a viewpoint.

In view of the dramatic reminder provided by Poliner, Mssrs. Getzoff and Miller suggest that hospitals, other peer review entities and their medical staffs should assure that they (1) update their bylaws regularly to assure conformity with California law; (2) follow those bylaws and California law completely and deliberately; (3) conduct investigations completely and fairly; and (4) propose no disciplinary action, whether voluntary or involuntary, unless such disciplinary action is legally and factually supported by the findings of the investigation. Whenever there is a question, medical staff counsel should be consulted to assure that a Poliner type of situation does not recur.

For more information concerning Poliner, its ramifications for California hospitals and medical staffs, or concerns about your hospital’s or medical staff’s bylaws or hearing and appeal process, please call Larry Getzoff at 310.551.8190 in the firm’s Los Angeles office or Cary Miller at 619.774.7302 in the firm’s San Diego office.

CMS Proposes Dramatic Shift in PPS Payments with Proposed IPPS Rule

The Centers for Medicare and Medicaid Services (CMS) recently released its Hospital Inpatient Prospective Payment System (IPPS) Proposed Rule for fiscal year (FY) 2007. CMS will accept comments through June 12, 2006. In several key areas, CMS proposes to make fairly significant changes to current IPPS payment methodologies. Key elements of the Proposed Rule include:

  • DRG Changes. CMS proposes to significantly revise how diagnosis related groups (DRG) are classified and recalibrated. In summary, CMS has proposed changing the basis for classifying and recalibrating DRG relative weights from a “charge” based calculation to a hospital “cost” based calculation. In addition, CMS proposes to introduce what are termed “consolidated severity-adjusted DRGs” or other alternative severity adjustment methods in FY 2008 (if not earlier), which are likely to add additional modifying factors to existing, recalculated DRGs, to reflect the severity and/or acuity of a particular medical condition or surgical procedure.
  • Wage Index. CMS proposes several changes to the hospital wage index. Perhaps the change likely to have the greatest impact is that CMS, as required by a judicial decision, will now collect new data on the mix of hospital employees and fully adjust by October 1, 2006 the area wage index for occupational mix.
  • Payment Update. CMS proposes a market basket update of 3.4% for hospitals that submit data on the ten previously identified quality measures and pledge to report on 21 anticipated measures starting in calendar year 2006. It should be noted that whereas in the past a hospital’s failure to report such quality data in a comprehensive and timely manner would result in only a 0.4% decrease in the hospital’s market basket payment update, pursuant to the Deficit Reduction Act of 2006, hospitals that do not report these required measureswill now receive an update at the market basket rate minus 2.0%.
  • GME/IME. CMS proposes various changes and clarifications relating to graduate medical education (GME) concerning how to determine per resident amounts for merged hospitals and new teaching hospitals, how to count and appropriately document numbers of FTE residents for purposes of computing per resident amounts, and how to count residents’ time spent in non-patient care activities.
  • Outliers. CMS proposes to raise the outlier threshold from its current level of approximately $23,600 to $25,530, which may make it more difficult for hospitals to qualify cases for outlier payments.
  • EMTALA. CMS proposes to clarify hospitals’ responsibilities under the Emergency Medical Transfer and Active Labor Act (EMTALA), particularly where hospitals do not operate dedicated emergency departments, but have specialized services and/or capabilities.
  • Hospitals Within Hospitals. CMS proposes policy changes regarding increases or deceases in square footage or deceases in the number of beds in the case of “grandfathered” hospitals within hospitals and satellite facilities of hospitals within hospitals. CMS also proposes additional changes for the long-term care hospital (LTCH) PPS and further changes to the methodology for determining LTCH cost to charge ratios. These may be of significant impact to the growing number of these types of facilities.
  • Rural Providers/MDH. A variety of changes are proposed affecting rural providers, sole community hospitals and in particular, Medicare dependent hospitals (MDH). Medicare dependent hospitals are now permitted to use 2002 cost reposting years as an allowable base year, and to have payments increased from 50% to 75% of the difference between the PPS payments and the Medicare dependent hospitals’ hospital specific rate. In addition,CMS proposes to eliminate the 12% disproportionate share hospital cap for MDHs. Depending upon each individual hospital’s or hospital chain’s unique situation, the Proposed Rule may have a minor or more substantial impact on overall payments in the coming fiscal years. As a result of the proposed change involving a move to cost-based DRG classifications and recalibrations, this Proposed Rule is likely to result in the most dramatic shift in PPS payments in several years.

HLB attorneys will present significant facets of the proposed rule to California Hospital Association members at three seminars in June (see back page for dates and locations).

For additional information or assistance with drafting and filing comments, please contact Laurence Getzoff at 310.551.8190, Byron Gross at 310.551.8125, Jon Neustadter at 310.551.8151 or John Hellow at 310.551.8151.

HLB Calendar

June 11 Employee Pharmacists Assn., Los Angeles. HLB Attorneys Stacie Neroni, Hope Levy-Biehl, Mark Hardiman, DEA, Pharmacy Board, present Inspections, Investigations, and other Regulatory Requirements.
June 13 San Francisco Bar Assn. HLB Attorney Mark Reagan co-presentsAnatomy of a Health Care Insolvency Case.
June 14, 28, 29 California Hospital Assn. Hospital Reimbursement Seminar, Sacramento, Pasadena, Costa Mesa. HLB Attorneys present all day seminars on Current Topics in Hospital Reimbursement.
July 23-26 California Association of Health Facilities Conference, Lake Tahoe. HLB Attorney Mark Johnson presents a 2-hour seminar onNursing Facility Transfer/Discharge Law.
July 27 United Government Services Audio Conference. HLB Attorney Jodi Berlin participates in a teleconference with UGS Medical Directory Arthur Lurvey on How Hospices become Medicare Part B Certified to Provide Palliative Care Services
For media assistance, please contact Maura Fisher at 202-580-7714.