Is it the End of Non-Compete Agreements for Alabama Healthcare Companies? The Federal Trade Commission Proposes a Ban

By: Howard Bogard and Matthew Scully, Burr & Forman

Under Alabama statutory law, “professionals” are exempt from non-compete agreements, which serve to restrict competing activity within a defined geographic area and time period.  The law does not define the term “professional” but, with respect to the healthcare industry, Alabama courts have found that professionals include physicians and physical therapists.  Based on case law, other healthcare professionals who practice independently, have direct patient contact, and are separately licensed might also be found to fall under the professional exemption. 

However, on January 5, 2023, the Federal Trade Commission (“FTC”) announced a Notice of Proposed Rulemaking that would prohibit and rescind all non-compete provisions in employment contracts. The public has 60 days to offer comment on the proposed rule, and a final rule will be published thereafter.

Background on the FTC Act

Section 5 of the FTC Act declares, “Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.”  On November 10, 2022, the FTC Commission issued a Policy Statement concerning its interpretation of Section 5, stating that part of its role is to identify unfair methods of competition, which the Commission defined as conduct undertaken by an actor in the marketplace that (1) is coercive, exploitative, collusive, abusive, deceptive, predatory, or overly restrictive, and (2) negatively affects competitive conditions (e.g., reduces output, limits choice, lowers quality, reduces innovation, impairs market participants, or reduces potential competition).

Building off the Policy Statement — as well as President Biden’s July 2021 Executive Order calling for the FTC to limit non-compete agreements — the FTC announced on January 5, 2023 a Notice of Proposed Rulemaking labeling non-compete agreements as unfair methods of competition. The FTC found that non-compete agreements reduce workers’ wages, stifle new businesses and new ideas and hinder workers’ economic liberty.  Indeed, the proposed rule specifically relied upon a study that showed non-compete clauses increase consumer prices and concentration in the healthcare sector.

The proposed rule defines non-compete agreements as “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.” The proposed rule would:

• Prohibit an employer from entering into or attempting to enter into a non-compete agreement with a worker;
• Require employers to rescind existing non-compete agreements with workers;
• Prohibit any contractual provision that would require a worker to repay training costs upon separation within a specific time period if the required payment is not reasonably related to the actual costs incurred by the employer; and
• Put at risk other agreements (e.g., protection of confidential information) if the agreement could prevent a worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer.

Moreover, the proposed rule would define “worker” broadly as any natural person who works, whether paid or unpaid, for an employer, which would include an employee, independent contractor, extern, intern, volunteer, apprentice or sole proprietor who provides a service to a client or customer. The only exception to the FTC’s proposed ban is a limited exclusion for non-compete agreements between the seller and buyer of a business.

Impact on Alabama Healthcare Companies 

Given that the proposed rule reverses over a hundred years of legal precedent enforcing non-compete agreements, it is likely that any final rule will be subject to years of litigation, with the U.S. Supreme Court likely ruling on the FTC’s authority to issue the non-compete ban. If the FTC’s rule is upheld, it would arguably have a marginal impact on Alabama healthcare providers currently protected by the Alabama professional exemption (although it would serve to solidify such exemption). An FTC ban on all non-compete agreements in an employment setting would, however, prevent healthcare companies from using such agreements with employed “non-professionals.”  For example, many dermatology and pathology practices, clinical laboratories, diagnostic imaging centers, and durable medical equipment providers, to name a few, commonly use non-compete agreements with marketing and sales staff and certain employees who are not likely covered by the Alabama professional exemption, such as aestheticians, laboratory technicians, and senior management.  If the FTC’s proposed rule is finalized and upheld by the courts, healthcare companies would be prohibited from using non-compete agreements in any form with employees (both professionals and non-professionals). The question then becomes what tools other than non-compete agreements (such as trade secret laws and confidentiality and non-solicitation agreements) might employers use to protect valuable investments in employees, and how sufficient are these alternatives?

Howard Bogard is a partner with Burr & Forman LLP and is the Chair of the firm’s Health Care Industry Group. Howard may be reached at (205) 458-5416 or hbogard@burr.com. Matthew Scully is a partner with Burr & Forman LLP and exclusively practices labor and employment law. Matthew can be reached at (205) 458-5321 or mscully@burr.com. 

Federal Trade Commission Proposes Rules Banning Non-compete Agreements

By: Brandy Boone, General Counsel

On January 5, 2022, a year and a half after President Biden signed an executive order encouraging the Federal Trade Commission (“FTC”) to limit or ban non-compete agreements, the FTC announced a proposed rulemaking that will prohibit employers from using non-compete agreements that restrict where an employee, or independent contractor, can work after leaving employment. 

The Rule will not only ban the use of non-compete agreements in future employment or contractor relationships, but it will also require employers with current non-compete agreements to notify employees or contractors that the non-compete agreements are rescinded and no longer in effect.  The FTC cites the unfairness of non-compete agreements as a method of competition as the primary reason for the rule, but also estimates the proposed rule could increase worker earnings by almost $300 billion per year, save up to $148 billion on annual health costs, and increase the number of companies within the same industry. 

Specifically within the healthcare industry, this change will likely lead to more competition between hospitals and ambulatory surgical centers for physician employees and contractors. The FTC’s proposed rule seeks public comment, particularly in three areas, (1) whether franchisees should be covered under the rule; (2) whether senior executives should be covered under the rule; and (3) whether the rule should affect low and high wage workers differently.  The public comment period will last 60 days from the date that the proposed rule is published in the Federal Register, and although the notice of rulemaking was announced on January 5^th, it has not yet been published in the Federal Register. 

You can read the rule here and a fact sheet summarizing the rule here.

MAKING SURE YOU’RE NOT SURPRISED BY THE NO SURPRISES ACT’S INDEPENDENT DISPUTE RESOLUTION PROGRAM

by Lindsey Phillips with Burr & Forman, LLP

The No Surprises Act (the “Act”), which became effective on January 1, 2022, was enacted in an effort to provide uniform protections against surprise medical bills. Surprise medical bills often arise when patients unknowingly receive medical care from out-of-network healthcare providers and are billed for the difference between the amount a patient’s health plan would pay for in-network providers and the full amount charged for the medical services received by the patient.

The Act generally prohibits surprise billing in three main categories: 1) when emergency services are provided by out-of-network providers or emergency facilities; 2) when non-emergency services are provided by out-of-network providers at in-network health care facility visits; and 3) when air ambulance services are provided. In these three instances, providers generally are prohibited from billing a patient for an amount that exceeds the in-network limit on cost-sharing.

So, in light of the prohibition on surprise billing, how can out-of-network healthcare providers recover payment for their services? The Act establishes a mandatory Independent Dispute Resolution (IDR) program, that was revised in August 2022, by which out-of-network providers can attempt to receive payment from health plans and insurers for the services they have provided.

The first step is for the provider and health plan or insurer to negotiate a reasonable payment amount. When there is disagreement about the amount owed by the plan or insurer to the provider, either party can initiate an open negotiation period by issuing a notice to the other party within 30 days after the provider’s receipt of the insurer or plan’s initial payment or denial notice. The notice must contain certain information, which includes, but is not limited to, information regarding the services provided and a proposed out-of-network rate for the services and items provided.  Once this notice is sent, the parties have 30 days to reach an agreement on the payment amount owed to the provider. If the parties reach an agreement regarding the payment amount, then the plan or insurer must remit the agreed-upon payment to the provider within 30 days of the agreement.

If the parties are unable to reach an agreement on their own, then either party can initiate the Act’s IDR program by providing notice to the other party and the Department of Health and Human Services (or the Department of Labor or Department of Treasury)[1]. The applicable Department will then provide a list of certified IDR entities. The parties will then have three business days to jointly select a certified IDR entity. If the parties are unable to agree on an IDR entity, then the applicable Department will randomly select an IDR entity.

After an IDR entity is selected, each party must submit a proposed payment amount along with supporting documentation for its proposal. The IDR entity will then select the offer that it determines best represents the value of the services provided. In making this determination, the IDR entity should consider the information submitted by the parties, the Qualifying Payment Amount for the applicable year for similar services, and other factors including, but not limited to, the provider’s experience, quality of outcome measurements, and the complexity of the services provided. The IDR entity should also weigh the credibility of the information received. Once the IDR entity reaches a determination, it must issue a written decision that fully explains the basis for its decision, including the information it relied on in determining which amount best represented the value of the services provided. Once the IDR entity renders its decision, the parties are required to comply with the IDR entity’s decision within 30 days.   

Lindsey Phillips is an associate at Burr & Forman LLP practicing exclusively in the firm’s Healthcare Industry Group. Lindsey may be reached at (205) 458-5370 or lphillips@burr.com.

[1] Oversight of the No Surprises Act’s provisions is conducted by either the Department of Health and Human Services, Department of Labor, or Department of Treasury depending on the nature of the plan, policy, and provider.

Federal Cures Act “Information Blocking” Compliance Date Approaching

The 21^st Century Cures Act (Cures Act), passed by Congress in 2016, included a provision in Title IV, Section 4004 against “information blocking,” defined in the Act as a practice or practices, “likely to interfere with, prevent, or materially discourage access, exchange, or use of electronic health information.”  The Act further required the Office of National Coordinator for Health Information Technology (ONC) and the Department of Health and Human Services (HHS) to promulgate rules (the rules) for enforcement on information blocking.  

The rules, which have been in effect since April 2021, apply the information blocking provisions of the Cures Act to “actors,” defined to include health care providers like physicians and hospitals, as well as health information exchanges and health information technology (HIT) developers or vendors.  They currently require physicians to make the following electronic health information, otherwise known as the United States Core Data for Operability, version 1 (USCDIv₁) accessible to patients in the electronic health record with no delay:  Consultation notes, discharge summary notes, history and physical, imaging narratives, laboratory report narratives, pathology report narratives, procedure notes, and progress notes.  

On October 6, 2022, physicians and other actors will be required to provide patient access to all electronically maintained health records, with the exception of psychotherapy notes and information compiled in anticipation of litigation, to avoid charges of information blocking.  The rules further provide that by December 31, 2022, electronic health record systems must have updated technology to allow easier patient access to electronic health information.

Because HIT vendors are also considered actors and must comply with information blocking rules, physicians who are not yet in compliance or preparing for upcoming compliance dates should work with their HIT vendors to develop a compliance plan for this section of the Cures Act. They should also become familiar with exceptions provided in the rules where delays or denials of access are not considered information blocking.  Finally, physicians should be on the alert for notice from ONC and HHS on the penalties for health care providers for information blocking.  Potential penalties for HIT vendors and health information exchanges found to be participating in information blocking have already been determined by rule to include fines up to $1 million per violation. To date the potential penalties for health care providers found to be information blocking are “disincentives” to be determined by HHS using a formula and criteria not yet developed.

Resources for Physicians on Information Blocking:

https://www.healthit.gov/topic/information-blocking?options=2450b60a-e96a-4f4c-ab17-40aac81e40be

https://www.ama-assn.org/practice-management/digital/new-information-blocking-rules-what-doctors-should-know

Prepare Your Practice for Expanded Information Blocking Requirements

By: Catherine (Cat) Kirkland, Burr & Forman LLP

Is your practice ready? Starting October 6, 2022, physicians and group practices will be required to make full electronic health information available for access, exchange, and use to patients (among others) in a reasonable manner. This deadline marks the end of a multi-year phase-in from the U.S. Department of Health and Human Services (HHS) of “information blocking” rules set forth in the 21st Century Cures Act Interoperability and Information Blocking Regulations.

The Cures Act defines information blocking as “a practice by an actor that is likely to interfere with the access, exchange, or use of electronic health information (EHI), except as required by law or specified in an information blocking exception.” Physicians, hospitals, and group practices, among many other provider types, are all specifically defined as “actors” under the Act and are therefore subject to the regulations. The Act defines EHI as information contained within a designated record set, which for a physician or group practice would include medical records, billing records, and other documents used by the physician or practice in conjunction with patient care (ex: scans received, emergency department records, etc.).

Examples of prohibited information blocking might include:

• Implementing a blanket (and not individualized) approach of withholding laboratory or other test results from a patient portal until a physician can evaluate the results;
• Charging a fee for physical copies of a patient’s EHI, when the fee does not meet HHS’ fee exception criteria; or
• Purposefully limiting what EHI is shared in a patient portal if the portal technology would allow for full EHI access.

A practice is not considered information blocking if it meets one of eight exceptions. Five of these exceptions relate to why a provider might not fulfill a request for access, exchange, or use of EHI, including: 1) prevention of harm (a very limited exception requiring a patient-by-patient analysis); 2) privacy protection (ex: if state or federal law require a patient consent to set-up a portal and the patient has not consented); 3) safeguarding security of the EHI; 4) infeasibility (ex: hurricanes or uncontrollable events); and 5) if the provider’s IT is temporarily unavailable. Each of these exceptions contain key conditions that must all be demonstrated by the provider before the exception can be claimed.

The Cures Act authorizes the HHS Office of Inspector General to investigate any claim of information blocking and in 2021, HHS established an online portal for complaints. Any complaint submitted through HHS’s portal could result in an OIG investigation and potentially penalties or disincentives.

The overall industry response to the expanded rules has been one of concern and confusion with a major push for HHS to release more guidance before the October 6 deadline. However, waiting on additional HHS guidance is not a defense to the information blocking rules. Physicians and group practices should be proactive in their compliance by reviewing the rules and exceptions carefully. Physicians should ensure that all policies, procedures, and/or compliance programs comply with the rules, address rule exceptions, and require documentation of when an exception is used and why.

Catherine (Cat) Kirkland is a partner at Burr & Forman LLP and practices exclusively in the firm’s Health Care Practice Group. Cat may be reached at (251) 340-7271 or by email at ckirkland@burr.com.

FIVE TIPS FOR MEDICAL DOCUMENTATION YOUR LAWYER WANTS YOU TO KNOW (AND FOLLOW)

By Angie Cameron Smith, Burr & Forman, LLP

Good documentation is important for many reasons: continuity of care, compliance, and risk management to name a few.  Documentation supports payment for services but can also form the basis of medical malpractice cases, whether it be lack of documentation, improper documentation or poor documentation.  Therefore, it is important to revisit best practices on a regular basis to protect providers from documentation pitfalls. 

1. Timely documentation and signatures

It seems elementary that a provider should timely document in a patient’s medical record, but one of the first issues that comes up in compliance audits (Medicare, Medicaid etc.), is whether there is timely documentation in the medical record.  In some instances, being timely may require a signature before a service is rendered; in other cases, the documentation should be done at the time of the encounter. It is important to document timely because it is a contemporaneous recording of the provider’s assessment.    

Signatures on medical documentation or orders can create significant liability because it is an essential element for payment and compliance.  For instance, Medicare has specific signature requirements, including:  (1) must be for a service ordered or provided by the provider signing; (2) must be handwritten or electronic, and (3) must be legible but can be confirmed through a signature log or attestation.  Neither Medicare nor Medicaid accepts stamped signatures unless the provider can establish an inability to sign due to disability.  We have often used signature logs and attestations in audits to establish the provider rendered the service, but it is preferable that the signature meet the requirements without the need for additional support.  Medicare also states that you cannot “add late signatures…beyond the short delay that happens during the transcription process.”  If a signature is missing from medical documentation (not orders) an attestation from the provider may render it valid.  

2. Follow your documentation policies  

Although there may be documentation requirements dictated by certain payors, a provider should also be mindful of any policies that a particular facility, practice or group may have regarding documentation.  Review your facility or practice policies with regard to documentation.  It is surprising how often there is a policy in place that addresses an aspect of documentation, and no one is following it, usually because the provider was unaware of it.  This can be very difficult to overcome when defending lack of documentation if a policy says the documentation should exist.

3. Need to make a change – use an addendum rather than editing an existing record

There may be times when a provider has created a timely entry on a patient, but sometime later, the provider recalls that he/she did not include a detail about the evaluation or treatment or encounter.  It is important in the age of electronic medical records that when editing, adding or updating an entry, that it be done as an addendum to the original entry rather than changing an existing record.  Editing could be problematic for many reasons.  For instance, when defending a medical malpractice case, there is often a request for a HIPAA audit trail that shows who viewed the record, made entries in the record or edited the record.  If something was changed as opposed to an addendum, this creates the appearance of an attempt to improperly alter a medical record.  Therefore, it is best to create an addendum to an entry previously made with an explanation as to the purpose of the addendum.  Where you are have a paper record or chart, it is less of an issue because the original note should be available but it is still important to initial any edits and not alter the original documentation.  

4. Copying and pasting, “cloning” 

For the most part, electronic medical records have made documenting medical evaluations and treatment more efficient, not to mention easier to read.  However, there are some efficiencies that should be avoided.  In some EMR systems, a provider has the ability to see information from a prior visit (see next tip).  As mentioned below, this can be great for continuity of care; however, if a provider copies the entry for review of systems or history and physical, and fails to edit it for the actual evaluation performed at the time of service, it can lead to problems.  From a compliance standpoint, such repeat/verbatim documentation can call into question whether the provider actually conducted the evaluation.  The same would be true from a liability standpoint.  It is unlikely that the exact same information would be gleaned from the patient on separate visits.  Therefore, a provider should not “clone” entries to create a new entry in the chart.   

5. Reviewing prior history or last visit 

Although not necessarily specific to documentation, it is important for continuity for care for a provider to consider or review information from any prior visit.  This often comes up in a failure to diagnose case where a provider failed to review a prior visit and on a subsequent visit, the symptoms complained of are exacerbated.  The patient’s attorney often argues that had the provider reviewed the prior visit, the diagnosis may have been different or the outcome may have been different.  A failure to review prior history does not necessarily lead to liability on the part of the provider, but it provides a narrative for a jury or arbitrator that a simple review of prior history could have led to a different outcome.  

Takeaway

Be mindful of documentation requirements necessary for payment/compliance, consider conducting self-audits of charts on a periodic basis to ensure compliance and ensure policies are up to date and reflect how providers are documenting.  

Angie Smith is a Partner at Burr & Forman practicing exclusively in the firm’s healthcare practice group. Angie may be reached at (205) 458-5209 or acsmith@burr.com.