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Federal District Court Issues First Court Opinion Regarding EKRA’s Commission Based Payments

By James A. Hoover, Esq., Burr & Forman, LLP

A Federal District Judge in the United States District Court, District of Hawaii issued the first court opinion interpreting the prohibition of the payment of commissions by clinical laboratories to employees or independent contractors that was implemented by the Eliminating Kickback in Recovery Act of 2018 (“EKRA”).  Judge Kodayashi entered her decision on October 18, 2021 in the case S&G Labs Hawaii, LLC v Graves.  

In S&G Labs, the court ruled that the commission payments made to an employee of a clinical laboratory were legitimate compensation payments and did not violate EKRA notwithstanding the fact the payments were made to a salesman who introduced S&G Labs to physicians, counseling centers and other entities that referred patients to the lab. In so ruling, the Court emphasized the salesman had no contact with any individual whose own specimens were tested.  

As a refresher, the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (the “SUPPORT Act) seeks to prohibit “patient brokering” practices by some recovery homes and treatment facilities. Section 1822 of the SUPPORT Act, signed into law and effective as of October 24, 2018, contains EKRA, now codified at 18 U.S.C. § 220. Although EKRA was created to address “patient brokering,” EKRA arguably prohibits a much broader scope of conduct by stating:

“whoever, with respect to services covered by a health benefit program… knowingly and willfully (1) solicits or receives any remuneration… directly or indirectly, overtly or covertly, in cash or in-kind, in return for referring a patient or patronage to… a laboratory, or (2) pays or offers any remuneration… directly or indirectly, overtly or covertly, in cash or in-kind (A) to induce a referral of an individual to a… laboratory or (B) in exchange for an individual using the services of that … laboratory, shall be fined not more than $200,000, imprisoned not more than 10 years, or both, for each occurrence”)

18 U.S.C. 220(a) (emphasis added).

EKRA also contains an exception to the prohibition set out above.  The exception states that “a payment made by an employer to an employee or independent contractor…if the employee’s payment is not determined by or does not vary by–(A) the number of individuals referred to a particular… laboratory; (B) the number of tests or procedures performed; or (C) the amount billed to or received from, in part or in whole, the health care benefit program from the individuals referred to a particular… laboratory.” 18 U.S.C. 220(b)(2).

EKRA on its face implicates any financial relationship between a clinical laboratory and an individual or legal entity that generates business for the lab. Although EKRA’s text is similar to the federal healthcare program anti-kickback statute, 42 U.S.C. 1320-7b(b) (the “AKS”), it is arguably much broader in scope for a number of reasons.  First, EKRA defines “laboratory” to include any CLIA-certified laboratory.  Second, the statute defines “health benefit program” to mean “any public or private plan or contract… under which any medical benefit, item, or service is provided to any individual.” Thus, EKRA applies to payments by any payor, such as commercial insurance and even self-pay, not just by government-funded plans.   

Relating to EKRA, the question before the Court in S&G Labs dealt directly with compensation paid by S&G Labs to an employee.  The compensation arrangement involved a compensation arrangement that included a base salary of $50,000.00 and a percentage of monthly net profits generated by the employee’s client accounts and by the client accounts handled by S&G employees whom the relevant employee managed.  The employee’s commission-based compensation resulted in him receiving more than $1.8 million in 2018 alone.

S&G Labs is a medical testing facility that performs urinalysis screening for legal substances, as well as for controlled substances for physicians, substance abuse treatment facilities and other types of entities.  The Court analyzed the definition of “laboratory” and “clinical laboratory” and concluded that S&G Labs was a laboratory for EKRA purposes.  

Next, the Court compared EKRA’s statutory language of “remuneration” and “individual” with the AKS’ statutory language for those terms.  The Court ruled, in light of the statutory construction of EKRA and the AKS, that the employee’s compensation from S&G constituted remuneration under EKRA.  

The Court also analyzed whether the remuneration paid to the employee was paid to “induce a referral of an individual to” S&G labs.  The Court opined that undoubtedly the employee’s “…commission-based compensation structure induced him to try to bring more business to S&G, either directly through the accounts he serviced himself, or through the accounts of the personnel under his management. However, the ‘client’ accounts they serviced were not individuals whose samples were tested at S&G. Their ‘clients’ were ‘the physicians, substance abuse counseling centers, or other organizations in need of having persons tested.’”  Thus, the Court concluded the compensation arrangement did not violate § 220(a) and the exception in § 220(b) was not applicable.  

Although the commission-based sales compensation arrangement in the employment agreement was upheld in this instance, this opinion is extremely narrow in its implications.  As a result, notwithstanding this opinion, EKRA remains a thorny problem for all laboratories and those who refer to them and requires much thought and consideration before using such commission-based compensation arrangements for clinical laboratories.  

Jim Hoover is a Partner at Burr & Forman LLP and practices exclusively in the firm’s Healthcare Practice Group. Jim may be reached at (205) 458-5111 or

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Supreme Court Rules on Vaccine Mandates

Supreme Court Rules on Vaccine Mandates

By: Brandy A. Boone, General Counsel of the Medical Association of the State of Alabama

The US Supreme Court (“the Court”) recently released differing opinions on the two-part Biden administration vaccine mandate.  In Biden v. Missouri1, the Court lifted a US District Court’s stay on enforcement of the Department of Health and Human Services’ (HHS) rule amending CMS Conditions of Participation to require covered staff to be vaccinated for COVID-19.  The Court took the opposite approach in National Federation of Independent Business v. Department of Labor2, by enjoining the enforcement of an OSHA standard requiring employers with at least 100 employees to require covered workers to be vaccinated.

The CMS rule, more commonly known as the healthcare worker vaccine mandate, was issued as an interim final rule for facilities regulated by CMS Conditions of Participation, including hospitals and long-term care facilities.   The rule requires covered facilities to have a plan for vaccinating all staff, a plan for the provision of medical and religious exemptions, and a plan for tracking and monitoring vaccinations and exemptions.  Because physician offices are not facilities regulated by CMS Conditions of Participation, this rule does not apply to physician offices or healthcare workers who work in physician offices, unless they are also on staff at a covered facility.

A number of states, including Alabama, filed lawsuits seeking injunctions to the enforcement of the healthcare worker vaccine mandate.  Those lawsuits were consolidated into two federal court actions, and in both, the federal district courts issued stays to enforcement.  The federal government petitioned the corresponding federal circuit courts for relief from the stays, and relief was denied in both courts. Following the circuit court denials, the government petitioned the US Supreme Court for the same relief, and the Court agreed to hear the specific issue of whether to lift the preliminary injunction.  

The Court issued a per curiam opinion on January 13, 2022, granting the government’s petition and lifting the US District Court’s stay on enforcement of the vaccine mandate. The Court noted in a 5-4 decision that the Department of Health and Human Services (HHS) is the administering agency for Medicare and Medicaid programs, and thus the HHS Secretary is charged by federal law to develop regulations to aid in efficient administration of those programs and to protect the health and safety of individuals served by them.  The Court also agreed that that the HHS Secretary was within his authority in issuing the vaccine mandate in an interim final rule, rather than through a usual notice and comment period, because of the highly infectious nature of COVID-19, and the particular vulnerability of populations served by Medicare and Medicaid. 

Although the Court lifted the preliminary injunction on enforcement of the healthcare worker vaccine mandate, it only ruled on that specific issue, so the state lawsuits to stop enforcement are back in the federal circuit courts, pending the federal government’s appeal, and a possible writ of certiorari.  However, the rule will remain in effect and enforceable pending the appeal and possible writ.  The Court’s opinion did not address or affect the available religious and medical exemptions to the rule, and it did not expand the scope of the rule beyond healthcare facilities with conditions of participation for Medicare and Medicaid Services, so it still does not apply to physician clinics or offices.

The other vaccine mandate, not specific to healthcare, came through the Occupational Safety and Healthcare Administration (“OSHA”), under the auspices of the Department of Labor.  OSHA enacted a temporary emergency standard covering employers with at least 100 employees.  The standard requires worker vaccinations, with no exceptions, other than daily masking and weekly testing at the employee’s expense.  

This new standard was challenged by states and business organizations in several federal courts, and one federal circuit court entered a stay on enforcement.  When all of the cases were consolidated under another federal circuit court, that court lifted the stay so the rule could go into effect.  The Supreme Court accepted an emergency petition from the states and business leaders on whether to impose a preliminary injunction on enforcement of the rule, pending the resolution of lawsuits consolidated with the Sixth Circuit Court of Appeals.

On the same day the Court lifted the stay on the healthcare worker vaccine mandate, the Court granted a stay of enforcement of the OSHA worker vaccine mandate.  In another per curiam opinion, this time a 6-3 decision, the Court reasoned that federal law authorizes OSHA to regulate workplace safety, but that Congress has not given OSHA specific authority to regulate “broad public health measures.”  Finding that while there is COVID-19 infection risk in the workplace, those risks are not relegated just to the workplace, and therefore, OSHA exceeded Congressional authority in enacting its temporary emergency standard requiring worker vaccinations.

As with the healthcare worker vaccine mandate, the Court’s ruling does not end the rule or the challenge to the rule.  The Court has stayed enforcement of this OSHA standard until the disposition of the legal challenges in the Sixth Circuit Court of Appeals and any potential writ of certiorari. 

  1.  Biden v. Missouri, Nos 21A240 and 21A241 (2022);

National Federation of Independent Business v. Department of Labor, Nos 21A244 and 21A247 (2022);

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By Angie Cameron Smith with Burr & Forman, LLP

On July 6, 2021 Governor Kay Ivey allowed the State of Emergency in Alabama to expire.  She had previously proclaimed a State of Emergency due to the COVID-19 Pandemic effective March 13, 2020.  Along with that proclamation, came the invocation of Alabama’s Emergency Management Act.  When the state of emergency ended, so did the waivers or suspension of state regulatory requirements that were afforded to healthcare providers operating during the pandemic.  Due to the spike in COVID-19 cases, which appear to be related to the Delta variant, Governor Ivey proclaimed a new State of Emergency effective August 13, 2021.  Why does this matter?  Because many of the expired waivers that allowed for flexibilities for healthcare providers have now been renewed under the new State of Emergency.

Under Governor Ivey’s August 13 proclamation and pursuant to the authority granted to her under the Emergency Management Act, she cut “red tape for health care providers.”  The emergency proclamation removes barriers to allow additional healthcare providers and resources to address the surge in cases and is focused primarily on staffing at acute care hospitals.  The following apply to general acute care hospitals, critical access hospitals or specialized hospitals licensed by the Alabama Department of Public Health:  

  • A hospital’s chief of the medical staff or medical director may collaborate with or supervise an unlimited number of certified registered nurse practitioners (CRNP), certified nurse midwives (CNM); physician assistants (PA) and anesthesiology assistants (AA), and provide direction to an unlimited number of certified registered nurse anesthetists (CRNA);
  • CRNPs, CNMs, PAs and AAs working under the supervision of the chief of the medical staff at a hospital may implement the standard protocol and formulary approved by the Alabama Board of Medical Examiners;
  • CRNAs under direction of, and AAs under registration with, a hospital’s chief of the medical staff or medical director or his/her physician designee, are authorized to determine, prepare, monitor or administer legend and controlled medications for performance of anesthesia-related services, airway management (related or unrelated to anesthesia), and other acute care services within their scope of practice.
  • CRNPs, CNMs and CRNAs who possess an active, unencumbered nurse license or equivalent advanced practice approval issued by an appropriate licensing board of another state, the District of Columbia, or Canada, are authorized to practice in covered hospitals as if licensed in Alabama; and
  • Alabama’s Board of Pharmacy, Board of Nursing, Medical Licensure Commission, and State Board of Medical Examiners are authorized to adopt emergency rules to allow for expedited licensure and/or temporary permits for individuals possessing unencumbered licenses in other states.  At this time, this is limited to those practitioners providing care in inpatient units, emergency departments or other acute care units within acute care hospitals, critical access hospitals or specialized hospitals.

Another flexibility afforded under the Governor’s new proclamation is the authorization granted to the State Health Planning and Development Agency (SHPDA) to invoke the emergency rule passed last legislative session to allow for the issuance of emergency Certificates of Need.  This waiver was effective during the last Public Health Emergency to permit facilities to create alternate care sites.  Alternate care sites allow for a healthcare facility to convert parts of or entire facilities to provide care for which is not originally authorized.  For example, while hospitals struggle for placement of patients and surge capacities, these waivers would allow hospitals to create or use space not normally used for patient care or acute patient care.  Other healthcare providers may also seek waivers under the SHPDA Emergency Rule.  Under the previous health emergency skilled nursing facilities were able to transfer patients who did not require acute care but were in need of isolation and observation due to COVID to areas in a hospital not being used.  More information about alternate care sites can be found at and   

Another important aspect of the State of Emergency proclamation is the application of an alternative standard of care.  When evaluating whether a healthcare provider has breached the standard of care in a medical malpractice case, the analysis involves what a reasonable person would do in like or similar circumstances.  Under the alternative standards of care, if a provider has invoked its emergency operation plan in response to the public health emergency, it can implement alternative standards of care and those standards are “declared to be state-approved standard of care in healthcare facilities.” 

You may also recall that during the last legislative session there was an immunity statute passed to provide liability protections to healthcare providers and businesses during the COVID-19 pandemic.  This immunity statute should be unaffected by the gap between the last state of emergency ending on July 6, 2021, and the new state of emergency invoked on August 13, 2021.

The federal public health emergency (PHE) and the waivers under the U.S. Secretary of Health and Human Services Section 1135 declaration is also unaffected by the state of emergency.  The current federal PHE is set to last through October 18, 2021, with some indication from the federal administration that it will continue through the end of the year.

Angie Smith is a partner at Burr & Forman LLP and practices in the Healthcare Industry Group. Angie may be reached at (205) 458-5209 or

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Training, Training, Training—The First Line of Defense When it Comes to HIPAA Compliance

Training, Training, Training—The First Line of Defense When it Comes to HIPAA Compliance

By: Kelli Carpenter Fleming with Burr Forman

When it comes to HIPAA compliance efforts, the first line of defense in ensuring that protected health information is secured appropriately and compliantly is training your practice’s employees. More often than not, when an inappropriate use or disclosure of protected health information occurs, it is because an employee made a mistake. For example, the employee may have faxed the information to the wrong patient, or released records before confirming that an authorization was on file, or clicked a link in an e-mail opening the door for bad actors to gain access to the system. One way to prevent these mistakes is to train your employees on HIPAA compliance efforts, as well as easy, practical steps they can take to prevent such mistakes. However, a lot of physician practices, especially smaller ones, do not routinely train their employees on HIPAA compliance efforts. 

HIPAA training should not occur in a silo. While employees should always be trained upon hire, they should also be trained periodically thereafter. I recommend that clients conduct routine, formal HIPAA training at least once a year. I also recommend implementing less formal monthly HIPAA reminders to ensure that HIPAA remains on the forefront of everyone’s minds. In addition, if an unauthorized use or disclosure occurs, the practice should conduct training related to that incident, at a minimum for the employees involved. If a policy or procedure is changed, training should also be conducted on the revised policy or procedure. 

Whenever training is conducted, whether internally or externally, the training must be documented. The documentation should include the date the training was conducted, the employees that were trained, the topics discussed, and a copy of any training materials that were utilized. This documentation becomes extremely important if there is a breach incident or an investigation by OCR.

All physician practices should strengthen their first line of defense when it comes to HIPAA compliance by ensuring that their employees are properly and periodically trained. 

Kelli Fleming is a Partner at Burr & Forman LLP and practices exclusively in the firm’s Healthcare Practice Group. Kelli may be reached at (205) 458-5429 or

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OSHA Issues COVID-19 Emergency Temporary Standard (ETS) for the Healthcare Industry

OSHA Issues COVID-19 Emergency Temporary Standard (ETS) for the Healthcare Industry

The Occupational Safety and Health Administration (OSHA) issued an Emergency Temporary Standard (ETS) for the healthcare industry on June 21, 2021.[1]

The Occupational Safety and Health Act (“the Act”) passed in 1970 and created OSHA to administer the Act. It has been thirty-eight years since OSHA issued its last ETS. That ETS was issued in 1983, covered asbestos, and was eventually struck down by a federal court.

The Act generally covers most employers, with some specific employers, such as “State(s) and political subdivision of a state,” being specifically excluded from OSHA’s jurisdiction.[2]  OSHA determined that COVID-19 causes health care industry employers and their employees to be in “grave danger,” which is the legal requirement allowing OSHA to issue an ETS.  Along with the ETS, OSHA issued General COVID-19 Guidance to most other workplaces, which followed the CDC’s guidance on COVID-19 in the workplace.  

The ETS generally applies to any workplace where employees provide healthcare services or healthcare support services, except for some specific exclusions such as retail pharmacies; home health care settings where all non-employees are screened prior to entry; healthcare support services not performed in a healthcare setting (e.g., off-site laundry); and telehealth services performed outside of a direct patient care setting.  Other exemptions include allowing employees to work from home and exemptions for those employees who cannot be vaccinated because of medical or religious reasons. One exemption could possibly apply to some physicians’ offices.  This exemption reads in full, “Non-hospital ambulatory care settings where all non-employees are screened prior to entry and people with suspected or confirmed COVID-19 are not permitted to enter those settings.”[3] More on this later.

It is clear that the ETS generally applies to physicians’ offices, as physician’s offices are used as examples in various parts of the ETS.[4]  However, employers with 10 or fewer employees have fewer requirements under the ETS.  For example, employers with more than 10 employees must have a written COVID-19 plan for each workplace. Employers with 10 or fewer employees must have COVID-19 plans, but the plan is not required to be in writing. OSHA’s plan is to include updates to the ETS as needed.  

The ETS covers the following subjects, as they relate to employment activities of health care workers in the health care industry:

COVID-19 Plan

Patient screening and management

Respiratory protection


Ventilation of rooms and buildings

Health screening and medical management

Physical barriers

Physical distancing

Hand hygiene and cleaning

Record keeping


Following is a brief discussion of each of the ETS requirements.

COVID-19 Plan.

Employers must have a plan to minimize the transmission of COVID-19 in the health care workspace.  Employers with more than 10 employees must have a written COVID-19 Plan.

Patient Screening and Management.

In settings where direct patient care is provided, employers must limit and monitor points of entry, screen and triage all non-employees entering the setting, and implement other patient management as necessary, including developing and implementing procedures regarding standard transmission-based precautions.

Respiratory Protections.

Employers must provide the personal protective equipment (PPE) necessary to protect employees, at no cost to the employees.


Employers must ensure and document that each employee receives training on the ETS, in a language and at a literacy level the employee understands.  Training should include various topics pertinent to COVID-19 safety measures, such as COVID-19 transmission and employer policies and procedures regarding COVID-19 transmission.

Ventilation of Rooms and Building.

HVAC systems should be operating at maximum efficiency, per the manufacturer’s recommendations.  Air filters that remove particles and aerosols that can transport the COVID-19 virus should be used where the HVAC system can accommodate the filters.

Health Screenings and Management.

All employees must be screened every day they work in a health care setting.  This can be accomplished by the employees answering questions before entering the workplace, or by the employee self-evaluating prior to entering the workplace. Where appropriate, employees must be kept from the workplace or removed from work (e.g., an employee develops a fever, cough and loss of the sense of taste while at work and is asked to leave). Employees must be informed of possible COVID-19 exposures (e.g., told of an employee (without giving their name) who has developed fever, cough and loss of the sense of taste at work, and is sent home). There are mandatory paid leave provisions for employees who develop COVID-19, or who must stay out of work because of a COVID-19 exposure, which are in addition to other employee paid leave provisions already in place for employers. Employees must be paid for the time they take while at work to be vaccinated against COVID-19, and for the day after receiving a vaccination, where there is a physical reaction to the vaccine.  

Physical barriers.

These include Plexiglas barriers when patients initially check in the office and between workers who must work at specific locations (e.g. computer billing) most of their workday.

Physical Distancing.

This is also referred to as “social distancing.”  Where there is room, employees should maintain at least six feet of distance between themselves and other employees (e.g., employee break rooms).

Hand Hygiene and Cleaning.

Hand hygiene and cleaning work together to reduce the spread of the COVID-19 virus. Offices and clinical spaces should be cleaned at least daily, and handwashing should occur between patient encounters.

Record Keeping and Reporting.

For employers covered by OSHA standards, there are already record-keeping requirements in place. Additional record-keeping and reporting are added by the ETS for employees who test positive for COVID-19 and employees who die because of a COVID-19 infection. Employers with more than 10 employees must keep a log of any employee diagnosed with COVID-19, whether or not the infection arose because of an occurrence at work.

This article began with an introduction to one of the exemptions that could possibly keep a physician’s office from having to comply with the ETS. That exemption reads “Non-hospital ambulatory care settings where all non-employees are screened prior to entry and people with suspected or confirmed COVID-19 are not permitted to enter those settings.”[5] Those physician’s offices that could operate under this provision — no suspected or confirmed COVID-19 patients or employers are allowed to enter the office — would be able to operate as they have in the past in regard to OSHA requirements. However, there are legal pitfalls with using this exemption to avoid compliance with the ETS.  For example, many surgeries require office follow-up. If a surgeon refused to see a patient who developed COVID-19 after surgery, but before the office follow-up, the patient could make a claim of abandonment.  There are other risks with this course of action, and many physicians could ill afford to refuse to see patients “suspected” of having COVID-19.  There may be ways to stay within the exemption; however, careful thought will need to be given for each patient in a similar situation. For instance, perhaps the post-surgery patient could be seen in a hospital ER, or evaluated/examined through a telehealth appointment, rather than in the surgeon’s office.  


As is often the case, the ETS has been issued almost beyond the point of usefulness. Physician offices, health care facilities, and other health care providers are going on two years of their response to the COVID-19 pandemic. To mandate changes to their well-established COVID-19 precautions at this time is disruptive, to say the least; and it places additional administrative burdens on employers subject to OSHA, without adding much, if any, additional value. Nevertheless, physician’s offices and others are well-advised to take the ETS seriously because it will likely be the subject of complaints, investigations, and audits by OSHA. OSHA investigates complaints of violations of federal law based upon anonymous employee complaints and random “audits” of employer compliance and has indicated it will enforce the ETS using both of these methods.

[1] Occupational Exposure to COVID-19; Emergency Temporary Standard, 86 Fed. Reg. 32376, available at

[2] 29 U.S.C. § 652(5). 

[3] 29 C.F.R. § 1910.502(a) (2) (iii).

[4] 29 C.F.R. § 1910.502(a), n. 2.

[5] 29 CFR Section 1910.502(a) (2) (iii).

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Potential HIPAA Changes That Would Allow Healthcare Providers to Disclose Phi and Better Protect Patients

Potential HIPAA Changes That Would Allow Healthcare Providers to Disclose Phi and Better Protect Patients

by Lindsey Phillips, Burr & Forman

On December 10, 2020, the Office for Civil Rights (“OCR”) at the United States Department of Health and Human Services (“HHS”) announced proposed changes to the regulations implementing the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). The proposed changes, which are set out in the Notice of Proposed Rulemaking (“NPRM”), are a part of the broader initiative to promote value-based care, enable better coordination among healthcare providers, and facilitate patient autonomy and engagement. 

One key theme found in the NPRM that will likely enable better coordination among healthcare providers and potentially increase patient safety is expanded permission to disclose protected health information (“PHI”) to third parties in emergency situations. For example, under the proposed changes, covered entities would be allowed more flexibility to disclose PHI in emergencies like a mental illness and substance abuse crisis. The current standard for disclosure of PHI in an emergency or health crisis is based on the covered entity’s “professional judgment.” This standard has often left covered entities unsure as to when a disclosure is permitted. The proposed modification relaxes this standard slightly in that it would allow a covered entity to disclose PHI in an emergency situation or health crisis when the covered entity has a good faith belief that the disclosure is in the best interest of the individual. A good faith belief could be based either on direct knowledge of relevant facts or representations by a person who can reasonably be expected to know relevant facts. For example, OCR has provided the following scenarios:

Good faith would permit a licensed health care professional to draw on experience to make a determination that it is in the best interests of a young adult patient, who has overdosed on opioids, to disclose relevant information to a parent who is involved in the patient’s treatment and who the young adult would expect, based on their relationship, to participate in or be involved with the patient’s recovery from the overdose. Likewise, front desk staff at a physician’s office who have regularly seen a family member or other caregiver accompany an adult patient to appointments could disclose relevant information to the family member or caregiver as a way of checking on the welfare of the patient, when a patient misses an appointment, based on the staff’s knowledge of the person’s involvement and a good faith belief about the patient’s best interest.

But not only would covered entities be allowed more flexibility to disclose PHI when individuals are experiencing emergencies or health crises, they would also be allowed more leniency to disclose PHI to avert a threat to safety. While covered entities are currently allowed to disclose PHI to prevent threats to health and safety, the current standard is considerably more stringent in that it allows the disclosure of PHI to avert a threat to health or safety only when the threat is “serious and imminent.” Under the changes proposed in the NPRM, covered entities could make a disclosure when the threat is “serious and reasonably foreseeable.” OCR has stated that “[a]dopting a ‘serious and reasonably foreseeable’ standard can enable a health care provider to timely notify a family member that an individual is at risk of suicide, even if the provider cannot predict that a suicide attempt is ‘imminent.'” In addition, “[a]n emergency room doctor who sees an elderly patient with COVID-19 could contact the patient’s nursing home to alert them of the potential exposure of other residents and staff based on the serious and reasonably foreseeable threat of infection with COVID-19 without delay caused by the need to assess whether the threat is sufficiently ‘imminent’ to permit the disclosure.” 

These proposed modifications provide additional clarity regarding PHI disclosures that would assist in the Department’s initiatives to increase coordination among healthcare providers and ultimately improve patient safety. Both of these proposed changes would hopefully empower covered entities to disclose PHI in situations where there is a genuine belief that harm is likely without being fearful of HIPAA penalties because the harm was not imminent.

Lindsey Phillips is an associate at Burr & Forman LLP practicing exclusively in the firm’s Healthcare Industry Group. 

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Physician Recruitment Agreements – What You Need to Know

Physician Recruitment Agreements – What You Need to Know

by Howard E. Bogard

Both the federal Anti-kickback Statute and the Stark Law allow a hospital to provide certain financial assistance to aid a medical practice in its efforts to recruit and hire a new physician. Financial assistance can take many forms, including a collection guarantee, net income guarantee and/or payments with respect to a physician’s moving expenses, school debt and marketing.  A recruitment agreement reflecting financial assistance is typically signed by the medical practice, physician and hospital and is structured as a loan that is forgivable as long as the physician practices medicine in the hospital’s service area for a defined time period. The amount of financial assistance cannot take into account past or future referrals from the recruited physician (or medical practice) to the hospital.

In order for a hospital to provide a medical practice financial assistance to recruit and hire a new physician, the hospital must first determine that there is a documented need in the community for the physician’s specialty.  Once confirmed, the arrangement must be in writing and the physician must “relocate his or her medical practice” to the “geographic area served by the hospital” to become a member of the hospital’s medical staff. With some exceptions for hospitals located in rural areas, the geographic area served by a hospital is the area composed of the lowest number of contiguous zip codes from which the hospital draws at least 75 percent of its inpatients.  A physician will be considered to have relocated his or her medical practice if the physician moves his or her practice at least 25 miles and into the geographic area served by the hospital or the physician moves his or her practice into the geographic area served by the hospital and the physician derives at least 75 percent of revenues from patients not seen or treated by the physician at his or her prior medical practice site. There are also exceptions for residents or physicians who have been in practice one year or less or for physicians who meet other requirements.  The main point is that it is not permissible for a hospital to provide recruitment assistance with respect to a physician who is already working in the hospital’s service area.  

A common form of recruitment assistance is a collection or net income guarantee that runs for one or two years after the physician is first employed by the medical practice.   In either case, the recruitment agreement “guarantees” that the physician will generate a certain amount of revenue to satisfy a collection “target” or a net income “target”.  If the physician’s collections are not high enough in a particular month to meet the target amount, the hospital pays the difference.  With respect to a net income guarantee, the target is based on the physician’s collections after certain “direct expenses” are subtracted.  By law, direct expenses can only consist of new, incremental expenses incurred by the medical practice by virtue of the physician’s employment. Examples of new, direct expenses include the cost of the physician’s compensation and benefits, license fees and dues, malpractice insurance and other costs incurred by the medical practice to the extent that such expenses increase directly as a result of the physician’s employment.  Existing expenses, such as office rent and personnel costs, cannot be included as a direct expense. 

When reviewing a physician recruitment agreement, it is important to not only review the financial terms of the assistance but also to consider the following:

 Commitment Period – What is the length of time the recruited physician must practice in the hospital’s geographic service area for the recruitment assistance loan to be forgiven? The typical time period is one to three years after the financial assistance period ends.

   Repayment Obligations – It is important to review whether the medical practice, physician or both are obligated to repay the loan upon a default of the recruitment agreement.  Oftentimes, if the physician is the direct recipient of the loan proceeds, such as moving expense reimbursement and payments for student loans, the physician will be solely responsible. However, a collection or net income guarantee will often obligate both the physician and medical practice to repayment in the event of a default. A promissory note is often signed by the physician and sometimes the medical practice to secure the repayment of the loan.

Physician Obligations – While the physician will need to remain on the medical staff of the hospital during the term of the recruitment agreement, it is important to determine if other obligations are imposed on the physician.  Often, during the term of the recruitment agreement the physician will be obligated to certain hospital call obligations and restricted from having an ownership interest in a provider that competes with the hospital. 

Security Interest – To secure the recruitment agreement loan sometimes the hospital will want a security interest in the medical practice’s accounts receivable generated by the recruited physician. These provisions must be carefully reviewed since medical practices often pledge their accounts receivable as collateral to a bank or other financial institution.

A physician recruitment agreement can provide a medical practice significant financial assistance with the recruitment and hiring of a new physician. However, the agreement may also impose significant financial restrictions and penalties on both the medical practice and physician if the terms of the agreement are breached.  Any recruitment agreement should be carefully reviewed and negotiated.

Howard Bogard is a Partner at Burr & Forman LLP and chairs the firm’s Health Care Practice Group. He can be reached at 205-458-5416 or at

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Are You Ready for Your PPP Loan Audit?

Are You Ready for Your PPP Loan Audit?

By: Jim Hoover, Burr & Forman

PPP loans received by individuals and businesses under the CARES Act will be audited (“reviewed”) by the SBA.  PPP loans of $2 million or more will automatically be audited by the SBA.  Many PPP loans of less than $2 million will also be audited.

Borrowers will often receive notification of the audit through their lending bank, but the SBA is directly notifying PPP borrowers as well.  The SBA is receiving support from the Internal Revenue Service and other federal agencies in these audits such as the Department of Justice.  There have been several criminal investigations resulting from these audits.

PPP loan audits request documents and information from the borrower, including income and employment tax returns, payroll records, financial statements, and bank account statements including deposit and payment information in order to verify information reported by the borrower on its PPP loan application.  However, the SBA PPP loan audits focus on much more.

SBA audits of PPP loans have thus far focused on whether the individual or business was eligible to receive a PPP loan, and whether the borrower correctly calculated its PPP loan amount.  Specific issues being reviewed by the SBA in these audits include “economic necessity” for a PPP loan, and “head-count” related issues including affiliation with other businesses, the appropriate “NAICS” code for the business, and whether the business counted all employees – full-time, part-time, and even temporary – in filing the loan application.  The SBA is also looking at other “business-specific” issues of the borrower.

The PPP loan application contains a borrower certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant“.  This same certification is also required in new PPP loan applications under the “Economic Aid Act”.  For borrowers that received PPP loans of less than $2 million, the borrower is deemed by the SBA to have made this “economic necessity” certification in “good faith.” As a result, the SBA may not be looking specifically at this issue for borrowers that received loans of less than $2 million.  However, for PPP loans of $2 million or more, borrowers are not eligible for this “good faith economic necessity presumption”, and the SBA is auditing this certification issue.

Without being an alarmist, false certifications is the keystone issue for most False Claims Act prosecutions.  Accordingly, it is important for borrowers to carefully review and gather the documentation that supports the certification.  

The SBA is beginning many audits by sending out a “Loan Necessity Questionnaire” (SBA Form 3509), which the SBA first sends to the lending bank and then the bank sends the questionnaire to the borrower.  The borrower has a limited amount of time, 10 days, to complete and return the questionnaire to the bank, and the bank then provides the completed questionnaire to the SBA.

If a borrower applies for forgiveness of a PPP loan, the forgiveness application may be separately reviewed by the SBA and, as a practical matter, if a borrower files for forgiveness this will likely trigger or at least accelerate a full SBA audit of the PPP loan.

Once an SBA PPP loan audit is completed, and where an adverse audit determination is made by SBA, including that the borrower may not qualify for the loan, the borrower then has administrative appeal rights within the SBA to have the audit determination reviewed, which can lead to a hearing before a federal administrative law judge. Those appeal rights are the subject of a future article.  


Jim Hoover is a partner at Burr & Forman LLP and works exclusively within the firm’s Health Care Practice Group and predominantly handles healthcare litigation. Burr & Forman has a dedicated team to counsel individuals and businesses in government audits, investigations and defense-related to the PPP under the CARES Act, and also new PPP loans under the Economic Aid Act. The PPP and CARES Act Audit, Investigations and Defense Team represents and advises clients in audits and investigations involving PPP loans and tax benefits that may have been claimed under the CARES Act. This multidisciplinary team combines more than 230 years of legal experience and attorneys with previous government positions, including attorneys with IRS Chief Counsel, the United States Department of Justice, and United States Attorneys’ Offices.  More information can be found at

Posted in: Coronavirus, Legal Watch, Management, MVP

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Physician Compensation Models in Light of Recent Stark Law Changes

Physician Compensation Models in Light of Recent Stark Law Changes

by Kelli C. Fleming, Burr Forman

On December 2, 2020, the Centers for Medicare and Medicaid Services (“CMS”) finalized sweeping changes to the federal Physician Self-Referral Law, commonly known as the Stark Law. At least one such change may materially impact how physician group practices allocate profits from Stark Law designated health services (“DHS”).

Under the Stark Law, a medical practice with at least two physicians must qualify as a “group practice” in order to take advantage of the Stark Law in-office ancillary services exception, which is the exception often used to allow a physician owner or physician employee to order DHS from his or her own medical practice. As part of the group practice requirements, DHS profits must be distributed to all physicians in the group, or to a pool of five or more physicians in the group, in a manner that does not directly take into account the volume or value of a physician’s referrals for DHS.

Currently, many physician group practices, especially large or multi-specialty practices, allocate DHS profits to its physicians based on DHS categories. For example, profits from one DHS category (e.g., imaging services) may be allocated to certain physicians in the group practice while profits from a second DHS category (e.g., physical therapy) may be allocated to a different (or possibly overlapping) subset of physicians in the group practice.

However, under the new Stark Law rules, CMS has clarified that DHS profits can no longer be allocated based on DHS category. Instead, profits from all DHS categories for all physicians in the group practice (or a component of at least five physicians in the group practice) must be aggregated and then distributed to all physicians in the group practice (or a component of at least five physicians in the group practice) in a manner that does not directly take into account the volume or value of referrals. Using the example above, under this new clarification, DHS profits from both imaging services and physical therapy services ordered by physicians in the group practice (or a component of at least five physicians in the group practice) must be aggregated and then the total aggregated profits distributed to such physicians in a manner that does not take into account the volume or value of referrals.

CMS also clarified that if a physician practice has more than one pool of five physicians, each pool does not have to be treated in an identical manner. For example, one pool may utilize one distribution methodology and a second pool may utilize another distribution methodology, as long as the methodologies used are Stark Law compliant (i.e., not based on the volume or value of referrals).

CMS recognizes that its prior regulatory guidance on the distribution of DHS profits has led to confusion by industry participants. While the other recent changes to the Stark Law take effect on January 19, 2021, the changes with regard to the distribution of DHS profits take effect on January 1, 2022.

Kelli Fleming is a Partner at Burr & Forman LLP and practices exclusively in the firm’s Health Care Practice Group.

Posted in: Legal Watch, MVP

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CMS and OIG Issue Historic Revisions to the Federal Anti-Kickback Statute and Stark Law

CMS and OIG Issue Historic Revisions to the Federal Anti-Kickback Statute and Stark Law

By: Anthony Romano with Burr Forman

On November 20, 2020, the Centers for Medicare & Medicaid Services and the Office of Inspector General of the Department of Health and Human Services issued two significant final rules to reform the Anti-Kickback Statute and Stark Law in an aim to reduce regulatory barriers to coordination of patient care, and to accelerate the transformation of the health care system to value-based care (a value-driven health care system that pays for health and outcomes, as opposed to the traditional fee-for-service payment system which rewards providers for the volume of care provided).

The 1,000-page Anti-Kickback Statute final rule does this by implementing seven new safe harbors, modifying four existing safe harbors, and codifying one new exception under the Civil Monetary Penalty Law.  As you are probably aware, the Federal Anti-Kickback Statute provides for criminal penalties for whoever knowingly and willfully offers, pays, solicits, or receives remuneration to induce or reward, among other things, the referral of business reimbursable under any of the Federal health care programs, including Medicare and Medicaid. Health care providers and others may voluntarily seek to comply with statutory and regulatory safe harbors so that they have the assurance that their business practices will not be subject to sanctions under the Anti-Kickback Statute. To receive safe harbor protection, an arrangement must squarely meet each requirement of an applicable safe harbor. However, failure to fit in a safe harbor does not mean that an arrangement violates the Federal Anti-Kickback Statute. Arrangements that do not fit in a safe harbor are analyzed on a case-by-case basis, including whether the parties had the requisite intent. Congress intended the safe harbor regulations to be updated periodically to reflect changing business practices and technologies in the health care industry, and the new final Anti-Kickback Statute regulations accomplish this by, among other things, removing potential barriers to more effective coordination and management of patient care, and by removing potential barriers to the delivery of value-based care.   

The 627-page Stark Law final rule creates new exceptions for value-based arrangements, provides additional guidance to make it easier for physicians and other health care providers to comply with the Stark Law, and provides protection for non-abusive, beneficial arrangements. Unless otherwise specified in the rules, the new provisions go into effect January 19, 2021.  When the Stark Law was enacted in 1989, healthcare was paid for primarily on a fee-for-service basis and the Stark Law recognized that a profit motive could influence some physicians to order services based on their financial self-interest rather than the good of the patient. For this reason, the Stark Law prohibits a physician from making referrals for certain healthcare services payable by Medicare or Medicaid if the physician (or an immediate family member of the physician) has a financial relationship with the entity performing the service. There are statutory and regulatory exceptions, but in short, a physician cannot refer a patient to any entity with which he or she has a financial relationship unless an exception is satisfied.  The Stark Law also prohibits the entity from filing claims with Medicare or Medicaid for services resulting from a prohibited referral, and Medicare or Medicaid cannot pay if the claims are submitted. Although the regulations that interpret the Stark Law have been updated several times, the Stark Law has not been significantly updated since it was enacted in 1989, and all previous changes left in place a framework that is tailored to a fee-for-service environment.  The new Stark Law final rule includes a comprehensive package of reforms to modernize the regulations that interpret the Stark Law while continuing to protect the Medicare program and patients from bad actors.

Overall, these new rules will have a significant, and expected positive, impact on healthcare providers by easing burdensome regulatory restrictions.  With over 1,600 pages of new rules to digest, be on the lookout for more detailed and specific analysis in the near future.  In the meantime, please do not hesitate to contact us if you have specific questions regarding the impact of the new Anti-kickback Statute or Stark Law final rules on you or your practice. 

Anthony Romano practices with Burr & Forman LLP in the firm’s Health Care Industry Group. Anthony may be reached at or (205) 458-5210.

Posted in: Legal Watch, MVP

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