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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.  

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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 www.burr.com.

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.

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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 aromano@burr.com or (205) 458-5210.

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The Perfect Storm for Litigation Resulting From the Paycheck Protection Program (PPP) and Coronavirus Aid, Relief and Economic Security (CARES) Act

The Perfect Storm for Litigation Resulting From the Paycheck Protection Program (PPP) and Coronavirus Aid, Relief and Economic Security (CARES) Act

By: Jim Hoover

Millions of American businesses and self-employed individuals applied for and received Paycheck Protection Program (PPP) loans authorized by the CARES Act. PPP loans are obtained from a bank and guaranteed by the Small Business Administration (SBA). The processes for obtaining loans and loan forgiveness are ripe for many types of possible litigation including administrative, civil, and criminal. 

Businesses and individuals were required to provide documents and information and make important certifications to their bank when they applied for a PPP loan. The certifications included the eligibility of the business or individual for a PPP loan meeting the many requirements of the CARES Act. In a PPP loan application a borrower also had to certify that “[c]urrent economic uncertainty make this loan request necessary to support the ongoing operations of the Applicant.” 

The CARES Act also allows PPP loans to potentially be forgiven subject to many conditions. Businesses and individuals seeking PPP loan forgiveness must provide additional documents and yet more certifications through an application filed with their PPP lending bank. It is the responsibility of the borrower to provide an accurate calculation of loan forgiveness and to attest to the accuracy of its reported information.

PPP loans under the CARES Act will be audited. The Department of the Treasury announced that all PPP loans over $2 million will be audited; other PPP loans will also certainly be audited.  For example, borrowers that seek forgiveness of a PPP loan increase their likelihood of being audited, and not limited just to forgiveness, but eligibility of the borrower for the loan and the accuracy of certifications made by the borrower in the borrower’s PPP loan application. 

The SBA also reserves the right to review and audit all PPP loans and related loan issues, including eligibility, borrower certifications, and forgiveness. The SBA may review whether a borrower calculated its loan amount correctly and whether the borrower used loan proceeds for allowable purposes. The SBA issued guidance stating that a borrower who received a PPP loan of less than $2 million will be deemed to have made this required certification in good faith. For borrowers who received a PPP loan of $2 million or more, the borrower may have to prove that its application was based on current economic uncertainty and that the PPP loan was necessary to support ongoing operations of the borrower.  If the SBA determines in the course of its audit/review that a borrower lacked an adequate basis for the required certification concerning the eligibility of the loan request, the SBA will seek repayment of the outstanding PPP loan balance and determine that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification, the SBA has announced that it will not pursue administrative enforcement or make referrals for enforcement to other agencies. 

Applicable to forgiveness, the SBA states that, to receive loan forgiveness, a borrower must complete and submit the Loan Forgiveness Application (or equivalent bank form) to the PPP lending bank (or the lender that is servicing the PPP loan). The bank will review the application and make a decision regarding loan forgiveness. Banks are expected to perform a good-faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning amounts eligible for loan forgiveness. The lender must issue a decision to the SBA regarding a loan forgiveness no later than 60 days after receipt of a completed loan forgiveness application.

That decision may take the form of an approval (in whole or in part), denial, or (if directed by the SBA), a denial without prejudice due to a pending SBA review of the loan for which forgiveness is sought. In the case of a denial without prejudice, the borrower may subsequently request that the bank reconsider its application for loan forgiveness, unless the SBA has determined that the borrower is ineligible for a PPP loan. If the bank determines that the borrower is entitled to forgiveness of some or all of the amount applied for, the SBA will, subject to any SBA audit or review of the loan or loan application, remit the appropriate forgiveness amount to the bank. If the bank denies forgiveness, in whole or in part, the bank must notify the borrower in writing that the lender has issued a decision to the SBA denying the loan forgiveness application. The SBA reserves the right to review the bank’s decision in its sole discretion. Within 30 days of notice from the bank, a borrower may request that the SBA review the bank’s decision.

In the event the SBA reviews or audits a borrower’s PPP loan, the SBA will notify the bank, who is required to notify the borrower in writing within five (5) business days of receipt of notice from the SBA and to request information from the borrower. The SBA may also request information directly from the borrower. A borrower’s failure to respond to the SBA may result in a determination that the borrower was ineligible for a PPP loan or ineligible to receive the loan amount or loan forgiveness.

If the SBA determines in the course of its audit or review that the borrower was ineligible for a PPP loan, the loan will not be eligible for forgiveness. If only a portion of the loan is forgiven, or if the forgiveness request is denied, any remaining balance due on the loan must be repaid by the borrower on or before the two-year maturity of the PPP loan. 

The CARES Act created the new “Office of the Special Inspector General for Pandemic Recovery,” whose task is to “conduct, supervise, and coordinate audits and investigations” of the financial assistance programs for businesses. Administrative appeal remedies from disputed PPP audits, including resulting litigation, are presently unclear. While adverse decisions of the Office of Hearings and Appeals are appealable to federal courts, more guidance from the SBA concerning PPP audits and appeal remedies will be issued. 

Borrowers must also be aware of the Federal False Claims Act (“FCA”).  Under the FCA, a claim generally means any request or demand, whether under a contract or otherwise, for money or property that–(i) is presented to an officer, employee, or agent of the United States; or (ii) is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest, or (iii) will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.  31 U.S.C. § 3729.  Federal courts have ruled that loan applications are “claims” for FCA purposes.  Thus, a PPP loan and any corresponding forgiveness is subject to the “False Claims Act.” In fact, government authorities are beginning to focus substantial resources on CARES Act fraud and abuse. Although the U.S. Department of Justice began indicting borrowers in connection with PPP fraud as early as May of this year, on September 10, 2020, federal authorities charged 57 people in jurisdictions across the U.S. with “stealing” $175 million from the PPP.  Additionally, a government report issued in September found “tens of thousands of loans could be subject to fraud, waste, or abuse.” The U.S. Government Accountability Office further reported to the U.S. House of Representatives that the SBA’s fraud hotline had received more than 42,000 reports of alleged fraud. 

Because of the many types of litigation, it is important that recipients of PPP loans and other financial assistance programs, carefully review their applications and requests for forgiveness to ensure they have met all of the programs’ requirements. 

Jim Hoover practices with Burr & Forman LLP and works exclusively within the firm’s Health Care Industry Group and primarily handles healthcare litigation and compliance matters.

Posted in: Coronavirus, Legal Watch, Management

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Five Things to Consider When Selling Your Practice to a Private Equity Firm

Five Things to Consider When Selling Your Practice to a Private Equity Firm

By Howard Bogard, Burr Forman

A growing number of physicians are selling their medical practices to private equity firms in order to “monetize” their practice, as well as to access capital and obtain operational efficiencies. In the Southeast, we are seeing consistent private equity activity in the specialties of anesthesiology, gastroenterology, dermatology, ophthalmology, oncology, ENT, and internal medicine, as well as others. 

 Private equity firms generally use capital from wealthy individuals, pension funds and university endowments to invest in various industries with the goal of obtaining a return on investment of 20% or more.  To start, the private equity firm will purchase a large, well-managed (“platform”) medical practice and thereafter will acquire additional practices in order to increase the number of employed physicians throughout a defined geographic area.  The goal is to grow revenue and decrease cost and then sell the practices within three to seven years of acquisition.

 If you are considering a sale to a private equity firm, there are several things to consider:

  1. Valuation of the Practice.  A private equity firm generally determines the purchase price for a medical practice based on a multiple of EBITDA (earnings before interest, taxes, depreciation, and amortization) as a measure of the operating performance of the practice. The multiple can run anywhere from 4 to 12 times EBITDA, with a platform or larger practice obtaining a multiple on the higher end of the range.
  2. Payment of the Purchase Price.  The purchase price is typically a combination of cash plus “roll-over” equity in the buyer from 10% to 30% of the total purchase price.  For example, if the total purchase price is $10 million, $8 million could be paid in cash at closing and $2 million paid as equity in the buyer.  When the buyer sells, the physicians receive a return on their roll-over equity.  A portion of the purchase price may also be paid by a promissory note with payment contingent on the physicians meeting certain revenue benchmarks.  
  3.  Expect a Change in Compensation. After closing, the physicians will become employees of the private equity buyer. In return for a large up-front purchase price, typically a physician will be paid less in annual compensation as compared to pre-closing compensation amounts, although “guaranteed” salaries for a period of time can be negotiated.  Compensation is based on a variety of factors, including collections from personally performed services, plus a percentage of ancillary revenue and/or a percentage of overall profits. Physicians considering a private equity sale should analyze and compare their expected compensation over a three to five year period in private practice versus the same period under a private equity model, to include the up-front payment.
  4. Penalties for Early Departure.  Typically, a private equity firm will require the selling physicians to sign a five-year employment agreement. In the event a physician leaves employment for certain reasons within a defined time period, the departing physician will be required to repay some of the purchase price he or she received (a “claw-back”).  Typically, the claw-back period runs from three to five years after the start of employment, with more money repaid in the first year of the claw-back as compared to the last year. In addition, the selling physicians are required to sign non-compete and non-solicitation/no-hire agreements that restrict the physician’s ability to compete with the private equity buyer in the event the physician leaves the practice.
  5. Loss of Control.  One of the benefits of being in private practice is that the physician owners make the decisions.  If a practice sells to a private equity firm, a management company (owned by the private equity firm) will manage the practice and will have authority to make essentially all operating decisions, other than clinical/medical decisions, which remain within the control of the physicians.  Oftentimes, there is a clinical management board or committee comprised of physicians and private equity representatives that has authority to address certain issues.  However, if the practice is well run and profitable (hence the reason the private equity firm is interested in the practice), in my experience, the private equity firm does not make significant changes without first consulting with the physicians.

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

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The Effect Differing Medical Opinions Have On Falsity and Scienter in False Claims Act Lawsuits

The Effect Differing Medical Opinions Have On Falsity and Scienter in False Claims Act Lawsuits

By: Jim Hoover with Burr Forman, LLP

There is currently a circuit split among the Federal Circuit Courts of Appeals regarding the effect differing medical opinions have on the elements of falsity and scienter in False Claims Act lawsuits.  

Earlier this year the Third Circuit Court of Appeals ruled that conflicting medical opinions can create a genuine dispute of material fact on “falsity” in a False Claims Act action. The case is United States v. Care Alternatives. This holding directly conflicts with the Eleventh Circuit’s September 2019 decision in United States v. AseraCare, which held that a mere difference in medical opinion between physicians regarding a patient’s prognosis was not enough to establish falsity under the FCA. In Care Alternatives, the Third Circuit rejected AseraCare and found that conflicting physician testimony about the validity of physician’s certifications was sufficient to raise a dispute of material fact regarding the element of “falsity.” The Third Circuit sought to make clear that in its Circuit, findings of falsity and scienter must be independent from one another for purposes of FCA liability. According to the Third Circuit, the scienter element helps limit the possibility that providers will be exposed to liability under the FCA any time the Government or relator can find an expert who disagreed with the certifying physician’s medical prognosis.

Former employees of Care Alternatives filed a qui tam action against the hospice provider, alleging the hospice had improperly admitted patients who were not eligible for Medicare’s hospice benefit and directed employees to falsify Medicare certifications in order to meet the eligibility requirements. The relators’ physician opined that in 35% of the sample cases he reviewed a reasonable physician would not have certified the patient as terminally ill with a prognosis of six months or less based on the accompanying documentation. Reviewing the same sample set, Care Alternatives’ physician disagreed, finding that a reasonable physician could reasonably certify each case. Thus, there was a disagreement among the parties’ experts. The United States District Court for the District of New Jersey agreed with AseraCare by adopting and applying AseraCare’s holding that an “objective falsehood,” something more than a retrospective difference of opinion, was required to create a genuine dispute of fact.

On appeal, the Third Circuit Court of Appeals disagreed and reversed and remand the case for consideration of the other elements of FCA liability, particularly the element of scienter. The Third Circuit noted it is well-established that subjective opinions can be false, and applied this reasoning to the FCA’s falsity element. The Third Circuit opined that AseraCare’s “objective falsity” standard improperly conflated falsity with scienter, i.e., that the whistleblower prove a certifying physician was making a knowingly false certification. The Third Circuit held that these elements must be considered separately, and the purpose of the scienter requirement is to limit the possibility that a provider could be found to violate the FCA any time the Government or a relator could find an expert who may establish falsity simply by disagreeing with a physician’s prognosis.

Thus, in the Third Circuit a determination that a claim was false does not immediately trigger FCA liability. Relators must still establish that the provider knew the claim was false when the claims was submitted. Unfortunately, however, one of the big problems for False Claims Act defendants is credibility determinations are typically reserved for the jury thus almost forcing the False Claims Act case to trial.  

Because of the circuit court split, a United States Supreme Court opinion is needed to resolve the differing circuits’ approaches. In the meantime, the key takeaway for health care providers across the country is these differing standards will be fought in FCA cases where defendants have made reasonable subjective judgments.  The arguments should focus on both the falsity element and the scienter element.  

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.

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Identifying The Proper Documentation For End of Life Care

Identifying The Proper Documentation For End of Life Care

By Angie C. Smith

In the midst of this global pandemic, there have been stories about prioritizing patient care based on the patient’s ability to recover.  The stories are heartbreaking and highlight the need for people to have important discussions regarding advance care planning before they get sick and are unable to direct their own care.  Further, it is essential that the patient’s choice for end of life care be the driving force for withdrawing or withholding life-sustaining treatment.  To ensure that occurs, healthcare practitioners need to be able to identify the documentation necessary to implement patient choice regarding end-of-life care.  This article will examine the most common types of documentation that a healthcare practitioner can look for when implementing end-of-life care.

Advance Directive/Living Will

The most obvious documentation for expressing a patient’s wishes for end-of-life care is the Living Will or Advance Directive.  Under Alabama Code § 22-8A-4, any competent adult may execute a living will directing the providing, withholding, or withdrawing of life-sustaining treatment.  If a healthcare provider determines that a patient has a living will, the provider should confirm that it meets the following requirements:

  • In writing;
  • Signed by the person making the advance directive or in the person’s presence and at his direction;
  • Dated; and 
  • Signed by two or more witnesses who are at least 19 years of age, neither of whom shall be the person who signed the advance directive on behalf of the person making the advance directive, appointed as the health care proxy in the advance directive, related to the declarant by blood, adoption, or marriage, entitled to any portion of the estate of the declarant, or directly financially responsible for declarant’s medical care.

Once a healthcare provider or facility confirms the living will meets the above requirements, it will then need to determine whether the advance directive is in effect.  For the living will to take effect, the patient’s attending physician must make a determination that the patient is no longer able to understand, appreciate, and direct his or her medical treatment, and two physicians – one the attending physician and another physician – personally examine the patient and diagnose and document in the medical record that the individual has a terminal illness or injury or is in a state of permanent unconsciousness.  

After determining the advance directive applies, next establish the patient’s wishes.  Sounds easy enough but sometimes the forms can be incorrectly checked or the statement by the patient may be vague.  If the patient used the form contained in Alabama’s statute, there are Yes or No questions that guide the provider.  The form covers terminal illness and permanent unconsciousness and whether the patient wants life-sustaining treatment, defined as “drugs, machines, or medical procedures that would keep [the patient] alive but would not cure [the patient], or artificial food and hydration.”    

Another important provision on Alabama’s form Advance Directive is the designation of a healthcare proxy.  A health care proxy is a competent adult designated to make decisions regarding providing, withholding, or withdrawing life-sustaining treatment and artificial hydration and nutrition.  If a health care proxy is designated, the advance directive form also provides instructions for the health care proxy.   There are three options:  (1) the  health care proxy must follow the instructions on the form; (2) the health care proxy should follow instructions on the form and make any decisions not covered by the form; and (3) allows the health care proxy to make the final decision even if contradictory to what the patient requests.  

Durable Power of Attorney

A durable power of attorney or health care durable power of attorney may also provide guidance to a healthcare provider in evaluating a patient’s end of life care.  If a patient has a durable power of attorney that designates a health care proxy, a healthcare provider should ensure that the language in the power of attorney specifically allows the attorney-in-fact/agent to make health care decisions providing, withholding and withdrawing life-sustaining treatment.  To say that the agent can make health care decisions alone is not sufficient to allow the agent to make decisions related to withdrawing life support or providing artificial hydration nutrition, as examples.  Additionally, the durable power of attorney should be executed in the same way that an advance directive is executed.  In other words, it must have two witness signatures who are not related by blood or marriage, not entitled to take under the patient’s estate and are not financially responsible for the patient’s healthcare.  

Surrogate
If a patient does not have an advance directive or the advance directive does not apply to the circumstances or the patient does not have a healthcare proxy as described above, another option for making end of life decisions for a patient who is unable to make those decisions is a health care surrogate.  Under Alabama law, an individual can act as a health care surrogate in consultation with the patient’s attending physician.  If a family member wishes to make end-of-life decisions regarding withholding and withdrawing life-sustaining treatment, she must complete a certification and may determine whether to provide, withdraw or withhold life-sustaining treatment or artificially provided nutrition and hydration.  The law dictates a hierarchy for choosing the appropriate person to serve as a surrogate as follows:   

  1. a guardian where the order of guardianship authorizes the guardian to make decisions regarding withholding of life-sustaining treatment;
  2. the patient’s spouse, unless legally separated or party to a divorce proceeding;
  3. adult child;
  4. one of the patient’s parents;
  5. adult sibling;
  6. any one of the patient’s surviving adult relatives who are of the next closest degree of kinship; or 
  7. if the patient has no known relatives and none can be found after reasonable inquiry, an ethics committee acting unanimously may make those decisions. Where an ethics committee is convened to make decisions regarding life-sustaining treatment, the health care provider is required to notify the Alabama Department of Human Resources.  

The surrogate must certify under oath that she has contacted the persons in a class equal to or higher than the surrogate and that person has either consented or expressed no objection to the surrogate acting as a surrogate or to the decision.  The certification should be included as part of the medical record.  The form can be found here.   

Portable Do Not Resuscitate Order 
Although commonly used by health care providers in the state for years, it was not until 2016 that there was a reference in Alabama’s laws to “Do Not Resuscitate” orders, which allow health care providers to withhold cardiopulmonary resuscitation to a patient who is experiencing cardiac arrest.  Since 2016, Alabama not only defines a DNR order but also allows for a Portable DNR to follow a patient from facility to facility.  Upon admitting a patient to a facility, a health care provider should ask the patient or the patient’s family if a Portable DNR exists.  There is a specific form that must be used and requires proper execution to be implemented.  The form can be found here.  

A properly executed Portable DNR requires the signature of one of the following:  the patient; a representative of the health care provider based on instructions in an advance directive; a health care proxy or an agent under a health care POA, or a surrogate (discussed above).  A physician must also sign the form, and it should be maintained in the patient’s medical record along with any supporting documentation, e.g. the advance directive or power of attorney.  Once properly executed, it can be used by any health care provider.

Although this list may not be exhaustive, and certainly a verbal request related to end of life care should be honored, these are some of the most common forms of documentation that can assist healthcare providers in implementing the wishes of their patients.

Angie Cameron Smith is a partner at Burr & Forman, LLP practicing exclusively in the firm’s Health Care Industry Group.

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What if No One was On Call?

What if No One was On Call?

2020 Legislative Recap

Over the past few months, “unprecedented” has become an oft-used term. Though the outbreak of infectious disease has been seen throughout history, the COVID-19 pandemic halted nearly all aspects of normal life, sparing not even the 2020 Regular Session of the Alabama Legislature.

When it was all said and done, only a handful of bills were passed by each Chamber, with most left hanging in the balance. However, that’s not to say the 2020 Session was without action on important health-related items; in fact; negotiations persisted well through the shutdown.

Had the Medical Association not been “on call” during these times, the health and welfare of physicians, patients and practices could have been in jeopardy. 

*Click the button below to download a pdf version*

COVID-19 Related Items

If no one was on call . . . physicians, their staff, and their practices could have no protection from COVID-19 frivolous lawsuits. The Association worked with both Sen. Arthur Orr (R-Decatur) on legislation (SB330) as well as the Ivey Administration on an executive order along with other health and business organizations. While time ran out on the legislation during the 2020 Session, the efforts with the Governor’s office were successful and on May 8, Gov. Ivey issued an executive order providing liability protection to physicians for care whose provision to patients was negatively affected or impacted by COVID-19 and/or the state’s response to the pandemic.  A summary of the executive order is available here.  Despite the issuance of this order, however, the Association will continue advocating for passage of Sen. Orr’s legislation, whether in a subsequent special session in 2020 or later.

If no one was on call . . . executive orders could have been issued giving out-of-state telehealth corporations unfair business advantages over Alabama medical practices.  Instead, out-of-state physicians providing telehealth to Alabama patients didn’t get special treatment and had to follow the same rules as physicians living, working, and paying taxes in Alabama.

If no one was on call . . . executive orders could have been issued allowing the far-reaching, unnecessary, and dangerous scope of practice expansions.  When the pandemic hit, a countrywide effort ensued from national non-physician associations seeking to advance their own specific scope-expansion agendas.  These groups urged their state-level counterpart organizations to push governors to broadly expand scopes of practice in response to COVID-19, but despite this, the Ivey Administration wisely maintained physician-led, team-based care as the standard for Alabama.

If no one was on call . . . parity in payments for telehealth services may not have occurred.  Parity in reimbursements for the same care provided in-person and via telehealth (especially telephonically) has long been an advocacy priority for the Association.  The Association applauded the Blue Cross Blue Shield of Alabama decision to temporarily cover telephonic services by physicians beginning mid-March.  Alabama Medicaid followed suit, and finally, after weeks of the Association and other allied groups petitioning Congress and Medicare regarding coverage for telephonic-only visits for seniors, CMS also agreed to cover telephonic-only telehealth. Moving forward, the Association supports making permanent these improvements in coverage of telehealth services  If insurers do so voluntarily, legislation may not be ultimately necessary.

Moving Medicine Forward in 2020

For many organizations, major policy proposals and legislative initiatives fell by the wayside during the 2020 Session. However, the Medical Association saw the achievement of two top-priority funding requests (MMRC and BMSA) that were put into place in this session.

If no one was on call . . . the Maternal Mortality Review Committee (MMRC) could not have received vital funding. The Association spearheaded a coalition of stakeholders – which included March of Dimes, the American College of Obstetricians and Gynecologists, the American Academy of Pediatrics, and Johnson & Johnson – to bring awareness to the issue of increasing maternal mortality rates in Alabama and spotlight the impact this committee could have to reverse that trend if properly staffed and resourced. Gov. Ivey included funding for the MMRC in her initial budget request, and legislators maintained the funding in the final budget.

If no one was on call . . . the Board of Medical Scholarship Awards could not have received a significant funding increase. The Association worked with BMSA and the Alabama Academy of Family Physicians (AAFP) to explain how additional funding would expand the impact of this already highly successful program which awards scholarships to physicians and in turn they agree to practice in an underserved area. Gov. Ivey agreed, and the final budget included a $500,000 increase for the BMSA.

If no one was on call . . .  support could not have grown for improving the existing rural physician tax credit. SB195, supported by the Association, would have amended the out-of-date definition of “rural” and strengthened the current residency requirement. The bill was passed by the Senate Committee, but died as a result of the session being cut short. This tax credit is a significant tool for attracting and retaining physicians for rural Alabama communities.

If no one was on call . . .  support for strengthening Alabama’s athletic trainer statute as it relates to physician supervision and care continuity could not have grown. Prior to the session, the Association worked closely with the Athletic Trainers Association in drafting SB93 to better define the practice of athletic training, ensure appropriate physician supervision and allow joint-promulgation of athletic trainer rules. The bill passed the Senate but stalled in the House due to the shortened session.

Scope Creep – Replacing Education with Legislation

Many people would like to be a physician, but few are willing to endure medical school, residency, and all the other various education and training requirements to become an M.D. or D.O. Instead of pursuing higher education, non-physicians are pursuing legislative changes as an end-around-means to practice medicine. The Association opposes any scope of practice expansions that could endanger quality care for patients.

If no one was on call . . . the physician referral requirement for physical therapy could have been abolished. As introduced, SB104 & HB145 would have abolished the need for a medical diagnosis before a physical therapist could begin providing therapy to a patient.  After consultation with many of our specialties most-involved with issuing PT referrals, the Association led negotiations to firmly maintain the importance of medical diagnosis but to also: (1) extend the current timeframe for which a referral is good from 90 to 120 days; (2) allow therapy without a referral for patients with a diagnosed chronic condition for which therapy is appropriate and who is under physician management for the condition; and, (3) allow therapy for without referral for restorative exercises so long as the patient does not initially present with new on-set pain, illness, or injury.  The bill did not pass but will return.

If no one was on call . . . standards for true collaboration within practice agreements could have been abolished. While SB114 originally would have allowed an “unlimited” number of nurse practitioners a physician could supervise, the Association, understanding that one-size-doesn’t fit all when it comes to practicing medicine,  negotiated a more prudent ratio of 9-to-1 of nurse practitioners. physician assistants or nurse-midwives for each collaborating or supervising physician while also preserving that physician’s autonomy and authority regarding patient care decisions within each collaborative or supervisory arrangement.  The bill did not pass, but will return.

If no one was on call . . . optometrists could have begun performing eye surgeries using scalpels and lasers as well as eye injections.  SB66 would have allowed optometrists, who do not undergo any surgical residencies anywhere in the U.S., to perform surgeries and injections on the eye and would also have given the Alabama Board of Optometry the sole power to define and regulate what is considered to be the practice of optometry, taking all authority away from the Legislature to define it. The bill was unfortunately rammed through the Senate Health Committee by its chairman, Jim McClendon, an optometrist himself (watch this video). The bill did not pass, but will return.

If no one was on call . . . a newly-created state board could have unilaterally set the scope of practice for imaging technologists and potentially increased costs to medical practices utilizing medical imaging.  Among other things, SB171 provided for the licensing and regulation y of health care personnel performing radiologic imaging or radiation therapy for diagnostic or therapeutic purposes. While this is not problematic on its face, the bill could have increased costs for medical practices and dangerously expanded the scope of practice for non-physicians. While the bill did not receive a vote in committee, it is expected to return.

If no one was on call . . . podiatrists could have been granted the ability to perform surgery on the ankle and lower leg. HB198 would have allowed podiatrists who have completed as few as 2-years of podiatry residency (significantly less than either a general orthopaedist or an orthopaedic surgeon specializing in the ankle) to perform ankle surgery. The legislation failed to receive a vote in committee but will return.

Beating Back the Lawsuit Industry

Plaintiff trial lawyers are constantly seeking new opportunities to sue doctors. Alabama’s medical liability laws have long been recognized for ensuring a stable legal climate and fostering fairness in the courtroom. Yet, year after year, personal injury lawyers seek to undo those laws and allow more frivolous lawsuits to be filed against physicians.

If no one was on call . . . physicians could have been held liable for emergency medical treatment decisions of individuals believed to be a threat to themselves or others.  Instead, physicians were protected in a revised version of the legislation, which aimed to create a process for immediate treatment of individuals believed to need mental health care.  The bill did not pass but will return.

If no one was on call . . . physicians participating in a pilot project “needle exchange” program could have been held liable for helping program enrollees.  Instead, revisions allowed physicians referring patients to the program and being referred patients from the program to be protected if following certain rules.

If no one was on call . . . athletic trainers and possibly other health professionals could have lost existing legal protections they currently enjoy under one proposed change to the athletic training legislation.  Instead, an amendment to the legislation allows athletic trainers and other health professionals to maintain the same level of liability protection they have at present. 

If no one was on call . . . physicians could have been held liable for the health of patients under their care who chose to use cannabis for medicinal use in the proposed medical cannabis bill.  Instead, an amendment was adopted removing this language. The bill did not pass but will return.

If no one was on call . . . physicians could have been held liable for school system employees’ decisions regarding following portable DNR orders for minor students.  Instead, an agreement was reached to ensure physicians cannot be held liable for the actions of those not under their supervision or authority in carrying out DNR orders.  The bill did not pass but will return.

If no one was on call . . . physicians could have been held liable for the actions of school system employees if the physician helped create a “seizure action plan” for a minor child with a seizure disorder.  Instead, physicians were protected for helping create such plans of action for school employees to follow for children with seizure disorders.  The bill did not pass but will return.

Other Legislation of Interest

Medical Cannabis. . . This much-discussed legislation, (SB165) sponsored by Sen. Tim Melson (R-Florence), an anesthesiologist, would provide for the regulation by the state, from “seed to sale”, of cannabis for medicinal use. After surveying its members, the Association found Alabama physicians believe if cannabis for medicinal use is legalized, then the growth, cultivation and sale of cannabis should be highly regulated by the state, and any physician involvement should be regulated not by some new state agency, but by the Board of Medical Examiners. As a direct result of Alabama physicians’ survey responses, the Association worked to bring the legislation in line with the areas of broad medical agreement on the topic. The bill passed the Senate but stalled when it reached the House.  It will return.

If no one was on call . . . various bills establishing standards of care in the law for physicians to follow or be penalized could have become law.  Instead, no such legislation passed, but the Association works on bills of this type every time the legislature comes into session.

If no one was on call . . . physicians could have been charged with manslaughter or murder if a patient experiences a deadly overdose that involved a drug the physician prescribed.  The legislation, intended to target drug dealers, was revised to protect physicians.

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Lights, Camera, Action…No!

Lights, Camera, Action…No!

By: Kelli Carpenter Fleming, Esq.

The Office for Civil Rights (“OCR”), the entity responsible for HIPAA compliance and enforcement, has issued a series of guidance documents regarding the interplay of HIPAA and the COVID-19 pandemic. The most recent guidance serves as a reminder to health care providers to follow the requirements of HIPAA when speaking with the media or allowing filming within the office or facility. This has even greater importance due to the increased amount of media attention on healthcare providers and the facilities treating COVID-19 patients. 

The recent guidance reminds health care providers that the HIPAA Privacy Rule is not altered during the COVID-19 public health emergency. HIPAA does not permit a health care provider to give media and film crews access to facilities where patients’ protected health information (“PHI”) will be accessible without the patients’ prior authorization. Even during the current COVID-19 public health emergency, health care providers are still required to obtain a valid HIPAA authorization from each patient whose PHI will be accessible to the media. Consistent with past guidance, OCR reminds providers that masking or obscuring patients’ faces or identifying information before broadcasting a recording of a patient is not sufficient. According to the guidance, by way of an example, “a covered hospital may not allow media personnel access to the emergency department where patients are receiving treatment for COVID-19, without first obtaining each patient’s authorization for such filming.”

We have seen at least two (2) previous OCR investigations regarding inappropriate disclosure of PHI to film crews (in 2016 and 2018), both of which were resolved with corrective action plans and monetary settlements. I would not be surprised if we see additional future OCR enforcement actions in this regard in light of the increased media coverage surrounding COVID-19. 

The recent guidance may be found here.

Kelli Fleming is a partner at Burr & Forman, LLP practicing exclusively in the firm’s Health Care Industry Group.

Posted in: Coronavirus, Legal Watch, MVP

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Gov. Ivey Provides Physicians Liability Protections from COVID-19

Gov. Ivey Provides Physicians Liability Protections from COVID-19

Today, Gov. Ivey issued an executive order protecting physicians, their staff, and their practices from lawsuits related to COVID-19. The governor’s order, the eighth such supplemental emergency order issued by her administration since the pandemic began, provides a “safe harbor” for services affected by COVID-19 or Alabama’s response to the pandemic and from other COVID-19 related claims.

“As one of many Alabamians on the front lines of this pandemic, I thank Gov. Ivey for working with the Medical Association to provide this much-needed liability protection for these unprecedented circumstances affecting care provisions that are far beyond any of our control,” Medical Association President John Meigs, Jr., M.D., said.

The order provides immunity for treatment that resulted from, was negatively affected by or was done in response to the COVID-19 pandemic or the State’s response to the pandemic unless proven by clear and convincing evidence that a health professional acted with wanton, reckless, willful, or intentional misconduct – a standard significantly higher than simple negligence. Importantly, the liability protections in today’s order apply retroactively to March 13, 2020, and will remain in place until the COVID-19 public health emergency is terminated.

Protecting physicians, their staff, and medical practices from COVID-19 lawsuits has been a priority of the Medical Association since Alabama entered a state of emergency in mid-March. In addition to the governor’s office, the Association has worked with multiple other organizations on today’s order and appreciates the expertise of the Birmingham law firm of Starnes, Davis and Florie during those negotiations. Click the button below to view a summary of the proclamation.

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