Archive for Legal Watch

The 11th Circuit Applies SCOTUS Ruling In Recent Alabama Physician Controlled Substances Conviction

The 11th Circuit Applies SCOTUS Ruling In Recent Alabama Physician Controlled Substances Conviction

By: Jim Hoover with Burr & Forman, LLP

On June 27, 2022, the Supreme Court of the United States (SCOTUS) heard an appeal emanating from a conviction of a local doctor in Mobile, Alabama for violating the Controlled Substances Act (CSA).  The justices specifically examined the convictions of Dr. Xiulu Ruan who is serving a prison sentence of more than 20 years. The Government charged Dr. Ruan with unlawfully dispensing and distributing drugs in violation of the CSA.  Dr. Ruan argued that the drugs were dispensed pursuant to a valid prescription, and were for a legitimate medical purpose by him acting in the usual course of his professional practice.  Dr. Ruan further argued that he did not knowingly or intentionally deviate from this standard.

The SCOTUS opinion heavily scrutinized 21 U.S.C. § 841(a), which makes it a federal crime for any person except as authorized to knowingly or intentionally manufacture, distribute or dispense a controlled substance.  As provided by the regulation, a prescription is only authorized when a doctor issues the prescription “for a legitimate medical purpose…acting in the usual course of his/her professional practice.”  The Department of Justice (“DOJ”) argued “knowingly or intentionally” merely refers to the knowing or intentional distribution of a controlled substance.  The SCOTUS held that once a defendant-doctor meets the burden of producing evidence that his or her conduct was “authorized,” the DOJ “must prove beyond a reasonable doubt that the defendant knowingly or intentionally acted in an unauthorized manner” in order to secure a conviction for improper prescribing.  

The SCOTUS ruled that prosecutors relying on the CSA for excessive prescribing of opioids and other addictive drugs must prove that the doctors knew the prescriptions lacked a legitimate medical purpose.  The SCOTUS vacated the Eleventh Circuit court of appeals opinions and directed it to consider whether the jury instructions given at the conclusion of the trial were consistent with this SCOTUS opinion.  

In an opinion published on January 5, 2023, an Eleventh Circuit panel held that the jury instructions used to convict Dr. Ruan for violating the CSA was inconsistent with the SCOTUS opinion. The Eleventh Circuit panel recognized that in order to obtain a conviction under 21 U.S.C. § 841(a), the government must prove beyond a reasonable doubt that a defendant (1) knowingly or intentionally dispensed a controlled substance, and (2) knowingly or intentionally did so in an unauthorized manner.  “What matters is defendant’s subjective mens rea.”  The Eleventh Circuit panel went on to say that “[W]ithout further qualification, the phrase ‘good faith’ encompasses both subjective and objective good faith. In the context of § 841 though, as the Supreme Court has explicitly held, only the subjective version is appropriate.  The instruction given by the district court did not contain any qualification to make this clear to the jury.”  

The Eleventh Circuit could not conclude that the district court’s error was harmless.  Accordingly, it vacated the defendant-doctor’s substantive drug conviction under 21 U.S.C. § 841(a).  However, the Eleventh Circuit held that the district court’s instructions were proper or any error in the instructions were harmless error as they related to the convictions for (1) conspiracy to violate the CSA, (2) conspiracy to commit health care fraud in violation of 18 U.S.C. §§ 1347 band 1349, (3) violation of the Anti-Kickback Statute, (4) conspiracy to commit mail or wire fraud, (5) conspiracy to violate RICO, and (6) substantive money laundering and conspiracy to commit money laundering.    Thus, the Eleventh Circuit vacated in part and affirmed in part the district court’s ruling and remanded the case to the district court for further proceedings consistent with the Eleventh Circuit’s opinion.

Jim Hoover is a Partner at Burr & Forman LLP practicing exclusively in the firm’s healthcare group. Jim may be reached at (205) 458-5111 or jhoover@burr.com.

Posted in: Legal Watch, Opioid

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

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

By: Howard Bogard and Matthew Scully, Burr & Forman

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

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

Background on the FTC Act

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

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

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

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

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

Impact on Alabama Healthcare Companies 

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

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

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Federal Trade Commission Proposes Rules Banning Non-compete Agreements

Federal Trade Commission Proposes Rules Banning Non-compete Agreements

By: Brandy Boone, General Counsel

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

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

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

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

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POTENTIAL PART 2 CHANGES ON THE HORIZON

POTENTIAL PART 2 CHANGES ON THE HORIZON

by Lindsey Phillips with Burr & Forman, LLP

On November 28, 2022 the Office for Civil Rights (“OCR”) at the United States Department of Health and Human Services (“HHS”) announced proposed changes to the regulations at 42 CFR Part 2 (“Part 2”). Part 2 protects the confidentiality of medical records related to treatment for substance abuse disorders and was first promulgated in 1987 to address concerns that relaxed access to these types of records would promote fear of discrimination and deter individuals from seeking help and treatment for substance abuse disorders. While the rationale supporting Part 2 is good in theory, it has presented practical challenges for patients and healthcare providers alike because its protections and provisions often conflict those afforded by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and other medical record privacy laws.

The proposed changes, which are set out in the Notice of Proposed Rulemaking (“NPRM”), are part of a broader initiative to promote value-based care, enable better coordination among healthcare providers, facilitate patient autonomy and engagement, and protect the privacy of patients’ medical records. Upon announcement of the NPRM, Secretary Xavier Becerra noted that “varying requirements of privacy laws can slow treatment, inhibit care, and perpetuate negative stereotypes about people facing substance use challenges.” He went on to say that the changes proposed in the NPRM would “improve coordination of care for patients receiving treatment while strengthening critical privacy protections to help ensure individuals do not forego life-saving care due to concerns about records disclosure.” OCR’s Director expressed similar sentiments and further noted that the HHS “understands how critical it is for patients to better align the Part 2 rules and program with HIPAA” and that the changes would decrease the burdens on both patients and providers “while protecting confidentiality of treatment records.”

This article briefly identifies some of the proposed changes contained in the NPRM. The proposed changes are loosely separated into two categories. The first category outlines the proposed changes that appear to relax the current provisions found in Part 2; the second category outlines the proposed changes that purport to create protections and enforcement mechanisms for violations of Part 2.

Proposed Changes Relaxing Current Requirements Found in Part 2

  • Permitting Part 2 programs to use and disclose Part 2 records based on a single prior consent signed by the patient for all future uses and disclosures for treatment, payment, and health care operations;
  • Permitting the redisclosure of Part 2 records as permitted by the HIPAA Privacy Rule by recipients that are Part 2 programs, covered entities under HIPAA, and business associates under HIPAA; and
  • Modifying the Part 2 confidentiality notice requirements to mirror those found in HIPAA.


Proposed Changes Creating Patient Protections and Enforcement Procedures

  • Creating two patient rights that parallel those afforded to patients under HIPAA:
    • The right to an accounting of disclosures, and
  • The right to request restrictions on disclosures for treatment, payment, and health care operations;
  • Requiring disclosures to the Secretary for enforcement;
  • Applying HIPAA penalties to Part 2 violations;
  • Requiring Part 2 programs to establish a process for receipt of complaints of Part 2 violations; and
  • Prohibiting Part 2 programs from requiring patients to waive the right to file a complaint as a condition of eligibility and providing treatment

While HHS has stated that the proposed modifications will not only increase coordination among providers but also afford more protections for patients, the proposed changes do present some concerns and tensions among stakeholders. Accordingly, all stakeholders are encouraged to participate in the public comment and feedback process. Stakeholders have 60 days after the publication of the NPRM in the Federal Register to provide commentary. The NPRM was published in the Federal Register on December 2, 2022, so stakeholders have until January 31, 2023 to provide comments. 

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

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

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

by Lindsey Phillips with Burr & Forman, LLP

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

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

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

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

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

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

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


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

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Federal Cures Act “Information Blocking” Compliance Date Approaching

Federal Cures Act “Information Blocking” Compliance Date Approaching

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

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

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

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

Resources for Physicians on Information Blocking:

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

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

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Prepare Your Practice for Expanded Information Blocking Requirements

Prepare Your Practice for Expanded Information Blocking Requirements

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

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

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

Examples of prohibited information blocking might include:

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

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

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

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

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

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I Have to Correct What?

I Have to Correct What?

By Kelli C. Fleming, Burr & Forman, LLP

A client recently informed me that their practice was experiencing a large increase in the number of medical record amendment requests it was receiving from patients. My perception is that this is the result of two things: (1) the widespread transition to electronic medical records, and (2) increased portal usage by patients to access medical information. Thus, I thought it might be a good time for a little refresher on a patient’s right to amend their health information.

Under HIPAA, a patient has the right to request an amendment of their health information for as long as the information is maintained in a “Designated Record Set.” Not only must the patient be notified of this right in the Notice of Privacy Practices, but a practice has certain obligations when a patient exercises this right.

When receiving a request from a patient to amend their health information, I recommend requiring that the request be in writing and include the reason for the requested amendment. 

Once a request is made, the request for an amendment must be acted upon no later than sixty (60) days after receipt of such request.  If, however, the practice is unable to act on the amendment within sixty (60) days, the time may be extended by no more than an additional thirty (30) days, provided that the practice provides the patient, no later than sixty (60) days after receipt of such request, with a written statement of the reasons for the delay and the date by which it will complete the request. Only one such extension is permitted.

If the request for amendment is accepted by the practice, the practice must properly amend the information and inform the patient that the information has been amended. The documentation in the record should reflect that the change is an amendment or an update and be dated as of the date of the amendment. The practice shall also obtain the patient’s permission to notify certain persons of the amendment.

However, providers are not required to abide by every amendment request. The request for amendment may be denied if the information (1) was not created by the practice, unless the patient provides a reasonable basis to believe that the originator of the information is no longer available to act on the requested amendment; (2) is not part of the Designated Record Set; (3) would not be available for access under the patient’s right to access; or (4) is accurate and complete.

If the requested amendment is denied, in whole or in part, the practice must provide the patient with a timely, written denial containing specific information. The practice must permit the patient to submit a written statement disagreeing with the denial and the basis of such disagreement. The practice may prepare a written rebuttal to the patient’s statement of disagreement.  If a written rebuttal is prepared, among other things, a copy must be given to the patient who submitted the statement of disagreement.

Kelli C. Fleming is a partner at Burr & Forman LLP and practices exclusively in the firm’s Health Care Practice Group. Kelli may be reached at (205) 458-5429 or kfleming@burr.com.

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

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

By Angie Cameron Smith, Burr & Forman, LLP

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

  1. Timely documentation and signatures

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

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

  1. Follow your documentation policies  

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

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

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

  1. Copying and pasting, “cloning” 

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

  1. Reviewing prior history or last visit 

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

Takeaway

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

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

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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 jhoover@burr.com.

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