FTC WATCHING HOSPITAL ACQUISITION OF PHYSICIAN PRACTICES

A recent Idaho Federal District Court Case, along with two prior litigation successes by the FTC, raise significant questions about hospital acquisitions of physician practices.

The recent decision of the Idaho Federal Court required the unwinding of the hospital’s acquisition of a physician owned group. This order was given despite the Court’s prior order in 2012, allowing the acquisition.

What went wrong?  In order to justify the hospital’s acquisition of the physician group, the hospital had made promises to improve care without hiking prices.  The hospital also asserted benefits from the transaction that it claimed could not be achieved with a method other than acquisition.  So the judge let the deal go forward in 2012, but based upon continuing FTC objections, and a month long trial, the Court eventually found that the hospital did not achieve its primary justification, promises to improve care without hiking prices.

Important in this were documents from the hospital and physicians group itself which discussed gaining leverage over insurers, and a quantification of moving up billing rates to hospital billing rates, and generating many more dollars.

The Court also found that the claim that the promised benefits could not be achieved reasonably in any other fashion to be without any basis.  There was no indication that the hospital had properly studied less integrated care models and non-acquisition models to determine the relevant benefits to an acquisition.

This case, and two earlier victories, should be a wakeup call to physicians and hospitals contemplating such transactions.  The FTC will examine emails, board minutes, presentations to financers and others to determine the real motive of the hospital and physician group, and will expect to see justified, rational studies which show significant benefits and minimal price hiking.  Given that in most communities there are a small number of hospitals, the FTC, and even a few state attorney generals, can be expected to start giving much more scrutiny to these acquisitions, particularly where the acquisitions result in significant concentration in practice areas such as heart cardiology labs, oncology and other specialties.

HOSPITALS WINNING EMTALA CLAIMS

Recent cases in Puerto Rico and Tennessee continue a string of victories by hospitals where plaintiffs attempt to make EMTALA claims.

In the Puerto Rico case, a patient was presented at two different hospitals within 24 hours.  Later, apparently, unrelated problems resulted in significant medical problems for the patient and an amputation.  The Plaintiff made claim under EMTALA, but the court found against the plaintiff because of her failure to show an emergency medical diagnosis had even been made with regard to the condition complained of in suit.  In the case, the hospitals made significant efforts to treat the patient and to diagnosis the cause of the patient’s primary medical condition.  The important points are that the plaintiff failed to show that any particular tests or test were available that would have diagnosed the patient’s condition, therefore, allowing the hospitals to “stabilize” the patient, or that such tests or diagnoses were even within the hospital’s capabilities.

In the Tennessee case, among other deficiencies in the complaint, the plaintiff failed to make any claim or statement regarding screening.  In other words, the plaintiff failed to allege any screening had occurred, or that such screening was deficient, essential parts of most EMTALA claims.

While not always true, it appears in at least some EMTALA cases, plaintiffs are seeking to make an end run against medical malpractice damage caps, and having little success.  In practice, EMTALA statutes require that a number of steps occur in order for EMTALA to apply, and the courts are reading the statutes closely.

HIPAA AND WINDOWS XP

Nearly every day I receive a telephone call or an email from a client who had been told that something the medical provider client did or didn’t do was a HIPAA was violation.  The latest is claims by some that continuing to use the Windows XP operating system past April 8th, the day that Windows will effectively eliminate support for this system, is a HIPAA violation.  It is not.

HIPAA does not mandate the use or nonuse of any particular hardware, software or other systems.  HIPAA, and its security provisions, do require that if you continue to use Windows XP after the support end date, that you have a risk analysis that appropriately analyzes the risks of doing so, and provides for appropriate steps for safeguarding patient data.

Two lessons here:  (1) Make sure you have a proper risk analysis for your security issues under HIPAA requirements; and (2) Most people who claim to understand HIPAA’s requirements don’t.

This newsletter is edited by Paul Wallace of Jones • Wallace, LLC, a member of the American Bar Association Healthcare Law Section and the American Health Lawyers Association who has been representing physicians and healthcare practices for over 25 years.  Mr. Wallace assists physicians in health practices in contract items, federal legal compliance, creation of practice entities, estate and wealth planning and similar issues.  Please feel free to call if you have any questions on this newsletter or legal matters at (812) 402-1600 or pwallace@joneswallace.com.