Stark Law Woes

Two California urologists have agreed to pay more than $1,000,000 to settle Stark Law and Anti-Kickback Statute violations.  Apparently, the doctors operated a urology practice and also owned an oncology center where they provide image guided radiation therapy treatments.  Both the two owner doctors and a number of lessee doctors entered into lease agreements with the urology practice that would allow the lessee urologists to bill for their referral fees for image guided radiation therapy.  Although we have not reviewed the contracts, it would appear this should have been a clear and obvious red flag.  Apparently, the US Attorney’s office agreed and so sought compensation for the doctors’ violations.

Our take, always have qualified counsel review all physician leases, employment agreements and similar agreements for any fees, referral or compensation arrangements.

Indiana’s Breach Notification Laws

Indiana has its own and separate computer breach reporting laws.  Indiana’s law protects Social Security Numbers and names if the names are connected to unencrypted driver’s license number or state identification card number, a credit card number or financial account information.

Indiana requires that notice be given to the Indiana resident without unreasonable delay.  The law also requires nationwide notification if more than 1,000 records are breached and requires reporting to the Indiana Attorney General.

Note this does not replace HIPAA, but rather provides a separate notice when healthcare information may or may not be a part of the breach.

Medical School Economic Impacts

The Association of American Medical Colleges recently reported a study of the economic impact of medical schools and teaching hospitals.  The report indicates the AAMC members constituting teaching hospitals and medical schools provide over six million jobs, $386 billion in labor income and includes a state by state profile.  For Indiana, it shows the total direct jobs to be over 40,000 and the total direct labor income to be over $57 million.  In terms of total labor income and total “value added,” the study reports numbers of $3.56 billion and $4.9 billion, again solely for Indiana.

We do not know exactly what all of the impacts will be from Evansville’s new Indiana University Medical School, but we expect them to be substantial.

Bad Outcome

Outcome (formerly Contextmedia Health) installs “free” tablets and flat screen TVs in doctors’ offices.  It then obtains content by broadcasting educational material to patients.  In order to generate revenue, it shows pharmaceutical company ads on these “free” tablets and TVs.

The company has a bit of a checkered history.  After an earlier funding round, Wall Street investors sued Outcome for providing them with fraudulent financial statements.  The suit was settlement by the company’s founders agreeing to step down.  Now, Outcome has settled another suit, this one from 2016, alleging Outcome continued to send automated text messages to patients despite repeated requests by the patients to opt out of the automated service.  Outcome agreed to pay $2.9 million to settle this suit.

SAMHSA and HIPAA

We continue to receive questions and inquiries about how SAMHSA’s “Part 2” regulations differ from HIPAA and work with HIPAA.  In short:

• Part 2 created a shortened disclosure notice for SAMHSA.  You may still use the long form but most programs are opting for the short form.
• Any person who is a “lawful holder” of Substance Use Disorder (SUD) treatment information may re-disclose such information to the lawful holder’s contractors for the purpose of payment and healthcare operations.  No additional consent from the patient is required for these uses.
• SAMHSA differs from HIPAA in that the SUD program may not use the exception to make disclosures for treatment purposes or case management (uses normally allowable under HIPAA).  In these cases an explicit, separate consent to disclosure must be obtained from the patient.  In other words, all disclosures and re-disclosures for treatment or case management requires specific patient consent.

Bigger Better?

As healthcare evolves and changes, we are aware of either past mega mergers or proposed mega mergers of insurance companies, large retailers, pharmacy chains and pharmacy benefit managers.  Will this improve healthcare outcomes?  Will this lower the cost of healthcare?

If the past is an indicator of the future, you may want to review a lawsuit filed in 2014 by an actuary at Aetna which claims CVS billed CMS more for Part D drugs than CVS billed retail pharmacies which were in Aetna’s network and kept the difference.  In part, this appears to be a fraud claim and in part it appears to be a breach of contract claim.  The whistleblower case suggests CVS Caremark was aware that what it was doing was wrongful and endeavored to hide or cover up the information.  In addition, there may have been contracts involved which stated how the pharmacy benefit management function would price drugs and report pass through prices.

Pharmacy Benefit Managers (PBM) were originally created with the promise of reducing prescription drug costs.  Since the overall cost of drugs to American health consumers has continued to substantially outpace inflation, it does not appear that PBMs, at least once acquired by other companies in the drug manufacturing and distribution system, were or are a satisfactory answer for reducing drug prices.  These lawsuits appear to suggest the battle is not over how to lower healthcare costs to consumers, but rather how to divvy up the large profits in the drug manufacturing and distribution system.

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, practices and hospitals in contract items, federal legal compliance, practice entity creation, 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.