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Legal News
Hospital Settles
Alleged Stark Violations Involving Employed Physicians
09.08.09
Covenant Medical
Center in Waterloo, Iowa, recently
agreed to pay the federal government $4.5 million to settle
allegations that certain employed physicians’ compensation exceeded
fair market value and was not commercially reasonable.
The government
alleged that the physicians’ compensation exceeded fair market value
in violation of the Stark Law, and that any Medicare claims
resulting from services provided by those physicians violated the
False Claims Act. In settling the case, the hospital did not admit
any wrongdoing and asserts that it believes the compensation paid to
the physicians was reasonable and within fair market value.
However, the hospital settled to avoid the uncertainty, disruption
and costs of litigating the matter.
There is little
publicly available information regarding this settlement because the
matter was settled prior to the filing of a case. However, the
settlement is one of the few involving allegations that the
compensation paid to employed physicians exceeds fair market value
in violation of the Stark Law and thus, that resulting Medicare
claims from those physicians violate the False Claims Act.
Financial relationships between hospitals and non-employed
physicians have historically been the focus of most health care
fraud and abuse enforcement, but this Iowa settlement may be an
example of enforcement actions to come as the federal government
continues to focus on health care fraud and increases its
enforcement activity. Hospitals should review their financial
relationships with employed physicians (as well as non-employed
physicians) to ensure their compensation arrangements constitute
fair market value. Furthermore, obtaining an independent,
third-party opinion regarding fair market value may be necessary in
some cases.
View more information on the case (Sean
McGlone)
Executive
Liability for Unpaid Payroll Taxes
08.14.09
Two recent court
cases serve as an acute reminder for hospital executives and board
members regarding their obligations to ensure payment of payroll
taxes. Under federal tax law, employers, including tax-exempt
hospitals, are required to withhold income tax and social security
and Medicare taxes from their employees’ wages and to submit those
withheld amounts to the government. Failure to pay those taxes can
result in penalties against the hospital and against the
“responsible persons” who willfully fail to withhold or pay the
taxes. The penalty that may be imposed against a hospital or
individual is the full amount of the tax not paid to the government,
which can be very large, as the cases discussed below illustrate.
In most
circumstances, voluntary board members of tax-exempt organizations
would not face liability for a failure of a hospital to pay its
required payroll taxes. However, as the Fifth Circuit Court of
Appeals found in Verret v. U.S., if a board member is closely
involved in the day-to-day financial operations of the hospital or
has actual knowledge of the failure to pay such taxes, then the
board member can be responsible for payment of the penalty. In
Verret, the board chair, who was heavily involved in the
hospital’s administrative activities (including, but not limited to,
being the signatory of Form 990s for many years, being a signatory
on hospital accounts, and being involved in many other hospital
operations, including tax matters), was personally responsible for
payment of a penalty of approximately $400,000 for the hospital’s
failure to withhold and pay payroll taxes. Though the “rule” is
that voluntary board members are not held personally responsible for
a hospital’s failure to pay payroll taxes, the Verret case is an
example where a board member who is particularly involved in the
hospital’s day-to-day operations and financial activity, or who has
actual knowledge of the failure to pay the taxes, can be held
responsible.
In another recent
case (Doulgeris v. United States), a federal court in Florida
found a hospital CEO personally responsible for almost $2 million in
unpaid payroll taxes. The court held that as a matter of law, the
hospital CEO was a “responsible person” regarding the obligation to
pay payroll taxes and thus, could be held personally liable for the
unpaid payroll taxes if it determined that the failure to pay was
willful. A “responsible person,” in this case the CEO can act
“willfully” by using the money withheld for payroll taxes to pay
other vendors or creditors, even though he/she knew about the
outstanding payroll tax obligation. The court decided that the CEO
acted willfully and found, among other things, that during the time
the CEO knew the taxes were delinquent, the CEO co-signed 57 checks
on behalf of the hospital for a total amount of $2.9 million.
Though the
obligation to pay payroll taxes, and the potential for personal
liability for failure to pay, are certainly not new concepts under
the tax laws, these cases illustrate the considerable exposure to
liability that hospital leaders may face for such failure to pay.
In the difficult economic environment in which hospitals are
currently operating, hospitals may be tempted to use withheld
payroll taxes to pay other creditors or accounts payable instead of
turning those funds over to the government. The cases noted above
should remind hospital leaders of the dangers in undertaking such
action. (Sean
McGlone)
Proposed
Legislation Would Mandate Paid Sick and Vacation Leave
08.04.09
Last month, two new
pieces of employment legislation were introduced in Congress: the
Healthy Families Act and the Paid Vacation Act. The Healthy
Families Act would require employers with 15 or more employees to
provide workers with up to seven days of paid sick leave per year.
Specifically, employees would earn one hour of paid sick leave for
every 30 hours worked, to a maximum of 56 hours per year. The sick
leave could be used to reasons similar to those required for leave
under the Family and Medical Leave Act.
The Paid Vacation
Act would amend the Fair Labor Standards Act initially to require
companies with at least 100 employees to offer at least one week of
paid vacation annually to “eligible employees.” After three years,
employers with 100 or more employees would have to offer eligible
employees at least two weeks of paid vacation while employers with
at least 50 employees would have to provide at least one week of
paid vacation. Employees would be required to provide at least 30
days notice of their plans to take vacation to their employer.
If you have any
questions regarding either piece of legislation, feel free to
contact
nancyf@ohanet.org.
Ohio Supreme
Court Rules Regarding Consent to Release of Medical Information
08.04.09
The Ohio Supreme
Court recently held that a patient’s consent to the release of
medical information is valid, and waives the physician-patient
privilege, if the release is voluntary, express, and reasonably
specific in identifying to whom the information is to be
delivered.
In Medical
Mutual of Ohio v. Schlotterer, 2009 Ohio 2496 (Ohio Sup. Ct.),
the plaintiff filed an action against the defendant for fraud,
breach of contract, and a demand for an accounting of the
defendant’s liabilities to it, based on the defendant’s alleged
misuse of a medical billing code. In order to assess the extent of
the alleged fraud, the plaintiff filed a motion for an order
directing the defendant to respond to discovery of patient records.
The defendant claimed that the documents were protected under
physician-patient privilege as set forth in R.C. 2317.02(B)(1).
The court ruled in
the plaintiff’s favor in holding that the consent provisions in the
certificates of coverage provided to all Medical Mutual insureds
that were patients of Schlotterer met the necessary requirements for
disclosure. First, the consent provisions were voluntary as the
patients weren’t forced to sign the certificates. Second the
provisions qualified as express consent, given the language: “You
consent to the release of medical information to Medical Mutual when
you enroll and/or sign an Application.” Finally, the court held
that the provisions were reasonably specific in identifying to whom
the release is made as they stated in numerous places that the
release was to Medical Mutual.
Federal Trade
Commission Delays Red Flag Rule Compliance Deadline Again
7.30.09
The
Federal Trade Commission (FTC)
announced today it will delay
enforcement of the new Red Flag Rules until Nov. 1, 2009, to give
affected entities more time to implement identity theft prevention
programs. This announcement marks the third time the FTC delayed
enforcement of these rules.
Under the Red
Flag Rules, all entities, including hospitals, that regularly defer
payment for goods or services or provide goods or services and bill
customers later, are “creditors” and must develop a program
to prevent, detect and mitigate
identity theft. OHA has partnered with Bricker and Eckler LLP to
develop a
Red Flag
Rules Compliance Guide for Nonprofit Hospitals to assist
hospitals in developing their programs.
HIPAA
Enforcement on the Rise
7.30.09
In what is perhaps
an indication of increased HIPAA enforcement efforts that are
anticipated in light of the HIPAA changes made in the federal Health
Information Technology for Economic and Clinical Health (HITECH) Act
(which was part of the federal stimulus bill passed in February),
the U.S. Department of Justice
announced guilty pleas by one physician and two hospital
employees in Arkansas for HIPAA violations. The physician and the
two hospital employees admitted to accessing a patient’s medical
record purely out of curiosity and without any legitimate purpose.
Sentencing is expected in August or September, and each individual
faces maximum penalties of 1 year imprisonment, a fine of up to
$50,000, or both. This case illustrates the importance of strict
compliance with the patient privacy requirements of HIPAA,
particularly in light of enhanced penalties and enforcement
activities set forth in the HITECH Act
and a recent announcement by the Secretary of Health and
Human Services that it is hiring additional employees for its
“health information privacy enforcement team.”
President Obama
Nominates Brian Hayes for NLRB
7.28.09
President Obama
recently announced his intention to nominate Brian Hayes to fill the
third of three vacant seats on the National Labor Relations Board
(NLRB). Mr. Hayes currently serves as the Republican Labor Policy
Director for the U.S. Senate Committee on Health, Education, Labor
and Pensions. Previously, Mr. Hayes spent over twenty-five years in
private legal practice representing management in labor and
employment matters. Mr. Hayes earned his undergraduate degree from
Boston College and his law degree from Georgetown University Law
Center.
In April, President
Obama announced his intention to nominate Craig Becker and Mark
Pearce, both union-side attorneys, for the other two vacant seats on
the NLRB. All three nominees must now be confirmed by the Senate,
but it is unclear when confirmation hearings will begin.
The two sitting
members of the NLRB are Wilma Liebman, a Democrat appointed
President Clinton, and Peter Schaumber, a Republican appointed by
President Bush.
Federal
Minimum Wage to Increase
7.23.09
On July 24, 2009,
the federal minimum wage will increase once again, this time from
$6.55 per hour to $7.25 per hour for all employees classified as
non-exempt under the Fair Labor Standards Act. This will be final
change in the series of increases which began under the Fair Minimum
Wage Act of 2007.
Currently, Ohio’s
minimum wage of higher than federal requirements. Ohio employers
with an annual gross receipts in excess of $267,000 must pay the
current Ohio minimum wage of $7.30 per hour while Ohio employers
with annual gross receipts less than $267,000 must pay the federal
minimum wage.
A revised
Federal minimum wage poster is now available for viewing,
downloading, and posting. Every employer of employees subject to
the Fair Labor Standard Act’s minimum wage provisions must post, and
keep posted, a notice explaining the Act in a conspicuous place.
OIG Approves Hospital Payment for Physician
On-Call Services
6.03.09
On May
21, the U.S. Department of Health and Human Services Office of
Inspector General (OIG) issued an advisory opinion in which it
concluded it will not impose sanctions or civil monetary penalties
against a hospital for an arrangement under which the hospital will
pay physicians for on-call services provided to the hospital’s
uninsured patients. Because of the unwillingness of its physicians
to provide on-call coverage, the hospital requesting the OIG’s
opinion desired to amend its medical staff bylaws to allow
participating physicians to submit claims to the hospital for
payment for services rendered to certain indigent and uninsured
patients presenting to the hospital’s emergency department. The OIG
concluded that adequate safeguards existed under the proposed
arrangement so as to present a low risk of fraud and abuse. View
OHA’s summary of the OIG’s opinion. Read the
OIG opinion in its entirety. (Sean
McGlone)
Medicare Secondary Payer Reporting Broader than Most Realize
5.13.09
Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of
2007 added new mandatory reporting requirements for group health
plan arrangements and for liability insurance (including
self-insurance), no-fault insurance, and workers' compensation.
(See 42 U.S.C. 1395y(b)(7) & (8)). While many hospital and
professional liability self-insurance trusts and self-insured
workers’ compensation programs are preparing for the new reporting
requirements, hospitals also may need to report due to deductibles
on liability insurance coverages or other programs. CMS continues
to get pressure from the employer and business communities and
another delay in implementation date is expected.
Click here
for a valuable outline on the MSP reporting rules by Christine Poth
of Bricker & Eckler. CMS updates can be found at
http://www.cms.hhs.gov/MandatoryInsRep/01_Overview.asp#TopOfPage.
FTC Postpones Red
Flags Rule
05.01.09
The Federal Trade Commission (FTC) voted
to delay implementation of the Red Flags Rule concerning identity
theft prevention programs until August 1, 2009. The previous
compliance deadline was May 1, 2009. For more information, see the
FTC's press release at
www.ftc.gov/opa/2009/04/redflagsrule.stm.
EEOC Reports
Discrimination Charges Hit Record High
04.28.09
The U.S. Equal
Employment Opportunity Commission (EEOC) recently announced that
national workplace discrimination charge filings soared to the
unprecedented level of 95,402 during fiscal year 2008. This
represents a 15% increase from the previous fiscal year. EEOC
Acting Chairman, Stuart J. Ishimaru observed, “the EEOC has not seen
an increase of this magnitude in charges filed for many years.
While we do not know if it signifies a trend, it is clear that
employment discrimination remains a persistent problem.” According
to the FY 2008 data, all major categories of charge filings
increased with charges based on age and retaliation having the
largest annual increases. Allegations based on race, sex and
retaliation remained the most frequently filed charges.
The FY 2008 data
also indicates that the EEOC file 290 lawsuits, resolved 339
lawsuits, and resolved 81,081 private sector charges. As a result,
the EEOC recovered approximately $376 million in monetary relief for
thousands of individuals, in addition to obtaining significant
remedial relief from employers. The FY 2008 enforcement and
litigation statistics are available at
http://www.eeoc.gov/stats/enforcemnt.htm.
This apparent
increase in discrimination claims, combined with Congress’s recent
changes to the Americans with Disabilities Act and the Family and
Medical Leave Act, should motivate hospitals to reexamine their
employment policies and handbooks to confirm that they comply with
current law.
Court Issues
Decision Regarding FICA Taxes for Medical Residents
03.17.2009
In September 2007,
the Ohio Hospital Association, along with hospital associations from
Michigan, Kentucky and Tennessee, filed an amicus (friend of the
court) brief with the Sixth Circuit Court of Appeals in an action
concerning whether the Detroit Medical Center is entitled to a
refund for FICA taxes it paid on medical residents’ stipends in the
years 1999, 2000, and 2001. In its claim for a refund, the DMC
argued first, that the “student exception” to FICA taxes applied to
the medical residents and second, that the residents’ stipends were
exempt from FICA as scholarships or fellowships.
OHA’s amicus brief
supported the DMC’s effort by arguing that the question whether
medical residents’ stipends qualify for the “student exception” to
FICA taxes raises genuine issues of material fact and that the
district court failed to apply a “facts and circumstances” analysis.
The Sixth Circuit
Court heard oral arguments in April 2008. On February 26, 2009, the
Court issued its decision in which it rejected DMC’s argument that
medical residents’ stipends were exempt from FICA as scholarships or
fellowships, but agreed that medical residents could qualify under
the “student exception” and that district courts must apply a “facts
and circumstances” analysis. Accordingly, the Court of Appeals sent
the case back to the district court with unusually specific
instructions for the court to take evidence regarding details of
DMC’s medical resident program.
In 2004, the IRS
amended its regulations so that a medical resident working 40 hours
or more per week does not qualify for the student exception from
FICA taxation. Although these new regulations have been challenged
in courts, they have not been revoked. Hospitals should consult
their tax advisors before changing the way they classify resident
stipends.
President Obama designates Liebman as
Chairman of the National Labor Relations Board
2.11.09
On January 20, 2009, President Obama designated
Wilma B. Liebman to be the Chairman of the National labor Relations
Board. Liebman has served on the Board as a member since first
appointed by President Clinton in 1997. Prior to joining the NLRB,
Liebman served as the Deputy Director of the Federal Mediation and
Conciliation Service (FMCS), Special Assistant to the Director of
FMCS, Labor Counsel for the Bricklayers and Allied Craftsmen, and
Legal Counsel to the International Brotherhood of Teamsters.
Typically, the Board includes five members.
Currently, however, the Board consists only of Chairman Liebman and
Member Schaumber. Accordingly, President Obama has three
vacancies on the Board to fill.
New HIPAA
Frequently Asked Questions for Family Medical History
1.21.09
The Department of
Health and Human Services (HHS) Office for Civil Rights (OCR) has
published new HIPAA Privacy Rule frequently asked questions (FAQs)
related to family medical history. These FAQs support the roll out
of the Surgeon General’s family health history portal, “My Family
Health Portrait,” a new version of the web-based tool that enables
individuals to electronically record, save and email family medical
information in formats that are compatible with electronic health
records (EHRs). Individuals using this portal to assemble, download
and transmit family history information may have questions about
privacy and how family history can be used or shared by health care
providers. The new FAQs provide answers to these questions.
These new HIPAA
FAQs are available on the OCR Privacy Rule Web Site at
http://www.hhs.gov/ocr/hipaa.
 |
2009
OHA Hospital Law Handbook
is now available.
A compendium of
Ohio
statutes and regulations applicable to hospitals, physicians, nurses and
other health care workers. 2009 Handbook
updates will
be available through June 2010.
Cost: $75 OSHRM & SOHA members, $100 OHA members; $150 nonmembers.
Contact Rhonda Major-Mack to
order.
2008 Handbook is no longer being updated |
|
Who to Contact |
Mary L. Gallagher
Senior Vice President & Chief of Staff
maryg@ohanet.org
614.221.7614 x142
|
Rick Sites
General Counsel & Senior Director of Health Policy
ricks@ohanet.org
614.221.7614 x144 |
Nancy Engbers Falk
Associate General Counsel & Director of Health Policy
nancyf@ohanet.org
614.221.7614 x125 |
Sean McGlone
Associate General Counsel & Director of Health Policy
seanm@ohanet.org
614.221.7614x139 |
Links
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