DELEGATION

TEX. OCC. CODE § 157.005: “A person to whom a physician delegates the performance of a medical act is not considered to be practicing medicine without a license by performing the medical act unless the person acts with knowledge that the delegation and the action taken under the delegation is a violation of this subtitle.”

TEX. OCC. CODE 157.001:

(a) A physician may delegate to a qualified and properly trained person acting under the physician's supervision any medical act that a reasonable and prudent physician would find within the scope of sound medical judgment to delegate if, in the opinion of the delegating physician:

(1) the act:(A) can be properly and safely performed by the person to whom the medical act

is delegated;(B) is performed in its customary manner; and(C) is not in violation of any other statute; and

(2) the person to whom the delegation is made does not represent to the public that the person is authorized to practice medicine.

(b) The delegating physician remains responsible for the medical acts of the person performing the delegated medical acts.

(c) The board may determine whether:(1) an act constitutes the practice of medicine, not inconsistent with this chapter; and(2) a medical act may be properly or safely delegated by physicians.

Tex. Occ. Code 157.052(c) - At a site serving a medically underserved population, a physician licensed by the board may delegate to a registered nurse or physician assistant acting under adequate physician supervision the act of administering, providing, or carrying out or signing a prescription drug order, as authorized by the physician through a physician's order, a standing medical order, a standing delegation order, or another order or protocol as defined by the board.

“Site serving a medically underserved population” means:(A) a site located in a medically underserved area;(B) a site located in a health manpower shortage area;(C) a clinic designated as a rural health clinic under 42 U.S.C. Section 1395x(aa);(D) a public health clinic or a family planning clinic under contract with the

Texas Department of Human Services or the Texas Department of Health;(E) a site located in an area in which the Texas Department of Health determines

there is an insufficient number of physicians providing services to eligible clients of federal, state, or locally funded health care programs; or

(F) a site that the Texas Department of Health determines serves a disproportionate number of clients eligible to participate in federal, state, or locally funded health care programs. TEX. OCC. CODE § 157.052(a)(4)

“Medically underserved area” means:A. an area in this state with a medically underserved population;B. an urban or rural area designated by the secretary of health and human

services as an area in this state with a shortage of personal health services or a population group designated by the secretary as having a shortage of those services, as described by 42 U.S.C. Section 300e-1(7); or

C. an area defined as medically underserved by rules adopted by the Texas Board of Health based on:i. demographics specific to this state;ii. geographic factors that affect access to health care; andiii. environmental health factors.

Tex. Occ. Code § 157.052(a)(2)

“Health manpower shortage area” means:A. an urban or rural area of this state that:

i. is not required to conform to the geographic boundaries of a political subdivision but is a rational area for the delivery of health service;

ii. the secretary of health and human services determines has a health manpower shortage; and

iii. is not reasonably accessible to an adequately served area;

B. a population group that the secretary of health and human services determines has a health manpower shortage; or

C. a public or nonprofit private medical facility or other facility that the secretary of health and human services determines has a health manpower shortage, as described by 42 U.S.C. Section 254e(a)(1).

Tex. Occ. Code § 157.052(a)(1)

“Registered nurse” means a registered nurse recognized by the Texas Board of Nursing as having the specialized education and training required under Section 301.152. (e.g. an “advanced nurse practitioner). TEX. OCC. CODE § 157.052(a)(3)

Physician supervision is adequate for the purposes of this section if a delegating physician:1. is responsible for the formulation or approval of the physician's order, standing medical

order, standing delegation order, or other order or protocol, and periodically reviews the order and the services provided patients under the order;

2. is on-site to provide medical direction and consultation at least once every 10 business days during which the advanced practice nurse or physician assistant is on-site providing care;

3. receives a daily status report from the advanced practice nurse or physician assistant on any problem or complication encountered; and

4. is available through direct telecommunication for consultation, patient referral, or assistance with a medical emergency.

Tex. Occ. Code 157.0541(b) – At an alternate site, a physician licensed by the board may delegate to an advanced practice nurse or physician assistant, acting under adequate physician supervision, the act of administering, providing, or carrying out or signing a prescription drug order as authorized through a physician's order, a standing medical order, a standing delegation order, or another order or protocol as defined by the board.

o “alternate site” means a practice site:(1) where services similar to the services provided at the delegating physician's

primary practice site are provided; and(2) located within 75 miles of the delegating physician's residence or primary

practice site.o Note that there are different standards for “adequate physician supervision” under this statute.

See TEX. OCC. CODE § 157.0541(c).

B/c the nurse and PA can sign a prescription drug order, it is unnecessary to leave a presigned prescription pad.

MEDICARE/MEDICAID CERTIFICATION

o Can shut down, but are intermediate sanctions – state inspects, state closes, Medicare withdraws funding, 15 day notice prior to termination, patients can stay until course of treatment done Have to give procedural DP, but no constitutional claim b/c no state action [Heckler –

Medicare does surveys] Cospito – loss of benefits

o Certification is a voluntary procedure for health care organizations to meet the qualifications for participation in government funding programs (as opposed to Licensure, which is a mandatory governmental process, and accreditation, which is a voluntary private process.)

o To receive funding under the Medicaid Act, “a state must submit to the Secretary and have approved by the Secretary a plan for medical assistance which meets the requirements of” 42 USC sec. 1396a(a)… “The plan must include descriptions of the standards and methods the state will use to assure that medical or remedial care services provided to the recipients are of high quality… The appropriate state agency must determine on an ongoing basis whether the participating institutions meet the requirements for continued participation…” In conducting the review the state must use federal standards, forms, methods and procedures… See Textbook Page 401 State of Smith v. Heckler).

o When a Hospital enters into a Medicare provider agreement it specifically undertakes to comply with Federal statutes and regulations governing Medicare certified hospitals; see section 1861(e) of the Social Security Act, 42 U.S.C. § 1395x(e); 42 C.F.R. Parts 482 and 488. Idem.

o “CMS may terminate a provider's agreement to participate in the Medicare program if CMS determines that the provider "fails substantially to meet the applicable provisions of section 1861." Section 1866(b)(2)(B) of the Act. CMS may also terminate a provider's agreement to participate in the Medicare program where the provider is not in substantial compliance with the provisions of title XVIII of the Act or the applicable regulations or if the hospital no longer substantially meets the appropriate conditions of participation or requirements. Section 1866(b)(2)(A) of the Act; 42 C.F.R. sec. 489.53(a)(1), (3).

o A hospital that is dissatisfied with CMS's determination to terminate it from participation in the Medicare program is entitled to a hearing. Sections 205(b), 866(h)(1) of the Act; 42 C.F.R. sec. 498.5(b), 498.3(b).

o The process of determining compliance and challenging adverse decision provide substantial procedural protections to providers. See Textbook page 407.

o The most intense disputes arise when findings are such that the facility is shut down immediately, without a chance for correction or rebuttal. These shutdowns have been challenged as unconstitutional but usually without success considering the patient protection concerns at stake and the ample procedural rights following a temporary shutdown. See Textbook page 407.

o Remember that a constitutional challenge requires state action, which usually doesn’t exist for private accreditation (like that of the Joint Commission for the Accreditation of Hospitals).

TEO + ANTITRUST

1. Page 380- The History of Marcus Welby Hospital and How it Grew

A charity will be tax exempt under section 501(c)(3) of the Internal Revenue Code if it is organized exclusively for the charitable purposes set out in its articles, no part of its net earnings inure to the benefit of a private individual or shareholder, and so long as it does not engage in certain lobbying and political activities. Harding Hospital, Inc v. United States. The provision of free or below cost service to those unable to pay is no longer essential. Eastern Kentucky Welfare Rights Organization v. Simon. A nonprofit cannot legally divert assets to any purpose other than its charitable purpose set out in its Articles, or else, face Ultra Vires liability. Queen of Angels Hospital v .Younger. To keep nonprofit tax exempt status hospitals must demonstrate their property is being used exclusive for their stated charitable purpose. Utah County v. Intermountain Health Care, Inc.

2 Avoid Any Antitrust Violations under §1

Learned professions are not exempt from the Sherman Act. Weiss v. York. If there is a (1) contract, combination, or conspiracy, (2) restraint of trade, and (3) an effect on interstate commerce, there will be a violation of §1 of the Sherman Act. Id. A medical staff may satisfy the conspiracy requirement within itself, but it will not be able to conspire with a hospital. Id. However, if the actors of the conspiracy are operating in the ordinary course of business, and the economic motivations are parallel to the corporate body as a whole, there is only one entity and thus no conspiracy. Id. An actor will not violate §1 by way of restraint of trade if under all the circumstances there is not unreasonable restraint. Id. But, boycotts or concerted refusals to deal are per se illegal restraints of trade. Id. Plaintiffs claiming per se violations must make a threshold argument showing whether the practice is not justified by plausible arguments that it is intended to enhance overall efficiency and make markets more competitive, and showing that the defendant possess the market power and exclusive access to an element essential to effective competition. Hassan v. Independent Practice Associates. So long as it is clear from the record that the agreement is not plainly anticompetitive there will not be a per se violation. Arizona v. Maricopa County Medical Society.

3 Avoid Any Antitrust Violations under § 2

§2 of the Sherman Act prohibits monopolization. Sherman Act §2. To be considered a monopoly an actor must possess monopoly power in the relevant market and have willfull acquisition or maintenance of that power as distinguished from growth or development as a consequence of superior product, business acumen, or historic accident. Ocean State Physicians Health Plan, Inc v. Blue Cross & Blue Shield of Rhode Island. Exclusionary conduct tends to impair the opportunities of rivals, but also either does not further competition on the merits or does so in an unnecessarily restrictive way. Id. However, a desire to crush a competitor standing alone is insufficient to make out a violation of the antitrust laws. Id. The McCarran Ferguson Act exempts from the antitrust laws conduct which are part of the business of insurance, regulated by the state, and not in the form of boycott, coercion or intimidation. Id. Three criteria relevant in determining whether a practice is part of the business of insurance are (1)whether a particular practice has the effect of transferring or spreading a policy holder’s risk, (2) whether the practice is an integral part o the policy relationship between the insurer and the insured, (3) whether the practice is limited to entities within the insurance industry. Id. Additionally, an insurer, like any buyer of goods or services, is lawfully entitled to bargain with its providers for the best price it can get. Id.

TEO – FOR PROFIT JOINT VENTUREo Can sell nursing home if organized to operate H, but use of funds is issue re:

inurement or not used to forward charitable purpose

o “The rules governing the use of the assets of a nonprofit charitable organization are well established: All the assets to a corporation organized solely for charitable purposes must

be deemed to be impressed with a charitable tryst by virtue of the express declaration of the corporation’s purposes. . .It follows that a nonprofit corporation cannot legally divert its assets to purposes other than charitable purposes.” Queen of Angels Hospital v. Younger, citing Pacific Home v. County of Los Angeles (p. 423 text).

o Here, while the JV bt a non-profit corp and a profit corp is not per se invalid, and it’s ok that MWH wants to sell its nursing home (which is separate from the hospital), so long as it continues to run its hospital in LA with the religious, educational, and charitable purposes set out in the Articles, MWH’s contemplated arrangement is invalid due to the proposed use of the capital funds from selling the home:

o The arrangement bt MWH and the for profit HMO doesn’t appear to be at arms- length with any definite benefit that will further the charitable mission of MWH.

o a) The 1% ownership interest for each of the Trustees is not appropriate: this creates an inurement problem. Absolute dedication of assets to charity is a precondition to exemption under section 501(c)(3).

o b) The discretionary 30% profit distribution “from time to time” as the HMO Board chooses does not guarantee or even reasonably ensure a return on MWH’s investment, that could be used to benefit MWH’s charitable purposes; instead, arguably it could inure private benefit to the HMO.

o c) If the arrangement were more concrete, there would not necessarily be any issue with a profit distribution so as long as the profits were used by MWH for some purpose laid out in the Articles. A pledge by the HMO to use 35% or more of its revenues (the amount equal or greater to value of MWH’s investment in the HMO) to pay for charity services or send patients to MWH would likely be appropriate.

TEO + INUREMENT + CORP PRAC MED

o Page 495- Choosing a Corporate Form

o A What are the relevant considerations with respect to tax exemption?

A nonprofit has tax benefits via 501(c)(3) tax exemption. A nonprofit cannot legally divert assets to any purpose other than charitable purposes, otherwise stand in the face of Ultra Vires liability. Queen of Angels Hospital v. Younger. 501(c)(3) tax exemption requires the corporation must be organized and operated exclusively for charitable purposes, no part of its net earnings may inure to the benefit of a private individual or shareholder, and it cannot engage in certain lobbying and political activities. Harding Hospital, Inc v. United States. To keep nonprofit tax exempt status hospitals must demonstrate their property is being used exclusive for their stated charitable purpose. Utah Count v. Intermountain Health Care, Inc. If MW chooses to be a nonprofit, MW is advised to have and follow its charitable purpose in the operation of its business.

o B What are the relevant considerations with respect to the ability to raise capital (JV’s)?

Tax-exempt bond financing + charitable deduction

Inurement – A hospital may lose its tax exempt status if part of its net earnings inure to the benefit of a private individual or shareholder. Hospital-Physician Joint Venture – General Counsel Memo. A hospital cannot legally divert assets to any purpose other than charitable purposes – ultra vires concern. Queen of Angels Hospital v. Younger. Hospitals must demonstrate their property is being used exclusively for their stated charitable purpose. Utah County v. Intermountain Health Care, Inc. If MW chooses to be a nonprofit, MW is advised to be precautious in any joint venture agreement it forms to be sure that the new entity is following its charitable purpose stated in its Articles.

o C What are the relevant considerations with respect to the role of physicians?

A corporation may not legally practice medicine, however, entities like an HMO are generally exempted so long as they qualify. Berlin v. Sarah Bush Lincoln Health Center. Additionally, a hospital may lose its tax exempt status if it forms a joint venture with members of its medical staff and such JV could be characterized as an inurment problem. Hospital-Physician Joint Venture – General Counsel Memo. MW is advised that the formation of an HMO does not violate the corporate practice of medicine and it should be careful on how it pays out to its medical staff – avoid dividend like distributions – as they will have a major stake in the HMO.

o D What are the relevant considerations with respect to operational constraints?

Hospital bylaws and medical staff bylaws are binding contracts between the two which must be honored and followed. St John’s Hospital Medical Staff v. St. John Regional Medical Center. Hospital bylaws regarding business judgments will be followed even if they incidentally effect medical personnel issues. Mahan v. Avera St. Luke. MW is advised to follow the bylaws of the medical staff, as well as its own, in all situations or face breach of contract liability. Additionally, as stated above, MW is limited to operating solely for its charitable purpose.

DELEGATION

TEX. OCC. CODE § 157.005: “A person to whom a physician delegates the performance of a medical act is not considered to be practicing medicine without a license by performing the medical act unless the person acts with knowledge that the delegation and the action taken under the delegation is a violation of this subtitle.”

TEX. OCC. CODE 157.001:

(d) A physician may delegate to a qualified and properly trained person acting under the physician's supervision any medical act that a reasonable and prudent physician would find within the scope of sound medical judgment to delegate if, in the opinion of the delegating physician:

(1) the act:(A) can be properly and safely performed by the person to whom the medical act

is delegated;(B) is performed in its customary manner; and(C) is not in violation of any other statute; and

(2) the person to whom the delegation is made does not represent to the public that the person is authorized to practice medicine.

(e) The delegating physician remains responsible for the medical acts of the person performing the delegated medical acts.

(f) The board may determine whether:(1) an act constitutes the practice of medicine, not inconsistent with this chapter; and(2) a medical act may be properly or safely delegated by physicians.

Tex. Occ. Code 157.052(c): At a site serving a medically underserved population, a physician licensed by the board may delegate to a registered nurse or physician assistant acting under adequate physician supervision the act of administering, providing, or carrying out or signing a prescription drug order, as authorized by the physician through a physician's order, a standing medical order, a standing delegation order, or another order or protocol as defined by the board.

“Site serving a medically underserved population” means:(G) a site located in a medically underserved area;(H) a site located in a health manpower shortage area;(I) a clinic designated as a rural health clinic under 42 U.S.C. Section 1395x(aa);(J) a public health clinic or a family planning clinic under contract with the

Texas Department of Human Services or the Texas Department of Health;(K) a site located in an area in which the Texas Department of Health determines

there is an insufficient number of physicians providing services to eligible clients of federal, state, or locally funded health care programs; or

(L) a site that the Texas Department of Health determines serves a disproportionate number of clients eligible to participate in federal, state, or locally funded health care programs. TEX. OCC. CODE § 157.052(a)(4)

“Medically underserved area” means:D. an area in this state with a medically underserved population;E. an urban or rural area designated by the secretary of health and human

services as an area in this state with a shortage of personal health services or a population group designated by the secretary as having a shortage of those services, as described by 42 U.S.C. Section 300e-1(7); or

F. an area defined as medically underserved by rules adopted by the Texas Board of Health based on:iv. demographics specific to this state;v. geographic factors that affect access to health care; andvi. environmental health factors.

Tex. Occ. Code § 157.052(a)(2)

“Health manpower shortage area” means:D. an urban or rural area of this state that:

iv. is not required to conform to the geographic boundaries of a political subdivision but is a rational area for the delivery of health service;

v. the secretary of health and human services determines has a health manpower shortage; and

vi. is not reasonably accessible to an adequately served area;

E. a population group that the secretary of health and human services determines has a health manpower shortage; or

F. a public or nonprofit private medical facility or other facility that the secretary of health and human services determines has a health manpower shortage, as described by 42 U.S.C. Section 254e(a)(1).

Tex. Occ. Code § 157.052(a)(1)

“Registered nurse” means a registered nurse recognized by the Texas Board of Nursing as having the specialized education and training required under Section 301.152. (e.g. an “advanced nurse practitioner). TEX. OCC. CODE § 157.052(a)(3)

Physician supervision is adequate for the purposes of this section if a delegating physician:5. is responsible for the formulation or approval of the physician's order, standing medical

order, standing delegation order, or other order or protocol, and periodically reviews the order and the services provided patients under the order;

6. is on-site to provide medical direction and consultation at least once every 10 business days during which the advanced practice nurse or physician assistant is on-site providing care;

7. receives a daily status report from the advanced practice nurse or physician assistant on any problem or complication encountered; and

8. is available through direct telecommunication for consultation, patient referral, or assistance with a medical emergency.

Tex. Occ. Code 157.0541 (b) At an alternate site, a physician licensed by the board may delegate to an advanced practice nurse or physician assistant, acting under adequate physician supervision, the act of administering, providing, or carrying out or signing a prescription drug order as authorized through a physician's order, a standing medical order, a standing delegation order, or another order or protocol as defined by the board.

o “alternate site” means a practice site:(1) where services similar to the services provided at the delegating physician's

primary practice site are provided; and(2) located within 75 miles of the delegating physician's residence or primary

practice site.o Note that there are different standards for “adequate physician supervision” under this statute.

See TEX. OCC. CODE § 157.0541(c).

B/c the nurse and PA can sign a prescription drug order, it is unnecessary to leave a presigned prescription pad.

MEDICARE/MEDICAID CERTIFICATION

o Can shut down, but are intermediate sanctions – state inspects, state closes, Medicare withdraws funding, 15 day notice prior to termination, patients can stay until course of treatment done

Have to give procedural DP, but no constitutional claim b/c no state action [Heckler – Medicare does surveys]

Cospito – loss of benefits

o Certification is a voluntary procedure for health care organizations to meet the qualifications for participation in government funding programs (as opposed to Licensure, which is a mandatory governmental process, and accreditation, which is a voluntary private process.)

o To receive funding under the Medicaid Act, “a state must submit to the Secretary and have approved by the Secretary a plan for medical assistance which meets the requirements of” 42 USC sec. 1396a(a)… “The plan must include descriptions of the standards and methods the state will use to assure that medical or remedial care services provided to the recipients are of high quality… The appropriate state agency must determine on an ongoing basis whether the participating institutions meet the requirements for continued participation…” In conducting the review the state must use federal standards, forms, methods and procedures… See Textbook Page 401 State of Smith v. Heckler).

o When a Hospital enters into a Medicare provider agreement it specifically undertakes to comply with Federal statutes and regulations governing Medicare certified hospitals; see section 1861(e) of the Social Security Act, 42 U.S.C. § 1395x(e); 42 C.F.R. Parts 482 and 488. Idem.

o “CMS may terminate a provider's agreement to participate in the Medicare program if CMS determines that the provider "fails substantially to meet the applicable provisions of section 1861." Section 1866(b)(2)(B) of the Act. CMS may also terminate a provider's agreement to participate in the Medicare program where the provider is not in substantial compliance with the provisions of title XVIII of the Act or the applicable regulations or if the hospital no longer substantially meets the appropriate conditions of participation or requirements. Section 1866(b)(2)(A) of the Act; 42 C.F.R. sec. 489.53(a)(1), (3).

o A hospital that is dissatisfied with CMS's determination to terminate it from participation in the Medicare program is entitled to a hearing. Sections 205(b), 866(h)(1) of the Act; 42 C.F.R. sec. 498.5(b), 498.3(b).

o The process of determining compliance and challenging adverse decision provide substantial procedural protections to providers. See Textbook page 407.

o The most intense disputes arise when findings are such that the facility is shut down immediately, without a chance for correction or rebuttal. These shutdowns have been challenged as unconstitutional but usually without success considering the patient protection concerns at stake and the ample procedural rights following a temporary shutdown. See Textbook page 407.

o Remember that a constitutional challenge requires state action, which usually doesn’t exist for private accreditation (like that of the Joint Commission for the Accreditation of Hospitals).

CORPORATE PRACTICE OF MEDICINE

o The corporate practice of medicine doctrine prohibits corporations from providing professional medical services.

o The rationale behind the doctrine is that a corporation cannot be licensed to practice medicine because only a human being can sustain the education, training, and character-screening which are prerequisites to receiving a professional license.

o The rationale of the doctrine concludes that the employment of physicians by corporations is illegal because the acts of the physicians are attributable to the corporate employer, which cannot obtain a medical license.

o The prohibition on the corporate employment of physicians is invariably supported by several public policy arguments which :

espouse the dangers of lay control over professional judgment, the division of the physician's loyalty between his patient and his

profitmaking employer, the commercialization of the profession.

o Numerous jurisdictions have recognized either judicial or statutory exceptions to the corporate practice of medicine doctrine which allow hospitals to employ physicians and other health care professionals.

First, some states determined that a hospital corporation which employs a physician is not practicing medicine, but rather is merely making medical treatment available.

Second, the courts of some jurisdictions determined that the corporate practice doctrine is inapplicable to nonprofit hospitals and health associations. These courts reasoned that the public policy arguments supporting the corporate practice doctrine do not apply to physicians employed by charitable institutions.

Third, the courts of several states have determined that the corporate practice doctrine is not applicable to hospitals which employ physicians because hospitals are authorized by other laws to provide medical treatment to patients.

o The hospital licensing statutes clearly authorize, and at times mandate, licensed hospital corporations to provide medical services.

o The concern for lay control over professional judgment is alleviated in a licensed hospital, where generally a separate professional medical staff is responsible for the quality of medical services rendered in the facility.

o In addition, such concerns are relieved when a licensed hospital is the physician's employer. Hospitals have an independent duty to provide for the patient's health and welfare.

o It would be incongruous to conclude that the legislature intended a hospital to accomplish what it is licensed to do without utilizing physicians as independent contractors or employees.

o A duly-licensed hospital possesses legislative authority to practice medicine by means of its staff of licensed physicians and is excepted from the operation of the corporate practice of medicine doctrine.

BYLAWS - ECONOMIC CREDENTIALING [Page 484]

A Removal for any reason regardless of Medical staff recommendations, so long as first consulted.

Probably not a good idea. Hospital bylaws and medical staff bylaws are binding contracts between the two which must be honored and followed. St. Johns Hospital Medical Staff v. St. John Regional Medical Center. MW will not be able to go in and unilaterally amend its bylaws in a way which conflicts with the bylaws bargained for by the medical staff.

B Amend the Medical Staff Bylaws to declare that additional criterion for medical staff membership is to practice an efficient style of medicine that avoids wasting medical resources or providing unnecessary care.

MW may amend. Generally, hospital bylaws regarding business judgments will be followed even if they incidentally effect medical personnel issues. Business judgment issues are better addressed by the corporation, not the medical profession. Mahan v. Avera St. Luke. Thus, MW is advised that so long as such amendment would withstand scrutiny, to the extent it does not substantively conflict with the bylaws bargained for by the medical staff or undermine their physicians’ medical treatment decisions. This should be a purely economic concern so as to avoid any corporate practice of medicine issues.

C. Amend the medical staff bylaws to declare that any physician who consistently loses money for the hospital will be removed for the medical staff.

o Probably not. Hospital bylaws and medical staff bylaws are a binding contract between the two which must be honored and followed. St. John’s Hospital Medical Staff v. St John regional Medical Center. Cannot amend med staff w/o procedure.

o However, Hospital bylaws regarding business judgments will be followed even if they incidentally effect medical personnel issues – K in nature. Mahan v. Avera St. Luke. First, since the medical staff legally bargained for its bylaws with MW, MW does not have the power to unilaterally amend the medical staff bylaws. And second, although Mahan stands for the general principle that a Hospital knows business better than a medical staff, and decisions relating to economic business concerns should be left to the hospital, a hospital can not breach its agreement with the medical staff via its bylaws without facing breach of contract liability. Thus, although the purpose behind this purposed amendment is one of economic concern, MW is still advised against such amendment.

D. Forget about amending any bylaws. Instead, go after physicians who are economic losers based on their general medical competence and their unwillingness to be cooperative.

o MW probably able to go after physicians who are economic losers. A hospital may deny staff privileges so long as it is supported by sufficient reliable evidence. Nanavati v. Burdette Tomilin Memorial Hospital. So long as there are more than just general complaints, but also things such as violations of policy, breaches of professional standards, or acts that adversely affect health care delivery, a hospital may terminate medical staff privileges. Id. Thus, so long as MW bases the termination of staff privileges on quality evaluations of substandard professional competence, and unwillingness to be cooperative to such an extent that it is adversely affecting health care, and not just on the mere fact that a doctor is irascible, MW may proceed.

o

o E. Keep but supplant the entire medical staff structure by limiting who can practice in each department through one year renewable contracts with the 200 best doctors out of the present 300.

o Depends. Arbitrarily striking qualified doctors who want to practice in a underserved areas will generally be rejected under a more rule making standard. Greisman v. Newcomb Hospital. However, if termination is supported by sufficient reliable evidence of breaches of professional standards, then they generally will be upheld. Nanavati v. Burdette Tomlin Memorial Hospital. Even so, if the medical staff bylaws requires certain procedures for termination, they must be followed. St. Johns Hospital Medical Staff v. St. John Regional Medical Center. Nonetheless, a Hospitals business judgments will be followed even if they incidentally effect medical personnel issues. Mahan v. Avera St. Luke. Additionally, an obligation for proper due process and notice of termination of privileges may arise if the insurer posses power so substantial that the removal significantly impairs the ability of an ordinary, competent physician to practice medicine. Potvin v. Metropolitan Insurance Co. Thus, if MW is a “special” underserved area an arbitrary removal or denial of qualified doctors may be rejected. However, if MW keeps the top 200 doctors based on sufficient reliable evidence of breaches of professional standards for the bottom 100, the termination will be upheld. If the physician at MW are in fact terminated, MW may be obligated to give notice and hearing to such doctors. And finally, if MW is keeping the 200 out of the 300 because of legitimate economic and business concerns, then either way, its actions will probably be able to withstand scrutiny, to the extent it does not substantively conflict with the Medical Staff Bylaws.

MEDICAL STAFF EXCLUSIONS – WHOLE CLASSES

a. Limitation of bylaws to psychiatrist onlyo Common-law fairness theory (a) rationale for general membership contained in

bylaws, and (b) evidence supporting the application of bylaws to individual physician.

o Advise that it would be a better argument to keep psychologist off staff b/c of quality of care concern. Could argue economic reasons but key is whether motivation is in improving quality of care or by limiting competition

o Can argue that bylaws are a contract, and can’t just change the bylaws. o Also, could amend the bylaws like in Greissman to admit psychologist, and then

argue that Dr. Zock, individually, is uncooperative and deny privileges for that reason. Must have concrete evidence of problems that effects patient care.

b. Antitrust / Illegal boycott o Several other hospitals w/ psychiatric units, so CP doesn’t have requisite market

share to cause harm. o Conspiracy: some jurisdictions have held that medical staff and hospital can join

together, but other jurisdictions reject this. Hospital and medical taff can’t conspire.

o Per se restraint of trade? Seems like a boycott / concerted refusal to deal, but can argue the learned profession exception if CP can offer a public service or ethical norm reason to discriminate against psychologist.

c. HCQIA 42 USC § 1111(a) Immunity for professional review action, but can’t relate to billing or anything related to economic…only competence. Problem b/c no one on the Panel can have a direct economic interest for qualified immunity under HCQIA.

STARK

Stark law- 42 USCA 1395nn ( p.75)o Rule: except as provided in SUBSECTION (B) of this section, if a PHYSICIAN ( or

an immediate family member of such physician) has a FINANCIAL RELATIONSHIP with AN ENTITY specified in paragraph (2), then-

The PHYSICIAN may not make a REFERRAL to the ENTITY for the furnishing of DESIGNATED HEALTH SERVICES for which payment otherwise may be made under this SUBCHAPTER, and

the entity may not present or cause to be presented a claim under this subchapter or bill to any individual, third party payor, or other entity for DESIGNATED HEALTH SERVICE furnished pursuant to a REFERRAL prohibited under SUBPARAGRAPH (A)

Finding Defso Physician defined in 1395 x(r)

o Immediate family member defined in 1320a(7)- question is if bro is immediate family

membero Financial relationship

Designated Health Serviceso 1395 (h)(6)

o Includes durable medical equipment (DME) but is wheelchair DME? See 1395 x(n)-

wheelchair is DME Was there a referral?

o 1395nn(h)(5)

o Except as provided in subparagraph (c), in the case of an item or service for which

payment may be made under part B, the request by a physician for the item or service, including the request by a physician for a consultation with another physician (and any test or procedure ordered by, or to be performed by (or under the supervision of) that other physician) constitutes a “referral” by a “referring physician”

o Borderline if there is a request and case for being a referral is weak here

Was there a financial relationship? 1395nn(a)(2)o For purposes of this section, a financial relationship of a physician (or an immediate

family member of such physician) with an entity specified in this paragraph is--o (A) except as provided in subsections (c) and (d) of this section, an ownership or

investment interest in the entity, or

o (B) except as provided in subsection (e) of this section, a compensation arrangement

(as defined in subsection (h)(1) of this section) between the physician (or an immediate family member of such physician) and the entity.

Is there an ownership interest?o Look at exceptions (c) and (d)

o Entitron is traded on small Puerto Rican stock exchange and had stockholders equity

of 74 million last year but average of 80 million for 3 years before thato (c)

Entitron available on small Puerto Rican exchange so satisfies (c)(1)(A)(i)- as long quotations are published on daily basis [we don’t know if published]

Also average assets of 80 million exceeds the 75 million requirement If have stock in big company then not count as entity and have defined big to

be really big so looks like entitron falls under exceptions unless quotations are not published on daily basis. Thus ownership of entitron is NOT considered to be ownership or investment interest

o (d)

(1) designated health services provided by a hospital located in Puerto Rico are not ownership or investment interests

But in this example services are provided near hospital but not at the hospital so exception is not applicable

Is there compensation arrangement via the cocounut?o Compensation arrangement defined in (h)(1)(a)

Means any arrangement involving any remuneration between a physician (or an immediate family member of such physician) and an entity other than an arrangement involving only remuneration described in subparagraph (C)

o Includes remuneration- defined at (h)(1)(b)

Includes any remuneration , directly or indirectly , overtly or covertly, in cash or in kind

o Need to check (e) exceptions

o Looks like coconuts might constitute remuneration under the statute

o What helps is this is not arrangement- only happened twice

STARK GROUP EXCEPTION Question whether statute applies b/c pediatric patient and not medicare. Assume for moment

that does apply Appears to be Stark violation so need to fall under exception Same group exception to ownership and compensation arrangements: 1395nn(b)(1)

o Physicians’ services provided personally by (or under the personal supervision of)

another physician in the same practice group (as defined in subsection (h)(4) of this section as the referring physician

o Group practice under (h)(4) - 6 requirements that all must be met.

4(A)(i) requires that all services of the physicians who are members provide substantially the full range of services which the physician routinely provides, including medical care… through the joint use of shared office space.

Group practice exception fairly narrow and dealing with indirect referrals and not satisfy (4)(a)(iv)

Here might also fail (v)- 75% requirement Any exception for indirect referral to DH? See 1395nn(d)(3)

o In the case of designated health services provided by a hospital (other than a hospital

described in paragraph (1) if- the referring physician is authorized to perform services at the hospital, and the ownership or investment interest is in the hospital itself (and not merely in the subdivision of the hospital)

Fact have interest in hospital may not be fatal You can refer to hospital in which you have interest if you are authorized to

perform services Doesn’t appear to have ownership interest in hospital here though

Rural provider exception- (d)(2)o If genuinely just serving rural area (and not other locales) then give exception and not

considered ownership or investment interesto Is Stephenville rural?

ANTIKICKBACKo (1) Whoever knowingly and willfully solicits or receives any remuneration (including

any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind—

o (A) in return for referring an individual to a person for the furnishing or arranging

for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or

o (B) in return for purchasing, leasing, ordering, or arranging for or recommending

purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program,

o shall be guilty of a felony and upon conviction thereof, shall be fined not more than

$25,000 or imprisoned for not more than five years or botho (2) whoever knowingly and willfully offers or pays any remuneration… (same as in

(1) Think Dr Y is ok here- have to show mens rea, receipt/solicitation, “in return”, federal health

program. Can show federal health program but as to others think Dr Y is oko Hanlester case (p 582) defines knowingly and willfully in the antikickback statute as

requiring appellants to (1) know that 1128b prohibits offering or paying remuneration to induce referrals, and (2) engage in prohibited conduct with the specific intent to disobey the law

DWT still violating statute

o Greber case “if one purpose of the payment was to induce future referrals, the

Medicare statute has been violated” Addt’l Chandler hypo: If Dr Y did not know but when receives charity card asks why.

Pharmacist says b/c have promotion for providers who refer the most prescriptions and you had number 23 and picked yours out.

o Point is law creates vast realm of prosecutorial discretion. Under this addt’l info on

hypo then probably have issues

Pharmacy rep employee safe harbor o Under (b)(1) looks like violating statute

o But there is safe harbor on p 46 – (i) employees

(i) remuneration does not include any amount paid by an employer to an employee who has bona fide employment relationship with the employer, for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare of a State health care program.

This exception only deals with medicare or state health care program so exception not that broad. Also she is not furnishing but rather recommending so might have issues.

o Instinct that not violating statute but concerned a little with bonus tied to getting

100 promises signed.

Pharmacy pays for educational seminaro Payments intended to induce a physician to use a service or purchase a

product violates the anti kickback statute, even if they payments were also intended to compensate them for their professional services. United States v. Greber. Inducement means the intent to exercise influences over the reason or judgment of another in an effort to cause the referral. Hanlester Network v. Shalala. For an anti kick back violation the government must prove the conduct was “knowing and willful.” Id.

o 1320a-7b (b) (2) (B) provides that whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program shall be guilty of a felony.

o SpectraSpecs may face anti kickback liability. They obviously offered and paid remuneration to the doctors in attendance at the conference. An all expense trip to Colorado, plus an additional coupon for 20% off on lift tickets is directly and overtly remuneration in kind. Additionally, the remuneration was for the purchasing of their lovegood medical imager to radiologists, for

which payment may be made in whole or in part under a Federal health care program. However, the government will have to prove SpectraSpecs had the requisite mens rea of “knowledge and will.” Although its possible, without proving SpectraSpecs knowingly and willfully reimbursed the physicians and provided the 20% off coupon for the purpose of receiving a kick back, SpectraSpecs will avoid liability. Additionally, there may be issues with whether SpectraSpecs reimbursement was in “cash or in kind.”

o The radiologists may be facing liability as well. Their involvement in the all expense trip could be characterized as them knowingly and willfully receiving remuneration indirectly and overtly in “kind” in return for purchasing the equipment. As such, they may be facing liability as well.

Payments intended to induce a physician to use a service or purchase a product violates the anti kickback statute, even if they payments were also intended to compensate them for their professional services. United States v. Greber. Inducement means the intent to exercise influences over the reason or judgment of another in an effort to cause the referral. Hanlester Network v. Shalala. For an anti kick back violation the government must prove the conduct was “knowing and willful.” Id.

1320a-7b (b) (1) (B) provides that whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program shall be guilty of a felony.

Dr. H knowingly and willfully receives remuneration directly and covertly in cash in return for ordering the x ray service. First, he knowingly and willfully chooses to use the HMO because he will get a better reimbursement rate. Secondly, even though his medical instincts tell him other facilities are better, he covertly chooses to only use health care services to within Corsicana. Thus from the facts, I believe the government will be able to satisfy the “knowingly and willful” requirement. There does not seem to be a safe harbor which would apply. Moreover, he already gets paid a salary, thus the remuneration in the form of reimbursement is in addition to whatever Dr. H is already getting paid, and as such, not part of the substantive bonafide employee/employer relationship exemption.

As for the HMO, it might be subject to anti kick back violations as well. It appears the HMO may be knowingly and willfully offering and paying physicians directly and covertly a better reimbursement rate in return for using its x-ray services. As such, if it can be proven, they may be facing liability as well.