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Medicare and Medi-Cal Investigations and Enforcement Proceedings

Wed, 02 Nov 2011 00:00:00 -0800

Licensure of Complementary and Alternative Practitioners

Fri, 08 Jul 2011 00:00:00 -0800

How States Control Health Care Licensure

For over 120 years, the Supreme Court has upheld the principle that states may regulate the practice of medicine and determine what is and is not lawful [1]. In Dent v. West Virginia, the State of West Virginia refused a license to Frank Dent, a member of the eclectic sect of physicians who incorporated botanical remedies into medicine. Dent had graduated from the American Medical Eclectic College of Cincinnati, but could not establish that he had attended a medical college recognized by West Virginia, passed a designated examination, or practiced in West Virginia for 10 years.

Dent argued that, by refusing him a license, West Virginia deprived him of due process of law. The Supreme Court disagreed, holding that the power of the State to provide for the general welfare of its people authorizes it to prescribe all such regulations as in its judgment will secure or tend to secure them against the consequences of ignorance and incapacity, as well as of deception and fraud [2].

Around the time of Dent, the states began enacting medical licensing statutes. Today, all states define the practice of medicine, in part, by using such words as diagnosis, treatment, prevention, cure, and prescribe, in connection with disease, injury, and mental or physical condition [3]. State law came to designate the practice of medicine without a license as a crime.

Subsequent cases relied on the Dent holding to interpret the medical licensing statutes and uphold prosecutions against a variety of complementary and alternative medicine (CAM) practitioners. For example, in People v. Amber, an acupuncturist argued that the statutory prohibition on unlicensed practice of medicine referred only to Western allopathic medicine and did not encompass systems such as Chinese acupuncture, which differs in its philosophy, practice and technique [4]. The court disagreed, holding that any sizing up or a comprehending of the physical or mental status of a patient constitutes diagnosis, which is part of the practice of medicine [5]. Similarly, other cases involved prosecutions of practitioners of modalities such as hands-on healing [6], iridology [7], and homeopathy [8]. In each case, courts interpreted statutory terms such as diagnosis and treatment broadly. Courts have also resisted constitutional challenges to health care licensure on a variety of fronts, including challenges based on free exercise and due process limitations [3].

Licensing of Allied Health Professionals and Complementary Care Providers

Allied health providers, such as dentists, psychologists, and nurses, have their own distinct licensing statutes. The key difference is that medical licensure, known as unlimited licensure, grants physicians broad leeway to diagnose and treat disease, whereas licensure for allied health professionals, known as limited licensure, carves out a narrower scope of practice [9]. Exceeding that designated scope of practice is considered the unlawful practice of medicine.

In response to the prosecution of CAM practitioners for unlicensed medical practice, efforts arose to garner statutory licensing for different CAM professional groups. Presently, chiropractors are licensed in every state; acupuncturists and massage therapists, in over 40 states; and naturopathic physicians, in at least 15 [10].

Like allied health professionals, CAM practitioners have limited licensure and a designated scope of practice. For example, chiropractors can manipulate the spine and provide certain ancillary therapies but may not diagnose and treat disease or otherwise practice medicine; massage therapists may deal with emotional content that arises during bodywork, but may not practice psychology. The legal boundaries of scope of practice vary and are sometimes difficult to ascertain [9].

The Different Kinds of Licensure

There are several different kinds of licensure. Under mandatory licensure, an individual cannot practice without a state license. For example, an individual may not practice medicine unless licensed as a physician. With title licensure, the state requires an individual to meet specified requirements in order to use a particular professional title. Some states use title licensure for the practice of psychology or counseling. Registration involves registering a practice and disclosing information about training and experience to a state consumer protection agency.

Typically, mandatory and title licensure require much higher standards than simple registration. For example, chiropractic licensure typically requires 4,200 hours of education, including basic medical sciences and clinical experience, and passage of the National Board of Chiropractic Examiners (NBCE) written exam [11]. The terminology can get confusing, however, because some boards granting title licensure use the term registrationfor example, the Massachusetts medical licensing board calls itself the Board of Registration in Medicine.

States also use exemptions to licensure as a mechanism to authorize health care practices. For example, in response to the proliferation of interstate electronic communications among clinicians, some states have elected (in lieu of explicit telemedicine statutes) to carve out exemptions from state licensing laws to provide that out-of-state physicians who periodically consult with in-state physicians about in-state patients are not considered to be practicing medicine within the state [9]. Similarly, some states exempt practices such as reflexology from medical and massage therapy licensing laws [9].

One interesting variation is a California statute authorizing health care practices by nonlicensed health care professionals, so long as they do not practice medicine, make appropriate disclosures to consumers, provide appropriate informed consent, and meet other specified requirements [12].

Licensure as Opposed to Certification, Accreditation, and Credentialing

It is important to distinguish licensure from related concepts such as certification, accreditation, and credentialing. Licensure refers to specific review and approval (and ongoing oversight) by the state of an individuals right to a license. By contrast, certification ordinarily refers to a review process by a third-party professional organization, typically involving the satisfaction of defined criteria, such as completion of a particular training program. Certification can be either a prerequisite for licensure or, in some cases, an alternative. For example, many states require acupuncturists to be certified by the National Certification Commission for Acupuncture and Oriental Medicine (NCCAOM). Professional certifications, however, do not always have licensing implications; states may, for example, require a practitioner to be certified without imposing a requirement of licensure.

Accreditation refers to the application of uniform standards to the educational organizations and programs that train people for certification or licensure. Often, the standards for licensure include a requirement of graduation from one of a limited number of specified accredited programs. The U.S. Department of Education (DOE), for example, has authorized the Council on Chiropractic Education to accredit chiropractic colleges. Similarly, the DOE has authorized the Accreditation Commission for Acupuncture and Oriental Medicine to accredit acupuncture programs.

Credentialing refers to efforts by organizations to ascertain the licensure and other qualifications or credentials of their health care practitioners. Typically, aspiring members of a credentialing organization submit applications setting forth their qualifications for review and approval of their credentials. Some states require self-governing bodies to perform peer review and credentialing functions within health care organizations.

Why Health Care Licensure Matters

From the states perspective, health care licensure protects patients from unskilled or unscrupulous practitioners. From the standpoint of health care professionals and groups, licensure offers legitimacy, credibility, and greater access to patients.

For CAM practitioners, licensure is a double-edged sword. On the one hand, licensure offers the states imprimatur of legitimacy and access to greater integration with conventional medical care. But for some practitioners, licensure also has a dark side. Many healing practicesparticularly those from folk traditionsrely on more intuitive sources of knowledge and fit less comfortably into highly structured systems. From the latter perspective, regulation represents a potentially unhealthy crystallization of healing work into the Western, analytical mindset and subjects practitioners to regulatory mazes they might rather avoid [9].

Most health care providers, from neurologists to shamans, fit somewhere in the spectrum of mandatory licensure, title licensure, registration, or exemption from licensure. A practitioner who does not fall within one of these four categories could be considered to be engaged in unlicensed medical practice (or the unlicensed practice of another profession).

Although, historically, regulation began with the effort to protect physicians affiliated with the American Medical Association from competition with other practitioners [13], the regulatory trend today is toward medical pluralism and greater inclusion of a variety of practitioners [10]. Due in part to such inclusion, CAM practitioners are increasingly being integrated into conventional medical settings, including academic medical centers [14].

The trend towards medical pluralism and inclusion of CAM practitioners appears to be accelerating as a result of the federal Patient Protection and Affordable Care Act (ACA) enacted in March 2010. Notably, for example, Section 2706 of the ACA includes a nondiscrimination provision, championed by chiropractors, that prohibits health care payors from discriminating against any health care provider who is acting within the scope of that providers license or certification under applicable State law [15, 16]. Elsewhere, the ACA calls for the inclusion of CAM practitioners in new community-based, interdisciplinary health teams (Section 3502) and recognizes both CAM practitioners and chiropractors as part of the health care workforce for purposes of a new National Healthcare Workforce Commission. It will be interesting to see whether the expanding role (and possibility of federal funding) for CAM services leads to an influx of new practitioners and changes in state licensing requirements.

The existence of licensure for CAM professionals makes it more likely that they and conventional medical professionals will exchange referrals and continue to integrate the divergent practices and philosophies relating to patient care.

References

1. Dent v West Virginia, 129 US 114 (1889).
2. Dent v West Virginia, 129 US 114, 117 (1889).
3. Cohen MH. A fixed star in health care reform: the emerging paradigm of holistic healing. Ariz State Law J. 1995;27:79.
4. People v Amber, 349 NYS2d 604, 613 (1973).
5. People v Amber, 349 NYS2d 604, 612 (1973).
6. Smith v People, 117 P 612 (Colo 1911).
7. Stetina v State, 513 NE2d 1234 (Ind Ct App 1987).
8. State v Hinze, 441 NW2d 593 (Neb 1989).
9. See Cohen MH. Complementary and Alternative Medicine: Legal Boundaries and Regulatory Perspectives. Baltimore: Johns Hopkins University Press; 1998: chapters 1-3.
10. See Eisenberg DM, Cohen MH, Hrbek A, Grayzel J, van Rompay MI, Cooper RA. Credentialing complementary and alternative medical providers. Ann Intern Med. 2002;137(12):965-973.
11. New York State Education Department Office of the Professions. Chiropractic: license requirements. http://www.op.nysed.gov/prof/chiro/chirolic.htm. Accessed May 13, 2011.
12. Cohen MH. California law for non-licensed practitioners and nutritional advice. http://www.camlawblog.com/articles/dietary-supplements/california-law-for-nonlicensed-practitioners-and-nutritional-advice/. Accessed May 12, 2011.
13. See Cohen, Complementary and Alternative Medicine, chapter 1.
14. See Cohen MH. Healing at the Borderland of Medicine and Religion. Chapel Hill: University of North Carolina Press; 2006.
15. Cohen MH, Sandler L, Hrbek A, Davis RB, Eisenberg DM. Policies pertaining to complementary and alternative medical therapies in a random sample of 39 academic health centers. Alt Ther Health Med. 2005;11(1):1:36-40.
16. Patient Protection and Affordable Care Act of 2009, section 2706. Non-discrimination in health care. http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/html/PLAW-111publ148.htm. Accessed May 13, 2011.

Harry Nelson is the managing partner and co-founder of Fenton Nelson, LLP, in Los Angeles, where he counsels health care providers on regulatory compliance and business matters. He has been named to the 2010 and 2011 lists of Southern California Super Lawyers in the field of health care law. His co-author is Michael Cohen.

© 2011 American Medical Association. All Rights Reserved.

This article is republished with permission from Virtual Mentor: American Medical Association Journal of Ethics Volume13 (Number 6) (June 1, 2011): 374-378. For more information about Virtual Mentor go to http://virtualmentor.ama-assn.org/.

The original article can be found at http://virtualmentor.ama-assn.org/2011/06/pfor1-1106.html.

Recent Court Opinion Affects Antitrust Aspects of Peer Review

Thu, 12 May 2011 00:00:00 -0800

By: Henry R. Fenton, Esq.

The May 8, 1989 issue of LACMA Physician featured an address by antitrust attorney Jack Bierig. He characterized the Patrick v Burgett decision as a very unusual case because of a rare convergence of circumstances, one which the medical community would not likely see again. He pointed out that the denial of staff privileges occurred at the only hospital in a small Oregon town. and that Dr. Patrick's exclusion from competition would obviously have an impact on competition in his specialty of general surgery in that town. Further, the conduct of the peer review physicians in the Patrick case had been characterized by the Supreme Court as "shabby, unprincipled and unprofessional."

Although Bierig was certainly correct that the peculiar facts of the Patrick case are unusual, a recent decision of t he Ninth Circuit Court of Appeals. the case of Pinhas v Summit Health Limited, decided in July 1989, suggests that Patrick may have a greater impact upon California medical staff disciplinary disputes than was previously anticipated.

In the Pinhas case, Dr. Pinhas challenged removal of his staff privileges at Midway Hospital Medical Center in Los Angeles under Section 1 of the Sherman Antitrust Act, alleging that the defendants, including various members of the medical staff, had engaged in a conspiracy in restraint of trade after Dr. Pinhas' medical staff privileges were suspended and then terminated.

Dr. Pinhas also claimed that in addition to excluding him from practice at Midway. the defendants conspired to preclude him from practicing elsewhere in California or anywhere else in the United States becuase state and healthcare facilities obtain reports of any previous denial of staff privileges before granting or reviewing staff privileges. Under Section 805 of the California Business and Professions Code, Midway would be required to report the disciplinary action to BMQA, which would then transmit the information to any other hospital where the plaintiff might apply for new or renewed staff privileges.

Similar reporting requirements are contained in the federal Health Care Quality Improvement Act. (In an unusual twist, the lawyers who represent the medical staff, and the hearing officer who presided over the disciplinary hearing, were also sued as co-conspirators.)

The first important issue decided in the case was whether the peer review activity involved would be exempt from the antitrust laws as part of a state regulatory scheme and thus, exempt under the state action doctrine. Despite the Supreme Court's decision affirming the antitrust judgment in the Patrick case, many commentators remained skeptical about whether the same analysis would apply to the California system of medical staff peer review. In the Patrick case, the Ninth Circuit Court of Appeals had concluded that the defendants were protected from antitrust liability under the state action doctrine.

The United States Supreme Court reversed the decision of the Court of Appeals and concluded that the exemption to the antitrust laws for state action was inapplicable, since the system of peer review in Oregon was not actively supervised by the State. Therefore, there was not a sufficient degree of state action to exempt the peer review activity in question from the antitrust laws.

Prior to the Pinhas case, much doubt remained about whether the same analysis with respect to the state action doctrine would apply to peer review activities in California. It was hoped by many that the courts would conclude that there was "active supervision" of peer review in California by the State and that, therefore, medical staff peer review proceedings in California would fall within the state action exemption to the antitrust laws.

The Ninth Circuit Court of Appeals in Pinhas decided that no state supervises peer review decisions, nor does any State agency have any power to review peer review decisions or overturn such decision, even if they are anticompetitive and are violative of State policy.

Further, the court stated that even the system of court review in California, with respect to peer review actions, provides such a limited rule for the courts - permitting them only to determine whether the action taken was irrational, unlawful or contrary to established public policy or procedurally unfair - that "such constricted review does not convert the action of a private party in terminating a physician's privileges into the action of the State for purposes of the state action doctrine."

This Court's analysis of the issue of state action exemption from the antitrust laws is interesting from another viewpoint. Several years ago, the California Supreme Court had ruled that medical staff privileges held by a physician constituted a property right. Therefore, decisions to terminate those privileges were subject to independent review by the courts.

Subsequently, the California Legislature passed a law which provided that peer review decisions to terminate medical staff privileges could only be overturned by the courts if there was not substantial evidence to support the decisions and that the courts were no longer to exercise their independent judgment in reviewing such peer review decisions.

Although this accorded a greater degree of protection from judicial review to hospitals and those persons taking part in peer review disciplinary decisions, it supervision by the courts and by all other California governmental agencies. Ironically, what was intended to provide greater security from litigation in some instances may pave served to create greater exposure to potential antitrust liability.

Several other aspects of the case are also of great interest. First, the Ninth Circuit Court of Appeals rejected the argument that it was necessary to exhaust remedies under the medical staff bylaws before filing the antitrust suit. Even though the lawsuit in federal court for damages was

filed before any hearing had been held under the medical staff bylaws, the court held that exhaustion was not necessary. The opposite is true as a matter of California law with respect to actions for damagesfi1ed in connection with peer review disciplinary proceedings.

As a matter of California law, peer review proceedings must be exhausted and no damage suit may be filed unless and until a California court sets aside the disciplinary action taken by the medical staff This ability to imm... federal courts under the federal antitrust laws.

Another interesting aspect of this case involved the court's analysis of whether there was injury to competition. The courts have often stated that it is not sufficient for a competitor to show that he has been injured by anticompetitive activity. It was also necessary to show an injury to competition. In his address, Bierig emphasized the fact that in the Patrick case, the market in which Dr. Patrick practiced was limited - there was only one hospital and one physician group in that market.

It was thus apparent that the exclusion of Dr. Patrick would have an impact upon competition in that town. Interestingly, the Ninth Circuit Court ofAppeals had very little trouble finding injury to competition in the Pinhas case, even though Dr. Pinhas was an ophthalmologist and eye surgeon practicing in a huge metropolitan area and in a market with a large number of competitors.

The court held that it was sufficient for Pinhas to establish that his services were provided at a rate lower than that of his competitors or that precluding him from practicing could conceivably injure competition by allowing other similar doctors to charge higher prices for their services. This analysis by the court seems to suggest that it will not be extremely difficult for plaintiffs in such antitrust actions arising out of medical disciplinary proceedings to establish injury to competition.

Although the Pinhas case is an important judicial interpretation of the antitrust laws as they affect medical staff peer review proceedings and disciplinary actions, the case arose as a result of the dismissal of Dr. Pinhas' claim immediately after it was filed. In other words, there has not been a trial and the facts of the case remain to be Iitizated. The appellate opinion in Pinhas, however, will govern the course of the trial if the case is not settled.

More significantly, as a published opinion and legal precedent, it contains the standards that will be followed by all federal trial courts in similar cases throughout the Ninth Circuit, which includes California. The decision teaches us that resourcefullitigations can still challenge medical staff disciplinary actions under the federal antitrust laws.

The Health Care Quality Improvement Act was a legislative reaction by the United States Congress to the jury verdict in the Patrick case, in which a jury in the Federal District court in Oregon awarded $2.2 million in favor of Dr. Patrick.

Although the passage of SB1211 has opted California out of portions of the federal Health Care Quality Improvement Act, it will not directly affect and cannot opt California out of the provisions pertaining to immunity under the federal antitrust laws, provided that fair procedure is accorded and that the action taken is based on the competence of professional conduct of the individual physician who is the subject of peer review, rather than on the basis of a personal vendetta or anticompetitive action on the part of competitors seeking to put the plaintiff out of business.

Thus, HCQIA provides expressly that "an action is not considered to be based on the competence or professional conduct of a physician" if the action is based on any "matter that does not relate to the competence or professional conduct of a physician." In cases such as Pinhas, if the plaintiff can prove that the dis-

This article is republished with permission from 1989's LACMA Physician. For more information LACMA's current journal, please visit Southern California Physician at www.lacmanet.org.

Ethical Considerations of Complementary and Alternative Medical Therapies in Conventional Medical Settings

Wed, 11 May 2011 00:00:00 -0800

Abstract:

Increasing use of complementary and alternative medical (CAM) therapies by patients, health care providers, and institutions has made it imperative that physicians consider their ethical obligations when recommending, tolerating, or proscribing these therapies. The authors present a riskbenefit framework that can be applied to determine the appropriateness of using CAM therapies in various clinical scenarios. The major relevant issues are the severity and acuteness of illness; the curability of the illness by conventional forms of treatment; the degree of invasiveness, associated toxicities, and side effects of the conventional treatment; the availability and quality of evidence of utility and safety of the desired CAM treatment; the level of understanding of risks and benefits of the CAM treatment combined with the patient's knowing and voluntary acceptance of those risks; and the patient's persistence of intention to use CAM therapies. Even in the absence of scientific evidence for CAM therapies, by considering these relevant issues, providers can formulate a plan that is clinically sound, ethically appropriate, and targeted to the unique circumstances of individual patients. Physicians are encouraged to remain engaged in problem-solving with their patients and to attempt to elucidate and clarify the patient's core values and beliefs when counseling about CAM therapies.

Karen E. Adams; Michael H. Cohen; David Eisenberg; and Albert R. Jonson, Ethical Considerations of Complementary and Alternative Medical Therapies in Conventional Medical Settings, Annals of Internal Medicine 137, no. 8 (October 15, 2002): 660 -664.

The full article is available here or by searching at http://www.annals.org.

Credentialing Complementary and Alternative Medicine Providers

Tue, 10 May 2011 00:00:00 -0800

Abstract:

Since the late 19th century, state legislatures and professional medical organizations have developed mechanisms to license physicians and other conventional nonphysician providers, establish standards of practice, and protect health care consumers by establishing standardized credentials as markers of competence. The popularity of complementary and alternative medical (CAM) therapies presents new challenges. This article describes the current status of, and central issues in, efforts to create models for health care credentialing of chiropractors, acupuncturists, naturopaths, massage therapists, and other CAM practitioners. It also suggests a strategy of CAM provider credentialing for use by physicians, health care administrators, insurance companies, and national professional organizations. The credentialing debate reflects fundamental questions about who determines which providers and therapies will be accepted as safe, effective, appropriate, and reimbursable. More nationally uniform credentialing mechanisms are necessary to ensure high standards of care and more generalizable clinical research.

The credentialing debate reflects fundamental questions about who determines which providers and therapies will be accepted as safe, effective, appropriate, and reimbursable. More nationally uniform credentialing mechanisms are necessary to ensure high standards of care and more generalizable clinical research. However, the result of more uniform licensure and credentialing may be excessive standardization and a decrease in individualization of services. Thus, increased standardization of credentialing for CAM practitioners may alter CAM practice substantially. Furthermore, even credentialed providers can deliver ineffective therapy. The suggested framework balances the desire to protect the public from dangerous practices against the wish to grant patients access to reasonably safe and effective therapies.

Academia and Clinic: Credentialing Complementary and Alternative Medical Providers
David M. Eisenberg, Michael H. Cohen, Andrea Hrbek, Jonathan Grayzel, Maria I. Van Rompay, and Richard A. Cooper Ann Intern Med December 17, 2002 137:965-97

The full article is available here or by searching at http://www.annals.org.

How I See It: Potvin v. Metlife Insurance

Tue, 03 May 2011 00:00:00 -0800

By Henry R. Fenton

The long awaited decision of the California Supreme Court in the case of Potvin v. Metropolitan Life Insurance Company represents a great victory for physicians and their patients. The case of the late Louis Potvin, M.D., Orange County OB/GYN and longtime CMA member, began in 1992when Dr. Potvin challenged his arbitrary termination from a network of health care providers. As his attorney I appealed, and in 1997 the Court of Appeal upheld the case. I described the case and its implications in the August 1997 California Physician.

Unfortunately, Dr. Potvin died shortly after he learned of his victory in the appellate court. A physician's physician, he was considered among the finest 0B/GYNs in Orange County. He was a president of the Orange County Medical Association and a CMA delegate from Orange County for 18 years.

Still, legal questions remained after Dr. Potvin's death because the California Supreme Court had granted a hearing to Met Life.

BUT THE MAY DECISION lays those questions to rest. A majority of the Supreme Court agreed with Dr. Potvin's contention that in the managed care environment, physicians and their patients are at the mercy of managed care organizations, which not only control the ability of physicians to practice their profession, but have the power to interfere with the public's interest in preserving and protecting physician patient relationships.

Amicus curiae briefs filed by CMA and AMA supported the contention that managed care organizations in California hold substantial economic power over physicians and their patients. This contention was adopted by the court majority, which concluded that such organizations could be considered private entities affecting the public interest, much like unions, professional societies, and hospitals-entities that the courts have held are required to provide fair procedure.

In essence, the court decided that when an insurance company or any other private entity in the health care industry possesses power so substantial that the physician's removal significantly impairs the ability of that physician to practice medicine or a particular medical specialty in a particular geographic area, because of the market power of that health care entity or for some other reason, then the physician in question may not be terminated unless the decision to terminate is "substantively rational and procedurally fair." In essence, this means that just cause must exist for termination, and the physician is entitled to specific notice of the reasons for the termination and to a fair hearing to permit the physician to challenge the termination.

The rationale of the Potvin decision extends to all sorts of health care professionals and managed care entities, including HMOs, insurance companies, TPAs, and other organizations that significantly control the ability of physicians to enter into and maintain physician-patient relationships. The rationale of the decision applies not only to termination or deselection situations, but also to initial credentialing.

The decision applies only to situations where the insurer or managed care entity possesses sufficient power that the physician's ability to practice medicine or his specialty in that particular geographical area is significantly affected. But in the current economic environment in California, that scenario is commonly the case. It is unlikely that insurers and HMOs will be litigating the matter, whether or not they have substantial power, on a case-by-case basis. More likely, throughout the state they will put into place notice and hearing procedures in compliance with the Potvin decision.

Henry R. Fenton is a Los Angeles-based attorney who specializes in representing physicians in Medical Board, medical staff, Medi-Cal, Medicare, fraud-and-abuse, and other administrative law and litigation matters.

This article is republished with permission from Southern California Physician's May 2000 issue. For more information about Southern California Physician go to www.lacmanet.org.

Legal Wrinkles Need Attention, Too

Tue, 29 Mar 2011 00:00:00 -0800

One of the byproducts of our appearance-oriented culture is the growing popularity of medical spas. New medical spas are opening continually, and physicians in various specialties are entering the field, yet many relevant legal issues draw little attention. This article explores a numberbut certainly not allof the regulatory issues applicable to the medical spa that is operated along with a nonmedical day spa in a common setting. The medical spa offers medical procedures, such as laser hair removal, Botox injections and intense pulse light treatments. The day spa offers nonmedical treatments, such as facials and massages. Some of the issues addressed in this article also apply to traditional medical offices that add medical spa procedures as an adjunct to the practice.

The absence of Medicare and private insurance, which generally do not cover medical spa procedures, narrows the regulatory landscape somewhat, but important regulatory issues under California law remain, including issues arising out of the following:

- The nonmedical spa as a source of patients for the medical spa;

- The physicians supervision without being physically present;

- Advertising and public communications concerning the medical spa; and

- The medical spa as a clinic or medical office.

The starting point for considering these and related questions is to recognize that the performance of medical spa procedures constitutes the practice of medicine. This has been confirmed by the Medical Board of California and, indeed, is the very reason that nonmedical spa owners have turned to physicians to expand their spas into medical spas. It follows that the numerous regulatory provisions applicable to physicians under Californias Business and Professions Code (B&P Code) are applicable to medical spas.

Adhere to Referral Fee Prohibitions

Most physicians no doubt are aware that it is illegal to pay for patient referrals. The prohibition (B&P Code §650) is very broad, and includes any rebate, refund, commission, or other consideration as compensation or inducement for referring patients, clients, or customers Moreover, it is applicable whether or not insurance or any government program covers the procedure.

The issue is pertinent to medical spa financial arrangements because, if the day spa is a source of patients for the medical spa, the nonphysician day spa owners sharing in revenues or profits from medical spa procedures could be construed as a payment for patient referrals. Excess payments to the nonphysician spa owner also could be considered fee splitting and could constitute the corporate practice of medicine, which is prohibited under California law.

In 2000, the maximum fine for a single violation of B&P Code §650 was increased from $10,000 to $50,000. Clearly, the physicians financial relationship with the nonphysician day spa owner must be structured and reviewed by an attorney to ensure that it does not violate antikickback, fee-splitting and corporate practice of medicine prohibitions.

The nonphysician day spa owner, of course, may be compensated for providing management services to the medical spa. However, the amount of compensation must be reasonable in view of the services provided, and the arrangement should be thoroughly documented in writing.

Referral fee prohibitions also should be considered in connection with promotional offers intended to generate business for the medical spa.

Supervise Procedures

Supervision requirements should not be taken lightly, not only because they are more involved than many people believe, but also because the failure to adhere to applicable supervision requirements could result in liability.

And liability is certainly more than an academic concern, as illustrated by the death of a 22-year-old college student medical spa patient in North Carolina following the application of lidocaine prior to laser hair removal, as reported by Cosmetic Surgery Times in its April 2005 issue.

In the case of physician assistants, supervision must meet the requirements of regulations promulgated by the Physician Assistant Committee of the Medical Board. In the case of registered nurses, supervision must meet the requirements of regulations promulgated by the Board of Registered Nursing. Other personnel, such as estheticians, licensed vocational nurses and medical assistants, are not authorized to perform medical spa procedures, even under the supervision of a physician.

If a physician permits procedures to be performed without proper supervision or by personnel who are not permitted by California law to perform such procedures, that physician could be found to have engaged in unprofessional conduct under B&P Code §2234 for assisting in or abetting the violation of the Medical Practice Act and under B&P Code §2264 for the aiding or abetting of any unlicensed person to engage in the practice of medicine

Run Appropriate Advertising

Charges of unprofessional conduct (not to mention corporate practice of medicine) also could arise if advertising and public communications do not meet applicable legal requirements. In our casual observation of medical spa advertising and public communications, the restrictive provisions of the B&P Code are commonly ignored.

B&P Code §2272 states any advertising of the practice of medicine in which the licensee fails to use his or her own name or approved fictitious name constitutes unprofessional conduct.B&P Code §2285 provides that the use of any name other than his or her own by a licensee in any public communication, advertisement, sign, or announcement of his or her practice without a fictitious-name permit constitutes unprofessional practice.

Under these B&P Code provisions, if the medical spa wants to advertise and provide services under a name that is different from the physicians name, it should obtain a fictitious-name permit from the Medical Board and follow fictitious-name permit requirements and regulations.

In our experience, medical spa practices are routinely advertised and promoted by and in the name of the day spa business, in contravention of the above-quoted statutory requirements, presumably without the physicians objection.

Operate as a Clinic or Medical Office

Since the performance of laser treatments and other procedures in a medical spa constitutes the practice of medicine, the question arises as to whether this means the medical spa setting is a clinic under California law. This is a significant question because it is illegal to operate a clinic without a license, unless the clinic is exempt from licensure under the law.

The term clinic is defined broadly under California law, and we believe it likely that a place or establishment providing medical spa treatments and procedures would be construed as a clinic under the law. Therefore, in order to operate lawfully, the medical spa must be organized and operated as a medical office as provided in the

clinic licensing laws, with appropriate documentation, and all medical spa procedures must be performed in the medical office.

Be Careful

Failure to adhere to the requirements discussed in this article apparently is commonplace. We do not believe that these are simply technical violations with which physicians need not be overly concerned. Rather, we view them as indicative of an apparently widespread pattern in which physicians have not taken responsibility for professional matters that clearly fall within the scope of their licenses. Noncompliance with these requirements not only exposes the physician to disciplinary action and monetary penalties, but it also magnifies the physicians exposure to liability if and when something goes wrong in the medical spa.

This article is not intended to constitute legal advice. You should consult with an attorney regarding these matters.

Michael D. Saphier and Beth A. Kase are attorneys at Saphier and Heller Law Corp. in Century City. The firm counsels physicians,

medical groups, hospitals, healthcare providers, medical management companies and other healthcare businesses regarding regulatory, corporate and general business matters. They can be reached at 310/789-1101.

Fenton Nelson, LLP was pleased to welcome coauthor Beth A. Kase, Esq. in December, 2010.

This article is republished with permission from Southern California Physician's August 2005 issue. For more information about Southern California Physician go to www.lacmanet.org.

Medical Spa Ownership

Tue, 29 Mar 2011 00:00:00 -0800

Are you protected from corporate practice of medicine and fee-splitting prohibitions?

By Mai Pham, Trends Editor

Aesthetic medicine is not just for cosmetic surgeons, dermatologists, or laser surgeons these days. Just attend a local laser seminar and you will meet any number of physicians from specialties wholly unrelated to cosmetics, dermatology, or laser surgery gastroenterologists, radiologists, family physicians. Spa and salon entrepreneurs, looking to expand their service offerings to include medical treatments such as laser hair removal, skin tightening, and dermal fillers are also trying to get into the medical spa business.

Whether youre a physician, entrepreneur or both, if you plan to offer aesthetic medical procedures such as laser hair removal, Botox« injections, or mesotherapy, you must abide by the same regulatory guidelines which govern other healthcare entities. This article will discuss the main regulatory issues of concern for medical spa owners: corporate practice of medicine, fee-splitting prohibitions, and self-referral conflicts.

CORPORATE PRACTICE OF MEDICINE PROHIBITIONS

The corporate practice of medicine is simple: it is illegal for a corporation or business to employ physicians in such a way that they may influence a physicians professional judgment. The idea is that a lay entity will make decisions based on corporate profit, which, in turn, can dictate the way in which a physician practices medicine.

Most states have corporate practice of medicine prohibitions which regulate lay ownership of healthcare businesses. Beth Kase, a healthcare attorney with the firm Saphier and Heller Law Corp. in Century City, CA, says that The issue arises when the lay owner treats these medical procedures as an ancillary service which is offered by a day spa.If the lay person has control over the medical spa services, this could result in an unlicensed practice of medicine violation which could implicate the physician and non-physician owner. The physician could then be charged with unprofessional conduct for aiding and abetting the unlicensed practice of medicine. No physician wants to have problems with the medical board.

If you dont know about these prohibitions, you can easily find yourself in violation. In many states, medical grade laser hair removal devices can be sold to spa or salon owners even though laser hair removal is considered the practice of medicine. Once the spa or salon owners buy the machine, they will hire a physician in order to comply with laws governing medical practice. These types of arrangements are fairly common, even in heavily regulated states. The spa/salon may continue to operate without regulatory oversight and without any problems until something happens. Perhaps a patient complains to the medical board, a disgruntled employee files a complaint, or a competitor complains to the state agency. Failure to take the necessary precautions to protect your business and comply with corporate practice of medicine laws is most certain to compromise your long-term business viability.

Another issue to be concerned with when dealing with corporate practice of medicine issues is contract enforceability. Kase says, If the contract is illegal because of the unauthorized practice of medicine by a lay entity, this illegality could void the contract. When an issue arises in which one of the parties wants to enforce the contract, the contract may not be enforceable.

REFERRAL PROHIBITIONS

Federal Laws

Healthcare self-referral laws and fee-splitting prohibitions exist at the state and federal level. Federal self-referral laws, such as the Stark Laws, prohibit a physician from referring Medicare and Medicaid patients to other medical services (e.g. physical therapy, imaging, diagnostic, lab, etc.) in which the physician has ownership interest. The purpose of this law is to prevent physicians from making unnecessary referrals to ancillary services where they would directly profit from the referral. The Federal Anti-Kickback Statute outlaws direct remuneration for patient referrals covered by federal health benefit programs. Since most medical spa procedures are not covered by Medicare or Medicaid, the federal laws may not be applicable to medical spas; however, an understanding of the federal statutes is important in understanding the various state laws which address these issues.

State Laws

Self-Referral Laws

Many states have self-referral laws similar to the Stark law which prohibit physician ownership in an entity where they are directing referrals. If you are a physician with undisclosed ownership or a profit sharing stake in a medical spa to which you are referring patients, self-referral prohibitions can be an issue.

Fee Splitting Prohibitions

If you are a medical spa receiving free, unincentivized referrals from hotels and satisfied customers, you do not have to worry about fee-splitting prohibitions and illegal remuneration. However, if you are a medical spa owned by lay entity, and the lay entity wants a 50% cut of the profits from the procedures performed, you may have some corporate restructuring about which to worry.

According to Michael Saphier, a partner at Saphier and Heller Law Corp., The financial arrangements between the physician and the day spa owner could cause additional problems, including illegal remuneration for the referral of patients by the day spa owner and illegal fee-splitting, as well as a corporate practice of medicine violation.

Typical spa procedures such as facials and massages do not fall within the regulatory scope of healthcare fee-splitting regulations. However, in states such as California, any procedure which requires administration by a licensed health professional is considered medical. This means that Botox ® injections, laser hair removal, and services performed using a Class II medical device are subject to fee-splitting prohibitions. California prohibits remuneration for referral of medical services. While the federal Anti-Kickback Statute only applies to federally funded health programs, the language in Californias Business and Professions Code extends to cover all types of medical services and different types of remuneration including but not limited to rebates, refunds, commissions, and other types of inducements.

If you and a physician are in a partnership whereby profits are distributed evenly among spa and medical services, you could be in violation of anti-kickback and fee-splitting prohibitions. Laypersons and entities are not entitled to compensation or other kickbacks for medical service referrals, even if the referrals pertain to aesthetic medical procedures which are paid for by cash.

HOW TO PROTECT YOURSELF

To protect yourself from corporate practice of medicine violations, the lay entity and physician entity should consider having a written agreement which distinguishes the activities of the lay entity from the medical entity. Kase recommends the following: Spell out the management company responsibility and professional entity responsibility. The written agreement should require that the physician take responsibility for medical decision-making.

To protect yourself from self-referral prohibitions, make sure the appropriate disclosures are being made to your patients about your financial interest in the entity which is receiving the referral. The patient has the right to know that you might be making money from the referral.

To protect yourself from fee-splitting prohibitions, be careful about monetary distributions, and try not to fashion financial agreements which disburse profits on a per-case or percentage basis. Make sure that payments to the lay entity related to medical services are clearly worded and are based on fair market value, monthly salary, or flat fee arrangement which is not directly connected with the volume of cases performed or the volume of referrals received. If you are concerned about any of the issues raised in this article, consult with your healthcare attorney as soon as possible. Addressing potential problems before they arise will be much less costly than waiting until something happens.

SHOULD YOU BE WORRIED?

Here are some typical scenarios which may apply to you:

- A nurse or spa owner wants to open a laser clinic and approaches a physician to ask that physician to be his/her medical director. In exchange for being medical director, the physician will receive a percentage of all aesthetic medical fees collected.

Potential problem: Violating Corporate Practice of Medicine and Fee-splitting prohibitions

- The spouse of a physician with an existing medical practice decides to open a medical spa with a lay business partner. The physician regularly refers patients to this medical spa, and the physicians spouse receives a 40%profit distribution from revenues collected at the spa.

Potential problem: Violating Self-Referral laws

- A spa regularly refers patients to a doctors clinic for laser hair removal. The doctor charges the patient $200 pretreatment and gives the spa a $25 referral fee.

Potential problem: Violating Fee-Splitting Prohibitions

- A non-professional lay corporation calls itself a Medical Spa, advertises medical procedures, runs all aspects of the medical spa business without physician oversight, purchases medical equipment, and hires and trains medical personnel.

Potential problem: Violating Corporate Practice of Medicine

Mai Pham has a Masters Degree in Public Health. Most recently, she built ambulatory surgery centers, serving as Managing Director for operations, billing, HR, and regulatory compliance. For more information, please contact 832.752.7772; send an email to Mai@medispainstitute.com, or visit www.medispainstitute.com. Mai Phamis the Trends Editor for Aesthetic Trends & Technologies and part of the research team for medical spa reporting.

This article is republished from the January/February, 2006 issue of Aesthetic Trends and Technologies and features an interview with Fenton Nelson attorney, Beth Kase.

Better Billing Contracts

Mon, 28 Mar 2011 00:00:00 -0800

Is your billing company doing a good job of billing for your services and collecting your accounts receivable? If youre like many physicians, you may not know. Whats worse, you may have trouble finding out.

Billing companies' standard contracts vary widely, but they frequently share common shortcomings. Among the most important of these is the contract's inadequate description of the billing company's obligations. Since physicians often simply sign the company's standard contract without changes, the contract's shortcomings can present problems if you are not happy with the company's performance or if you suspect the company is not doing the job it should be doing.

The contract should provide you with:

- A means of determining how good a job your billing company is doing,

- The right to early termination if you are not satisfied, and

- The ability to transition smoothly to a new billing company.

Determining how good a job your billing company is doing.

You need to be able to obtain current, detailed and readily understandable information regarding the status of your billing and collections. In our experience, information from billing companies is often difficult to comprehend or poorly organized. You should be able to obtain accounts receivable aging and related information on a patient-by-patient basis, and you may have special requirements depending on your specialty and your practice. The billing company's obligation to furnish you this information should be set forth in the contract, in reasonable detail. You may want to receive this information in a particular way, such as in an Excel spreadsheet or other format compatible with your computer system, in which case this should be specified in the contract.

Right to early termination of the contract.

Billing company contracts often are for fixed terms of one or two years with an automatic renewal for another one or tvo years, unless either party gives notice of termination a certain number of days before the expiration of the initial term. This is fine so long as you also have the right to terminate the contract at any time without cause.

However, all too often there is no such right in the contract. This leaves you with having to claim that you have the right to terminate based on the company's breach of contract, but the billing company is likely to dispute this. You may have difficulty supporting your position, particularly if the company's obligations are set forth in vague terms. In most cases, there should be little difficulty including such a provision in the contract before it is signed, when the company is trying to get your business.

Ability to transition smoothly to a new billing company or in-house billing.

Some billing agreements state that after notice of termination, the company does not have to provide you with your pending billing and accounts receivable information until you pay all of its outstanding invoices. Of course, the reason that you may not have paid those invoices is because the billing company has not been doing an adequate job. We recommend you delete this overreaching provision from your contract.

Beyond this, it is important that the billing agreement specify the data that will be provided to you upo termination, includingthe format in which it will be furnished (for example, hard copies with detailed back-up or computer files in Excel format). The agreement should also specify that the data will be providedon or before the termination date of the contract.

In addition, the contracts should indicate who is responsible for continued efforts to collect bills for services provided prior totermination. If the terminated company is to have such responsibility, the contract should indicate the length of time that responsibility runs.

Beware Various Problem Areas

We have encountered numerous shortcomings in billing contracts in addition to those mentioned above. Other problem spots include the following:

- Absence of required" business associate" provisions, thereby placing the physician in violation of HIPAA by making confidential information available to a billing company without required contractual protections against disclosure.

- Power-of-attorney provisions giving the company broad authority to take various actions in the physician's name.

- "Limitation of liability" provisions drastically limiting the companys liability under the agreement, irrespective of the company's performance.

- Indemnification provisions running in favor of the billing company, without a comparable reciprocal provision in favor of the physician and medical practice.

- Absence of any restriction against the company's assigning the contract to another billing company without physician consent.

- Compensation based on gross collections, rather than on net (after refunds).

- Absence of provisions detailing timeframes for the company's performance of its obligations.

- Absence of provisions protecting the physician from the billing company's access to collected amounts. (Don't forget that Medicare reassignment rules prohibit billing companies under percentage-based contracts from receiving and negotiating checks payable to you.)

Due Diligence ls Essential

The comments above should demonstrate the importance of negotiating the contract, rather than simply signing the billing company's standard agreement. Even before negotiating the terms of the contract, there are important stepoften overlookedthat you can take.

One very simple step is asking for samples of the reports that the company will furnish under the contract. (The billing company should black out patients' names first. If it doesn't, you are on alert that the company may not protect patients' confidential information as required by HIPAA.) If you have questions about any of the reports, ask the company for clarification. Also if you feel there is a need for additional reports, ask for them and make sure they must be provided under the terms of the contract. The time to make sure the billing company can provide you with the information you want is before the company starts doing your billing.

Get references to make sure the billing company has experience in your particular specialty including any ancillaries you may provide, such as imaging services. Additionally, fast and inexpensive online services can provide you with public records information about the company and its principals, including information about legal judgments and any exclusion from participation in the Medicare program. Federal law prohibits you from contracting with entities or individuals that you know or should have known have been excluded from participation in Federal healthcare programs. If the company has been involved in a number of lawsuits, it makes sense to look for another billing company.

Lastly, dont turn over your billing until the contract is signed by both parties. One client did this and lost a lot of negotiation leverage because the billing company already had the business.

This article does not address all issues that you must consider, nor does this article completely cover any of the issues that have been discussed. This article is not intended to constitute legal advice and youre are advised to consult with an attorney for any related legal matters.

Michael D. Saphier, Esq., and Beth A . Kase, Esq., are attorneys at Saphier and Heller Law Corp.in Century City. The firm counsels physicians, hospitals MSOs, medical spas and other healthcare businesses regarding regulatory corporate and general business matters. They can be reached at 310/789-1101.
Information about the firm is at www.saphierheller.com.

Fenton Nelson, LLP was pleased to welcome Beth A. Kase, Esq. in December, 2010.

This article is republished with permission from Southern California Physician's January 2007 issue. For more information about Southern California Physician go to www.lacmanet.org.