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Antitrust and Physician Mergers

October 16, 2014 | No Comments
Posted by Frank Ciesla

Co-Authored by Frank Ciesla, Esq. and Patrick S. Convery, Esq.

While the acquisition or merger of most physician practices generally will not rise to the level which would require approval from the Federal Trade Commission or the United States Justice Department under the Hart-Scott-Rodino Act, a statute adopted earlier this year in the State of Connecticut (P.A. 14-168) has now taken effect that mandates that parties to any transaction resulting in “material changes” to a group medical practice must notify the Attorney General at least 30 days in advance of the effective date of the transaction.  While there is no such requirement in the State of New Jersey, the State of New Jersey has in the past floated, and on a limited basis implemented, proposals under which the New Jersey Department of Health (as opposed to the Board of Medical Examiners) would regulate certain aspects of the private practice of medicine.  Those efforts have largely been suppressed by various decisions rendered over the years, including the decision of the New Jersey Appellate Division in Marsh v. Finley, 160 N.J. Super. 193 (1978), in which the Appellate Division found that New Jersey’s Health Care Facilities Planning Act (and the regulations adopted thereunder) did not apply to a physician’s private practice.

In a statement released on September 29, 2014, Connecticut Attorney General George Jepsen noted that  “[a]cquisitions and mergers often make business sense, and may lead to some efficiencies and more integrated care, but they also may lessen competition, leading to higher prices and fewer consumer options”.  Jepsen further noted that “[t]he notice requirement enacted this year will allow us to better monitor the health care market and, where appropriate, to enforce antitrust laws designed to protect Connecticut consumers.”   The new law was apparently proposed in response to a number of mergers and consolidations of physician practices in Connecticut.

While there are other technical requirements in the new Connecticut law, it is clear that the overall purpose of the law is to enable the state to proactively enforce the State’s antitrust laws against “anticompetitive” results, when, as determined by the Connecticut Attorney General, there is a possibility that a proposed merger, consolidation or acquisition involving a physician practice could raise the price of services or severely lessen competition.  At the federal level, the St. Alphonsus Medical Center v. St. Luke’s Health System case, in which the United Stated District Court for the District of Idaho held that the acquisition of a large physician practice (the largest independent multi-specialty group in the state) by a health care system that operated seven hospitals throughout the state violated the antitrust laws and rejected a defense involving the concept of the accountable care organizations, is clear notice that such transactions are being closely monitored and may be challenged if not properly structured to comply with state and federal antitrust laws.

The application of both federal and state antitrust laws (even in New Jersey, which has a state antitrust statute), therefore must be considered by physicians practicing in the State of New Jersey, whenever a transaction involving the acquisition or merger of a physician practice with or into a health care system or other physician practice is proposed.  Although neither New Jersey law nor the federal Hart-Scott-Rodino law contains a notification requirement similar to the  notification requirement adopted in Connecticut,  a transaction involving the acquisition or merger of a physician practice with or into a health care system or other physician practice can still, as in the St. Luke’s case, be challenged under the federal or state antitrust laws if it is not carefully planned and structured to comply with antitrust laws.

OIG Issues Advisory Opinion Re: Municipal Payment for Medical Transportation Services

October 15, 2014 | No Comments
Posted by Beth Christian

The OIG has issued an Advisory Opinion regarding a municipality’s use of tax revenues for payment of a stipend to a volunteer ambulance squad to cover the cost of co-payments and deductibles that would otherwise be incurred by residents, as well as the cost of transports provided to residents without insurance coverage.  In Advisory Opinion 14-09, the OIG concluded that the arrangement would not constitute grounds for the imposition of civil monetary penalties.  The OIG also concluded that while the arrangement could potentially violate the anti-kickback law if the requisite intent to induce or reward referrals were present, the OIG would not impose administrative sanctions in connection with the arrangement.  Under the arrangement reviewed by the OIG, the volunteer ambulance squad did not bill residents of the municipality, some of whom were Medicare and Medicaid beneficiaries.  The OIG relied on the earlier guidance it had issued within its Compliance Program Guidance for Ambulance Suppliers, which state in pertinent part that:

A city or other political subdivision of a state…may not require a contracting ambulance supplier to waive copayments for residents, but it may pay uncollected, out-of-pocket copayments on behalf of its residents.  Such payments may be made through lump sum or periodic payments, if the aggregate payments reasonably approximate the otherwise uncollected cost-sharing amounts.

The OIG found that because the municipality pays the ambulance supplier an annual stipend that the ambulance supplier has certified reasonably approximates out-of- pocket amounts for residents, the non-billing of residents for cost-sharing amounts did not constitute a routine waiver that implicates the anti-kickback statute or the civil monetary penalty law.

October 6, 2014 Regulatory Developments

October 14, 2014 | No Comments
Posted by Beth Christian

Here are the most recent health care related regulatory developments as published in the New Jersey Register on October 6, 2014:

  • On October 6, 2014 at 46 N.J.R. 2007, the Board of Examiners of Master Plumbers published notice of its proposal of amendments to its rules governing medical gas piping.  The proposed rule would require that individuals who install, improve, repair, or maintain medical gas piping within the office of a licensed dentist or a dental clinic or an animal or veterinary facility must be certified as a medical gas piping installer.
  • On October 6, 2014 at 46 N.J.R. 2008, the State Board of Medical Examiners published notice of its proposal of a new rule governing the standards for the supervision and/or administration of hyperbaric oxygen therapy by a licensed podiatrist.
  • On October 6, 2014 at 46 N.J.R. 2009, the State Board of Medical Examiners published notice of its proposal amendments to its continuing education rules.  The proposed amendments would require physicians to obtain continuing medical education credits in programs or topics relating to end-of-life care.
  • On October 6, 2014 at 46 N.J.R. 2010, the State Board of Nursing re-proposed a notice of its proposed repeal of N.J.A.C. 13:37-5.6.  The existing rule requires an individual who is licensed as a registered professional nurse or licensed practical nurse to be held to the standard of practice associated with his or her licensure, regardless of his or her employment status.  The New Jersey Hospital Association has raised concerns that the rule might prohibit hospitals and other health care facilities from employing a nurse in any role outside of a registered professional nurse or licensed practical nurse role.

Appellate Division Holds That Applicants For A Professional License Need Not Exhibit An Intent To Deceive In Order To Have Their License Application Denied Due To Misrepresentation

October 7, 2014 | No Comments
Posted by Beth Christian

The Appellate Division recently issued a decision in which it found that an applicant’s failure to disclose information on their application for a license could be denied based on a finding that their application contained a misrepresentation, even if the failure to disclose was unintentional.  In Matter Of Y.L., an applicant for a license as a massage and bodywork therapist had been arrested on prostitution charges some years prior to her application for New Jersey licensure.  The charges were later dismissed.  When the applicant applied for New Jersey licensure, she swore that she had never been arrested for any crime or offense.  When the licensing board discovered this, the applicant indicated that she had misread the application, that English was not her first language, and that she had not engaged in prostitution.   She argued that in order to have her license denied based on misrepresentation, the board was required to show that she had an “intention to deceive.”  The Appellate Division rejected her argument, finding that the failure to disclose the information constituted at least negligent misrepresentation, and could be used as a basis to deny her application.  The Appellate Division referenced an earlier decision in which a pharmacy applicant’s request to participate in the Medicaid program was denied because the applicant failed to disclose that one of its employees had entered a guilty plea to a drug possession charge.  We reported on that development here: http://www.njhealthcareblog.com/2013/08/recent-appellate-division-decision-represents-importance-of-employee-background-checks/ The K.L. decision serves as an important reminder of the need for full and honest disclosure on professional licensure applications.

Beth Christian Receives the 2014 Distinguished Service Award by NJSBA’s Health Law Section

October 3, 2014 | No Comments
Posted by Beth Christian

Beth Christian, a Shareholder in GH&C’s Health Care Practice Group was recently presented with the 2014 Distinguished Service Award by the Health Law Section of the New Jersey State Bar Association. The honor was given to her in recognition of her outstanding service and contributions.

For full press release please click here.

OIG Proposes New Safe Harbors and Other Regulatory Changes

October 3, 2014 | No Comments
Posted by Beth Christian

The HHS Office of Inspector General has published notice of a proposed rule which (if adopted) would modify some of the existing safe harbors to the anti-kickback statue, and add new safe harbors (including a long-awaited safe harbor for free or discounted local transportation services).  The proposed rule would also codify civil monetary provisions for gainsharing and would amend the definition of “remuneration” in the existing civil monetary penalty regulations to provide for additional exceptions.

The proposed rule:

  • Makes a technical correction to the existing safe harbor for referral services.
  • Proposes the addition of a new safe harbor for certain cost sharing waivers, including:

(i)        pharmacy waivers of cost-sharing for financially needy
Medicare Part D beneficiaries; and

(ii)       waivers of cost-sharing for emergency ambulance services
furnished by State or municipality-owned ambulance services.

  • Proposes the addition of a new safe harbor for certain remuneration between Medicare Advantage plans and FQHCs.
  • Proposes the addition of a new safe harbor for discounts by manufacturers on drugs furnished to beneficiaries under the Medicare Coverage Gap Discount Program.
  • Proposes the addition of a new safe harbor for free or discounted local transportation services to established patients for the purpose of obtaining medically necessary items or services and which  meet specified criteria.
  • Would exclude the following from the definition of “remuneration” under the civil monetary penalty law:

(i)        copayment reductions for certain hospital outpatient
department services;

(ii)       certain remuneration that poses a low risk of harm and
promotes access to care;

(iii)      coupons, rebates, or other retailer reward programs that meet
specified requirements;

(iv)      certain remuneration provided to financially needy individuals;
and

(v)       copayment waivers for the first fill of generic drugs.

  • Codification of the gainsharing civil monetary penalty rule.

Some of the proposed rule originates from statutory changes set forth in the Affordable Care Act and the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Others go back even farther.  The OIG initially announced that public comments would be solicited regarding the provision of free and discounted local transportation services in an August 2002 Special Advisory Bulletin entitled “Offering Gifts and other Financial Inducements to Beneficiaries”.  Public comments regarding the proposed rule will be accepted 60 days from the publication of the proposed rule in the Federal Register.

September 15, 2014 Regulatory Developments

September 16, 2014 | No Comments
Posted by Beth Christian

Here are the most recent health care related regulatory developments as published in the New Jersey Register on September 15, 2014:

  • On September 15, 2014 at 46 N.J.R. 1968, the Division of Taxation published notice of its proposal of a new rule which is intended to clarify the categories of drugs and durable medical equipment which are exempt from New Jersey sales and use tax.

September 2, 2014 Regulatory Developments

September 11, 2014 | No Comments
Posted by Beth Christian

Here are the most recent health care related regulatory developments as published in the New Jersey Register on September 2, 2014:

  • On September 2, 2014 at 46 N.J.R. 1882, the Department of Human Services published notice of its readoption of its rules governing the Senior Gold prescription program.
  • On September 2, 2014 at 46 N.J.R. 1883, the Department of Human Services published notice of its readoption of its rules governing pharmaceutical services under the Senior Gold program.
  • On September 2, 2014 at 46 N.J.R. 1910, the State Board of Social Work Examiners published notice of its action on a petition for rulemaking filed by the New Jersey Association of Mental Health and Addiction Agencies, Inc.  The Board denied the NJAMHAA’s request that it be recognized as an approved provider of continuing education hours for social workers.

Legislature Expands Health Care Service Firm Licensing Requirements

September 5, 2014 | No Comments
Posted by Beth Christian

Recent amendments to the health care service firm law will require companies providing companion services in New Jersey to become registered as a health care service firm.  Currently, entities that place or arrange for the placement of personnel to provide health care or provide personal care services in the personal residence of a person with a disability or a senior citizen aged 60 or older must become registered as a health care service firm.  As a result of the amendments to the law, companion service providers will also need to become registered.  The term “companion services” is defined in the law as non-medical, basic supervision and socialization services which do not include assistance with activities of daily living and which are provided in the individual’s home.  Companion services may include the performance of household chores.  In addition, all registered health care service firms will be required to obtain accreditation from an accrediting body that is recognized by the Commissioner of Human Services as an accrediting body for homemaker agencies participating in the Medicaid program.  Health care service firms will also be required to submit an audit report with an unqualified opinion and a management letter.  The amendments to the law will take effect 18 months after their August 1, 2014 enactment.

Physician Compensation under Medicaid

August 29, 2014 | No Comments
Posted by Frank Ciesla

In a July 31st article in the Kaiser Health News, it reported that just six states and the District of Columbia will use their own money to sustain the level of federal Medicaid payment increase under the ACA to primary care doctors.  It also notes that two of the states extending the payment increase are Alabama and Mississippi, states that did not expand their Medicaid coverage.  The other states continuing the payment increase with their own funds are Colorado, New Mexico, Idaho and Maryland, as well as the District of Columbia.  The States of Alaska and North Dakota have been paying their primary care doctors above the Medicare payment rate even before the ACA provisions took effect in 2013.  What this means is that the payment rate to primary care physicians for Medicaid will revert back to the 2012 levels, unless the state steps in.

As can be seen in the General Accounting Office Study below, the Medicaid costs in the State of New Jersey were high even before the 2012 implementation.  This study is for the fiscal year 2008, a year in which there obviously was not the expanded Medicaid coverage under the ACA nor the bump for primary care under the ACA.  (GAO Report to Congressional Requestors, June 2014).  There is no reason to believe, with the expanded Medicaid coverage in New Jersey, that the costs are going to move closer to the national average and encourage the Legislature to implement the state funding of the higher primary care Medicaid payments.

In the GAO report (http://www.gao.gov/assets/670/664115.pdf), in listing the estimated Medicaid spending per enrollees, their report provides for New Jersey:

All Enrollees Children Adults Disabled Aged

$11,612    $2,758  $7,908 $28,393 $22,817

Compared to the state average of:

All Enrollees Children Adults Disabled Aged

$7,847       $2,973  $5,497 $19,135  $17,609

As we are all aware, while an individual may qualify for Medicaid, that does not ensure that individual access to a health care provider, since the majority of New Jersey physicians do not take Medicaid.

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