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Our Coaching Culture Helps You Navigate through Legal Compliance - YouTube

Transcript

Hello, this is Michael H. Cohen. Healthcare and FDA attorney and founder and president of the Cohen Healthcare Law Group.

I was just sitting in my car driving on the way of Veggie Grill, when I’m sitting outside the lovely Veggie Grill here in this beautiful San Diego, with its sunny weather, and I was thinking about, how do we compete with the large law firms? Because I’ve been doing some SEO for my website, and I noticed that a lot of niche areas that I had successfully penetrated and thought I was pioneering, some years ago, have now become very mainstream, and even the large big players, in big law, are going after these areas. Areas like digital health, mobile healthcare, telemedicine, mobile medical apps. There still are not a lot of lawyers who themselves combine both the healthcare law side and the FDA law side. So that in itself is unique.

An edge against the rest of them

And also I was thinking: how do we deal with these heavy players that say they do everything? And in fact they do. I mean, they have like 50 plus service lines. What’s our unique edge? Well, I’ve always felt an edge pretty naturally. I never had to define it, but since then growing my firm and scaling, just like you’re scaling your own company, I was thinking about, well, what makes us different? By the way, this is an unusual video because normally you’ll see me in a suit. You won’t see these glasses which have now turned dark, due to the sun. But hey, I’m still trustworthy and, I might need these to look at my notes. I think there are three things that set us apart. For one: we really, really listen to the clients and we also listened within.

            Listening is a lost art. Just, yesterday I talked to a client who had come to us from a big firm, where he had a very experienced FDA lawyer give them advice. Now, two things that the lawyer did. Number one, the lawyer said, “That’s ridiculous. The rule is X. You can’t do such and such.”

And instinctively that didn’t seem right to me. And when I did some research, in fact, the lawyer was unexpectedly categorical. Very few lawyers or that categorical. Most things simply aren’t that granularly black and white, and not that. So clearly, when they’re in the red zone, we tell the clients, “This is in the red zone.” We say, “More than gray area, but most often you’re in yellow.” And what you got to figure out is, do I press on the gas or do I brake? And there are a lot of factors that go into that kind of risk analysis.

The lawyer is very categorical and dismissive. And secondly, the big firm FDA lawyer didn’t listen. He just lectured and gave his spiel, and so the client didn’t feel listened to. We listen, and I listened very carefully. As you may know from other videos, I, myself have studied energy healing, taught bioethics, wrote an article on bioethics of compassion. I’ve done a lot of psychotherapy simply because I’ve been very into the journey of self-discovery. Psychological and spiritual as well as physical, through pushing the edges of fitness.

            We’re very into mind body spirit. That’s one of our special areas. Integrative medicine, functional medicine, the healthcare practice, and as well as cutting edge business technologies in healthcare. And we’re very into personal development and as such we attract that clientele. Sometimes people are all about the retainer. Sometimes they’re all about getting their venture financing and often times through these other dimensions as well.

We played that edge. We listen. So he liked having a healthcare lawyer who actually listened to his idea and followed him as he articulated the idea. Of course, we lead. As lawyers, we give advice. We are giving the benediction, if you will, the priestly benediction. I’m not going to do my Spock orthodox, my Spock rabbi imitation here, but we do give the benediction. We do to the blessing. We do save the law. Gives the, “Thou shalt.” Gives the, “Thou shall not.” And, “Here’s how you might proceed with these caveats.” And, with these safeguards in place so that we mitigate your compliance risk, your regulatory risk, your enforcement risk, your risk of downright being sued, whether by a competitor, by some plaintiff’s troll, or by someone unexpected.

That’s what we do. We listen.

I think that’s a differentiating edge, and we follow the inner logic of what the client’s trying to do so that we can be maximally supportive. There really is a ministry that really is a healing function. I’ve done another video on the integration of the mundane and the cosmic and that’s what we do.

We have high emotional intelligence, high spiritual intelligence, and we listen. And, that is extremely valuable, because when you listen, you can really give unparalleled advice. You can give unparalleled legal advice, because you deeply understand. We understand deeply what you are trying to accomplish. And we’re in service of that. We’re not here with braggadocio and arrogance and talking over you and showing you how smart we are. I know exactly which 22 CFR 101.320 ABC little three in the whole, three, two, one blast off, says. That’s not our style.

Secondly, I would say, we’re cost effectivewe are light and deployable. The focus is not so much on the cost savings. For sure we don’t have the overhead, the mahogany table, the marble floors, the clunky a structure of overbilling that a lot of large law firms have.

I would say, a couple of years ago, I’m not a military man, but I remember Rumsfeld talking about how the army of the future has to be light and deployable, and we’re dealing with technology. We just zip in and we parachute in. And we don’t have these clunky artillery pieces that you might’ve had 100 years ago. So we’re light deployable. We work in teams. You get a blended rate, and we really focused on giving you the best overall value.

My commitment to you is to give you three times the value as a firm, to what you pay in the retainer. We want you to give them value. Three to five is very modest. Sometimes people get a million-dollar insight or even build a 10 or 50 or $100 million business. It’s happened, with our clients, based on a nugget of advice. So we’re looking for those nuggets. We are digging, we are data mining through the intellectual database. We’re applying the best we can.

And that leads me to my third differentiator, which is we have depth as well as breadth. There are some lawyers out there, we say, “Chained to a desk.” An unfortunate metaphor, but that’s all they do, is they do something very specialized. So if I want to know, if I want the world’s expert on 21 CFR 101.321 ABC, little three in the hole, little two in the hole, three, two, one. Blast off at $1,000 an hour. And I need an hour of their time that may be a good cost-benefit analysis.

On the other hand, can that person’s seamlessly talk about a HIPAA, digital health, telemedicine, cross state legal issues, regulatory enforcement hazards, IP issues, corporate law, a panoply of Medicare issues, insurance issues, reimbursement, concierge practice, I mean, everything that intersects, in one legal consultation? We really strive to be specialists while at the same time we don’t lose our family practice, general medicine. And so, one or more of us might have different expertise in the present team configuration.

I focus more on prevention and compliance. We have an associate who’s very deep into privacy and security issues among other areas of expertise. We have a former prosecutor who can guide and advise on the compliance side. So we really bring this depth of expertise together, and we also bring in a breadth, where we can be a cross disciplinary, if you will, cross cutting and the issues, because if you take the water balloon and you push here, it pops there. I mean, you not only have to be lighten and deployable, but you have to be absolutely prepared for whatever’s going to come on the enemy terrain, if you will, of … Let’s reframe that. It’s friendly terrain, because we’re going to make it friendly. We’re going to make it a green grass that our clients can traverse so that they can get to the other side of the hedge, with respect to building their dream. This is their why. We empower and support that.

Our firm culture

So those are differentiators. Let me say that we have, if I had to pick one word to describe our firm culture, we have a coaching culture. We are constantly self-coaching, working towards self-development, self-improvement, whatever we can do better. We also have a coaching culture within the firm. I grew up in a very archaic structure, Wall Street law firm. We have people, by the way, the best of the best. I choose the best people. I select the best people. These are people that I like working with. I like them personally. They have an inner being that’s very alive. They really are, they’re nurturers. They are emotionally intelligent, spiritually intelligent, legal intelligent. They’re the best lawyers that you can get. I’m giving my thumbs up to the Veggie Grill guy. And I really believe that. I love working with these people. I think you’ll enjoy them as well.

So, our culture is to coach one another in a 360 degree way, and then constantly have training, self-improvement. It’s how we can do better as legal counsel. How we can stay sharp on the law, and how we can stay sharp, having great client relationships. That is what we bring to you. We want you to have blue skies, rainbows and unicorns, beautiful green, healthy vegetables.

So we can be traditional and conventional, and we can be very, very edgy at the same time.

We’re here for you. We really appreciate you. The more we help you, it’s a feedback loop. You’re helping us, and we grow our business by serving you. And so it truly is that model of servant-leadership. And this is what we aspire to. This is what we embody. This is why we say that our mission is, and our vision is that we provide legal strategies and solutions to businesses that accelerate health and healing. Namaste. Great day to you and now it’s time for some serious, a fake meat and vegetables, which I will consume, and then a work out, and onto some more good SEO. All right, we’ll talk to you soon. Michael H. Cohen, Cohen Healthcare Law Group.

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Evangelizing your Health and Wellness Venture with your Angel Attorney - YouTube

TRANSCRIPT

This is Michael H. Cohen, President and Founding Attorney of Cohen Healthcare Law and I’m here to get you excited about your healthcare project, your health and wellness company, your healthcare service, whether it’s a clinic, a clinical laboratory, a medical group, a practice, a naturopathic medical practice, a joint venture between a chiropractor and an MD let’s say focusing on stem cells, or maybe it’s a healthcare venture. Maybe you’re doing a home infusion IV hydration therapy business.

That’s about eight nouns in a row, but who cares? You get the idea. Right?

It spells delivery of healthcare services, use of the internet, healthcare as a product, telemedicine, and questions of the good faith exam.

Do the same rules apply to you as a medical spa?

What kind of consents do you need?

Who does the patient belong to?

Who owns the records?

What are the arrangements between the MSO, the Management Services Organization, and the physicians?

Can an RN do certain things?

Can the RNs carry and transport and store the IV bags? Are the IV bags drugs?

Are they regulated as dangerous drugs?

Who can control them?

What are the rules?

You get it. It’s a morass. It’s a Labyrinth. It’s a maze. It’s a regulatory maze. What makes us different? People come to us for legal strategies and solutions. We provide legal strategies and solutions to businesses and practices that accelerate health and wellness. And I’m excited about it.

This morning I’ve been listening to motivational talks and I’ve had my own healthcare transformation revolution. A revolution of the mind, if the mind is clear when the doors of perception are cleansed, then perception is infinite. Aldous Huxley. Read a wonderful book about that. Probably had to do with Aldous Huxley’s experimentation with illegal controlled substances.

Anyway, that was before all these laws came into place. And I was in college, so I wasn’t a healthcare lawyer. I didn’t experiment. I didn’t inhale, I didn’t ingest. I’m watching this Sci-Fi drama Osmosis about this capsule that has an app inside it. It releases nanobots inside the brain and people are supposed to find their perfect love. But maybe they don’t because this little thing called the Human Condition intervenes. This little thing called the Regulatory Structure intervenes. Between the truth and the objective falls the shadow, to paraphrase T.S. Eliot.

I’ve been listening to this motivational stuff. I’m going to try being a little bit more motivational because one of the issues that most of you face with your healthcare or FDA lawyer who you currently have on retainer or whom you fired in the past or maybe the past four, five or six lawyers that you’ve retained, is that frankly they sound like Eeyore. Eeyore is very depressed and everything he has to say is very glum.

Or maybe they sound like the character in Rocky and Bullwinkle. “We’re doomed. We’re doomed.” It’s the anti-kickback statute. It’s HIPAA. It’s malpractice liability. It’s risk from every single angle. It’s medical board discipline. It’s all going to end. “Chicken Little, Chicken Little the sky is falling down.” That’s what your lawyer said to you. We’re not like that.

What you would love is for me to say, “Listen, You would love for us to say that we would be the lawyers who would green light your proposal, give you the official certification, the guarantee, the seal of approval. And once you have that from us for a low, low, low price now you’re going to go out and market your healthcare service or product free. You will have your get out of jail free card”.

You will not be worried about stark, anti-kickback, fee splitting, patient exploitation, fraud and abuse, HIPAA, state privacy and state security laws, data breaches, liability therefrom, liability flowing from who knows what, liabilities that are not provided for in your contracts, malpractice, negligence, negligent credentialing, inadequate consent forms, corporate practice of medicine, corporate practice of psychology, corporate practice of who knows what, unlicensed practice of medicine, psychology, social work, nutrition and dietetics, or something else.

5 KEY STARK AND ANTI-KICKBACK LEGAL RULES YOU’LL WANT TO KNOW

While federal Stark and anti-kickback laws, and state law equivalents (often known as “mini-Stark” and “fee-splitting prohibitions”) are very complex, there 5 key legal rules you’ll want to know. […]

WHAT MEDICAL PRACTICES SHOULD KNOW ABOUT THE STARK LAW

The Stark Law is named after California U.S. Congressman, Peter Stark. It seeks to regulate how physicians refer Medicare and Medicaid patients. The law is part of the Omnibus Budget […]

KICKBACKS, FEE-SPLITTING, CORPORATE PRACTICE OF MEDICINE, STARK, MSOS: GUIDING HEALTHCARE VENTURES THROUGH THE MAZE

Fundamentally, you’re worried about legal rules prohibiting kickbacks, fee-splitting, corporate practice of medicine, as well as Stark law; you don’t know whether the MSO or management structure […]

Who knows what the next frontier will be of regulatory liability. You could be slapped with a lawsuit from a private plaintiff. Maybe some enterprising class action lawyer finds out that no, you said you were selling mushroom burgers and on 1% of the burgers out there your employee forgot to put mushrooms on them. That severely damaged customers, so that’s a multi-million dollar claim.

Or your website is not in conformance with the disabilities requirements now for websites, those standards. Or you didn’t comply with, say in California, Business and Professions Code 17600, which has to do with automatic disclosures. We’ve had clients who’ve been hit with assaults from class action plaintiffs on various fronts. Whether or not they relate to the healthcare core of regulatory issues, the private plaintiffs will seize on something and juice it up into a claim of unfair business competition, or some statutory violation that may or may not even be related to the underlying healthcare regulatory issues.

ONLINE TRACKING OF PERSONAL INFORMATION DISCLOSURES REQUIRED IN WEBSITE PRIVACY POLICIES

California, like other states, makes online tracking of personal information disclosures required in website privacy policies.

Wouldn’t it be wonderful if we could just be 100% enthusiastic? And we are enthusiastic. I’m very charged today. I’m very pumped. And I realize that you have to have this can-do mindset because that’s what our healthcare and FDA clients like is they like someone who joins with them in their effort and in their passion to transform healthcare. Not only to transform healthcare, but to challenge existing paradigms and to evangelize their models of digital health.

Whether they’re an integrative medicine, functional medicine, the hydration therapy and/or IV therapy model that I discussed earlier that I touched on early, medical spas, telemedicine, use of artificial intelligence and algorithms, and genetics, genomics, nutritional genomics. The list goes on and on. Whatever the new therapeutic approach is to health and wellness and the packaging of the delivery of health care as part service, but part product with software, the computer, the internet, the digital world mediating. Clients would love us to give them the great stamp of approval.

We don’t do that. We have disclaimers. We’re caveats. We’re lawyers. I am wearing dark, even though it’s not a dark suit and I’m not wearing a tie, but we are not Eeyore. We are not ashen-faced. We are neither demons nor angels. With the word evangelist contains within it the word angel. But we’re here to support you on your health and wellness journey. We’re here to walk you through the nitty-gritty legal issues. Often we do it through a legal strategy memo, which lays out the regulatory landscape and sets out the blueprint, your legal foundation.

HOW CAN FUNCTIONAL AND INTEGRATIVE MEDICINE DOCTORS PRACTICE WITHOUT UNDUE FEAR OF LEGAL JEOPARDY?

Hello. Good morning. Good day. Good afternoon. Buenos Dias. Shalom. Wherever you are. I’m Michael H. Cohen, a healthcare and FDA lawyer. Today’s topic is how can functional and integrative […]

Just the other day I talked to a company. They have three to five million dollars in revenue. Probably somewhere between. Probably four, but it’s climbing. Heavy upward projections. They’ve been through many, many lawyers. The lawyers gave… Most of them said no. Some of them gave a very canned response. I asked them, “Was the advice largely verbal or was it in writing? Do you have anything in writing that creates a legal roadmap for your business?” And they said no.

They told us,

We have to have a professional corporation, but then we do this in the MSO. Then everything gets loaded up into the MSO so that all the value’s there. And yet, we’re doctors so we’re not sure how we use the Professional Medical Corporation that we want to expand into different states. And then there’s this other wrinkle. We want to hire mid-levels to do these therapies plus we’re training doctors. So we’re doing some things that maybe seem clinical, but maybe seem like they could be done by a management company. We’ve gotten different advice. The arrows point in every direction.

And frankly our current big firm lawyers who are statewide experts in healthcare in the state of X, they are conservative. They are boring. They don’t give us news we can use. Could you please help us present your multilayered solution or suggestion and recommendations so that we can get our business model four years later and millions of dollars in revenue later finally on a firm foundation so that we keep our licenses as doctors. Not to mention don’t go to jail for a kickback violations, don’t handle fee splitting, don’t have corporate practicing medicine issues.

ROCK YOUR PRACTICE WITH AN MSO—MSO COMPLIANCE VS. USING INDEPENDENT CONTACTOR PRACTITIONERS

Growing Pains in Your Healthcare Practice or Healthcare Venture? We’ve had many clinical practices and healthcare ventures come to us asking how to mitigate risk of anti-kickback and […]

What’s the retainer? It’s the usual. It’s small, medium, or large. But it’s something really manageable. I mean, if the retainer was 25 thousand dollars and for 25 thousand dollars you could solve a 4 million dollar year problem and being mature, more mature in your business and having conflicting arrows with no solid written initial foundation, wouldn’t it be worth it? What if you could get that for half or even a third of that cost or maybe even a quarter or maybe even a fifth? Wouldn’t that be amazing?

Get excited. We’re with you. We’re passionate. Make no bones about it. I’m in health and wellness because I believe in it, because I’m passionate about health, because I like to look and feel great. And I also believe in the spiritual dimensions of health. If you read my academic legal scholarly writing, you’ll see. Those seeds are implanted throughout that work. And I believe in you. We are angels on your side and we’d love to work with you. This is Michael H. Cohen, Cohen Healthcare Law Group. We provide legal strategies and solutions to businesses and practices that accelerate health and wellness. Call us soon. We’ll look forward to working with you.

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The post Evangelizing your Health and Wellness Venture with your Angel Attorney appeared first on Cohen Healthcare Law Group | Healthcare Lawyers | Life Sciences | FDA & FTC Law.

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Legal Keys Every Medical Doctor Must Know Before Merging With or Acquiring A Medical Practice - YouTube

TRANSCRIPT

Greetings. This is Michael H Cohen. President and founding attorney of Cohen Healthcare Law Group.

M&A Definition

I’m going to talk to you today about M&A, also known as mergers and acquisitions. One of our physician clients wondered what M&A was and they wondered if it was any relation to the candy M&M. I’m sure that is not you, but no, M&A is not a candy. It stands for mergers and acquisitions.

And essentially, this physician is intending to acquire another physician practice. This is quite a common scenario and in some senses, this transactional part of our practice is straight M&A and in other senses, there is a medicare/healthcare regulatory flavor to this. The very first step in acquisition of a medical practice is that somebody signs a CDA or a confidentiality agreement, also known as an NDA, a non-disclosure agreement.

The CDA or NDA can be fairly formulaic. You can find a ton of these on the web. The thing to remember, as for all legal documents, when you’re signing your name to it, it would be very prudent to review it. Or in plain English, you better have it reviewed.

How many of you have signed a legal document, a legally binding agreement without having attorney review?

I’ll include myself in that list. Any lawyer who has himself for a client is a fool or some expression like that so, it’s not uncommon to err is human, to forgive is divine. Right. So, it’s not uncommon, but it’s a bad idea. And so when you have an NDA, like any legal document, your name goes on it. Even though these documents are fairly formulaic, they can also be tricky.

Remember, a lot of times, it’s not you or your attorney drafting it. If you’re thinking of signing it without having attorney review, that means that the document was drafted by the other side’s attorney. And he might slip in something sneaky.

I personally don’t like NDA’s to last for more than three years. Three years is a long time. But of course, if you’re the one that’s divulging the confidential information, then you want it to last as long as possible. Five years is pretty typical phase and things can change a lot in five years. But they can go even longer, sometimes 10 years.

When you signed the non-disclosure agreement, the idea is that if you are, for example the buyer, it means that the seller can now provide you information. And you’re sworn to secrecy, pledge to keep it confidential. So it gives the seller peace of mind that they can actually in fact give you that rich information, so that you can evaluate their business.

LEGAL ISSUES BUYING OR SELLING AN URGENT CARE CENTER

When buying, selling, or starting an urgent care center, be sure to handle legal and regulatory pitfalls adroitly.

Due Dilligence

Now the next thing that happens is potentially the biggest, costliest and lengthiest part of the overall transaction. And that is called due diligence.

Here’s a simple analogy.

When you’re buying a car, do you want to know if it’s the fresh paint that the manufacturer put on? Or whether the seller of the car spray painted the car just yesterday to cover up an accident. And they put the spray paint on in their garage. And you, not being an expert, will never know. Or do you want to know whether there was an accident that compromised the safety of the vehicle? Do you want to know whether the tires need to be replaced? Do you want to know whether there’s something wrong with the transmission? What are you going to do? Are you going to look under the hood yourself? Kick the tires?

You’re going to hire an expert.

You’re going to hire a mechanic.

And in the same way for due diligence, you want to get all of the documents that show the overall health and wellness of the company, of the medical practice that you’re buying. Typically this process begins with a due diligence checklist. This is the checklist prepared by your attorney if you’re the buyer. Is you’re the seller, you’re on the receiving end. And it says, “We would like to see the following things.” And typically, there’s some big bucket items. And within each of those, there are lists within lists, if you will.

MEDICAL SPA DUE DILIGENCE QUESTIONS – M&A DUE DILIGENCE CHECKLIST FOR BUYER

If you the buyer of a medical spa in an M&A transaction, what kinds of due diligence questions should you ask regarding regulatory compliance?

So number one, you want to look at the business and financial aspects of the company or the medical practice that you’re buying. You want to see all of the accounting, all of the financial records.

Number two, you want to look at HR and employee matters.

  • How many employees are there?
  • What do they cost?
  • What are the agreements?
  • Do you owe anything to any of these employees if they get terminated?
  • Are there any ticking time bombs that you need to be aware of when you buy the company? Does the company have all its licenses?
  • Does it have compliance in place?
  • Are there trademarks?
  • Are there patents?
  • Are there licensing agreements that are critical to the health of the company?
  • What about other things?
  • Other leases? Are there sub leases?
  • Are there vendor contracts? What is it that you’re getting?

And next you want to know the valuation of the practice. What is the medical practice actually worth? Is the valuation process itself dictated by some document in the company’s governing structure, such as for example, the bylaws or shareholder agreement. There are a lot of documents that you’re going to be asking for as a buyer, a lot of legal documents that you’ll be requested to provide as the seller of the professional medical corporation or other healthcare entity or healthcare company. These take a while to assemble, they take a while to analyze. Essentially the buyer’s attorney is looking for ticking time bombs.

For example, are there significant liabilities that haven’t been disclosed? Did you dump some waste and now you’re responsible to EPA? Did you get some kind of letter of violation from OSHA or from Medicare? Is there some calamitous regulatory action that is under way that you the buyer are going to inherit when you get the company.

There’s some new movie out. I think it’s called Hereditary or something like that. I don’t like Horror movies, but I’m always on the look out for metaphors and I guess there’s some maleficent gene that causes people to do horrible, shocking things that titillates and enthralls the slightly sadistic viewer. So, I’m not recommending that movie, I’m not going to go see it personally, but the point is that you don’t want to have a hereditary calamity in the form of buying a company that has some terrible, built in, toxic flaw.

The way to do this is you want to actually examine the DNA of the company, put it in the centrifuge and that is my quasi-scientific metaphor for the due diligence process. It’s a very important process. It goes to the deal. And it requires attorney review.

Now, the next thing is, you want to look at the deal structure. The bottom line is that you have two types of sales and purchases. One is stock and one is an asset acquisition. When you buy the stock, you get the company lock, stock and barrel. You get everything in the company. You get all of the assets and you get the liabilities. You get the good, the bad and the ugly.

When you have an asset acquisition, you have the opportunity to carve out the assets and exclude specific liabilities. So for example, if you’re buying an oil company and you know that the oil company spilled in some river, then you might say that the liabilities relating to that oil spill remain with the company and are not passed on to you in the purchase. So obviously, if you’re a buyer, which one would you favor? Well, the asset acquisition is more complicated, but it leaves liabilities that you as a buyer specify in the hands of the seller. And so it’s more advantageous. And if you’re a seller and you want to exit, you just want to get out, then you would prefer a stock sale. In that case, the buyer buys the whole company and you as the seller are done. You’re out.

We have to look at the deal structure. In addition to the bottom line choice as to whether you have a stock sale and purchase or an asset acquisition, another question is whether the seller is going to stay on under some kind of employment or consultant agreement. This can be a cost to the buyer.

At the same point, the buyer can potentially benefit from the seller’s experience and expertise. The seller can contribute something. The seller can help the buyer transition. Sellers often want this kind of agreement. And whether or not you have one should be one of the bullet points in your deal structure.

What comes next after doing due diligence

After you sign the CDA or NDA, the non-disclosure agreement, you almost always have a letter of intent. Sometimes you might hear the term MOU or Memorandum of Understanding or LOI.

LOI is not laugh online with an I. LOI is Letter of Intent.

A letter of intent is essentially the deal reduced to a piece of paper. It’s sort of like the back of the napkin deal. The buyer is going to get this, if this is the type of sale that it’s going to be. These are, there is or there will not be an employment or consulting agreement for the seller. This is how much he’s going to get paid. This is, there may be some earn out. Some amount that the sellers get over time when certain conditions are met. And those fundamental deal points go in the LOI, or letter of intent.

The most important thing to know about the letter of intent is that it’s non-binding. It should say that it’s non-binding. Because whether you’re a buyer or a seller, you only want to be bound to the terms of definitive agreements. The LOI should be subject to a definitive agreement.

Okay. You signed the dots so then we might have some interim phases. We might have different versions of the LOI going back and forth. We might have different phases of due diligence. We might have some notifications to the government, some compliance checks. Then we get the definitive deal documents, like a stock purchase agreement, trademark assignments, draft employment agreements for key individuals. Those are all garden variety M&A requirements.

Then, next, we will have provisions to notify the patients, any HIPAA requirements, there might be some specialized healthcare regulatory notifications, like a CHOW or Change of Ownership for Medicare, per 42CFR424.520B. Which should just roll off the tongue. A CMSA55A. Any Medicaid parallels. There might be a notification to the state medical board a change of ownership. So there’s the whole regulatory piece that has to be done, that is specialized to medical and health and wellness transactions especially involving the change in ownership of a medical practice.

Then, we have the closing, the funds transfer. We transfer the ownership of the entity. Finally, there might be some post-closing filings.

Completing Your Medical Acquisition Checklist

That is the basic checklist for acquisition of a medical practice. There are some miscellaneous items that we have not included on this list. If and when you plan to acquire a medical practice or any healthcare venture, it’s a smart idea to consult a healthcare and FDA attorney who understands the specific legal and regulatory landscape related to healthcare transactions. There are healthcare related nuances and a good healthcare M&A attorney will pay attention and help protect you.

Contact the Cohen Healthcare Law Group with any questions about your M&A healthcare transaction.

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The post Legal Keys Every Medical Doctor Must Know Before Merging With or Acquiring A Medical Practice appeared first on Cohen Healthcare Law Group | Healthcare Lawyers | Life Sciences | FDA & FTC Law.

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TRANSCRIPT

This is Michael H. Cohen, founding attorney and President of the Cohen Healthcare Law Group, and welcome to today’s healthcare legal adventure.

A Tale of 3 Healthcare Legal Adventures

Three different clients came in today. One is a physician who specializes in functional medicine. The second one is a healthcare startup dealing with a product that everybody is going to want for greater wellness and getting revived, and then the third is a mental health clinic.

Now, this is three healthcare practitioners and startup founders walked into a bar kind of joke. What I’m going to do is talk to you about these different people. Of course, masking the names and details to protect their identities and their work, product, and inventions, and ideas, but simply, to give you a sense of the staggering depth and breadth of the legal pitfalls and roadblocks, and I’m going to say minefields. It’s a terrible metaphor, but the hazards that they have to navigate and things that can just take people by surprise. With that, let’s have a way the first.

A Physician’s Contractual Healthcare Legal Adventure

Our first client is a physician who is very well-known in the area of anti-aging and functional medicine, does a lot to keep people youthful and off of meds, and get them out of chronic disease, and just get them really healthy. To make a long story short, he’s looking at how to protect himself when he changes his role from being a physician in clinical practice and being somebody who gets involved with a healthcare startup. The question in a very generic sense is, “How do you protect yourself if things happen in the company and you’re the person who happens to be a doctor and is therefore handy target when things go down?”

I think there was a movie with Jim Carrey where he gets promoted, and he goes up the elevator, and they say, “Hey, how would you like your egg this morning?” He just looks really pleased, and then it turns out that he’s all over the internet because he has become the fall guy for the company. This is the kind of stuff that just takes a lot of sensitivity, and judgment, and knowledge of contract law. You have to understand employment agreements. You have to understand deal-making.

Again, not to say anything in public about this, but simply that I talked more in a webinar about like the three key legal mistakes that healthcare startups and practices often make. The first one is failure to diagnose, that they simply don’t spot the issue. They don’t see what the worst that could happen once you come down the pike.

In here, we have to diagnose very specifically what are the very real threats.

  • Is the threat from the medical board?
  • Is the threat to the physician’s side practice?
  • Is it from a shareholder?
  • Could there be an employee lawsuit?
  • Could there be an FDA action?
  • Could there be a regulatory action that somehow impacts the doc adversely?
  • What can he do?
  • How much control does he actually have over what the company says about his product, or what the company says that he says about the product, or what the company says about him?

Again, just staying very broad-brush here without getting deep into the weeds because we don’t want to reveal anything.

See our prior post:

HOW CAN FUNCTIONAL AND INTEGRATIVE MEDICINE DOCTORS PRACTICE WITHOUT UNDUE FEAR OF LEGAL JEOPARDY?

Hello. Good morning. Good day. Good afternoon. Buenos Dias. Shalom. Wherever you are. I’m Michael H. Cohen, a healthcare and FDA lawyer. Today’s topic is how can functional and integrative […]

Contract drafting with a heavy regulatory component is something that we really put a lot of focus on in our healthcare law practice, and this is a gentleman who simply needs to know what the risk exposure is, and then how to tackle and shackle these different risks, and figure them out, and then embody the contract language.

I want to make a broader point here instead of getting into the wheeze about this legal issue and that. In addition to spotting the issues, you have to really understand that lawyers do certain things:

  • Lawyers can help negotiate.
  • Lawyers can push for advantages.
  • Lawyers can craft a deal.
  • Lawyers can be savvy about business.
  • Lawyers also aren’t there to be deal-breakers.

It’s not about what the lawyer wants. It’s more about giving advice and counseling. Then, the client has to make a decision.

There are legal points and there are business points like a legal point might be, “I want this contractual provision as broad as possible in favor of my client. Here’s what I would advocate for,” and the business point might be, “Who can terminate under what conditions? When? Does one have to give a lot of notice and the other doesn’t? I mean, what’s the relative balance of power? What is the scope of the job? What is it that they’re supposed to do? What is it that they can’t do? Who has authority over them? How much do they get paid?”

These are deal points, so the lawyer has to really guide the client, “This is the deal point, and this is something you need to say like if you’re getting this offer on the back of a napkin, here’s the stuff you got to press for.” Then, of course, we’ll push forward. We’ll craft the language. We’ll make it make sense for you, and we’ll get the deal done, but in terms of articulating what the deal is, like you have to have a very high-level discussion with the principals.

Sometimes, physicians, and healthcare startups, and healthcare… even mature companies, executives, they make mistake because they delegate… They try to delegate to the lawyers, but they’re really advocating their business role. They don’t understand the difference, and then also, concurrently, they don’t officially articulate to the lawyer, “Hey, these are the business points. This is what I want you to really, really focus on when you create your language like don’t spend my retainer wordsmithing all that commas and a lot of minor stuff. These are the real important deal-breakers, and we need to make sure that they’re embodied in the right language so that I’m protected.”

Just going back a few moments ago, I talked about three classic mistakes. One, failing to spot the issue. Second is underestimating the direct hit like what could go wrong and how things could go south, and you really got to … like you got to be an optimist, but you got to wear the pessimist glasses just to see the dark future so that you can avoid it, prevent it, mitigate it, and then put in the good stuff so you can create the bright future, so we have both of those roles at the same time.

I know it’s a little bit yin and yang, paradoxical. I said to this doc, by the way, looking at Barry, I said, “Wow, you’re all over conventional Western medicine, and oh my gosh, you got the Eastern too like you are the total synthesis, which a lot of our clients are.” It’s a beautiful thing to say.

Number one mistake, failing to properly diagnose the issues, the critical possible pitfalls. Number two, failing to predict the big hit, the main hit, and three is not anticipating all the little side things that could go wrong, so those are three mistakes that we want to cure, and in general… and I’m giving you a sense of what you get into when you’ve got a contract negotiation, and it’s not just all about salary. Sometimes, it’s about like power, and control, and ability to walk away and liability, and who’s going to pay if there’s a big liability, so that’s the kind of thing that we want to protect about whether we’re dealing with a functional medicine doc, or an executive for a healthcare startup, or really, a physician getting into a deal with a healthcare venture.

Of course, there are other issues like Corporate Practice of Medicine, and kickbacks, and fee splitting, and HIPAA, and all those other juicy regulatory goodies that we get into elsewhere in our blog and podcast, but that’s my physician story of the day, and now we’ll move on to scenario number two.

Healthcare startups shouldn’t pay for the mahogany conference table

All right, so our next healthcare legal adventure is a healthcare startup entrepreneur. This individual had raised a substantial amount of money for another healthcare startup, did extremely well, very savvy. He went to another healthcare law firm, and they told him … Actually, I won’t give you the legal issue here because I really want to be generalized and just completely just … preserve the confidentiality, but basically, this other healthcare law firm said, “Absolutely not. There is ‘no way in hell’ that you’re going to be able to do that.”

Now, I’m not sure when the last time somebody in your life used “hell” in a citation. It sounds like Catholic school, or Hebrew school, or some other school, but in any rate, I told him, “I’m not going to give you a categorical no.” At the same time, the client said, “Well, are you saying that if I do X, Y, Z, it’s no big deal?” Well, I’m a lawyer. I would never say, “No big deal,” even if I was at a restaurant ordering an appetizer. I mean, we’re just like … I can say pretty wild things in my private time and even swear on occasion, but I’m not going to say, “There’s no way in hell that you can do something.” I’m not going to give … I’m not going to say, “No big deal.” I’m not going to give a categorical yes or categorical no.

Now, that doesn’t mean that you’re like the land of mush and all you could say is, “Gray area. Gray area,” like a robot. Nobody wants a no-man or woman for a lawyer. Nobody wants a yes-man or a yes-woman, and nobody wants a gray area robot. You got to wear like some spunky socks these days. I learned that nobody wears black socks anymore like that’s just very old-school. You don’t want to be square. You don’t want to be uncool. You got to wear your multicolored, brightly-patterned, very interesting socks.

It is nuanced. It is definitely not gray, and there’s no categorical yes. There’s no categorical no. I mean, you’re in the yellow light zone. The question is, do you accelerate through the yellow light, or do you brake? A lot of that depends on your risk profile. Now, this was the absolutely pivotal issue, and I gave a qualified answer that told him how to do something, whereas the other law firm just basically said, “Absolutely not.”

Look. This isn’t Catholic school. This isn’t Hebrew school. I don’t think he’s going to go to hell. I don’t think that he… because he ate a shrimp or whatever, or decided that he’s going to do something. These rules are very strict, and they’re out of date. I mean, Corporate Practice of Medicine. People can’t practice medicine unless they’re doctors and companies shouldn’t be involved in clinical decision-making. The reality is a lot of healthcare is delivered no longer in the brick-and-mortar, but over this little technological development called the internet.

Whether it’s software, or mobile medical app, or telemedicine company, or an MSO model, which we talk about extensively elsewhere in our Healthcare Law blog and Healthcare Legal Adventures podcast, there’s going to be a delivery of a digital health service, and so it’s necessarily going to grind up against the old-school rules of Corporate Practice of Medicine and a kickback at fee splitting.

The question is, how do you get as compliant as possible? I even think “compliance” is like a black and white word or a red light/green light kind of word. I mean, it isn’t yes and no. It’s not like pulling a lever in a vending machine and out pops the candy, which is statute that says, “Thou shalt,” or, “Thou shall not.” It’s more like interpolating between the laws that are current, but were made a long time ago in industry practice now.

Having said that, “Everyone else is doing it,” is not the answer either, so again, you can’t be categorical no. You can’t be a categorical yes. What you could do is you could say, “Okay. I see what you’ve got is a classic telemedicine model. We’ll use the MSO structure. We’ll get you the documents. We’ll craft a legal strategy for you. We’ll make sure that the clinical people are working for the right clinical supervisors, and we’ll make sure that you’re structured as a management and marketing entity.”

Well, okay, so we put this all together. Then, the client said, “In addition, I was like…” We kept trying to frame this to get a pass. We said like, “Well, are you saying that I’m free from liability if I just do it the way you’re suggesting?” No. I’m not a get-out-of-jail-free card, and your lawyer is not going to tell you that there’s no risk. We said mistake number three is to fail to properly estimate the side hit.

One of the side hits is you could get… Say, you claimed for unfair business competition. Some competitor could say that you’re violating one of these rules, Corporate Practice of Medicine, Anti-Kickback Law, et cetera. Even though the regulatories don’t think you are, or don’t care enough about it, or see it as a technical violation, but not necessarily an enforceable one or not one worth their enforcement dollars, energy, and time, so you’re fine and sailing through on the regulatory front, but some competitor decides to get a bee in their bonnet, and they file in California an unfair competition, unfair business competition, Business and Professions Code 17200 claim, so you got to watch out for and anticipate the side claims.

That’s basically the broad-level picture that I want to give you about this, and also, I want to give you insights along the way about working with a lawyer because a lawyer is not like waving the incense saying, “You’re going to get into heaven here, and you’re not going to go to hell.” I’m talking about… Well, heaven I guess would be more on the business side. You get your product to market, and you don’t go to legal or regulatory hell. You don’t go to purgatory either. You wash away your sins. You’re cleansed, and you get an IPO. There you have it.

See our prior post:

LEGAL RISKS ARISE IN INTERDISCIPLINARY MD-DC PRACTICE, CHALLENGING INTEGRATIVE MEDICINE MODEL

When medical doctors collaborate with other licensed healthcare providers (such as chiropractors) in a multidisciplinary, clinical care or integrative medicine setting, legal risks can arise that […]

Anyway, I hope that this becomes our first billion-dollar client. We’re certainly… If you want to mention that raise, we’d love to have you, and trust that we gave more nuanced advice than this last healthcare legal team, and he’s on his way with some foundational stuff. Please remember us when you get to $10 million because we do securities work too, and there’s no reason to move on to people who are going to charge you three times the hourly rate simply so that you can admire the polish on their mahogany table.

Healthcare regulatory risk – watch for the side hit

All right, so this last one is very interesting. Again, I’m going to say very little substantively that’s going to be identifiable, but the gist of it is that they created a professional corporation, and states differ in terms of who can be in what professional corporation, whether it’s medicine, or chiropractic, or behavioral health, or mental health. In California, you can mix and match. To some extent, the kinds of healthcare practitioners that can be shareholders, directors, officers, and/or employees of a professional corporation, PC. In some states, it’s called a PLLC. It’s a Professional Limited Liability Company, but at any rate, some states, you can mix and match. Some states, you can’t. California has the Moscone-Knox Professional Corporations Act, which does allow some mixing and matching.

One of the issues here is that different healthcare professions have a different scope of practice. Meaning, they are legally authorized to do different things, and these things might look very similar, but when you get into the nitty-gritties, some of these professionals can supervise one another and some can’t, and so there is a pecking order of hens here, if you will, and you can’t peck up the chain. If you peck up the chain… I’m tempted to continue the linguistic play here, but just to keep it simple, it’s not fun.

What happened with this particular professional healthcare company composed of clinicians is that they made a lot of money, did very well, got a lot of revenue, and are helping lots and lots of patients. Unfortunately, the state disagrees now with their model and their structure, and let’s move from hens to ducks. They did not line up their regulatory ducks at the get-go, and it’s not their fault in a way. You can’t find these rules. I mean, it’s very hard to find these rules. Even if you find them, you got to figure out what they mean. They’re not necessarily written in English, and one rule contradicts the next.

I remember when I was a kid and I studied the Talmud. Literally, you have one finger on the Mishnah, which is the core text, and then you’ve got your other finger on the Gemara, which came a couple hundred years later and it’s commentary, and then you have your finger on the different commentators who came many hundreds of years later like there would be Rashi or Tosafot. For those of you who went to an orthodox Hebrew school, you know what I’m talking about. For most of you, you have no idea what I’m talking about. It probably seems like I went on an incredible tangent, but I like to do that because I’m a metaphor guy, and there’s a wonderful book called The Talmud and the Internet where they say that the Talmud was actually… The first hyperlinks were in the Talmud because you put your finger here, you put your finger there. It basically is open a new tab. That’s what you’re doing.

The point is you got to read law like the Talmud like that’s how you have to read law. You’re constantly opening new windows, and you have to see… They’re all like disputing with each other. What’s beautiful about the Talmud is the rabbis are making legal arguments at one another across the centuries, and that’s what… It’s a kind of hypertext. It is a hypertext because time passes, the body disintegrates, the ideas remain, and we talk across the centuries to each other. How beautiful is that?

That’s how you have to read the law, and in this case, people don’t always know enough to even know… Go back to my Jewish roots again. We say Passover, their four sons who ask about, “What is the meaning of the Passover?” There’s the wise son, there’s the bad son, there’s the simple son, and then there’s the son who doesn’t know what question to ask. For him, you have to tell him, “This is the story, the Passover.”

Now, he and she will make a gender neutral in this day and age. The point is the client, you, the healthcare venture, practitioner, entrepreneur don’t always know even the question asked… even if he asked the question, people have to really dig and dig, and come up with the answer, and it doesn’t just jump off the page like it really is the process of interpreting these commentators across the veil of many years trying to figure out what the heck this means.

If you do it at the beginning and you get a good legal strategy memo, you can sort this stuff out. You could be on your way. You might have asked $5,000, $10,000, maybe $15,000. Super complicated. Maybe a little more, but heck, you could cry all the way to the bank a million or $2 million later, and how much better to have that preventative advice then… Now, you’ve built your clinic. You’ve built your healthcare startup. You put your venture together. You got the funding. Your grandma was the angel investor, but now you’ve got a million from actually a real investor, and you don’t want to let him down.

One day, you get an email from some state regulatory department. They say, “Hey, the whole thing is screwed up, and by the way, now that this has happened, your fair game for the other regulatory agencies, your fair game for…” Remember, in the last segment, I mentioned these class action lawsuits, this plain of trolls, unfair competition, Business and Professions Code 17200. You failed to anticipate the direct hit. You failed to diagnose, and now you get the side hit. Guess what? Three in one. It’s just a bad day.

Now, fortunately for this client, we were able within an hour actually, less, to put together a legal strategy session, a legal..

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This is third in a series of OIG compliance guidelines for individual and small medical practices. Compliance plans help reduce the possibility that a medical practice will be investigated for charged for improper billing to federal agencies, violations of various federal laws such as self-referral laws and the Anti-Kickback Statute, and other laws.

Enforcing Disciplinary Standards through Well-Publicized Guidelines

While many employees will report violations of federal healthcare program laws because they just want to do a good job, the OIG recognizes that many employees feel uncomfortable disclosing wrongs or possible violations committed by their co-workers. An effective OIG compliance plan for individual and small medical practices does require the inclusion of enforcement and disciplinary procedures for non-compliance with the regulatory compliance program.

The Office of Inspector General recommends that the enforcement/disciplinary procedures be consistent and appropriate for the violation committed. The compliance program should “be flexible enough to account for mitigating or aggravating circumstances” but also understand that some employees and workers may need to be terminated from the practice.

It should be clear that sanctions apply not just to the people who commit any federal healthcare program violations but sanctions also apply to anyone who doesn’t make the proper effort to detect violations and report them to the compliance officer.

In general, disciplinary actions can include:

  • Verbal warnings
  • Written reprimands
  • Probation
  • Demotion
  • Temporary suspension
  • Being fired from the payment

Penalties can also include being required to pay back or provide restitution for any damages and the possible referral of any violations to local or federal law enforcement agencies.

The possible sanctions should be set forth in any training and compliance manuals.

When sanctions need to be communicated to an employee or worker, the communication and reasons for non-compliance should be documented including:

  • When the non-compliance took place
  • Who reported the non-compliance
  • Who was responsible for taking action?
  • What follow-up disciplinary action was taken

Assessing a Voluntary Compliance Program

Compliance standards for a small practice should be an active daily part of the medical practice. They should be part of the medical practice’s culture to achieve the best results. In medical terms, an effective voluntary compliance program is a type of preventive medicine. Many programs, once implemented, shouldn’t take a lot of time away from the daily practice of medicine. The OIG states that many of its suggestions have already been adopted by individual and small medical practices.

Other risk areas

Some risks for federal investigations and complaints depend on the nature of the medical practice and the geographical location of the practice. If these risks apply to your practice, after review and discussion with your healthcare small medical practice compliance lawyer, then the procedures for handling them should be added to the standards part of the compliance plan. The OIG identifies the following additional risks:

  • Reasonable and Necessary Services. Physicians need to understand that what is considered a “reasonable and necessary” service can vary depending on “local medical review policies (LMRPs) among carriers.” Physicians must apply their local LMRP when billing to Medicare – aside from the submission of properly coded claims that are submitted to Medicare “solely for the purpose of obtaining a written denial” The individual or small medical practice should request the applicable LMRPs for their practice and then incorporate the LMRP into their compliance standards.
  • Advanced Beneficiary Notices. Medical practices should explain to their patients when their service or treatment may not be covered by Medicare. This way the patient can make an informed decision about whether to receive the service/treatment and pay through other means than billing Medicare. The ABN informs the patient that Medicare coverage may be denied or uncertain and indicates that the patient agrees to pay the portion of the bill that Medicare does not pay. The patient should have a reasonable idea why Medicare may not pay the bill. ABNs should:
    • Be in writing
    • Indicate the service or treatment that may not be covered
    • State why the doctor believes the service or treatment may not be covered
    • Signed by the patient – indicating his/her informed understanding that the patient will be responsible for the unpaid bills.
  • The OIG guidelines for ABNS for small practices. The OIG also suggests physicians to pay careful attention to diagnostic tests. The medical practice should:
    • Analyze if the test is covered under national coverage rules
    • Analyze if the test is covered under LMRP rules (the doctor’s local carrier should help provider an answer)
    • Review which tests are only covered for certain diagnoses.
  • Certificates of medical necessity (CMN). Doctors are liable for improperly certifying to Medicare that the patient needs certain medical equipment, supplies, and home health services. Your healthcare compliance lawyer can help explain these guidelines. An OIG alert on this topic is available. Physicians need to understand they can face criminal, civil, and administrative penalties for falsely signing a CMN of signing one with reckless disregard to its accuracy. The OIG compliance plan recommendations state that home health services and durable medical equipment orders are especially problematic.
  • Billing for non-covered services. While the OIG understands that some medical practices submit claims to federal agencies for the sole purpose of obtaining a denial (so the patient can then request that an alternate payer be responsible), there is a risk which the OIG phrases this way –

“If the medical services provided are not covered under Medicare, but the secondary or supplemental insurer requires a Medicare rejection in order to cover the services, then would the original submission of the claim to Medicare be considered fraudulent?”

The OIG states that the submission should not be fraudulent. Still, the best course of action is to review these types of submissions with experienced small medical practice healthcare lawyers before the submissions are made.

Physician Billing Practices

The OIG compliance plan has additional recommendations for the following types of billing practices:

  • Third-Party Billing Services. Doctors need to understand that they are responsible for the accuracy and reasonableness of medical bills that are submitted to Medicare by the practice’s billing service even if “the physician had no actual knowledge of a billing impropriety.” The OIG is especially concerned about medical practices that contract for billing services through a percentage basis. This can lead to the “risk of intentional upcoding” and other “abusive billing practices.” Medicare requires that payments either be made to the beneficiary or to the party (the medical practice) that provided the services.

Payments cannot be made directly into the billing service’s bank account under the service’s sole control. More on this compliance requirement can be found on the OIG’s website. Billing services do not qualify as providers of medical services. At some level, the ability of the billing service to receive payment must be controlled by the individual or small medical practice. Claims should typically be billed through the physician’s name and tax ID number.

  • Billing Practices by Non-Participating Physicians. Solo and small medical practices should review with experienced healthcare billing compliance lawyers of the rules and laws for billing by physicians who did not participate in the practice. For example, there are laws that preclude a

“nonparticipating physician from knowingly and willfully billing or collecting on a repeated basis an actual charge for a service that is in excess of the Medicare limiting charge.”

As an example, the Office of Inspector General, states that “a nonparticipating physician may not bill a Medicare beneficiary $50 for an office visit when the Medicare limiting charge for the visit is $25.”

Doctors who violate the statutes that govern billing by non-participating physicians can be fined up to $10,00 for each violation and can be excluded from participation in Medicare or other federal health care programs for up to five years.

Additionally, there are strict timelines for when overpayments, such as the repeated billing of $50 for a $25 office visit, must be reimbursed. Failure to make reimbursement in a timely manner can subject the medical practice to fines and exclusion from the federal health care programs.

Additional Risk Areas for solo and small medical practices

Two additional areas of concern for small medical practices which physicians should review with experienced healthcare compliance lawyers, according to the OIG are:

  • Renting office space by the medical practice to “persons or entities to which the physicians refer business.” The OIG’s Special Fraud Alert on this topic, summarizes the concerns as follows:
    • A concern arises when “suppliers that provide items or services to patients who are referred or sent to the supplier by the physician-landlord” rent space in the physician’s office. Medical practices that rent, for example, to a durable medical equipment supplier, raise a concern because the durable medical equipment suppliers are likely to benefit from referrals of the medical practice’s patients.
    • The specific OIG concern is that these rental/referral arrangements may violate anti-referral laws and the Anti-Kickback statute. Whether and how arrangements can be created that satisfy the anti-referral law exceptions and the safe harbors to the Anti-Kickback Statute should be reviewed with the medical practice’s healthcare compliance attorney. The OIG recommends the following compliance steps:
      • The agreement is set out in writing and signed by the parties.
      • The agreement covers all the space rented by the parties for the term of the agreement and specifies the space covered by the agreement.
      • If the agreement is intended to provide the lessee with access to the space for periodic intervals of time rather than on a full-time basis for the term of the rental agreement, the rental agreement specifies exactly the schedule of such intervals, the precise length of each interval, and the exact rent for each interval.
      • The term of the rental agreement is for not less than one year.
      • The aggregate rental charge is set in advance, is consistent with fair market value, and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare or a State health care program.
      • The aggregate space rented does not exceed that which is reasonably necessary to accomplish the commercially reasonable business purpose of the rental.
    • Unlawful Advertising. Medical practices should understand that they can’t imply or suggest, in their advertising; through the use of the agency’s names, symbols, or other criteria, that any of the following agencies endorse the advertisement:
      • Medicare
      • Medicaid
      • The Social Security Administration
      • The Department of Health and Human Services
      • The Health Care Financing Administration

PHYSICIAN-LAB AGREEMENTS TO PROVIDE EXCLUSIVE LAB SERVICES AND WAIVE PATIENT FEES COULD BE KICKBACK, OIG ADVISES

The federal Office of the Inspector General (OIG) reviewed a laboratory’s proposal to enter into agreements with physician practices to provide all laboratory services for the practices’ […]

Effective regulatory and billing compliance plans should include an understanding by the medical staff of what constitutes a violation of the plan and how the plan will be enforced. Solo and medical practices need to be careful about what constitutes a reasonable and necessary service and when and how patients should be informed of what Medicare may not pay for a service. Doctors need to properly certify additional services such as home health care and medical equipment. Payment of bills through third-party services should be monitored by the medical practice. Renting office space to non-physicians needs careful review.

To understand how to create a quality compliance risks and the risks that should be examined, contact Cohen Healthcare Law Group, P.C. today. We have the experience and skills to provide quality compliance plans for individual and small medical practices.

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The post Solo and Small Medical Practice Essentials – Part Three appeared first on Cohen Healthcare Law Group | Healthcare Lawyers | Life Sciences | FDA & FTC Law.

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Work Through the Thorny Knots of Healthcare Law - YouTube

Transcript

Hello, this is Michael H. Cohen, founder and president of Cohen Healthcare Law Group. I’d like to tell you why we are so passionate about the health and wellness industry, and why our team is dedicated to helping people, like you.

You see, we’re not just lawyers on the other side using our brains, and our heads, to help you think through weighty legal issues, thorny regulatory issues, enforcement hazards, liability challenges, and the thorny knots of the law sometimes imposes in the way of health and wellness businesses and practices.

Of course, we do that.

We are experts in areas, such as Stark and kickback law, fee splitting issues, FDA enforcement, FTC enforcement, legal issues surrounding advertising and marketing, medical board issues, medical technology, healthcare information, healthcare software. All of those areas of healthcare law we specialize in.

But why do we do what we do?

I’d like to say that we’re different. We’re different because we hold a different energy, a different intention, a different awareness than the average law firm. We’re not just lawyers, we’re also people who passionately believe in health and wellness for our own reasons.

How it started

Let me talk a little bit about my own journey. I am the son of a businessman and a doctor. When I was growing up, I would go and visit my Dad’s office where my Dad was in charge of financial matters at a large automobile company in Detroit. My Dad was an economics major in college. He passionately and firmly believed that that way to make the world better was by making the economy better by contributing goods and services, by making things flow more efficiently, by creating products in the world, and by helping companies operate in such a way that all boats would float, everything would rise with the tide.

He believed in capitalism. He believed in the invisible hand of the marketplace. He believed that by making things better, in a business way, everybody’s lives would be improved. At the same time, I would go on rounds with my Mom, a medical doctor, who was also on faculty as a professor of medicine at Wayne State University School of Medicine.

My Mom did research. My Mom published a lot of papers. She became a world expert in endocrinology. She wrote a book called, The Paleo Pathway. She’s very into medicine and I would go, and I would watch her at the bedside. I was developing an understanding of the doctor-patient relationship, medical ethics, bio-ethics, the importance of empathy and compassion. All of these themes in my professional and personal life that were later to unfold really were cultivated during my childhood, watching my Dad, watching my Mom go to work, hearing them talk about work, and coming home.

How we’re different

We’re not at a remote distance hovering in just cranking out legal documents. We’re not like Charlie Chaplin in modern times cranking out these huge legal agreements, big memos, and cranking through things from a great objective place in outer space. We’re passionately engaged to help you, to help our clients, because we understand that you, like us, really believe in health and wellness.

You’re doing what you do for a reason.

You’re doing what you do because you believe that your medical device, your cosmetic, your dietary supplement, your integrated and functional medicine practice, your genetic screening, your test, your lab test, your healthcare venture with this particular structure is going to make a huge impact on people’s lives.

By helping you, by helping you operate more efficiently, by helping protect you against potential enforcement hazards, regulatory dangers, and perspective liabilities – we, in fact, are moving the needle in terms of helping lots, and lots, of people.

That’s why we do what we do.

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Gift to the world

Yesterday, I was on the phone with a business coach. We were talking about the perception that sometimes there’s a disconnect, or split, between material reality and spiritual reality. But, for me, between my physical embodied existence going to the office, being on the computer, writing, thinking through puzzles, standing in line at Starbucks waiting to get my half sweet caramel macchiato, and the spiritual life. The life that is silent, that is inner, that is alive and, yet, nobody sees it.

It’s very private. That is quiet. That is filled with peace as opposed to the hustle and bustle of the world.

My coach was reflecting that part of my task, my challenge, and my gift to the world is to continue integrating these two sides within my own being. So that we have the descending triangle from the heavens of inspiration, creativity, innovation, fullness, peace, love, nurturing, and all of the above, and the up-swell of the ground occurrence of the earth with everything that, that brings, evolution. So it’s a struggle, challenges, going to Starbucks and waiting in line, moving through legal issues, pushing the envelope of innovation beyond what these sometimes archaic regulatory structures may otherwise allow.

This truly is the union, the synthesis, the marriage of the up-swelling triangle and the downward descending triangle. The union of having an earth, if you will, within my own being. This is something that I am now aware of that I’m working on.

It’s also, to me, a metaphor, or a description, of what happens in the healthcare business or practice. If you’re a doctor, if you’re a clinician, a chiropractor, a acupuncturist, there is this professional knowledge. There’s the inspiration. There’s the sensitivity. There’s the cultivation of your own essence, and then how you bring this to the patient to help them feel better, to help them improve materially, physically, emotionally, mentally, and spiritually.

NAVIGATING SPIRITUALITY IN MEDICAL SITUATIONS – WHAT DOCTORS AND PATIENTS NEED TO KNOW

Michael H Cohen was quoted in A Sacred Space: Navigating Religion and Spirituality in Medical Situations, in The New Physician, for comments on spirituality in medicine and health care

The balance

If you are a healthcare business, then there is the technology. There’s the knowledge, the IP, the know-how, the can-do, the creativity, the innovation, the disruptive innovation, and then all of the financing, the raising money. All these things are in the space. It’s really like the yin-yang.

Everything intersects with everything else and you, the entrepreneur, have to hold it all in balance, as guided by the structure of the law and what it allows. We really understand these energetic configurations, if you will. We really understand the journey that you’re going through. We understand the challenges and we come from a holistic place. We are not these disembodied giant head cerebral octopuses, if you will, with our tentacles in the different areas of law.

I mean, sometimes you almost have to be that way. I remember, when I studied Talmud as a child, I would have my finger on the Mishnah, and my other finger on the Gemara, and my other finger on what Rashi said, and then, maybe, there was another commentator, and you had to keep all these things together. I don’t know if I ever had eight fingers, but you had to keep in mind these different strands of law and the commentary that was a wonderful preparation.

So there is that dimension of law, but there’s also understanding what is the client’s objective? What is the clear through point here? What is the fundamental business decision that has to be made? How do we synthesize this, if you will, chaotic map with all of these legal and regulatory hazards and distill it into a clear pathway, so that our clients can punch through, can push through with their own innovation, with their own innovation, with their own gift?

There is no split between the material, the emotional and spiritual, it’s really of a union and the more that I am aware of this union in myself, and how … This really is the energy that we bring, this holistic vision, myself and my team. The more I’m aware of this, the more that we can augment, and support, and facilitate the breakthroughs of our clients.

When I came in the office today, I was thinking about my childhood and the wonderful Passover dinners that we would have when we had all of our relatives arrayed around the table. We would sing and we would chant and we would read. Again, it was that infusion of knowledge, learning, understanding, history, all of the right brain aspects of these are the things that happened, so the left-brain aspects of understanding, Judaism, and the stories of our people.

Then there’s the right-brain, the creativity, the singing, the nurturing, the glasses of wine and all of the ceremony and ritual and tradition. This is, again, that same synthesis, that same bringing together that has been part of this journey.

When I was a Wall Street lawyer and I was drafting these 200-page merger documents for multi-million dollar companies, companies with hundreds of millions of dollars, at the same time I was studying transcendental meditation. Again, it was integrating these different components and learning how to bring a sense of peace, and a sense of balance, and really a higher wisdom.

That’s the energy that we hold here. That’s the energy that I see on my teammates. And that is the integration that we bring to you when we help you have your own breakthroughs, your own synthesis, your own amalgamation, your own creative life contribution to the world through your own service or product.

That’s why we do what we do. We’re really pleased to do it. We love what we do. We love having you as a client. This is Michael H. Cohen, Cohen Healthcare Law Group, and we look forward to working with you and to seeing you soon.

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The post Work through the thorny knots of Healthcare law appeared first on Cohen Healthcare Law Group | Healthcare Lawyers | Life Sciences | FDA & FTC Law.

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Signs that shape the landscape of the healthcare industry - YouTube

TRANSCRIPT

This is Michael H. Cohen, founder of the Cohen Healthcare Law Group.

Introduction

            Let’s talk about signs. I was driving with my toddler this morning and he was suddenly noticing that there were signs and once he started noticing that he realized that there are signs everywhere. So there are stop signs. There are yield signs. I’m looking right now at a sign that says dip. I guess there’s a dip in the road, so you wouldn’t know that. The sign has to tell you so you can anticipate it, no stopping at any time, truck route, all these road signs. He was fascinated by yield. The fact that the cars have to wait, some cars can go. And then, of course he really loves the u-turn. You can make a u-turn. So today we were also noticing that there’s a sign that says no u-turn.

So we got into this joke about it, this rhythm.. yes u-turn, no u-turn, yes, no. And I’m looking at the road and I realize that you can turn this way, you can turn that way, you can do this, but you can’t do that. There’s yes and there’s no. You get the metaphor, right?

            This is pretty much the landscape for healthcare law and regulation. Whatever your business, whatever your practice, whatever your healthcare enterprise, whatever your health industry venture, whether it’s telemedicine, a medical spa, some kind of arrangement that involves a venture or a business and a doctor where you’re worried about issues like corporate practice of medicine, stark, self-referral, fee splitting, any kick back rules, medicare exposure, up coding, billing issues, a medical management issues, those kinds of items that are typically on the plate…

All of those are rules that frame where you can go, whether you can turn right or left, whether you can stop or go, fundamentally, whether you can make a u-turn, whether you can engage legal counsel to help you make a u-turn or whether even with a healthcare attorney and FDA lawyer at your side, you could not make a u-turn.

KICKBACKS, FEE-SPLITTING, CORPORATE PRACTICE OF MEDICINE, STARK, MSOS: GUIDING HEALTHCARE VENTURES THROUGH THE MAZE

Fundamentally, you’re worried about legal rules prohibiting kickbacks, fee-splitting, corporate practice of medicine, as well as Stark law; you don’t know whether the MSO or management structure […]

Rules and more rules

You need to know the rules of the road. In fact, medicare has a seminal document for a physician, which is about the anti-kickback statute, and it’s called The Rules of The Road. And they have stop signs there, so probably that’s where I got the idea even though I thought that it was ingenious at the moment. Of course, there’s a wonderful book called the Anxiety of Influence, and we are all influenced by what we’ve seen in the past, so this might have influenced me. At any rate, it really is a road and you need to be able to see the signs and you need to be able to obey the signs.

And there are times when people will go a little over the speed limit. There are times when people will go past the yellow, but we know that you cannot run a stop sign. So you cannot double bill Medicare. You cannot engage in healthcare fraud, and you need to understand what the signs mean. By and large, the difference is the road signs are very black and white, literally. If the sign says speed limit 30 miles an hour, that’s the speed limit. Of course, there might be some tolerance for going beyond it, but if you go too far beyond it, especially if you have a red convertible, you’re probably going to get nailed, so especially if it says radar enforced.

When you’re looking at signs, there are unambiguous, right? This is this road, this is that road. There’s a camera and you cannot run the stop sign. You cannot run the red light. Healthcare is the same way. Some of the rules are unambiguous. Some of the rules contain some leeway, some room for interpretation. And the important thing is to know the difference.

4 WAYS TO MINIMIZE THE RISK OF AN FDA, FTC OR PRIVATE PLAINTIFF, HEALTHCARE FRAUD LABEL WHEN MARKETING HEALTHCARE PRODUCTS

Whenever you market a healthcare product, beware of potential FDA and FTC enforcement as well as private plaintiffs who can sue for false advertising, unfair competition, deceptive and misleading […]

Disaster waiting to happen?

Recently, we talked about a client that came to us where the company had started a line of products, let’s say dietary supplements, let’s say cosmetics, where at least the company thought that that’s how the product would have been classified. And they paid no heed to the kinds of claims that they were making.

And therefore, they mixed up all the regulatory categories so they made disease claims. They should have made structure function claims for the dietary supplements. They should have stuck to cosmetic claims for the cosmetics. And instead they made therapeutic drug or disease claims and that meant that FDA considered their products to be intended for use as drugs. Therefore, the products were misbranded, therefore FDA could issue a warning letter, seize the products, shut down the company, even in extreme egregious cases impose criminal penalties.

            And so the business owners that launched this healthcare products venture found themselves in deep trouble. As we said, they found themselves in trouble at this juncture not from FDA, but from a class action plaintiff’s law firm that was salivating to get a huge settlement and was able to cite every single violation, put the statutory authority behind their complaint, and really put the fear of God into these mom and pop business owners who unwittingly and without much forethought went out onto the market without getting proper FDA, legal and regulatory advice.

My example today is from another domain. This is one in the unlicensed practice of medicine area. We have had clients who’ve come to us from other countries and they want to have a US address, a prestigious US address for their business. Let’s say it’s a medical spa. Let’s say it’s an anti aging clinic. Let’s say it’s an integrative and functional medicine practice. Let’s say it’s a beauty business or a cosmetics business or a plastic surgery practice with a line of cosmetics attached to it, all beautifully branded and superbly marketed in their home country. The challenge is they want to create a beachhead in the US, but the principles in the foreign country are not US licensed physicians.

Yesterday, one of these clients sent us this question. “If our doctor from let’s say China comes and gives an assessment to one of the patients who is also from China, and all that occurs in a private room, and they’re only speaking Chinese, is this okay? Can we do it? Is it legal?”

It should be legal. This is the way the logic usually goes. It should be. Therefore, it is legal. Therefore, we’re not going to have any enforcement issues and we want you, the attorney, the healthcare attorney, to bless this arrangement. Well, it just doesn’t work that way. It doesn’t matter that they’re both speaking a foreign language. It doesn’t matter that they’re in a room. It doesn’t matter if that, for all intents and purposes, the room could be in China, in our physical reality. In this quantum reality, the room is here and there is this crime known as unlicensed practice of medicine. And a foreign physician, unless qualified and licensed here and they jumped through the necessary hoops, they cannot practice medicine here.

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How do I practice medicine then?

That takes us back to the question of what does it mean to practice medicine? Any diagnosis, treatment, operation, prescription or cure or mitigation for any human ailment, disease, affliction, injury, deformity, blemish and so on … Those are the broad terms in which the statutes define the practice of medicine. And given the breadth of these statutes, it’s very easy to run afoul of the prohibitions against unlicensed practice of medicine. These are issues that go back to even the founding of this country when the regulators were trying to figure out what is medicine was not medicine.

If we put leeches on George Washington to help suck out the evil blood humors and get him back to health, is that medicine? Is that not medicine? So they were trying to figure out what could and could not be practiced. And in those days, they came up with the definitions of practicing medicine. And they came up with these very broad definitions which have lasted for 150 years or more as embodied in the statutes that came in the 18th century and late 19th century. If you’d like a deeper dive into this really rich history, you can look at my book, Complimentary and Alternative Medicine, Legal Boundaries and Regulatory Perspectives. The book is still fresh after all these years because those rules haven’t changed in a century or two. And they certainly haven’t changed much in a decade or more. Very broad definitions of unlicensed practice of medicine are potent.

Typically, they affect practitioners. For example, your healer, your Reiki practitioner, possibly your hypnotherapist, somebody who wants to begin a practice that involves the interpreting and commenting on physical or emotional health. What we’ve seen in our law practice is that increasingly these issues affect businesses. And so for example, I mentioned the business from let’s just say China that wants to create a beachhead for its operations, with a clinical practice in the US.

The mega superstar physician from China cannot position himself or herself as a US medical doctor and cannot do medical consults here, even if those consults are coachless assessments, to put it in very narrow terms, still, it’s hard to escape the breadth of the statute. I have been watching this wonderful science fiction show on Amazon prime called The Expanse. And in The Expanse there is an alien life form or life force. And one of the things that it does is it controls inertia, it somehow can control physical reality. It slowed these ships down. So the ships slowly descend into the gravitational pull of this object, which is at the core of this blue Goo, which is this alien intelligence.

And that is what the practice of medicine statutes are. They are alien goo superimposed on your healthcare venture or market from the late 1800s, when we had just emerged from our colonial history and we had Native American medicine and a very vibrant and rich plant medicine tradition, and all sorts of different traditions, some of them valid, some of them not valid. We had “scientific medicine” trying to call everything else unscientific. And all of these debates were raging. And that is what shaped the licensing statutes.

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Be aware of restrictions set forth by the FDA on your healthcare venture

Also, as I talk about in my book, Complimentary and Alternative Medicine, Legal Boundaries and Regulatory Perspectives, I talk about how the AMA was a part of this history and they essentially tried to stamp out and squash and all other forms of “alternative healing”, including chiropractors. In fact, this resulted in a case called Wilk vs AMA, in which the Federal Court of Appeals actually found that the AMA had engaged in a “conspiracy” to wipe out a licensed profession. The MDs had tried to wipe out the chiropractors and they got busted by a US federal Appellate Court. The prohibition against unlicensed practice of medicine is the grandfather, if you will, the granddaddy of the prohibition against corporate practice of medicine. And again, all of this affects not only practitioners but also businesses.

If you are a telemedicine company, a mobile app developer with software with some kind of remote diagnosis that’s done by humans, a medical spa, almost any kind of healthcare venture that in some way, shape or form involves, I won’t say partners with, but involves physicians, medical doctors, you must be aware of the prohibition against unlicensed practice of medicine and corporate practice of medicine.

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California, New York, Massachusetts, and other states that emphasize corporate practice of medicine & fee-splitting lead medical spa compliance enforcement.

Conclusion

We have a lot of blog posts on our site about these prohibitions. You can reference those. You can read those in depth. Today, I wanted to give you another perspective, another flavor, on these rules. Even though the rules are ancient and somewhat archaic, they still affect how healthcare businesses operate today. Whatever your healthcare venture, always look out for these rules, always look out for unlicensed practice of medicine issues. Always look out for the blue goo that is slowly sucking in all of the spaceships. It’s there. You can resist its gravitational orbit. You will want the assistance of an experienced healthcare and FDA lawyer who deeply and truly understands how these archaic prohibitions with respect to the practice of medicine can affect, topple, impair or critically wound your business dream

An experienced healthcare and FDA lawyer can help you navigate these rules and come up with creative solutions, so that you can manifest your vision, so that you can see the road signs, so that you can interpret them, so you know where you can’t make a u-turn, yet on the other hand, where you can make a u-turn. And as you probably know, sometimes there’s a camera and there’s no sign telling you whether you can make a u-turn or not. In those cases, it’s especially important to have a capable professional legal advisor at your side because some of the signs are written, some of the signs are unwritten, and many of the signs are simply implied.

Contact Cohen Healthcare Law Group today if you’d like a read on your situation.

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As medical doctors near retirement, many begin to think about selling their practice. Physicians who have a better opportunity may need to sell their medical practice. Starting physicians or physicians who are looking to expand their current practice may look to purchase an existing practice. Selling or buying a medical practice can be a strong consideration if one of the doctors wants to move to a different state or location within a state.

An experienced healthcare medical purchase attorney is needed to review the major issues.  Some of the primary issues the healthcare lawyer will analyze are:

Understanding Corporate of Medicine Prohibitions

In California, a medical practice must be run by a medical corporation.

The Moscone-Knox Professional Corporation Act governs who can invest in and own the professional medical corporation and the limits that apply to non-medical practitioners. In general, there must be a clear dividing line between the clinical operation, the practice of medicine, and the administrative side which can include investors, managed service organizations, and other non-professional managers.

Medical corporations in California are also bound by:

See our prior post:

3 WAYS HEALTHCARE & TELEMEDICINE COMPANIES CAN TRIGGER UNLICENSED AND CORPORATE PRACTICE OF MEDICINE LEGAL TRIPWIRES

Healthcare startups, including telemedicine and mobile health startups, can unwillingly trigger unlicensed and corporate practice of medicine legal tripwires.

What is being sold?

There are two essential parts of any business – the assets and the liabilities. Sellers usually want to sell both parts. Buyers normally prefer to purchase just the assets and avoid the liabilities. What parts (assets and liabilities or just some of the assets are sold) depends, in part, on the business structure.

In states where a partnership can own a medical practice, the considerations for the sale or purchase begin with the partnership agreement. The written partnership contract usually controls:

  • Who can sell the practice
  • Who has the right to buy the practice
  • The value of the seller’s interest in the medical practice
  • Many other factors that are predetermined by the partnership agreement

In California, where the medical practice must be a medical corporation, the starting point is that the sale must be to licensed physicians and not private investors. In corporate practices, stock sales are used to sell the entire practice. Assets sales, as mentioned, are used to sell the customer accounts, medical equipment, buildings if owned by the corporation, and other assets.

There are tax considerations which both the seller and buyer need to consider for all types of sales especially corporate sales.

Determining the Value of The Practice

Unless the fair market value of the practice has been predetermined, such as is often the case in a partnership agreement, the practitioner(s) should consult with qualified appraisers who understand how to properly value a medical practice. The starting point, as with most businesses, is what comparable sales have taken place for a similar type of practice in the same geographical area.

Another way to value the medical practice is to detail the physical assets, the good will of the business, existing business relationships, existing patient list, intellectual property, liabilities, and many other factors such as what patients need to be told about the sale.

Due Diligence & Healthcare Compliance

Buyers need to work with experienced medical practice buy and sell lawyers to understand a full range of legal, financial, and practical issues that affect the sale. These issues, which require due diligence, include:

  • Healthcare Compliance. The buyers of a medical practice need to know what healthcare laws regulations apply to their business. There are many federal and state laws that regulate how business referrals work, how bills can be submitted to private insurers and public health care programs, healthcare privacy laws such as HIPAA, and many other issues. A skilled healthcare lawyer explains the impact of Stark Law, the Anti-Kickback Statute, the False Claims Act, and other federal and state laws and regulations. The medical purchase healthcare lawyer will review with the seller and/or the seller’s attorney the seller’s current compliance plan, any current or likely compliance complaints, and other compliance red flags that need to be addressed. If the compliance issues aren’t addressed before the sale, the physicians who buy the practice may find that they are liable for any open compliance issues.
  • Patient notification. There are specific rules that apply to sales such as how and when to notify patients about the sale. Patients should also be informed about their right to access and control their medical records in the event of a sale. Typically, an authorization that also meets HIPAA standards) is required to transfer medical records from one medical practice to another practice. Both the seller and buyer normally want the letter to comply with the legal requirements while also helping the patient to choose the new doctors over other doctors. This type of letter must be carefully drafted so as not to unduly pressure the patient.
  • Medical records. Who owns the medical records after the sale and how long those records should be kept – should be part of the agreement of sale.
  • Billing and coding. Due diligence requires an understanding how the medical practice enters its bills and billing codes and how those bills are submitted. Bills that are improperly submitted may result in a complaint that the medical practice is violating the federal False Claims Act or a state false claims law. The health care purchase attorney should also review which insurance carriers and medical programs the medical practice works with, how quickly and how much of the bills those insurance carriers and programs pay and any issues that have been raised in the past or currently regarding payment. If the medical practice changes ownership, then Medicare, Medicaid, and other payors will need to be properly notified of the change.
  • License requirements. Due diligence requires reviewing the current medical licensure needs of the medical practice and the current status of those licenses.
  • The financial records and tax statements – normally for the past three years. This includes any judgements, liens, or claims. It also includes withholding taxes that may be due, unpaid vacation pay, the status of any worker’s compensation and unemployment compensation accounts, business and medical insurance, and many other financial issues.
  • Current working relationships. The working relationship with the staff such as nurses, technicians, receptionists, and others. Just as with patient records, there may be a legal duty (and often a practical requirement) that staff be properly informed of any sale. Employees and contractors should understand what to expect when the medical practice changes ownership hands.

There are many other due diligence matters an experienced health care buy and sell lawyer will review. These include:

  • Any managed service organization agreements. There are corporate practice of medicine issues that should be examined – such as whether the MSO can act as a medical director. Generally, this is not allowed in California.
  • All open contracts with administrators, supplies, vendors, and third-parties
  • All open litigation the medical practice that is selling their business is involved with
  • Any open lease or rental agreements
  • All open contracts with employees and independent contractors

Not every contract is assignable. Experienced medical practice lawyers will review the existing contracts.

See our prior post:

THE LEGAL DANGERS PHYSICIANS FACE WHEN WORKING WITH THIRD PARTIES

Physicians regularly work with businesses who want the doctors to use their products. To encourage physicians to choose their practice over competitor practices, vendors often offer incentives. […]

The Agreement of Sale

The buyer’s attorney will want the seller to warrant and represent many of the items that have been reviewed in the due diligence phase. These representations should be clear as to what the seller is agreeing to regarding the existing practice. The agreement should also clarify what the buyer’s rights and remedies are if the warranties and representations turn out to be false or deceitful.

The seller’s lawyer will likely want the buyer to make certain warranties and representations too. This can include that the buying physicians have the correct licenses for the state where the practice is located and that there are no current complaints pending or disciplinary action with the state and local medical boards.

The agreement of healthcare business or medical (or chiropractic or other clinical practice) sale will detail many basic issues starting with:

  • Identifying what is being sold
  • Identifying what isn’t being sold
  • The professional and personal obligations of each party to the sale
  • The terms of the sale. This includes the consideration and purchase price. It includes the time for the buyer to obtain financing or the terms of any payments if the seller is giving the buyer time to pay for the medical practice. The agreement of sale should make clear what happens if the buyer can’t get the necessary financing or defaults on any payments.
  • The remedies on default including the right to demand arbitration

The healthcare practice or business buyer and seller in the healthcare M&A transaction also need to review, through their health care lawyers:

  • Drug Enforcement Agency requirements. Normally, the DEA will not allow controlled substances to be sold with the practice. The seller should understand its duties regarding drugs in its possession when the practice is sold. The buyer normally needs to make new arrangements regarding the acquisition of new controlled medications.
  • There should be an understanding as to any open insurance issues to cover medical malpractice claims, worker’s compensation claims, and other claims that may be filed after the sale date.
  • The buyer will normally want the seller to list any liabilities and warrant their status and the status of any likely future claims.
  • Non-compete clauses. Normally, the doctors who buy the medical practice don’t want the selling doctors to compete with them. These agreements should be in writing and clear as to their terms. Many states hesitate to strictly enforce restrictive non-compete agreements. Non-compete clauses should limit the duration of the clause and the geographical where the restrictions apply.
  • Anti-Kickback & Fee-Splitting Issues. As mentioned in a discussion of the sale and purchase of urgent care centers:

“To help mitigate fee-splitting and anti-kickback issues, the MSO should be paid at fair market value (justified, documented). A flat fee should be paid for marketing services – i.e., no fees on a per-patient basis. This is sometimes trickier than it seems. Ventures come up with all sorts of “per ….” formulas, which is attractive financially but risky legally.”

See our prior post:

LEGAL ISSUES BUYING OR SELLING AN URGENT CARE CENTER

When buying, selling, or starting an urgent care center, be sure to handle legal and regulatory pitfalls adroitly.

Sellers normally want to review the buyer’s credit history if the seller is providing the financing or extending the financing of the purchase. This may include a security interest in the practice or in the assets of the buyer. The buyer may want to hold back some of the purchase price to cover any conditions that must be met to complete the sale – such as repairs or transfers of records (with patient consent).

The need to speak with an experienced medical practice purchase and sale lawyer begins well in advance of looking for a buyer. Skilled health care lawyers help prepare the buyer or seller by explaining and reviewing the following key legal issues:

  • The corporate practice of medicine
  • What due diligence is
  • Health care compliance requirements
  • How to determine the value of the medical practice
  • Open contracts
  • Employee and staff relations
  • Patient lists and patient records
  • Agreement of sale and related documents

With proper planning and analysis, sellers can get the right price for their practice, satisfy their legal requirements to their patients, and feel confident that the sale won’t have any after-shocks. Buyers, with the use of skilled lawyers, will be able to focus on their new medical practice while understanding their medical and legal obligations.

To speak with an experienced healthcare M&A lawyer who understands how to negotiate and plan for a sale or purchase of a medical practice or other healthcare business, contact Cohen Healthcare Law Group PC today by calling us or by using our online contact form.

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The post Healthcare M&A: Do’s and Don’ts of Buying or Selling a Medical Practice appeared first on Cohen Healthcare Law Group | Healthcare Lawyers | Life Sciences | FDA & FTC Law.

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TRANSCRIPT

Hello. This is Michael H. Cohen, president and founder of Cohen Health Care Law Group. Our guest today is an expert in healthcare privacy and security, both on the federal side with HIPAA, and the state side, especially dealing with California law. Her name is Joyce L.T. Chang, and she’s an attorney at the Cohen Healthcare Law Group.

HIPAA Policies Drive Medical Risk Management

Joyce LT Chang:        

Policies and Procedures really are the bread and butter of any good starting point, whether you’re in house, you’re an entrepreneur, you really can use Policies and Procedures as an effective tool. It’s kind of nerdy to say that I get excited about it, but that’s really the time where you can memorialize what your company or your client’s vision, what that is, and also outlining what the procedures are for how you’re going to accomplish that. So, it’s a chance for you to put down your organization’s culture, how you’re going to comply with the law, and really, to set the expectations for your company as you’re growing, for how you’re going to handle business.

Michael:         

Can you give us an example of, let’s say, one Policies and Procedures that was particularly complicated that’d you say you had to wrestle with? Or let’s just say something that made a really big difference in terms of health care privacy and security, or something else that you tackled that was really, really, really critical?

Joyce LT Chang:        

For the big difference one, I think the hot item one is how you handle breaches and investigations, and that is something where if you think high risk, that’s where there’s financial risks, reputational risks. So when you’re outlining the policies and procedures for that, it’s a very thoughtful process just from what you do when you have notification that there may be a policy violation. Even the terminology you use, people often say, “Oh, there’s been a breach. There’s been a breach,” but that’s actually really a term of art, and also has legal implications.

So you can start by training your workforce that it’s not necessarily a breach immediately, but a privacy violation that has to be investigated. And as a lot of entities are growing and merging together, having these expectations outlined in your Policy and Procedures are critical. You can have shared services, and people need to know who is doing what, and when that has to be done.

Michael:         

What would be an example of a privacy violation, let’s say that you’re in the hospital or you’re getting treated at the doctor’s office, what would be something that would be a violation as opposed to a security breach that would have to be reported and dealt with?

Joyce LT Chang:        

Yeah, a common one has to do with incidental disclosures, and a good example is, “It’s flu season. The Emergency Department is incredibly crowded, and you have hallway beds stacked with patients.” A patient may have a complaint, “Hey, I was put in a hallway bed and this was a breach of my privacy.” HIPAA and there are other reasonable safeguards allow incidents like this where hospitals are allowed to reasonably accommodate with the resources that they were given.

In that incident rather than having a nurse say, “There’s been a breach. There’s been a breach,” it’s working out, how do we inform our Privacy Office to have a conversation with that patient to see, were there reasonable safeguards that this isn’t something that we have to report to Agent Jess? Having that outlined and really being able to have more risk mitigation factors in place so you don’t have an upset patient who goes directly to the regulatory agencies to report this, what they perceive as a serious breach.

So that’s one example of just by explaining and empowering your staff, or of “Hey, if a patient has X complaint, you can contact the privacy Office and they can help with the investigation and the follow-up, rather than it getting lost somewhere in the shuffle of all the other clinical responsibilities.

Michael:         

So the idea there would be, for example, to have some kind of process where, if a patient feels like there’s some kind of violation, they can actually go somewhere within the organization and get their complaint out, get some kind of satisfaction. It doesn’t necessarily have to be escalated to reporting to a regulator, and the patient doesn’t get aggravated or escalate the complaint themselves, but rather they get good information, and it can be handled internally. Is that the idea?

Joyce LT Chang:        

Absolutely. That is the idea, and it’s something that you can use your Policies and Procedures, not just for when you have patient complaints, but as a really effective training opportunity for your staff members throughout the year. Even if you have the most well-crafted, beautifully written Policies and Procedures, they’re not meaningful if you’re not figuring ways to implement them and to continuously educate your workforce members on those requirements.

So really it’s a partnership where you can get the legal and regulatory requirements outlined, and also figure out in your business practice how can you communicate this effectively to the people who are really on the front lines, who need to understand and live and really showcase what these Policies and Procedures are?  They have to be meaningful.

Michael:

Obviously we don’t want to violate any confidentiality, but like just in general, what would be a good example of something that somebody did that was really stupid or unfortunate? Or there are some very obvious things that people do sometimes that compromise privacy like throwing patient files in the trashcan, and then somebody else picks them up, and they can be read, those kinds of things are out there.

What would be an example of something that you’ve come across that you could talk about that people should … Like don’t do this at home.

Joyce LT Chang:

Yeah, I’ve unfortunately done my fair share of dumpster diving or even at popular coffee shops on hospitals doing this sweep for-

Michael:

Really?

Joyce LT Chang:

Yep. When people think of protected health information they think that it is what you have in your electronic medical records. But you think of just the practical day to day that clinical staff have to do, and that’s patient notes as you’re transitioning, shift changes, paperwork, PHI really is in so many forms and often in the most basic paper documents that those documents fall out of pockets. You find them on the floor.

Clinicians are humans, and there are just so many human errors that can happen even with the most well intentioned people. So dumpster diving is a big thing, pieces of paper that you find around campuses, sending emails to the wrong people. My mom always says, “High tech, high risk” with auto fill and auto completion for emails. It’s easy to send emails to the wrong people within organizations, to the wrong patients, to complete strangers. That is something where with the convenience of technology, it also makes it very easy for people to get into risky privacy situations.

Michael:

What would happen? What would your advice be if somebody, they’re sending information about a patient … The doctor let’s say, says, “Hey Mrs. Smith, I’m so glad that we were able to get you symptom free of your X,” and they start typing in a name, and they send it to somebody else by accident. What should they do at that point?

Joyce LT Chang:

Michael, the problem for that started before that email’s sent, and that’s going to back to your Policies and Procedures questions, basic things that seem so straightforward are really complicated when it comes to healthcare. The question really is, should you really even be emailing patients to begin with? Should there have been other systems and procedures, encryption, other methods, to help with being able to securely recall this information?

But if you get to that point where you have that situation where you’ve emailed the wrong patient, it really is something that is a case by case decision of how to handle that. You can ask for the recipient to permanently delete that email and provide written assurances, but depending on what type of information is in that email, it really becomes a risk assessment of, do we need to report this? And what other mitigation steps do we have to take?

In addition to the federal requirements, you also have state requirements that you have to look at. You often hear of HIPAA as sort of the scary buzzword, but California requirements are even stricter than the federal requirements. So if you find yourself in that situation, call for help. The dangerous part is you don’t know what you’re missing. That’s where people can really get into trouble.

Michael:

It’s where like say, a nurse carries a bunch of folders, and it’s a windy day, and one piece of paper somewhere is whirling around, but they haven’t numbered the pages so they don’t know what it is.

Joyce LT Chang:

Right. Without good procedures you don’t even know what your risk areas are so that’s a scary place to be in.

Michael:

I understand that you worked on these Policies and Procedures for some pretty big institutions, are we talking about a Reader’s Digest version or how dense do these things get?

Joyce LT Chang:

They can get very dense, and very detailed. You think about, there is the legal side of things and also all the clinical requirements that have to be documented in your Policies and Procedures. We’re talking anywhere from tens of thousands of different Policies and Procedures for large hospitals. And even for the smallest clinics, there are so many Policies and Procedures that are required that often people don’t think about until the situation is presented for them, and that’s really when it’s a little too late for that.

An example for that is, if patients want to amend their record, a lot of small doctors’ offices may not have thought about what that process looks like. And just understanding that patients have the right to request amendments, but doctors are obligated to comply with those requests, but patients do have the ability to leave notes in their records with limitations on certain revisions or parts of their record that they don’t believe are accurate.

The request for amending your records, that’s only one small example of just the other aspects. I think a more common one that comes up is emergency contacts. What is your policy for contacting your patient’s emergency contact? If you can’t reach them for an appointment, is that an emergency?

What if they are expressing suicidal tendencies or there’s a serious risk? You don’t want to be in a position where there’s patient safety, but because you haven’t thought out your Policies and Procedures, you don’t know what to do. That’s a tough position for practitioners to be in.

Michael:

Most doctors in a small practice, who do they have to handle all this? Does the Office Manager do it? Do they need to talk to the head of the practice? Does the head of the practice have to have legal counsel? How do they handle this, and even if they have someone they can call, how do they deal with thousands or even tens of thousands of pages? What do these organizations do? I guess that’s a compound question, but, yeah.

Joyce LT Chang:

Yeah. I think the short answer is people do what they think is the best they can do, but often that’s not enough. Large hospitals will have tens of thousands of Policies and Procedures. But for a smaller office to get set up, you can consult with someone initially to get your system set up, and then it’s really just regular maintenance to make sure that you’re on time for things.

A lot of times I’ve seen people just download forms from the internet, and they feel like, “Okay, we have this checklist, we’re good,” but privacy and compliance is much more robust and complicated than that.

I really recommend hiring outside counsel or someone who has the experience to help get those initial documents and training programs set up in place. Because again, clinical expertise, that is what healthcare providers should be doing, and they’re not expected or trained on what the legal requirements are.

So just like you wouldn’t go get surgery from someone selling lemonade, why would you try to invent these documents and understand compliance when you don’t even know where to really begin?

Michael:

Yeah, well they might be very good at slicing lemons, which certainly wouldn’t qualify them to do surgery, not in the modern age.

Joyce LT Chang:

No, and that’s something where, even ask someone who has extensive experience with large hospitals, smaller providers, privacy laws and regulations are constantly changing. That’s part of our challenge is figuring out how the different regulatory landscapes fit in with each other, and even with our background, that’s something we are continuously working on staying on top of.

It’s not expected to be easy, and the consequences are very real. Having been on the other side of investigations where you have the California Department of Public Health and Human Services looking at your practices, if you are under investigation for privacy breach, they are not limited to just that specific incident. You’re really exposing yourselves, your practice, your patients, to a microscope of what regulatory agencies can do.

It’s not something that you should take lightly. There are very serious consequences, and even in the best case scenario, you can be on a corrective action plan for years after their investigation is done.

Michael:

Sounds to me like this is a case of where an ounce of prevention does a lot of good.

Joyce LT Chang:

Absolutely, and it goes so far in just preventing future headaches for years and years.

Michael:

Joyce, thanks so much for giving us a glimpse into some fundamentals of privacy law, and why it’s so important, and why HIPAA sounds like it’s something that you want to deal with better before than after, and better on your own than during some kind of regulatory investigation, if, indeed, a breach occurs.

Just one last question, how often do these things come to light, and how likely is it … What if somebody said, “Gee, I’m a small office, and no one’s going to know, and HIPAA’s expensive, and I just don’t want to deal with it, and it’s not even written in English anyway, and…

Joyce LT Chang:

If you touch any patient information, you need to understand HIPAA, and if you fail to prepare, you can prepare to fail. It’s really that simple. All it takes is for one patient complaint, one random regulatory review, and that can completely cripple your practice, and not just with financial penalties, but with potentially all sort of consequences as well too.

Michael:

On the flip side, what’s the good news about prevention?

Joyce LT Chang:

People who go into healthcare, they want to do right by their patients, and part of that is protecting their patients’ privacy and their legal rights as well too. You want to have clear expectations for everyone involved so you can strive really for the most harmonious relationship and treatment.

Michael:

Wonderful. Thank you very much, Joyce. It’s really been great hearing from you today.

You’ve been listening to the Healthcare Legal Adventures Podcast. This is Michael H. Cohen, president and founder of Cohen Healthcare Law Group. If you’d like to hear more episodes, simply go to cohenhealthcarelaw.com, go to the tab that says blog podcast, and you can download more episodes. Or visit our other website at healthcarelegaladventures.com, where you’ll find online courses, DYI forms, and other resources to help you with your healthcare and legal adventure. We’ll look forward to seeing you on the next episode.

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