1. Cite the reasons for the increase in medical spas and retail medicine clinics.

2. Describe some of the rules pertaining to licensure and proper supervision of physician extenders; medical records and privacy; the treatment of Medicare patients and the use of advance beneficiary notices (ABNs).

3. Explain the regulatory and legal consequences of the improper off-label use of drugs, medications, and medical devices.

4. Describe key considerations when selling a physician practice, or entering physician employment, physician recruitment, medical director, call coverage, joint venture, or gainsharing agreements.

5. Avoid violations of the Stark Law and federal antikickback statute.

Off-label Use of Drugs and Other Legal Traps

Introductory remarks: estimated shortage of 400,000 physicians in United States by year 2014; recent Gallup poll found health care professionals most trusted people in United States; 70,000,000 baby boomers enter Medicare in next 20 yr, with more discretionary income than ever before; predicted they will spend ≤50% on health, wellness, and beauty at medical spas and retail medicine clinics; services offered by medical spas include weight loss, diet and nutritional counseling, antiaging modalities, and laser procedures, eg, hair removal; different from traditional office visit and prescription of medications; patient attitudes— becoming increasingly suspicious of medications; looking for alternative methods of health care; want advice from health care professionals on new modalities; off-label use of drugs or services—no clear set of laws and rules regulating this

Health care professional who can perform services and procedures: physicians should check with their state Licensing Boards or Department of Health about licensing and supervision requirements; speaker offers examples of Florida licensing regulations and supervision requirements for nutritional counseling and laser procedures; know laws and understand how to use them to your advantage; ancillary professionals and providers useful under proper supervision; use physician extenders, but understand what they can and cannot be allowed to do

Legal considerations: licensure and supervision of providers —nurse practitioners (NPs) and physician assistants (PAs) must be individually licensed in state in which they practice; know your state’s supervision requirements; medical records and privacy—keeping careful records essential, especially if using drugs off label (keep record of dosages; speaker recommends keeping manufacturer’s label and attaching it to records); know state medical practice act considerations, eg, fee-splitting issues; professional liability—make sure insurance carrier covers services being offered; in Florida, if clinic not owned by hospital, not wholly owned by physicians, or not nonprofit, medical director required if health care services offered and third party billed (other states have similar statutes; covered by professional liability carriers); Food and Drug Administration (FDA) off-label use and liability considerations—physician planning off-label use of drug or cosmetic procedure must make sure it is covered by insurance carrier; know difference between “FDA-approved” and “FDA-certified”; medical devices must be marketed as “certified”; only drugs or medications can be advertised as “approved”); off-label use permitted by FDA, but physician must research product first (have manufacturer provide product information, but do not let manufacturer tell you how to market it; every state that licenses physicians has marketing regulations); Medicare patients and use of advance beneficiary notices (ABNs)—ABNs used whenever Medicare patient seeking noncovered service; if physician planning to provide service not covered by Medicare, ABN required or patient cannot be charged; use form on Centers for Medicare and Medicaid Services (CMS) Web site; ABN must be completed before patient sits down with physician; form must state what service will be, that it is not covered, and what cost will be; must be signed and agreed to, and combined with assignment of benefits or financial responsibility form; new form required every time patient has noncovered service

Comments: most state medical boards have Web sites where they post their rules and regulations for licensure and supervision; physicians should review these and consult lawyer only if they do not understand rules; be aware of what FDA says about off-label use (FDA has off-label use development and approval process); if drug or medication not approved for off- label use (or if device not certified for off-label use), do not use it for off-label purpose; in Florida, if clinic not properly licensed, it can be fined, and if Agency for Health Care Administration (AHCA) finds violation, and finds physician working for clinic, it will report this to Board of Medicine; physician must do homework to ensure facility properly licensed, and get a written employment agreement (reviewed by legal counsel)

Medical records and privacy: Health Insurance Portability and Accountability Act (HIPAA) complaints have risen every year since 2003, and number one category of complaints is wrongful disclosure or wrongful use of protected health information (PHI); physicians working in area of off-label use often working with clinical research company or with its results; evolving area of liability associated with clinical research; 3 specific types of liability—failure to properly advise and treat patient with respect to clinical research drug, filler, or device; kickbacks, ie, has clinical trial paid physician to refer patient? privacy lawsuits; check state laws on ownership of medical records; sale of medical data— physicians involved in this must understand legal considerations (HIPAA and state laws) regarding patient privacy; courts reading into statutes duty to be regulatorily compliant; if signing medical research or clinical trial agreement, make sure it addresses patient privacy, who is going to use data, and how data to be used (especially if off-label use involved)

Medical malpractice and professional negligence: make sure professional liability insurance policy covers services you will be offering; most insurance companies not familiar with rules governing off-label use, medical spas, health and wellness service, weight-loss clinics, and other nontraditional services; physician must advise insurance company about these issues; when does patient dissatisfaction become professional negligence?—in speaker’s opinion, very few occasions when patients should be compensated; people equate bad outcomes with negligence, but not necessarily true; physicians must advise patients up front (eg, give them information sheets on off-label use of drug); document everything (eg, use of ABN; service performed; any questions patient may have); use physician extenders to speak with patients (access to physicians number one complaint patients have); speaker suggests that patient dissatisfaction becomes professional negligence when it is designated as such by a judge and jury; have policy and staff member for handling patients who demand refund; when issuing a refund, get complete release from patient and discharge him or her in accordance with applicable state laws; which products and services considered health care services?—determined by state medical boards and CMS; speaker counsels physicians to treat anything they do with patient as health care service

FDA and off-label use: must obtain informed consent from patient (beyond ABN if noncovered service for Medicare patient); do not do procedure without signed, written consent form (form must advise patient on what he or she is getting and why, and what potential risks and complications may be); discuss all potential risks with patient and note discussion in medical records; many manufacturers already have consent forms developed (use their materials); learn about product so you can use it safely, and educate patient if getting marketing materials from product manufacturer (have them looked at by counsel to make sure they meet state marketing regulations)

Comments by Dr. Mengel: other area where physician can get into trouble is in performing accepted treatment or test for unaccepted reason; whether using it for on-label or off-label purpose, to make sure everything documented in patient’s chart and procedure followed exactly; if patient uncomfortable with off-label drug or questions, whether he or she should really be using it, physician should respect this (use really up to patient)

Comments by Mr. Lowe: agrees use up to the patient, but physician should not let patient push him or her into off-label use; if physician does not think it in patient’s best interest to use specific modality, device or drug, tell patient, and document that you told him or her in the record; improper off-label use of drugs can lead to regulatory and disciplinary actions (example); make sure you know which version of given drug or medication is approved, and what it is approved for off-label, before using it; with an aging baby boomer population that is more affluent than ever, many Medicare patients will be seeking the types of services offered at or by medical spas; these services will most likely not be covered; however, if patients want to use them, use ABN

Deal or No Deal: If It Looks Too Good

Introductory remarks: heavy consolidation starting to occur in health care market because of shortage of physicians; in last 6 to 12 mo, have seen huge increase in physician-hospital transactions (similar to mid-1990s in volume ,but transactions different); driving factors for hospitals (eg, physicians leaving hospital medical staffs; loss of revenue to outpatient facilities); driving factors for physicians (eg, declining reimbursement rates; rapidly rising overhead; malpractice insurance considerations; bargaining power with third-party payers; desire to lessen administrative burden); percentage marketing arrangements illegal in Florida, and speaker expects other states to make them illegal also

Types of relationships and transactions: purchase of physician practices—if selling practice, be sure you understand what it is worth; first step in making deal is having exit strategy; physician employment agreements—make sure you understand termination provisions; that you can get back patient medical records and lists; that there is no noncompete clause (or if there is, that it is minimal); physician recruitment and retention agreements—hospitals and other healthcare institutions are legally able to recruit physicians to medically underserved areas; federal regulatory considerations (specific requirements to make agreements compliant with Stark Law and federal anti-kickback statute; if physician recruited by existing practice, federal government strongly discourages practice from having non-compete clause apply to recruited physician; in these types of deals, recruiting institution usually subsidizes physician’s income until revenue rises to meet his or her needs; physician must then stay another 2 to 4 yr to get forgiveness of what institution classifies as loan (this can have income tax consequences and should be reviewed by accountant before deal signed); comments—understand any deal up front; read contract first, and outline questions before going to attorney or business consultant; ask attorney or consultant how many deals they have done like yours

Medical director agreements: internists best candidates for medical director positions; read agreement carefully before signing; be careful of percentage-volume compensation; speaker offers scenario where institution offers physician medical director position because it knows he or she is or could be good referral source; if agreement not structured properly, it will violate federal antikickback statute (two-party statute; makes it criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration in exchange for referrals of items or services reimbursable by any federal health care program; violation results in $25,000 minimum fine, minimum of 5 yr in prison, and mandatory exclusion from Medicare and Medicaid); beware medical director agreements where you are referring physician; get everything in writing; verbal contracts in Florida and most states are worthless and can lead to time-consuming and expensive depositions

Call coverage agreements and arrangements: it is legal for hospitals to pay physicians to be on call in certain situations; speaker recommends having written agreement; Office of Inspector General (OIG) has published advisory opinions on how to properly structure these

Joint venture agreements: highly suspect; speaker offers example of hospital with capital approaching doctor who is referring physician for, eg, clinical laboratory tests or diagnostic imaging and proposing joint venture in diagnostic imaging center; look at such deals carefully, possible violation of federal antikickback law

Gainsharing agreements: gaining acceptance; financial arrangement between hospital and physician where hospital gives physician percentage of savings generated by physician’s cost reductions in medical management; at least ≥7 OIG advisory opinions on gainsharing arrangements; these should be carefully reviewed before signed (if not done correctly, could be violation of antikickback statute)

Applicable laws: Florida Patient Self-Referral Act (§456.053, Florida Statutes); federal statutes—Stark Law (42 U.S.C. §1395nn) and Stark II regulations; Federal Anti-Kickback Statute (42 U.S.C. §1320a-7b[b]) and Safe Harbor Regulations (42 C.F.R. §1001.952); laws highly complicated, and physician can be compliant with one and still be in violation of another; Stark law—“per se statute” ie, intent to violate not required; applies only to physicians and to Medicare or Medicaid patients; designed to prevent physicians from referring patients for ancillary service to entity with which he or she has financial relationship; antikickback statute—intent-based statute; now 27 or 28 safe harbor regulations; if physician’s transaction meets the requirements for one of these, he or she is compliant; arrangements that do not meet safe harbor regulations examined by OIG on case-by-case basis; antikickback statute applies to all federally funded healthcare beneficiaries; Florida Patient Self-Referral and Patient Brokering Acts apply to all patient referrals, including workers’ compensation, private insurance, self-pay, and indigent patients (many states have similar statutes)

Comments: federal law applies across all 50 states; federal false claims act and “tainted transaction theory”

Purchase of physician practices: paramount consideration –price paid for practice must be fair market value (and speaker would argue that good will and trust generated by physician adds to that value)