Health Lawyers Weekly:
September 26, 2008 Vol. VI Issue 37
Aetna Adds External Review Of Policy Rescissions
Aetna Inc. announced September 22 that it has added an external review feature to its individual health plans so that members who face policy rescissions can obtain, at no cost to them, an independent third-party review of the decision.
According to a release, medical professionals from Boston-based MCMC LLC will conduct the external review. The decision will be binding on Aetna, the release said.
“This issue has generated much public attention for our industry, and we want to address it head on,” said Aetna Chairman and Chief Executive Officer Ronald A. Williams.
“At Aetna, we believe that the rescission process is a critical part of our efforts to combat fraud and misrepresentation to help keep costs more affordable for our customers. That said, we want to go the extra mile when it comes to the touch decision of rescinding the few polices we must and provide our members with an external review option in addition to our already existing internal review option,” he said.
Read Aetna’s press release.
Attorney-Client Privilege In The Workplace
By Wade Pearson Miller, Esq., Amy Bailey Muckler, CHC, CPC-I, CPC-H-I, CCS-P, Sarah Spry, CHC, CPC, CPC-I, PCS
Healthcare providers and their employees frequently have occasion to work with attorneys and often expect those communications to be covered by the attorney-client privilege. The application of the attorney-client privilege in the workplace can be complicated, leading to confusion as to when communications are privileged.
A recent case involving a New York hospital raised the question of whether an employee’s communications with his or her own individual counsel is protected by the attorney-client privilege when the communication is made using the employer’s computer and email server. This case raises interesting questions about the application of the attorney-client privilege in the hospital setting, particularly given employees’ reliance on email and Internet services to perform their jobs.
Basics of the Attorney-Client Privilege
The attorney-client privilege protects confidential communications that are exchanged between an attorney and client and made for the purpose of seeking or rendering legal advice. It is the client’s privilege to refuse to disclose and to prevent others, including the attorney, from disclosing confidential communications between lawyer and client. It is important to note that the privilege protects communications—not the underlying facts.
In the healthcare provider context, the privilege generally exists when the communications at issue are made by employees of the healthcare provider client to counsel at the direction of superiors in order to obtain legal advice from counsel for the healthcare provider.
The healthcare provider’s attorney-client privilege can protect interviews of employees conducted by the organization’s counsel, attorney’s notes, and summaries of interviews—to the extent these materials quote, contain, or reflect communications to or from employees of the healthcare provider. Importantly, because the privilege belongs to the healthcare provider, it can be waived and communications between the healthcare provider’s counsel and its employees can be disclosed by the organization without the employee’s consent.
Basics of the Work Product Doctrine
The work product privilege is narrower than the attorney-client privilege. The work product privilege provides qualified protection to documents prepared in anticipation of litigation or for trial by or for a party, or by or for a party’s representative. Opinions, conclusions, legal theories, mental impressions, etc. of an attorney or other representative also are protected under the privilege. This privilege is held by both the client and the attorney.
Summary of Scott v. Beth Israel Medical Center, Inc
A physician employed by Beth Israel Medical Center (Beth Israel) in New York sued the hospital for breach of his employment contract. During the discovery process, Beth Israel learned that the physician had been using the hospital’s computer and email server to communicate with his own personal attorney. Beth Israel took the position that such communications were not protected by the attorney-client privilege or work product doctrine. The physician disagreed and demanded return of all email communication made between him and his attorney.
The court in the case found that the test for determining whether a communication between attorney and client is privileged is whether the client communicates with the attorney in confidence for the purpose of obtaining legal advice. Using that test, the New York Supreme Court found that the physician’s email communications on the hospital’s computer were not confidential in nature and therefore the attorney-client privilege did not apply.
In reaching its determination, the court looked to Beth Israel’s email policy. The policy governing Beth Israel’s computer and communication system stated as follows:
- All Medical Center computer systems, telephone systems, voice mail systems, facsimile equipment, electronic mail systems, Internet access systems, related technology systems, and the wired or wireless networks that connect them are the property of the Medical Center and should be used for business purposes only.
- All information and documents created, received, saved or sent on the Medical Center's computer or communications systems are of the Medical Center. Employees have no personal privacy right in any material created, received, saved or sent using Medical Center communication or computer systems. The Medical Center reserves the right to access and disclose such material at any time without prior notice.
The physician argued that privileged communications do not lose their privileged character by being communicated electronically. While the court recognized that communicating electronically alone does not waive the privileged nature of the communication, there may be other reasons that the privilege is lost. The relevant inquiry, regardless of how the communication is made, is whether the communication was made in confidence. Because the court found that Beth Israel had a “no personal use” policy and specifically reserved its right to monitor communications and disclose them without prior notice and that the physician was aware of the policy, the court concluded that the physician did not have a reasonable expectation that the communications would be confidential.
The physician also argued that the emails with his counsel were protected as privileged work product. The court looked at whether the physician and his attorney took adequate steps to protect the information from the physician’s adversary, in this case, the hospital. The physician argued that his attorney took steps to prevent disclosure by including a notice on the email that the emails may be confidential and to notify the attorney if anyone other than the intended recipient received the emails. The court found that the pro forma notice on the emails was not sufficient to prevent waiver of the work product privilege.
Other courts looking at this issue also have placed great weight on the employer’s policy with respect to personal email usage and whether that policy was enforced.
For example, in Kaufman v. Sungard Investment Systems, the court upheld the magistrate judge’s finding that an employee waived the attorney-client privilege because she knowingly utilized her employer’s computer network with the knowledge that her employer’s email policy provided that it could search and monitor email communications at any time. In the case, it was undisputed that the employee agreed to abide by the policy, which specifically stated, “the Company has the right to access and inspect all electronic systems . . . and computer files and electronic mail, even if protected with a password.” Based on the policy and the employee’s knowledge of its provisions, the court found the employee had no reasonable expectation of privacy as to communications with her attorney.
In Curto v. Medical World Communications, Inc., the court considered whether there was enforcement of any computer usage policy and found that lack of enforcement lulled employees into a false sense of security. In this case, the employee sent emails to her attorney using her personal email account that did not go through her employer’s computer servers and attempted to delete the privileged material before returning the company’s laptop. The court found enforcement of the policy was relevant to whether the employee’s conduct was so careless as to suggest that it was not concerned with the protection of the privilege. Because there were few instances of actual monitoring of employee email accounts and because large numbers of employees had personal email accounts at work, the court found that the employee had not waived the attorney-client privilege. In reaching its determination that the attorney-client privilege had not been waived, the court also considered the fact that the employee’s laptop was not connected to the employer’s computer server, the privileged communications were made from the employee’s home on her personal email account, and she attempted to delete the privileged communications prior to returning the laptop.
In another recent case, the defendant employer argued that an employee who communicated with his own lawyer on the employer’s computer waived the attorney-client privilege because its policy specifically reserved the employer’s right to view any email communication at any time and informed employees they had no expectation of privacy in email communication. The court considered whether the employee had actual knowledge of the policy and absent such a showing refused to find a waiver of the privilege.
Given these rulings, questions arise for employers, employees, and attorneys of healthcare providers. The following describes some of these concerns.
Given healthcare providers’ reliance on electronic communications and data transmission and storage, employers are finding it more difficult to promote the efficient and necessary use of technology while policing employees’ use of employer computer systems for inappropriate, personal employee communication. In addition, employers must be constantly concerned with allegations of invasion of privacy and improper grounds for termination.
One of the keys to any organization’s success is to develop clear, defined policies and procedures that govern the day-to-day affairs of the organization. As part of the effort, employers should implement processes to ensure that employees are aware of all policies and that the policies are enforced consistently.
Organizations that choose to monitor computer usage and email should implement explicit policies, in accordance with applicable state and federal law, regarding personal use of company property. For example, the policy should indicate that use of company computers for personal use is strictly prohibited, personal email communications are the property of the organization and are not confidential, and the organization will perform routine monitoring of all computer activity and may disclose any information discovered through the monitoring process. The policy also should define disciplinary action for detected violations. Additionally, organizations should maintain adequate records to support the performance of routine monitoring and consistent application of the policy. Most importantly, the monitoring of email communications in the absence of a clearly defined policy may violate the Electronic Communications Privacy Act, a federal law enacted in 1986.
Many organizations require employees to sign and date an attestation acknowledging that they have received a copy of, are aware of, and will abide by all company policies. Generally, this statement is retained in the personnel file and maintained by the Human Resources department.
Employees should use caution in communicating with their personal attorneys on their employer’s computer system and in light of the case law above, should consider avoiding it altogether. The employee should familiarize himself with his employer’s policy and discuss it with his attorney prior to having privileged communications by email.
If you are unsure if your employer has a policy governing the use of company property and the monitoring of personal communications, you should contact Human Resources, or other appropriate department, for clarification to ensure compliance with organizational policies and to maintain your privacy.
It is commonplace in today’s Internet age for lawyers to communicate with their clients via email. The American Bar Association (ABA) has addressed the issue of electronic communication in light of Model Rule 1.6, which imposes on a lawyer a duty to take reasonable steps in the circumstances to protect confidential client information against unauthorized use or disclosure. The ABA concluded that lawyers have a reasonable expectation of privacy in communications made by all forms of email, including unencrypted email. However, in deciding whether to communicate with a client via his or her company email, the attorney should consider the sensitivity of the communication, the costs of its disclosure, and the relative security of the contemplated mode of communication. Ultimately, the lawyer must follow the client’s directive regarding the means of communication.
In Scott v. Beth Israel, the court found the standard pro forma notice that we see on almost all email communications from attorneys was not alone sufficient to protect communications from disclosure. So what else can the lawyer do? If there is a concern about preserving confidentiality, the attorney may consider taking additional security measures such as encrypting emails and making them password protected—as hospitals often do when emailing confidential patient identifying information. If the attorney has serious concerns about protecting confidentiality of communication, the attorney may simply avoid communicating substantively by email.
Things to Consider
The same considerations that apply to email also apply to use of an employer’s telephone system, voicemail, and facsimiles. Indeed, given that many business voicemails and facsimiles are transmitted through the computer network, the same concerns about confidentiality apply and an employer’s policies should address those electronic media as well.
While the facts and circumstances of each case will be different, attorneys and clients should be mindful of policies and procedures governing use of employer property and take adequate steps to ensure confidentiality of any privileged information is preserved.
Wade Pearson Miller is an attorney with Alston & Bird LLP. She concentrates her practice in healthcare litigation, internal investigations, and corporate compliance. Ms. Miller has handled matters in a wide variety of areas, including Medicare and Medicaid and the False Claims Act.
Mrs. Bailey Muckler, CHC, CPC, CPC-H, CCS-P, PCS, FCS is the Healthcare Consulting Manager with Hopper Cornell, P.L.L.C. Amy is Certified in Healthcare Compliance and is an Approved Instructor for the American Academy of Professional Coders and currently sits on the Board of Governors for the American College of Medical Coding Specialists. Amy has over thirteen years of healthcare experience and specializes in audit, compliance, and litigation support services. Amy has been selected as a speaker for groups including the American Academy of Professional Coders, Healthcare Compliance Association, Idaho Medical Group Management Association, and the Idaho Association of Home Care.
Mrs. Spry, CHC, CPC, PCS is a Senior Healthcare Consultant with Hooper Cornell, P.L.L.C. Sarah is Certified in Healthcare Compliance and is an Approved Instructor for the American Academy of Professional Coders and is the Idaho State Chairperson for the American College of Medical Coding Specialists. Sarah has over 10 years of healthcare experience and specializes in coding, documentation, and compliance reviews and customized education and training. Sarah has been selected as a speaker for groups including the American Academy of Professional Coders, Healthcare Compliance Association, Idaho Medical Group Management Association, and the Idaho Association of Home Care.
 Upjohn Co. v. United States, 449 U.S. 383 (1981).
 See Fed. R. Civ. P. 26(b)(3).
 847 N.Y.S.2d 436 (N.Y. Sup. Ct. 2007).
 Scott, 847 N.Y.S.2d at 439.
 No. 05-cv-1236, 2006 WL 1307882 (D.N.J. May 10, 2006).
 No. 03CV6327, 2006 WL 1318387 (E.D.N.Y. May 15, 2006).
 Mason v. ILS Technologies, LLC, NO. 3:04-CV-139, 2008 WL 731557 (W.D.N.C, Feb. 29, 2008).
 ABA Comm. on Ethics and Prof’l Responsibility, Formal Op. 99-413 (1999).
CMS Finalizes Contracting Requirements for Medicaid Integrity Program
The Centers for Medicare and Medicaid Services (CMS) issued September 26 in the Federal Register (73 Fed. Reg. 55765) a final rule establishing the eligibility and contract requirements for entities performing audits and reviews under the Medicaid Integrity Program (Program).
The Deficit Reduction Act of 2005 established the Program to combat Medicaid fraud and abuse with the aim of identifying and recovering Medicaid overpayments.
While states work individually to ensure the integrity of Medicaid, the Program is CMS’ first national strategy to detect and prevent Medicaid fraud and abuse, according to the final rule.
Under the Program, CMS will enter into contracts with eligible entities to review individuals and entities providing Medicaid services, audit claims, and identify overpayments.
The requirements detailed in the final rule include procedures for identifying, evaluating, and resolving organizational conflicts of interest that are generally applicable to federal acquisition and procurement; competitive procedures to be used; and procedures for contract renewal.
The final rule is effective October 27, 2008.
View the final rule.
CMS Finalizes Rule On Terminating Non-Random Payment Review
The Centers for Medicare and Medicaid Services (CMS) published in the September 26 Federal Register (73 Fed. Reg. 55753) a final rule that implements requirements for terminating a provider or supplier from non-random payment review as required under the Medicare Prescription Drug, Improvement and Modernization Act of 2003.
Under the final rule, unless an exception applies, CMS will terminate a provider or supplier from non-random prepayment complex medical review no later than one year from the initiation of the review or when the provider’s or supplier’s error rate decreases by 70% from the initial error rate.
CMS stated in its October 7 proposed rule (70 Fed. Reg. 58649) that it believes an error rate reduction of 70% from the error rate calculated during probe review--the "initial error rate"--would sufficiently protect the financial integrity of the Medicare program and allow the provider or supplier a realistic opportunity to be terminated from non- random prepayment complex medical review.
In addition, the final rule notes that providers and suppliers "may also be removed at any time at the discretion of the contractor."
The rule is effective January 1, 2009.
Read the rule.
CMS Has Paid Billions Of DME Claims With Questionable Diagnoses That Are Unrelated To Purchased Equipment, Senate Staff Report Finds
The Centers for Medicare and Medicaid Services (CMS) should take steps such as incorporating system edits that would deny questionable Medicare durable medical equipment (DME) claims or flag them for medical review or follow-up in order to reduce fraud, waste, abuse, and improper payments, according to a minority staff report released September 24 by the Senate Committee on Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations.
The Subcommittee’s investigation into questionable DME claims found the laws governing the use of diagnosis codes on most DME claims have been inconsistent from 1991 through 2003, including certain rules that appear contradictory.
In addition, according to the report, CMS and its claims review contractors are not effectively utilizing the codes.
The report identified several instances in which examining the diagnosis codes on DME claims “could be a valuable tool to uncover fraudulent or abusive claims.”
The Subcommittee’s analysis of blood glucose test strips and 17 other DME items found millions of claims that contained questionable diagnosis codes totaling more than $1 billion.
For instance, “the Subcommittee uncovered numerous claims in which the diagnosis code section contained a valid ICD-9-CM code, but the diagnosis appeared highly questionable and unrelated to the purchased medical equipment,” the report said.
One example cited in the report was the Subcommittee's review of claims paid by Medicare for blood glucose test strips, which are used by diabetics to test their blood-sugar levels.
The Subcommittee found many of these claims contained questionable diagnoses that appeared wholly unrelated to diabetes—some of the stated diagnoses were chronic airway obstruction, bubonic plague, leprosy, typhoid, or cholera.
The report recommended that CMS strengthen its contractor oversight and its claims review process by more effectively utilizing diagnosis codes submitted on claims.
In addition, the minority staff recommended that CMS consider developing procedures to link diagnosis codes with medical procedures.
CMS also should consider incorporating an edit into the claims processing system that would check a claim for a DME item against a claim for a doctor visit that would have resulted in an order or prescription for the item, the report suggested.
View the report.
CMS Urges Beneficiaries To Review Prescription Drug Plan Options
With marketing set to begin in October for 2009 plans under Part D, the Centers for Medicare and Medicaid Services (CMS) announced this week that roughly 97% of beneficiaries enrolled in a stand-alone prescription drug plan (PDP) would have access to Medicare drug and health plans whose premiums would be the same or less than their coverage in 2008.
At the same time, CMS encouraged beneficiaries to review changes to their existing plans, as some may see “significant premium increases or changes, such as reduced coverage in the gap,” and determine whether other options may better suit their needs.
CMS said the monthly premium for the basic Medicare drug benefit in 2009 is projected to average roughly $28.
According to CMS, in every state except Alaska beneficiaries will have access to at least one prescription drug plan with monthly premiums of less than $20. Those beneficiaries living in Alaska will have access to one prescription drug plan at $23 per month, CMS said.
CMS also said 93% of beneficiaries will have access to a Medicare Advantage plan that offers prescription drug coverage with a zero premium and deductible.
View the list of national stand-alone PDPs and state specific fact sheets.
Congress Clears Bill Reauthorizing Health Centers Program
The House and Senate passed this week legislation (H.R. 1343) reauthorizing three healthcare safety net programs—the Community Health Centers Program, the National Health Service Corps, and the Rural Health Care Programs.
The Community Health Centers Program helps provide care to over 17 million patients in 6,300 sites nationwide each year. The National Health Service Corps places doctors, dentists, nurse practitioners, and other health professionals in rural and underserved areas, while the Rural Health Care Programs fund collaborative models to deliver basic healthcare to Americans living in rural areas.
The Senate passed the measure September 24 with an amendment by unanimous consent. The House approved the changes September 25 by voice vote.
The bill authorizes appropriations for health centers for fiscal years 2008 through 2012.
Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA) lauded the passage of the bill, saying it would protect rural clinics from the risk of closing.
According to a Committee press release, Baucus and Grassley won inclusion in the measure of a provision that would change the timeframe for the Centers for Medicare and Medicaid Services (CMS) to certify rural health clinics from every three years to every four years.
The change, the release said, brings the timing in line with that used by the Health Resources and Services Administration in determining what areas of the country need safety-net rural health clinics.
Without the change, the lawmakers said, rural clinics could lose their certification and risk closing simply because of uncoordinated timing.
Baucus and Grassley said they were prompted to push for the change after CMS issued a rule in June that would add new requirements for rural health clinic recertification.
Read the Committee’s press release.
Connecticut Supreme Court Upholds Finding That Oxygen Vendor Committed Medicaid Fraud
The Connecticut Supreme Court found September 23 “overwhelming evidence” that a company providing oxygen therapy services and supplies and its owner committed Medicaid fraud.
The high court affirmed a trial court ruling dismissing the administrative appeal of plaintiffs Goldstar Medical Services, Inc. (Goldstar), and its owner and president Donald F. Bouchard after they were suspended from the state’s Medicaid program for five years.
Goldstar provided oxygen therapy services to nursing home residents under a Medicaid provider agreement with the Connecticut Department of Social Services (Department) from January 1992 through October 1999.
The Department conducted an audit of Goldstar in July 1997 that examined a sample of 93 paid claims. The audit report revealed numerous problems—e.g., improper coding, lack of required physician certifications, bills for non-covered oxygen use, altered documentation, and billing Medicare and Medicaid for the same service.
The report ultimately concluded Goldstar had received excess and unauthorized payments totaling $261,303, which was offset against outstanding payments owed to Goldstar for a net audit overpayment of $178,053.
The Department revoked Goldstar’s Medicaid provider number and, following a hearing, concluded plaintiffs had engaged in fraud and abuse in violation of federal and state Medicaid laws.
Specifically, the Department found plaintiffs had made false statements to obtain payment for services provided to Medicaid recipients and had failed to adhere to program requirements. The Department barred both plaintiffs from the Medicaid program for five years.
Plaintiffs sought judicial review of the Department’s decision, but the trial court dismissed their appeal. The Connecticut Supreme Court affirmed the trial court’s decision.
The high court rejected as “illogical and absurd” plaintiffs’ contention that the Department lacked jurisdiction to sanction them because they were no longer “providers” under the state’s Medicaid law.
The high court said it would “def[y] logic” and thwart the state Medicaid statute’s legislative purpose to allow a provider to escape “strong statutory sanctions and provisions” simply by terminating their provider agreement.
The high court also rejected plaintiffs’ argument that the Department lacked jurisdiction to suspend Bouchard because he signed the provider agreement on behalf of Goldstar.
“If the plaintiffs’ interpretation . . . were to prevail, an individual in Bouchard’s position would be free to defraud federal and state health care programs in perpetuity by simply forming new corporations with different provider numbers,” the high court observed.
In addition, the high court saw no problem with the Department relying on extrapolation of a sample of paid claims to determine the total amount of excess reimbursement, noting such an approach had been endorsed by numerous cases and sanctioned in federal regulations.
The high court also disagreed with plaintiffs that the Department improperly applied the preponderance of the evidence standard, rather than the clear and convincing evidence standard, to prove its fraud claim.
While the clear and convincing standard of proof should be applied to cases involving common law fraud, the preponderance of evidence standard is appropriate for cases involving Medicaid fraud at the administrative level, the high court concluded.
Finally, the high court agreed that substantial evidence existed in the record to support the Department’s decision that plaintiffs committed Medicaid fraud.
Goldstar Medical Servs., Inc. v. Department of Social Servs., No SC 18111 (Conn. Sept. 23, 3008).
Eli Lilly, Merck Announce Planned Online Registry Of Payments To Physicians
Eli Lilly and Company will become the first pharmaceutical research company to disclose its payments to physicians in an online registry, Eli Lilly president and chief executive officer, John Lechleiter, Ph.D., said September 24.
In a speech before the Economic Club of Indiana, Lechleiter said the company plans to launch the registry in 2009.
"With each of our industry firsts, from launching our clinical trials registry to the public reporting of educational grants, Lilly is striving to be a leader in improving transparency across our industry," Lechleiter said in a press release. "As Lilly continues to look for more ways to be open and transparent about our business, we've learned that letting people see for themselves what we're doing is the best way to build trust."
Eli Lilly also was the first pharmaceutical manufacturer to endorse federal legislation, known as the Physician Payments Sunshine Act, which was introduced last year and is currently pending in Congress. The legislation would establish a national registry of payments to physicians by medical device, medical supply, and pharmaceutical companies.
"Though we remain hopeful that the Sunshine Act will be passed by Congress at some point, Lilly is taking action independently," Lechleiter added.
Under Lilly's plan, the public will have access to an Internet database listing its payments to physicians, including 2009 payments to physicians who serve the company as speakers and advisors.
By 2011, Lilly plans to expand the reporting capabilities of the registry to resemble the Sunshine Act legislation, the release said.
On September 25 Merck and Co., Inc. announced that it will also publish its grants to patient organizations, medical professional societies, and other organizations on its website in order to enhance transparency.
According to a company press release, Merck will make available grants made by its Global Human Health division to U.S. organizations for independent professional education initiatives, including accredited continuing medical education (CME).
The company also said that it is "committed to begin disclosure in 2009 of payments to physicians who speak on behalf of our company or our products."
Read Eli Lilly's press release.
Read Merck's press release.
Employer-Sponsored Health Plan Premiums Increased 5% In 2008, Employees Paying Higher Deductibles, Survey Says
Premiums for employer-sponsored health insurance for family coverage increased an average of 5% in 2008 to $12,680 and an increasing number of employees are paying significantly higher deductibles, according to a survey released September 24 by the Henry J. Kaiser Family Foundation (KFF) and the Health Research & Educational Trust (HRET).
Key findings from the survey also were published in the online journal Health Affairs.
The 2008 Kaiser/HRET Employer Health Benefits Survey, an annual survey, was conducted between January and May of 2008 and included 2,832 randomly selected, non-federal public and private firms with three or more employees, according to KFF’s press release announcing the survey results.
The survey found that, although the 5% premium increase in 2008 was relatively modest, premiums have more than doubled since 1999 when premiums for family coverage totaled $5,791 (of which workers paid $1,543), according to the release. By contrast, of the $12,680 average premium for family coverage in 2008, workers paid an average of $3,354.
A growing number of workers in 2008 also faced higher deductibles in their plans, according to survey results, with18% of all covered workers having a deductible of $1,000 or more in 2008, up from 12% in 2007. This increase was partly driven by the growth in consumer-directed plans “such as those that qualify for a tax-preferred Health Savings Account (HSA),” the release said.
Survey results also indicated that the increase in deductibles has been most dramatic for workers in small businesses (three to 199 worker), where more than 35% of covered workers in 2008 (as compared to 21% in 2007) had a deductible of $1,000 or more.
“With rising deductibles, more and more people face a substantial amount out of pocket for their health care before their insurance fully kicks in,” commented Kaiser President and CEO Drew Altman, Ph.D. “Health insurance is steadily becoming less comprehensive, and it’s no wonder that in today’s tough economic climate many families count healthcare costs as one of their top pocketbook issues.”
The survey results were consistent with results of previous annual surveys in finding that smaller employers (62%-49% depending on size) are much less likely than larger ones (virtually all) to offer health insurance to their workers.
The survey also found that, among all small firms (three to 199 workers) not offering health benefits, nearly half (48%) indicated that the most important reason for making this decision was “high premiums,” the release said.
Read KFF’s press release.
Florida Appeals Court Reverses Denial Of Nursing Home’s Motion To Compel Arbitration Of Personal Representative’s Claims
A deceased nursing home resident’s personal representative (PR) under a durable power of attorney (POA) had the authority to enter into an arbitration agreement with the nursing home, even though the POA did not specifically grant the PR the power to consent to arbitration, a Florida appeals court ruled September 12.
The Florida District Court of Appeal, Second District, therefore reversed a state trial court’s decision denying the nursing home’s motion to compel arbitration of the PR’s claims brought on behalf of the deceased nursing home resident pursuant to state laws protecting residents' rights.
The nursing home resident in the case, Ethelwin A. Crisson, executed in December 1997 a POA designating Deborah A. Moots as her PR.
Approximately 17 months later, Moots executed a care agreement with the nursing home in her capacity as attorney-in-fact for Crisson. The agreement contained an arbitration clause.
After Crisson died, Moots filed a lawsuit on behalf of Crisson against the nursing home, its owners Jaylene, Inc., and other individuals (collectively, defendants), alleging violations of state nursing home residents’ rights statutes in the care of Crisson.
Defendants moved to compel arbitration pursuant to the arbitration clause in the agreement signed by Moots.
Although finding the arbitration clause valid, the state trial court denied defendants’ motion based on its conclusion that the POA did not authorize Moots to agree to arbitration.
Reversing, the appeals court said that its review of the POA persuaded it that Moots, as the attorney-in-fact, had the requisite authority to consent to arbitration of claims.
The appeals court first noted that, although the POA did not contain any provisions specifically granting the attorney-in-fact the power to consent to arbitration or to waive Crisson’s right to a jury trial, it did contain an “extremely broad and unambiguous” provision granting authority to the attorney-in-fact.
In addition to the extensive grant of power authorized in this provision, the POA also included a comprehensive list of specific powers granted by the principal to the attorney-in-fact, including the power to “[t]ake any and all legal steps necessary to collect any amount or debt owed to [Crisson], or to settle any claims, whether made against Crisson or asserted on Crisson’s behalf against any other person or entity,” the appeals court said.
The POA also gave Moots the power to enter into binding contracts on Crisson’s behalf, the appeals court noted. Moreover, the POA included a provision indicating that the listing of specific powers was not intended to be exhaustive.
“The POA unequivocally expresses the principal’s intent to make a comprehensive grant of authority to the attorney-in-fact,” the appeals court said, adding that this grant of authority was “virtually all-inclusive.”
The appeals court also pointed out that two of the powers specifically mentioned in the POA supported the conclusion that the POA provided authorization for Moots to consent to arbitration, specifically the provisions authorizing the attorney-in-fact to enter into binding contracts and to settle claims held by the principal.
“Not unlike agreeing to arbitrate, settling a claim typically involves foregoing the remedy of submitting a claim to a court for final adjudication,” the appeals court noted.
Finally, the appeals found that state statutes, Fla. Stat. §709.08(6) and (7)(a), supported the determination that the POA encompassed the authority to agree to arbitration.
“Neither the POA nor the statute limits the attorney-in-fact from agreeing to submit claims to arbitration,” the appeals court said. “The parties have not cited to us (and independent research has not disclosed) authority for the proposition that an attorney-in-fact cannot agree in advance to arbitration on behalf of the principal.”
Jaylene, Inc. v. Moots, No. 2D08-707 (Fla. Dist. Ct. App. Sept. 12, 2008).
House, Senate Clear Mental Health Parity Legislation
The House and Senate cleared legislation this week that requires insurance companies and employers offering mental health coverage to provide it on par with the coverage offered for other physical illnesses.
The Senate approved September 23 the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Parity Act of 2008 as part of a broad energy and tax extenders package (H.R. 6049) by a vote of 93-2. The House on the same day passed the measure as a free-standing bill (H.R. 6983) by a vote of 376-47.
The legislation, which amends the Employee Retirement Income Security Act and Public Health Service Act, prohibits discrimination in the provision of treatment for mental health and substance abuse disorders when compared to coverage for treatment of medical and surgical disorders.
The bill applies to businesses with 50 or more employees that offer mental health coverage and requires parity to other medical benefits on a financial basis (e.g., deductibles, copayments, coinsurance, and out-of-pocket expenses) and with respect to treatment limitations.
The bill has an estimated price tag of $3.9 billion over 10 years, according to a statement posted by the Senate Finance Committee.
The legislation does not mandate that insurance companies provide mental health coverage, but if they do, it must be on equal footing with medical and surgical benefits.
“We are on the cusp of enacting legislation that is critically important to those with mental illness and their families,” said Senator Pete Domenici (R-NM), one of the bill’s primary architects. “We have a finite amount of time to get this through Congress and we are anxious to see it get done.”
Both the Senate and House previously had passed versions of the measure but only recently hammered out a compromise on the substance of the legislation. The question of how to pay for the legislation, however, remains open and will need to be reconciled before the measure can become law.
In a Statement of Administration Policy, the White House said it supported the mental health parity legislation included in the Senate’s amendments to the tax extenders bill, noting H.R. 6049 “eliminates disparities between mental health benefits and medical and surgical benefits without significantly increasing health coverage costs.”
House Approves Bill To Curb Rogue Online Pharmacies
The House approved September 24 by voice vote a bill (H.R. 6353) aimed at stopping pharmacies that operate on the Internet from selling controlled substances to consumers without a valid prescription.
“Hundreds of Internet sites are selling, or offering to sell, controlled substances to almost anybody without a prescription and little action has been taken to address the problem,” said Representative Bart Stupak (D-MI), who introduced the bipartisan legislation along with Representatives Lamar Smith (R-TX) and Mary Bono Mack (R-CA).
“Our legislation will counter this growing trend and ensure all controlled substances purchased on the Internet are legitimate,” Stupak added.
According to a press release Stupak posted, the Government Accountability Office in a 2004 study was able to obtain a number of prescription drugs, including addictive narcotic painkillers, over the Internet based on a medical questionnaire or without any prescription requirement at all.
The Ryan Haight Online Pharmacy Consumer Protect Act of 2008, named for the 18-year-old who died after an overdose of painkillers he obtained online, would amend the Controlled Substances Act and bar the sale of all controlled substances via the Internet without a valid prescription.
The measure also would, among other things, require online pharmacists to post identifying information about their business, increase penalties for all illegal distributions of controlled substances classified as Schedule III, IV, or V substances, and create a new federal cause of action that would allow a state attorney general to shut down a rogue site selling controlled substances in any state.
H.R. 6353 is a companion measure to legislation introduced in the Senate by Diane Feinstein (D-CA). Because of changes made to the legislation during a House Energy and Commerce Committee hearing last week, the bill must now go back to the Senate for final approval, Stupak’s press release said.
Read Stupak’s press release.
Individual And Small Group Health Insurance In Need Of Substantial Reform, House Subcommittee Told
Many small employers and those who purchase health insurance on their own are experiencing significant problems as they try to obtain coverage, and major changes will be necessary to ensure affordable and comprehensive coverage for all Americans, the Commonwealth Fund’s President, Karen Davis, Ph.D., told the House Ways and Means Health Subcommittee at a September 23 hearing.
“The individual health insurance market is the 'weakest link' in the U.S. health insurance system,” Davis said. Individual health plans “are characterized by high administrative costs and poor benefits, and in most states, they exclude poor health risks.”
Davis also said that, because health expenditures are “highly skewed” in the individual insurance market with 10% of people accounting for 64% of healthcare outlays, “health insurers have a strong incentive to avoid covering those with health problems, to charge much higher premiums, or to provide policies with very restrictive benefits.”
Drawing from the Commonwealth Fund’s most recent Biennial Health Insurance Survey, Davis noted that, of 58 million adults under age 65 who sought coverage in the individual insurance market over a three-year period, nine of ten respondents did not purchase coverage either because they were rejected, they were unable to find a plan that met their needs, or they found the coverage too expensive.
Davis also explained that, in all but a few states that require insurers to have open enrollment and community-rated premiums, insurers typically screen applicants for health risks and exclude high-risk individuals from coverage or charge higher premiums.
In addition, “[c]overage for employees of small firms is eroding—both in terms of proportion of firms offering any health benefits and the quality of those benefits,” Davis said.
“While 99 percent of firms with 200 or more employees continue to offer health insurance coverage, the corresponding rate for the smallest firms (those with fewer than 10 employees) is, at 45 percent . . . down from 57% in 2000,” Davis noted.
Moreover, three of five workers who are uninsured are self-employed or working for a firm with fewer than 100 employees, according to Davis.
Davis explained that small businesses face disadvantages in obtaining health insurance for their employees because “they do not enjoy the economies of coverage of large groups with natural pooling of risks.”
As a result, employees of small businesses receive fewer benefits and often face higher premiums, according to Davis. Small employers often pass the higher premiums onto their employees.
In addition, “deductibles have risen particularly sharply in small firms (three to 199 employees)—with the mean deductible for single coverage rising from $210 in 2000 to $667 in 2007,” Davis noted. “By contrast, for larger firms, deductibles increased from $157 to $382 over this period.”
Another witness at the hearing, Bruce Bodakem, Chairman and Chief Executive Officer of Blue Shield of California, echoed Davis’ description of problematic small-group and individuals health insurance markets.
“Since employers are not required to offer coverage and employees are not required to buy it, those who need it most [the older and sicker employees] are disproportionately represented in the small group insurance pool,” Bodakem said. “As a result premiums are much higher than in the large group market.”
“Unbalanced risk is an even bigger concern for the individual market,” Bodakem added. “Since there is no mandate to purchase insurance, which would guarantee a broad risk pool, California and more than 40 other states allow insurers to deny coverage or impose limits on the coverage offered to people with pre-existing health conditions.”
Davis and Bodakem offered similar suggestions for reform, and both referred to Massachusetts as a model for some proposed changes.
More specifically, Davis said that subsidies should be provided to low-income and moderate-income families to assist them in paying for premiums.
While Davis said the goal should be to strengthen and not weaken employer-sponsored coverage, she also suggested offering a public plan modeled on Medicare to small businesses and individuals “to lower premiums by 30% and increase the stability of insurance coverage.”
Davis also suggested setting up national rules for the operation of individual insurance markets, and/or creating a national insurance connector modeled after the one implemented in Massachusetts that “makes affordable health insurance policies available to those without access to employer coverage.”
Bodakem discussed a reform plan similar to that enacted in Massachusetts, stating that the plan is based on “universal coverage, universal responsibility” and would include a “pay or play” mandate for employers, subsidies for low-income purchasers, regional purchasing pools, and regulations requiring insurers to accept applicants regardless of health status.
Other speakers at the hearing included Mila Kofman, Maine’s Superintendent of Insurance, and Roger Feldman, Blue Cross Professor of Health Insurance at the University of Minnesota.
View more information about the hearing.
Joint Commission Issues Sentinel Alert On Blood Thinners
The Joint Commission issued September 24 a new Sentinel Event Alert aimed at preventing medication errors associated with commonly used blood thinners known as anticoagulants.
“Patients being treated with these medications must be closely monitored and screened for drug and food interactions, given that commonly used anticoagulants such as heparin and warfarin have narrow therapeutic ranges and a high potential for complications,” a Joint Commission press release said.
The alert highlights factors that contribute to anticoagulant medication errors, including lack of standardized labeling and packaging, failure to document and communicate patient instructions during hand-offs, and inappropriate dosing for pediatric patients.
The alert recommends 15 specific steps to prevent medication errors, such as assessing the risks of using anticoagulants and establishing standard dose limits and requiring a physician to confirm exceptions.
The Joint Commission said anticoagulant medication errors are such a serious patient safety issue that they are addressed in the accreditation organization’s 2008 National Patient Safety Goals.
View the alert.
Massachusetts Appeals Court Holds Physician Entitled To New Trial On Medicaid Fraud Convictions
A physician convicted of two counts of Medicaid fraud was entitled to a new trial based on evidence that Medicaid was never billed for the suspect services, a Massachusetts appeals court held September 17.
Board-certified psychiatrist Kennard C. Kobrin was indicted on 82 counts related to Medicaid fraud and the illegal prescribing of controlled substances to patients in his Massachusetts practice.
The state’s case against Kobrin alleged he leased space in his office to psychologists at high rental amounts and in exchange referred patients to them for medically unnecessary psychological testing.
The state also alleged Kobrin would prescribe his patients, many of whom had psychological and substance abuse problems, addictive drugs known as benzodiazepines, for which Medicaid would often pay, at low doses and in small quantities to keep patients coming back regularly.
A jury eventually acquitted Kobrin on all but three counts: one count of illegally prescribing a Class C controlled substance (the benzodiazepine known as Klonopin) to a long-standing patient and two counts of Medicaid fraud for ordering unnecessary psychological testing of two patients.
Kobrin appealed. The trial judge granted a new trial on the Medicaid convictions, citing new evidence that no actual claims to Medicaid had been submitted for the services in question. The judge refused, however, to order a new trial on the illegal prescribing conviction.
The Massachusetts Appeals Court reversed as to the illegal prescribing conviction, finding the evidence insufficient to sustain Kobrin’s conviction.
Under the Massachusetts Controlled Substances Act, criminal liability for illegal prescribing requires a showing that the physician did not intend to achieve a legitimate medical objective, not merely that he failed to comply with accepted medical practice, which instead is a component of medical malpractice.
The appeals court examined Kobrin’s treatment of the patient at issue, who suffered from significant mental illness, and found while Kobrin’s prescribing of benzodiazepine may have been negligent, it was not criminal.
“The ‘crucial intent elements,’ . . . that must be established beyond a reasonable doubt cannot be collapsed into and proven simply by evidence of profitable and bad medical decision-making. Having even a keen profit motive does itself denude a physician of the intention to treat medically a patient’s condition, even if the physician does so negligently,” the appeals court said.
Next, the appeals court concluded that the trial court properly ordered a new trial on the Medicaid fraud convictions, citing post-trial evidence that no actual bills were submitted to Medicaid for the suspect psychological testing services.
Specifically, the appeals court noted evidence that the patients who received the allegedly unnecessary psychological tests had both Medicare and Medicaid and that Medicare, rather than Medicaid, was billed for the services.
The appeals court rejected the state’s contention that it need not prove the claims were actually submitted to Medicaid to support a Medicaid fraud conviction under state law.
The state argued that it sought Kobrin’s conviction not as one who submitted bills for services to Medicaid, but as one who signed referral forms to the psychologists containing false statements that were used “in determining rights to such benefit or payment[.]”
But the appeals court was unwilling to make the distinction urged by the state, saying the only way false statements would be used in determining rights to benefits or payments was if they were submitted in connection with a requested reimbursement.
The statutory purpose, the appeals court said, is to deter and punish fraud that “brings about the unwarranted disbursement of limited Medicaid resources.”
Massachusetts v. Kobrin, No. 04-P-1678 (Mass. App. Ct. Sept. 17, 2008).
Medicare Fraud Strike Force Arrests 18 In Medicare Fraud Scheme, DOJ Announced
Federal and state Medicare Fraud Strike Force agents arrested and charged 18 durable medical equipment (DME) company owners, medical professionals, and medical clinic owners who are alleged to have engaged in various schemes to defraud Medicare of more than $33 million, the Department of Justice (DOJ) announced September 18.
DOJ, along with U.S. Attorney for the Central District of California Thomas P. O’Brien, said that the eight indictments outline various types of fraud including schemes involving the fraudulent ordering of power wheelchairs, orthotics, hospital beds, enteral nutrition, and feeding supplies.
"Strike Force operations are a new weapon in federal law enforcement’s arsenal to protect American taxpayers from Medicare fraud," O’Brien said in a press release. "With real-time access to Medicare claims data, law enforcement in Los Angeles is developing better tools to enhance our abilities to combat fraud in our community."
View DOJ’s press release for more information.
Medicare Less Generous On Average Than Employer Plans
The benefit value of Medicare in 2007 was lower than the value of either the typical large employer preferred provider organization (PPO) or the standard PPO option offered to federal employees, according to an issue brief released by the Henry J. Kaiser Family Foundation.
The issue brief is based on a study by Hewitt Associates that compared the actuarial value of benefits under the original fee-for-service Medicare program to two prototype large employer plans—the standard nationwide PPO option available through the Federal Employees Health Benefits Program (FEHBP) and a typical employer PPO.
In 2007, the average benefit value of Medicare ($10,610) lagged behind the benefit value of both the typical large employer PPO ($12,160) and the FEHBP standard option ($11,780), the issue brief reported.
“Medicare is less generous, on average, than the comparison employer plans because it has higher cost-sharing . . . for inpatient care under Part A . . ., no out-of-pocket limit on services provided under Part B, and less generous drug coverage under the standard Part D benefit,” the issue brief said.
The issue brief also noted that most employer plans provide some dental coverage, which Medicare generally does not cover.
In addition, Medicare pays a smaller share (74%) of total costs associated with covered benefits than the typical large employer PPO (85%) and the FEHBP standard option (83%).
Thus, the average Medicare beneficiary pays a larger portion of total costs (26%) than the average individual covered under the typical large employer PPO (15%) or the FEHBP standard option (17%), the issue brief noted.
The study found a similar picture with respect to prescription drug costs, with the standard Medicare Part D benefit covering 51% of drug costs on average, while the typical employer plan and the standard option FEHBP plan paying a substantially larger share of total drug costs (73% and 80%, respectively).
“If employer plans were arrayed based on their benefit value, Medicare would be among plans in the bottom decile,” the issue brief said.
The issue brief acknowledged that Medicare’s ranking would be higher if the analysis was extended to include small and mid-size employers, or insurance plans in individual markets, which tend to offer less generous plans than larger employers.
Read the Kaiser issue brief, How Does the Benefit Value of Medicare Compare to the Benefit Value of Typical Large Employer Plans?
Ninth Circuit Issues Opinion Explaining Earlier Order Allowing Suit To Enjoin 10% Reduction In Medi-Cal Payments
The Ninth Circuit issued September 17 an opinion explaining its rationale for reversing the denial of a preliminary injunction to enjoin the California Department of Health Care Services (DHCS) from implementing a 10% reduction in Medi-Cal’s reimbursement rates for certain providers.
The appeals court’s July 11 order had temporarily enjoined DHCS from implementing the Med-Cal reduction, finding the district court had committed legal error in denying plaintiffs a preliminary injunction to block the reduction in Medi-Cal payments called for under a state law (AB 5) passed by a special session of the California Legislature in February 2008.
Independent Living Center of Southern California, the Gray Panthers of Sacramento and San Francisco, along with multiple pharmacies (plaintiffs) sued DHCS alleging AB 5 violated the federal Medicaid Act, specifically 42 U.S.C. § 1396a(a)(30)(A), and therefore was invalid under the Supremacy Clause of the U.S. Constitution.
Under § 1396a(a)(30)(A), a state Medicaid plan must provide payments that “are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.”
DHCS argued that § 1396a(a)(30)(A) did not confer a private right of action that plaintiffs could sue to enforce.
According to established case law, the appeals court said, under the Supremacy Clause a plaintiff may “enjoin the implementation of a state law allegedly preempted by federal statute, regardless of whether the federal statute at issue confers an express ‘right’ or cause of action on the plaintiff.”
In its September 17 opinion, the Ninth Circuit rejected the district court’s earlier conclusion that the Shaw Supremacy Clause doctrine did not apply to the case. See Shaw v. Delta Air Lines, Inc. 463 U.S. 85 (1983) (holding a plaintiff seeking injunctive relief from state regulation on the grounds of federal preemption under the Supremacy Clause presents a federal question).
The appeals court found instead that Shaw’s reach was expansive, holding that “injunctive relief is presumptively available to remedy a state’s ongoing violation of federal law.”
The Ninth Circuit also found in its latest opinion that plaintiff medical providers and beneficiaries had Article III standing because they alleged a direct economic injury that was directly traceable to DHCS’ implementation of AB 5 and could be redressed by the court through an injunction blocking the 10% rate reduction.
Following the appeals court’s July 11 order, the U.S. District Court for the Central District of California granted a preliminary injunction to most of the plaintiffs (physicians, dentists, pharmacists, adult day healthcare centers, clinics, health systems, and other providers) blocking the 10% cut in Medi-Cal rates.
Independent Living Ctr. of S. Cal., Inc. v. Shewry, No. 08-56061 (9th Cir. Sept. 17, 2008).
OIG Approves Waiver Of Cost-Sharing For Government Co-Sponsored Clinical Trial
Waiving cost-sharing obligations for protocol-required clinical services and oxygen therapy provided to Medicare beneficiaries who participate in a particular clinical trial would not run afoul of federal fraud and abuse laws, the Department of Health and Human Services Office of Inspector General (OIG) said in an advisory opinion posted September 24.
The Long-term Oxygen Treatment Trial (LOTT), sponsored by the National Heart, Lung, and Blood Institute (NHLBI) and the Centers for Medicare and Medicaid Services (CMS), is a randomized, controlled trial designed to investigate the possible benefits of providing continuous oxygen therapy to patients with chronic obstructive pulmonary disease (COPD) and moderate hypoxemia at rest, the opinion explained.
Under the proposed arrangement, providers, practitioners, and suppliers participating in the LOTT will waive cost-sharing obligations for protocol-required clinical services and oxygen therapy provided to Medicare beneficiaries who agree to enroll in the trial.
The opinion noted that the proposed arrangement, which would waive Medicare cost-sharing amounts routinely and without regard to financial hardship, implicates the Anti-Kickback Statute’s proscription against offering or paying something of value as an inducement to generate business payable by a federal healthcare program, as well as the proscription against beneficiary inducements.
“Our concerns about routine waivers of Medicare cost-sharing amounts in the context of clinical trials are long-standing,” OIG said.
However, explaining its decision not to impose administrative sanctions, OIG pointed to several factors that adequately protect the proposed arrangement from fraud and abuse.
First, the opinion explained that LOTT is a government study co-sponsored by NHLBI and CMS and “will be closely monitored by them as well as a number of independent entities.”
The opinion also found that LOTT is not a commercial study and is not intended to develop, study, or benefit any specific commercial product or entity.
“In particular, utilization of oxygen therapy and clinical services will be closely monitored and controlled in accordance with the LOTT protocol, which effectively replicates the prudent purchaser protection of usual cost-sharing requirements,” OIG said.
Lastly, OIG found that the proposed arrangement “is a reasonable means of enhancing the likelihood of success of the LOTT.”
The study is specifically designed to develop the quality scientific evidence CMS needs to ascertain the suitability of providing reimbursement for continuous oxygen therapy in patients with moderate COPD, OIG explained. Thus, waiving cost-sharing obligations is a reasonable means of enhancing patient compliance with study requirements and ensuring that economically disadvantaged Medicare patients are not precluded from the study, the opinion said.
Advisory Opinion No. 08-11 (Dept. of Health and Human Servs. Office of Inspector Gen. Sept. 24, 2008).
Senate Finance Committee Examines Individual Health Insurance Markets
The Senate Finance Committee examined September 23 individual health insurance markets in the last in a series of hearings focusing on healthcare reform.
Committee Ranking Member Charles Grassley (R-IA) noted in his opening statement that individual policies are expensive because the cost to sell and administer them is higher; people buying individual coverage often tend to be sicker; and there is virtually no tax subsidy for an individual who is buying coverage in the individual market.
Chairman Max Baucus (D-MT) acknowledged in his statement that “the individual market for heath insurance is broken” and explained that “without strict rules, insurance companies can and often do avoid risk by denying coverage to people who have health conditions—like diabetes—or a history of health problems.”
One focus of the hearing was recent healthcare reform in Massachusetts that required all individuals to purchase health insurance.
Speaking to the success of that effort, Andrew Dreyfus, Executive Vice President at Blue Cross Blue Shield of Massachusetts, noted the most recent U.S. Census numbers “reveal that Massachusetts has the lowest rate of uninsured in the nation and Massachusetts is responsible for 24% of the overall national decline in the number of uninsured.”
Dreyfus warned, however, that Massachusetts has “become a victim of its own success” and has “seen those gains threatened by continued increases in health care costs, which strain state, federal and employer budgets.”
“Without durable solutions that slow the growth of health care costs, our historic coverage expansions will be placed at risk,” Dreyfus said.
Suggesting ways to reform the insurance market, Dreyfus opined “that by changing the way health care is purchased, and eliminating the incentives that are working against high-quality, affordable care, we can liberate physicians to select treatments based on effectiveness, efficiency, and patient preference.”
“If we can change the way we pay for care, we can change the care itself, paving the way for a high quality, high value health care system,” Dreyfus concluded.
John Bertko, FSA, MAAA, with the RAND Corporation, spoke to the panel about the rating practices of the private health insurance market.
Bertko explained that states allow two distinct approaches to rating methods in the individual health insurance market.
In five states, insurers must offer policies to all applicants and are limited to rates that are similar regardless of health status, called adjusted community rating.
In the other states, individual health insurance policies are underwritten, meaning that past health conditions of individuals are examined and rates are set according to the applicant's health risk, Bertko said.
Bertko detailed the rating systems for small and large employer-provided insurance as well.
According to Bertko, the two key issues in the private health insurance market are affordability and access. He noted that the average health insurance premium this year is around $13,000 for a family covering two adults and children.
In addition, Bertko said, out of pocket cost sharing generally amounts to about 20% of covered services in addition to payroll deductions for premiums.
View more information on the hearing.
Senate Passes Measure Providing Additional Funding For Qualified Individual Program
The Senate passed September 25 by unanimous consent the QI Program Supplemental Funding Act of 2008 (S. 3560), authorizing an additional $45 million to fund the Qualifying Individual (QI) program.
Certain low-income individuals who are aged or have disabilities, as defined under the Supplemental Security Income program, and who are eligible for Medicare also are eligible to have their Medicare Part B premiums paid for by Medicaid under the Medicare Savings Program (MSP), a summary of the bill explained. Eligible groups include Qualified Medicare Beneficiaries (QMBs), Specified Low-Income Medicare Beneficiaries (SLMBs), and Qualifying Individuals (QI-1s).
The bill, co-sponsored by Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA), also specifies that in order to receive Medicaid federal matching funds for reimbursement of state costs for automated data systems used for the administration of Medicaid state plans, states must have in operation a Medicaid eligibility determination system that provides for data matching through the Public Assistance Reporting Information System (PARIS).
In addition, according to a summary of the legislation, the bill provides that any antibiotic that was the subject of an application submitted to the Food and Drug Administration but not approved, can get the three-year and/or five-year Hatch Waxman exclusivity or a patent term extension.
Among other provisions, the legislation also provides a total of $2.290 billion to the Medicare Improvement Fund for expenditures for services furnished during fiscal year 2014, according to the summary.
View the staff summary of the bill.
State Alliance Says E-Prescribing, Consumer Privacy Key To Advancing HIT
The National Governors Association (NGA) released September 23 the inaugural report of the State Alliance for e-Health featuring recommendations and specific strategies to help states speed the widespread adoption of health information technology (HIT) and electronic health information exchange (HIE).
NGA created the State Alliance, a consensus-based, executive-level body comprised of governors, state legislators, attorneys general, and state commissioners, to identify and address the barriers to increased use of HIT and HIE.
“HIT and electronic HIE are essential tools in states’ efforts to control costs and improve health care in the United States,” said Vermont Governor Jim Douglas, co-chair of the State Alliance.
According to their report, Accelerating Progress: Using Health Information Technology and Electronic Health Information to Improve Care, e-prescribing and consumer privacy should be the top priority in achieving HIT and HIE goals.
“The State Alliance recognizes e-prescribing as a gateway to other advances in e-health. Therefore, the State Alliance calls on states to lead these efforts and take action to drive adoption of e-prescribing,” the report said.
The report also urged states to be proactive in developing consistent and appropriate polices to address privacy and security issues
The report offered a number of other recommendations and specific strategies to advance the increased use of HIT and electronic HIE, including:
- Promoting the use of standards-based, interoperable technology;
- Streamlining the provider licensure process to enable cross-state e-health;
- Engaging consumers to use HIT in managing their health and healthcare;
- Developing workforce capacity to support electronic HIE efforts; and
- Providing leadership and support for e-health efforts.
Read the report.
- U.S. Attorney for the Central District of California Thomas P. O’Brien announced September 22 that a federal jury in Los Angeles convicted Leonard Uchenna Nwafor, the owner and operator of a durable medical equipment company, for his involvement in a fraudulent scheme involving more than $1.1 million in false billing to Medicare. According to evidence presented at trial, Nwafor billed this amount to Medicare over a two-and-a-half year period, and was paid over $525,000 as a result of the billing. Nearly all of the bills were for motorized wheelchairs and wheelchair accessories for more than 170 beneficiaries, none of whom needed wheelchairs. Read O’Brien’s press release.
- Carlson Therapy Network (CTN), a physical therapy network located in Brookfield, Connecticut, entered into a civil settlement with the federal government under which it has paid $1.88 million to resolve allegations that it violated the False Claims Act by submitting false claims to Medicare and TRICARE, announced Acting U.S. Attorney for the District of Connecticut Nora R. Dannehy September 22. Under relevant regulations, physical therapists are required to have direct, one-on-one contact with the patient when performing certain types of therapy services. The federal government alleged that, on numerous occasions, CTN billed for direct, one-on-one care when such services were not provided. Instead, CTN therapists routinely provided therapy services to multiple patients at the same time, and billed the government for one-on-one care to every patient. Over a period of four years, this practice allegedly defrauded the government of approximately $943,000. Read Dannehy’s press release.
- Thomas McKenzie, a physician’s assistant, pled guilty to defrauding the Medicare program in connection with a $119 million HIV infusion fraud scheme, announced U.S. Attorney for the Southern District of Florida R. Alexander Acosta September 18. According to plea documents, McKenzie admitted that, over a two-and-a-half year period, he trained physicians at 11 Miami medical clinics how to make medical records appear to support medically unnecessary HIV infusion services allegedly administered to patients. In addition, McKenzie admitted to overseeing the documentation of fraudulent services at these clinics to make it appear that legitimate services were being provided. McKenzie also admitted to knowing that the infusion treatments being billed at the clinics were medically unnecessary and/or never provided. Read Acosta’s press release.
- Cooper University Hospital (Cooper), located in Camden, New Jersey, reached a $3.85 million settlement with the federal government to resolve allegations that it defrauded the Medicare program by improperly inflating charges to Medicare patients to obtain higher reimbursement, announced the U.S. Department of Justice (DOJ) in a joint September 24 press release with U.S. Attorney for the District of New Jersey Christopher J. Christie. According to the government’s allegations, Cooper improperly inflated charges, over a two-and-a-half year period, for inpatient and outpatient care provided to Medicare beneficiaries to make its costs for providing such care appear greater than they actually were, and thereby obtain outlier payments from Medicare that it was not entitled to receive. Read DOJ’s press release.
- U.S. Attorney Christie also announced September 23 that the owners of a Newark-based medical business that provided medical services to the elderly—Aaron Robinson and Darnell Tolliver (collectively, defendants)—admitted to submitting false claims to the Medicare program. Through their business, defendants recruited medical personnel, including physicians, physical therapists, and other healthcare professionals, to provide medical services and exams to low-income individuals in their own apartments. According to plea documents, defendants admitted to recruiting a physician who provided them with signed prescription forms authorizing various tests on patients (i.e., physical therapy, bone density tests), even though the physician never examined or treated such patients. Defendants then submitted false claims for these services by falsely certifying that the prescribing physician had examined the patients and determined services to be medically necessary. Read Christie’s press release.
- A pharmacist, Brian L. Martin, was convicted of defrauding the Ohio Medicaid program by submitting “dummy” prescriptions from the pharmacy he co-owned, announced U.S. Attorney for the Southern District of Ohio Gregory L. Lockhart September 22. Over a 15-month period, Martin forged prescriptions for drugs and routinely entered and submitted, or directed pharmacy technicians to submit prescriptions that were never prescribed by physicians nor dispensed by the pharmacy to the Medicaid program. The loss to Medicaid was estimated in the range of $300,000 to $1.1 million. Read Lockhart’s press release.
- U.S. Attorney for the Western District of Pennsylvania Mary Beth Buchanan announced September 24 that a dentist, Gregory L. Jovanelly, was sentenced to three years’ probation, including six months’ home detention, for defrauding a private health insurance company out of approximately $94,000. According to information presented in court, Jovanelly submitted fraudulent claims to a private health insurance company for dental treatments and services that were either never performed or where different than the services actually performed. Read Buchanan’s press release.
- Boehringer Ingelheim Roxane, Inc. (Roxane) agreed to pay $1.8 million to the Massachusetts Medicaid program to resolve allegations that it violated the False Claims Act by falsely inflating prices it reported to national pharmaceutical price reporting services, announced Massachusetts Attorney General Martha Coakley September 22. Roxane is one of 13 drug manufacturers that the state has sued based on these same charges. The state has already settled with four other drug companies, recovering a total of $5.67 million. Read Coakley’s press release.
U.S. Court In Arkansas Dismisses Nurse’s Claim That Hospital Wrongfully Fired Her For Refusing To Take Drug Test
A federal district court in Arkansas ruled September 12 that a licensed practical nurse who was an at-will employee at a hospital could not proceed with her claim that the hospital wrongfully terminated her after she refused to take a drug test.
The U.S. District Court for the Western District of Arkansas granted a motion to dismiss filed by the hospital, National Park Medical Center (NPMC), and its parent corporation, Tenet Corp. (Tenet) (collectively, defendants). The court also dismissed the nurse’s complaint with prejudice.
In November 2000, after working as a nurse at NPMC for more than ten years, plaintiff Susan Hamilton was terminated from her job. The firing occurred after a patient Hamilton had been treating during her shift allegedly told Hamilton’s supervisor that Hamilton was using drugs.
When the supervisor requested that Hamilton submit to a drug test, she refused. Upon returning to work the following week, Hamilton offered to take a drug test, but she was advised that this was no longer necessary because her job had been terminated.
Hamilton complained to management about the firing, pointing out that the handbook contained a drug testing policy that laid out three situations that might subject a current employee to a drug test: (1) involvement in a serious incident or accident while on duty, (2) upon reasonable belief of drug-related impairment, or (3) in cases of previously testing positive and therefore becoming subject to random testing.
Under these circumstances, a refusal to consent to testing is “considered insubordination,” according to the handbook, and “may result in corrective action, up to and including termination of employment.”
After receiving no response from NPMC, Hamilton sued for wrongful termination, arguing none of the circumstances cited in the handbook were applicable and therefore she was fired in a manner inconsistent with the drug testing policies outlined in that document.
Defendants moved to dismiss, emphasizing the “numerous admonishments” in the Handbook stating that employment was at-will.
The district court acknowledged that Arkansas is an at-will employment state, and that employment becomes non-at-will only in two situations: where an employee has an agreement that the employment is for a specified time, or where an employer’s employment manual contains an express provision stating that the employee will only be dismissed for cause and such provision is relied on by the employee.
Arkansas also recognizes, however, a limited exception to the at-will doctrine when an employee “‘is fired in violation of a well-established public policy of the state,’” the district court said, citing Sterling Drug, Inc. v. Oxford, 743 S.W.2d 380 (Ark. 1988). The court also highlighted language in Sterling stating that this exception “is not meant to protect merely private or proprietary interests.”
“For purposes of a motion to dismiss, her assertions that the request to take a drug test was wrongful, and that she was not insubordinate within the meaning given by the Handbook will be accepted,” the district court said. “However, the provisions that Hamilton thinks modified her at-will status do not concern termination or in any way limit the discretion of her employer in making termination decisions.”
“Hamilton alleges no express representation either in the Handbook or elsewhere that her employment was for a length of time or that she could only be fired for cause,” the court said. “As such, [Hamilton] was an at-will employee who could be fired for no cause.”
Next, the district court rejected Hamilton’s argument that her firing violated public policy because it was contrary to Arkansas’ statutory Voluntary Testing Program (see Ark. Code Ann. § 11-14-108).
This statute, however, applies only to employers that have adopted a drug-free workplace program pursuant to state workers’ health and safety regulations, the district court said. Moreover, the statute specifically states that it should “not be construed to amend or affect the employment at-will doctrine,” the court noted.
Finally, the district court found Hamilton’s firing only implicated private interests, and did not violate Arkansas public policy.
Hamilton's refusal to take the drug test in this case “was an act done to protect her purely private interest in not being bothered with an unwarranted drug test,” the court said.
Hamilton v. Tenet Corp., No. 08-6057 (W.D. Ark. Sept. 12, 2008).
U.S. Court In California Finds ERISA Does Not Preempt Certain Claims Against Kaiser Brought By Enrollee
The Employee Retirement Income Security Act (ERISA) does not preempt claims brought by an enrollee in an individual Kaiser health plan and may not preempt claims made when the enrollee switched to a group plan, the U.S. District Court for the Eastern District of California held September 11.
In so holding, the court refused to dismiss the enrollee's claims finding do so would be premature because the plaintiff could potentially prove a set of facts under which his claims would not be preempted.
Plaintiff Charles Shlegel was an enrollee in an individual Kaiser health plan. On or about December 12, 2005, plaintiff enrolled in Kaiser’s group health plan through his employer.
In June 2003, a Kaiser physician diagnosed plaintiff as in need of a kidney transplant. Because Kaiser at that time did not operate a kidney transplant program, Kaiser referred plaintiff to the UC Davis Medical Center.
Kaiser subsequently opened a kidney transplant facility and told plaintiff that he must now receive his transplant at its facility.
Kaiser assured plaintiff that he would not lose his place on the national kidney transplant list by changing medical providers and that the transition from UC Davis to the Kaiser transplant center would be smooth and seamless.
Among other problems, however, Kaiser failed to transfer plaintiff’s name to Kaiser’s kidney transplant list for one year.
In May 2006, Kaiser closed its transplant facility and transferred plaintiff back to UC Davis.
Plaintiff sued Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals, Permanente Medical Group, and others (collectively, defendants) in state court alleging breach of the duty of good faith and fair dealing, breach of contract, negligence, fraud, negligent misrepresentation, negligent infliction of severe emotional distress, and intentional infliction of severe emotional distress.
Kaiser removed the action to federal court and then moved to dismiss.
The court turned first to Kaiser’s argument that Sections 502(a) and 514(a) of ERISA preempted plaintiff’s claims.
According to the court, ERISA did not preempt plaintiff’s claims against Kaiser between December 18, 2001 to December 12, 2005 because those decisions were made under the individual plan.
To the extent plaintiff’s claims against Kaiser arose from decisions made after December 12, 2005, those claims could be subject to ERISA regulation because plaintiff was covered by his employer’s group plan at that time.
While the court agreed with Kaiser’s argument that Section 502(a) preempted any claims made pursuant to the group plan because they would duplicate, supplement, or supplant the remedies established in ERISA, the court found it unclear from the complaint “if the alleged denials were made while Plaintiff was covered by the Individual Plan or the Group Plan.”
“If a claim occurred during the time period Plaintiff was covered by the Individual Plan, then that claim would clearly fall outside of ERISA regulation,” the court held.
In addition, the court noted plaintiff’s claim that Kaiser negligently understaffed, underfunded, and mismanaged its kidney transplant program “does not attempt to rectify the denial of a benefit.”
Turning to ERISA Section 514(a), the court disagreed with Kaiser’s argument that plaintiff’s claims that arose under the group plan should be dismissed because they questioned the administrative actions of an ERISA plan.
If the factual allegations in the complaint are “taken as true and construed in the light most favorable to the Plaintiff, then these claims involve a medical decision made by Kaiser in the course of treatment, and thus survive section 514(a) preemption,” the court found.
Accordingly, the court denied Kaiser’s motion to dismiss.
Schlegel v. Kaiser Found. Health Plan, Inc., No. 2:07-cv-00520-MCE-KJM (E.D. Cal. Sept. 11, 2008).
U.S. Court In Connecticut Finds Withdrawn State Claims Do Not Toll Statute Of Limitations For Federal Claims
A medical malpractice plaintiff who voluntarily withdraws a state court suit against multiple plaintiffs only to refile federal claims, cannot then claim the applicable statute of limitations was tolled by the state court suit, the U.S. District Court for the District of Connecticut ruled September 16.
Plaintiff Yadira Garcia underwent a bilateral laparoscopic tubal fulguration performed by Henry Nusbaum, M.D. Plaintiff alleged that Sandra Checca, M.D., who was the anesthesiologist, negligently failed to perform a discharge evaluation on November 3, 2003.
On October 25, 2005, plaintiff filed a medical malpractice action in state court, but subsequently withdrew her claims against Nusbaum because her action against him was subject to the Federal Tort Claims Act.
On March 7, 2007, plaintiff filed a new complaint in the U.S. District Court for the District of Connecticut against the United States, Yale-New Haven Hospital, Yale University School of Medicine, Yale-New Haven Ambulatory Services Corporation, Sandra Checca, M.D., and Women's Surgical Center.
Checca moved for summary judgment, arguing the claims against her were barred by the applicable two-year statute of limitations.
Plaintiff argued, however, that her claim was tolled by her timely commencement of the state court action against Checca.
According to the court, under Connecticut case law, “if a prior action prevents enforcement of a remedy sought in a later action, the pendency of the prior action can toll the statute of limitations for a later filed action.”
The court found here, however, “no indication that plaintiff's prior action in state court prevented enforcement of a remedy in her later filed federal law suit seeking damages against defendant Dr. Checca.”
In addition, the court noted, a “plaintiff who has voluntarily withdrawn a prior action cannot avail herself of the extension to the statute of limitations provided in the accidental failure of suit statute.”
Accordingly, the court granted Checca’s motion for summary judgment.
Garcia v. United States, No. 07CV322 (D. Conn Sept. 16, 2008).
U.S. Court In D.C. Finds Federal Jurisdiction Over District's Claims Alleging Federally Charted Health Insurer Violated Charitable Trust Obligations
The U.S. District Court for the District of Columbia refused September 15 to remand to the D.C. Superior Court an action alleging nonprofit Group Hospitalization and Medical Services, Inc. (GHMSI) violated its federal charter by operating contrary to its public service mission and breached its charitable trust obligations by misappropriating assets.
GHMSI was created by a congressional charter in 1939. Its federal charter states that GHMSI is a charitable and benevolent institution that “shall not be conducted for profit, but shall be conducted for the benefit of [its] certificate holders.”
The District of Columbia (District) sued GHMSI, which sells health insurance and administers health plans, and its controlling and managing company, CareFirst, Inc., after it amassed a surplus in excess of $750 million. According to the District, which Congress designated to regulate GHMSI, after CareFirst took over the management of GHMSI, “the pursuit of profitable business and the building of asset value became GHMSI’s bottom-line goals.”
Defendants removed the action to federal court. The District claimed its substantive causes of action arose under state, not federal, law and that remand was required.
Applying the U.S. Supreme Court’s three-pronged test for jurisdiction over federal issues embedded in state law claims, the U.S. District Court for the District of Columbia denied the District's motion for remand.
Under the Supreme Court's federal jurisdictional analysis, a court must consider whether the state law claim raises a stated federal issue, whether that federal issue is disputed and substantial, and whether a federal forum can entertain the issue without disturbing any congressionally approved balance of federal and state judicial responsibilities.
Here, the District claimed defendants violated their federal charter. This raised a federal issue, the court explained, because GHMSI’s charter was enacted by Congress and therefore constituted federal law.
Moreover, the District could not obtain relief on its state law claims without interpreting GHMSI’s federal charter, which made the federal issue substantial. The issue also was disputed because the District and defendants disagreed over the correct reading of the charter regarding GHMSI's operation as a charitable institution.
Lastly, because GHMSI is the only insurer in the nation whose corporate existence is established by congressional charter, removal would only have a microscopic effect on the federal-state division of labor.
District of Columbia v. Group Hospitalization and Med. Servs., Inc., No. 08-1218 (ESH) (D.D.C. Sept. 15, 2008).
U.S. Court In Massachusetts Refuses To Dismiss Claims That Pharmaceutical Manufacturer Violated FCA By Promoting Off-Label Uses
The U.S. District Court for the District of Massachusetts September 18 refused to dismiss whistleblower claims against a pharmaceutical manufacturer alleging unlawful promotion of off-label uses for one of its drugs.
In so holding, the court found the qui tam plaintiff asserted sufficient facts to overcome a motion to dismiss under Fed. R. Civ. P. 12(b)(6) and 9(b).
Whistleblower Dr. Peter Rost was employed by Pharmacia in June 2001 as Vice President in charge of the Endocrine Care Unit in Peapack, New Jersey.
Pharmacia was acquired in 2003 by Pfizer, Inc. According to Rost, beginning in 1997 the drug Genotropin, a recombinant human growth hormone, has been promoted for off-label indications.
In April 2007, Pharmacia and Pfizer pled guilty to one count of offering “kickbacks” in connection with their outsourcing contract for the administration and distribution of Genotropin.
The plea agreement covered off-label uses of Genotropin in adults, but did not discuss any off-label promotion of the drug for pediatric uses.
In June 2003, Rost brought a qui tam action against Pharmacia and Pfizer (collectively, defendants) claiming they violated the federal False Claims Act (FCA) and state law by unlawfully promoting the off-label use of Genotropin.
The U.S. declined to intervene in the case. Defendants moved to dismiss for lack of subject matter jurisdiction arguing the action was barred by the FCA’s public disclosure bar as it was “based upon” defendants’ disclosure to the government and plaintiff was not an “original source.”
Pfizer also moved to dismiss under Fed. R. Civ. P. 9(b). Plaintiff subsequently amended his complaint and defendants moved to dismiss the amended complaint.
The court first addressed defendants’ argument that in the amended complaint, Rost failed to plead his FCA claims with particularity, as required under Rule 9(b).
After his first complaint was dismissed for failure to plead with particularity, Rost added more than 200 alleged false claims that were submitted to both Medicaid and other federal programs from citizens of Indiana, the court explained.
Rost alleged in his amended complaint that claims submitted to federal agencies for reimbursement were for off-label, non-FDA approved uses of Genotropin such as for “short stature” and “small for date.”
Based on these allegations, the court found the amended complaint satisfied Rule 9(b)’s heightened pleading requirement.
The court rejected defendant’s argument that DRUGDEX—one of the compendia on which the Medicaid program rely to determine whether to reimburse for a drug—supported the use of Genotropin to treat “small stature” in children.
The court noted defendants had a stronger second argument that off-label claims approved by the Drug Utilization Review Board under Indiana law were not false.
“Defendants have a compelling position that state approval undermines the assertion of a ‘false claim,’” the court said. Plaintiff also alleged, however, that the claims were false if they were caused by unlawful kickbacks, the court noted.
Thus if plaintiff could demonstrate the alleged financial incentives paid to physicians to prescribe Genotropin for off-label uses were unlawful kickbacks that foreseeably caused the submission of a false claim for federal reimbursement under the FCA, plaintiff could prevail on his FCA claim, the court concluded.
Accordingly, the court allowed limited discovery on the kickback issue.
Lastly, the court summarily dismissed plaintiff’s claims relating to off-label uses of Genotropin for adults.
United States ex rel. Rost v. Pfizer, Inc., No. 03-11084-PBS (D. Mass. Sept. 18, 2008).
U.S. Court In New Hampshire Says Physician Not Entitled To Summary Judgment On Deaf Patient’s Disability Discrimination Claim
A federal district court in New Hampshire refused September 9 to grant summary judgment to a podiatrist in a discrimination action brought by a deaf patient after the podiatrist refused to provide an American Sign Language (ASL) interpreter and recommended that the patient go elsewhere for treatment.
In July 2007, plaintiff Cindy Columbia, who is deaf and primarily uses ASL to communicate with others, sought treatment for a heel spur at a podiatry clinic (Center) owned by Dr. John B. Gregory. During Columbia’s first appointment with Gregory, no ASL interpreter was present, and after difficulty communicating with each other, Gregory scheduled another appointment with her.
At the second appointment, with an ASL interpreter present, Gregory and Columbia discussed her problem, and Columbia agreed to undergo surgery.
A week before the surgery, Columbia and her husband went to the Center because she had questions about the preoperative instructions. At the front desk, Columbia was given a letter that Gregory had mailed out a couple of days earlier but that she had not yet received. The letter said Gregory would provide an ASL interpreter after the surgery if there were a complication that required more than ordinary post-operative care and otherwise he felt communication could be handled in writing or through family members.
Gregory subsequently sent Columbia another letter terminating their doctor-patient relationship, explaining he would be canceling the surgery and recommending alternative physicians.
Columbia sued Gregory and the Center (collectively, defendants), alleging violations of Title III of the Americans with Disabilities (ADA) and Section 504 of the Rehabilitation Act.
Shortly thereafter, Gregory resumed treatment of Columbia, even though the case remained pending. At all subsequent appointments, an ASL interpreter was provided. In addition, Gregory successfully performed the heel spur surgery, and Columbia went through post-operative care with no complications. An ASL interpreter was present at all times.
Meanwhile, Columbia’s lawsuit moved forward, and defendants moved for summary judgment on the basis that the “auxiliary aids” requirement of the Rehabilitation Act did not apply to them because the Center employed fewer than 15 employees.
In addition, defendants argued that Columbia’s claim for injunctive relief under Title III of the ADA was moot because they had already provided Columbia with the treatment she needed and had agreed to provide an ASL interpreter if she needed any further assistance in relation to this treatment.
The district court first rejected defendants’ “mootness” argument.
“Although [defendants] are now providing an ASL interpreter for Columbia, nothing has occurred that would prevent them from deciding not to do so for future appointments,” the district court said. Therefore, the court found that defendants have not shown that Columbia’s ADA claim was moot.
On defendants’ argument that the Rehabilitation Act claim did not apply to them, the district court acknowledged that implementing regulations promulgated under that Act (45 C.F.R. § 84.52(d)(1)) provide that the Department of Health and Human Services (HHS) “may” require providers with fewer than 15 employees to provide auxiliary aids for people with disabilities.
The district court also pointed out, however, a notice released in December 2006 by HHS’s Office for Civil Rights (OCR), which appeared to make the auxiliary aids requirement in the Rehabilitation Act mandatory regardless of the number of employees.
The district court concluded that the legal effect of the notice was unclear. Therefore, the court denied defendants’ motion for summary judgment, noting specifically that it was not deciding the issue of whether the notice was enforceable through a private cause of action.
“That issue may be addressed, if necessary, through a properly supported motion for summary judgment,” the court said.
In a closing paragraph, the district court recommended the parties "engage in serious and good faith efforts to settle this case."
“The issue of providing ASL interpreters for continuing or future treatment of Columbia at the Center can and should be addressed through settlement discussions,” the court concluded.
Columbia v. Gregory, No. 08-cv-98 (D.N.H. Sept. 9, 2008).
Utah High Court Allows Claim That Pharmacy Negligently Dispensed Fen-Phen After Its Withdrawal From Market
A state trial court erred in granting summary judgment to a pharmacy in a customer’s negligence action alleging the pharmacy should be liable for continuing to fill prescriptions for Fenfluramine, commonly known as fen-phen, after it had been withdrawn from the market by the drug manufacturer at the request of the Food and Drug Administration (FDA), the Utah Supreme Court ruled September 16.
The state high court therefore reversed the trial court’s decision and remanded the case for further proceedings consistent with its opinion.
Plaintiff Steven Downing began taking fen-phen in 1996 under a prescription from his physician. Downing filled his prescription at Hyland Pharmacy, doing business as United Drug Hyland Pharmacy (Hyland) from February 1996 until September 2000.
In September 1997, the FDA learned of new evidence about significant side effects associated with fen-phen and requested that manufacturers voluntarily withdraw the drug from the market.
Downing sued Hyland, alleging negligence for continuing to fill his fen-phen prescriptions after the manufacturer withdrew it from the market as requested by the FDA.
Hyland moved for summary judgment, arguing it acted as a reasonably prudent pharmacy in filling Downing’s valid prescription. In addition, Hyland asserted that it did not breach any duty owed to Downing.
The state trial court granted Hyland’s motion, concluding that Downing’s claims were precluded by the Utah Supreme Court’s decision in Schaerrer v. Stewart’s Plaza Pharmacy, Inc., 79 P. 3d 922 (Utah 2003), which involved product liability claims against a pharmacy that filled a customer’s valid prescription for fen-phen, and failed to warn of general side effects and/or dangerousness of fen-phen prior to the time it was removed from the market.
In Schaerrer, the Utah high court adopted the “learned intermediary” rule in holding that pharmacists are exempt from liability if they fill a prescription as directed by the manufacturer or physician.
The state trial court applied this holding to Downing’s negligence claims, apparently relying on case law from several other states applying the learned intermediary rule to negligence as well as products liability claims, the high court explained.
Disagreeing with the trial court’s conclusions in this regard, the high court first noted that the majority of recent decisions discussing the learned intermediary rule as applied in the negligence context have concluded that the rule’s “protections extend only to warnings about general side effects of the drugs in question, but not to specific problems known to the pharmacist such as prescriptions for excessively dangerous amounts of the drugs or for drugs contraindicated by information about a patient.”
The high court then said that its application of the learned intermediary rule in Schaerrer did not “mean that [it would] not limit its application to negligence claims when the facts and public policy require such limitation.”
“We hold that the learned intermediary rule does not preclude as a matter of law a negligence claim against a pharmacist for dispensing a prescribed drug that has allegedly been withdrawn from the market, and that the pharmacists under such circumstances owe their customers a duty of reasonable care” with respect to the sale of such drugs.
“Our declaration that a duty exists does not, however, establish what the pharmacist’s standard of care is; that is a factual matter that must be examined on remand,” the high court concluded.
Thus, the high court remanded the case to the trial court to address the question of the standard of care for a reasonable pharmacist under the factual circumstances of the case.
Downing v. Hyland Pharmacy, No. 20060771 (Utah Sept. 16, 2008).
Zerhouni To Step Down From NIH Post
National Institutes of Health (NIH) Director Elias A. Zerhouni, M.D. announced September 24 that he will step down from the position by the end of October 2008, citing the desire to pursue other professional opportunities.
Zerhouni has overseen the biomedical research agency, which has more than 18,000 employees and a fiscal year 2008 budget of $29.5 million, since May 2002.
According to an NIH news release, one of the hallmarks of his tenure is the NIH Roadmap for Medical Research, launched in 2003. The NIH Roadmap brought together all 27 institutes and centers to tackle research projects that were too big for individual institutes to handle, the release explained.
“I have had the privilege of leading one of the greatest institutions in the world for six and a half years,” Zerhouni said. “NIH’s strength comes from the extraordinary commitment and excellence of its people in serving a noble mission.”
Zerhouni also embarked on a wide array of organizational reforms to make NIH more effective and overhauled the agency’s ethics regulations after it came under fire when certain lucrative consulting arrangements between intramural researchers and pharmaceutical companies came to light.
Despite the reforms, however, the agency continues to face scrutiny concerning conflict of interest issues.
One day before the announcement of Zerhouni’s departure, Senate Finance Committee Ranking Member Charles Grassley (R-IA) sent a letter to Zerhouni questioning potential conflicts of interest created by hiring medical experts as contractors rather than as full-time employees.
In the letter, Grassley cited the case of a senior advisor in the National Heart, Lung and Blood Institute that stayed on staff of a major academic medical center while also acting as a high-profile advisor and advocate for a cardiac device company.
“While I thank you for the changes that you brought to the NIH, I am concerned that others at your Agency might not share your views. Perhaps others at NIH do not recognize how critical it is to maintain the integrity of the NIH,” Grassley said in the letter.
Read Grassley’s letter.