By Mercedes Varasteh Dordeski, Esq.and Gary A. Kravitz, Esq.

The Centers for Medicare and Medi-caid Services (CMS) recently released the2010 Medicare Physician Fee Schedule,which sets the reimbursement rates forservices provided under Medicare Part B.Notably, this year’s rates include the

most significant reductions in reimburse-ment since 1992, and contain cuts of up to35 percent and more in some areas, suchas non-invasive cardiology.Such reductions (if not deferred by Con-

gress), coupled with ever-expanding rulesand regulations governing health care,have made it increasingly difficult forphysicians to offer patients quality healthcare without sacrificing profitability.In order to strike a proper balance be-

tween practice economics andkeeping patients happy, somephysicians are turning toconcierge medicine as a newbusiness model.Concierge medicine is, in

essence, a system whereby apatient pays a monthly oryearly retainer to a physicianin addition to their insurance

premiums for privileged health care. Inexchange, concierge patients receive in-creased access to care, such as guaran-tees to receive same day and/or weekendappointments; access to the physician’scell and/or home phone numbers; andenhanced amenities, such as receivingcare in a spa-like setting.Concierge medicine provides obvi-

ous benefits to both patients andphysicians: for the former, it meansthe ability to receive immediatecare; and for the latter, it can meana reduced workload from carryingfewer patients and enhancedphysician-patient relationships.Broadly speaking, most physi-

cians who make the transition toconcierge medicine are gen-

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Hot spotMichigan one of a handfulof areas targeted for HEAThealth care fraud teamBy Pamela C. Enslen, Esq.and Matthew F. Leitman, Esq.

Both the federal governmentand the State of Michigan haverecently increased the resourcesthey are dedicating to battlingMedicare, Medicaid, and otherhealth care-related fraud.Last spring, a Medicare Fraud

Strike Force team, known as theHealth Care Fraud Prevention &Enforcement Action Team (HEAT)was formed by the Departments ofJustice (DOJ) and Health and Hu-man Services (HHS) to investigateand prosecute health care fraud.HEAT is a joint task force of sen-

ior leaders from the DOJ and HHSand also is comprised of state and

‘Micropractice’ could lead to amore satisfying careerBy Maro E. Bush, Esq.

Frustrated by dwindling profitsand an increasingly elusive work-life balance, many physicians havebegun utilizing innovative practicemodels, from hospital-owned prac-tices to system-ownedmultispecial-ty groups to medical foundations.Rounding out this list is the mi-

cropractice model.Often overlooked, microprac-

tices have been gaining in popu-larity with proponents who believethe model is a step in the right di-rection for a system gone wrongfor both physicians and patients.Micropractices (also called pa-

tient-centered practices) are low-volume, highly efficient solo med-ical practices.In a nutshell, micropractices

utilize the idea that by eliminatingthe usual overhead associated

with running an office, costs canbe reduced, thereby allowingphysicians to spend more timewith fewer patients without hav-ing to sacrifice revenue.The micropractice model is gen-

erally used by primary care orfamily practitioners and fo-cuses on optimizing thesmallest functionalwork unit capable ofdelivering excellentcare: the solo doc-tor, even withoutany staff.For example, a

physician maychoose to elimi-nate nursingstaff and takeblood pressurereadings and

Opening the door toconciergemedicine

The law firm of RAC, Medicare and other third party payor audits

Stark and fraud and abuse analysis

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See “Concierge,” page 14

See “Micropractice,”page 6 See “Fraud,” page 13

In order to strike a proper balancebetween practice economics and

keeping patients happy, somephysicians are turning to conciergemedicine as a new business model.

Inside MedLawRegulationCompliance with complexStark regulationsmust be analyzed,re-analyzed with eachrevision or pending effectivedate. See story, page 3

‘Apsey’Med-mal plaintiff who enduredyears of legal wrangling, rancorousuproar among law community getsday in court. See story, page 3

ComplianceCovered entities, beware: Increasedenforcement, heightened penaltiesfor violations of health informationlaws. See story, page 10

Business of Medicine

Mobile leasing diagnostics becomea viable way to enhance practicerevenue. See story, page 11

Health PolicyWhat will be the impact now thatCMS will no longer recognize inpatient,office/outpatient consultation codes?See story, page 11

MalpracticeAppeals court tackles “functional use”in a case involving loss of the use ofan extremity. See story, page 12

Notice of Intent“Furtherance of justice” appliesto NOI mistakes, rules Michigan Courtof Appeals. See story, page 13

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Verdicts & Settlements Plus

‘Apsey’ finally gets her day in courtBut despite years of legal wrangling and a judgment in her favor,there may be ‘no easy end in sight’ for med-mal plaintiff

Michigan Medical Law Report • 3Winter 2010Cite this page 5 M.L.R. 51

Stark changes demand re-evaluation of somehealth services contracts and relationshipsStark compliance is not something that

any physician can simply check off a to-dolist, and never to think of again.Instead, compliance with these complex

regulationsmust be analyzed and re-analyzedwith each revision or pending effective date.Stark bans physician self-referral of des-

ignated health services under Medicare un-less one of the exceptions contained withinthe law are met. Yet another one of thesetimes where Stark demands that physiciansre-evaluate their contracts and businessarrangements, was Oct. 1, 2009.If you failed to do so, it is imperative that

you act immediately to ensure continuedcompliance.Significant changes to Stark went into ef-

fect relating to percentage-based leases, “perclick” payments and “under arrangements”relationships.Because Stark is a strict liability statute,

physicians cannot claim ignorance of thesechanges as a defense if they are found to benoncompliant.

Percentage-based leasesPreviously under Stark, the rental of office

space or equipment did not constitute a fi-nancial relationship, even if payments werebased on the revenue earned from the spaceor equipment (as long as the lease agreementwas in writing and met specific criteria).As of Oct. 1, 2009, Centers for Medicare

and Medicaid Services (CMS) closed this“loophole” in light of their concern that suchpercentage-based leases created an unac-ceptable risk for patient abuse.Under the new regulations, any office or

equipment lease that bases the paymentamount on a percentage of revenue creates afinancial relationship between the parties.As a result, any referral between parties

to a percentage-based lease may trigger lia-bility under Stark, potentially subjectingphysicians to civil monetary penalties of$15,000 per violation; refund of Medicarepayment related to such referrals; exclusionfrom the Medicare program; and false claimsliability exposure.Therefore, physicians should immediately

have their leases reviewed to ensure contin-uing compliance with Stark.Moreover, this may not be the last change

we see relating to percentage-based com-pensation.While it is still permissible to usepercentage-based compensation for man-agement or billing services, CMS has left thedoor open to further revise the regulations ifneeded in the future. Thus, physicians mustremain mindful of any upcoming changes.

Per-click leasesAs with percentage-based leases, “per-

click” payments for use of office space orequipment also can create a financial rela-tionship between the parties.The term per-click refers to payments per

use of the space or equipment tothe extent that the charges re-flect referrals betweenthe parties. Notably,non-physicians maycontinue to leaseequipment andspace on a per-click basis.Also, physi-

cians are still al-lowed to leaseequipment orspace on a per use ba-sis for services referred byothers. However, if thephysician-lessor also is re-ferring patients to use theequipment, an alternativeleasing arrangement that meets a Stark ex-ception must be put in place.While CMS declined to prohibit all time-

based leasing arrangements, CMS has indi-cated that it will interpret the per-click regu-lations broadly and has stated that certainarrangements — such as “on-demand” rentalagreements, leasing of small blocks of time(such as a single four-hour block per week) oran extended block of time beyond what thelessee can reasonably use — are problematicand may be covered by the revised language.Therefore, any physician who is party to

any time-based rental arrangements also

should have these contracts reviewed forcompliance.

Services provided‘under arrangements’Prior to these recent changes, Stark al-

lowed many joint ventures between hospitalsand physicians where physicians were ableto refer to the joint venture without meetinga Stark exception, because, if only the hospi-tal was billing Medicare for the service, thenonly the hospital was considered to be pro-viding designated health services.This is no longer the case.Now, an entity is considered to be provid-

ing a designated health service if the entitybills for the service or performs the service.And, it is possible that a single referral isactually going to two separate entities:the entity that is billing for the service,and the entity that is actually perform-ing the service. If the referring physi-cian has a financial relationship with ei-ther party, a Stark exception must existor there is a violation.

Compliance a necessityCMS gave significant time for physi-

cians to comply with these three changesto Stark. However, many physicians re-main unaware of the need to review ex-isting arrangements.

If a violation is found, physiciansshould contact legal counsel and care-fully consider the next steps thatshould be taken, as retention of

Medicare reimbursement re-ceived from an improperarrangement could cre-ate liability under therecently revised Fed-eral False Claims Act.Moreover, even forphysicians who donot participate inthe Medicare pro-gram, there may beimplications under

Michigan’s version of the Stark law,which applies to all payors.If you have not evaluated your con-

tracts and business arrangements toensure compliance, do not wait anylonger. Each violation of Stark meansthe possibility of more denied pay-ments and more $15,000 penalties.Now is the time to make sure that

you are complying with Stark, until, ofcourse, it changes again.

RegulationBy Andrew B.Wachler, Esq.and Alicia B. Chandler, Esq.

Andrew B.Wachler is the principal of Wachler &Associates. P.C. He counsels health care providersand organizations nationwide in a variety of healthcare legal matters. In addition, he writes and speaksnationally to professional organizations and otherentities on health care law topics such as MedicareRAC appeals, Medicaid Integrity, Stark and fraud and abuse, HIPAA, and other topics.Contact him at (248) 544-0888 or awachler@wachler.com.

Alicia B. Chandler’s health care practice focuses on Stark, fraud and abuse, and MedicalStaff Privileges issues. She also has experience in alternative dispute resolution,negotiation and investigations as well as corporate and transactional matters. Contact herat (248) 544-0888 or achandler@wachler.com.

By Douglas J. Levy

Sue Apsey never would have predictedhow the removal of an ovarian cyst wouldbecome such a long-lasting nightmare.And not just for her.A bowel leak almost a decade ago resulted

in multiple abdominal surgeries, abdominalhernia and disfigurement for the Owossoresident.In the Michigan legal community, it

turned into a passionate, often rancorousuproar over a technicality regarding out-of-state affidavits of merit.But onMay 29— after years of legal wran-

gling, a Court of Appeals decision, an appel-late reconsideration and, finally, a MichiganSupreme Court ruling — a ShiawasseeCounty Circuit Court jury returned a verdictApsey had waited nine years to hear: Shi-awassee Radiology Consultants, PC, one ofthe three defendants in Apsey v. MemorialHospital, et al., was fully negligent, andwould be ordered to pay $2,978,000.Yet, Frank Mafrice, the Southfield-based

medical-malpractice attorney who repre-sented Apsey, said the nightmare continues.Damage caps will reduce the award to just

around $1 million, he said, adding that anappeal is likely.“I’m pessimistic about it ending soon,”

Mafrice told Michigan Lawyers Weekly. “Ifelt bad enough just knowing it took so longto get her case heard, and now it doesn’t looklike there’s an easy end in sight.All she wanted was her day in court.…All

she wanted at the beginning was reason-able compensation for what she’d gone

through, and she seems like she’s being vic-timized again by the system.”

Questions of meritApsey originally filed suit in November

2001, 10 months after post-operative carefrom the removal of an ovarian cystcaused an infection and required addi-tional surgeries. She underwent twoskin-graft procedures that left herwith a very large abdominal herniaand permanent disfiguring scars.

“When access is denied wrongfully, cases like thisoccur,where [plaintiff Sue Apsey] can’t get to thecourthouse door because of some technicality.”—Frank Mafrice, Southfield-based medical-malpractice attorney

See “Apsey,” page 14

WACHLER CHANDLER

Michigan Medical Law Report, a quarterly pub-lication covering issues of concern to medicalprofessionals throughout Michigan is the onlynewspaper in Michigan presenting unique law-related issues tomedical professionals. MichiganMedical Law Report is sent for free to medicalprofessionals throughout Michigan. Any med-ical professionals not yet on themailing list cansubscribe for free. Send in this form, visitwww.mimedicallaw.com or call 1-800-451-9998, to start your subscriptiontoday! Not a medical professional? Call 1-800-451-9998 or visit www.mimedicallaw.com tosubscribe for only $39.99/year.

Mail form to: Michigan Medical Law Report;Subscription Services; SDS-12-2632; P.O. Box86; Minneapolis, MN 55486-2632.

4 • Michigan Medical Law Report Winter 2010 Cite this page 5 M.L.R. 52

New rules greatly increaseprivacy breach notificationGovernment actions earlier this year es-

tablished significant new requirements toreport medical privacy violations to indi-viduals and/or the media and the HHS.In February, Congress enacted the

Health Information Technology for Eco-nomic and Clinical Health (HITECH)Act aspart of the American Recovery and Rein-vestment Act of 2009.Then, in response to a mandate in the

HITECH Act, the Department of Health andHuman Services (HHS) issued an interim fi-nal rule with request for comments forBreach Notification for Unsecured ProtectedHealth Information (the “Rule”) this summer.The Rule establishes significant new no-

tification obligations for covered entitiesand business associates that are subject toHIPAA.Specifically, the new regulations estab-

lish guidelines for determining when abreach of unsecured Protected Health In-formation (PHI) occurs; dictates who mustnotify of such a breach and to whom notifi-cation must be made; and establishes thetimeframe and contents of such notification.The Rule became effective in September.Covered entities and business associates

must be aware of the new obligations underthe Rule and should begin taking steps im-mediately to ensure compliance. In addi-tion, these entities must remain cognizantof additional changes and modificationsthat may develop.They must be prepared toalter their compliance efforts with these ad-ditional potential changes in mind.

When are requirements triggered?The Rule only requires notification if an in-

cident qualifies as a “breach” of unsecuredPHI.The Rule defines “breach” as the “acqui-sition, access, use or disclosure of protectedhealth information in a manner not permit-ted under [the HIPAA Privacy Rule], whichcompromises the security or privacy of [PHI].”Therefore, a use or disclosure that vio-

lates the HIPAA Privacy Rule is a prereq-uisite, and any uses or disclosures that donot violate the Privacy Rule cannot consti-tute a “breach” requiring notification underthe Rule.In addition, an incident will only qualify as

a “breach” if it meets a certain “harm thresh-old.” In other words, the use or disclosuremust “pose a significant risk of financial, rep-utational, or other harm to the individual.”To determine whether this harm thresh-

old has been met, covered entities and busi-ness associates must conduct and documenta fact specific “risk assessment.”The risk assessment should take into ac-

count the following factors:• The identity of the entity or individualthat impermissibly used the informa-tion or to whom the information was im-permissibly disclosed;

• The steps taken to mitigate harm andthe immediacy with which such stepswere taken;

• Whether the information was returnedbefore being accessed; and

• The type and amount of information dis-closed.Finally, the Rule also contains three statu-

tory exceptions to the “breach” definition.These exceptions are as follows:• Uses or disclosures by persons actingunder the authority of the covered enti-ty or business associate that are madein good faith, that fall within the scopeof the disclosing individual’s authority,and that do not result in further viola-tions of the HIPAA Privacy Rule;

• Inadvertent disclosures from one personauthorized to access PHI to another per-son also authorized to access PHI withinthe same covered entity, business associ-ate, or organized health care system; and

• Situations in which the covered entity orbusiness associate has a good faith be-lief that an unauthorized person receiv-ing the PHI could not reasonably havebeen able to retain the information.

Notification requirementsIn situations in which a covered entity or

business associate has a reasonable beliefthat the breach involved an individual’sPHI, the entity must provide written noticeto each affected individual.Such notice must be provided without

“unreasonable delay,” but in no case laterthan 60 days after discovery of the breach.To the extent possible, the notice should

include the following information:• A brief description of what happened;• The types of information that were in-volved in the breach;

• Steps that affected individuals shouldtake to protect themselves from poten-tial harm;

• A description of what the entity is doing toinvestigate the incident, mitigate harm,and protect against further breaches; and

• Contact procedures by which affected indi-

viduals may learn additional information.In certain situations, such as when the

covered entity or business associate deter-mines that misuse of the PHI is imminentor when the entity has insufficient contactinformation for the affected individuals, ad-ditional or substitute notice by alternativemeans may be made.Covered entities and business associates

must also notify a prominent media outletwithin the same time frame as required forindividual notice in situations in which abreach involves the PHI of more than 500individuals within a state or jurisdiction.Finally, covered entities and business as-

sociates must track and report all breachesto HHS. Breaches involving the PHI ofmore than 500 individuals (in any state orjurisdiction) must be reported “immediate-ly.” All other breaches must be recorded andannually reported no later than 60 days af-ter the end of each calendar year.The Rule establishes significant new

breach notification obligations for coveredentities and business associates covered byHIPAA.In sum, the Rule requires such entities to

provide individual and/or media noticewhen there has been a breach of unsecuredPHI and to track and report such breachesto HHS.Affected entities should review HIPAA

compliance efforts with these new obligationsin mind. For example, entities should ensurethat policies are in place requiring workforcemembers to immediately report any potentialprivacy violations or security incidents sothat they can effectively and promptly evalu-ate the incident to determine whether notifi-cation obligations are triggered.Entities also should establish policies

and conduct training to communicate whatnotification will be required and shouldmaintain accurate records to prepare re-quired reports to HHS.Affected entities must remain aware of

potential changes to these requirements inthe future, and be prepared to revise poli-cies and procedures accordingly.

Health PolicyByAmyK. Fehn, Esq. and Laura C. Range, Esq.

Amy K. Fehn is an attorney at Wachler &Associates, P.C. Fehn is a former registered nursewho has been counseling health care providersfor the past 11 years on regulatory andcompliance matters. She also co-authoredworkbooks on both HIPAA Privacy and Securityand has presented on HIPAA issues to local andnational organizations. Contact her at (248) 544-0888 or afehn@wachler.com.

Laura C. Range is an associate at Wachler & Associates, P.C., where she practices in allareas of health care law, with specific concentration in transactional and corporatematters, licensure and staff privileging cases, Medicare and other third-party payor auditdefense and appeals, and regulatory compliance, including HIPAA privacy and securitycompliance. Contact her at (248) 544-0888 or lrange@wachler.com.

CONTENTS

‘Apsey’ finally gets her day incourt . . . . . . . . . . . . . . . . . . . 3

Business of Medicine:Mobile leasing diagnosticsare a good way to enhancepractice revenue . . . . . . . . . 11

Compliance:HIPAA enforcement strengthened,penalties increased . . . . . . . 10

Court of Appeals clarifies‘functional use’ standard. . . 12

‘Furtherance of justice’ appliesto NOI mistakes . . . . . . . . . . 13

Health Care Fraud:Use of Civil InvestigativeDemands is expanded . . . . . . . 6

Health Policy:Consultation codes eliminateddue to confusion, uncertainty. . 11

New rules greatly increaseprivacy breach notification . . . 4

State licensing investigations:An ounce of prevention …. . . 6

Pending Legislation . . . . . . . . 8

Regulation: Stark changesdemand re-evaluation of somehealth services contracts andrelationships . . . . . . . . . . . . . 3

FEHN RANGE

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administer shots herself. This not only elim-inates the need for the physician to hire, su-pervise, and pay a nurse, but also allows aphysician to spend extra time with patients.

Namely, micropractices achieve successby “strip[ping] a primary care office to its es-sential components so that it is capable ofdelivering patient-centered, collaborativecare,” according to Drs. L. Gordon Mooreand John H. Wasson in “The Ideal MedicalPractice Model: Improving Efficiency, Qual-ity and the Doctor-Patient Relationship.”

Technology is keyTechnology is the cornerstone of the mi-

cropractice. With the help of cutting-edgetechnology, including electronic healthrecords, e-prescribing and virtual office vis-its, physicians have the ability to keep over-head low, freeing up time for more doctor-patient interaction, or what somemicropractice owners refer to as the “Nor-man Rockwell-style of practice.”

For instance, a micropractice might uti-lize an automated phone system, allowingpatients to schedule their own appoint-ments and eliminating the need to employ areceptionist. It is estimated that imple-menting the right technology can help pri-mary care practices reduce their costs tonearly half of what a typical practice pays,from 60 percent to 35 percent.

Given that micropractice physicians havelittle or no overhead costs, they are able totreat fewer patients and still remain prof-itable. Additionally, physicians are free tomake patient visits on their own time, in-stead of being tied to a 9-to-5 office staff.

Physicians who have adopted the micro-practice model report higher levels of satis-faction. Not surprisingly, patients are hap-pier as well. In published studies, patientsreport high levels of satisfaction in access,efficiency, continuity of care, and physicianawareness of patients’ key concerns.

Proponents of the micropractice point outthat, traditionally, failure in primary careresults in costlier specialty and hospitalcare down the road. In many cases, provid-ing excellent primary care at the outset canlead to better outcomes for patients andhelp lower the cost of health care in theUnited States.

This is an important consideration in acountry where 60 percent of all bankrupt-cies are driven by health care costs.

Because physicians working in micro-practices have more time to spend with pa-tients, they also have a greater opportunityto emphasize prevention and education tokeep patients healthy. According to a 2008study by Wasson at Dartmouth MedicalSchool, patients in micropractices were morelikely to say they were informed about howto manage chronic diseases and received thecare they needed, compared with those in anational sample of medical practices.

Government offers incentivesThe government also is taking note of

how new technology and streamlined process-es can make better, less costly health care areality.

The Obama administration included in-centives for physicians who want to makethe switch to electronic health records andset aside $2 billion for community healthcenters through the economic stimuluspackage. They also are considering ways topersuade medical students to pursue ca-

reers in primary care by raising primarycare physicians’ pay or offering loan for-giveness programs.

To date, there are no exact statistics onthe number of micropractices operating inthe U.S., but physicians say that the popu-larity of the micropractice is growing.

It could be the right move for physicianswho want to step out of “treadmill medi-cine,” where doctors are expected to see a dif-ferent patient every 15 minutes. However,the micropractice model is not without itsown unique challenges and physiciansshould take these into careful consideration.

For example, practitioners should consid-er whether they can efficiently multitaskand run a practice without administrativeassistance; how willing and/or able they areto embrace technology; or the fact that, onaverage, primary care physicians receivethe least amount of reimbursement of anymedical specialty.

Additionally, physicians may have ques-tions about the rules and regulations in-volved with e-prescribing, virtual office vis-its, or electronic health records (and what todo in the event of a breach of these records).

However, all challenges aside, the bene-fits of a micropractice certainly make it amodel worth investigating.

Maro E. Bush is an associatewith Frank, Haron, Weiner andNavarro PLC, where she focusesher practice on federal FalseClaims Act/qui tam litigationand health care law, includingrepresentation of individual

physicians, health care professionals and otherhealth care entities in a variety of areas relating tohealth law and regulations. She may be contact-ed at (248) 952-0400 or mbush@fhwnlaw.com.

MicropracticeContinued from page 1

6 • Michigan Medical Law Report Winter 2010 Cite this page 5 M.L.R. 54

Serious business

Recent changes to the federal False ClaimsAct (FCA) have enhanced the government’sability to investigate health care and otherkinds of fraud through the expanded use ofCivil Investigative Demands (CIDs).

The Fraud Enforcement Recovery Act of2009 (FERA) significantly amended theFCA. It not only eased the requirements forthe Department of Justice (DOJ) to issueCIDs, but it also permits the sharing of in-formation obtained pursuant to a CID withgovernment agencies and FCA plaintiffs.

CIDs are formidable investigative tools,and health care providers should under-stand how they are used in a governmentfraud investigation.

Prior to FERA, CIDs were infrequently is-sued. Because only the U.S. attorney generalcould issue a CID, only the most importantcases were subjected to the time-consumingprocess of being submitted to the attorneygeneral for consideration.

Now, FERA permits the attorney general todelegate the authority to issue CIDs to de-signees. The attorney general has so far dele-gated such authority to Assistant AttorneyGeneral Tony West, head of the DOJ’s civil di-vision. However, it is not yet clear whetherthis delegation also extends to U.S. Attorneys.

For now, CIDs may be issued wheneverthe attorney general or West has reason tobelieve that any person may be in posses-sion, custody, or control of any documen-tary material or information relevant to afalse claims law investigation.

FERA also has provided substantial fund-ing to the DOJ to hire more investigators

and to pursue more investigations. Coupledwith the easing of restrictions on the shar-ing of information, these changes are ex-pected to result in greater use of CIDs.

CIDs are similar to subpoenas that canrequest documents. But, more importantly,CIDs also can request answers to inter-rogatories and oral or written testimony.

In one sense, a CID is somewhat similarto discovery in a civil case. However, there isa significant difference between discoveryand a CID. Notably, discovery occurs after aFCA case has been filed and unsealed and isgoverned by the Federal Rules of Civil Pro-cedure, which require notice to the defen-dant when discovery requests are served ona third party.

CIDs are not required to be served on thetarget of an investigation prior to servingthem on a third party. The CID does noteven have to name the target of the investi-gation but just describe the nature of theconduct constituting the alleged violation ofthe FCA and the applicable provision of theFCA alleged to be violated.

Therefore, it may not be clear to the re-cipient of a CID whether the recipient itselfis being investigated, or whether the recip-ient is a third party in possession of infor-mation useful to a DOJ investigation.

The CID’s main use is as an investigato-ry tool to aid in the investigation of fraud re-sulting from suits filed under the FCA. Itcan be issued prior to the time that theplaintiff, an individual referred to as a “re-lator,” files a FCA suit, known as a qui tamsuit, on behalf of the taxpayers.

A CID also can be issued during the in-terval between the filing of a Qui Tam suitand the government’s decision to either in-tervene or decline to intervene in the suit.

Through use of the CID, the DOJ canmore thoroughly investigate a potentialfraud case than in the past. CIDs give thegovernment an early opportunity to obtainthe information needed to prosecute fraudand abuse and an advantage over the targetof the investigation, who must wait until af-ter a complaint has been served and un-sealed to request information from the DOJor the relator through discovery.

Before responding to a CID, a recipientneeds to keep in mind that the DOJ maynow easily share CID information with oth-ers. Prior to FERA, the DOJ was restrictedto sharing CID information only with Jus-tice Department employees, Congress, orother federal agencies.

Sharing with other federal agencies re-quired an order from a federal district courtissued upon a showing that the other agencyhad a substantial need for the information.

FERA eliminated the requirement for a courtorder and the substantial need standard.

Now, the DOJ can share such informationwith a broad array of third parties includingfederal, state or local government agenciesand their contractors, and with Qui Tam re-lators. Such sharing may expose the recipi-ent of the CID to liability under state law orto administrative actions by governmentagencies other than the DOJ.

The statute provides that CID informationis exempt from disclosure under FOIA andrequires the DOJ to safeguard CID informa-tion. However, relators and other third-partyrecipients of the CID information (such asstate agencies) are not required to protectthe confidentiality of the information.

Therefore, recipients may try to take ap-propriate action to protect the confidential-ity of CID information prior to respondingto a CID.

Such sharing may erode the ability of thedefendant to challenge a relator’s fraud claim.Under FERA, it is more likely that a defen-dant will become involved during the inves-tigative process of a case.This puts the defendant inthe difficult position ofbearing the expense ofresponding to the CIDwithout the benefitof knowing what arelator has allegedin the complaint.

The receipt of a CID is a serious matter,whether the recipient is a target of an in-vestigation or a third party.

Targets need to be aware that a civil in-vestigation often proceeds in tandem with acriminal investigation.

When responding to a CID, a target’srights against self-incrimination may be un-dermined, prejudicing the target’s ability todefend itself in a criminal proceeding. Addi-tionally, third parties need to try to takesteps to protect confidential business infor-mation provided in response to a CID.

The recipient of a CID should seek advicefrom an attorney as to how to respond. Bykeeping the foregoing in mind, health careproviders will be better prepared to respondto a CID.

Health PolicyBy Robert S. Iwrey, Esq.

State licensinginvestigations: An ounce ofprevention …

Unfortunately, some health careproviders fail to appreciate the seriousmagnitude of an allegation filed againstthem with their state licensing body.

Whether a health care provider is con-tacted directly by an investigator, orwhether he or she hears from a patientor an employee that an investigator hasbeen asking questions regarding theprofessional behavior/conduct of thehealth care provider, the health careprovider should immediately contact anexperienced and knowledgeable healthcare attorney to provide assistance andguidance at the earliest possible stage.

All too often, health care providers be-lieve that they can explain away or jus-tify the alleged inappropriate behav-ior/conduct, only to learn later on thatsuch admissions are used as direct evi-dence against them to support a sanctionagainst his or her health care license.

Moreover, depending on the severity ofthe sanction imposed, there are numer-ous collateral effects that a state licens-ing action may have on the health careprovider, including, but not limited to:• Loss of hospital privileges and/or em-

ployment;• Loss of enrollment with state profes-

sional associations and their associ-ated benefits (e.g., health, disabilityand life insurance);

• Loss of participation in PreferredProvider Organizations (PPOs) andother third-party payors;

• Loss of Drug Enforcement Adminis-tration (DEA) registration, state con-trolled substance licenses and otherhealth care licenses/registrations;

• Loss of board certification;• Exclusion from participation with

Medicare, Medicaid and other feder-al and state governmental programs;

• Commencement of other judicial oradministrative proceedings (e.g.,criminal proceedings, civil monetaryproceedings, malpractice actions, andother state licensing actions); and

• Permanent reports to the NationalPractitioner Data Bank and state li-censing data banks.Prior to the commencement of a formal

hearing, there often is a window of op-portunity in which an experienced andknowledgeable health care attorney canhelp the physician to develop and imple-ment prophylactic measures, and to takecertain actions that may convince the li-censing authorities not to proceed withdisciplinary action or to accept a sanctionless severe than originally recommended.

Due to this relatively small timeframe, it is imperative that the healthcare provider contact an attorney at theearliest recognizable stage of a potentiallicensing matter.

As Benjamin Franklin once said, “Anounce of prevention is worth a poundof cure.”

A health care provider that retainsan experienced and knowledgeablehealth care attorney early in the processoften can avoid the increased time andfinancial resources involved in trying towin a licensure case at an administra-tive hearing, when compared to re-sources needed to implement reasonablemeasures to rectify the alleged inappro-priate behavior/conduct.

Robert S. Iwrey is afounding partner of TheHealth Law Partners,P.C., where he focuses hispractice on litigation, dis-pute resolution, contracts,licensure, staff privileges,

Med icare, Medicaid, Blue Cross/BlueShield and other third-party payor au-dits and appeals. Contact him at (248)996-8510 or riwrey@thehlp.com.

Use of Civil Investigative Demands is expanded;confidential information should be protected

Health Care FraudBy Suzanne D. Nolan, Esq.

Suzanne D. Nolan isan associate at Frank,Haron, Weiner andNavar ro, PLC. Nolan’spractice focuses uponbusiness and intellec-tual property transac-tions, including trade-mark, patent, andcopyright licensing, e-

commerce transactions, asset purchaseand sales transactions, and real estatetransactions for all types of entities, in-cluding healthcare providers. She adviseshealthcare clients on HIPAA Stark, andAnti-Kickback Statute compliance and li-censing matters. Contact her at (248) 952-0400 or snolan@fhwnlaw.com.

CIDs are formidableinvestigative tools, and health care providersshould understand how they are usedin a government fraud investigation.

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8 • Michigan Medical Law Report Winter 2010 Cite this page 5 M.L.R. 56

Michigan MedicalLegislation Report Following is a list of bills pending in the MichiganLegislature related to health care and health careprofessionals. Detailed information and analysison this and other pending legislation can befound at www.michiganlegislature.org.

HOUSE BILLS

HB 4776 – Require prescribers to request in-formation from the Michigan automated prescrip-tion system before prescribing and prohibit dis-persing under certain circumstances

“Beginning Jan. 1, 2010, a prescriber shall re-quest information from the electronic system asallowed in section 7333a(2)(f) before prescribinga controlled substance included in schedule 3 or4 to a patient. In addition to any other duty theprescriber has with regard to that patient, the pre-scriber shall utilize information received from theelectronic system under this subsection to deter-mine whether a controlled substance included inschedule 3 or 4 should be prescribed for that pa-tient. Information obtained by the prescriber fromthe electronic system under this subsection isconfidential and is subject to the physician-pa-tient privilege. A prescriber shall mark on the pre-scription form that he or she has received infor-mation from the electronic system as requiredunder this subsection with regard to the patientfor which the prescription for a controlled sub-stance included in schedule 3 or 4 is written.

“Beginning Jan. 1, 2010, a pharmacist or dispens-ing prescriber shall not dispense a controlled sub-stance included in schedule 3 or 4 to a patient un-less the prescription form contains the mark of theprescriber that indicates the prescriber has receivedinformation from the electronic system as requiredunder subsection (1) with regard to the patient forwhich the prescription for a controlled substance in-cluded in schedule 3 or 4 is written. As used in thissection, ‘pharmacist’ and ‘dispensing prescriber’mean those terms as defined in part 177.”

Sponsored by: Wayne Schmidt-RReferred to the Committee on Health Policy

HB 4778 – Require primary care physician toinclude in patient’s medical record a copy ofcriminal record, if any, and government-issuedphoto identification; and to require, and prohibitprovision of primary care services until obtained.

“A physician under part 170 or part 175 or anyperson acting under the supervision of that physi-cian shall not provide primary care services to apatient unless all of the requirements of this sec-tion are met. This section does not apply to aphysician or any person acting under the supervi-sion of a physician who provides emergency ornonprimary care services to a patient.

“A patient who is 16 years of age or older shallpresent his or her government-issued photo iden-tification to his or her primary care physicianupon entering the office or during the check-inprocess. A physician shall make a copy of the pa-tient’s government-issued photo identification andplace that copy in the patient’s permanent med-ical record. The physician shall determine at eachsubsequent visit by the patient whether the iden-tification in the patient’s medical record is up-to-date and shall update the record if necessary.

“A patient who has been convicted of a drug of-fense shall disclose that conviction to a physicianwho is providing primary care services. A physicianshall include in any documentation required of pa-tients during the check-in process a space for thepatient to disclose if he or she has been convictedof a drug offense. If a patient discloses a drug of-fense under this subsection, the physician or anyperson acting under the supervision of that physi-cian shall not provide primary care services to thatpatient at any subsequent visit until the patientprovides a copy of his or her criminal record. Aphysician shall make a copy of the patient’s crimi-nal record and place that copy in the patient’spermanent medical record. The physician shall de-termine at each subsequent visit by the patientwhether the patient’s criminal record is up-to-dateand shall update the record if necessary.”

Sponsored by: James Marleau-RReferred to the Committee on Health Policy

HB 4937 – Requirements for any physician orother licensee who writes prescriptions to utilizee-prescribing system established under Medicareregulations

“Except as otherwise provided in this section, be-ginning July 1, 2010, a prescriber shall electroni-cally transmit every prescription for a prescriptiondrug written in this state in a manner that complieswith the electronic prescription drug program es-tablished for prescribers under the Medicare im-provements for patients and providers act of 2008,Public Law 110-275. A prescriber shall offer thepatient a written receipt of the information trans-mitted electronically to the pharmacy. The receiptshall include the patient’s name, the dosage anddrug prescribed, and the name of the pharmacywhere the electronic prescription was sent andshall indicate that the receipt cannot be used as aduplicate order for the same prescription drug.Nothing in this section interferes with the right of apatient to choose a pharmacy or with the prescrib-ing decision at the point of care. If the pharmacyto be used by the patient for whom the prescrip-tion is written is not able to receive electronicallytransmitted prescriptions as provided in this sub-section, the prescriber shall write the prescriptionutilizing electronic prescription technology and doone of the following as directed by the patient:

“(a) Print or otherwise provide the patient with apaper copy of the electronic prescription.

“(b) Transmit the electronic prescription to thepharmacy by facsimile or other means of elec-tronic transmission, if that transmission is oth-erwise allowed under this act.

“Nothing in this section diminishes or modifiesany requirements or protections provided for inthe prescription of controlled substances as oth-erwise established by this act. A prescriber and apharmacy shall comply with applicable state andfederal confidentiality and data security require-ments and applicable state record retention andreporting requirements with regard to electronical-ly transmitted prescriptions under this section.

Sponsored by: Kate Segal-DReferred to the Committee on Health Policy

HB 5043 – License revocation or denial uponconviction of first-, second- or third-degree crimi-nal sexual conduct

“Except as otherwise provided, an individualwhose license is limited, suspended, or revokedunder this part may apply to his or her board ortask force for a reinstatement of a revoked or sus-pended license or reclassification of a limited li-cense pursuant to section 16247 or 16249.

“Except as otherwise provided, an individualwhose registration is suspended or revoked underthis part may apply to his or her board for a rein-statement of a suspended or revoked registrationpursuant to section 16248.

“A board or task force shall reinstate a license orregistration suspended for grounds stated in sec-tion 16221(i) upon payment of the installment.

“Except as otherwise provided in this subsection, incase of a revoked license or registration, an appli-cant shall not apply for reinstatement before theexpiration of three years after the effective date ofthe revocation. In the case of a license or registra-tion that was revoked for a violation of section16221(b)(vii), a violation of section 16221(c)(iv)consisting of a felony conviction, any other felonyconviction involving a controlled substance, or a vi-olation of section 16221(p), an applicant shall notapply for reinstatement before the expiration of fiveyears after the effective date of the revocation. Inthe case of a license or registration that was re-voked for a violation of section 16221(b)(xiii), thatrevocation is permanent and the licensee or regis-trant is ineligible for reinstatement. The departmentshall return an application for reinstatement re-ceived before the expiration of the applicable timeperiod under this subsection or if the applicant isineligible for reinstatement under this subsection.

“The department shall provide an opportunity fora hearing before final rejection of an applicationfor reinstatement.

“Based upon the recommendation of the discipli-nary subcommittee for each health profession, thedepartment shall adopt guidelines to establishspecific criteria to be met by an applicant for rein-statement under this article or article 7. The crite-ria may include corrective measures or remedialeducation as a condition of reinstatement. If a

board or task force, in reinstating a license or reg-istration, deviates from the guidelines adopted un-der this subsection, the board or task force shallstate the reason for the deviation on the record.”

Sponsored by: Lesia Liss-DReferred to the Committee on Health Policy

HB 5057 – Require certain physicians to in-form patients during second trimester about op-tions regarding cord blood stem cells

“If funding is made available, the departmentshall promote public awareness and increaseknowledge about the statewide network of cordblood stem cell banks, cord blood banking op-tions, and the benefits of cord blood stem cellsby developing and disseminating educational ma-terials on the uses and benefits of cord bloodstem cells, the viability of cord blood stem cells,information on research results utilizing cordblood stem cells, and any other related materialsand information to enable the public to make in-formed decisions about the utilization of cordblood stem cells. Information shall include, but isnot limited to, all of the following:

“(a) An explanation of the differences betweenpublic and private cord blood banking.

“(b) Information on the statewide network of cordblood stem cell banks.

“(c) Cord blood options available.

“(d) The medical process and risks involved in thecollection of cord blood.

“(e) Medically accepted uses and benefits of cordblood collection and transplantation.

“(f) A statement that due to ongoing research anddevelopment there may be future uses andbenefits of cord blood collection and trans-plantation.

“(g) An explanation of any costs to the donor asso-ciated with cord blood donation and storage.

“(h) Information on how to request printed mate-rials and how to access other informationavailable on the department’s Web site.

“(i) Options for ownership and future use of thedonated material.

“(j) An explanation of the storage, maintenance,and viability for transplantation of cord bloodstem cells.

“The department, on its Web site, shall make thematerials and information gathered and developedunder subsection available in printable format to thepublic and to health care facilities and agencies,cord blood banks, and health care professionals.

“Except as otherwise provided in this section, ahealth professional who is the primary careprovider for a patient who is in her secondtrimester of pregnancy shall inform the patient ofthe following options relating to cord blood stemcells after the delivery of her child:

“(a) Discard the cord blood stem cells.

“(b) Donate the cord blood stem cells to a donorbank.

“(c) Store the cord blood stem cells for use by theimmediate and extended family members in acord blood stem cell bank.

“(d) Store the cord blood stem cells for family usethrough a family or sibling donor banking pro-gram that provides free collection, processing,and storage where there is a medical need.

“If the department has developed educationalmaterials under section 2683, the health profes-sional described in subsection 1 shall also pro-vide his or her patient with those materials. Ahealth professional described in subsection 1meets the notification requirements of this sec-tion by providing the information verbally or inwriting or by providing the woman with a publica-tion prepared by the department that, as certifiedby the department, contains all the informationrequired by this section in addition to the infor-mation required under section 2683.

“This section does not apply to a health profession-al and he or she is not required to inform a preg-nant patient regarding cord blood stem cell optionsif providing that information conflicts with thehealth professional’s bona fide religious beliefs.

“A person who acts in good faith pursuant to thissection is not subject to civil or criminal liability orprofessional discipline for those acts.”

Sponsored by Paul Scott-RReferred to the Committee on Health Policy

Pending LegislationLegislativeCommittee Members Contact information for state senators can be found at http://senate.michigan.gov.

Contact information for state houserepresentatives can be found athttp://house.michigan.gov.

COMMITTEE ON HEALTH POLICY House• Marc R. Corriveau (D) Committee Chair,

20th District• Kate Segal (D) Majority Vice-Chair,

62nd District• Barb Byrum (D) 67th District• Andy Coulouris (D) 95th District• Marie Donigan (D) 26th District• Bert Johnson (D) 5th District• Lesia Liss (D) 28th District• Andy Neumann (D) 106th District• Roy Schmidt (D) 76th District• Mike Simpson (D) 65th District• Dian Slavens (D) 21st District• Mary Valentine (D) 91st District• Jimmy Womack (D) 7th District• Jim Marleau (R) Minority Vice-Chair,

46th District• Richard Ball (R) 85th District• Brian N. Calley (R) 87th District• Hugh D. Crawford (R) 38th District• Cindy Denby (R) 47th District• Kevin Green (R) 77th District• Tim Moore (R) 97th District• Paul Scott (R) 51st District

Senate• Thomas M. George (R) Chair,

20th District• Jason Allen (R) Vice Chair, 37th District• Bruce Patterson (R) 7th District• Alan Sanborn (R) 11th District• Hansen Clarke (D) Minority Vice-Chair,

1st District• John Gleason (D) 27th District• Gilda Z. Jacobs (D) 14th District

COMMITTEE ON SENIOR HEALTH,SECURITY AND RETIREMENT• Andy Neumann (D) Committee Chair,

106th District• Dian Slavens (D) Majority Vice-Chair,

21st District• Bob Constan (D) 16th District• Robert B. Jones (D) 60th District• LaMar Lemmons Jr. (D) 2nd District• Richard Ball (R) Minority Vice-Chair,

85th District• Larry DeShazor (R) 61st District• Tim Moore (R) 97th District• Sharon Tyler (R) 78th District

COMMITTEE ON INSURANCEHouse• Barb Byrum (D) Committee Chair,

67th District• Coleman A. Young II (D)

Majority Vice-Chair, 4th District• Bob Constan (D) 16th District• LaMar Lemmons Jr. (D) 2nd District• Ellen Cogen Lipton (D) 27th District• Andy Neumann (D) 106th District• Gino Polidori (D) 15th District• Kate Segal (D) 62nd District• Joel Sheltrown (D) 103rd District• Jimmy Womack (D) 7th District• Cindy Denby (R) Minority Vice-Chair,

47th District• Kevin Green (R) 77th District• Joseph Haveman (R) 90th District• Pete Lund (R) 36th District• Jim Marleau (R) 46th District• Tim Moore (R) 97th District• Tory Rocca (R) 30th District

COMMITTEE ON JUDICIARY Senate• Wayne Kuipers (R) Chair, 30th District• Alan L. Cropsey (R) Vice-Chair,

33rd District• Gretchen Whitmer (D)

Minority Vice-Chair, 23rd District• Alan Sanborn (R) 11th District• Bruce Patterson (R) 7th District• Hansen Clarke (D) 1st District• Raymond Basham (D) 8th District

Michigan Medical Law Report • 9Winter 2010Cite this page 5 M.L.R. 57

HB 5284 – Amend 1969 PA 317, entitled“Worker’s disability compensation act of 1969,”compensation for exposure to secondhandsmoke.

“A lung disease or other condition that has beenlinked to secondhand smoke by credible scientificevidence shall be presumed to have been con-tributed to, aggravated, or accelerated in a signifi-cant manner by employment and is compensableas provided in this act if all of the following condi-tions are met:

“(a) The employer permits smoking in the workplace.

“(b) The affected employee does not smoke andhas not been a smoker in the immediatelypreceding 10 years.

“(c) The employee was subject to secondhandsmoke in the workplace for 1 year or more.

“The presumption under subsection (1) is removedif the employer provides affirmative evidence ofnon-work-related causation or specific incidentsthat establish a cause independent of employmentand not merely evidence of a preexisting conditionor an abstract medical opinion that employmentwas not the cause of the disease or condition.

Sponsored by Timothy Bledsoe-DReferred to the Committee on Regulatory Reform

SENATE BILLS

SB 0423 – Amend the Nonprofit Health Care Corporation Reform Act to include coveragefor K-12 school-required vaccines.

“A health care corporation that issues or renewsin this state a group or nongroup certificate shallinclude coverage for immunizations against dis-eases as specified by the director of the depart-ment of community health as necessary for atten-dance in grades K through 12 in this state.

“Coverage under this section shall not be subjectto any dollar limit, co-payment, deductible, orcoinsurance provision that does not apply toscreening coverage generally.

“This section does not apply to specified diseaseor accident-only coverage.”

Sponsored by: Gilda Jacobs-DReferred to the Committee on Health Policy

SB 0477 – Amend the Corrections Code of 1953, by adding agreements to have Michiganmedical schools provide medical services toprisoners.

“The department shall enter into agreements withone or more medical schools in this state underwhich health care services would be provided toprisoners by those medical schools.

“The department shall report to the legislature notlater than 180 days after the effective date of thissection, and annually thereafter, on the status ofany agreements entered into under this section.The report shall include an evaluation of the costand efficiency of health care services delivered un-der the agreements. Copies of the report shall bedelivered to the secretary of the Senate and theclerk of the House of Representatives and to thechairpersons of the standing committees of theSenate and House of Representatives responsiblefor legislation pertaining to corrections issues.”

Sponsored by: Thomas George-RReferred to the Committee on Judiciary

SB 0499 – Creation of the EmployeeAccommodation Act

“A health care provider may request reasonableaccommodation to avoid providing or participat-ing in a health care service to which the healthcare provider objects on ethical, moral, or reli-gious grounds.

“A health care provider shall request reasonableaccommodation described in subsection (1) inwriting. The written request shall be given directlyto his or her supervisor and shall include a state-ment explaining his or her objection and thehealth care service or services to which he or shespecifically objects to providing or participating inunder this act.

“A health care provider may request reasonable ac-commodation under any of the following conditions:

“(a) Upon being offered employment.

“(b) At the time the health care provider adoptsan ethical, moral, or religious belief systemthat conflicts with participation in a healthcare service.

“(c) Within 24 hours after he or she is asked orhas received notice that he or she is sched-uled to participate in a health care service towhich he or she objects.

“An employer shall retain a health care provider’swritten request filed under section 5 for the dura-tion of the health care provider’s employment. Thewritten request is valid for the duration of thehealth care provider’s employment or until re-scinded by the health care provider in writing.

“Within 7 days after receiving a written requestpursuant to section 5, an employer shall developa plan for reasonable accommodation with thehealth care provider to ensure that the healthcare provider will not be scheduled or requestedto participate in a health care service to which heor she specifically objects.

“An employer shall not ask a prospective employ-ee regarding his or her objection or potential ob-jection to a health care service unless participa-tion in that health care service is a regular orsubstantial portion of the normal course of dutiesfor the position or staff privileges the prospectiveemployee is seeking.

“An employer shall not refuse employment or staffprivileges to a health care provider who is knownby the employer to have previously requested or iscurrently requesting reasonable accommodationunder section 5 unless participation in that healthcare service is a regular or substantial portion ofthe normal course of duties for that position orstaff privileges.

“A medical school or other institution for the edu-cation or training of a health care provider shallnot refuse admission to an individual or penalizethat individual because the individual has filed inwriting with the medical school or other institutiona request for reasonable accommodation undersection 5. …

“Except as provided in section 9, a health careprovider’s objection to providing or participating in ahealth care service as described in section 5 shall

Pending LegislationContinued

COMMITTEE ON JUDICIARY House• Mark S. Meadows (D) Committee Chair,

69th District

• Ellen Cogen Lipton (D) Majority Vice-Chair, 27th District

• Lisa Brown (D) 39th District

• Bob Constan (D) 16th District

• Marc R. Corriveau (D) 20th District

• Andy Coulouris (D) 95th District

• Andrew J. Kandrevas (D) 13th District

• Bettie Cook Scott (D) 3rd District

• Rebekah Warren (D) 53rd District

• Tonya Schuitmaker (R) Minority Vice-Chair, 80th District

• Justin Amash (R) 72nd District

• Joseph Haveman (R) 90th District

• Rick Jones (R) 71st District

• Eileen Kowall (R) 44th District

• Tory Rocca (R) 30th District

COMMITTEE ON TAX POLICY • Kate Ebli (D) Committee Chair,

56th District

• Tim Melton (D) Majority Vice-Chair, 29th District

• Vicki Barnett (D) 37th District

• Andy Coulouris (D) 95th District

• Robert B. Jones (D) 60th District

• Andrew J. Kandrevas (D) 13th District

• Ellen Cogen Lipton (D) 27th District

• Jeff Mayes (D) 96th District

• Jim Slezak (D) 50th District

• Rebekah Warren (D) 53rd District

• Brian N. Calley (R) Minority Vice-Chair,87th District

• Eileen Kowall (R) 44th District

• Pete Lund (R) 36th District

• Arlan B. Meekhof (R) 89th District

• Kim Meltzer (R) 33rd District

• Jim Stamas (R) 98th District

• John J. Walsh (R) 19th District

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See “Pending Legislation,” page 10

10 • Michigan Medical Law Report Winter 2010 Cite this page 5 M.L.R. 58

not be the basis for one or more of the following:

“(a) Civil liability to another person.

“(b) Criminal action.

“(c) Administrative or licensure action.

“If a health care provider is required by his or heremployer to participate in a health care servicemore than seven days after the health careprovider has submitted a written request regardingthat health care service, the health care provider isimmune from civil liability in an action arising fromhis or her participation in that health care service.

“A civil action for damages or reinstatement ofemployment, or both, may be brought against aperson, including, but not limited to, a governmen-tal agency, health facility, or other employer, for pe-nalizing or discriminating against a health careprovider, including, but not limited to, penalizing ordiscriminating in hiring, promotion, transfer, a termor condition of employment, licensing, or grantingof staff privileges or appointments, solely becausethat health care provider has submitted a requestregarding participating in a health care service un-der section 5. Civil damages may be awardedequal to the amount of proven damages and at-torney fees. A civil action filed under this subsec-tion may include a petition for injunctive reliefagainst a person alleged to have penalized or dis-criminated against a health care provider as de-scribed in this subsection.

“A person who violates this act is responsible for astate civil infraction and may be ordered to pay afine of not more than $1,000 for each day the vio-lation continues or a fine of not more than $1,000for each occurrence.”

Sponsored by: Roger Kahn-RReferred to the Committee on Health Policy

SB 0565 – Amend Public Health Code torequire promulgation of rules relating to programfor allocating leftover medical supplies (PALMS)

“Subject to subsection (2), the department, inconsultation with the board, shall promulgaterules and establish procedures necessary to es-tablish, implement, and administer the PALMS.The board shall provide technical assistance to in-dividuals, health facilities and agencies, adult fos-ter care facilities, assisted living facilities, manu-facturers, pharmacies, and charitable clinics thatparticipate in the PALMS.

“The department, in consultation with the board,shall promulgate emergency rules under the ad-ministrative procedures act of 1969 on or beforethe expiration of six months after the effective dateof this section to establish, implement, and admin-ister the PALMS. The department, in consultationwith the board, shall promulgate permanent rulespursuant to the administrative procedures act of1969 as soon as practical after emergency ruleshave been promulgated under this subsection. Thedepartment and the board shall include all of thefollowing in rules promulgated under this section:

“(a) Eligibility criteria for pharmacies and charita-ble clinics authorized to receive and dispensedonated prescription drugs for the PALMS.

“(b) Eligibility criteria for eligible participants.

“(c) Establishment of a formulary that includes allprescription drugs approved by the federalfood and drug administration.

“(d) Standards and procedures for transfer, trans-portation, acceptance, safe storage, security,and dispensing of donated prescription drugs.

“(e) A process for seeking input from the depart-ment in establishing provisions that affecthealth facilities and agencies, adult foster carefacilities, and assisted living facilities.

“(f) A process for seeking input from the depart-ment and the department of human servicesin establishing provisions that affect mentalhealth and substance abuse clients.

“(g) Standards and procedures for inspecting do-nated prescription drugs to ensure that theprescription drugs meet the requirements ofthe PALMS and to ensure that, in the profes-sional judgment of the pharmacist, the pre-scription drugs meet all federal and statestandards for product integrity.

“(h) Procedures for the destruction and environ-mentally sound disposal of prescription drugsor other medications that are donated andthat are controlled substances or otherwise in-eligible for distribution under the PALMS.

“(i) Procedures for verifying whether the charitableclinic, pharmacy, responsible pharmacist, orother health professionals participating in thePALMS are licensed and in good standing withthe applicable licensing board.

“(j) Establishment of standards for acceptance ofunused prescription drugs from individuals,health facilities and agencies, adult foster carefacilities, and assisted living facilities.

“(k) Any other standards and procedures the de-partment, in consultation with the board, con-siders appropriate or necessary to establish,implement, and administer the PALMS.

“Pursuant to the rules promulgated and proce-dures established for the PALMS under this sectionand section 17775, an individual; a resident of ahealth facility or agency, adult foster care facility, orassisted living facility; or the representative orguardian of an individual or a resident of a facilitymay donate unused prescription drugs for dispens-ing to eligible participants under the PALMS.

“This section and sections 17775 and 17776 donot impair or supersede the provisions regardingthe cancer drug repository program established insection 17780. If any provision of this section orsection 17775 or 17776 conflicts with a provisionof that section with regard to cancer drugs, thatsection controls.”

Sponsored by: Tony Stamas-RReferred to the Committee on Health Policy

SB 0651 – An individual shall not intentionallyengage in or attempt to engage in human cloning.

“This subsection does not prohibit scientific re-search or cell-based therapies not specificallyprohibited by that under this subsection.

“An individual shall not intentionally transport, at-tempt to transport, or cause to be transported intothis state a human embryo created through hu-man cloning.

“An individual who violates subsection (1) thissection is guilty of a felony punishable by impris-

onment for not more than 10 years or a fine of notmore than $10,000,000 or both.

“As used in this section, ‘human cloning’ meansthat term as defined in section 16274 of the pub-lic health code, 1978 PA 368, MCL 333.16274.”

Sponsored by: Judson Gilbert-RReferred to the Committee on Health Policy

SB 0681 – Requirement to obtain informedconsent before testing for human immunodefi-ciency virus (HIV); eliminate, and provide optionto decline test in writing.

Except as otherwise provided in subsections (12)and (13), a physician who orders an HIV test or ahealth facility that performs an HIV test shall pro-vide counseling appropriate to the test subjectboth before and after the test is administered.

“Except as otherwise provided in this part, a physi-cian, or an individual to whom the physician hasdelegated authority to perform a selected act, task,or function under section 16215, shall not may or-der an HIV test for the purpose of diagnosing HIVinfection without first receiving the written, informedconsent of the test subject. For purposes of thissection, written, informed consent consists of asigned writing executed by the test subject or thelegally authorized representative of the test subjectthat includes, at a minimum, all of the following:

“(a) An explanation of the test including, but notlimited to, the purpose of the test, the poten-tial uses and limitations of the test, and themeaning of test results.

“(b) An explanation of the rights of the test subjectincluding, but not limited to, all of the following:

“(i) The right to withdraw consent to the test at anytime before the administration of the test.

“(ii) The right under this part to confidentialityof the test results.

“(iii) The right under this part to consent to andparticipate in the test on an anonymous basis.

“(c) The person or class of persons to whom thetest results may be disclosed under this part.Unless the HIV test is declined in writing underthis section, the test subject’s consent to gen-eral medical care is considered consent to anHIV test.

“Beginning July 28, 1989 through October 1, 2009,a physician or an individual to whom the physicianhas delegated authority to perform a selected act,task, or function under section 16215 who orders anHIV test shall distribute to each test subject a pam-phlet regarding the HIV test on a form provided bythe department. The department shall develop thepamphlet, which shall include all of the following:

“(a) The purpose and nature of the test.

“(b) The consequences of both taking and not tak-ing the test.

“(c) The meaning of the test results.

“(d) Other information considered necessary orrelevant by the department.

“(e) A model consent form for the signed writingrequired under subsection (2) test subject touse if he or she wishes to decline the HIV testin writing. The department shall include in themodel consent form all of the information re-quired under subsection (2)(a), (b), and (c)following:

“(i) An explanation of the test including, but notlimited to, the purpose of the test, the po-tential uses and limitations of the test, andthe meaning of test results. …”

Sponsored by: Thomas George-RReferred to the Committee on Health Policy

BILLS PASSED

HB 4377 – HEALTH, SmokingRequire smoke-free workplace and food serviceestablishments

Sponsored by Lee Gonzales-DPassed in House, Senate and signed by Gov.Jennifer Granholm

HBS 4763-69 – HEALTH, ChildrenCreate short title and allow for promulgation ofrules for Children’s Safe Products Act.

Sponsored by Judy Nerat-DPassed in House (63-44) Status: Referred to Committee on Health Policy

HB 4899 – HEALTH, DiseasesRequire department to create and update list ofreportable diseases at least annually

Sponsored by Kate Segal-DPassed in House (106-2) Status: Referred to Committee on Health Policy

HB 4900 – HEALTH, Local Health DepartmentsPenalties for violation of a local health depart-ment regulation or order of a local health officer.

Sponsored by Tim Moore-RPassed in House (104-4) Status: Referred to Committee on Health Policy

HB 4940 – HEALTH, Medical Equipment ReuseProhibit reuse of single-use medical equipmentand supplies

Sponsored by Dian Slavens-DPassed in House (108-0)Status: Referred to Committee on Health Policy

SB 0151 – OCCUPATIONS, Physical TherapistsGeneral amendments for individual licensing andregulation for physical therapists

Sponsored by Bruce Patterson-RPassed in Senate (37-0) Status: Referred to Committee on Health Policy

SB 0528 – Prohibiting reuse of single-usemedical devices under certain circumstances andprescription of remedies for violation.

Sponsored by: Bill Hardiman-RPassed in Senate (35-0)Status: Referred to the Committee on Health Policy

SB 0419 – HEALTH, BloodAllowing blood donation at age 16 with parentalconsent

Sponsored by Wayne Kuipers-RPassed in Senate (37-0) Status: Referred to Committee on Health Policy

Pending LegislationContinued from page 9

Covered entities, beware: Health care providers, healthplans and health care clearinghouses that commit health in-formation privacy and security violations will now face in-creased enforcement and will be subject to heightened penal-ties for violations of health information laws.

In compliance with the Health Information Technology forEconomic and Clinical Health Act (HITECH Act), on Oct. 30,2009, the Department of Health and Human Services (HHS)issued an interim final rule (the “Final Rule”) with commentperiod, which outlines HHS’ planned strengthened enforce-ment and increased penalty provisions for violations of theHealth Insurance Portability and Accountability Act (HIPAA).

The Final Rule was effective Nov. 30, 2009.

HIPAA prior to the HITECH ActPrior to the HITECH Act, a penalty of $100 could be im-

posed for each violation or $25,000 for all violations of iden-tical provisions of HIPAA.

To avoid liability for a HIPAA violation, a covered entitycould raise as an affirmative defense that it did not know,and by exercising reasonable diligence, would not haveknown, that it violated HIPAA.

Heightened penalties Section 13410 (d) of the HITECH Act established height-

ened penalties for violations of HIPAA, which are describedin the Final Rule, and which will be codified at 45 C.F.R. §401 et seq.

The HITECH Act created a tiered civil money penalty sys-tem for HIPAA violations and established a new maximumpenalty of $1.5 million for all violations of identical provi-sions of HIPAA.

Further, unless the covered entity corrects a HIPAA viola-

tion within 30 days from the date it discovers the violation, theHITECH Act removed the affirmative defense that permittedcovered entities to avoid liability for HIPAA violations by es-tablishing that it did not know, and by exercising reasonablediligence, would not have known, that it violated HIPAA.

Response to the Final RuleGeorgina Verdugo, director of the HHS Office for Civil

Rights (the agency responsible for enforcing HIPAA privacy,security and breach notification rules), stated by way of pressrelease published contemporaneously with the Final Rulethat one goal of the strengthened enforcement and increasedpenalty provisions is increased compliance with HIPAA:

“This strengthened penalty scheme will encourage healthcare providers, health plans and other health care entitiesrequired to comply with HIPAA to ensure that their compli-ance programs are effectively designed to prevent, detectand quickly correct violations of the HIPAA rules.”

Covered entities should re-evaluate their existing HIPAApolicies and protocols to ensure compliance.

This would include not only enacting policies to complywith the new breach notification provisions of the HITECHAct, but also to ensure that other existing policies and pro-tocols are consistent with HIPAA.

Physicians should consider having their HIPAA policiesand protocols reviewed by health care legal counsel as partof their annual compliance reviews to ensure conformitywith the regulations.

HIPAA enforcement strengthened, penalties increased ComplianceBy Abby Pendleton, Esq. and Jessica L. Gustafson, Esq.

Abby Pendleton and Jessica L.Gustafson are partners with the healthcare law firm of The Health Law Part-ners, P.C. They specialize in a numberof areas, including but not limited to, Recovery Audit Contractor (RAC), Medicare, Medicaid and other payoraudit appeals, health care regulatorymatters, compliance matters, reim-bursement and contracting matters,transactional and corporate matters,and licensing, staff privilege and payorde-participation matters. Contact themat (248) 996-8510 or apendleton@ thehlp.com and jgustafson@thehlp.com.

PENDLETON

GUSTAFSON

Business of MedicineBy Adrienne Dresevic, Esq. and Carey F. Kalmowitz, Esq.

Adrienne Dresevic, Esq. is a foundingmember of The Health Law Partners, P.C.She practices in all areas of health carelaw and devotes a substantial portion ofher practice to providing clients withcounsel and analysis regarding Starkand fraud and abuse. Contact her at (248) 996-8510 or adresevic@thehlp.com.

Carey F. Kalmowitz, Esq. is a founding member of The Health Law Partners,P.C. He practices in all areas of health care law, with specific concentration onthe corporate and financial areas, including structuring transactions amongphysician group practices and other health care providers, development of di-agnostic imaging and other ancillary services joint ventures, physician prac-tice, IDTF and home health provider acquisitions, certificate of need, compli-ance investigations, and corporate fraud and abuse/Stark analyses. Contacthim at (248) 996-8510 or ckalmowitz@thehlp.com.

Michigan Medical Law Report • 11Winter 2010Cite this page 5 M.L.R. 59

Despite legislative attempts to limit diag-nostic testing agreements, doctors still haveoptions. We’d like to provide a brief overviewof the elements that comprise a typical leas-ing model structure and examine some of thehealth care regulations that must be consid-ered in connection with these arrangements.

Finally, we’ll discuss the current legal sta-tus of the leasing model, which permits ap-propriately structured diagnostic testing inthe physician’s office.

The leasing modelA mobile leasing entity (Mobile Company)

enters into a written contract with a physi-cian under whom it leases portable diagnos-tic testing equipment, a technologist and theassociated imaging supplies to enable thephysician to furnish certain diagnostic test-ing to patients of the practice in the office(Leasing Services).

The physicians will exercise the requireddegree of supervision of the services and,thus, the physicians will be the entity that isconsidered to be the provider of — and enti-tled to bill for — the services.

In practice, the Leasing Services model pro-vides physicians with in-office access to theequipment, personnel and supplies with whichthey are then able to furnish the technicalcomponent (TC) of the testing to their patients.

The physicians will bill Medicare and oth-er payors for the tests. The Leasing Servicesmust be structured as a block lease arrange-ment, subject to certain minimum hourlyrequirements. The physicians must pay theMobile Company a fixed fee for the leasedblock of time (i.e., without reference to thenumber of studies performed), and the feemust be (i) fair market value and (ii) estab-lished in advance.

In addition to being the provider of the TC,provided that certain standards are met, thephysician also can furnish (and bill for) theprofessional component (the PC) of the tests.

Regulatory considerationsBecause diagnostic testing arrangements

(including the Leasing Model) potentiallyimplicate a number of different health careregulations, physicians employing a LeasingModel must ensure that that their contractcomplies with applicable legal requirements.

It has been our experience that, so long ascertain structural safeguards are integratedinto the arrangement (i.e., in particular, fac-tors that (i) demonstrate the nexus betweenthe physician group’s core services and the di-agnostic services, and (ii) permit the group toshow that the group is at sufficient financialrisk), in the majority of cases, the LeasingModel can be structured in a manner thatcomplies with the Federal Stark Law (Stark),Medicare’s Anti-Markup Rule (the AMR),Medicare’s independent diagnostic testing fa-cility (IDTF) regulations, and the Medicareand Medicaid Anti-kickback Statute (AKS).

Federal Stark lawPhysicians that furnish diagnostic imag-

ing services under the Leasing Model mustdetermine whether, under the group’s struc-ture, they will be able to provide the servic-es in a manner that meets Stark’s in-officeancillary services exception (IOASE).

Notably, a practice will be able to furnish(and bill for) diagnostic testing under the Leas-ing Model, provided that the practice (i) quali-fies as a “group practice” under the Stark, (ii)bills for the testing services under the group’sprovider number, (iii) supervises the tests inaccordance with Medicare rules, and (iv) fur-nishes the services in the same building inwhich the group’s physicians furnish profes-sional medical services unrelated to the tests.

Further, groups that will bill for the PC ofthe services, if an employed physician providesthe interpretation, there is no on-site require-ment under Stark, but the Medicare AMR willapply to the services, which means that if the

physician provides the PC of the services off-site, he must “share a practice” with the physi-cian by providing at least 75 percent of his/herprofessional services for such group.

Medicare anti-markup rulePhysicians that operate under a Leasing

Model must also ensure that their arrange-ments are structured in a manner that doesnot cause the services to fall within thepurview of the AMR’s payment limitations.

The Centers for Medicare and MedicaidServices (CMS) adopted two alternative

tests for determining the applicability of theAMR as follows:

• If the performing physician (the physi-cian who supervises TC or performs thePC, or both) performs substantially all(at least 75 percent) of his or her profes-sional services for the billing physicianor other supplier, the services will not besubject the AMR payment limitations.

• TCs conducted and supervised in, andPCs performed in, the “office of thebilling physician,” which includes the“same building,” by an employee or inde-pendent contractor physician avoid theAMR payment limitation.

Physicians should readily be able to satis-fy the first alternative if they provide atleast 75 percent of their services through thebilling practice. Further, it is possible for the

physicians to satisfy the second alternative,if the physicians furnish and supervise theservices in-office.

Pursuant to CMS guidance, the LeasingModel does not fall within the purview of theIDTF regulations. Thus, the physicians thatemploy the Leasing Services can billMedicare directly for the services furnishedin conjunction with the Leasing Model.

Anti-kickback statuteAlthough the Leasing Model does impli-

cate certain legal risks that the Office of In-spector General typically reviews in its AKSguidance, a carefully structured LeasingModel will incorporate mitigating factorswhich reduce risk.

For example, the Leasing Model contem-plates a block leasing schedule, which requiresthe physicians utilize the leasing Services fora minimum amount of time per week (ormonth, depending upon the nature of the test).

The physicians must pay a fair marketvalue fee for the blocks of time to which theysubscribe, despite the volume of services. Agroup cannot subscribe for the Leasing Serv-ices solely when the group is assured ofearning a profit and, as a result, the group isrequired to bear financial risk.

Finally, an appropriately structured Leas-ing Model also should permit the group toshow a reasonable nexus bet