This is Michael H. Cohen, founding attorney and president of Cohen Healthcare Law Group. And welcome to today’s Healthcare Legal Adventure.
How to overcome healthcare legal roadblocks – first spot the legal traps
What is it that you want to get out of talking to a healthcare lawyer, an FDA lawyer or really any lawyer? What’s it about who leads the session? You’re spending all this time, energy, money during the hour. You want to get some answers. What’s the process like? What is it that was going to help you maximize your investment here?
Let me tell you what we do with every single client that walks in the door. We have an intake form and on that form, we ask four questions. The first is, what legal or business challenge brings you to our firm? What legal or business challenge brings you to our firm? This is really important because we always want to start with what they want to get out of it. What is it that’s concerning you? What’s keeping you awake at night? What’s the dominant problem? What’s the obstacle? What’s the roadblock? What’s the pitfall that you’re staring to the dark, deep belly of the beast or you’re saying, “If only I can get this one thing resolved, then my business can take off.”
People sometimes balk at paying a retainer. It’s kind of like going to the dentist. You’re going to put it off, put it off but if you’re smart, you’re going to calendar it for every six months or every four months if you need some extra TLC there on the teeth, some cleaning because you don’t want to use your dentist for emergency care. You don’t want to walk in when you neglected the tooth and it’s all painful and you’re suddenly there and, “Oh, my God, now it’s a root canal or is it I’d rather be in Philadelphia than get a root canal,” something like that. Or even have the tooth extracted. Now, you have to have an implant.
We don’t want to give you surgery. In law, litigation is the equivalent of the emergency surgery. That’s the appendectomy. That’s the emergency procedure where you get a big bill from the insurance company and suddenly the complexities multiply. You’ve got complaint and cross-complaint and counterclaims, and claims and the answer in interrogatories and deposition, hearings, motion practice, I mean all of that stuff. And then normally, finally, the thing goes away if somebody pays a hefty sum.
It’s very efficient, it’s very inexpensive, very economical to hire a lawyer preventatively. And the first thing that a lawyer should ask you, the first thing that we ask as a healthcare legal team is, what legal or business challenge brings you to our firm?
What healthcare legal outcome would you like – if I could waive a magic wand?
The next thing we ask is what outcome would you ideally like? What outcome would you ideally like? If I could a wave a magic wand and you could get like the perfect legal advice, what is it that you’d like to do? “I’d like to get investors.” “I’d like to not get blown out of the water by the FDA.”
I was talking to a colleague who asked me for FTC legal review of their advertising and marketing. And I didn’t have to sell this potential client on the pros and cons and the advantages of having FTC legal reviews of his advertising and marketing material because he just asked me basically like … Basically, he just wanted to be compliant. He understood that with FTC, it’s strict liability or as we used to say in law school, “Strict liability, strict liability, strict liability.” Just like that.
There’s no negligence. There’s no intent. You haven’t done anything wrong in anyone’s eyes, well, except in the eyes of the law, it’s strict liability. I supposed if you plow through the stop sign or at the red light, it doesn’t matter that you were careless or negligent, or intentional. Really, your state of mind doesn’t matter. It’s strict liability. You’re strictly liable simply because you did the action.
When medical doctors advertise their professional medical services (including online advertising) they can easily run afoul of legal and regulatory traps. Watch out for these 7 legal traps in […]
This prospective client actually said to me, “Listen, if you really want to be a good healthcare and FDA lawyer, you have to see …” I think it’s called Little Nicky with Adam Sandler. Absolutely clear, you have to see Little Nicky. And I said, “Why?” He said, “You know that scene where, you know, the character goes to hell and they take this giant pineapple. They shove it up his butt.” Forgive my crudeness here but this was what the analogy was. He said, “I don’t want FTC to shove a giant pineapple up my butt.”
Pretty much, that was the outcome that he didn’t like. The outcome that he like would be to continue making millions of dollars a year without intrusion, interference, investigation, enforcement, being shut down by regulatory authorities. And what FTC in particular can do is they can require a company to disgorge all of the unlawful gains. Meaning every single penny you’ve ever made from any sale, guess what? It goes right to the government. That is the potential negative outcome of FTC enforcement.
Sometimes, the outcome isn’t stated in a dramatic positive way. It’s more like the prevention of something negative and painful. We don’t want the pineapple. You don’t have to go and see Little Nicky but you can easily Google the scene and think about FTC and understand that that’s an outcome that we don’t like.
Ideally, we’d like a positive outcome which results in smooth operation, smooth flow of profits without interference by a regulatory agency, without liability, without a lawsuit, without all of the arrows and slings of outrageous misfortune which are the side of law that nobody wants to encounter. We want the good side. We want law to support your business and that’s what we do in a legal strategy session.
How to move your healthcare venture forward
And now, we’ve waved that magic little wand. Question #3, what have you done so far to resolve this? This is pretty interesting because a lot of clients come to us having seen other lawyers, having gone to other law firms. They come with it with a certain post-lawyer stress syndrome. They’ve gone out. They’ve gotten advice. They didn’t like the advice or they didn’t get the right advice.
Or, they consulted a business lawyer who didn’t know anything about healthcare law, or might have had some personal wrangle with their healthcare insurer and says that they know something about healthcare law but they really don’t know the ins and outs of HIPAA, Stark, Anti-Kickback, Fee-Splitting, corporate practice of medicine, FDA law, FTC law, state law, marketing and advertising regulations in California, all the nitty-gritty, itty-bitty nuances that are in the business and professions code.
By the way, I had one client. She’s a physician. She wants to do a functional and integrative medicine practice and she told me that her husband is on some committee that’s tasked with reforming the business and professions code. And I say, “Good luck, and God bless, amen, hallelujah. You know, I hope that some of these arcane rules can really be reformed. That’s a noble pursuit and the proof will be in the proverbial pudding.”
What have you done so far to resolve this? And then finally, what will it cost you in terms of time, money, or reputation? If you don’t solve this puzzle, what will it cost you in terms of not TMI but TMR, time, money, or reputation if you don’t solve the jigsaw puzzle? The Rubik’s cube, the regulatory Rubik’s cube of healthcare law which is we don’t want your ships to break on the Scylla of law and the Charybdis of regulation and enforcement policy. We want to navigate you safely through the channel so you can get to the other shore.
Fundamentally, you’re worried about legal rules prohibiting kickbacks, fee-splitting, corporate practice of medicine, as well as Stark law; you don’t know whether the MSO or management structure […]
Healthcare legal challenges… spotting the key legal roadblocks so you can tackle and shackle them
To bring this alive and showcase the diversity of legal issues that healthcare ventures and healthcare practices face, let me give you a couple of examples because I think this will really crystallize in your mind how you can make best use of a healthcare and FDA lawyer during your time together. And as we say, we always start every client with a legal strategy session. Well, before the legal strategy session, we have sent this intake form. We have analyzed responses. We’ve done a little bit of research and we have a basic grasp of some of the healthcare legal issues that are going to come up that we can address during our legal strategy session.
Now, I’m not going to violate any client confidentiality, obviously. There are no names. There are no details but just to give you a sense of how some of our healthcare clients have answered the form, a sense of how these answers range depending on whether the person asking is a clinician like a medical doctor, a chiropractor, an osteopath, a naturopathic medical doctor, a nurse practitioner or a registered nurse or someone else versus let’s say a healthcare startup.
It could be someone in digital health, a telemedicine company, a mobile medical app, a developer. It could be a dietary supplement company, a cosmetics company, someone in the beauty industry or someone with a new therapeutic idea. Somebody wants to put together the medical, clinical, and wellness side and the business side and create an MSO or a mighty healthcare venture that’s going to be branded that will cross states, that will get people engaged with a particular diagnostic or a therapeutic approach that’s going to bring about health and wellness.
Here are some examples. With legal challenge, what legal or business challenge brings you to our firm? I learned from a fellow complement an alternative medicine practitioner about your law practice. What outcome would you ideally like? “To understand what’s legally appropriate, I need to push the edge in integrative medicine.” What have you done so far to resolve this? “Study what I can do and what I can’t do by talking to other medical doctors that I respect.”
There was one. This was a functional medicine practitioner who is using stem cell therapies in trying to stay within the bounds of stem cell law and regulation but he literally said that when he offered this to his patients, that competitor doctors, their eyes would bug out and they would say, “I thought these treatments were legal.” We wanted to give this person some healthy healthcare law advice.
Hello. Good morning. Good day. Good afternoon. Buenos Dias. Shalom. Wherever you are. I’m Michael H. Cohen, a healthcare and FDA lawyer. Today’s topic is how can functional and integrative […]
Now, here’s another one again from an integrative medicine practitioner that happens to be. What legal or business challenge brings you to our firm? “I don’t know the best way to set up my online healthcare education business.” And this is very common. People who want to change it up a little bit, not simply offer clinical medical services, they want to operate online with a health coaching service or product. They don’t know the best way to set it up.
What outcome would you ideally like? “I would like instruction by a healthcare lawyer on the best way to incorporate. I’d like some legal advice on my potential liability as a physician who is offering educational information online versus in person, so telemedicine digital health. I’d like to be ready to launch my website and to feel that I am secure and safe in accordance with laws, rules, regulations, and policy.”
What have you done so far to resolve this? “I’ve done online research, signed up for this legal strategy session and I’ve I planned to attend some legal and business mentorship classes.”
What will it cost you in terms of time, money, or reputation if you don’t solve this puzzle? “I will lose the valuable time I spent building my business. I will lose the market share as the market is moving rapidly and I’d like to jump in. I would lose customers and future revenue. My reputation would be considered unreliable.”
This was how the functional and integrative medicine practitioner who heads their own holistic healthcare wellness center answered these particular questions, and of course, we dove in with appropriate legal advice.
Here’s another one. This one is actually a startup making a product that is FDA regulated. It could be biologic. It could be cosmetic. It could be a dietary supplement. It could be medical device, but basically these are kits.
What legal or business challenge brings you to our firm? “Making sure our kits test are compliant with US healthcare law and regulations we’re planning in advance.” What outcome would you ideally like? “I would like to be educated on the healthcare legalities of our product and what I need to do in the future to assure my continued business success.”
What have you done so far to resolve this? “Well, we know that we fall into a legal gray area. We’ve had research, disclosures, talk to other lawyers, et cetera, et cetera, et cetera.” What will it cost you in terms of time, money, or reputation if you don’t solve this puzzle? “If FDA acts or if we get a class action by a private plaintiff, then my business ends.” Pretty much tells you why you don’t want to go to the emergency room. You don’t want to be DOA, dead on arrival, because you neglected to do the preventative legal work.
The Legal Strategy Memo: aligning the Rubik’s Cube of healthcare legal challenges
Now, sometimes after legal strategy session, very often, there is more work to do, more healthcare legal work to puzzle out some of the complexities. To give you an example, this one is a professional chiropractic corporation which also has some other license healthcare professionals on board. It has massage therapists. It has personal trainers, certified athletic trainers, a physical therapist, and marriage and family therapist. And they also want to bring a licensed medical doctor on board.
On the surface, it’s simply a clinic with lots of different practitioners but because it weaves in all of these different healthcare licensees, there are some complexities. And we have to tease them out one by one. This is what we lawyers call issue spotting. For example, they want to bring in some of these practitioners as independent contractors, yet they want you exert control over the way that these contractors work.
Some years ago, I represented a healthcare startup and their entire business model was based on using massage therapists and there are questions about whether in their state they could even do this or whether that would be considered fee-splitting, at least technically because of the breadth of the way that the anti-kickback and fee-splitting statutes were drafted. And this client had gone to five or six different law firms including some the largest, most reputable law firms in the country. And each of those lawyers had said, “No. You can’t do it. It’s too risky.”
And at that point, I was a strapping young solo practitioner. I did a legal analysis, wrote a memo for a couple of thousand dollars at that time. Who knows? Maybe it was $10,000 at the most to do all of the work that they required. And I gave them a yes and I told them how they could do it. And we went to the nooks and crannies and crevices, and we read these rules very, very carefully. And we’ve added them. We didn’t just simply shy away from it, run from the problem, give a conservative legal answer, just say no because it’s easy to do and because easiest way in the world to make money as a lawyer is to take $10,000 and just say no.
But we don’t always find an unqualified yes. Normally, there are a lot of qualifiers, caveats, and there are a lot of pitfalls and traps and you have to be very nuanced. We’re not yes people. On the other hand, we’re not no people. In any event, this client got a way through and a couple of years later, their revenues are … They just did an offering for something in the range of $10 million. So, $10,000 legal investment to get the company started, $10 million in funding. You could do the math. It’s just tremendous ROI and well worth it.
And one of their questions was, if they have the massage therapists wear T-shirts, is that adding to the exercise of a degree of control if there were company T-shirts? Could some regulator then come around and say, “Well, hey, you misclassify these employees. These are really employees, and you misclassified them and therefore, they’re not contractors. By the way, you owe back-pay and you know a $25,000 per violation statutory penalty,” which if you consider each employee a violation and you do a multiplier, times 25 G’s, that number can get pretty high pretty quickly.
Don’t fool with mother nature. Don’t fool with some of these legal rules. And not all of the legal questions that people address to us are healthcare legal questions. Some are in the general business domain. Some are IP, intellectual property questions, legal questions and those we address as well. As you may know, the issue of control is really quite dispositive with respect to whether an individual should be classified as an independent contractor versus an employee.
That was one of the issues that we addressed in our legal strategy memo as a follow up to the legal strategy session. There were also issues of fee-splitting. There were issues about kickbacks, issues about corporate practice and ultimately, some economic decisions to be made with respect to how to hire and engage these different practitioners.
Now, note that there are particular legal prohibitions applicable to physical therapists in some states and also with respect to the MD, medical doctor, DO, doctor of osteopathy, and ND, naturopathic medical doctor. These are special cases because of legal prohibitions against unlicensed in corporate practice of medicine.
Now, without getting deep into the weeds, just know that in California, there is a statute known as the Moscone-Knox Professional Corporation Act. This statute allows different combinations of healthcare licensees such as, for example, an MD and a chiropractor to be shareholders, officers, directors, or employees of various kinds of professional corporations.
For example, a chiropractor could be an employee or an officer or director or shareholder of a professional medical corporation. And there are also provisions allowing for the medical doctor to be part of the chiropractic professional corporation.
What’s interesting is that the Moscone-Knox Professional Corporation Act allows these structures, yet it does not address the corporate practice of medicine. You have to really understand the way that these different rules interlock and intersect, and sometimes frankly contradict one another and then figure out the whole package so that you can present appropriate advice to the client.
That’s just an example. Again, we’re not giving away any client confidentiality. We are not honing in on deep in the weeds legal solutions but simply to say that legal issues are complex. They’re nuanced, and I described them as a Rubik’s cube. Really, you got to line up all the blues, and yellows, and greens, and reds, and whites, and blacks, and oranges because you have to have this one side lined up so that the other sides line up so the whole thing makes sense. If you missed part of the puzzle, if you don’t spot all the right legal issues, if you don’t take the time to put the business model in writing in one or two pages in a simple yet crystal clear and accurate way and then do a legal analysis, then you might leave yourself exposed.
While federal Stark and anti-kickback laws, and state law equivalents (often known as “mini-Stark” and “fee-splitting prohibitions”) are very complex, there 5 key legal rules you’ll want to know. […]
And again, going back to the dental analogy, it’s like when the dentist puts in your crown, they don’t want to leave the margins open. They don’t want to leave a space for the bacteria to get in. We don’t want legal bacteria to get in. We don’t want to have a legal or regulatory root canal. I don’t think that there’s a legal implant. There are briefs and responses, and it’s simply better if you don’t go there.
My last metaphor for the day, many years ago, I had a motorcycle. It wasn’t a Harley. It was a nice Honda and it went vroom-vroom. It was wonderful and delicious to ride. And I remember taking a safety class. My instructor would always talk about these things that could get you in trouble. Like for example, when you get to an intersection not having at least some kind of head signal or acknowledgment to the other cyclist, so that who goes first? And he would say, “Because if you don’t get these things right, you end up down there,” and he pointed the ground. Then he say, “What’s down there?” Pain.
We don’t want pain. We want success, business success. So, here’s to your healthcare legal adventure, to your business success. Pay attention to the details. Get good legal advice. Don’t roll the dice. Get sound healthcare legal advice. Figure out the puzzle. Get the Rubik’s cube lined up so that your healthcare venture can prosper.
Revenue, Revenue, Revenue
A couple more examples here. This one involves a medical doctor who had a contract that needed a review. What legal or business challenge brings you to our firm? “Very simple, review of healthcare contract.” What outcome would you ideally like? “Identify any problems, concerns and advise me on how to proceed,” very straightforward. What have you done so far to resolve this? “I’ve spoken and exchanged emails with the person who sent me the contract.” What will it cost you in terms of time, money, or reputation if you don’t solve this puzzle? They said uncertain. How did they find us? They researched corporate practice of medicine.
Here’s another one. This is a telemedicine, tele-dentistry startup that’s establishing their telehealth business. What legal or business challenge brings you to our firm? “To verify that our business and billing model for our tele-dentistry healthcare startup is generally legally allowed across the United States.” What outcome would you ideally like? “To get an understanding of our business model, and whether the way that we are marketing with respect to leads for a tele-dentistry is legally acceptable.”
What have you done so far to resolve this? “We’ve contacted and submitted questions to various attorneys. We’ve contacted various professional organizations to check into the law and ethics of our business. We’ve researched and reviewed state law independently in terms of the legality and the compliance aspects of marketing to physicians, marketing to patients.”
What will it cost you in terms of time, money, or reputation if you don’t solve this puzzle? And this one is very interesting. “The lost time is not measurable per se but it is in knowing whether it is wise to move forward with the business, because right now we have a halt of our productivity and investment resources until we get this legal roadblock solved.”
Here is another one. This is a health and wellness clinic. What legal or business challenge brings you to our firm? “I own a medical practice that has independent contractors and I want to make sure everything is set up legally.” What outcome would you ideally like? “Confirmation that what we are currently doing is within the law.” What have you done so far to resolve this? “Well, we’ve given patients a bunch of waivers that say that everything that we do is magically okay, but we understand that this is not a total legal solution.”
What will it cost you in terms of time, money, or reputation if you don’t solve this problem? “In terms of time, we have to solve it because we have to make more revenue. In terms of money, revenue. In terms of reputation, revenue.” So, there you have it.
Healthcare Legal Adventures Continue
You’ve been listening to the Healthcare Legal Adventures podcast. This is Michael H. Cohen, president and founder of Cohen Healthcare Law Group. If you’d like to hear more episodes, simply go to CohenHealthcareLaw.com. Go to the tab that says blog/podcast and you can download more episodes, or visit our other website at HealthcareLegalAdventures.com where you’ll find online courses, DYI forms and other resources to help you with your healthcare legal adventure. We look forward to seeing you on the next episode.