Physician Run and Physician Driven Practices – Part 1

At Cohen Healthcare Law Group, PC, we advise many different types of medical practices. One of or our groups of clients are physicians and other core healthcare providers who provide direct medical services to patients in physician-owned facilities. We also represent healthcare professionals who provide a broad range of specialty services such, mental health professionals, and other medical services.

Our firm also provides council to health providers who use telemedicine services to reach patients online and medical facilities that may be shared by many different doctors such as ambulatory surgery centers. Other client categories include biotech and life science companies, cannabis ventures, cosmetic companies, MSOs, medical device companies, dietary supplement and nutraceutical companies, medical spas, and OTC and homeopathic drug companies. We also advise many ancillary care services such as laboratory testing centers and imaging centers.

The types of physician business we advise are:

• Medical Groups and Medical Centers. These include physician practices, medical clinics, and other entities.
• Allied Health Providers. These providers have many different legal needs based on the type of practice and the relationship with the physicians (MDs and Dos). Over ½ of all healthcare providers are allied health providers. Allied health providers are often at the front line of care for patients. Allied health providers include Advanced Practice Nurses, Registered Nurses, and Nurse Practitioners, various types of pathologists, clinical psychologists, EMTs, genetic counselors, health information technologists, imaging specialists, pharmacists, therapists, physician assistants, and licensed social workers. The laws regarding allied health providers are complicated because the providers need to be aware of the relevant physician compliance issues and the compliance issues for each specific type of practice.
• Concierge and Direct Medical Primary Care Practices. Concierge medicine is also called boutique medicine or retainer medicine. Concierge/direct medicine generally involves billing patients or clients a subscription for medical care and other health care services. Direct medical care practice involves physicians who typically bill for services through insurance carriers, Medicare, or Medicaid
• Complementary, Alternative, & Integrative Medicine Providers. This category of clients includes a variety of healthcare practices including:
  • Acupuncture and traditional oriental medicine
  • Dietary supplements and natural products
  • Energy healing and energy medicine
  • Guided imagery, hypnosis, and progressive relaxation
  • Healing touch, therapeutic touch, Reiki
  • Herbal medicine
  • Homeopathy
  • Integrative cardiology
  • Integrative oncology, integrative pediatrics, integrative pain management
  • Massage therapy and manual therapy
  • Mind-body medicine
  • Nutrition and lifestyle approaches to health
  • Osteopathic medicine
  • Yoga and meditation
• Healthcare Facilities. We advise licensed and non-licensed facilities and ventures on business and regulatory compliance issues. Clients in this category include, among many others:
  • Hospitals
  • Ambulatory care
  • Addiction treatment centers
  • Clinical laboratories
  • Home health agencies
  • Long-term care facilities
  • Clinical research laboratories
  • Diagnostic and screening facilities
  • Hospices
  • Pharmacies
  • Psychiatric facilities
  • Rehabilitation centers
  • Senior service centers
  • Sober-living facilities
  • Urgent care facilities
  • Skilled nursing facilities
• Anti-Aging & Functional Medicine Practices. We counsel practices/businesses that provide longevity, anti-aging, aesthetic, and functional care – or any type of care other than traditional medical care. This ever-expanding healthcare category includes treatments for staying fit and good-looking. This care includes diet, nutrition, mind-body-spirit care, exercise, relationship and other types of emotional, mental, and physical care. Some of the clients we represent in this category include:
  • Aesthetic medicine
  • Ayurvedic medicine
  • Anti-aging medicine
  • Bio-identical hormones
  • Complementary and Alternative Medical (CAM) Therapies
  • Cosmetics and Cosmeceuticals
  • Dietetics and Nutrition
  • Dietary Supplements and Herbal Medicine
  • Energy medicine
  • Functional medicine
  • Genetics counseling and genetics or genomics based therapies
  • Health and wellness lifestyle apps and mobile medical apps
  • Integrative medicine
  • Lifespan medicine
  • Osteopathic medicine
  • Physical fitness and integration of healthcare into fitness and gym settings

The common denominator in physician driven healthcare practices are generally that the practices are either run by the physicians, supervised by physicians, or staffed by physicians. In all physician driven practices, there are many different issues that we help clients understand and address. Some healthcare practices and business may fit into multiple categories. Practices also have unique issues for each particular practice that an experienced healthcare lawyer will review.

What are the general compliance and transactional issues for physician driven practices and arrangements?

Generally, physician-driven healthcare practices have the following compliance and business issues:

• Numerous legal and regulatory compliance laws and requirements. We advise clients about:
  • Anti-referral laws such as Stark Law and the Anti-Kickback Statute (AKS)
  • HIPAA
  • The use of Managed Service Organizations (MSOs)
  • Federal and state agency compliance laws including warning letters.
    • The Federal Trade Commission generally monitors your online and offline advertising and marketing
    • Food and Drug Administration (FDA) regulations generally apply to companies that make and distribute drugs, medical devices, cosmetic devices, and other healthcare products. Physicians the physician-driven businesses do need to understand when and how FDA oversight does affect practices and businesses.
    • Over-the-Counter (OTC) compliance
• Many business related issues including:
  • Business formation issues
  • Employment and consulting agreements
  • E-commerce issues
  • Real estate and licensing
  • Dispute resolution
  • Insurance issues

Some of the regulatory compliance issues that Cohen Healthcare Law Group, PC, provides includes the following.

Stark Law and AKS Law

Physicians need to take very careful precautions for every type of business relationship they have – whether regarding their own business, ancillary practices, the people who might refer patients to them, and the people/businesses whose products they use. The federal government and state governments place an extremely high priority on ensuring that all financial and referral arrangements are designed to put the patient’s health and safety above everything else. For example, patients shouldn’t be given tests they don’t need. If they do need tests, the tests should be reliable and accurate so the patient can receive quality care.

We review the professional arrangements and contracts our clients have with other doctors, nurses, and healthcare professionals and business. We focus on planning and compliance regarding:

• Stark – a federal self-referral law
• The federal Anti-Kickback Statute (AKS)
• State laws governing fee-splitting such as the California Business & Professions Code.

Stark law (a physician self-referral civil law) focuses on the relationships between a physician and a “designated health service (DHS)” In which the physician (or a family member) has a financial interest in. Generally, it is illegal for the doctor to refer patients to a DHS (where they have a financial interest in that DHS) unless a specific Stark exception applies. Stark law is a strict liability law which means doctors are subject to the law if they knew or “should have known” the conduct violated the law. Penalties can include:

• Substantial fines – up to $15,000 for each prohibited referral.
• A return of payments made by a government agency such as a Medicare or Medicaid
• Exclusion from participating in Medicare or Medicaid programs

Some of the numerous exceptions (which we review with our clients) include exceptions for:

• Rental space
• Office equipment
• Bona-fide employment relationships
• Physician recruitment
• Group practice arrangements with a hospital
• Personal service arrangements
• Many other transactions

We explain the requirements for each exception and then work to craft documents and protocols to help ensure you meet those specific requirements.

The AKS is a criminal statute, an anti-corruption law, designed to benefit the beneficiaries of healthcare programs such as Medicare, Medicaid, or TRICARE, from the influence of financial incentives on referral decisions. “The law makes it illegal to exchange (or offer to exchange), anything of value, in an effort to induce (or reward) the referral of business reimbursable by federal health care programs.” Value includes money, sham directorships, discounts on office costs, vacations, and many other financial benefits.

Penalties can include:

• Fines up to $25,000 for each violation
• Five years in jail
• Exclusion from Medicaid and Medicare programs

While Stark law applies to physician referrals, the AKS applies to referrals from any source.

The AKS has a list of safe harbors which can help protect physicians if they are crafted and implemented correctly – with the help of an experienced healthcare lawyer. Many of the safe harbors are similar to the Stark Law exceptions. A few notable AKS safe harbors are payment for personal service arrangements or through a management contract.

The basic requirements of a management contract safe harbor are, for example,

1. “The management agreement covers all the services the manager provides for the term of the agreement and specifies those services
2. The agreement is intended to provide for the services of the agent on a periodic, sporadic or part-time basis, rather than on a full-time basis for the term of the agreement, the agreement specifies exactly the schedule of such intervals, the precise length, and the exact charge for such intervals
3. The term of the agreement is for at least one year
4. The aggregate compensation paid to the manager over the term of the agreement is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties
5. The services performed under the agreement do not involve the counseling or promotion of a business arrangement or other activity that violates any state or federal law; and
6. The aggregate services contracted for do not exceed those which are reasonably necessary to accomplish the commercially reasonable business purpose of the services.”

California and Illegal Medical Referrals

There is a California counterpart set forth in Business & Professions Code Section 650(b) which provides an allowance as follows:

“(a) Except as provided in Chapter 2.3 (commencing with Section 1400) of Division 2 of the Health and Safety Code, the offer, delivery, receipt, or acceptance by any person licensed under this division or the Chiropractic Initiative Act of any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for referring patients, clients, or customers to any person, irrespective of any membership, proprietary interest, or coownership in or with any person to whom these patients, clients, or customers are referred is unlawful.

(b) The payment or receipt of consideration for services other than the referral of patients which is based on a percentage of gross revenue or similar type of contractual arrangement shall not be unlawful if the consideration is commensurate with the value of the services furnished or with the fair rental value of any premises or equipment leased or provided by the recipient to the payer.”

Two of the key requirements of the California law are:

• The compensation is at fair market value for the services rendered; and
• The compensation does not vary by volume or value of patients referred

Cohen Healthcare Law Group, PC Cohen has represented numerous healthcare practices, practitioners, and companies (including physicians, medical groups, home health agencies, addiction treatment centers, chiropractors, and diagnostic facilities) on Stark and AKS issues for both:

• Healthcare startups
• Continuing healthcare practices

Doctors who run their own medical practices and doctors who run, mange, or assist practices that provide traditional, complementary, and integrative care for patients need to review the laws and regulations that apply to their practice. Failure to comply with these laws can result in the closure of the business, fines, and penalties – especially for violations of Stark Law, the AKS, and the state anti-referral laws.

Contact Cohen Healthcare Law Group, PC to review the regulatory compliance and business needs of your medical practice. Our experienced healthcare attorneys advise medical groups, allied health providers, direct services, concierge care, complementary and integrative care, healthcare facilities, anti-aging, and functional medicine practices.