New Jersey has proposed additional legislation (A4091 and S2729) to adopt the state’s County Option Hospital Fee Pilot Program on a permanent basis. The proposed legislation is currently being reviewed by the Senate Budget and Appropriations Committee and it is anticipated it will be enacted, expanding the program from the current seven participating counties (Atlantic, Camden, Essex, Hudson, Mercer, Middlesex, and Passaic) to include five counties (Bergen, Burlington, Cumberland, Monmouth, and Ocean).

By way of background, New Jersey adopted the County Option Hospital Fee Pilot Program Act on November 1, 2018. The goals of the pilot program are (1) to increase financial resources through the Medicaid program to support local hospitals and ensure they continue to provide necessary services to low-income citizens; and (2) to provide participating counties with new fiscal resources.

Under the pilot program, the initial seven participating counties are authorized to impose a local healthcare related fee on hospitals within their borders. The funds collected from the fee are subject to a federal match, provided they do not exceed the federal Department of Human Services (DHS) limit.

At least 90% of the funds collected from the fee imposed are to be used for the benefit of hospitals within the county to ensure they continue to provide necessary services to low-income citizens. Specifically, such funds may be used to: (1) increase Medicaid/NJ FamilyCare payments to hospitals in the county; (2) make payments to Medicaid/NJ FamilyCare managed care organizations operating in the participating county for increased hospital or hospital-related payments; and/or (3) pay costs directly related to the administration of the pilot program.

As a pilot program, the County Option was intended to last only five years, which would begin to run 180 days after its November 1, 2018 enactment.  However, due to delays in obtaining federal approval of the program, in 2021, the State Legislature clarified that the five-year period would not begin to run until each participating county had begun to collect the healthcare related fee.  The pilot program is now scheduled to expire in the fall of 2026. However, the proposed legislation would make the program permanent.

Hospitals in Bergen, Burlington, Cumberland, Monmouth and Ocean counties should pay close attention to this proposed expansion of the program and begin analyzing the potential impact on their Medicaid reimbursement.

The COVID-19 Fraud Enforcement Task Force was established in May 2021 to utilize the resources of the U.S. Department of Justice (DOJ) and various governmental agencies to combat COVID-19-related fraud. These efforts have led to investigations and prosecutions involving Paycheck Protection Program (PPP) fraud as well as healthcare-related COVID-19 fraud, the extent, and implications of which is only now becoming clear.

The DOJ is looking to cast a wide net around what it sees as healthcare-related COVID-19 fraud. Kevin Chambers, Director for COVID-19 enforcement for the DOJ, has described such coordinated efforts as “extraordinary” with the purpose being “to prosecute some of the largest and most-wide ranging pandemic frauds detected to date.”

At this writing, nearly two dozen defendants from across the U.S. have been charged for their alleged participation in such schemes. Federal law enforcement agencies that are involved include the Federal Bureau of Investigations, Department of Homeland Security; Department of Health and Human Services Office of the Inspector General, Food and Drug Administration Office of Criminal Investigations; and the Postal Inspection Service.

The subjects and targets of healthcare-related COVID-19 fraud cases vary from alleged bogus telemedicine encounters, to falsifying COVID-19 vaccination cards, to misuse of relief funds – and from medical professionals to manufacturers and distributors, respectively. In Florida, a medical professional was charged with healthcare fraud for allegedly billing bogus telemedicine encounters that did not legitimately occur during the pandemic. In California, a pharmacy director was accused of using actual vaccine lot numbers to falsify COVID-19 vaccination cards. Here in New Jersey, a postal service employee was charged with conspiracy for allegedly participating in a scheme to distribute fraudulent COVID-19 vaccination record cards to unvaccinated people. In Pennsylvania, an individual was charged with knowingly creating and possessing an unauthorized COVID-19 vaccination card, which bore an official government insignia.

Charges have also been brought against individuals for misappropriating the CARES Act Provider Relief Fund (PRF) monies meant to reimburse eligible medical providers for increased costs or lost revenue caused by the COVID-19 pandemic. An individual in California who owned and operated healthcare and hospice companies pleaded guilty to theft of government property because of his misuse of PRF monies, misappropriating nearly $200,000 worth of allocated PRF monies for personal use rather than for its intended purpose – to ensure continued relief and access to medical care. Moreover, the Center for Program Integrity, as a part of the Centers for Medicare & Medicaid Services has taken corresponding administrative actions against medical providers accused of such alleged wrongdoings.

It may become challenging for the government to discern between PPP loan borrowers that intended and affirmatively acted to commit fraud and those that were well-intentioned but nonetheless failed to comply with this fast-tracked federal relief program. As a result, many unwitting borrowers may find themselves caught in the DOJ’s fishnet of fraud charges. It is therefore critical for healthcare entities that received PPP funds to immediately review their compliance, mitigate any non-compliance, and address corrective measures and exposure to enforcement with the appropriate government agency. Moreover, healthcare providers, owners and executives of medical businesses, physicians, and healthcare marketers and manufacturers should keep careful track of their billing practices, including billing for telemedicine, and institute safeguards to ensure COVID-19 relief funds are not being intentionally or negligently misused.

 

Generally speaking, licensed physicians in New Jersey cannot practice medicine in just any corporate form. But for a limited number of exceptions listed in N.J.A.C. 13:35-6.16, a general business corporation cannot employ a physician to provide healthcare services.  This is known as the prohibition against the corporate practice of medicine, or as we healthcare lawyers affectionately refer to it, CPOM.

The reason for the CPOM doctrine is that an inherent conflict exists between a physician’s obligation to provide medical care to his or her patient and the general business corporation’s motive to maximize profits.  The goal of CPOM is to remove the burden on physicians of choosing between providing appropriate medical care to their patients and being influenced by shareholders who are laypersons. The CPOM rule is enforced by the New Jersey Board of Medical Examiners (BME).

With this background, there are several ways physicians may structure their practices:

  • As a solo medical practice with other employed professionals, including other physicians. It is important to note that in this structure, the physician, as the plenary licensed professional, must employ and supervise the limited licensed professionals such as nurses or physician assistants.
  • As a partnership, professional association, or limited liability company, so long as the practice entity is composed solely of healthcare professionals who are licensed or authorized to provide the same or closely allied professional services.  Oftentimes, a plenary license physician wants to form a partnership with a limited licensed practitioner. This is not strictly prohibited but the physician must, at a minimum, maintain a greater ownership interest in the entity than the limited licensed partner. This is true whether the physician is in partnership with one or several limited licensed professionals – e.g., the physician must always maintain at least a 51% interest in the entity.
  • Through an associational relationship (e.g., as an employee or independent contractor) with another physician or professional entity; however, the physician’s license may not exceed the scope of the hiring practitioner’s license.
  • In certain circumstances, a physician may have an equity or employment interest in a professional practice that is a limited partner in a general business corporation that has a contractual relationship with a professional service entity. In this model, the general business corporation may contract to provide administrative services, such as management services, hiring of non-professional staff, provision of office space and equipment, and billing services.  The physician must ensure that an appropriate licensed healthcare professional determines and implements all medical services and policies, including decisions regarding patient fees and waiver of those fees, and must ensure that the general business corporation makes no representations to the public, under its own corporate name, about offering healthcare services which require licensure.

In the case of Allstate Insurance Company v. Northfield Medical Center, P.C., the New Jersey Supreme Court issued its most recent pronouncement on the CPOM doctrine. Suffice it to say, the CPOM doctrine is alive and well and provides important guidance to providers:

  • A plenary licensed physician and a limited licensed (allied) healthcare professional cannot together own a medical practice that results in its control and direction by the limited licensed healthcare professional. In addition, an unlicensed individual cannot own a medical practice with a licensed healthcare professional.
  • A general business corporation cannot employ or otherwise engage, for example, through an independent contractor relationship, a healthcare professional.

In light of the Supreme Court’s ruling, it is more important than ever to structure the management services organization (MSO) model between a management company, on the one hand, and a physician or medical practice, on the other, carefully to stay within the parameters of the CPOM rules.  Special attention needs to be paid to the terms of the management services contract and the manner in which it is implemented and operationalized.

This was the dilemma faced by the Court in Northfield Medical Center. Through an interwoven web of space rental leases, equipment leases, and management contracts, a chiropractor-owned management company was able to syphon profits from and maintain control over an affiliated medical practice. Although the majority of stock in the medical practice was owned by the physician, (1) the physician did not participate in day-to-day patient care, (2) medical practice profits were turned over to the management company in exchange for the provision of management services, leased space, and leased equipment, (3) the physician-owner of the medical practice signed an undated resignation letter and affidavit of non-issued or lost certificate bearing an unexecuted notary attestation for the physician’s signature and date, which permitted the chiropractor to remove the physician, and (5) the leases between the management company and the medical practice included a “break fee” of $100,000 intended to penalize the medical practice’s physician-owner for breaking the lease.

The New Jersey Supreme Court found that a factfinder could reasonably conclude the structure was “little more than a sham intended to evade well-established prohibitions and restrictions governing ownership and control of a medical practice by a non-doctor.”  Physicians, limited-licensed professionals, and lawyers alike are on notice that they will be imputed with knowledge of what the CPOM law requires, and conduct intended to protect an investment and circumvent these rules will not be tolerated.

The CPOM doctrine comes into play in virtually every multi-disciplinary practice structure, management contract negotiation, and private equity transaction. In all circumstances, control over and supervision of the clinical aspects of the medical practice and patient care must remain with the plenary licensed physician.

The occurrence, prevention, and consequences of burnout among healthcare professionals have been matters of concern and study since the 1960s. The concept of burnout encompasses emotional and psychological job-related stress in any health practice environment with resulting negative impacts on job satisfaction, job performance, and patient outcomes. Both physicians and nurses experience burnout which may be manifested with higher rates of depression, fatigue, and anxiety. A higher rate of substance abuse, increased incidents of sleep disturbances, damaged relationships and even increased rates of suicide have been reported. Physician burnout can also appear as a loss of interest in and enthusiasm for work as well as increased frustration and emotional exhaustion. Decreased empathy for patients as well as diminution in a sense of personal worth and professional accomplishment may be present. There may also be an onset of post-traumatic stress disorder (PTSD).

The prolonged pandemic associated with COVID-19 was expected to intensify physician burnout. A recent survey published in March 2022 by BMC Health Services Research adds supportive data and information for further evaluation.  This study was conducted in June 2020 and again in December and January 2021. These were the first two waves that occurred before the Delta and Omicron virus variants had spread. The authors focused on five groups of medical practitioners: (1) primary care physicians, (2) hospitalists, (3) critical care and pulmonary intensivists, (4) emergency medicine physicians, and (5) infectious disease physicians. In the first wave, emergency medicine physicians had the highest burnout score but in contrast they had the lowest scores in the second wave. The article attributes this as possibly due to institutional or personal adaptation to the pandemic. For all other specialties, the burnout scores increased with the highest scores coming from the hospitalists. Hospitalists are the principal segment of physicians who dealt with increasing caseloads of COVID-19 patients who were often hospitalized for prolonged periods of time.

Many resources have become available for dealing with the prevention and management of physician burnout. For example, the American Medical Association has a STEPS Forward program that can be utilized for ways to reduce burnout. In March 2022, President Biden signed into law the Dr. Lorna Breen Health Care Provider Protection Act. 42 U.S.C. § 294n. This law authorizes the Department of Health and Human Services to award grants for programs to promote mental health and resiliency among health care providers. It was passed with a recognition of COVID-19 having worsened the high levels of stress and burnout experienced by healthcare providers.

 The increases in physician burnout prompt concerns for increased legal risks. Extensive literature has explored this topic. However, a recent study published in April 2022 by Health Affairs challenges that proposition. The researchers reviewed Medicare data for over 1,000 patients with a hypothesis that physicians reporting more frequent episodes of burnout or having developed increased callousness to patients would experience higher Medicare costs or more frequent bad outcomes. In the context of this study, the researchers found that physicians who had self-reported experiencing several episodes of burnout had lower rates of undesirable outcomes. While not suggesting that burnout was beneficial or that attempts to reduce burnout should not be pursued, they noted that physicians who self-reported burnout were more conscientious and gave more effort to providing good care to their patients.

This study, while having a limited sample size, provides support for programs for physician empowerment, wellness, and resilience. Participation in such programs can lead to insight and improved health.

Signed into law by President Joe Biden in March 2022, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 amended the Federal Arbitration Act (FAA) to effectively ban the pre-dispute arbitration of sexual harassment and sexual assault claims. Although this important legislative update has often been framed within the employment context, it is important for all employers, including those in the healthcare industry, to note that the sweeping ban on sexual assault and sexual harassment arbitration agreements does not appear to be limited to claims arising solely within the workplace.

The new law’s broad definition of the term “pre-dispute arbitration agreement” as “any agreement to arbitrate a dispute that had not yet arisen at the time of the making of the agreement” does not explicitly exclude agreements outside of employment agreements. Additionally, the law’s definitions of the terms “sexual assault dispute” and “sexual harassment dispute” do not explicitly limit conceivable claims to the workplace.

Importantly, many states have civil statutory frameworks outlawing sexual harassment/assault that provide for a cause of action for sexual harassment/sexual assault outside of the employment context (such as the public accommodation provisions in the New Jersey Law Against Discrimination – NJLAD). Employers should therefore closely consider how the new law might also affect arbitration agreements with customers, clients, and/or patients that limit premises liability.  Insurance rates could also be impacted, as the cost of defending these claims in state court are often much higher than through arbitration.

Since the passage of the first amendment to the FAA, the House has passed a second bill amending the FAA that would extend the ban on pre-dispute arbitration agreements to future employment, consumer, antitrust, and civil rights claims. Notably, this second proposed amendment defines “employment” and “civil rights” claims broadly enough to include the full panoply of federal and state employment discrimination/civil rights claims, and explicitly includes claims arising from alleged discrimination in – among other places – “public accommodations and facilities” and “healthcare.”

Although the first FAA amendment passed mostly along party lines with limited bipartisan support, the pending second amendment is expected to garner far more contention and debate in the Senate along the usual party lines. As of now, it appears that the second amendment may narrowly pass in the Senate if Democrats can maintain their partisan coalition that led to passage of the first amendment. However, this outcome assumes that the vote takes place before the mid-term elections in November 2022, which remains uncertain. Regardless, the recent changes to the FAA and the potential future changes should be closely reviewed by healthcare providers.

White House chief medical advisor Dr. Anthony Fauci reported in late April that the U.S. is out of the pandemic phase despite a continuing uptick in COVID-19 cases driven by the growth of the Omicron subvariant BA.2. In May 2022, the New York Times is reporting a “threefold” increase in new cases since early April, with case reports in much of the Northeast and Midwest higher than they were during the summer of 2021’s peak Delta surge. Although COVID-related hospitalizations have also increased significantly since the beginning of May, they remain far lower than they have been in any prior surge.

Still, whether cases and hospitalizations are surging or in decline in our “new normal” transitional phase of living with COVID, hospitals and healthcare providers must continue to be vigilant about how resources such as medical supplies, medications, hospitalization, and long-term or critical care are allocated to avoid claims of disability discrimination in violation of Section 504 of the Rehabilitation Act and Section 1557 of the Affordable Care Act.

Earlier this year, the Department of Health & Human Services (HHS) Office of Civil Rights (OCR) issued important guidance to covered healthcare entities regarding civil rights protections for persons with disabilities. An overview of this guidance with related recommendations can be found in the Client Alert we published at that time.

In light of the ongoing conflict in Ukraine and the consequential global impacts and destabilization, the Department of Health and Human Services (HHS) continues to caution about escalating threats of cyberattacks. In early March 2022, HHS issued a bulletin warning those in the U.S. healthcare sector of the potential threats of cyberattacks by Russia and those aligned with it.

In particular, HHS warned of threats by one of the most prominent cybercriminal groups to publicly support Russia, the Conti ransomware operators. Historically, this group has been known to target U.S. healthcare organizations with threats including Managed Service Provider compromises, big game hunting, multi-stage attacks (leveraging other malpractice variants as part of the attack), and double and triple extortion (data theft combined with a ransomware attack). Healthcare providers of all sizes and types should therefore continue to be familiar with the various types of potential attacks, which are discussed in the HHS bulletin.

To assist our healthcare sector clients, we have previously written about steps taken by the federal government to help private entities stay vigilant, including the passage of the Strengthening American Cybersecurity Act and the Statement by President Biden on our Nation’s Cybersecurity. Entities in the healthcare sector would be well advised to remain on guard and continue to implement protocols and other measures to protect their organizations from cyberattacks.