Professional Documents
Culture Documents
Health Care Law Outline Fall 2023
Health Care Law Outline Fall 2023
*all impact health, but some countries funnel $$ to 1 > other while other countries include all as
part of health care.
E. What is Illness?
1. Fx’ing baseline is affected: Day to day activities Fx’d Dz/illness.
2. Dz = biological malfunction – deviation from biological norm/natural Fx.
3. Illness = a subset of Dz.
a. The acute chronic manifestation of a Dz that impairs daily Fx.
4. KATSKEE v BCBS
a. F: ∏ Dx with syndrome, genetic predisposition to CA, but ∅ have CA yet Tx = surgery to prevent
CA. BCBS denied surgery b/c sts ∏ ∅ have illness, ∏ = okay now ∴ ∅ have to pay for surgery.
**Surgery is preventative** ∴ ∅ medically necessary for Tx of illness, just predisposition.
b. I: Did ∏ have an illness that would trigger rights under insurance K?
c. Dictionary: Policy defines illness as “bodily disorder” or “disease” encompassing any abnormal
condition of the body/its components to degree that in its natural progression would be expected to
be problematic.
d. K Law Application: Assigning risk in xaction – insurance policy is like any other contract to give FX to
parties’ intentions at time K formed. Application for ambiguity is in favor of insured.
e. Illness: exists when there is a deviation from normal state or what is a considered normal, healthy
physical state or structure. Can arise from genetic makeup and can result in substantial risk of
development of further disorder (CA in this case). Impairment of Fx of daily life or detection by
physical evidence ∅ necessary if there is a significant deviation from normal physical state.
f. Medically Necessary: ∆ only covers MedNec services. Expert Dr. testimony helps attest to ID SoC
and what’s “medically necessary”
g. H: ∏ suffered from a bodily disorder/Dz and ∴ suffered from an illness as defined by BCBS policy
∆ must pay.
2
II. QUALITY CONTROL REGULATION: LICENSING HCP
C. Promoting Quality of Care (QoC)
1. Legal & Nonlegal Mechanism
a. L: Licensing; NPDB; Med review boards
b. NL: Service reviews of care by pt; reimbursement for meeting quality metrics
c. Medical review boards
2. Licensure Laws: Fx’s (governed by state law via police power)
a. Govern entry into profession
b. Establish Scope of Practice (SoP)
c. Prohibits unlicensed persons from perf’ing Fx that requires license.
d. Monitors conduct & quality care & discipline those who fall below standards.
3. Licensure Laws: Regulatory Power
a. Create Medical Boards dominated by members of profession (MDs) but also lay persons.
b. Create Agencies implement regulation requirements via rule making, enforcement, adjudication,
& guidance.
Admin Agencies (w/i exec branch) = responsible for implementing legislation pursuant to
authority given to it by legislature.
Agency Action
Rulemaking – binding with force of law
Informal Guidance – nonbinding STRONG suggestions. Can be ∆’d
Adjudication – hearing officer of admin law judge may have the right to appeal decision
w/i agency then goes to Ct for judicial review of agency action.
c. Unlicensed person acting as if licensed or licensed person exceeding scope of licensure CRIME
D. Discipline for not fulfilling SoC (gross incompetence/impairment/unprofess conduct)
1. Process (generally) is reactive. Triggered by complaint/report of wrongdoing.
2. Board screens & investigates has discretion to pursue disciplinary action/probation/removal of license
3. MD has right to hearing at agency level w/ review by Board. Then, MD has right to an appeal to Ct for
judicial review of agency decision.
4. In Re WILLIAMS
a. F: MD under review s/p Rx’ing weight loss stimulants. In process, regulations passed & only Rx for
short term use. He stopped. Board prosecutes for ∅ conforming to minimal standard of med
practice violating state §. BoM suspends license + probation. ∆ appealed to Ct.
b. I: Whether the Board’s decision was valid and Dr. violated the SoC?
c. Ct’s standard of review: If “evidence is reliable, probative, & substantial, and is in accordance w/
law” uphold agency order.
d. H: Ct overturns agency action b/c agency ∅ bring expert testimony evidence that Dr. was ∅ w/i
accepted SoC. ∆/Dr. showed that he was w/i minority view of SoC.
Even though Board is made up of MDs w/ medical expertise, they CANNOT use their own
opinion or judgment/bias to say what is reasonable.
Board does not have specialized expertise ∅ all MDs have same medical knowledge.
** Judicial review (Ct’s review of agency decision) is meaningless unless there is evidence to
review BoM lay members need evidence to base their judgment. Licensee needs
opportunity to confront the evidence and cross-examine.
e. Distinguish Arlen: MD Rx’d drugs directly in violation of § at time of Rx. Brightline rule is violated
and ∴ ∅ need evidence.
Williams: § ∅ in FX at time of Rx ∴ was in line with SoC. Once admin rule was promulgated,
MD ∅ Rx’ing.
3
5. Challenging Agency Rule:
a. Regulation must be w/i scope of authority of BoM following procedures of state admin procedure
act & cannot be unconstitutionally vague.
b. Substantively, Ct will uphold regulation that is rational & ∅ arbitrary or capricious.
6. HOOVER v AGENCY CARE ADMIN
a. Ct overturns disciplinary action even though agency has experts – why?
Agency’s experts ∅ examine pt’s or their medical records OR have expertise in managing
chronic pain
Inadequate evidence in support of BoM conclusions
MD followed federal guidelines for CA pt’s w/ chronic pain were the only guidelines
available at the time for chronic pain.
Agency expert sts “lethal amt of pills” but guidelines are present for CA pt’s ∴ if ∅ lethal
to CA pt’s, then ∅ likely lethal for intractable pn pt’s.
Unjustified rejection of hearing officers findings attempting to supplant their findings of
fact of MD Rx practices with own opinions
7. ***Compliance with minority SoC ≠ not following SoP.
a. Minority view could be using disfavored, old practices or new practices that aren’t mainstream yet.
8. National Practitioners Data Bank (NPDB)
a. Federal data bank to address MD license issues in 1 state while trying to qualify for practice in
another state.
b. Medical Boards and hospitals must report certain disciplinary actions to Bank & check bank before
issuing license or granting staff privileges.
c. State licensures boards must check & report when issuing license or disciplining MDs.
9. Telemed & interstate must be licensed with Pt is.
a. MD compact allows MD with valid license to apply for multi-state license
E. Unlicensed Providers
1. Unauthorized practice of medicine/nursing.
2. Exceeding SoP
a. Non-MD charged with crossing line from what they are permitted to do into the practice of medicine
went beyond their scope.
Charged for SoP violation & unauthorized practice of med.
b. MDs can be charged with aiding and abetting unauth’d practice of med.
3. BoN v RUEBKE
a. F: Ruebke was performing midwifery w/ supervision of MD.
b. I: OBs MDs do same thing & OB = practice of medicine Ruebke does the same practices – is
Ruebke doing unauth’d practice of medicine (UPM)? What activities or services fall w/i practice of
medicine?
Ruebke = lay midwife ∴ ∅ licensed ∴ ∅ exceeding SoP, but is it UPM?
c. Who defines practice of med?
#1: state § & legislature
#2: Board may issue guidance for their interpretation of §.
d. Argument OB is included in Practice of Med ∴ if Ruebke is perf’ing OB skills ∴ midwifery = PoM
Ruebke is doing things that we medical professionals do, ∴ she is engaging in PoM/PoN
e. Ct rejects above:
Midwives & OBs have co-existed, historically, w/o issue.
PoM § sts dz/∅ natural condition. Childbirth/pregnancy = natural condition/process/bodily Fx.
∴ Ct owes no deference
4
BoM = offended by midwifery encroaching on profits ∅ a disinterested, but self-
interested statement.
Hx shows co-existence -- § no attempting to keep midwives out.
f. H: § is ∅ unconstitutionally vague & pregnancy/childbirth ∅ fall within § (dz vs natural process).
Ruebke was ∅ UPM by midwifing. Assisting pregnant women ∅, on its face, UPM she has limits
though.
***PLUS § exception if perf’ing PoM UNDER a supervising MD (which happened here)
∴ Ruebke is statutorily protected.
F. Scope of Practice Regulation
1. SERMCHIEF v GONZALEZ (SoP & UPM case)
a. F: Licensed APNs performing assessments, exams, med admin. Boundary dispute did nurses step
o/s SoP/PoN and into the scope of PoM?
b. I: Where is the line btwn PoM and PoN?
c. H: No brightline barrier btwn the two. Here, APNs ∅ acting o/s SoP/licensure
APNs working under standing orders & protocols. Guidelines of Tx, assessment, med admin,
secondary to Pt presentation & C/C criteria.
∅ blanket standing orders/protocols targeted administration.
Nurse Practice Act (NPA) defines practice of nurse:
§335.155 med practice act (Chpt 334) ∅ apply to nurses practicing in their profession
Nurse practicing profession as defined by NPA, then ∅ PoM ∴ ∅ UPM
Ct ∅ grant deference to BoM definition – see above.
G. Questions to ask yourself in this scenario
1. What was the agency’s interpretation of the statute?
2. What was the interpretation of the professionals?
3. If the court settled on an interpretation from the professionals how do we account for the rule that
agency interpretations of their statutes are entitled to some degree of deference by the Courts?
4. REMEMBER two agencies cannot interpret the same statute and then one have that null and void
4. Regulation of QoC
a. Degree to which health services increase the likelihood of desired health outcomes & are consistent
with current professional knowledge.
5
b. NH QoC promotion is different than hospitals.
NH has shared responsibility btwn fed and state law
Fed law b/c MCD – single largest payer for NH care.
1. MCR = purely federal HC Coverage > 65 or LT disability.
2. MCD = fed public insurance – joint with state funds admin’d by each state for pl
w/ low incomes.
Licensure = state law matter
D. Defining & Assessing Quality
1. SMITH v HECKLER (admin law principle)
a. F: ∏ alleges NH with poor conditions weren’t fixed through inspection process b/c process is insuff.
challenges informal guidance
Sec’y of HHS acted arbitrarily when they failed to institute a system of NH review &
enforcement that assures NHs qualifying for MCD payment actually provide the care &
services which beneficiaries are §’ly entitled to HHS Sec’y failed § duty to ensure MCD $$
goes to only NH actually providing quality care.
HHS Sec’y made § form that was facility quality oriented, not pt quality centered
b. Federalism in NH Regs
State Role Fed Role
-Conduct review to comply w/ state plan -Provides standards/forms/methods/procedure
-Licenses NH to meet req of state licensure -MCD § Act establishes obligations to be carried
law (all NH in state – subject to this) out
-State agency carries out survey/inspects NH -HHS Sec’y given authority by MCD § Act to
to see whether federal req’s for participation establish quality standards & survey, and
in MCD are met enforcement process
ONLY required by NHs wanting to receive -HHS K’s with states to perform surveys &
funding from MCD investigate complaints
PRO: ↑ gov’t efficiency. Shifts cost of oversite to private body (JC). JC charges hospital for
accred so they get $$.
b. NH = more regulated by Public/Gov’t mechanisms
c. Hospitals more regulated by private mechanisms.
7
Tele consult, eval information, made a decision on Tx or Dx)
d. MD contractual obligation w/ hospital/MCO to provide Tx to pt or defined group of pts.
e. Informal consultations btwn colleagues typically ∅ found to create MD-Pt relationship.
3. HIPAA FRAMEWORK (not a private cause of action) Preempts state law when in conflict
a. 1. Is entity covered by HIPAA (CE/BA)?
CE any health plan, HCP, HC clearing house
Ex. insurance company. City Clinic
BA any person or org w/ which a CE shares PHI in order for person or org to perform a
service for CE.
1. 3PTY org to submit Dr. office info to insurance co.
No HIPAA ∅ apply
b. 2. If yes, is info PHI?
PHI individual identifiable Health info maintained in any form (esp eMedia)
Any IIH info created, transmitted, maintained by CE/BA concerning person Tx/condition
of pt (past-present-future).
No HIIPPA ∅ apply
8
c. 3. If yes, is the req’d use or disclosure permitted w/o individual authorization or prohibited w/o
individual authorization (term of art – detailed written doc allowing CE/BA to disclose PHI for specific
ID’d purpose)?
Required HHS when undertaking investigation or review or enforcement action
1. HIV pt Tx, MD req’d to tell wife
2. §164.512(a) pg 188.
3. §164.502(a)(2) CE & (4) BA pg 182.
Permitted Treatment, payment, HC operations, quality assessments, peer review process,
limited data set for research, Public Health Dept
See if permitted by HIPAA but req’d by state law can follow state law as long as ∅ in
conflict with HIPAA. Otherwise HIPAA preempts.
d. Minimum Necessary Standard – make reasonable effort to ↓ or limit PHI release to minimum amt
necessary to accomplish the intended use/disclosure/req
Minimum necessary varies with circumstances but CE/BA should have protocols to address
recurring situation & ∅ share > than min necessary.
4. Any data an individual is tracking on phone ≠ HIPAA protected b/c ∅ being tracked by CE/BA but pt
providing info to another entity.
5. Law enforcement seeking PHI info must be specific conditions met under §164.512(f)(1-6).
Pursuant to process subpoena or Ct order CE/BA are permitted, ∅ req’d by HIPAA to
release PHI, but see other laws about disclosure.
6. §164.606 pg 186. Permits CE use/disclose of PHI for Tx, payment, HC operations (QI/QA)
7. SE Airlines ∅ CE/BA
Has right to condition employment
PHI excludes IIH in employment see pg 177.
8. Ex. Wellmart = CE/BA. Vaxx status = PHI.
Release to individual = req’d disclosure
§164.502(a)(2) pg 182 req’d CE to disclose PHI to individual upon request subject to
certain limitations. Other req’d disclosure = when gov’t is asking for PHI about HIPAA
compliance.
9. Legal Options
a. No private right of action for individual Fx’d by HIPAA violation.
b. File complaint with office of civil rights & HHS about HIPAA violation.
They’ll ID HIPAA violation & OCR can impose civil fines/sanctions & make referral to DOJ if it
warrant criminal action.
ONLY OCR can file right of action for HIPAA violation.
c. State law violations negligence in training staff or handling of PHI breach of duty of
confidentiality
HIPAA is fed but only a floor of regulations
BYRNE CT states: HIPAA will preempt state laws that directly conflict with HIPAA but
EXPRESSLY ALLOWS state law to have ↑↑ regulations above what HIPAA requires.
Some cts will permit tort ∏ to rely on HIPAA to establish applicable SoC for handling
private medical info
1. ∅ negligence per se but will eval case by case
G. Medical Malpractice
1. Species of negligence law.
2. SoC professional customary SoC. ∅ RPP SoC
a. What do MDs customarily do in this situation?
b. What other MDs customarily do under circumstances?
9
3. Req’s expert testimony to prove SoC & MD/∆’s breach.
V. LIABILITY OF HC INSTITUTIONS (Legal Theory to hold hospitals/HC institutions liable for pt injury)
C. 3-Legged Stool of Hosp Governance
1. Board - Sets strategy & policy for hospital. ∅ employed & ∅ work at hospital
2. Med Staff Independent, self-governed group of MD. Have admitting privileges at hospital. Perform
peer review & disciplinary functions. ∅ employees, but independent K’ors
3. Hosp Admin Implement strategy. Run business of hospital and daily operations. Led by C-Suite
employees
4. THOMPSON v NASON
a. F: Pt in car accident – saw 4 MDs neuro Sx worsening. Sues hosp for failure to adequately
examine, Tx, assess, and monitor pt and failure to adequately consult other MDs/specialties. Hosp
response = No duty to oversee MD care.
b. Ct sites duties of Hosp (can apply to MCO – see Shannon):
(1) Duty to maintain safe/adequate facilities
(2) Duty to select & retain competent MD
(3) Duty to oversee all ppl who practice medicine w/i walls as to pt care
(4) Duty to formulate/adopt/enforce adequate rules/policies to ensure quality care for pts
c. LIABILITY IS LIMITED to cases where hosp has notice (actual or constructive) of problem AND
hospital’s negligence is a substantial factor in causing pt’s injury
If injury would have resulted w/o hosp negligence, then not liable.
d. There are practical steps a hosp can take to monitor/provide oversight of medical care MDs provide
(3-legged stool)
QI/QA data about general outcomes per procedure/dept.
Peer review (part of MedStaff Fx)
Share info across departments RCAs
See something, say something about MD irregularities
MDs = top of med hierarchy so may have resistance/hesitance/intimidation here.
Protection against retaliation
Create systems/procedures for monitoring & ID who is responsible for that.
MedStaff buy in & incentives to report.
5. Apply CoL to facts:
a. ID the nature/demands of institution (hosp/MCO)
b. Duty will vary depending on nature of inst & its relationship w/ providers of care & pts/subscribers.
12
See Shannon for what duties MCO has to subscribers in relation to how it selects its MDs
6. Avoid Liability by IDing where you have a duty and taking steps to satisfy that duty.
F. Liability of Health Plans/MCOs
1. VL RS/OS & CoL applies to Health Plans and MCOs. Health plan/MCO held liable for negligent acts of
another or for its own negligent acts (breaching own duty to pts).
2. MCO is the umbrella term for HMO.PPO.POS
3. All health plans/MCOs share:
a. Use provider networks financial incentive for in-network providers
b. Negotiated discounted payments to in-network providers (b/c ↑ pt’s financial incentive by ↓ prices
pt’s pay
c. Utilization review/controls
Administrative mechanisms the plan uses to limit services need preapproval for certain
procedures or referral req’d from PCP to see specialist, otherwise pay OOP b/c plan ∅ pay.
4. VL of MCO – GENERAL RULE:
a. MCO can be held VL for negligence of employees but CANNOT be held liable for indep K’ors.
∴ ask: was MD/actor indep K or employee?
b. To apply RS or OA/AA theories to MCO, you must understand the nature of plans affiliation with MD
Staff Model HMO HMO owns hospital & employs MDs who practice within.
Pts/subscribers pay premium to HMO, & HMO delivers full range of care to pt/subscriber.
Here – if one of the MDs employed by HMO negligently injures pt can go after HMO
alleging VL through RS clear employment relationship.
***THIS IS NOT A COMMON MODEL***
IPA Model HMO Pt/Subscriber pays HMO but HMO contracts with indep pract. Assoc. (IPA)
who then K’s with individual MDs. HMO promises to arrange delivery of care for pt while
paying IPA group to provide that care by K’ing with MDs to actually provide pt care.
13
Here – much harder to sue HMO through VL b/c no direct relationship with MDs.
5. Are there other theories besides VL (which is likely to fail since most use IPA model)
a. SHANNON v MCNULTY
F: pregnant woman with abd pn, examined by MD. Woman chose MD b/c he was in network
(∴ the MCO chose the MD for pt). Called several times s/p 5 min contractions – sts preterm
labor. Md blows off pt. Pt calls HMO emergency line, but RN sts to call MD MD gets angry
& no RN follows up. Call HMO directly and gets orthopedic MD. ∏ claims MD malpractice and
HMO negligence.
Ct sts: HMO is providing medical services (∅ practicing medicine, but dictating & directing
subscribers’ medical care) HMO is making decisions that limit where Pt can go for care.
Ct sts: all 4 Thompson CoL duties apply here, especially #3: duty to oversee all persons who
practice medicine w/i walls as to pt care.
14
b. Becomes hub to coordinate care w/ many diff providers who participate within ACO (hosp, lab,
pharmacy, clinic, PCP, NH, etc…)
c. ACO = responsible for setting up HER, QI/QA programs, policies etc.
d. Payments from MCR ↑ if it keeps cost below target while maintaining quality.
3. Exam Question: How would ACO be liable for negligent act injury? VL or CL?
a. Likely will follow similar to MCO
b. Is there any choice by pt for provider or all pt’s locked into specific providers?
c. Proving Actionable Disparate Impact req’s statistical evidence/data that policy/practice disp
impact on 1 protected group.
d. Even if +disp impact: ∆ has ability to ID legitimate, nondiscrim reason for policy/practice = Defense
e. To overcome defense ∏ must show alternative, nondiscrim way of accomplishing ∆’s goal.
6. Sex – Title VII – CRA for Employer-Sponsored Health Insurance & §1557 by ext (also Title IX – edu inst)
a. ERICKSON v BARTELL
F: ∏ alleges ∆/HI Plan excluded Rx contraception while others were covered, violating T-VII as
amended by Preg Discrim Act (PDA) no discrim: preg, childbirth, or related condition
F: ∆ argues this is facially neutral & could apply to male or female ∴ FX both equally no one
gets coverage for contraception.
Ct sts:
Yes, facial equality but evidence shows only females can bear health and socioec
consequences of pregnancy
18
Rx contraception excluded across the board. Look at plan & how comprehensive it is in
meeting health needs females and males.
Equality under T-VII by eval relative comprehensiveness of male to female special or
↑ needs of female’s unique sex-based characteristics must be met to same extent & on
same terms as other HC needs
The exclusion of female only benefits from a generally comprehensive Rx plan is sex
discrim under T-VII.
Ct sts: ∅ intentionally discriminatory, but sts it’s facially discriminatory.
b. To ensure contraception coverage:
Laws prohibiting discrim based on sex
Affirmative mandates requiring HI Plans to cover contraceptives
State & ACA mandates.
7. §1557 Timeline for prohibiting discrim of sex stereotypes, sexual orientation, gender identity
(transgender) Unresolved.
a. 2010 ACA Enacted
b. 2016 Obama admin issues reg §1557 to extend to protecting gender identity
c. 2020 Trump admin issues new, limiting regs to only include sex orientation, ∅ gender identity
d. 7/2022 Biden admin proposes new reg, but ∅ promulgated
We are still officially under Trump regs right now, which ∅ include gender identity protections
8. How will ↑ FX health care?
a. Gender affirming care, hormone Tx, sex ∆ surgery. Providers can refuse to Tx and HI Plans can
refuse to cover b/c right now gender identity/xgender ∅ protected class.
b. PREP-HIV employers objected to cover b/c ∅ agree to homosexuality. ∏ argue preventative Tx &
employer covers other preventative Tx. Employer sts ∅ have to cover in ∅ medically necessary.
Who defines medically necessary?
19
c. Failure to take steps to ensure accessibility
ADA & §504 FRA req HC providers provide individuals w/ disabilities:
Full & = access to HC services & facilities.
Reasonable modifications to policies, practices, & procedures, & provisions of auxiliary
aids/services when needed to make HC services fully available to PWD (person w/ disab),
unless modification would fundamentally alter the nature of services.
ADA has req’s for new construction of & alteration to buildings & facilities relating to barrier
removal.
If you build a new facility, must comply & be accessible via guidelines
Old buildings must make achievable/reasonable ∆’s to make more accessible.
7. Moral Hazard
a. Having insurance prompts insured persons to use it more, creating more demand for covered care
Consumers will use the services in ways to maximize utility and its cost.
If you don’t have insurance then you’re less likely to use medical services b/c of cost
Causes market imperfection b/c consumers ∅ acting rational consumers would act.
8. Market Imperfections for HI
a. Employer, ∅ consumer, decides which HI plan to enroll in
b. Insurers want healthier ppl in pools paying but not utilizing services
c. HI Plans try to compete by trying to enroll the lowest risk insured (∅ on price/quality of product)
VIII. ERISA
C. ERISA Preemption: Framework
21
1. BACKGROUND
a. Most ppl get their private HI through their employer.
b. ERISA ∅ include substantive standards (that they had to offer HI or if they did, what to cover in HI
plan) but did include procedural standards for plan administration.
If you’re going to have a health plan then you must explain what the benefits are.
Provide what you say you’re going to provide.
c. Regulation of ESBP were an area of exclusive federal control (acting to displace certain state
regulations), however they wanted to preserve some state authority in areas of traditional concern
(§514 preemption)
d. ERISA ∅ require employers to offer ESBPs but it wanted to induce them to do so
Induced them by limiting employer liability §502 creates exclusive federal remedy for
violation of statutory or plan obligations
Only remedy employees have is through §502 (preemptive FX but also remedial FX)
e. 2 levels of ERISA preemption
Limits/preempts state legislation/regulation affecting HI Plans operating as a constraint on
states’ ability to pursue health reform
Regulations that directly apply to HI but also ERISA can preempt broader attempts at
state level HC reform b/c may FX ESBP.
Limit state CL actions against HI Plans
22
Savings clause: ERISA ∅ preempt state laws that regulates insurance, banking, securities etc…;
except:
Deemer clause: an EBP, itself, shall not be deemed to be an insurance co or to be
engaged in business of insurance [for purpose of any state law that reports to regulate
insurance or business of insurance].
b. ***THRESHOLD QUESTION: Is the ∏ suing health plan/MCO that is provided as part of EBP
subject to ERISA???
Market place purchased insurance ∅ subject to ERISA.
Privately purchase HI o/s employer ∅ subject to ERISA.
c. Analysis – 3 Step: (Does scenario involve state leg, reg, CL action that req’s/prohibits actions by EBPs or has subst FX on them?)
(1) Is this a state law the relates to an ESBP?
If no, ∅ worry about ERISA preemption under §514 state law applies
(2) If yes relating to ESBP, does it regulate insurance (savings clause)?
1. Be specifically directed towards insurance entities, &
2. Must substantially affect the risk pooling arrangement btwn the insurer &
insured
a. Does the state law “alter scope of permissible bargains btwn insurer &
insureds?
If no, then state law preempted, ∅ apply.
If yes falls in savings clause & state law ∅ preempted (state law applies).
(3) Is the plan self-insured? Deemer clause exception
Laws that fall w/i savings clause can be applied to fully insured insurance plans but
cannot be applied to self-insured plans b/c deemer clause says EBP can’t be deemed to
be insurance.
Preclude state reg of self-insured plans creating incentive for employers to self-insure
B. ERISA Remedies & Preemption
1. §502(a) [conflict or civil enforcement] preemption (pg 459)
a. ERISA’s ONLY remedial scheme for employees/beneficiaries who think they are not getting what
they are supposed to from ESBP go to §502 to sue in fed ct to get what’s owed to them from
ESBP.
Can seek specific remedies:
Benefits due under plan terms
Enforce rights under plan term (declaratory judgment about entitlement to benefits)
Clarify rights to future benefits
Enjoin/injunction against actions that violate ERISA or plan terms (denial of benefits).
b. Exclusive enforcement mechanism to induce employers to sponsor ESBPs limit exposure, this is
the only way to get sued by employees. Won’t face lawsuits in state court as well.
c. Any state law or CL action that duplicates, supplants or supplements this remedy is preempted by
§502 b/c § remedy is so strong that it preempts entire field of judicial oversight of ESBPs by state
ct.
C. RUSH PRUDENTIAL HMO v MORAN (preemption of state legislative action)
1. F: ∏ needed an unconventional shoulder procedure that her PCP deemed med-nec, but insurance sts ∅
med-nec & states do regular, conventional surg instead. Pt ended up getting surgery and now seeks
reimbursement for costs, insurance denied. Pt sues stating you have to pay me b/c benefit is due
Insurance sts ∅ have to b/c pt’s claim and Ill law of ext review are preempted by ERISA
a. §514 and §502 Preempt to Ill. law that requires external review by jointly selected MD by pt and
HMO about med necessity when PCP and HI Plan disagree on med-nec.
23
If ext MD says yes, med-nec then plan will pay, if ∅ then ∅ pay.
2. §514 Analysis: (Does scenario involve state leg, reg, CL action that req’s/prohibits actions by EBPs or has subst FX on them?)
a. (1) Is there a state law that relates to an ESBP? Yes, state law that relates to ESBP.
What does relate to mean?
Look for clear manifest congressional purpose to preempt area w/i state historic powers.
Direct regulation of HI plan ∅ req’d.
1. Here: ∅ directly regulate ESBPs - ∅ say this is what you have to do with ESBP,
but does FX them if going to K with HMO for coverage to employees, HMOs =
subject to this law and FX what employer can offer.
2. It’s enough if law bears indirectly but substantially on all insured BPs.
a. If purchasing med coverage by HMO covered by law, ESBP will be
limited to HMOs subject to external reviews Can’t purchase
cheaper plan that’s cheaper b/c ∅ include ex review provision, b/c
provision means HMO will have to cover more care.
b. (2) Does the law regulate insurance, so that it falls w/i the savings clause and thus avoids
preemption?
To fall w/i insurance savings clause, state law must:
(1) Be specifically directed towards insurance entities, &
(2) Must substantially affect the risk pooling arrangement btwn the insurer & insured
1. Does the state law “alter scope of permissible bargains btwn insurer & insureds?
(1) Here: Yes directed specifically towards insurance entities (HMO is in the name of the
act)
(2) Here It means insurers can no longer bargain for coverage at lower price if law is
preempted by giving HMOs unfettered discretion ∅ subject to external review on question of
medical necessity. ∅ a bargain that’s available anymore.
Yes , Ill. HMO Act falls w/i scope of savings clause and ∅ preempted under §514. ∏
wins.
1. B/C you don’t want it preempted limits insurers options, so savings clause
saves it from preemption.
c. (3) What if ESBP was self-insured?
Change facts of Moran to self-insured ESBP?
Deemer clause says that EBP themselves shall not be deemed, for purposes of savings clause,
to be an insurance company or to be engaged in the business of insurance
Savings clause ∅ save state laws from preemption to the extent that those state laws are
applied to self-insured EBPs.
Here if Moran’s EBP was self-insured then she ∅ able enforce the Ill. External review
law against self-insured EBP.
1. If it were fully insured ESBP, then could enforce Ill state law b/c saved from
preemption by savings clause.
3. §502 Preemption (Does scenario involve person who is beneficiary of EBP bringing claim that arguably supplants, supplements, or
duplicates remedies provided by §502?)
a. Civil enforcement provision that gives remedies to plan beneficiaries who claim that EBP hasn’t
complied with terms of the plan, hasn’t done what it promised to do.
∅ provide for consequential or punitive damages
b. Exclusive enforcement no other remedies available.
c. Moran wins and HMO loses under §514 but HMOs argument = that Ill. Law creates an alternative
remedy to the ones provided by §502 ∴ inconsistent with exclusivity and thus is preempted by
§502.
24
Ct sts Ill. Law ∅ create a new cause of action & ∅ grant or authorize new form of ultimate
relief. Pg 464 2nd to last paragraph.
Dissent sts external review law is a form of arbitration which is a different remedy than §502
& inconsistent with §502.
Majority sts ∅ like arbitration which would be a different remedy, this is more like a second
opinion only looking at single term: medical necessity or not.
Once 2nd opinion is done and they vote med nec procedure eBP needs to pay ∏ can
enforce by filing lawsuit under §502 for plan to pay benefit owed to her.
No punitive damages, lost wages, pain/suffering, just cost of care.
∴ no new state law cause of action or new for of ultimate relief
1. Got interpretation of 1 provision of K regarding med nec, to be done by MD and
now can enforce by §502.
Majority, w/ respect to §502 preemption ∅ think that right Moran has under Ill. HMO Act
creating external review is inconsistent with §502 remedial scheme. ∅ supplement or
supplant. Still pursuing it now that she knows what plan owes her.
D. AETNA v DAVILA
1. F: TX passed HC law that imposed on MCO’s a duty of reasonable care in making Tx decisions & made
them liable for damages proximately resulting from breach. ∏ suing MCO for breaching this duty (tort
claim)
2. I: Does ∏’s §-based claim of negligence against MCO fall w/i scope of §502 b/c they “duplicate,
supplement, or supplant” the ERISA civil enforcement”
3. Preemption Analysis: 2-part test
a. (1) If individual, at some point in time, could have brough the claim under §502(a)(1)(B);
b. AND (both must be shown for complete preemption)
c. (2) where there’s no other independent legal duty (independent of ERISA) implicated by ∆’s action
d. then the cause of action is completely preempted by ERISA §502.
4. DAVILA ANALYSIS: 2-part test
a. (1) When coverage for proposed Tx was denied, ∏ could have sued for inunction under ERISA §502
or paid for Tx & sued under ERISA §502 for reimbursement
∏ could have pursued these remedies and did not so ∏ loses §502 analysis.
b. ∏ can argue that TX § created an independent legal duty to use reasonable care to make medical Tx
decisions relevant to coverage that’s independent of ERISA ∴ PRONG 2 isn’t met
Ct Rejects this argument: TX § ∅ create any new liability for failing to provide a Tx that’s ∅
covered by plan
c. (2) To know whether ∆s breached any duty of reasonable care, the court has to interpret the terms
of ∏’s EBP
Any ∏ rights from potential liability under TX § derives from rights & obligations established
by EBP subject to ERISA (plan’s promise to cover certain Tx’s) TX § creates no independent
legal duty.
Bring suit t rectify a wrongful denial of benefits promised under ERISA regulated plans and ∅
attempt to remedy any violation of a legal duty independent of ERISA. Negligence cause of
action authorized by TX law really supplements remedy available under §502. ∴ is preempted.
5. H: ∏’s state law claims fall w/i scope of §502 & ∴ are completely preempted
E. RECAP
1. §514 preempts state laws
a. broader preemption of LAWS: legislation, regulation, CL-action (claims) that regulate EBPs or have
substantial effects on them
2. §502 preemption of certain claims that ∏ can bring
25
a. Exclusive Fed Jx for certain types of claims and preempts attempts to bring those types of claims in
state ct or in different forms; if claim supplants, supplements, or duplicates §502’s exclusive remedy,
its preempted.
b. TX law dressed up as tort claim for breach of duty of reasonable care but was really just claim
brought to force benefits due under §502 cant bring TX law claim without relying on existence of
ERISA EBP.
3. Some law saved from preemption by savings clause could be preempted by §502.
a. Ex. State law authorized claims against EBP may be saved under savings clause but still preempted
in §502 (Rush Prudential and Davila)
b. §502 takes a bite out of laws saved by §514 savings clause now preempts them under §502.
4. Entire Davila § ∅ preempted by Fed Law, but that ∏’s claims are preempted, ∴ there may be claims by
other ∏ that wouldn’t be preempted.
5. ERISA ONLY APPLIES WHEN TALKING ABOUT EBP ERISA ∅ apply to market place insurance
F. RUTLEDGE v PHARMA
1. F: Law at issue: Ark Act requiring PBMs to pay pharmacies price at least as high as what pharmacies pay
to buy drug from wholesaler so pharmacies aren’t losing $
a. No §502 involvement b/c ∅ involve claim or civil action w/ employee trying to get remedy.
b. +§514 issue Ct stops after first questions (Does relate to EBP?)
Ct sts: This law ∅ relate to EBP
∏ argues regulation of PBM to pay pharmacies at least as much for drugs that they get from
wholesaler = PBM ↑ what they charge EBP & ∴ impacts EBP
∅ directly regulate EBP (∅ telling them what to do or offer) but indirectly FX on EBPs
Ct sts: law ∅ relate to EBPs for purpose of ERISA §514 despite indirect FX law ∅ specifically
target EBP, applies to all plans. ALSO, ∅ directly reg EBPs but regulating PBM companies that
EBPs K or operate with and that’s ok
Just b/c increase costs for EBPs or create incentives for ERISA plans without forcing plans to
adopt any particular scheme of substantive cover then ∅ saying it relates to ERISA plans.
Cost regulation that ∅ bear an impermissible cxn w/ or reference to ERISA plans
26
c. (3) Subsidies (tax credits) for Low-Income Purchasers
Purchases of HI on X∆ for ppl w/ income of 100-400% FPL
2. X∆ - offers private insurance coverage that meets standards req’d by ACA.
B. Insurance Reforms: Underwriting Rules (Limits HI underwriting and ratemaking practices)
1. Community Rating of Premiums (§300gg)
a. Addresses insurer’s ratemaking
b. Prohibits discrim premium rates Modified community rating w/ limited adjustments permitted
for:
Family composition (single/couple/family)
Geography (Cost of living expenses: city v rural)
Age: 13:1 variation permitted
Tobacco use ($1.5:1 variation permitted)
** Older and smokers = ↑ health expenses
2. Prohibition of PEC exclusion or other discrim on health status
a. Prohibits enrollment eligibility rules based on health status or related factors
b. Prohibits premium variations for individuals based on health status or related factors.
c. REASONING:
HI is to protect against unpredictable health issues ∅ want ppl to wait until they’re sick to
get insurance death spiral b/c already a loss for HI Co.
Ppl will get coverage but ∅ for dz they need Tx for Barrier to care
Job Lock once have coverage and develop PEC ∅ want to leave job because new insurance
will exclude you from coverage forced to stay at job forever. No mobility.
3. Guaranteed Issue
a. Requires insurance companies to issue a health plan to any applicant regardless of the applicant’s
health status or other factors.
b. §300gg-1 Guarantees availability of coverage.
c. §300gg-2 Guarantees renewability of coverage.
Exception: Nonpayment of premiums & Fraud (see below)
d. §300gg-12 Prohibits recissions of coverage.
Exception: Fraud practice or act that is fraudulent or intentional misrepresentation of
material fact
Limist “post issuance of claim underwriting” nit-picking Dx condition post issuance to
prevent coverage for expensive insured.
4. Other Provisions to Benefit Individuals
a. §300gg-11 No annual/lifetime limits.
No limits (caps) on $ value of benefits covered
b. §300gg-13 Coverage of preventative health services
W/O any cost sharing obligation
Being healthy & preventing illness is cheaper than Tx illness.
c. 10 categories for Essential Health Benefits (EHBs)
d. Quality Health Plans
No junk insurance some ppls premiums went up and their HI choices went down.
e. Tax credits w/i FPL & cost sharing reductions financial assistance.
f. Extension of dependent coverage until 26 y/o
Helps ↓ adverse selection.
C. Individual Mandate
1. Individ Mandate is necessary to avoid adverse selection
a. **If ∅ everyone is in the pool sicker pool ↑ premiums death spiral
27
b. IM = important role to insurance reform provisions of ACA
c. ↑ pool population ↑ risk spreading ppl ∅ waiting until sick & need HC to get HI.
2. Minimum Req’d Coverage
a. (1) Get covered
b. (2) Claim exemption
c. (3) Pay a penalty (tax)
3. NFIB v SEBELIUS (ACA CASE)
a. F: Challenge to Congress’ Const’l authority to enact IM
b. Commerce Power:
US Gov’t: IM falls w/i Congress’ commerce pwr by regulating economic activity that, when
aggregated together, impacts interstate commerce.
Everyone will use HC in lifetime
Failure to purchase HI has substantial negative FX on ISC by creating a cost shifting
problem upon consumption
1. Uninsured ppl ∅ pay, but hosp still provides service/care uncompensated
care costs are incurred by hospital hosp ↑ costs to HI Co. HI Co. ↑
premiums paid by subscribers to cover costs to those who are ∅ insured but
using HC.
SCt: Commerce pwr is broad but ∅ extend to compel individ commercial activity
Distinction btwn regulating commercial activity vs inactivity (not buying HI)
Congressional authority ∅ extend to regulating inactivity.
c. Taxing (& Spending) Clause
SCt: Penalty associated to IM resembles & Fx’s as a tax despite labeled name (labels ∅ matter,
Fx does).
“Penalty” collected by IRS & amt is based partly on income (like a tax)
If ∅ have to pay income tax, then ∅ pay penalty
Produces revenue like a tax.
Ppl having meaningful choice to participate or not.
∅ get HC, then are taxed gov’t uses tax to incentivize behavior that’s OK.
4. CA vs TX 2021
a. F: 2017 tax reform package that set penalty to zero (removing non-coverage penalty)
∏ theory: w/o penalty to enforce IM, it no longer operates as a tax ∴ const’l basis for IM is
gone.
b. I: Is the IM now unconst’l?
If so, is it severable from ACA, or is it integral to ACA § scheme, making the entire ACA
unconst’l?
c. Sct: Sorry but ∅ deciding issue of const’lality or severability b/c lack Art III standing.
d. Status of IM 2022: Still in existence but ∅ enforceable b/c penalty = $0.
∅ unconst’l & ∅ repealed by congress.
Is IM essential to avoid adverse selection/death spiral since now = ∅ effective?
It hasn’t led to adverse selection since 2019 implementation of $0 penalty.
Ppl are still getting insurance & still get subsidies
D. Employer “Mandate” (really an incentive than mandate)
1. Historically employers offered HI pre-ACA b/c:
a. Benefited employer healthy work force
b. Promoted employee longevity & loyalty, recruitment & productivity.
c. WWII wage control (∅ able to ↑ pay so offer other benefits)
Wages = taxed compensation
28
Employer spons’d HI (ESHI) = non-taxed benefit/compensation tax efficient from employer
perspective.
2. Essential Health Benefits (EHBs) (§18022: pg 531): required coverage benefits by ACA
a. Competing ACA Goals
Standardized Plans Diversity of Choices
Promotes predictability: know what you get Pick the plan that best suits consumers needs
for what price & allows for comparisons
Ensures every policy on X∆ = certain minimum Promotes competition among insurers
coverage (preserving free market)
Information symmetry: consumer has as Permits insurers to continue offering existing
much info as seller policies as long as meeting minim coverage
req.
Standard plan prevents consumer getting
“hoodwinked” or duped.
b. Required for ALL insurances (on X∆ or not!)
30
c. See pg 531 for list. (Emergency services, preventative health, maternal care, etc)
d. ∅ apply to large group insurance or self-insured, b/c they typically already provide these basic
benefits in their coverage.
e. Variations in OOP costs or # visits allowed.
f. HHS req’s each state to choose a “benchmark plan” to ID EHB for that state.
ALL HI/health plans in state MUST offer benefits substantially equivalent to those of
benchmark plab
***EHBs mat ∆ drastically from state to state but are consistent w/i state.
31
X. MCR/MCD
A. MCR
1. Who receives benefits – automatic eligibility no $$ means test)
a. 65 y/o and older
b. “Permanently disabled” for SS purposes (s/p 2 yr wait period)
c. Ppl w/ specific conditions: ESRD, ALS
2. What benefits are covered?
a. Part A – Hospital insurance (in-pt)
In-pt hospital care plus other institution-based services (home-health, hospice care, extended
care, SNF);
If paid into SSI payroll tax for long enough, then automatic coverage at 65 for this benefit.
If ∅ paying in long enough, can still get coverage with additional premium paid s/p 65 y/o
***A & B = Subject to limits on amt & duration (limit # in-pt days) & signif cost sharing (deductibles +co-pay)
***A & B ∅ cover vision, dental, hearing.
As a result of MCR cost share/lack care purchase supplementary private insurance
Medigap insurance for MCR coverage gaps/MCD/retiree health benefits
b. Part B – Supplementary medical insurance
MD office, out-pt services, other services, lab services, ambulatory care centers.
Voluntary decide if want to participate at 65 or not, but if yes must pay premium.
32
b. Part C & D Fed gov’t pays premium to private health plans who agrees to cover all benefits of
MCR Parts A, B, D health services to beneficiaries
c.
34
Congress crossed line from persuasion to coercion.
d. Ct ∅ strike expansion entirely
MCD expansion is unconstitutionally coercive but remedy is to sever or limit HHS Sec’y’s ability
to w/hold existing MCD funding (pre-aca coverage) from states that ∅ expand
FX’ively makes expansion optional for state
35
cardiologist who used Soc. For Thorac Surg professional standards statistical analysis ∅ individual
cases of MD
Conclusion ∏/MD had higher than expected, risk adjusted mortality rate
b. Judicial Standard of Review
Process Review Point: Did hosp provide procedural due process, aka fundamental fairness?
Sufficient Notice: did pt receive meaningful notice of problems?
1. ∏ sts hosp ∅ point to specific pt or case where problems arose
Fundamental Fairness
1. Ct will look at CL/case law so see if anything in Jx about notice requirement.
2. Ct will also look at MedStaff bylaws, contractual in nature, to see if it requires
any more procedural protection than CL does.
a. Source of guidance to Ct for peer review cases
b. Here: for insuff notice, bylaws ∅ K’lly provide for quality of notice
exceeding that required by state CL
I: Did ∏ have sufficient notice, was fund fairness satisfied in regards to peer review
process?
H: Ct sts: Yes, hospital decision was valid b/c fundamental fairness was met sufficient
notice was given: ∏/MD knew about statistical study that hosp was comparing MD’s stats
to, could ID/knew which patients died/adverse outcomes, could access autopsy reports.
1. Knew what the hospital was arguing based on and could have done research to
mount a defense.
Substantive Review Point: Was hospital decision invalid because it was “arbitrary, capricious,
or unreasonable” or not supported by “any evidence” (poorly supported)?
Deferential standard of any evidence
1. H: Ct states that there was SOME evidence.
Most Jx ∅ have any judicial review on merits of hospital decision on staff priv review.
This Jx has minimal of ANY EVIDENCE
5. Sources of Guidance for StaffPriv Actions
a. CL/case law regarding fundamental fairness
b. Hosp’s own MedStaff bylaws
c. State § to establish req’s (if state has them)
d. JC Accreditation standards (creates both procedural and substantive standards)
e. Fed HC QI Act standards
Gives hosp immunity from damages associated w/ credentialing decisions b/c it wants hosps
to engage in peer review w/o fear of being sued.
Creates presumption of immunity for hosp unless:
∏/MD can overcome presumption by proving hosp acted unreasonably
1. ∏/MD must prove 1 of 4 things on pg 705
∅ provide immunity for civil rights claims
HCQIA created the NPDB
6. MATEO-WOODBURN v FRESNO COMM’Y HOSP
a. F: Hosp restricted MD’s priv b/c hosp has issue with anesthesia dept system of scheduling caused
pt safety concerns, delays, etc… (∅ a quality-of-care issue – see Sokol – but an administrative issue
whole dept involved)
Initially hospital had open dept (any MD on own can apply and if qualified can be granted
priv), but now closed dept (a group of MDs who exclusively K to provide services to this hosp
alone & nowhere else. No other providers can apply.)
Xsition from open to closed problems (scheduling, delays, pt safety concerns) new reg’s
∅ all anesthesiologists from open that xsition’d agree w/ new rules Mad & sue.
36
b. Hosp: Looking out for quality of care for pts & wants efficient system.
Admin decision for how to best run hospital, & ∅ stating that any one MD provided poor
quality of care.
c. Ct reasoning rejecting MDs lawsuit:
Fund Fair = making sure process if fair when something big is at stake.
But decision ∅ harm MDs reputation or FX their livelihood
Distinguish hosp decision regarding administrative policy to ensure quality of care to pts
holistically vs decision regarding individual MDs quality of care
Wanted efficient & controlled system to achieve QoC goal
Ct give hosp deference to make these decisions.
Finds no ∆ in manner/procedure for credentialing MDs & admitting them to MedStaff
38
a. F: SH claim that board members inattention (what they failed to do) permitted corp’s alleged
violation of AKS, which led to plea agreement & payments of approx. $250M by Caremark, a FP hosp
$250M loss to SHs profit.
b. I: What is the boards responsibility with respect to the org & monitoring of the enterprise to assure
that the corp Fx’s w/i the law to achieve its purposes?
Board’s purpose is to seek to advance the corp’s purposes but must do it in a way that’s
legal
Did you have an effective compliance program?
c. Compliance Progams
What do they do
Educate ppl working in the company on how to do their job w/o violating the law
1. Ex: HIPAA, Fraud/Abuse
Oversight look at how hosp’s Fx’s and practices & see if they are complying w/ the law
& detect violations of the law when they occur.
Detect violations of law, Report violations to pub officials/gov’t/CCO when ID’d, take
prompt voluntary remedial efforts
Prevent violation of law by training staff on how to perf jobs w/o violating the law
d. Here: What is the board’s responsibility in respect to compliance programs
Exercise oversight & monitor
Ensure systems in place to accomplish goals of compliance programs
e. Ct approach: more on relaxed side ∏ almost always loses these kinds of cases.
BoD must try in good faith to assure adeq compliance program
∅ a high bar to set assure corp info & reporting system that board decides is adeq.
Failure to meet low bar or no compliance program may make BoD liable for breach of
fid duty of loyalty for losses caused by corp noncompliance.
Ct Finds: Board did enough to fulfil fid duties. ∅ need compliance program that successful at
preventing or detecting violations BUT must make good faith attempt to do so
9. Compliance Takeaways:
a. Caremark: Board members are ∅ guarantors of corp compliance of laws/regs, but they do have duty
to develop, implement, & assess a compliance program
b. HC Compliance = growing field
c. In large, sophisticated compliance programs, CCOs often have direct access to board, may be attys
d. ACA req’s providers who participate in MCR/MCD to have compliance programs
39
Can’t operate for private benefit of XYZ rather than for exclusive benefit for the
community/public
2. How to avoid disqualification?
a. (1) No part of net earnings inures to the benefit of any private SH or individual
b. (2) No substantial part of activity to influence legislation limits on amt of
propaganda/lobbying/politic’ing can be involved in
c. (3) ∅ participate or intervene in political campaign of candidate for specific public office (can’t get
involved at all)
3. Sub-reg guidelines ∅ binding law Revenue Rule = sub-reg
a. Administrative pronouncements by IRS/Public position of IRS/opinion to certain issues
b. Provide useful guidance on how IRS interprets code
((Comment regulations = binding law))
***Reg ∅ establish substantive req’s for FAP for how generous or stingy it has to be no
minimum set tax exempt hosp will determine that, however they’d like. Just needs an FAP.
State law may have requirements
Publishing FAP (#1) will FX if #2 & #3 are meaningful
40
BUT could pose a threat to tax exempt status
Could lead to violation of private inurement/benefit
1. Net profits are going to MD’s benefit & ∅ using charitable assets to further
charitable purpose of org private benefit & ∅ community benefit.
b. Private Inurement (insiders) Prohibition
A tax-exempt org cannot let insiders (person in control or with influence: ex Board members,
family of, CEO, MedStaff, etc) to siphon off charity’s income or assets for personal use.
c. Private Benefit (broader) Prohibition
A tax-exempt org cannot be organized or operated for the benefit of private interests (∅
limited to insiders)
d. IRS won’t see private benefit that is incidental to hosp business in effort to pursue charitable
purpose as violating prohibition on private benefit.
2. Factors to consider to ID if MDs recruitment package violate the prohibition on private
inurement/benefit?
a. Objective evidence of need in community or hosp that MD will specifically address (CHNA, MUA,
current MDs ∅ accept MCD but this one does)
b. Recruitment furthers hospital’s charitable (exempt) purpose
c. MD will become part of hosp’s MedStaff
d. Recruitment package in written agreement, approved by hosp board.
XIV. FRAUD & ABUSE (Can violate 1 § w/ 1 offense or violate multiple §s w/ 1 offense)
A. FCA (∅ HC specific law – others yes)
1. Elements: ∆ is subject to liability when:
a. ∆ presents or causes to be presented a claim for payment or approval
b. Claim is false or fraudulent
c. ∆’s acts are taken knowingly (false)
2. Penalties = $10-21K per claim + treble (3x) damages sustained by Fed gov’t in paying out false claim
3. FCA Application in HC Settings:
a. Claim where no goods/services rendered but Provider tries to bill gov’t
Ex. Pt is dead but Dr. bills for services as if pt were alive
Ex. Bill for ambulance xport but pt never xported anywhere.
b. Claim for “upcoding” goods/services for higher reimbursement
c. Claim for goods/services not medically necessary
d. **Reverse false claims, subject to 60 day rule
Gov’t pays out too much $$ to provider, but provider keeps it (esp. when provider knows they
were over paid and keeps $$ [31 U.S.C. §3729(a)(1)(G)])
Once ID overpayment 60 days to return it.
**Did you know or should you have known of overpayment that’s compliance
programs are necessary to ID these issues.
e. “Implied false certification” as a false claim
When submitting a claim to the gov’t for payment, you are implying that you are complying w/
K, §, regs obligations (material) in relation to submission
Claim that fails to disclose claimant’s noncompliance with MATERIAL requirement
(§/reg/K’ual) of MCD/MCR payment
If claimant ∅ in compliance, then failure to disclose noncompliance can = misrepresentation.
4. What level of knowledge (scienter) is necessary?
a. FCA § imposes liability on a person who
Knowingly presents a false claim
Actual knowledge
41
Deliberate ignorance of truth
Falsity/reckless disregard of truth or falsity
1. Can’t put head in sand & pretend ∅ to know what’s going on.
**ACA added provision that no specific intent is req’d.
5. US v KRIZEK
a. F: Solo psychiatrist practitioner providing services to MCR/MCD pts. Charged with (1) filing claims
for Tx that was not medically necessary despite him stating they were necessary; (2) improper billing
upcoding.
b. Medically Necessary Claim
Ct sts gov’ts experts never saw pts, only reviewed their files
Dr. K on stand, reviewed and justified necessity of services
Ct exonerates Dr. K on MedNec claim, b/c gov’t ∅ put proof necessary to make its case
c. Improper Billing Claim
Dr. K sts exams last 45-50 min while gov’t states should only be billing for 25-30 mins
upcoding for higher reimbursement.
Ct sts proper code was 45-60 min provider ∅ have to be face to face w/ pt for time but time
needs to be spent on pt care (speaking to RNs, phone calls to consult other MDs)
Bundle service = local and nat’l norm.
d. FALSE CLAIM HERE:
Sloppy billing & failure to supervise
Wife defaulted to imputing 45-50 min code for every pt w/o asking Dr. K if he actually
spent that much time w/ each pt.
Billing irregularities improper billing submission.
Dr. K ∅ make sure they were billing for correct time allotment.
Dr. K acted with reckless disregard of the truth/falsity of claims submitted.
6. UNIVERSAL HEALTH SERVICES v US ex rel ESCOBAR (how implied cert theory is used)
a. F: MD claimed to be licensed psychologist but school attended was ∅ accredited. Pt received
services from someone ∅ certified to give her medications family sued.
∆ failed to disclose violations of MA MCD regulations regarding staff qualifications, licensure,
supervision
Misleading, half-truths can misrepresentation
1. Pt received services = true
2. Failure to state services = inconsistent & ∅ by qualified personnel.
b. H: SCt accepts false cert theory when:
(1) Claim makes specific representations about goods/services
AND
(2) Failure to disclose noncompliance w/ material §/reg/K’ual req’s produces misleading half-
truths.
7. Materiality Req’s/Inquiry
a. If the gov’t had known the truth, would the undisclosed, misleading half-truth have made a
difference in whether or how much the gov’t paid out?
8. Qui Tam actions under FCA ex rel ESCOBAR
a. Private party (relator) w/ direct & independent knowledge of false claim can file action on behalf of
Fed gov’t
b. Initial filing under seal (so ∆ ∅ know being investigated, esp if whistleblower still works there), DOJ
has 60 days to review, investigate, & decide whether to intervene & pursue action itself.
c. If DOJ ∅ proceed w/ action the qui tam relator can proceed on their own
42
Relators = 15-30% share if gov’t wins
Depends on if gov’t proceeds with action itself; extent of relator’s contribution to
prosecution; relator’s own involvement in violation of § (whistle blower w/i ∆s camp)
§ usually includes whistle blower protection to incentivize whistleblowing ($$)
Qui Tam relator is doing work for & protecting interests of fed gov’t
1. QTR ∅ injured party here, fed gov’t is.
B. MCD/MCR Anti-Kickback § (∅ apply to PURELY private insurance)
1. Criminalizes conduct relating to payment of MCD/MCR benefits and civil monetary penalty & MCD/MCR
exclusion can be devastating to providers b/c rely heavily on fed programs.
2. BROAD wording, so addresses a wide range of financial arrangements in HC marketplace.
3. Prohibits quid pro quo (QPQ) - X∆ arrangements meant to induce business involving fed HC programs.
ID Motivation
ID payment by MCR
Must be QPQ
1. “I’ll do X for you if you do Y for me” & “I’ll do Y for you if you do X for me”
43
∆ sts payment was to interpret holter monitor results
Govt’t sts payment to induce future referrals of MD pt’s to holter monitor services.
∆ interprets some results on own and still pays MDs interpretation fee which was greater
than what MCR allowed for.
b. I: Are referrals that are only PART of the reason/purpose for payment enough for AKS violation?
∆ sts MD wouldn’t use him w/o the interpretation fee but also paid the fee b/c the MD was
actually providing a service (by interpreting fees). Referrals were only part of why they were
paid
c. H: Must show 2 aspects of intent for AKS violation
(1) Motive/Inducement (Purpose to induce referrals)
Renumeration must be paid in return for or to induce referral or purchase focus is on
whether referrals were the motivation
1. Here: Ct sts that if 1 purpose of payment (∅ necessarily the only purpose) is to
induce referrals then violations of AKS
AND (must show both)
(2) Mens Rea
§ req’s knowingly & willfully
ACA sts gov’t need ∅ show/prove specific intent to violate AKS, but must show intent to
perform the allegedly illegal act & some knowledge of general unlawfulness
45