The market for health care services in the U.S. is consolidating at a breakneck pace. A total of 1,498 health care mergers and acquisitions were announced in 2015—a new record for health care M&A deal volume. (The previous record-holder was 2014, with 1,318 deals). Spending on M&A transactions in 2015 reached $563.1 billion, another new record.
These mergers have resulted in dramatically increased concentration in the industry, at multiple levels. Hospitals are acquiring other hospitals. (San Francisco, for example, now has only three significant hospital chains).
In turn, bigger hospitals are buying up specialty medical practices, turning previously-independent physicians into employees. The number of independent physicians has declined, from 57% in 2000 to 37% in 2013, according to a study published by Accenture last summer. By the end of this year, Accenture predicts that the percentage of independent physicians will drop to 33%.
More than 200,000 physicians in the U.S. are now employees, and three in four medical residents will start their career as employees of a medical group, hospital or faculty plan. In 2000, one in 20 specialists were hospital employees; by 2012, the ratio was one in four. By the end of this year, that ratio will likely be lower still.
Meanwhile, the number of physicians, relative to demand, is shrinking. The Association of American Medical Colleges (AAMC) predicts a national shortage of between 124,000 and 159,300 physicians by the year 2025. This trend leaves big institutional health care providers in a race to hoover up a diminishing supply of doctors to meet the demand for health care services of a growing and aging population. They are using covenants not to compete in employment agreements to fortify their competitive positions not only against doctors, but against each other.
Big employers can use their superior bargaining power to extract big concessions from employed physicians. The fewer the number of employers of physicians, the fewer employment options for physicians. Naturally, this has detrimental effects on a physician’s career and family.
But it also harms patients, as well. Physician non-competes frustrate the right of patients to choose their own physicians. Geographic restrictions in non-competes are there in order to make it so burdensome on the patient to visit a departing physician’s new practice that the patient will simply give up and continue seeing the physician’s former employer instead, even if that isn’t what the patient prefers.
Non-competes don’t only frustrate patients’ freedom of choice: they also disrupt continuity of patient care--a critical ingredient to good treatment outcomes. Patients who receive care from a physician whom they know and trust are more likely to comply with that doctor’s recommendations, such as by losing weight and taking medications regularly. Patients are also more likely to seek out preventive care from doctors with whom they have a long-standing relationship. Continuity of care has also been shown to reduce emergency room visits and hospitalizations, and to reduce the cost of healthcare generally--especially for seniors.
And, of course, less competition among health care providers in a geographic area means higher costs in that area. Higher cost means less accessibility – and less care – overall. In this light, it’s hardly irrational to view physician non-competes as a threat to public health.
Courts Often Aren’t Much Help
Courts typically view the doctor-patient relationship as a business asset of the doctor’s employer, just like any other customer relationship. This leads them to look primarily at market concentration as the measure of public harm that could result from enforcing a non-compete, rather than the harm that would be visited upon any of the departing physician’s individual patients as the result of the covenant’s enforcement.
Courts have been known not to enforce a non-compete if the loss of a physician’s services in a particular geographic area would result in the complete loss of services of that kind in the area, or if it would result in a monopoly over services of that kind in the area. Some courts have struck down non-competes where enforcement would deprive a community of the availability of a doctor at all times for emergencies.
But other courts have been far less enlightened. For instance, the Supreme Court of Illinois has ruled that a shortage of physicians resulting from non-competes in any particular geographic area within that state would be self-correcting, because it would encourage “young doctors” from outside to relocate to that area. (One must ask: if Mr. Market is really this good at allocating physicians, then how come there are such things as Health Provider Shortage Areas, Medically Underserved Areas and Medically Underserved Populations?)
Fortunately, not all courts are this casually dismissive toward patient welfare and choice. Courts in a number of states will consider the unique nature of the doctor-patient relationship and the harm that can result when that relationship is severed purely for commercial gain by a non-compete. The Arizona Supreme Court, for one, has observed that the “doctor-patient relationship is special and entitled to unique protection,” and has ruled that covenants not to compete involving physicians in that state must be strictly construed in light of their effect on that relationship.
But unless you live in one of the few states that prohibit physician non-competes as a matter of law, whether or not a particular physician non-compete is enforceable will depend on the unique facts and circumstances of the case. That makes the outcome of any dispute over its enforceability difficult to predict in advance. This lack of predictability – and the typically high cost of challenging a non-compete in court – can make even a facially unenforceable non-compete a burden on a physician’s career prospects.
The AMA Isn’t Much Help
Non-competes between attorneys violate lawyers’ rules of professional conduct throughout the United States. This is because the American Bar Association (ABA) has incorporated a general prohibition against non-competes in its Model Rules of Professional Conduct. Most states model their rules of conduct for attorneys on the ABA’s Model Rules.
The relationship between attorney and client is an intimate and confidential one, much like the relationship between physician and patient. One would assume that the American Medical Association (AMA) would have adopted a strong ethical stance against non-competes in physician employment agreements comparable to the ABA’s position on non-competes among lawyers. But one would be wrong.
Certainly, the AMA has challenged the ethics of physician non-competes over the years. In 1933, the AMA resolved that restrictive covenants which prevented free choice of physician were unethical.
However, when the AMA’s Judicial Council revisited the issue in 1960, it backed away from that position, ruling that a “reasonable agreement not to practice within a certain area for a certain time, if it is knowingly made and understood,” wouldn’t be unethical. Then, in 1980, the AMA reversed itself again with a Judicial Council opinion which flatly declared that physician non-competes were not in the public interest.
The AMA’s current position on this issue, which it adopted in 1996, can be found in Opinion 9.02 of the AMA’s Code of Medical Ethics. This Opinion condemns non-competes for their tendency to restrict competition, disrupt continuity of care and deprive the public of medical services. And it discourages them generally— except insofar as they are reasonable in duration and geographic scope, and reasonably accommodate patients’ choice of physician. This rule essentially tracks the “rule of reason” test which most state courts employ to determine the enforceability of non-competes.
Thus, the AMA has largely left it for each state to decide for itself what is reasonable when it comes to physician non-competes. In cases where physicians have argued that enforcement of a non-compete would violate the AMA’s ethics rules, courts have usually refused to adopt that argument, reasoning (in essence) that if the AMA’s ethics rules are not binding on its own members, why should the courts take these rules seriously.
Legislation Helps, But Are Legislatures Willing?
State legislature can take the proverbial bull by the horns and outlaw the use of non-competes in physician employment agreements. Several states—namely Colorado, Massachusetts, Delaware, Arkansas and Alabama—prohibit physician non-competes outright. California, Montana, North Dakota, and South Dakota prohibit the enforcement of employee non-competes generally, not just with respect to doctors. And while Virginia, Tennessee and Texas do not ban enforcement of physician non-competes, they do limit the conditions under which they can be enforced.
But while state legislatures may be able to strike a blow against anti-competitive practice in medical care, surprisingly few have been willing to do so.
Just last month, the state of West Virginia took legislative action to preempt the Federal Trade Commission (FTC) from blocking the merger of two large hospitals in the state. In the FTC’s view, this merger would create a near monopoly over acute-care, inpatient hospital services and outpatient surgical services in and around Huntington, West Virginia—leading to higher health care costs and reducing the hospitals' incentives to improve quality of care in that community. Nevertheless, in a move characterized by detractors as a case of “special interest politics,” West Virginia lawmakers decided to shield this and other hospital mergers from all antitrust scrutiny.
West Virginia's misguided efforts will likely fail. (State legislation can't be used to prevent federal enforcement agencies from enforcing federal law). But, if anything, this case illustrates the difficulty of fighting the consolidation wave among big hospitals on the legislative front. Can employed doctors, hoping for legislative relief from the competitive restraints big hospitals have placed on them, expect to fare better than the FTC?
What May Help: Collective Bargaining
Maybe the best way for employed doctors to resist the imposition of non-competes is to rely on a tried-and-true technique first perfected in the industrial sector: Collective bargaining. The National Labor Relations Act (NLRA) protects the rights of employees, including doctors employed by healthcare facilities, to engage in “concerted activity,” even if they are not members of the union. “Concerted activity” is when two or more employees take action for their mutual aid or protection regarding terms and conditions of employment. A single employee may also engage in protected concerted activity if he or she is acting on the authority of other employees, bringing group complaints to the employer’s attention, trying to induce group action, or seeking to prepare for group action.
It is important to know that the NLRA does not cover employees who are “supervisors,” as that term is defined under the statute. (Basically, a “supervisor” is any employee having the authority to hire, fire discipline other employees on behalf of the employer). But it does protect supervisors who refuse to violate the NLRA against employer retaliation.
One physician may not be able to negotiate a non-compete out of his or her employment agreement all alone. But a substantial segment of a large employer’s physician workforce – acting in concert under the NLRA – may be able to. When it comes to non-competes, big employers commonly use concerted action against the interests of employees. Why shouldn’t employees do the same?
David M. Briglia is an employment lawyer who represents physicians and other healthcare professionals in negotiating their employment, non-compete and practice acquisition contracts with hospitals, health systems and group practices, and in litigating breach of contract, non-compete and employment law claims. The Law Office of David M. Briglia serves doctors and other healthcare professionals in Washington, D.C. and Maryland. The article above is for informational purposes only, and is not intended, nor can it be relied upon, as legal advice. It is also not intended as an advertisement, solicitation or invitation to enter into an attorney-client relationship.
Last month, the U.S. Department of Health and Human Services’ Office of Civil Rights (HHS OCR) published the first in a series of guidance materials which are meant to further clarify individuals' core right under HIPAA to access and obtain a copy of their health information. The new guidance, in the form of a Frequently Asked Questions (FAQs), addresses the scope of information covered by HIPAA's access right, the very limited exceptions to this right, the form and format in which information should be provided to individuals, the requirement to provide access to individuals in a timely manner, and the intersection of HIPAA's right of access with the requirements for patient access under the HITECH Act's Electronic Health Record (EHR) Incentive Program.
Among other things, the new guidance explains that, under the Privacy Rule, a health care provider cannot require patients to pick up their records in person if they ask for the records to be sent by mail or email. A provider cannot require an individual to use a web portal for requesting access, as not all individuals will have ready access to the Internet, or to mail an access request, as this would unreasonably delay the covered entity’s receipt of the request and thus, the individual’s access. A health care provider cannot deny a request for access to health information because a patient has failed to pay medical bills. And although a doctor or a hospital may charge a fee to cover the cost of copying, it cannot charge for the cost of searching for data and retrieving it.
The new guidance is available on HHS OCR's website at: http://www.hhs.gov/hipaa/for-professionals/privacy/guidance/access/index.html
The HIPAA Privacy Rule has always provided individuals with the right to access and receive a copy of their health information from their doctors, hospitals and health insurance plans. The Privacy Rule is especially important in the era of EHR, which are supposed to empower consumers to easily transfer health information from provider to provider. HHS characterizes this as a right “critical to enabling individuals to take ownership of their health and well-being.” HHS OCR’s press release argues that, with “more targeted treatments discovered through the new precision medicine model of patient-powered research, it is more important than ever for individuals to have ready access to their health information.” HHS OCR’s stated reason for rolling out a series of explanatory information products concerning the Privacy Rule is its perception that providers have raised unjustified roadblocks to individuals’ access of their own health information.
The Privacy Rule has been an area of heightened enforcement activity for HHS OCR over the last few years. OCR has the power to levy penalties against providers who violate HIPAA, but it doesn’t often do so. And individuals do not have a private right to sue covered entities for violations of HIPAA.
So why should health care providers worry about complying with the Privacy Rule in particular, and HIPPA more broadly? Because individuals have found ways to circumvent the federal statute’s preclusion of private rights of action by filing actions in state courts under state law. HIPAA does not preempt state-law causes of action for the wrongful disclosure of health care information. If an individual were to be harmed by the wrongful withholding of health care information, there’s no obvious reason why a state cause of action wouldn’t lie against the responsible provider.
State courts have allowed plaintiffs to use HIPAA as a standard for measuring the duty to maintain confidentiality in negligence, privacy, and professional liability cases. Due to the broadness of state tort laws pertaining to negligence and the substantial damages awarded by some state courts in lawsuits arising out of conduct that violated HIPAA, covered providers need to make sure that their HIPAA compliance programs are well-designed and working as planned.
Last year, in a rare moment of bipartisanship (especially where health care policy is concerned) Congress enacted Medicare Access & CHIP Reauthorization Act of 2015 (MACRA). MACRA was a response to the growing consensus that double-digit annual growth rates for Medicare outlays under the traditional, fee-for-service delivery model of providing health care in the U.S. simply isn’t sustainable, and that the government should be buying quality care and efficient outcomes, not just volume, when it pays for medical services. The changes MACRA wrought include:
Based on the MIPS composite performance score, providers will receive positive, negative, or no adjustments in Medicare payments they are owed. Positive and negative adjustments will be up to a maximum of 4 percent in 2019, and will grow over time to a maximum of 9 percent in 2022 and beyond.
HHS has already set an aggressive goal for tying Medicare payments to quality and value, even before MIPS takes effect. By the end of 2016, it expects that 85% of Medicare fee-for-service payments will be tied to quality or value, and that 90% of fee-for-service payments will be tied to quality or value by the end of 2018.
Whether HHS’s alternative payment schemes will actually result in quality and value is hotly disputed – perhaps most hotly in the last month by Robert A. Berenson, M.D., of the Urban Institute in Washington, D.C. One of the nation’s most respected health care policy experts, Dr. Berenson served on the Medicare Payment Advisory Commission, headed the Medicare payment policy and private health plan contracting in the Centers for Medicare & Medicaid Services (CMS), and served as an assistant director of the White House Domestic Policy Staff under President Carter. In a JAMA Forum editorial published in January, Dr. Berenson predicted MIPS would fail to improve the quality of US healthcare because of its obsession with what he characterized as a “few, random, and often unreliable measures” of physician performance, at the expense of paying proper attention to such essential qualitative factors as rates of misdiagnosis.
In an interview in the most recent issue of Medical Economics, Dr. Berenson told the publication that only about 50 percent of physicians in private practice currently submit data under PQRS because of the administrative burden and because they don't think the measures are good ones. However, under the current regime, non-cooperating practices only stand to lose only 2 percent of revenue if they don’t participate. Under MIPS, the stakes are higher: Eventually, practices will stand to lose up to lose 9 percent. Dr. Berenson pointed out that in focusing on data production regarding quality, resource use, clinical practice improvement activities and meaningful use of electronic health records systems, MIPS will strain the financial resources of small practices, perhaps to the breaking point. Small physician practices don't have the IT systems they need to collect and report this data, Dr. Berenson argues. They would need to spend the money to hire a consultant to produce the data from their medical records or use a registry option the government is offering, which will also entail expense. Dr. Berenson believes many small practices will decide they can't afford to do that, and simply dissolve.
Forecasts of doom for small practices are premature: Much will hinge on the outcome of CMS’s rulemaking for MIPS. Final rulemaking is scheduled for release this year. Among other things, CMS will define a threshold for low-volume providers who are exempt from MIPS, based on some combination of minimum Medicare patients, service volume, and/or billings. Depending on how the low-volume threshold is defined, it could provide considerable breathing space for small providers, whose air supply might otherwise be cut off by a value-based payment system that demands extensive, expensive data gathering.
Who knows? The low-volume threshold could even make small and solo practice more desirable, by creating a safe haven from the onerous reporting requirements faced by larger groups and institutional providers.
How Far Must A Hospital Go to “Reasonably” Accommodate a Deaf Health Care Professional Under the ADA? A Federal Judge in Maryland Gives a Surprising Answer
On January 21, 2016, Judge Catherine Blake of the US District Court for the District of Maryland (Maryland’s federal trial court) handed down a somewhat surprising decision in Searls v. Johns Hopkins Hospital, a case involving a deaf nurse who was offered a job by Johns Hopkins Hospital (JHH) in Baltimore, only to have her offer rescinded after JHH decided it would be too expensive to provide her with the American Sign Language (ASL) interpreter she requested as an accommodation. JHH had sought to dismiss the case on summary judgment (which is a way that litigants can dispose of a case without going to trial if there are no genuine disputes of material fact, and all that is needed to decide the case is an interpretation of law from a judge). Instead, Judge Blake granted summary judgement to the plaintiff, Lauren Searls, finding that she had made out a case of disabilities discrimination against JHH under Title I of the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act of 1973. Judge Blake left the issue of damages to be resolved at trial.
Nurse Searls is a deaf 2012 graduate of the Johns Hopkins University School of Nursing. She can read lips but understands better through ASL. When communicating with hearing individuals, she voices for herself. As a nursing student, Searls successfully completed two clinical rotations at JHH in its Halsted 8 unit. During her clinical placements at JHH, the School of Nursing provided her a full-time ASL interpreter.
At the end of her final rotation, she received a very positive faculty summary of her clinical performance. One faculty member wrote that Searls "[w]orked well with others on the team and communicated appropriately and with empathy with the patients and their families." She met all of the course objectives, frequently at a high level.
Just a few days before Searls' graduation from the School of Nursing in July of 2012, JHH’s Nurse Manager sent Searls an email giving her advance notice that two openings for Nurse Clinicians in Halsted 8 were about to be posted. The Nurse Manager encouraged Searls to apply. Not surprisingly, one of the essential job functions listed in the position description was the ability to "liste[n] actively to opinions, ideas and feelings expressed by others and respon[d] in a courteous and tactful manner." Searls interviewed for the position, and she was hired the very next day.
After Searls received the employment offer, she told a staff member from JHH’s Department of Occupational Health that she would require full-time ASL interpretation as an accommodation. This prompted JHH’s ADA/Accessibility Consultant to investigate the cost of providing interpreters to Searls. The consultant determined that the average annual salary of an ASL interpreter proficient in medical terminology would be between $40,000 and $60,000. The consultant also determined that Searls would require a team of two interpreters with her at all times, at a total annual cost of $240,000. (JHH failed to convince Judge Blake that there was a legitimate factual basis for these conclusions).
Halsted 8, which is part of JHH's Department of Medicine, had an operating budget of $3.4 million in 2012. The budget of the Department of Medicine was $88 million that year, and JHH had an overall operating budget of $1.7 billion in 2012. The Nurse Manager who had hired Searls assumed (again with no apparent factual basis) that the Halsted 8 unit would need to absorb the entire expense of the interpreters, with no cost sharing from the larger institution. She flatly concluded that Halsted 8 could not afford to hire Searls, even though she believed that Searls was “bright and would [have been] a good hire other than [for her] hearing issue.” During the time Searls' accommodation request was evaluated, no one asked Searls how she would work with an interpreter or proposed any alternative accommodation.
Searls subsequently clarified that she was only seeking one full-time ASL interpreter. That didn’t change JHH’s decision to rescind her offer of employment several weeks after it had hired her. In its rescission letter, JHH stated that it engaged in “several interactive consultations” with her, but could not provide her requested accommodation because of “its effect on the resources and operation of the department.”
After several months of searching for a new job, Searls began working as a nurse at the University of Rochester Medical Center's Strong Memorial Hospital (Strong). After Strong offered her the job, Searls requested a full-time ASL interpreter. Strong agreed. Searls' supervisor at Strong testified that Searls' deafness and use of an interpreter had never negatively affected patient care, her response to alarms, or her participation in codes—all things that JHH assumed would be a problem for Searls even with the assistance of an interpreter.
Title I of the ADA makes it illegal for an employer to "discriminate against a qualified individual on the basis of disability...." To establish a prima facie case, a plaintiff must show that (1) he or she is an individual with a disability within the meaning of the ADA; (2) the employer had notice of the disability; (3) he or she could perform the essential functions of his or her job with a reasonable accommodation; and (4) the employer refused to make such reasonable accommodation.
Section 504 of the Rehabilitation Act provides that "[n]o otherwise qualified individual with a disability ... shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance...." Employment discrimination claims brought under Section 504 are evaluated using the same standards as those applied under Title I of the ADA. Health care facilities, which usually receive federal financial assistance through Medicare, are covered by Section 504.
An employer may avoid liability under the ADA and Section 504 if it can show as a matter of law that the proposed accommodation will cause “undue hardship” under the relevant circumstances, or that the employee constitutes a "direct threat" to the health or safety of others that cannot be eliminated or acceptably reduced by a reasonable accommodation.
Why Hopkins Lost
A “Reasonable” Request for Accommodation
In her opinion, Judge Blake noted that, in defining the term "reasonable accommodation" under the ADA, Congress expressly included "the provision of qualified readers or interpreters" as an illustration of accommodations that may be reasonable, depending on the prevailing circumstances. The reasonableness of a requested accommodation of a disability depends on whether it enables the employee to perform the essential functions of the job. An essential job function is one that bears a "more than a marginal relationship” to the job. A reasonable accommodation does not require an employer to reallocate essential job functions, to assign permanent light duty to an employee with a disability, or to hire an additional person to perform an essential function of that employee’s position. (For example, reducing a school counselor's caseload would not be a reasonable accommodation if it would shift her duties to other counselors and increase their workload).
Searls had provided evidence in the form of expert testimony that employers often provide interpreters as a reasonable accommodation. Searls also showed that she had worked effectively with interpreters while she was completing her clinical rotation at Halsted 8 as a nursing student, and that she continued to work effectively with ASL interpreters in her current nursing job at Strong. Thus, Judge Blake found that the accommodation Searls proposed to JHH in 2012 was a reasonable one.
Judge Blake further found that JHH had failed to show that in hiring a full-time ASL interpreter, it would have been forced to reallocate essential job functions. The parties agreed that communicating with patients, family members, and other hospital personnel and monitoring and responding to alarms were essential functions of the Nurse Clinician position. Judge Blake found, quite sensibly, that a nurse's duties with respect to communicating and responding to alarms go beyond hearing what patients are saying and hearing an alarm ringing. Searls would have used her own medical expertise and training when speaking to patients, families, and other hospital personnel, providing care based on her exchanges with patients, and taking the appropriate action in response to an alarm after an interpreter communicated the sound of an alarm visually. Therefore, Judge Blake concluded, providing Searls an ASL interpreter would not have reallocated the essential job functions of communicating with others and responding to alarms from Searls to another employee.
No “Undue Hardship”
JHH still could have prevailed against Searle if it had shown that her requested accommodation, although reasonable, posed an “undue hardship” on JHH. The expense of a reasonable accommodation is a factor in undue hardship analysis. In that regard, Judge Blake found that JHH's overall budget, the Department of Medicine's operational budget, and Halsted 8's operational budget were all relevant.
But in making its undue hardship argument, JHH insisted on focusing solely on the much smaller budget of the Halstead unit rather than on the larger department budget or the much larger institution budget. JHH insisted that its budget for reasonable accommodation was $0. But an employer's budget for reasonable accommodations is an irrelevant factor in assessing undue hardship under the ADA. Otherwise, an employer could budget $0 for reasonable accommodations and thereby always avoid liability under the ADA.
Judge Blake further found that, even if it were true that the salary of a full-time ASL interpreter is twice the salary of a nurse, that in itself does not establish that an ASL interpreter would be an undue hardship. The EEOC's interpretive guidance on its Title I ADA regulations explains that "[s]imply comparing the cost of the accommodation to the salary of the individual with a disability in need of the accommodation will not suffice." Judge Blake faulted JHH for not taking its $1.7 billion budget into account when evaluating the expense of the accommodation. She found particularly persuasive the fact that Strong had no apparent problem providing Searls with an ASL interpreter. Because JHH denied Searls an accommodation that was reasonable and that imposed no evident undue hardship, Judge Blake ruled that Searls had made out a prima facie case of unlawful employment discrimination under Title I of the ADA.
No “Direct Threat”
JHH still could have defeated Searls’ claim if it could have shown that her disability posed a "direct threat" under the ADA. A “direct threat” is as a significant risk to the health or safety of others that cannot be eliminated or acceptably reduced by reasonable accommodation. But JHH’s direct threat defense also failed, because JHH could not show that Searls, when accompanied by an ASL interpreter, would not be able to perform the essential functions of her job, including responding to unexpected phone calls, call bells, and critical patient situations. Judge Blake characterized JHH’s direct threat defense as a post-hoc rationalization: It had not cited patient safety concerns as a reason for rescinding its job offer to Searls in 2012; it only cited the expense of providing her with interpreter services.
JHH's direct threat defense also failed because JHH didn’t base its decision to rescind Searls’ job offer on an individualized assessment of her present ability to safely perform the essential functions of her job—an assessment which the EEOC’s regulations under Title I require. Such an assessment must "be based on a reasonable medical judgment that relies on the most current medical knowledge and/or on the best available objective evidence" and must consider factors such as: "(1) The duration of the risk; (2) The nature and severity of the potential harm; (3) The likelihood that the potential harm will occur; and (4) The imminence of the potential harm." JHH undertook no such individualized assessment of Nurse Searls. It relied instead on stereotypes and generalizations about deafness.
What’s So Surprising about Searls?
It is passing strange when a plaintiff alleging discrimination under Title I of the ADA obtains summary judgement in his or her favor. In fact, it is exceedingly rare that plaintiffs win Title I cases in Federal court at all. The most recent survey conducted by the American Bar Association’s Commission on Mental and Physical Disability Law on Title I litigation in the federal courts found that employees only win these cases 2.6% of the time. (By comparison, the win rate for plaintiffs in employment discrimination cases overall is about 15%; in all other civil cases, it’s about 51%). The win rate in 2009 was the lowest ever recorded by the survey, even though the ADA had been amended in the prior year to expand the scope of disabilities covered by the law. One would hope this execrable statistic merely reflects the fact that most cases under Title I which have merit settle early—and perhaps that it has taken a little time for the federal courts to incorporate into their decision-making Congress’s expansion of the scope of covered disabilities under the ADA in 2008.
Unfortunately for Nurse Searls, it is still possible that the Court of Appeals for the Fourth Circuit (the intermediate federal court serving Maryland) will reverse Judge Blake’s summary judgment ruling against JHH, and that Searls will lose her case yet. Employers are granted reversals in their favor from federal appellate courts about 41% of the time. But for now, attorneys who represent employed health care professionals in claims involving disabilities discrimination can savor a relatively rare plaintiff’s summary judgement win—and deaf health care professionals in Maryland can perhaps feel a little more secure in their employment.
The Law Office of David M. Briglia represents doctors, nurses and other medical professionals in cases involving wrongful termination and wrongful denial of employment on account of disability and other protected characteristics in Maryland and Washington D.C. You can contact the firm here. The article above is for informational purposes only, and is not intended, nor can it be relied upon, as legal advice.
Looking Back at Health Care False Claims Enforcement in 2015; Looking Ahead at Trends Driving Health Care False Claims Enforcement in 2016
On December 3, 2015, the U.S. Department of Justice (DOJ)—the principal public enforcer of the U.S. False Claims Act (FCA)—released its report of recoveries obtained under the FCA during its 2015 fiscal year. In FY 2015, the DOJ recovered more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government. This is the fourth year in a row that the DOJ has recovered more than $3.5 billion in cases under the FCA, and brings total recoveries from January 2009 to the end of the fiscal year to $26.4 billion.
Of the $3.5 billion recovered last year, $1.9 billion—more than half of the total recovery—came from companies and individuals in the health care industry who were accused of providing unnecessary or inadequate care, paying kickbacks to health care providers to induce the use of certain goods and services, or overcharging for goods and services paid for by Medicare, Medicaid, and other federal health care programs. This $1.9 billion reflects federal losses only. In many of these cases, the DOJ played a salient role in recovering additional millions of dollars for consumers and state Medicaid programs.
Big recoveries for FCA violations in the health care industry are nothing new. Health care fraud recoveries in 2015 were actually slightly less than they were in 2014, when DOJ’s FCA recoveries for fraud against federal health care programs were about $2.3 billion in all. Health care fraud has been assuming an increasingly prominent role in FCA enforcement for decades. In 1987, the number of FCA cases that the DOJ filed involving fraud on federal health care reimbursement programs was a whopping zero. By 2011, it was over 400 cases. By the late 1990s, HHS cases began to represent a majority of all FCA cases.
The growth in health care FCA claims is mostly attributable to qui tam actions—that is, lawsuits alleging FCA violations that have been filed by private individuals acting on the government’s behalf, pursuant to 31 U.S.C. § 3729 et seq. In 1992, the number of qui tam filings exceeded for the first time the number of FCA claims filed by the DOJ. For the last decade, about 80 percent of all FCA recoveries in health care have resulted from qui tam lawsuits.
What can we expect by way of FCA enforcement trends in health care this year? Extrapolating from last year’s developments, there seem to be at least two safe bets:
1. Individuals will be in the cross-hairs like never before. In a memo issued in September 2015, the DOJ announced that it will aggressively pursue individuals in the health care industry who are responsible for corporate FCA violations. The memo, addressed to all federal prosecutors and issued by Deputy Attorney General Sally Quillian Yates (and therefore popularly referred to as the “Yates Memo”), states among other things that: (1) in order to qualify for any cooperation credit, corporations must provide to the DOJ all relevant facts relating to the individuals responsible for the misconduct; (2) criminal and civil corporate investigations should focus on individuals from the inception of the investigation; (3) absent extraordinary circumstances or approved departmental policy, the DOJ will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation; (4) DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and (5) civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual's ability to pay.
All of this is likely to increase the incentives for employers in the health care sector to place the blame for FCA violations on the actions of "bad apple" employees, in an effort to escape corporate culpability. Those incentives were already powerful before the Yates Memo was issued.
2. Enforcement focus on physician compensation arrangements will likely continue. Physician compensation arrangements that violated the Stark Law, and that therefore violated the FCA as well (at least where federal money was directly or indirectly involved), were the focus of several big-dollar FCA recoveries in 2015.
In September of last year, the DOJ announced that Florida-based Broward Health had agreed to pay the federal government $69.5 million to settle allegations it violated the FCA by engaging in improper financial relationships with nine physicians. This case originated as a qui tam complaint brought by a physician-whistleblower, Dr. Michael Reilly, MD, an orthopedic surgeon in private practice, who alleged the health system carefully tracked the value of physician referrals and pressured physicians to increase referral volume when they lagged. Dr. Reilly's claim came about after he was offered an employment deal with Broward Health, but rejected it after his lawyer told him it was illegal.
Just one week after the Broward Health settlement was announced, Florida-based Adventist Health System reached a $118.7 million settlement with the DOJ and four states to settle similar allegations. The settlement resolved claims that the nonprofit health system had paid bonuses to employed physicians based on a formula that improperly took into account the value of the physicians' referrals to Adventist hospitals.
Then in October of 2015, the DOJ announced that it had settled its years-long battle with Tuomey Healthcare System in South Carolina. Trial in that case in 2013 yielded an astonishing $237 million jury verdict, which was subsequently upheld by the US. Court of Appeals for the Fourth Circuit in July of 2015. The DOJ settled the case for $72.4 million, and Tuomey was sold to Palmetto Health, a multi-hospital healthcare system based in Columbia, South Carolina. The basis of the DOJ’s complaint against Tuomey was that it illegally billed the Medicare program for services referred by physicians with whom the hospital had improper financial relationships.
Given all of the attention directed at these big settlements in 2015, physician compensation cases should continue to fuel FCA claims in 2016. It's not enough to have a written employment contract with compensation provisions that appear to comply with the Stark Law on their face. The government has signaled that it will not only scrutinize a written agreement memorializing a compensation arrangement, but will also scrutinize the parties' performance under the contract and the basis on which compensation is determined. Compliance is an on-going obligation throughout the term of a physician's employment.
The Tuomey and Adventist cases, which are only two among the many enforcement actions brought recently by the DOJ against non-profit providers, also make clear that the DOJ won't cut any slack to a hospital or health system just because it is non-profit. There is no "halo effect" that will shield a non-profit health care provider from a potentially devastating FCA claim.
It’s easy to make a short list of the important clauses in a physician employment contract. These are clauses involving economic rights and basic duties. Salary, incentive bonus, call responsibilities, signing bonus, relocation allowance, expense reimbursement, malpractice coverage, buy-in option – the list goes on. But the most important clause in an employment contract, hands down, is one you will usually find in the very back of the agreement, buried among the clauses that attorneys and clients alike usually refer to as “boilerplate” and often (to their detriment) treat as insignificant “legalese.”
What clause is that? It’s the integration clause. Here's how it typically reads:
This Agreement constitutes the entire agreement between Employer and Physician with respect to matters relating to Physician's employment, and it supersedes all previous oral or written communications, representations or agreements between the parties.
It’s usually that simple. Its effect, however, can be profound. Sometimes called the “entire agreement” or "merger" clause, its purpose is to preclude either party – employer and employee alike – from relying on any promise, understanding or representation which the other party may have made in the course of negotiating the contract, unless that promise, understanding or representation is, in fact, included in the contract.
So what about the oral assurance that the hospital’s CMO made to you that physicians in your specialty who are employed by the hospital are only expected to cover call every fifth weekend? What about the practice group manager’s statement that scheduling vacations among the groups employed physicians is never a problem? What about that promise which was made to you in an email when you were first considering the position that you would be considered for partnership after two years of employment? What about various representations and promises that were made in the letter of intent? Were all of them faithfully incorporated into the definitive contract? If not, then these things will be without any legal effect, thanks to the integration clause.
The purpose of an integration clause is to take advantage of a legal doctrine of contract interpretation commonly referred to as the “four corners” rule. Under the “four corners” rule, a court will determine the meaning of a written contract solely by reference to the text of the contract itself, without relying on other evidence. So-called “extrinsic evidence” of what the contract is supposed to mean – or what the contract is supposed to have said – will not be considered by the court at all. This would include documents such as letters of intent, term sheets, emails and text messages exchanged between the employer and employee before the contract was signed, as well as oral statements that the parties may have made to each other during that time, as recounted by witnesses.
Thus, if the employer fails to live up to any promise that it made before the contract was signed that is outside the “four corners” of the contract, and that contract contains integration clause, then that promise is of no further legal effect. You will not be able to terminate the agreement for breach if that promise is subsequently not honored (which it may well not be). If you were relying on any extra-contractual representations about (for example) the employer’s financial condition or patient volume, then you will not be able to terminate the agreement for breach if these representations turn out not to have been true when they were made. Plus, the presence of an integration clause may frustrate – or at the very least complicate – your ability to bring a fraudulent inducement claim or defense against your employer for that reason. (But not, however, in Maryland, where the presence of an integration clause in a contract cannot be used to defeat a fraudulent inducement claim relating to that contract. See Greenfield v. Heckenbach, 797 A.2d 63, 144 Md. App. 108 (2002)).
The point here is not to persuade you to try to negotiate the integration clause out of the contract. You’ll never be able to do that. The point instead is to encourage you to review the contract carefully before you sign it, and make sure that all promises, understandings and factual premises that you are relying on in entering into the contract – and certainly all that are contained in a letter of intent or term sheet which preceded the contract – are clearly reflected in writing in the contract. And if you are relying on prospective employer’s oral assurances of good faith and fair dealing in the future, and statements to the effect of, “you’re just going to have to trust us about this,” think again: A court will only enforce the literal provisions of a fully integrated, written contract. You will only get one bite at the apple.
The Law Office of David M. Briglia represents physicians, physician assistants, nurse practitioners and other professionals in the healthcare industry in the negotiation of employment contracts, separation agreements, practice buy-ins and partnership and shareholder agreements, and in litigation involving employment and contract disputes in Maryland and Washington D.C. The article above is for informational purposes only, and cannot be relied upon as legal advice.
Hospital-physician recruitment agreements provide a source of financing for private medical groups to bring an additional physician on staff, reducing the economic risk of making a new hire. They serve the public interest by encouraging physicians to relocate to medically underserved areas and health professional shortage areas. The need for primary care providers in these areas is especially great. Yet, more and more, primary care is being delivered by ancillary providers, particularly physician assistants and nurse practitioners.
In its Proposed Rule from July of last year, CMS acknowledged that there have been drastic changes to the primary care workforce and the delivery of primary care services throughout the United States. As such, CMS proposed a limited exception for hospitals, federally qualified health centers ("FQHCs") and rural health clinics ("RHCs") to provide remuneration to physicians who want to recruit a non-physician practitioner ("NPP"). CMS previously declined to expand the physician recruitment exception to NPPs during the regulations promulgated in Phase III of the Stark Law. But CMS has now determined that this extension of the exception is appropriate for certain employed and independent contractor physician-NPP arrangements in light of health care and primary care workforce shortage projections.
In the Final Rule, CMS made several modifications to the version of the NPP exception that it included in the Proposed Rule. The Final Rule’s definition of NPP is broader than the one originally proposed, covering any NPP who furnishes substantially all primary care services or mental health care services to patients of the physician's practice. As such, covered NPPs include clinical social workers, clinical psychologists, physician assistants, nurse practitioners, clinical nurse specialists and certified nurse midwives.
Prior to the new exception, hospitals, FQHCs, and RHCs could offer recruitment assistance to physicians only for the recruitment and retention of physicians into their geographic service areas.
To be protected under the exception, the recruitment arrangement must satisfy these conditions:
1. It must be in writing and signed by the hospital, the physician, and the NPP.
2. It cannot be conditioned on the physician’s or the NPP’s referrals to the hospital.
3. The remuneration from the hospital cannot exceed 50 percent of the actual compensation, signing bonus, and benefits paid by the physician to the NPP (which compensation must meet the fair market value requirement common to the Stark Law).
4. The remuneration from the hospital can only be paid during the first two consecutive years of the compensation arrangement between the physician and the NPP.
5. The remuneration from the hospital cannot be determined in a way that takes into account the volume or value of actual or anticipated referrals by the physician (or any physicians in that practice), the NPP (or any NPP in the practice), or any other business generated between the parties.
6. The NPP cannot have, within one year of the commencement of the NPP’s compensation arrangement, practiced in the geographic area serviced by the hospital or been otherwise employed or engaged to provide patient care services by a physician or physician organization that has a medical practice site located in the geographic area served by the hospital (whether or not the NPP actually furnished services at that site within the geographic area).
7. Substantially all (that is, at least 75%) of the patient care services that the NPP furnishes to the physician’s practice must be primary care services or mental health care services.
8. The physician cannot impose practice restrictions on the NPP that unreasonably restrict the NPP’s ability to practice in the geographic area.
9. Records of the amount of remuneration by the hospital to the physician, and by the physician to the NPP, must be maintained for at least six years.
The exception may be used by a hospital, FQHC, or RHC only once every three years with respect to the same referring physician. However, this three-year limitation does not apply where an NPP is replacing an NPP who terminated his or her employment or contractual arrangement within one year of its commencement, and the remuneration provided to the physician is provided during a period that does not exceed two consecutive years from the commencement of that employment or contractual arrangement.
CMS expanded the definition of a compensation arrangement to include independent contractors, employees, and "other" arrangements. Thus, the NPP need not be a bona fide employee, as specified in the proposed rule.
However, regardless of whether the NPP is an employee or an independent contractor, the compensation arrangement must be directly between the physician (or physician organization) and the NPP. This requirement would prohibit, among other things, staffing services from holding the contract.