Health Law Ticker : California Lawyers & Attorneys for Regulatory, Transactional & Litigation Representation for Healthcare Professionals in the US

The post below was authored by Nossaman attorney, George Joseph, who specializes in complex business litigation with emphasis in healthcare and employment law.

Effective January 1, 2012, California Labor Code Section 6403.5 will require that employers operating healthcare facilities adopt various measures designed to reduce injuries incurred by employees who move patients.  Requirements include a safe patient handling policy, increased use of powered patient lifting devices, assignment of employees to "lift teams," and appropriate employee training.  Employers are also prohibited from retaliating against employees who raise concerns about safe patient handling.  A summary of the key provisions of this new law follows.

Background

• California Occupational Safety and Health Act of 1973 created the Division of Occupational Safety and Health ("Cal/OSHA"), which "protects workers and the public from safety hazards."
• Cal/OSHA currently requires that virtually every employer in California create and implement an Injury and Illness Prevention Program ("IIPP") to improve workplace safety and health.  Requirements vary depending on industry.
• Injuries to healthcare workers from patient handling (lifting) have been a persistent problem – 36,130 occupational musculoskeletal disorder cases among healthcare workers in 2008.

The Legislation

• On October 7, 2011, Gov. Brown signed into law AB 1136, "The Hospital Patient and Healthcare Worker Injury Protection Act," which adds Labor Code Section 6403.5.  This new law becomes effective January 1, 2012.
• LC 6403.5 imposes new requirements on employers operating healthcare facilities regarding the safe handling of patients.

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The below blog post was authored by Nossman ERISA and Employee Benefits attorney, Harley Bjelland:

CYR v. Reliance Standard Life Insurance Company, et al., decided June 22, 2011 by the Ninth Circuit Court of Appeals makes it clear that who may be a defendant in an action for benefits under an ERISA plan will depend upon the status of the person being sued, not whether the person is designated as the Plan, its fiduciaries or as the Plan Administrator.

Laura Cyr (“Cyr”) was an executive with Channel Technologies, Inc. (“CTI”) and was covered by a disability benefits plan (the “Plan”) that was insured by Reliance Standard Life Insurance Company (“Reliance”).  CTI was the Plan Administrator of the Plan, but Reliance had the absolute authority and control over what benefits were paid and to whom they were paid.

Cyr was terminated by CTI and filed a claim for disability under the Plan based upon a back condition.  Reliance processed the claim and paid Cyr disability benefits based upon her $85,000 per year salary.  A year later, Cyr filed an action against CTI claiming gender discrimination based upon unequal pay.  CTI and Cyr settled the action and enterred into a settlement where Cyr’s salary was retroactively adjusted to $155,000, effective one week before she was terminated by CTI.

Based upon the settlement, Cyr sought benefits from the Plan based upon the $155,000 salary.  Reliance refused to provide the higher benefit and Cyr brought the current action to enforce the higher benefit.

Reliance claimed that only the Plan and CTI, as Plan Administrator, could be sued for benefit claims under Section 1132(a)(1)(B) of ERISA.  Section 1132(a)(1)(B) provides that a participant may file a civil action to “recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.”

The Ninth Circuit made it clear that Section 1132(a)(1)(B) has no limitation on who may be sued.  CTI and the Plan were both sued as appropriate defendants, but neither one of them had any authority or control over the benefits paid under the Plan.  Reliance alone possessed that power and the Court indicated that Reliance was “a logical defendant for an action by Cyr to recover benefits due her under the terms of the plan and to enforce her rights under the terms of the plan.”

The Cyr decision is consistent with the long line of cases that provide responsibility when one has discretionary authority or control over some aspect of an ERISA plan.  We note, however, that Cyr is a welfare benefit plan case.  Where persons outside the employer have responsibility for oversight and decision making regarding benefits the Ninth Circuit will permit actions against that person under ERISA Section 1132(a)(1)(B).  At least in the Ninth Circuit, plaintiffs may now be able to allege causes of action against insurers and possibly other persons that serve in a decision making capacity, even if those persons are not employees of the plan sponsor.

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The below blog post was authored by Nossman ERISA and Employee Benefits attorney, Harley Bjelland:

Some pundits are calling CIGNA Corp. v. Amara, et al., decided May 16, 2011 by the United States Supreme Court, a very important case changing the landscape of employee benefits litigation. It has been described as eliminating the requirement that employees prove detrimental reliance on miscommunications about benefit plan terms in order to obtain relief.  As a benefits expert, I read the case differently.

A common theme in many employee benefit cases is the existence of a wrong without a remedy. These cases often include circumstance where the plan document provides for a specific benefit, but the summary plan description or some other communication provided by the employer ("Employer Communication") provides for another.  Does the employee get the richer benefit even though not provided for in the formal plan document?  In most cases the employee gets the benefit promised in the plan document regardless of any contrary language in any Employer Communication.

The typical facts involve an employee reading and relying on a description of a valuable benefit in an Employer Communication and, after relying on the promised benefit, the employee retires. Some cases even involve circumstances where the employee double checks the benefit described in the Employer Communication with an employee in Human Resources.  In general, the federal courts have refused to rewrite the terms of a qualified retirement plan to give the richer benefit.  The logic behind these decisions is that ERISA consistently encourages employers to communicate benefits to employees in terms the employees can understand and in so doing, perfection is not required.  All benefit plans are voluntary and the Supreme Court has consistently held that plain English communication may become extinct if employers are required to insure the precision of all Employer Communications.

CIGNA Corp. v. Amara does not change this legal premise.  In CIGNA, the employer sent summary plan descriptions to all employees.  The summary document described a greater benefit than actually provided by the terms of the plan itself.  The plaintiff sued for the benefit promised in the summary description.  The District Court agreed and ordered CIGNA to pay the higher benefit.  In a unanimous decision, the Supreme Court reversed and remanded.

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For 28 years the public-policy-making machine of The Great State of California has struggled and sputtered to decide how to regulate discount fee health plans.  These are basically arrangements wherein persons for a fee are granted access to networks of healthcare providers who have agreed to grant discounts off their fees.  (This saga is of particular interest to this blogger both because he represented clients in various phases of it, and because he negotiated and prepared the application for the first licensure of a discount fee plan in California.)

Through a stream of Commissioner’s Opinions from the Department of Corporations and the Department of Managed Health Care, informal administrative actions, two AG Opinions, some tangential statutory language, much failed legislation, a burst of celebrated enforcement actions, a few Knox-Keene licensures, formal administrative law adjudications, and proposed regulations, attempts have been made to subject the discount plans to some form of public regulation (see article, “The Birth of a Reg”). While some discount plans have operated honorably, shady others have abused the trust of their members, too often from the more vulnerable categories of society.

In early 2008 the Legislature, weary of years of  bills that died, punted the task of getting the discount plans into the administrative state to the Department of Managed Health Care.  The Department at the time had already for months been working on a regulation, and after a protracted process of iterative drafts, “stakeholder” consultations, hearings, and engaging the formal procedures of adopting a regulation, in November it brought forth a final text and duly submitted it to the Office of Administrative Law (OAL) for review and approval.

The proposed regimen would comprehensively subject discount plans to licensure and many elements of the Knox-Keene Health Care Service Plan Act of 1975 (H&S section 1340 et seq.), the charter for regulation of HMO’s in California (final reg text).  None of the industry “stakeholders” were very happy with the proposed regulation.

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In a landmark decision, Nossaman received the final decision in its client’s favor in the longest-running Medi-Cal appeal ever, Sutter Medical Center Sacramento (SMCS) v. Maxwell-Jolly. The case began in August 2002 and the Department issued its final decision in September 2010.

The SMCS decision is of major significance to all California hospitals having Neonatal Intensive Care Units (NICUs) because it distinguishes two significant courts of appeal decisions that had severely limited Medi-Cal reimbursement for the advanced services provided in sophisticated NICUs.

The two decisions, known as Sierra Vista and Kern County, held Medi-Cal did not have to provide the special NICU rate when nurse-staffing ratios were greater than one nurse to two patients (1:1-2).  Arguing on behalf of Sutter Medical Center Sacramento, Nossaman demonstrated the SMCS NICU had met requirements entitling it to reimbursement for the special NICU rate for NICU days when the staffing ratio was at one nurse to three or four patients (1:3-4) as well. 

Approximately 70 percent of most NICUs days are at the 1:3-4 staffing ratio.  As a result, all California hospitals having sophisticated NICUs will benefit from this major clarification of the law. 

During the litigation, Nossaman had to overcome numerous hurdles and had to appeal to the Superior Court twice in order to receive a fair hearing.  Nossaman even proved that, prior to this litigation, the Department's policy was precisely the same as the legal position Nossaman argued.  The Department attempted to hide that policy, and the related "smoking gun" evidence, in order to deny SMCS's appeal.  Nossaman's victory amounted to a ringing declaration that the Government cannot disregard its own policies and [like everyone else,] must follow the law.

More information about this landmark victory can be found on the Nossaman website.

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Immediately after Congress passed the health care reform bill, the Patient Protection and Affordable Care Act (PPACA), Virginia enacted its own countermeasure, called the Virginia Health  Care Freedom Act; and its Republican Attorney General then brought suit to enjoin the Federal government's performance of section 1501 of the PPACA, which requires individuals to pay a "penalty" along with their taxes if they do not purchase health insurance.  Virginia claims that this provision is beyond the power of the Federal government to enforce and also contradicts Virginia's own newly enacted law. 

The Secretary of Health and Human Services moved to dismiss this complaint for a variety of reasons, many extremely technical and not notable from the general health reform perspective.  What is important here is that Congress based its law on extensive findings concerning the effect on interstate commerce of the manner in which individuals obtain health care.  The Commerce Clause of the Federal Constitution has served, certainly since the New Deal, as the linchpin for economic regulation and control over much of the country's overall activities.  Probably best known of the many cases which have upheld expansive Federal legislation under the Commerce Clause are the cases Wickard v. Filburn (1942), which upheld a fine on a farmer who raised food to feed his own geese,  finding this a violation of market controls during World War II, and Gonzales v. Raich (2005) which upheld  a  Federal prohibition against the growth of marijuana for the grower's home use despite  the express authorization  of that conduct by the  grower's home state.   In the Virginia case, the Federal government argued that everyone must at some point in their life receive health care, and that therefore the regulation of health care economics -- by requiring the purchase of health insurance and assessing a "penalty" on those who fail to do so -- lies well within its powers under the Commerce Clause as interpreted by Wickard, Raich and many other cases.

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In a previous musing we wondered whether California medical foundations would “hold”, given cited turbulence and possible over-reaches with the form. They seem to be hanging on just fine at mid-summer. Some developments:

1. A proposed piece of legislation (SB 364) would have required an intense investigation by the Attorney General’s Office and the preparation of a “patient impact report” or a “negative declaration” whenever a non-profit hospital proposed to establish a medical foundation.  The review regimen would have required public notices, hearings, comment periods, opportunities for challenges and the like. The measure was sponsored by the medical group that is locked in bitter litigation with the City of Hope Medical Center over the Center’s plans to establish a medical foundation, as referenced in the previous musing. A classical collateral assault maneuver to be sure: sue the ba*tards, regulate ‘em too.

But at a recent legislative hearing the bill was drastically reduced to a “study” bill on, inter alia, the governance structures of medical foundations – but the Task Force that would be set up must find the funds to carry out the study. The California Hospital Association suggests that the focus of the Task Force be shifted to studying options for clinical integration of care delivery, in light of the recent federal reforms.  Seasoned legislative veterans caution that counter-attack gambits by the City of Hope Medical Group may crop up in the waning days of the session.

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We are pleased to include here the comments of colleague, Paul Quinn, a Partner in Nossaman's Washington DC office.

Two new final governmental rules implementing the “HITECH Act,” an aspect of the “Obama Stimulus Bill,” now provide financial incentives through Medicare and Medicaid for qualified hospitals and individual healthcare professionals who can demonstrate “meaningful use” of Electronic Health Records (EHR).

One rule, issued by the Centers for Medicare and Medicaid Services (CMS), defines the minimum requirements providers must meet in order to qualify for the payments and the other rule, issued by the Office of the National Coordinator for Health Information Technology (ONC), identifies the standards and certification criteria for the certification of EHR technology.

The amount of financial incentives for hospitals from Medicare and Medicaid is not specifically limited and may run into the millions of dollars. The amount for professionals is limited to $44,000 for Medicare and $63,750 for Medicaid.

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For some time, the law regarding what a provider was required to do in the event of a Medicare or Medicaid overpayment was unclear. The government took the position a provider was required to disclose the overpayment to the Program and refund it. But there was no statute saying precisely that.

Now, as part of the new Patient Protection and Affordable Care Act (PPACA), i.e., the recent national healthcare reform legislation, Congress has indeed created the statute to say precisely that and to require providers to refund the overpayment within 60 days of the overpayment being identified.

There are many theoretical "angels dancing on top of pins" questions that could be asked about exactly when an overpayment is "identified" and many factual situations may become complicated, but the new law makes it crystal clear that a provider may not keep a known overpayment with the intent of "settling up later," nor may a provider "turn a blind eye" and decline to investigate the facts of a potential overpayment situation.

One dilemma providers face is whether to investigate a potential overpayment through its own staff or by bringing in outside experts such as attorneys and billing and coding experts. The advantage of using a provider's own staff typically is lower investigative costs and a faster completion of the investigation. Bringing in outside experts, although more expensive, generally offers a strong statement of objectivity that may convince the government to accept the refund without further investigation. Also, an outside investigation conducted at the direction of an attorney will be protected against disclosure by the attorney-client privilege and work product doctrine. There is no easy solution. As always, "it all depends on the specific facts."

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Nearly two decades ago, the plucky Palo Alto Medical Clinic won legislation in California that enabled it to align more closely its interests and those of its practicing doctors.   It midwived the creation of  “medical foundations”, through the passage of what became Health & Safety Code Section 1206(l).    It is a terse, tightly packed one-sentence provision that exempts from state licensure as a “clinic”:

A clinic operated by a nonprofit corporation exempt from federal income taxation under paragraph (3) of subsection (c) of Section 501 of the Internal Revenue Code of 1954 ……that conducts medical research and health education and provides health care to its patients through a group of 40 or more physicians and surgeons, who are independent contractors representing not less than 10 board-certified specialties, and not less than two-thirds of whom practice on a full-time basis at the clinic.

Pretty pithy stuff, but it has been the font of that distinctly California phenomenon, the medical foundation.  Foundations have gradually emerged over the ensuing years as a robust alternative for some hospitals, health systems and medical groups seeking a closer and more interdependent modus vivendi in the environment of California’s prohibition on the “corporate practice of medicine” (Business & Professions Code Sections 2052, 2400).  Simplistically put, in a typical structure a hospital or medical center is the sole corporate “member” of the foundation, which in turn contracts with one or more medical groups to provide services at the hospital, sometimes even acquiring the assets of the medical group(s).   Operationalizing this construct is of course enormously challenging, but it can be an effective mechanism for the delivery of quality, cost-contained care.

Such prestigious non-profit entities as the Sutter Health System, Cedars Sinai Medical Center, Catholic Healthcare West, Children’s Hospital Oakland, Scripps Health and others have established or collaborated with foundations as their approach to the integrated “delivery” of healthcare.  The foundation movement has generally been institution-specific or geographically limited.   

The California Medical Association (CMA), focused on individual doctors, has long groused from the sidelines that foundations are merely a gimmick to evade the California prohibition on the corporate practice of medicine, a charge it has leveled for years also against HMO’s.   The California Association of Practice Groups (CAPG), representing doctors in groups, has been more benign towards foundations.

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Doctors, lawyers, and other professional licensees beware, a recent court of appeal decision creates a low burden of proof for revoking the license of a professional on probation.

A licensed health care provider has a fundamental vested right to her license (Bixby v. Pierno (1971) 4 Cal. 3d 130). Therefore, efforts to deprive her of her license require the licensing authority to prove its case by clear and convincing evidence. (Ettinger v. Board of Medical Quality Assurance (1982) 135 Cal. App. 3d 853, 856.) The Ettinger court clearly explained why it was adopting this heightened standard of proof: “It seems only logical to require a higher standard of proof when dealing with revocation or discipline of a professional licensee as opposed to mere termination of state employment.”

But most disciplinary cases settle, and the standards for settlement are well understood and have even been published: so many years of probation depending on the offense; good behavior; law compliance; regular reports; payment of prosecution costs, etc. But the format of a probationary settlement is also cast in stone: the stipulation will recite that the license is revoked but that the revocation is stayed during the term of probation; and if the licensee successfully completes the probation, the charges will then be dismissed. In other words, the provider’s license – physician, dentist, nurse, whoever – is theoretically revoked, but the revocation is not in force.

It will not be surprising that some licensees will continue to have compliance problems while on probation: all persons may have such problems at one time or another; and most often, people will settle their cases by accepting probation because something in their conduct wasn’t quite right. And people who were in trouble once may have a proclivity for more trouble. So, if there is another charge against a licensee already on probation, more discipline can be expected.

But what will be the standard for proving that new violation? Will it be the same requirement of “clear and convincing evidence,” which the courts have held to be necessary because “a fundamental vested right” is in danger of being lost?

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I recently had the pleasure of hearing Atul Gawande, M.D. speak about his views on health care reform, including his simple but profound message that the yeoman’s share of healthcare reform work needs to be done at the community level, rather than at the national or corporate level. I have also recently been interviewing physicians, nurses and technicians who are witnesses in a peer review hearing about the quality of services being provided by one of their colleagues.

Because these physicians’ compensation amounts are determined, to some degree, by the physician’s ability to cut costs, rather than the more traditional fee-for-service model, there is little concern that the physician who is the subject of the peer review matter can allege competition or “turf” battles as a cause of witness bias. Further, to Dr. Gawande’s point, it is clear that this “community” of interventional radiologists, vascular surgeons, neurosurgeons and cardiologists, does a terrific job of deciding amongst them who can provide the most effective and economical care, in large part because they do not compete for those dollars.

This struck me as another example to illustrate Dr. Gawande’s conclusion that local communities and physicians are the ones to determine cost control and healthcare improvement, as he discusses in a recent New Yorker article.

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A  prosecuting attorney who represents professional licensing boards shared with me his view that the decision to file disciplinary charges (PDF) is determined largely by the licensee's past conduct, whereas the degree of discipline is significantly influenced by the remedial measures undertaken by the licensee since the events leading to the disciplinary action.

In my experience, this is true.  The sooner a health care professional can take a serious look at and begin to effectively address the issues leading to the board's action, the better off he or she will be.  This is appropriate even if the allegations are exaggerated, and even in some cases where the allegations are untrue.

What kinds of remedial measures are appropriate in a given case?  The best answer to this is to initiate whatever measures are necessary to assure the licensing board that patient safety will be protected.  The highest priority of any health care licensing board is to protect patient safety.  So, any problem (or allegation of a problem) that threatens patient safety must be addressed.

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Even the most casual observer of the healthcare scene knows that “exchanges” are going to be an important element of the coverage system that is transforming because of the recent federal reform legislation.  There will presumably be a public exchange in each state -- an administered and serviced electronic marketplace through which groups, families and individuals will be able to sign up for healthcare coverage.  In certain instances this will be subsidized, including through tax credits. The state exchange will likely be the exclusive portal for subsidized programs.  It could over time become the dominant venue for purveyors and purchasers of healthcare coverage to interact and transact. If structured properly it could have a positive impact on the quality, cost, accessibility, effectiveness and creativity of healthcare.

An exchange will have multiple and operationally complex responsibilities. It will be linking people together with huge HMO’s, carriers and other kinds of delivery systems.  By as-yet undetermined mechanisms it must ensure that the on-going relationships are enrollee-friendly and productive. It must be the central “trusted information source” to help everyone, on all sides of the care equation, to understand and engage in the very new world of care coverage and delivery that is emerging.  There are already major, competing bills in the California Legislature to structure a State Exchange, even though the federal law sets January 2014 as the start-up date for state exchanges.

Critical up-front roles of a state exchange will be promoting its coverage opportunities and services to the public and facilitating participation in the exchange marketplace.  A state exchange will need all the help it can get with this. A public bureaucracy will not be able to do the job by itself. It must enlist the intimate collaboration of the private sector, of professionals who know and meet the challenges of explaining and enrolling the laity in healthcare coverage.  The skill and expertise of brokers need to be enlisted, so-called “navigators” who can get the word out and people in must be signed up.  Other entities that today serve as portals to coverage or as private exchanges need to be structured into the processes of the state exchanges as private sector partners in what will be a gargantuan undertaking.

A tattered page should be taken from California’s last experiment with a similar mechanism, the public small-group HIPC of the ‘90’s.  Such was the ideology of the day, brokers were banned from participating in its processes, even though the small group market is heavily dependent on their services. The result of so scorning the potential of the private sector was that the HIPC never realized its potential and eventually folded.  By contrast, a parallel undertaking of the same timeframe in the private sector, the California Choice Exchange, relied heavily on brokers to recruit and educate small groups and survives to this day.  Notably, 44% of the groups who receive their coverage through this exchange had not previously offered coverage to their employees. The private sector made it work then, it must be involved this time.

Much is at stake with the anticipated state exchange, and it better be set up right. A pivotal condition of success will be deploying the expertise of the private sector. 

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