News / Resources

2010. . .what a year. Of course, the major event was the passage of healthcare reform. Even before full implementation, we started working with clients on the changes resulting from health reform, including development of accountable care organizations, deeper integration among hospitals, physicians and other providers, responded to better-funded fraud and abuse investigations, health plans responding to a rapidly changing marketplace through different product designs and arrangements with the provider community and, of course, working with regulatory agencies to interpret health reform legislation and designing the implementing regulations.

The Baker Hostetler Healthcare Industry Team thinks it’s important to share a representative sampling of the unique and complex matters we handled for our clients in 2010. Our variety of engagements and deep experiences across the country allows the Healthcare Industry Team not only to provide effective and efficient counsel to our clients, but also allows us to provide unique industry perspective to clients in these rapidly changing times. Serving as a thought partner to our clients allows us to facilitate their business.

In addition to the accomplishments below, Baker Hostetler coordinated webinars and seminars on a variety of topics, ranging from healthcare reform to accountable care organizations and other new business models. We received great feedback on these events and plan to expand them in 2011. As in years past, our Team continued to speak at healthcare conferences and contribute articles to leading industry publications. We also added a number of new partners to our team, reinforcing our ability to provide comprehensive service to healthcare clients.

As we move into 2011, we thank you for entrusting us with your legal and advocacy matters. We are pleased to work with so many leaders in the healthcare industry.

Buying, Selling, Integrating. . .A Robust Transactional Year

Members of the Healthcare Industry Team represented a large healthcare system in one of the largest-ever acquisitions of a physician group. The health system acquired a physician group having over 400 providers and 200 locations, including a robust primary care base that will be helpful to the system’s push into accountable care. We expect hospitals and health systems to continue the acquisition of physician practices to more closely align in anticipation of healthcare reform.

The firm also served as lead counsel in an acquisition that led to a joint venture hospital involving a non-profit health system and a group of physicians who were in a dispute with the developer of the hospital.

We continued to see a great deal of activity with respect to ancillary facilities. For instance, Baker Hostetler represented a leading regional imaging center in Florida as it sold a significant interest to a not-for-profit healthcare alliance. The result: an innovative joint venture between the health system and a group of physicians.

We also represented a large nephrology practice in the negotiation of medical director agreements for over 40 dialysis centers in the Midwest, its acquisition of related physician groups and the establishment of numerous joint ventures in the dialysis space. In addition, we provided counsel to several physician groups and healthcare systems with respect to their investment in ambulatory surgical facilities and development of sleep labs.

Creation of Accountable Care Organizations

Baker Hostetler is heavily involved in the anticipated regulations and comments associated with such regulations on behalf of various constituencies. We have been engaged in the establishment of a pediatric ACO and involved with the State of Texas in establishing demonstration projects relating to its Medicaid program, including the creation of a medical home demonstration and accountable care models of care. We have drafted white papers for CMS, and have drafted legislative language, as well as appropriations language for such programs.

Additionally, we are working with several health systems and Independent Physician Associations across the country as they develop accountable care organizations, including collaborations among hospitals, employed physicians, community physicians and payors. Absent regulatory guidance, we have had direct discussions with regulatory agencies regarding the current regulatory impediments to achieve the desired efficiencies.

Focusing on Compliance and Government Investigations

Government investigations continue to be a focus area in the healthcare industry. This past year, we were again involved in many government investigations and reviews. For example, we represented a physician group in a compliance and billing investigation by the Department of Justice. We also represented a hospital in an investigation by the Department of Justice and Office of Inspector General for alleged overpayments. We also worked with numerous clients in responding to subpoenas and civil investigative demands from the Office of Inspector General and/or the Department of Justice and in defending the clients in the related allegations. We also represented a device company in a government investigation regarding relationships with physicians.

Do You Want to Work Together: Co-Management and Gainsharing?

We worked with health systems and physician groups on a variety of co-management models involving different service lines. One arrangement involved a hospital and members of its surgery department who were from a variety of physician practices. Working with the health system, we developed an arrangement that the health system believes will not only improve quality and efficiency in the delivery of surgical services, but also cause competitors to work together to improve the delivery of surgical services.

In addition to co-management, we developed a gainsharing arrangement for an academic medical center around a service line. The arrangement took tremendous amounts of collaboration because of the regulatory challenges presented by gainsharing arrangements.

Academic Medical Centers

We have continued to grow our academic medical center practice and the unique issues present in this environment. A specific area of expertise is arrangements between the academic medical center and the faculty practice plan. For instance, we have assisted clients with several funds flow arrangements that recognize the different challenges and opportunities with academic medical centers. We have also assisted several faculty practice plans with respect to restructuring and integration, allowing them to better collaborate and achieve efficiencies so that they are better positioned for the results of healthcare reform.

Strategic Planning Associated With Health Reform

We have provided advice and counsel to health systems relating to the Affordable Care Act (ACA) and have worked with the executive teams of several health systems to help craft strategic plans in response to health reform and within the parameters of the culture and market of the provider.

We also counseled several insurers on the long-term strategic implications of the ACA. This ranged from traditional healthcare insurers to specialty companies such as dental and vision health maintenance organizations.

To improve the breadth and depth of our strategic consulting, Baker Hostetler joined the Health Care Advisory Board and its Health Law Roundtable. In addition to providing access to the Advisory Board’s research studies and position papers, we partnered with the Advisory Board in making presentation to the healthcare industry on accountable care organizations, delivery system restructuring and the impact of the midterm elections on PPACA and healthcare reform.

Thought Leadership on Government Relations/Health Policy Matters

Our Team represented children’s hospitals and other healthcare clients relating to issues associated with the Affordable Care Act, assuring that DSH, Medicaid cuts were not as severe as initially proposed, and ensuring that a pediatric ACO demonstration program was represented in the legislation. Work is ongoing relating to children’s hospital policy initiatives.

Baker Hostetler also coordinated meetings on Capitol Hill and with Administration officials relating to healthcare reimbursement matters and potential cuts to healthcare providers in the Affordable Care Act.

Similarly, the team prepared comments to proposed regulations for clients, including requests relating to the 340B drug pricing program issues and the Accountable Care Organizations and potential legal barriers to implementation.

Guiding Clients on Internal Investigations, Self-Disclosures and Refunds

We represented numerous providers in conducting internal investigations of potential compliance issues. We assisted clients in analyzing the issues, assessing any payment impacts and making appropriate self-disclosure and refunds to fiscal intermediaries and carriers, the OIG and state Medicaid payors where appropriate. For example, we assisted hospitals with a self-disclosure regarding potential overpayments related to radiology services and behavioral health services. We also assisted a physician group with analyzing and making payment adjustments related to compliance reviews for professional services. In addition, we worked with clients on reviewing compliance with clinical trials and grants.

Managing Medicare/Medicaid Claims Appeals of Overpayment Demand

Our Team represented several providers in appeals of Medicare overpayments. For example, we represented a provider in a Medicare overpayment demand of approximately $750,000. The allegations related to the medical necessity of the services and were initiated by the Program Safeguard Contractor, the predecessor to the Zone Program Integrity Contractor. We pursued the case through the administrative appeals process and were successful in reversing the entire overpayment demand. We have also assisted and represented clients with demands made by Recovery Audit Contractors, including issues related to long-term care services. In addition, we worked with clients to resolve Medicaid appeals issues and assisted a client with recovery of approximately $500,000 owed.

Handling Payment Disputes with Commercial Payors

During the past year, the Healthcare Team represented various providers in payment disputes with commercial payors. Several of these cases have involved out-of-network payment rates, as well as coverage issues. This area appears to be a focus for the commercial payors.

Support in Hospital Certification Matters

Members of the Baker Hostetler Healthcare Industry Team worked with a number of healthcare facilities involved in surprise CMS complaint surveys, full surveys and focused surveys, to help the internal team manage the surveyors, prepare for surveys and respond with corrective action plans. We were successful in staving off more aggressive actions on behalf of such providers.

Upper Payment Limit Program Development

In 2010, our team worked to establish and prepare documentation for the establishment of a Medicaid Upper Payment Limit program for increased medical residency training programs in Texas.

Managing Reimbursement Issues

Baker Hostetler continued its tradition of advising clients in reimbursement matters including provider-based/satellite clinic establishment, GME reimbursement and DSH/UPL reimbursement.

Representation Before State Agencies

We have successfully coordinated self-disclosures and settlements with state agencies involving state contract issues, including negotiation of positive settlements and corrective action plans. We also have assisted clients in preparing certificate of need (CON) applications and contesting CON hearings.

Advocating for Key Legislation

Baker Hostetler represented a key constituency in legislation that established a new model of care in Ohio.

In June 2010, Ohio House Bill 198 established the Patient-Centered Medical Home (PCMH) Education Pilot Project—enabling 44 primary care practices educationally affiliated with four medical schools and five nursing schools to design and implement the PCMH model of care in their practices. This bill additionally addresses curriculum reform in the PCMH model at the medical school, nursing school and primary care residency levels; and it designs a primary care scholarship process to be used at the medical school and advance practice nurse (APN) training levels for students destined for future primary care practices in Ohio.

Ohio is one of just a handful of states to expressly allow APNs to lead the patient-centered medical home as part of their pilot project.

In addition, Baker Hostetler has been recognized by national nursing organizations for its efforts on this project.

Guidance on Information Technology Issues

Members of our Team represented a New York hospital in its acquisition of a multimillion-dollar electronic records and medical information system. This was the hospital’s first major upgrade of technology and hospital information systems in the past decade. Partnering with the hospital’s in-house legal department, the firm completed this complex matter successfully despite significant time pressures.

Managing the Supply Chain

We are working with several health systems as they revisit and redesign their supply chain, GPO and vendor relationships. With the financial pressures expected to result from health reform and the economy as a whole, supply chain has become a source of financial opportunity.

Corporate Support

Members of our Team continued to provide counsel on contracts and agreements as part of their relationship with healthcare clients coast to coast—preparing, negotiating and reviewing materials ranging from employment agreements and shareholder agreements to consulting contracts and leases. Our comprehensive counsel for healthcare clients also extends to developing health, welfare and qualified benefit plans.

At the Forefront of FICA Refund Litigation

Baker Hostetler’s Healthcare Team, in conjunction with our Federal Tax Controversy Team, continued to assist academic medical centers and teaching hospitals in their efforts to recover FICA taxes previously paid on stipends provided to medical residents. The arguments our Team successfully asserted to support academic medical centers in ongoing and threatened litigation were a key factor in its decision in March to concede the issue nationwide. Since that announcement we have assisted our academic medical center clients in complying with the very detailed procedures to actually secure the refunds.

The IRS change of position affected only refunds for periods prior to April 1, 2005, when new regulations took effect. The validity of those regulations was the subject of ongoing litigation which made its way to the U.S. Supreme Court in 2010. We counseled several clients with respect to participating in that litigation. Our counsel against devoting significant resources in this effort was confirmed earlier this month when the Court, in an 8-0 ruling, sustained the IRS position.

Charting a Course Through Rocky Financial Times

Baker Hostetler continued its representation of hospital systems, long-term care facilities, senior living facilities and other issuers of tax-exempt debt as they struggled through another challenging year with wide shifts in the market. We assisted clients on a wide range of covenant compliance issues. We assisted these clients in negotiations with letter of credit banks and other credit and liquidity support providers, presentations to Bond Trustees and Rating Agencies and compliance with their ongoing disclosure requirements. We also represented clients on entering into new swaps and terminating existing swaps.

While the number of new tax-exempt issues continued at lower than historical levels, the Baker Hostetler Healthcare Financing Team successfully completed several financings, representing either the borrower or the underwriter in 9 completed transactions with several more currently in process.

We also represented a large health system prior to and through its bankruptcy, ultimately resulting in a sale to a publicly traded hospital company. The financial challenges endured by the health system required great leadership among the Board of Trustees and management, and we worked with each to help drive a good result for the community.

HIPAA Privacy, Security and HITECH Act Compliance

Baker Hostetler assisted several corporations, including a publicly traded management services company engaged as a business associate to affiliated healthcare providers, with development and implementation of policies, procedures and information security safeguards to comply with the HIPAA Security Standards, as amended and expanded by the Health Information Technology for Economic and Clinical Health Act (HITECH Act).

We also advised healthcare providers, medical groups and business associates on risk assessment, reporting and mitigation of effects of breaches of “protected health information” pursuant to breach notification regulations promulgated under the HITECH Act, including advice relating to organizational procedures, encryption and other methods for securing electronic data from potential security incidents or breach. In addition, our Team advised faculty practice medical groups comprising some 300 physicians on the availability of financial incentives and regulatory requirements for “Meaningful Use of Electronic Health Records (EHR) Technology” under the HITECH Act.

Finally, our attorneys advised an academic medical center on the application of HIPAA privacy and security requirements to a proposed social media website.

Advising on Regulatory Matters

We routinely provided regulatory advice regarding fraud and abuse, Stark and reimbursement compliance. For instance, we are working with a grandfathered physician-owned hospital in adding services and physician investors in compliance with the new Stark growth restrictions.

We have also been engaged by several health systems to conduct contracting audits, reviewing the existing contracting process and implementing changes to best position the organization in the event of a governmental audit or investigation.

We continued to provide advice related to referral law implications of physician employment, medical director, recruitment and other financial relationships, such as equipment and space leases. Similarly, we are advising clients on permissible business courtesies with physicians and what is permitted under the Medicare beneficiary provision (e.g., transportation). And we are advising medical device manufacturer on permissible financial relationships with physicians.

Finally, we regularly monitor legislation for clients and as necessary submit comments directly for the client or through an association. We’ve assisted clients on multiple matters, including the preparation of comments to NIH’s proposed rules restructuring the reporting of financial interests and comments on the post-PPACA Stark regulations.

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the Firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience. © 2011 Baker & Hostetler LLP