Health Law Update—April 26, 2012

Alerts / April 26, 2012

Welcome to this week's edition of the Health Law Update. Topics covered today include:

We hope you find this information helpful. Please contact any member of Baker Hostetler's Healthcare Team with questions.


The U.S. Government Accountability Office (GAO) issued a report on April 16 assessing the adequacy of antitrust guidance for collaborations among competing healthcare providers. The GAO asked three types of stakeholders -- healthcare industry groups, antitrust law experts and the antitrust enforcement agencies -- to evaluate the adequacy of antitrust guidance in three areas: clinical integration, exclusive arrangements and the size and scope of antitrust safety zones. The results reflected the uncertainties regarding the application of antitrust rules in the changing healthcare marketplace. The industry groups were unsatisfied with the available guidance; the antitrust experts generally regarded the guidance as sufficient but with room for improvement; and the enforcement agencies -- the Antitrust Division of the Justice Department and the Federal Trade Commission (FTC) -- thought that their guidance was just right.

Antitrust guidance for collaborations among competing healthcare providers comes from a patchwork of sources. Those include the 16-year-old joint FTC/Justice Department Statements of Antitrust Enforcement Policy in Health Care, the more recent FTC/Justice Department enforcement policy statement for accountable care organizations, and the FTC advisory opinions and Justice Department business review letters that the agencies issue in response to specific requests. Litigated cases are of limited help. The enforcement agencies sue most often in extreme cases, where competing providers enter into arrangements with little regard for antitrust compliance.

The first area GAO evaluated was clinical integration. Clinical integration among competing providers is thought to contribute to procompetitive efficiencies. Only one of the four industry groups thought antitrust guidance on clinical integration was sufficient. Five of the six antitrust experts found the degree of guidance adequate, while the agency officials contended that their guidance in the area is sufficient. The second area was whether the agencies should permit greater use of exclusive collaborative arrangements among competing providers. Exclusive arrangements often are regarded as having a greater potential to reduce competition unduly. Three of the four industry groups thought that the agencies should be more hospitable to exclusive arrangements. In contrast, four of the six experts thought that the agencies' position on exclusive arrangements was reasonable. The agencies took the position that current guidance gives providers sufficient flexibility to use exclusive arrangements and that numerous collaborative arrangements do so.

Finally, only one of the four industry groups and only one of the six antitrust experts thought that the size and scope of the safety zones laid out in the 1996 enforcement policy statements were appropriate. The agency officials stressed that arrangements outside the safety zones are not presumptively unlawful and expressed reluctance to expand those safety zones.
Certainty and predictability in structuring business arrangements are crucial, but the healthcare industry depends for guidance on enforcement agencies that function as prosecutors, not rule makers. The GAO report reflects this fundamental disconnect. Healthcare providers have to make the porridge as best they can, but the enforcement agencies won't tell the industry whether it's too cold, too hot or just right until they taste it.

For more information, please contact Lee H. Simowitz, or 202.861.1608.

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Last week the U.S. Court of Appeals for the District of Columbia enjoined the National Labor Relations Board (NLRB) from enforcing its employee rights notice-posting rule. (Nat'l Ass'n of Mfrs. v. NLRB, D.C. Cir., No. 12-5068, injunction pending appeal, April 17, 2012).The injunction comes just days after a federal judge in South Carolina ruled that the NLRB lacked statutory authority to promulgate the rule. (Chamber of Commerce v. NLRB, D.S.C. No.11-cv-2516, April 13, 2012).

The NLRB's notice-posting rule required all private sector employers to post a notice to their employees informing them of their rights under the National Labor Relations Act, including the right to organize and form a union, the right to bargain collectively and the right to engage in concerted activity, including the right to engage in strikes.

As a result of the injunction, the notice-posting rule will not go into effect on April 30, 2012, as previously scheduled, and the rule will remain suspended while the circuit court resolves the legal challenges to the rule. Accordingly, employers should not post the notice of employee rights mandated by the rule at this time. The circuit court is scheduled to hear oral arguments on the merits of the case in September and we will keep you informed as this issue continues to develop.

If you have any questions about this injunction or its impact, please contact M.J. "Mike" Asensio, or 614.462.4740 or any member of Baker Hostetler's Labor Relations Team.

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The Americans with Disabilities Act (ADA) prohibits discrimination against individuals who are qualified to perform the essential functions of their jobs with a reasonable accommodation. Where a disability causes frequent unscheduled absences from work, the question arises whether the employer must accept the absences as a reasonable accommodation, or whether the employee is no longer qualified to perform the essential functions of his or her job.

NICU Nurse Exceeds Number of Permitted Unscheduled Absences

This was the question addressed by the Ninth Circuit Court of Appeals in Samper v. Providence St. Vincent Medical Center. Plaintiff Monika Samper worked part-time in the neo-natal intensive care unit (NICU) at Providence St. Vincent Medical Center in Oregon. Providence St. Vincent had an attendance policy that limited unplanned absences; employees who exceeded the maximum number of such absences could face discipline.

Throughout her eleven-year career at Providence St. Vincent, which began in the late 1990s, Samper often exceeded the policy limit for unplanned absences. These absences were noted in Samper's performance evaluations, and Samper was told that she needed to improve her attendance.

Hospital Relaxes Attendance Policy as Accommodation for Disability

Sometime in 2005, Samper was diagnosed with fibromyalgia, a condition that limits sleep and causes chronic pain. Providence St. Vincent sought to manage and accommodate Samper's absences. Thus, Samper was allowed to call in when she was having a bad day, and Providence St. Vincent would move her shift to another day in the week. Providence St. Vincent also agreed not to schedule Samper's shifts on consecutive days. These accommodations were in addition to various leaves accorded to Samper, none of which counted toward the attendance policy limit on unplanned absences.

Samper continued to violate the attendance policy, and in 2006 she received a verbal warning. In response, Samper asked to be exempt altogether from the policy, something the hospital declined to do.

Hospital Terminates Nurse's Employment and Nurse Claims Violation of ADA; District Court Finds Nurse Unqualified Because Attendance Was Essential Job Function

Finally, in 2008, Providence St. Vincent told Samper that it was eliminating her part-time position and that if she did not transfer to another position, her employment would be terminated. Samper reacted by making inappropriate comments in the workplace. In very short order, and after further disciplinary notices for additional unplanned absences, the hospital discharged Samper, who filed a lawsuit alleging, among other things, that Providence St. Vincent had failed to accommodate her disability in violation of the ADA.

View the complete article here.

If you have any questions about how this decision may affect you or your business, please contact Ellen J. Shadur, or 310.442.8816 any member of Baker Hostetler's Employment Law Team.

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On April 12, 2012, the Internal Revenue Service (IRS) issued proposed regulations implementing fees on certain health insurance issuers and self-funded group health plan sponsors to help finance the Patient-Centered Outcomes Research Institute established under the Patient Protection and Affordable Care Act (PPACA). The fees will fund research on comparative clinical effectiveness to assist healthcare providers and consumers in making informed health decisions.

Insurers issuing fully-insured accident and health policies and the plan sponsors of self-insured group health plans, including retiree-only plans, are subject to the fee. The fee is not imposed on certain "excepted" benefits (e.g., limited-scope dental/vision benefits, employee assistance programs that do not provide significant medical care benefits, HRAs that are integrated with a self-insured health plan that provides major medical coverage if both plans are maintained by the same plan sponsor and most flexible spending accounts) or government programs (e.g., Medicare, Medicaid and SCHIP programs). The fee is calculated based on the applicable dollar limit ($1 for the first plan year ending on or after October 1, 2012, and before October 1, 2013; $2 for the second year and indexed thereafter based on increases in national health expenditures) multiplied by the average number of covered lives (including employees and their dependents) for each plan or policy year. The fee is set to expire on October 1, 2019. The proposed regulations provide various methods for calculating the average number of covered lives, such as an actual count method, a snapshot count method, a "Form 5500 method" based on the average number of participants at the beginning and end of the plan year, or a special rule for 2012 authorizing any reasonable method of determining the average number of covered individuals.

The plan or policy must file a return (IRS Form 720 - Quarterly Federal Excise Tax Return) with the assessed fee by July 31 of the calendar year following the last day of the applicable plan or policy year. Therefore, for plan years ending December 31, 2012, the return and related fee are due by July 31, 2013.

For additional information, please contact Tasia McIntyre at or 614.462.4736; Jennifer A. Mills at or 216.861.7874; Deborah Bracy at or 216.861.7354; or Susan Whittaker Hughes at or 216.861.7841.

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Phoenix Cardiac Surgery recently entered into a $100,000 settlement with the U.S. Department of Health & Human Services (HHS) for alleged violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy and Security Rules. The settlement is the result of an investigation by the HHS Office for Civil Rights (OCR) after it received a complaint that Phoenix Cardiac Surgery had a publically available online calendar that included clinical and surgical appointments for its patients. The OCR investigation further revealed that the practice's HIPAA compliance was deficient in several other aspects, including implementation of policies and procedures to safeguard patient information, documentation of training employees on policies and procedures related to the Privacy and Security Rules, identification of a security official, completion of a risk analysis and failing to obtain business associate agreements for vendors of e-mail and calendar services that included storage of and access to electronic protected health information. In addition to the monetary settlement, Phoenix Cardiac Surgery will be required to take corrective action by implementing policies and procedures to safeguard its patients' protected health information with oversight by HHS.

For more information, please contact Lynn Sessions, or 713.646.1352 or Darby C. Allen, or 713.646.1311.

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The Texas Health and Human Services Commission (HHSC) has announced a "tentative contract award" for the Recovery Audit Contractor (RAC) Program for Texas Medicaid to CGI, Federal, Inc. CGI is currently the Medicare RAC for Region B, and has been awarded the Medicaid RAC contract for Ohio and Colorado. Section 6411(a) of PPACA expanded the RAC program to Medicaid and requires each state Medicaid program to establish a RAC program for auditing Medicaid claims submitted by providers. The HHSC award is contingent upon the successful negotiation and execution of a contract.

According to the Final Rule, states are required to implement their respective RAC programs by January 1, 2012. The Centers for Medicare and Medicaid Services clarified that their expectation of "implementation" was for states to have a signed contract in place with its selected RAC vendor by January 1, 2012, unless an exception was requested. HHSC recently published a notice in the Texas Register announcing its intent to submit an amendment to the Texas State Plan for Medical Assistance to request a delay in implementation of the RAC program. The amendment would be effective January 1, 2012. HHSC expects that "the program may not be fully implemented until June 1, 2012."

For more information, please contact Ameena N. Ashfaq, or 713.646.1329.

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May 1
Houston partner Scott McBride will speak on "Anti-Kickback, Stark and False Claims Act Liability" at the Health Care Compliance Association's 16th Annual Compliance Institute in Las Vegas, Nevada.

May 11
Houston counsel Lynn Sessions will speak on "Lessons from Cutting Edge Transactions in Health Care and Life Sciences -- HIPAA/HITECH Compliance" at the Current Issues in IP Contracting conference in Houston, Texas.

May 12
Cleveland partner Chris Swift will speak on "Taxation of Healthcare Institutions" at the American Bar Association Midyear Meeting of the Taxation Section in Washington, D.C.

May 24
Houston counsel Lynn Sessions will speak on "Healthcare Data Breaches: Enterprise Impact and Enterprise Approach" at a webinar sponsored by the American Health Lawyers Association.

June 5
Houston counsel Lynn Sessions will speak on "Healthcare Highlights" at the NetDiligence® Cyber Risk & Privacy Liability Forum in Philadelphia, Pennsylvania.

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