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Health Law Update—October 29, 2009

Alerts / October 29, 2009

Topics covered in this issue of the Health Law Update include:


Today, House Speaker Nancy Pelosi (D-Calif.) and other House leaders unveiled H.R. 3962, the Affordable Health Care for America Act, in a ceremony on the West Front of the U.S. Capitol. A product of the merged versions of the healthcare reform bills (H.R. 3200) adopted by the House Education and Labor, Energy and Commerce, and Ways and Means committees, the 1990-page bill would extend coverage to 96 percent of Americans at an estimated cost of $894 billion over ten years. Rep. Louise Slaughter, Chair of the House Rules Committee, has announced a scheduled hearing and markup for H.R. 3962 next week with the goal of a vote by the full House by November 11. The full text of the Affordable Health Care for America Act is posted on the committee website at

Highlights and key changes from the previous version of the House bill (H.R. 3200) follow below. Also be sure to look for additional details on H.R. 3962 in future issues of the Health Law Update.

  • Includes a public health insurance option that authorizes the Secretary of the U.S. Department of Health and Human Services (HHS) to negotiate payment rates with providers that participate in the public plan; clarifies that members of Congress may enroll in the public option.
  • Provides start-up loans to establish not-for-profit CO-OPs that compete with private insurers and the public health insurance option.
  • Establishes a temporary government program (i.e., high-risk pool) for those who have been uninsured for several months or denied a policy because of pre-existing conditions.
  • Provides for an expansion of mandatory Medicaid coverage from 133 percent of poverty to 150 percent.
  • Repeals the antitrust exemption for insurers “so that it no longer shields these insurers from liability for fixing prices, dividing up territories, or monopolizing their market.”
  • Establishes new voluntary state grant program designed to encourage states to implement alternatives to traditional medical malpractice litigation.
  • Permits states to enter into agreements to allow for the sale of insurance across state lines.
  • Creates a new, voluntary, public, long-term care insurance program to assist persons with functional limitations as a supplement to Medicaid and private long-term care insurance.
  • Creates a Center for Medicare & Medicaid Payment Innovation within CMS to test and expand new payment models that encourage higher quality and lower cost.
  • Increases the independence of the Comparative Effectiveness Research Commission and establishes a separate independent funding stream for the Commission; clarifies that comparative effectiveness reports “are not considered as mandates for payment, coverage or treatment and that no federal officer or employee will interfere with the practice of medicine.”
  • Provides for a number of insurance market reforms including prohibition on exclusion for pre-existing conditions, prohibiting insurance companies from placing lifetime caps on coverage and prohibiting employers from reducing retirees’ health benefits, unless the reduction is also made to benefits for active participants. Also allows individuals through age 26 not otherwise covered to remain on their parents’ health insurance at their parents’ discretion.

The overhaul of the Medicare physician payment formula (SGR) was removed from the bill. The House plans to address the physician payment fix as separate legislation (H.R. 3961).

For more information please contact Susan Feigin Harris, or 713.646.1307, or Kathleen P. Rubinstein, MPA, Policy Analyst, or 713.276.1650.


On Thursday, October 29, 2009, Baker Hostetler presented the webinar, “Healthcare Reform 360°: Policy, Politics and Provider Implications.” This informative and timely 90-minute event was designed to put healthcare reform into context for the healthcare industry. Topics included an overview on the status of the various health reform bills; perspectives “From the Hill,” including a brief introduction from former Congressman Michael G. Oxley; key tax-related issues; insurance reform implications and likely delivery system changes.

Baker Hostetler speakers included:

The program also included comments from Employment and Labor team partner Mike Asensio, who offered his thoughts on labor issues related to healthcare reform.

View a recording (audio and video) of the webinar.


On October 14, the Occupational Safety and Health Administration (OSHA) announced that it will issue a compliance directive in the near future regarding inspections related to healthcare workers facing high to very high risk of occupational exposures to the 2009 H1N1 influenza A virus. The directive will follow closely the Centers for Disease Control and Prevention’s (CDC) Interim Guidance on Infection Control Measures for 2009 H1N1 Influenza in Healthcare Settings, Including Protection of Healthcare Personnel.

OSHA inspectors, according to the announcement, will inspect facilities to ensure that healthcare employers implement a hierarchy of controls to prevent the spread of the H1N1 virus to employees, including source control, engineering and administrative measures and encouraging vaccination and other work practices recommended by the CDC. Where respirators are required, OSHA announced that its Respiratory Protection standard must be followed, including worker training and fit testing.

For more information, please contact Robert M. Wolin, or 713.646.1327.


On October 13, 2009, the U.S. District Court for the District of North Dakota reversed the Centers for Medicare and Medicaid Services (CMS) Administrator’s ruling that two hospitals could not claim their respective residents rotating to a nonhospital clinic because the hospitals “shared” the costs of the residency program at the clinic. Medcenter One Health Systems and St. Alexius Medical Center v. Leavitt, Case No. 1:08-cv-063 (D. N.D. 2009). The Plaintiff hospitals operated a family practice residency program in conjunction with the University of North Dakota. As part of the program, residents were required to rotate to a Family Practice Center, which was created by the two hospitals and the University of North Dakota. Both of the hospitals rotated residents to the Family Practice Center, and each claimed the number of full-time equivalent (FTE) residents rotating to the Family Practice Center for whom they had incurred the training costs (i.e., resident salaries and fringe benefits and a portion of teaching physician costs associated with the residents’ training at the clinic). Because each hospital only claimed the number of FTE residents that they had paid for, there was no concern that any resident was being claimed twice. In spite of the fact that the hospitals had been claiming residents in this manner for 15-20 years, the hospitals’ fiscal intermediaries disallowed the FTE residents assigned to the Family Practice Center for the hospitals’ fiscal years 1999-2001, based on the contention that a hospital must have incurred all of the costs for the full complement of residents rotating to a nonhospital site in order to claim any residents rotating to that site. In other words, because the hospitals had split the costs of the residency training program, no one hospital had incurred all of the costs at that nonhospital site and, therefore, neither hospital could claim any residents rotating to that site.

Effectively, this decision implemented a ban on hospitals sharing costs at nonhospital sites. The hospitals argued that it was not Congress’s intent to prohibit one or more hospitals from sharing costs of residency programs at nonhospital sites, and that the rules merely require that a hospital incur all of the training costs with respect to the particular resident FTEs that it claims. The North Dakota District Court sided with the Plaintiff hospitals, holding that the Secretary of HHS’s interpretation of the rules, which first appeared in the Federal Register in 2003, was a change in policy that could not be applied retroactively to the hospitals’ FY 1999-2001 cost reports.

Although this ruling is not applicable to time periods after 2001 (i.e., time periods after the Secretary’s 2003 policy change), the court did make a number of comments regarding the Secretary’s policy that could be applied to later time periods, including: “the language of the Medicare Act does not require a single hospital to pay for and claim all of the residents in a medical residency training program,” and “the confusing and ill-advised ‘all or nothing’ interpretation adhered to by the Secretary since 2003 serves no legitimate public interest.”

For more information, please contact Krista M. Barnes, or 713.646.1352, or Gregory N. Etzel, or 713.646.1316.


The Federal Trade Commission (FTC) recently revised its guidance with respect to the use of endorsements and testimonials in advertisements. 16 C.F.R. Pt. 255. The new guidance is effective December 1, 2009, and is applicable to advertisements of almost any type by entities subject to FTC jurisdiction if a consumer is likely to believe the advertisement reflects the opinions, beliefs, findings or experiences of the spokesperson or expert portrayed in the advertisement, rather than those of the sponsoring advertiser. The new guidance requires that:

  • endorsements reflect the honest opinions and experiences of the endorser. If the endorser’s experience is not representative of what consumers can expect with respect to central or key attributes of the product, the advertisement must disclose clearly and conspicuously the performance that consumers generally can expect. Advertisers can no longer simply use a disclaimer indicating that the endorser’s results are not typical. Endorsements by experts, such as physicians, must be supported by an actual exercise of the person’s expertise in evaluating the product, which includes a reasonable examination or testing of the product with respect to factors that are relevant and available to consumers;
  • an advertiser not distort the endorser’s opinion or experience. If a product is changed, the advertiser must assure that the endorser would continue to endorse the reformulated product before again using the endorsement;
  • an endorsement by user actually be from a bona fide user of the product. Such an endorsement may only be used for so long as the advertiser has good reason to believe the endorser is a bona fide user of the product;
  • an advertiser disclose “material connections” with the endorser of a type or magnitude that ordinarily would not be expected by consumers, both financial and non-financial. Endorsers, for example, are required to disclose clearly and conspicuously that they are being paid for the endorsement, if that is the case, even if the compensation includes only free product, if consumers would not expect the endorser to have been compensated, such as a blogger;
  • if an endorser is portrayed to be an actual consumer and is not, the advertisement must disclose clearly and conspicuously that the person is not an actual consumer of the product; and
  • an advertiser possess and rely upon adequate substantiation for all claims made in an advertisement.

While FTC guidance only represents the FTC’s interpretation of the law and is not binding, the guidance should be considered by providers. Furthermore, all providers should consider the guidance even if they are not subject to the Federal Trade Commission Act (e.g., certain nonprofit entities) as state deceptive trade practice laws that are applicable to nonprofit organizations may look to the FTC guidance as the applicable standard under the state law. Consequently, providers, for profit and not-for-profit, should consider these rules when using endorsements and testimonials.

For more information, please contact Robert M. Wolin, or 713.646.1327.


On October 20, 2009, the House of Representatives voted 400-0 to pass H.R. 3763, a bill to exempt small professional businesses from the FTC’s Red Flags Rule. The Red Flags Rule, enforcement of which becomes effective November 1, 2009 (see our July 29, 2009, Executive Alert), requires many businesses to implement and maintain a written identity theft prevention program. The bill, would exclude from the definition of “creditor” any healthcare practice, accounting practice or legal practice with 20 or fewer employees. In addition, the FTC would be required to issue rules allowing any business to apply for an exemption from the Red Flags Rule under certain criteria. The bill now is pending before the Senate Committee on Banking, Housing and Urban Affairs. The Rule’s broad application of the creditor classification remains opposed by the American Medical Association, who said H.R. 3763 does not go far enough to exempt healthcare professionals.

For more information, please contact John S. Mulhollan, or 216.861.7484.


The Genetic Information Nondiscrimination Act’s (GINA) employment-related provisions become effective November 21, 2009. GINA provides a baseline level of protection from discrimination by employers on the basis of genetic information with respect to job applicants, employees and former employees. In addition, labor organizations, employment agencies and employer agents are subject to GINA.

Genetic information is broadly defined in GINA and in the Equal Employment Opportunity Commission (EEOC) regulations to include information regarding (1) the results of genetic tests on an employee; (2) results of genetic tests of the individual’s family members (dependents and up to and including 4th degree relatives); (3) results of genetic tests of any fetus or embryo (including donor eggs) of the individual or a family member; (4) the employee’s family medical history (manifested diseases that are diagnosed or could be diagnosed by a properly trained health practitioner); and (5) any request for, or receipt of, genetic services (genetic testing, counseling or education) or participation in clinical research that includes genetic services by an employee or family member.

Genetic information, however, does not include information about the sex or age of any person. However, an employer still is subject to the Americans with Disabilities Act and other laws regarding nongenetic healthcare information.

Under GINA, employers, labor organizations and employment agencies generally are prohibited from inquiring about, requesting, requiring or purchasing a person’s genetic information in the employment context, except for certain narrowly defined exceptions. In most cases, except for genetic information obtained through public sources, the employer must maintain genetic information as confidential medical information in a separate file.

While only proposed regulations have been published, employers must review their employment-related forms and processes to assure that genetic information will not be improperly collected, used or disclosed after November 21. The EEOC, which enforces Title II of GINA, has submitted its final regulations to the U.S. Office of Management and Budget and expects the regulations to be released before November 21. The Health Law Update will follow the regulatory process.

For more information, please contact Robert M. Wolin, or 713.646.1327.


The Food and Drug Administration (FDA) recently issued Guidance for Industry Investigator Responsibilities—Protecting the Rights, Safety, and Welfare of Study Subjects (Guidance) to help investigators satisfy their responsibilities with respect to protecting human subjects and ensuring the integrity of the data from clinical investigations.

The Guidance clarifies that an investigator must provide adequate supervision over tasks that are delegated to employees or other agents. In assessing the adequacy of supervision, the FDA will focus on four major areas: (1) whether delegates were qualified to perform the delegated tasks, (2) whether study staff received adequate training on how to conduct the delegated tasks and were provided with an adequate understanding of the study, (3) whether there was adequate supervision and involvement in the ongoing conduct of the study, and (4) whether there was adequate supervision or oversight of any third parties involved in a study, to the extent such supervision or oversight was reasonably possible.

The Guidance also clarifies an investigator’s obligation to protect the rights, safety and welfare of his or her study subjects, including (1) providing reasonable medical care for study subjects for medical problems arising during participation in the trial that are, or could be, related to the study intervention; (2) providing reasonable access to medical care when specialized care is needed; and (3) adhering to the protocol so that study subjects are not exposed to unreasonable risks.

For more information, please contact Robert M. Wolin, or 713.646.1327.


The Nebraska Supreme Court, in a recent decision, held that a child’s signature, as the representative of his mother, on an arbitration agreement was not binding upon his mother’s estate. The child argued that the arbitration agreement was not binding against his mother’s estate because he signed it rather than his mother, who was the patient. Koricic v. Beverly Enterprises, 278 Neb. 713 (2009).

Because the arbitration agreement was not required as a condition of admission to the facility, the court found that the child did not have actual or apparent authority to sign the arbitration agreement, despite the fact that he had authority to sign and had signed medical documents for his mother for ten years.

Providers must understand carefully the precise scope of an agent’s authority to sign admission-related documents to avoid a similar result and, where possible, the patient should re-sign or ratify documents signed by an agent.

For more information, please contact Robert M. Wolin, or 713.646.1327.


November 4-6

Houston partner Robert Wolin will present “Pandemics and Corporate Health Departments” at the Doubletree, Washington D.C. to the Conference on Transforming Employee Healthcare Through Corporate On-Site Medical Clinics sponsored by Active Communications International.

November 5

Houston partner Susan Feigin Harris will present “Healthcare Reform: A Study in Policy, Politics and a Sign of the Times” at the Houstonian Hotel, sponsored jointly by ACHE—SouthEastTexasChapter and HFMA—Texas Gulf Coast Chapter in Houston, Texas.

November 11

Houston partner Susan Feigin Harris will present “Healthcare Reform: What’s Real, What’s Myth, What Might Stick” at the Houston Bar Association’s monthly meeting in Houston, Texas.

November 18

Houston partner Robert Wolin will present “Swine Flu—Legal Considerations Involved in Corporate Medical Department Responses” at a webinar for the American College of Occupational and Environmental Medicine.

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. © 2009 Baker & Hostetler LLP