An Alabama police officer's conviction for knowingly impeding a federal investigation under a provision enacted as part of Sarbanes–Oxley was recently upheld by the 11th Circuit. The officer's criminal act involved falsely claiming, in a routine departmental report, that a suspect grabbed the officer before the officer used force to subdue him. The routine report was submitted prior to the initiation of any investigation, state or federal. The government showed that the officer knowingly impeded the investigation based upon the fact that the officer knew that the federal government investigates and prosecutes civil rights violations such as excessive force claims. Significantly, nearly every healthcare provider and provider employee is aware that the federal government investigates and prosecutes healthcare fraud claims. Consequently, a false statement in a routine provider document, even if not submitted to the federal government, may allow the government to claim that the person making the statement knowingly intended to impede a federal investigation. Section 802 of Sarbanes–Oxley criminalizes knowingly altering, destroying, mutilating, concealing, falsifying, or making a false entry in any record or document, with the intent to impede, obstruct, or influence a federal investigation.

For more information, please contact Robert M. Wolin, rwolin@bakerlaw.com or 713.646.1327, or B. Scott McBride, smcbride@bakerlaw.com or 713.646.1390.

PRRB EXTENDS PRELIMINARY POSITION PAPER DEADLINES AS NEW PRRB RULES and INSTRUCTIONS TAKE EFFECT

The Provider Reimbursement Review Board (PRRB) recently issued an update to its new PRRB instructions stating that for all appeals that received an Acknowledgement and Critical Due Dates letter prior to August 21, 2008, and with preliminary position paper due dates on or after September 1, 2008, the provider's preliminary position paper due date has been extended by four months from the original deadline. Additionally, all final position paper due dates issued for appeals meeting this criteria should be disregarded. For a more in-depth discussion of the new PRRB regulations and instructions and the extension for filing preliminary position papers, see the Baker Hostetler Executive Alert issued August 14, 2008, and the August 19, 2008, Executive Alert on automatic extension of position paper due dates. Providers should also take note that the majority of the new PRRB regulations and instructions take effect today. Providers must now begin filing individual and group appeals using the forms and procedures supplied in the new PRRB instructions. The only major changes still to come will occur on October 19, 2008 (the deadline for adding any issues to currently pending appeals), and when cost reports are filed for cost reporting periods ending December 31, 2008 (those cost reports for which providers will be required to follow the new procedures for protested and self-disallowed items).

For additional information, please contact Gregory N. Etzel, getzel@bakerlaw.com or 713.646.1316 or Krista M. Barnes, kbarnes@bakerlaw.com or 713.646.1352.

OIG APPROVES COST-SHARING ARRANGEMENT

The OIG recently issued an Advisory Opinion (No. 08-09) addressing a medical center's arrangement with groups of neurosurgeons and orthopedic surgeons by which it would share cost savings from the surgeons' implementation of 36 specific operating room cost reduction opportunities during designated spine fusion surgery procedures. The OIG determined that although the arrangement has the potential to induce physicians to reduce or limit items or services furnished to their Medicare and Medicaid patients, it would not impose civil monetary penalties because the arrangement provides sufficient safeguards. Such safeguards include (1) the transparency of the arrangement allowed for public scrutiny and sufficient physician accountability; (2) the medical center offered credible medical support for the position that implementation of the recommendations did not adversely impact patient care; (3) the amount paid under the arrangement was calculated based on all surgeries regardless of the patient's insurance coverage, subject to the cap on payment for federal healthcare program procedures; and (4) the arrangement protected against inappropriate reductions in services by establishing a "floor" beyond which no savings would accrue to the surgeons. In addition, the fact that (1) the medical center and surgeon groups provided written disclosures of their involvement in the arrangement to patients whose care might have been affected and provided patients an opportunity to review the cost-savings recommendation before admission; (2) the financial incentives were reasonably limited in duration and amount; and (3) the surgeon groups would distribute profits to their respective members on a per capita basis were critical to the OIG's analysis. Similarly, the OIG determined that although the arrangement, if the requisite intent to induce referrals were present, could potentially generate prohibited remuneration under the anti-kickback statute, it would not impose administrative sanctions, concluding that several factors were present that reduced the risk that the arrangement might be used to induce referrals. The OIG highlighted such factors as (1) the participation was limited to surgeons already on the medical staff who perform spine fusion surgery; and (2) the surgeons had responsibility for the change in operating room practices and carried the increased risk of liability for those changes. Although the OIG chose not to impose sanctions for this arrangement, it made a point to reiterate its concerns regarding the potential pitfalls of arrangements between hospitals and physicians to share cost savings. This opinion closely tracks the requirements imposed by the Centers for Medicare and Medicaid Services in the new proposed Stark Law exception for gainsharing arrangements. See the July 10, 2008, Health Law Update.

A copy of the advisory opinion is available online.

For more information, please contact Donna S. Clark, dclark@bakerlaw.com or 713.646.1302, or Summer D. Rohde, srohde@bakerlaw.com or 713.646.1306.

HOSPITAL ON THE HOOK TO TEMP AGENCY EMPLOYEE FOR OVERTIME

A recent decision from the U.S. Court of Appeals for the 2nd Circuit should cause hospitals and other facilities to monitor carefully the hours of workers provided by staffing agencies. A nursing aide (Aide) signed on with three different temporary staffing agencies for work at various facilities. All three agencies gave the Aide numerous temporary assignments at Bellevue Hospital (Bellevue) in New York City. While the Aide never worked more than 40 hours per week for any one agency, the Aide did, on occasion, work more than 40 hours per week at Bellevue. Finding Bellevue was a "joint employer" along with the staffing agencies that directly employed and paid the Aide, the court held that Bellevue must pay overtime to the Aide, in compliance with the Fair Labor Standards Act (FLSA).

As defined in the FLSA, "employer" is "any person … acting directly or indirectly in the interest of any employer in relation to an employee." "Employee" is "any individual employed by an employer." The court used an "economic reality" test to determine whether a worker is an employee under the broad definition of the FLSA. Examining six factors, including the facts that (1) the Aide worked on Bellevue's premises; (2) the referral agencies assigned workers to the same facility whenever possible for continuity of care; (3) the Aide performed work which was integral to Bellevue's operations; (4) the Aide's work responsibilities at Bellevue were the same regardless of which agency referred the Aide; (5) Bellevue effectively controlled the on-site terms and conditions of the Aide's employment; and (6) through the various agencies, the Aide worked exclusively for Bellevue, the court held that the economic reality was that Bellevue exerted enough control over the agency-referred workers to be treated as a joint employer. Accordingly, Bellevue was responsible for the Aide's overtime pay. Additionally, having made no effort to insure that its employment of temporary workers complied with the FLSA, Bellevue was ordered to pay liquidated damages and a portion of the Aide's attorney's fees as well.

For more information, please contact Laurie Levin, llevin@bakerlaw.com or 407.649.4076, or Joyce Ackerbaum Cox, jacox@bakerlaw.com or 407.649.4077.

FDA DEBARMENT POWERS POSSIBLE FOR MEDICAL DEVICE AND LEGEND DRUG COMPANIES

The Federal Food, Drug and Cosmetic Act's (FFDCA) voluntary debarment provision applicable to generic drugs is the focus of a bill recently introduced in Congress by Representative Joe Barton, R-Texas, ranking member of the House Energy and Commerce Committee. The proposed legislation (H.R. 6378) broadens both the depth of enforcement options available to the FDA and the scope of individuals and companies that fall under such authority.

Debarment restricts an individual or company from providing services in any capacity to a person or entity that has an approved or pending drug product application. Generic drug companies must certify as part of their Abbreviated New Drug Application (ANDA) filing that they have not used and will not use the services of any debarred person or entity in connection with the drug product application.

Currently, the FDA has only permissive debarment authority over generic drug companies and related individuals, and then only as they are associated with felonies involving generic drug development or approval. Rep. Barton's bill would require mandatory debarment in certain instances and adds breadth by expanding the scope of felony convictions to include those associated with the "regulation of" a drug, and by including brand name drug and medical device companies and related individuals under the FDA's debarment authority.

The bill, entitled the Strengthening of FDA Integrity Act of 2008, also tightens the time within which the FDA must begin debarment proceedings from the current five-year limit to one year following a felony conviction. A congressional staff report found that the FDA has not debarred a single generic drug company in the 15 years it has had the authority to do so, and where the FDA has attempted to pursue individuals in debarment proceedings, it has often failed to meet the five-year deadline.

For more information, please contact Karen A. Weaver, kweaver@bakerlaw.com or 310.442.8866.

NEW ADDITION TO HEALTHCARE INDUSTRY TEAM:
EMILY E. WILLIAMS

Healthcare associate Emily E. Williams recently joined Baker Hostetler's Cleveland office from the Columbus, Ohio office of Taft Stettinius & Hollister LLP. Emily graduated with honors from The Ohio State University Moritz College of Law and holds a bachelor's degree in Chemistry from Miami University (Oxford, Ohio). Her experience includes providing transactional and regulatory advice to physician practices in a wide variety of specialties. Specific examples of projects she has been responsible for include: drafting and negotiating service agreements between physicians and hospitals, drafting and negotiating medical office leases, providing regulatory advice concerning physician compensation arrangements and Medicare reimbursement issues, and guiding clients through joint venture projects with DHS entities. Emily also has experience in the intellectual property arena, drafting and negotiating IP consulting and licensing agreements, and prosecuting trademark applications before the United States Patent and Trademark Office.

During law school, Emily served as a law clerk for the U.S. Attorney's Office for the Southern District of Ohio in its Health Care Task Force, and was a member of The Ohio State University Journal on Dispute Resolution. She served on the planning committees for the 2007 and 2008 Cystic Fibrosis Foundation Central Ohio "Wine Opener," an annual wine tasting event benefiting children, adults and families affected by cystic fibrosis. In her free time, Emily is an avid reader and enjoys hiking with her husband Jonathan and two dogs, Athena and Phoenix.

Emily Williams can be reached at eewilliams@bakerlaw.com or 216.861.7373.