Health Law Update —October 25, 2012

Alerts / October 25, 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 BakerHostetler's Healthcare Team with questions.


Recently, the Federation of State Medical Boards (Federation) released its Model Policy Guidelines for the Appropriate Use of Social Media and Social Networking in Medical Practice (Guidelines). The Guidelines are intended to address how physicians can utilize social media to facilitate patient care while still maintaining the privacy and confidentiality of patient information and the appropriate level of professionalism.

Social media usage, such as Facebook, Twitter, LinkedIn and blogging, has increased among healthcare providers. One survey indicates that 87 percent of physicians use social media websites for personal use and 67 percent use social media for professional purposes. Another study indicates that 35 percent of physicians have received friend requests from patients or their family members, and 16 percent of physicians have visited an online profile of a patient or a family member.

The expanded use of social media raises challenging questions for healthcare providers, such as the extent to which physicians can share their work experiences online without violating the privacy and confidentiality of their patients and how to clearly delineate appropriate boundaries of professionalism. An analysis of physician blogs found that nearly 17 percent included enough information about patients to identify them.

The Guidelines state that 92 percent of state medical boards have reported violations of online professionalism, including Internet use for inappropriate contact with patients, inappropriate prescribing and misrepresentation of credentials or clinical outcomes. This conduct has serious consequences for physicians, with 44 percent of disciplinary actions from inappropriate Internet use resulting in medical license revocation.

To address these issues, the Guidelines recommend that physicians abide by the following standards when using social media:

  • Candor: Physicians should disclose any information that could influence patients' understanding or use of the information, products or services on any website offering healthcare services or information;
  • Privacy: Physicians should prevent the unauthorized access to, or use of, patient and personal data and assure that any de-identified data cannot be linked back to the user or patient; and
  • Integrity: Physicians should ensure that the information contained on their websites is truthful, up-to-date and supported by relevant clinical evidence when necessary.

The Guidelines employ these principles to provide guidance on the appropriate use of social media and social networking in the following contexts:

  • Professionalism: Physicians should:
    • Use separate personal and professional social networking sites, profiles, and e-mail accounts and ensure separation between the two;
    • Report any unprofessional behavior to the proper authorities; and
    • Observe the same standards of ethical conduct online that normally would be observed offline.
  • Medical Board Sanctions and Disciplinary Findings: State medical boards have the authority to discipline for inappropriate online conduct,
    • Inappropriate communication with patients;
    • Use of the Internet for unprofessional behavior;
    • Misrepresentation of credentials;
    • Violations of patient confidentiality;
    • Failure to reveal conflicts of interest;
    • Derogatory remarks regarding a patient;
    • Depiction of intoxication; and
    • The use of discriminatory language or practices.
  • Interacting with Patients: Physicians should refrain from interacting with past or current patients on personal social networking sites like Facebook and never discuss information pertaining to the physician-patient relationship on personal social networking sites.
  • Privacy/Confidentiality: Patient privacy and confidentiality must be protected at all times, especially on social networking sites. Physicians can discuss their clinical experiences but should refrain from including details that may identify a patient.
  • Disclosure: Physicians may write online about their experience as healthcare professionals, but they must reveal existing conflicts of interest and be honest about their credentials as physicians.
  • Posting Content: Physicians must realize that any information they post online can be disseminated without their consent to a huge audience. The content posted often can be taken out of context and remain online forever.
  • Discussion of Medicine Online: While professional social networking sites designed specifically for physicians can be useful forums for medical discussion, physicians must ensure that the information exchanged on these sites remains confidential and that nonphysicians do not rely on the online discussion as medical advice.

The Guidelines recommend that all healthcare providers implement policies and procedures addressing social media and social networking usage in accordance with these recommendations. If you are concerned about the use of social media or social networking in your medical practice or would like assistance with policies and procedures, please contact Lynn Session, or 713.646.1352; or Cory J. Fox, or 713.646.1358.

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The Internal Revenue Code requires employers to either pay or collect a series of taxes related to compensation paid to employees. A recent ruling by the Sixth Circuit addressed the question of whether payments made to separated employees pursuant to supplemental employment compensation plans (SUB payments) constitute "wages" subject to FICA. United States v. Quality Stores, Inc., No. 10-1563 (6th Cir. Sept. 7, 2012). At issue was whether the Section 3402(o) exclusion of SUB payments for withholding purposes created a parallel exclusion of SUB payments from the definition of "wages" for FICA purposes.

The Sixth Circuit ruled that the Section 3402(o) exclusion of SUB payments from the definition of wages for withholding purposes also applies to the definition of wages for FICA purposes. The court rejected the government's argument that the statutory definitions of "wages" differ under the two provisions, noting statutory amendments and legislative history that the government contended had "de-coupled" the definition of wages for the two provisions.

Interestingly, the Federal Circuit had reached the opposite result in CSX Corp. v. United States, 518 F.3d 1328 (Fed. Cir. 2008), concluding that SUB payments should be treated as "wages" for FICA purposes. The CSX and Quality Stores decisions address essentially the same arguments and both courts acknowledged that the statutory construction issue is close. Nonetheless, the result is a direct circuit conflict, and the issue may be taken up by other circuits or the Supreme Court before it is put to rest.

For present purposes, the most important question is identification of the types of payments that might fall within the reasoning of Quality Stores. The statutory definition of SUB payments provides:

For purposes of [chapter 24 of the Internal Revenue Code, which deals with income tax withholding], the term "supplemental unemployment compensation benefits" means amounts which are paid to an employee, pursuant to a plan to which the employer is a party, because of an employee's involuntary separation from employment (whether or not such separation is temporary), resulting directly from a reduction in force, the discontinuance of a plant or operation, or other similar conditions, but only to the extent such benefits are includible in the employee's gross income.

The Sixth Circuit construed this definition as having five separate elements:

  1. An amount is paid to an employee;
  2. The amount is paid pursuant to an employer's plan (the case law appears to provide some flexibility regarding how formal this plan needs to be);
  3. The amount is paid because of an employee's involuntary separation from employment, whether temporary or permanent;
  4. The separation results directly from a reduction in force, the discontinuance of a plant or operation, or other similar conditions; and
  5. The amount is included in the employee's gross income.

The ultimate outcome of the litigation involving the taxation of SUB payments for FICA purposes is still unknown. According to the government, the Internal Revenue Service (IRS) already has recieved more than $1 billion in claims asserting the Quality Stores legal theory. The government filed a petition for rehearing en banc in the Sixth Circuit earlier this week, suggesting that the IRS is not ready to give up the fight just yet. Even if that petition is denied, it still can seek certiorari in the Supreme Court. Alternatively, the IRS may announce a formal change in position accepting some or all of the Sixth Circuit's analysis. Either way, it is unlikely that the government will allow disparate treatment of taxpayers in different circuits to continue for long.

In the interim, clients should protect themselves from statute of limitations issues by filing refund claims for all open years asserting that the Quality Stores reasoning applies to the broadest possible categories of SUB payments. Presumably, the IRS will adopt a "go slow" approach in reviewing these claims and should hold them in abeyance pending final resolution of the Quality Stores litigation. Even if the IRS audits and formally rejects the claims, taxpayers still will have two years to file suit, by which time the uncertainty in the law should be resolved.

For more information, please contact Stuart J. Bassin, or 202.861.1736.

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The Medicare Audit Improvement Act of 2012, a House bill introduced on October 16, 2012 (Bill), proposes to improve the operations of recovery auditors (RACs), as well as increase transparency and accuracy of audits conducted by other Medicare contractors, including Medicare administrative contractors (MACs), fiscal intermediaries and zone program integrity contractors (ZPICs).

The Bill provides for a number of protections for hospitals relating to documentation requests, short-stay denials and physician review of denials. The Bill would limit the number of additional documentation requests from a Medicare contractor related to Part A claims to the lesser of two percent of all such claims for the year or 500 additional documentation requests during any 45-day period. It also would contractually require that RACs and MACs provide for physician review of each denial of a claim for medical necessity when the denial is determined by someone who is not a physician. Under the proposed Bill, MACs are to focus prepayment and postpayment medical necessity reviews on issues with widespread payment error rates, defined as a payment error rate of 40 percent or greater for a particular medical necessity audit. Moreover, the Bill seeks to explicitly allow for rebilling denied Part A inpatient claims under Part B where the services are found medically necessary at the outpatient level.

In addition to the above protections, the Bill also provides for penalties for noncompliant RACs and incentivizes accurate reviews prior to appeal. RACs would face financial penalties if they fail to comply with audit deadlines and timely communication and would owe a fee to the prevailing party for overturned appeals. According to the American Hospital Association (AHA), hospitals are successfully overturning RAC denials 75 percent of the time.

The AHA has long voiced concerns over the burden that Medicare audits can place on hospital resources. The AHA supports the Bill, noting: "No one questions the need for auditors to identify billing errors; but the flood of new auditing programs, along with confusing and conflicting regulations, is drowning hospitals with a deluge of redundant audits, unmanageable medical record requests and inappropriate payment denials."

For more information, please contact B. Scott McBride, or 713.646.1390 or Ameena N. Ashfaq, or 713.646.1329.

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The Centers for Medicare and Medicaid Innovation (CMMI), a unique creature of the Patient Protection and Affordable Care Act (PPACA), which authorizes CMMI to spend $10 billion to test and evaluate innovations in payment and service delivery arrangements, commented recently on its multi-payor initiative, originally announced July 19, 2012. The grant program is a $275 million initiative offered to states specifically focused upon creating complete realignment of payment between providers and all its payor sources - state, federal, commercial and employers through self-insured plans. The initiative is focused on improving care while lowering costs through transformative payment and delivery system reforms with states in two phases - Track 1 would be accessed by states that are "ready to go," while Track 2 would be accessed to test new models and to accommodate the need for additional state waivers.

Recently, Dr. Richard Gilfillan, Director of CMMI, lauded the response he has seen from states at a speech to the National Academy for State Health Policy. The application period closed on September 17. Up to 25 states will receive $2 million to develop these programs and the remaining $225 million will be divided among the five states with the most promising "ready to go" state transformation models, he reported.

Significantly, in a signal of innovations to come, Dr. Gilfillan spoke about the importance of the multi-payor initiatives. He identified the barriers that exist when all payors do not agree on a similar approach to payment and how it ends up confounding efforts to realign delivery models. Consequently, a common payment approach that rewards the practice for a new treatment model will ease the transition to these new models when all payors participate.

Additionally, Gilfillan revealed that CMMI is actively working with the Office of Personnel Management on a more unified approach to healthcare purchasing to encourage that purchasers "emerge from their silos" and is thinking about how to convene them in one room.

Against the backdrop of an election that could determine the ultimate fate of PPACA, the work of CMMI aimed at aligning payment incentives to encourage coordinated care among payors outside of the federal/state construct could potentially reach far beyond the confines of PPACA and portend a significant shift in payment models and service delivery arrangements in the coming years.

For more information, please contact Susan Feigin Harris, or 713.646.1307.

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October 30



Houston counsel Lynn Sessions will speak on "Lessons from Cutting Edge Transactions in Health Care and Life Sciences: HIPAA/HITECH Compliance" at the IP and Technology Licensing Seminar in Houston, Texas.

October 31

Houston counsel Lynn Sessions will speak on "Anatomy of Health Care Data Breaches -- The Good, the Bad and the Almost Very Ugly" at the American Hospital Association Solutions Seminar in Boston, Massachusetts.

November 1

Houston counsel Lynn Sessions will speak on "Healthcare Enterprise Risk Management: Just Do It!" at the Minnesota Society for Healthcare Risk Management Seminar in Minneapolis, Minnesota.

November 7

Cleveland counsel Thomas S. Campanella will provide "A Primer on the Accountable Care Act" to third year medical students of the Ohio University Heritage College of Osteopathic Medicine at South Point Hospital in Warrensville, Ohio.

Houston counsel Lynn Sessions will speak on "Anatomy of Health Care Data Breaches -- The Good, the Bad and the Almost Very Ugly" at the American Hospital Association Solutions Seminar in Chicago, Illinois.

November 9

Cleveland counsel Thomas S. Campanella will speak on "The Current State of Health Care in the U.S." to third year medical students of the Ohio University Heritage College of Osteopathic Medicine at St. John's Medical Center in Westlake, Ohio.

November 14

Houston counsel Lynn Sessions will speak on "Anatomy of Health Care Data Breaches -- The Good, the Bad and the Almost Very Ugly" at the American Hospital Association Solutions Seminar in Philadelphia, Pennsylvania.

November 15

Houston counsel Lynn Sessions will speak on "Anatomy of Health Care Data Breaches -- The Good, the Bad and the Almost Very Ugly" at the American Hospital Association Solutions Seminar in Houston, Texas.

December 14

Houston counsel Lynn Sessions will speak on "Developing a Smartphone Policy for Healthcare Providers" at an audio conference sponsored by Lorman Education Services.

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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. © 2012 Baker & Hostetler LLP

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