Monthly Archives: June 2011

Governor’s Workgroup Begins Review of Assisted Living Issues

The Agency for Health Care Administration (AHCA) hosted the first of three meetings of Governor Scott’s Assisted Living Workgroup on Monday. The workgroup – consisting of 14 appointed members representing the Florida Legislature, industry leaders, assisted living facility (ALF) operators and resident advocates – listened and directed questions to a dozen speakers who voiced their concerns about the current problems facing assisted living facilities and those who reside in them.

Industry representatives, from the Florida Assisted Living Association and Florida Association of Homes and Services for the Aging, voiced the need for more streamlined and better defined regulation so that ALF and nursing facility operators know what is expected of them. Alberta Granger, from FALA, noted that facility surveys “are all over the place.” Problems the ALFs must contend with include various and overlapping statutory provisions which confuse ALF operators and causes problems with compliance, inconsistent facility surveys, and poorly trained surveyors. Adding to this confusion, according to the speakers, is the multitude of agencies involved in oversight. Not only does AHCA regulate ALF facilities and operators, but also the Department of Children and Families, the Department of Health, local health and fire departments, Florida Department of Elder Affairs, and others.

Consumer advocacy representatives from organizations such as the Florida Peer Network and Florida Long Term Care Ombudsman spoke in favor of a stronger “bill of rights” for ALF residents and pushed for more quality of life measures to be mandated in facilities. State Senator Ronda Storms, R-Brandon, echoed these sentiments and questioned whether the four ALF operators on the panel, as well as other industry representatives, supported such measures in the past.

There seemed to be a consensus among all participants that more mental health services need to be delivered to ALF residents and that ALF operators who are proven to be “bad actors” – references to the Miami Herald’s six-part series “Neglected to Death” were repeatedly provided as examples – should face more serious consequences. According to those newspaper articles, AHCA did not do enough to punish certain ALFs which were allegedly caught abusing or neglecting its residents.

However, one common misconception about ALFs is they are supposed to provide health care beyond basic residential and custodial services. ALFs provide housing and some support services, but do not provide round-the-clock nursing supervision. The state’s moratorium on skilled nursing facility construction may be forcing many elderly residents into ALFs when, in actuality, they need a higher level of skilled nursing services. In reality, ALFs provide an important and valuable service to the state’s elderly residents and the vast majority of them work to stay in compliance with agency regulations.

Larry Polivka, the panel’s chairman, laid out objectives for the workgroup’s next two meetings, which includes evaluating the current legislation that regulates ALFs in Florida and make recommendations to the Governor regarding regulation of ALFS, consumer information and choice, and long-term care services and access to adequate care.
As to regulatory issues, the workforce will be considering the following:

• Enhanced regulatory oversight of “troubled” facilities and a streamlined regulatory process for facilities with a favorable regulatory history;

• Roles of various oversight and regulatory agencies, collaboration to improve oversight and protections, and use of findings by another regulatory agency in agency actions;

• Enforcement action, such as mandatory sanctions, revocation or denial, and related due process matters;

• Licensure structure, including “types” of licensure by size, specialty and residents served;

• Qualifications and training requirements for assisted living administrators, management , staff and core trainers;

• Limited mental health services in ALFs, including specialty license qualification, staff preparation, community support, facility size, resident needs and co-mingling of diverse resident populations;

• Frequency of inspection and monitoring ALFs and the “resource impact” of such changes;

• Evaluation of ALF fee structure as it relates to paying the cost of ALF regulation.

The next workgroup meeting will be held on August 23 at the University of South Florida in Tampa, Florida. Attendees are invited to listen, but may not participate in the workgroup discussions. The workgroup will have a final meeting in September before making its recommendations to the Governor’s office.

If you have any questions regarding the workgroup or issues relating to ALF operation, regulation or agency action taken against your ALF, one of the attorneys at Smith & Associates will be happy to help you.

Assisted Living Facilities: Asserting a Legal Defense in Response to AHCA Enforcement Action

Recent news reports show increased legal sanctions are being imposed by the Agency for Health Care Administration (AHCA) against operators of Assisted Living Facilities (ALFs) for alleged violations of licensure standards. The sanctions available in the AHCA enforcement arsenal are many and include imposition of a moratorium on admissions, imposition of fines and penalties, or the suspension or revocation of the ALF’s license to operate. Recent developments suggest AHCA is presently engaged in an orchestrated “crackdown” on ALF operators, leading some to ask: What are my legal rights and responsibilities? What should I do if my facility becomes the subject of an AHCA investigation or enforcement action?

Chapter 429, Florida Statutes, includes the basic laws governing operations of an ALF. The rules governing licensure and operations are contained in Chapter 59A-5, Florida Administrative Code. These Rules address such areas as licensure requirements, resident care standards, staffing standards, physical plant standards, fiscal standards, and detailed Agency administrative enforcement mechanisms including inspections, survey deficiencies, and sanctions. Sections 408.811, and 429.34, Florida Statutes, provide the authority for AHCA and other state agencies to make unannounced inspections of an ALF. If faced with an inspection, an ALF operator has no legal right to refuse to allow the inspectors access to the facility. However, there is a right to require that proper identification be presented by AHCA or other agency employees. An ALF operator may also request that an Administrator or other designated representative accompany the inspectors while at the facility. It is advisable that the ALF operator immediately consult with legal counsel if an unannounced AHCA inspection is made. During an exit interview, the AHCA representatives should explain their findings, including any alleged deficiencies that were found.

Subsequent to an inspection, AHCA will provide the ALF Administrator with a survey report that provides a detailed written explanation of the findings made during an inspection. The ALF will be given 10 days in which to present a Plan of Correction. Although seldom asserted, an ALF operator may assert a legal right to challenge a survey report and petition for a formal administrative hearing pursuant to Section 120.569 and 120.57(1), Florida Statutes, if the provider believes that there were in fact no deficiencies that should result in a Plan of Correction being submitted. However, in most instances, the results of a licensure or complaint survey can be resolved through submission and implementation of a Plan of Correction.

In the event of alleged severe deficiencies which AHCA claims threaten the health, safety or welfare of an ALF resident, AHCA can impose an immediate moratorium on admissions, or an emergency order of license suspension pursuant to Section 408.814, Florida Statutes. In order to support such emergency action, AHCA is required by Section 120.60(6), Florida Statutes, to make specific findings that document the existence of the emergency situation, and may take only such action as is required to address the emergency. Further, an ALF operator faced with an emergency moratorium, or suspension order, or any other effort to suspend or revoke a license is entitled to file a Petition for Formal Administrative Hearing to challenge the validity of AHCA’s action or proposed action on the license. Hearings on license proceedings are held before an independent administrative law judge at the Division of Administrative Hearings. Such hearings are an opportunity to prove that the true facts do not support a moratorium, suspension or revocation of the ALF license.

In addition to taking direct action against an ALF operator’s license, AHCA is also empowered to seek imposition of civil penalties for alleged violation of licensure rules and standards. Pursuant to Section 429.19, Florida Statutes, according to the “classification” assigned to the alleged violation, as follows:

Class I violations: present an imminent danger to clients (residents) or a substantial probability that death or serious physical or emotional harm would result. These must be corrected within 24 hours. Imposition of a fine is mandatory in an amount of $5,000-$10,000 per violation, even if the violation is corrected.

Class II violations: directly threaten the physical or emotional health, safety or security of clients (other than Class I). Fine in the amount of $1,000-$5,000 per violation, even if the violation is corrected.

Class III violations: indirectly or potentially threaten the physical or emotional health, safety or security of clients (other than Class I or Class II). Fine in the amount of $500-$1,000 per violation.

Class IV violations: pertain to reports, forms or documents that do not have the potential of negatively affecting clients (purely paperwork type violations). Fine in the amount of $100-$200 per violation.

In order to assess a penalty against an ALF operator, AHCA is required to file an Administrative Complaint. An ALF operator has the right to demand a formal hearing to challenge the facts, and to challenge the amount or appropriateness of the fines being imposed. While it is clear that fines for Class I and Class II violations are mandatory, even when the violation is corrected, it is less clear whether a fine should be imposed when a Class III or Class IV violation is timely corrected by the ALF operator. Language in Section 408.813 (AHCA’s “Core Licensure Act”) suggests that no fine shall be imposed when such minor violations are corrected. However, there is some language in the statute that creates ambiguity, and the specific fine amounts for violation of ALF licensure standards are also stated in mandatory language in Chapter 429, Florida Statutes. Section 408.832, Florida Statutes, provides that when the AHCA Core Licensing Act conflicts with the specific facility governing statutes (such as the ALF statute) that the Core Licensure Act should prevail. Applying that principle, then no fines should be imposed for minor Class III and IV violations when they are timely corrected. AHCA takes a contrary view, and this legal issue will likely need to be resolved through legal challenges if an operator feels that a fine is not appropriate.

Undoubtedly the best course of action for any ALF operator is to develop and implement a strong staff education and compliance program. This can be done with assistance of a qualified health care consulting firm, or health care attorneys. An ounce of prevention in this respect will be well worth avoiding the costs of a bad survey or inspection by AHCA.

However, even with a good education and compliance program in place, AHCA may still seek to suspend or revoke a license, or impose a moratorium on admissions or levy substantial fines. The ALF Operator in such situations may assert the legal right to contest and defend against such actions by retaining qualified legal counsel and filing a Petition for Formal Administrative Hearing. Further, for small operators, Florida’s Equal Access to Justice Act, Section 57.111, Florida Statutes, allows for recovery of attorneys’ fees and costs in an amount of up to $50,000 for a “prevailing small business party.” Thus, an ALF operator is not without legal rights when AHCA takes action. To the contrary, ALF operators are entitled to basic due process, and can assert the right to require that the State prove its case in an administrative hearing process.

As always, please refer specific questions regarding ALFs, and their role under the new federal health care reform, to any of our attorneys at Smith & Associates.

Enforceability of Physician Noncompete Clauses

Does 10 miles make a difference in a noncompete clause? A court in Lee County, Florida, is about to answer this question. Dr. Eric Eskioglu alleges that the 2006 noncompete clause in his employment contract with Lee Memorial Health System is unenforceable. The contract restricts Dr. Eskioglu from practicing neurosurgery within 50-miles of Lee Memorial Hospital. Dr. Eskioglu has resigned from Lee Memorial Health System and has started performing neurosurgery at Physicians Regional Medical Center in Collier County, 40 miles away. The impending question is whether the court should enjoin him from continuing to perform surgeries at Physicians Regional. Unique to his case is the fact that Dr. Eskioglu’s practice involves a new type of minimally invasive neurosurgery that only approximately 60 physicians in the country are trained to perform. Thus, the jury will have to decide if Dr. Eskioglu’s unique skills benefit the community enough to modify the terms of his employment contract. See Eskiloglu v. Lee Memorial Health System, 11-CA-000617)(12th Judicial Circuit, J. McHugh).

While this case is interesting for its public policy precedent, the more pressing question for most employers and physicians are: what are your rights as an employer who has a noncompete clause with an employed physician; or as an employed physician what are your legal obligations under a noncompete clause and what defenses might be available to you?

Since noncompete clauses are generally governed by the law in effect as of the year they were entered, a short overview of the history and evolution of noncompete clauses is informative to these questions. Florida has a somewhat tortured history when it comes to interpreting and enforcing post-termination restrictive covenants (frequently termed noncompete clauses) in employment contracts as discussed herein.

Prior to 1953, Florida courts heavily disfavored noncompete agreements. See John A. Grant, Jr. & Thomas T. Steele, Restrictive Covenants: Florida Returns to the Original “Unfair Competition"; Approach for the 21st Century, 70 FLA. B.J. 53 (1996)(“Grant & Steele"); John Sanchez, A Survey Of Physician Non-Compete Agreements In Employment Under Florida Law, Nova Law Review (Fall 2010)(“Sanchez"); see, e.g., Love v. Miami Laundry Co., 160 So. 32, 34 (Fla. 1935)(holding: “courts are reluctant to uphold contracts whereby an individual restricts his right to earn a living at his chosen calling").

In 1953, the Florida Legislature enacted Section 542.12, Florida Statutes. The original purpose for this statute was to protect the legitimate business interests of employers. Ergo, it was intended to alter the judicial disfavor of noncompete clauses and enhance their enforceability. Id.; see, e.g., Capelouto v. Orkin Exterminating Co. of Fla., 183 So. 2d 532, 534 (Fla. 1966)(holding the goal of section 542.12 was to “ protect the legitimate interests of the employer” ); see also Miller Mech., Inc. v. Ruth, 300 So. 2d 11, 12 (Fla. 1974)(holding: “ [t]he statute is designed to allow employers to prevent their employees and agents from learning their trade secrets, befriending their customers and then moving into competition with them.” ).

However, through the 1970s and 1980s Florida courts veered away from the original intent of the legislation and instead sunk into the murky abyss of contract case law. Thus, decisions were inconsistent, fact oriented and extremely unpredictable. The thread of consistency that emerged through the case law was a judicially created presumption of irreparable harm where a breach of the noncompete clause was shown. This allowed the entire body of noncompete clause judicial interpretation to be focused on whether the noncompete clause was reasonable. That question in turn typically centered around the geographic scope and term of the limitation. See King v. Jessup, 698 So. 2d 339 (Fla. 5th Dist. Ct. App. 1997)(acknowledging the judicial creation of presumption of irreparable harm); see also infra (Grant & Steele; Sanchez).

In 1990, there was a significant amendment to Section 542.33, enacted by the Florida Legislature which eliminated the judicially created presumption of irreparable harm and instead forced the employer to prove that the breach of the noncompete clause actually caused the employer irreparable harm. Obviously, this made it much more difficult for employers to enforce noncompete clauses. In 1996, however, the Florida Legislature adopted Section 542.335, which among other changes shifted the burden of proof of irreparable harm from the employer having to prove there was irreparable harm to the employee having to prove there was not irreparable harm. See Infra Grant & Steele; Sanchez. Thus, depending on when the noncompete clause was entered into there could be vastly different results as to its enforceability.

Regardless of when a noncompete clause was entered, there are numerous defenses that both employers and employees should understand. The first issue to consider is the duration of the restrictive covenant. Section 542.335, Florida Statutes, creates specific “ rebuttable presumptions” for restrictions against former employees and those that are 6 months or less are presumed reasonable and enforceable, while those over 2 years are presumed not reasonable and not enforceable. The substantial grey area in between 6 months and 2 years must be weighed and evaluated based on all of the facts and circumstances.

As to geographic scope, the statute does not create a specific range of reasonable scope, but generally speaking the larger the scope, the less likely of its enforceability. On the other hand, the more specialized area that the physician practices, the greater geographic area that might be determined to be reasonable. An important consideration in this determination are the available alternatives for patients within the particular geographic area to access the same physician services. Thus, in the Eskioglu case, the fact that Dr. Eskioglu has a specialized medical practice will weigh in favor of allowing a broad geographic range to be acceptable for his noncompete clause; however, the fact that there are so few neurologists that have his skill set and the potential harm to patients that have to travel to receive those services will weigh in favor of finding the noncompete clause unenforceable as a matter of public policy.

One of the most common defenses to the enforceability of a noncompete clause is that the employer breached the underlying employment contract (a prior breach of a dependant covenant) and therefore the employee’s obligations under the noncompete are not enforceable because of the employer’s breach. On a related concept, an employee may also claim the employer has “ unclean hands” and therefore the noncompete clause is unenforceable. For example, if an employer was asking the employed physician to do something unethical or illegal, it could be argued the employer does not have “ clean hands” to enforce the noncompete clause. Another common defense to a noncompete clause is that the employer failed to enforce a similar noncompete clause against other employees and has waived the right to enforce it now. See N. James Turner, Successfully Defending Employees in Noncompete and Trade Secret Litigation, 78 FLA. B.J. 43, 44-46 (2004); see, e.g., Cordis Corp. v. Prooslin, 482 So. 2d 486 (Fla. 3d DCA 1986)(denied temporary injunction where employer breached underlying contract); Benemerito & Flores, M.D.s, P.A. v. Roche, 751 So. 2d 91 (4th DCA 1999)(noncompete clause unenforceable where employer breached the employment contract by failing to fully compensate her for services provided); Troup v. Heacock, 367 So. 2d 691 (Fla. 1st DCA 1979)(same); Bradley v. Health Coalition, Inc., 687 So. 2d 329 (3d DCA 1997)(same); Bradley v. Health Coalition, 687 So. 2d 329 (3d DCA 1997)(holding employer had “ unclean hands” and could not enforce noncompete agreement where employer had attempted to make employee resell certain plasma products that had been returned by a customer and employee believed product had been rendered unsafe for medical use).

There are also of course other basic contract defenses such as lack of consideration or statute of frauds problems. For example, where the written contract has ended per its terms but an oral extension of the employment contract is entered into and both parties continued to work under similar terms without executing a new written employment contract, most courts have held that the failure to have a written noncompete clause makes enforceability of the employment contract term based on the prior written agreement unenforceable. See Sanz v. R.T. Aerospace Corp., 650 So. 2d 1057 (Fla. 3d Dist. Ct. App. 1995)(holding employee not bound by noncompete where contract was orally extended after three year term had expired); Gray v. Prime Management Group, Inc., 912 So. 2d 711 (Fla. 4th Dist. Ct. App. 2005)(holding oral extension of employment contract did not apply to his non-compete agreement); Zupnik v. All Florida Paper, Inc., 997 So. 2d 1234 (Fla. 3d Dist. Ct. App. 2008)(holding “ post-termination restrictions expire upon the termination of [a contract] for a specific term, even if [the] employee remains an at-will employee after the [contract term ends].” ).

Another issue is whether particular interests of an employer may even be protected as a “ legitimate business interest.” For example, there is wide spread agreement in Florida courts that a general advertisement seeking new patients usually will not be considered a violation of a physician noncompete because it is not a solicitation aimed at specific current or prospective patients of the former employer.

On the other hand, there is disagreement in Florida courts as to whether a former employee violates a noncompete by seeking patient referrals from “ referring physicians.” Some courts have ruled that there is no violation in seeking referrals from the former employer’s “ referring physicians” ; while other Courts have ruled that there is a legitimate and enforceable business interest in protecting established relationships with “ referring physicians.”

Another potential defense and issue involves consideration of public policy and the relationship between patients and physicians. Florida law specifically recognizes that restrictive covenants among lawyers will be narrowly construed to protect the “ special trust and confidence” inherent in attorney-client relationships. Some legal commentators have called for a similar approach as to restrictive covenants involving physician-patient relationships. See Infra Sanchez. While courts in Florida have thus far rejected some broad based attacks on restrictive covenants for physicians as being “ void and against public policy” other states have found that the physician-patient relationship is entitled to the same degree of protection as the lawyer-client relationship, and therefore noncompete clauses are narrowly construed with special consideration of possible negative impacts on the public.

All and all there are numerous defenses to enforceability of noncompete clauses. Whether you are the employer seeking to draft an enforceable noncompete agreement, or an employee about to enter into a contract with a noncompete clause, or even a party to a contract that has a noncompete clause, given the uncertainty and inconsistency of the courts in this rapidly evolving field of law, it is always best to seek advice of legal counsel on the specific issues as they relate to your contract. When consulting legal counsel about the noncompete clause make sure to ask about liquidated damages provisions and their enforceability and also about potential tortuous interference of a contractual relationship claims and possible attorneys’ fees consequences to the non-prevailing party, as all of these issues are inextricably involved in every noncompete clause.

As always, please refer specific questions regarding ACOs, and their role under the new federal health care reform, to any of our attorneys at Smith & Associates.