Category Archives: Health Care Law

Revalidation Required for Continued Medicare Payments

All Medicare-enrolled providers should be on the look-out for a “revalidation letter” from their Medicare Administrative Contractor (MAC) between now and March 23, 2012. The notices are being sent in accordance with the Patient Protection and Affordable Care Act (PPACA), Section 6401(a), which requires CMS to reevaluate all providers and suppliers enrolled with Medicare prior to March 25, 2011, under new screening guidelines. Newly enrolled providers and suppliers that submitted their enrollment applications to CMS on or after March 25, 2011, are not impacted.

To ease the burden on providers, the revalidation process will be prompted by MACs. Under existing guidelines (42 CFR 424.515(d)) CMS is permitted to conduct off-cycle revalidations for certain program integrity purposes. Therefore, MACs will be sending revalidation letters and instructions to each provider in stages. Upon receipt of a revalidation letter, the provider (or supplier) will have 60 days from the date of the letter to submit enrollment information and the 2011 application fee of $505. (Physicians, non-physician practitioners, physician group practices and non-group practices are not required to pay the enrollment fee.)

How to complete the revalidation process

When you receive notification from your MAC to revalidate, you have two options: 1) update your enrollment via the Internet-based PECOS; or 2) complete and submit the appropriate CMS 855 paper application for 2011.

PECOS allows you to review information currently on file, update and submit your revalidation via the Internet. First go to https://pecos.cms.hhs.gov on the CMS website. Once you have submitted your revalidation, you must then print, sign, date, and mail the certification statement (along with all required supporting documentation) to your MAC.

To revalidate by paper, download the appropriate and current CMS-855 Medicare Enrollment application from the CMS website at www.cms.hhs.gov/cmsforms. Mail your completed application, along with all required supporting documentation, to the MAC address on your revalidation letter.

Second, all institutional providers and suppliers must submit an enrollment fee via the Pay.Gov online service. To pay your application fee, go to http://www.pay.gov and type “CMS” in the search box under Find Public Forms, and click the GO button. Click on the CMS Medicare “Application Fee” link. Complete the form and submit payment as directed. You may submit your fee by electronic check, debit, or credit card. A confirmation screen will display indicating that payment was successfully made. This confirmation screen is your receipt and you should print it for your records. CMS strongly recommends that you mail a copy of this receipt to the Medicare contractor along with the Certification Statement for the enrollment application. CMS will notify the Medicare contractor that the application fee has been paid. Revalidations are processed only when fees have cleared. If needed, providers can request a waiver of the application fee if hardship can be verified.

What happens if a provider fails to revalidate?

Medicare providers and suppliers have 60 calendar days from the postmark date of the revalidation letter to submit the completed enrollment forms and pay the fee. Failure to comply as requested may result in the deactivation of your Medicare billing privileges. As stated in 42 CFR § 424, if an application is not received within 60 calendar days from the date of the request, CMS must revoke the provider’s billing privileges and impose a 1-year re-enrollment bar. It is important to note that a revocation, in this situation, will be effective 30 days after the notification of such action is mailed. The notice of revocation will also include your right to appeal. All appeals must be submitted in a timely manner to allow a re-examination of the revocation.

CMS is urging providers and suppliers to refrain from submitting a revalidation until your MAC notifies you to do so.  Proactively submitting a revalidation will significantly impact the ability to process applications in a timely fashion as well as the ability to take advantage of innovative technologies and streamlined enrollment processes currently under development by the CMS. If you would like to check to see if a revalidation letter has been sent, you can check online at: https://www.highmarkmedicareservices.com/enrollment/status.html. The provider’s CCN is needed to perform a search. For each CCN entered, a message will display advising whether or not a revalidation letter has been issued. If a revalidation letter has been issued, the date of the HMS request and revalidation application due date will be provided.

If you have questions about the revalidation process, or have received a notice of deactivation of Medicare billing privileges, please feel free to contact one of the attorneys at Smith & Associates for assistance.

Second ALF Workgroup Meeting Nets Few Recommendations

The second meeting for the Governor’s Assisted Living Workgroup, held last week on the University of South Florida’s campus in Tampa, fell short of producing any substantive recommendations that the entire panel would back. While representatives of various agencies gave presentations with their recommendations to improve ALF oversight, ALF operators were quick to point out problems with those recommendations.

In one example, Kathryn Hyer, an associate professor and director at USF’s School of Aging Studies, strongly recommended that ALF operators be required to have a bachelor’s degree in a health care-related field. Several members on the ALF panel stated that monies received for the care of ALF residents would never cover the cost of hiring an administrator with such education. Currently, Medicaid only reimburses assisted living facilities up to $32.20 per day for services provided to waiver residents.

Molly McKinstry, Deputy Secretary for Health Quality Assurance at the Agency for Health Care Administration (AHCA), presented an overview of the state and local government’s role and responsibilities in regulating ALFs. Ms. McKinstry noted that Florida has experienced a 30-percent increase in the number of ALFs over the last several years, with more than half of all facilities having six or fewer beds. AHCA’s recommendations for improving ALF oversight included a revision of the complaint survey process to reflect a model used by Wisconsin, and to incorporate the following:

• An enhanced focus on the residents;
• Concentration on resident and family interviews, observations and record review;
• Improved consistency of surveys;
• Abbreviated surveys for high-performing ALFs (i.e., no history of complaints, consistent ownership, consistently good surveys).

The meeting ended with workgroup’s chairman, Larry Polivka, requesting panel members to read over the Florida Senate Committee on Health Regulation’s report on ALF oversight and warned members to be ready to discuss them at the last meeting, to be held in Miami in early November.

The Senate Committee report identified problems with AHCA’s survey and inspection process in that AHCA is not generating enough revenue from fees and fines to adequately fund the necessary number of ALF inspections needed in light of the increases in facilities. The report recommended more abbreviated inspections for facilities in compliance with the law, while requiring more frequent and extensive inspections of those ALFs that have recurring deficiencies.

The Senate report also recommended increased training and qualifications of Core Training Providers, which train ALF administrators. The report raises the possibility of returning the responsibility of core training back to the Florida Department of Elder Affairs (DOEA), which was the agency with primary responsibility before the role was privatized in 2003 by the Florida Legislature. Other related suggestions included expanding the core training curriculum, increasing administrator qualifications to require a 2-4 year degree with coursework in gerontology or health care, increasing staff training and examinations, increasing staffing ratios at ALFs, and requiring special elopement training for staff members.

To ensure that AHCA consistently enforces penalties on poor-performing ALFs, the Senate report recommends legislation that removes the agency’s discretion to reduce administrative fines, moratoriums and other penalties when certain deficiencies or violations are discovered. Additionally, it was noted that consumers would benefit from an easy-to-use rating system (similar to Nursing Home Compare) that could be coordinated by the Ombudsman’s Office to help families make informed decisions about choosing an ALF.

Finally, the Senate report recommends streamlining agency oversight over those areas where more than one state agency performs a function in the regulatory process of ALFs.

While a site for the next meeting in Miami has not yet been announced, the panel is considering a two-day meeting on November 7-8, 2011.

If you have any questions regarding the workgroup or issues relating to ALF operation, regulation or agency action taken against your ALF, please feel free to contact one of the attorneys at Smith & Associates.

New and Proposed CMS Rules Promise to Cut Costs

The Federal Register recently published a final rule and two proposed rules which eliminate certain regulatory burdens on health care providers and are expected to save health care providers more than $1.1 billion annually. These final and proposed regulations are part of the Obama Administration’s initiative to reduce “unnecessary and outdated” CMS rules which serve only to hinder productive work in private companies and limit growth in the economy.

The finalized rule, CMS-3217-F, revises the conditions for coverage (CfC) for ambulatory surgical centers (ASCs) to allow patient rights information to be provided to the patient, the patient’s representative, or the patient’s surrogate just prior to the start of a surgical procedure (as opposed to the earlier CfC requiring the ASC to provide notice of the patient’s rights in advance of the date of procedure). This change helps those ASCs which provide same-day surgical services and eliminates the added time and expense of providing a detailed list of patient rights during a separate office visit before the date of the surgical procedure. The rollback of this and other minor safety requirements in the rule are purported to save ambulatory surgery centers $50 million annually. Two other proposed rules are expected to continue this trend in accordance with the President’s Executive Order 13563.

The first proposed rule, CMS-3244-P, updates the Medicare Conditions of Participation (CoPs) required of hospitals and critical access hospitals to participate in the Medicare and Medicaid programs. This new proposal is expected to increase patient-centered care in hospitals and enhance care coordination.

One administrative-cost cutting change proposed is the elimination of a requirement that hospital systems create governing bodies for each individual hospital. Specifically, the rule proposes to revise 42 CFR 482.12 to state that “There must be an effective governing body that is legally responsible for the conduct of the hospital.” This provision would allow multi-hospital systems having more than one CMS Certification Number (CCN) to have just one governing board to provide comprehensive oversight across their hospitals.
Other proposed changes in CMS-3244-P include:
• Removing the requirement for a single director of outpatient services;
• Allowing critical access hospitals (which serve rural areas) to contract with other entities for laboratory and radiology services;
• Easing the reporting requirements for hospitals when the circumstances of a patient’s death involve only the use of soft two-point wrist restraints and no use of seclusion;
• Eliminating the requirement that a physician or non-physician (i.e., ARPN) be a member of a hospital’s medical staff in order for its governing body to grant practice privileges; and
• Expand the list of practitioners, to whom hospitals may assign certain management responsibilities over medical staff, to also include doctors of podiatric medicine (DPMs); and
• Revision of certain nursing service requirements to ease burden of developing two care plans and, also, allowing certain “standing orders” for drugs and biologicals.

The second proposed rule, CMS-9070-P, seeks to cut costs by cutting the list of emergency equipment that ASCs are currently required to keep on hand and eliminate some of the costly Federal Life Safety Code (LSC) requirements on certain structures. The savings to non-hospital providers and health care equipment suppliers is anticipated to save $200 million per year. Similarly, the rule proposes eliminated duplicative requirements pertaining to infection-control plans within 42 CFR 416.51 and 42 CFR 416.44.

Significantly, the rule proposes to remove a list of emergency equipment contained in 416.44(c) – which may be outdated or unnecessary – and, instead, require that ASCs develop their own policies and procedures specifying the types of emergency equipment that would be appropriate for the facility’s patient population, and make the items immediately available at the ASC to handle inter- or post-operative emergencies. The belief is that these proposed changes would enable ASCs to better meet current demands, while also giving them the flexibility necessary to respond to emergency needs and incorporate the use of modern equipment more suitable for their needs.

The rule also proposes to eliminate the automatic 1-year bar to re-enroll in the Medicare program in certain situations where the providers and suppliers have not timely responded to requests for revalidation of enrollment or other requests for information initiated by CMS. This change is based, in part, on the belief that the automatic bar is an unnecessarily harsh consequence in circumstances where a provider may not be aware of the CMS request due to misrouted mail or a clerical mistake. The rule proposes a less restrictive regulatory remedy available for addressing a failure to respond timely to a revalidation request. Additionally, the rule proposes to ease the deactivation and re-enrollment requirements if a provider does not submit a Medicare claim within a 12-month period.

The rule also proposes to ease many of the Federal LSCs covering End-Stage Renal Disease (ESRD) Facilities after finding many of them were duplicative of already existing state and local fire safety codes.

CMS will be accepting public comments on the proposed rules until December 16, 2011. If you have questions regarding any provisions contained in the proposed or final rules, or if you would like more information, one of the attorneys at Smith & Associates will be happy to assist you.

EMTALA: Diving into the Murky Abyss

An ambulance radios an emergency room from the other side of town saying the ambulance is on the way to the emergency department with a woman in active labor about to deliver. The emergency room physician takes the call and tells the driver the hospital does not have an obstetrical program and that the patient should go to the other hospital two blocks away because they have a fantastic obstetrical program and can better handle the delivery. The EMS driver proceeds to take the woman to the other hospital where the baby is delivered in good health without any adverse medical effects from the transfer. As an aside the woman has fantastic private insurance and it pays all of her medical bills. Has an EMTALA violation occurred? If you live in Maine, Massachusetts, Rhode Island, New Hampshire, Puerto Rico, Hawaii, California, Washington, Oregon, Montana, Idaho, Arizona, Nevada, or Alaska the answer is probably yes. If you live in any other state, the question is still open to interpretation.

The Emergency Medical Treatment and Active Labor Act (EMTALA) was enacted by Congress in 1986 as part of the Consolidated Omnibus Budget Reconciliation Act (COBRA) as a reaction to scenarios similar to that described above (except where the results were suboptimal and in some highly publicized cases devastating). EMTALA requires hospitals that accept Medicare (which is almost all hospitals except federal military hospitals) to provide emergency medical screening and stabilization care to anyone needing emergency health care without regard to the patient’ s race, religion, ethnicity, citizenship, legal status, or ability to pay.

What does it mean to provide an emergency screening examination? EMTALA provides that any patient who comes to the emergency department requesting examination or treatment for a medical condition must be provided with an appropriate medical screening examination to determine if he is suffering from an emergency medical condition. On its face, the plain language of EMTALA seems clear; however, the legal meaning of the terms highlighted above has spawned decades of litigation that make predictability of liability in scenarios like that described above less than certain.
For example, what does it actually mean to “come to the emergency department” ? A literalist might think that it means the patient has to come into the emergency department of the hospital. But, what if the patient is an obstetrical patient that presents to the labor and delivery department of the hospital, does EMTALA still apply even though she did not “come to the emergency department” ? After much scholarly debate and legal wrangling, at least for now, this question has been answered. Coming to the labor and delivery department is adequate to invoke EMTALA.

In fact, it is pretty well settled now that coming within 250 feet of the main hospital campus (exclusive of nonhospital owned attached businesses such as gift shops or physician offices) is close enough to invoke EMTALA. Interestingly, even hospitals that do not have an emergency department (a psychiatric hospital for example) can still have EMTALA obligations invoked if the psychiatric facility typically handles psychiatric emergencies or Baker Act patients.

Likewise, “requesting examination or treatment” is not limited to its literal meaning either. If a patient’ s condition is such that it would appear that the patient needs medical attention to a reasonably prudent person, then there does not have to be a request at all.

So what is an appropriate medical screening examination? Essentially it needs to be sufficient to determine if the patient has an emergency medical condition. CMS defines emergency medical condition as a condition of sufficient severity that the absence of immediate medical attention could reasonably be expected to result in: (1) serious jeopardy to the patient’ s health; (2) serious impairment to bodily functions; or (3) serious dysfunction of any bodily organ or part.

So the obvious question is what if a patient comes to the emergency department and requests examination and treatment for an emergency medical condition, but while the patient is waiting for care decides it is taking too long and leaves the emergency department without treatment? Has an EMTALA violation occurred? If there has been an appropriate medical screening examination and the patient was told not to leave and to wait for treatment and the patient is not leaving based upon a suggestion of the hospital staff, then there is not an EMTALA violation. It would be best to get the patient to sign an informed refusal of care if possible to avoid a factual dispute should there be future litigation.

But, what if the medical screening examination was never performed before the patient left and the patient dies in the hospital parking lot? Well, then the issues becomes was the patient properly triaged, how long had the patient had to wait before s/he left, was the hospital operating above its capacity and if so, was there an offer to transfer the patient; did the patient leave at the suggestion of hospital staff, and most importantly, was there any disparity in the treatment of this patient based upon the patient’ s race, religion, ethnicity, citizenship, legal status, or ability to pay? Obviously, the best practice is to get the medical screening done quickly because not providing the screening can lead to significant liability.

Some of the key issues to remember when planning for EMTALA are that EMTALA does not by its terms or by any that have been extended to it by judicial interpretation apply to stable patients. EMTALA relates to accepting, treating and transferring unstable patients.

Also, a hospital can only perform that which is within its capability and capacity. However, it is worth noting a hospital is not at capacity just because it is exceeding it licensed bed capacity – the hospital would be expected to move stable patients, bring in additional staff, and borrow equipment before it would likely be found to be at capacity. That said, if the needed service is truly beyond the hospital’ s capability or capacity, courts have tended to not find EMTALA violations.

Given the lack of clarity regarding EMTALA, it’ s not surprising so many physicians and hospital administrators struggle with its application. To assist in clarifying this murky abyss, here are a few of the most common questions about EMTALA:

Q. If our hospital does not have an obstetrical department do we have to treat a woman in active labor?

A. Yes, if: (1) there is inadequate time to affect a safe transfer to another hospital before delivery; or (2) transfer may pose a threat to the health or safety of the woman or her unborn child.

Q. If our hospital does not have a psychiatric department and a patient presents with signs of an unstable psychiatric emergency medical condition what are the hospital’ s obligations?

A. Note: a key word here is unstable. EMTALA does not apply to stable patients. But note there have been some controversial court decisions such as the recent 9th Circuit Moses case, where a court held a hospital that admitted a psychiatric patient and kept the patient for several days before releasing the patient violated EMTALA because the hospital failed to “stabilize the patient” before discharging the patient. On the other side of the coin, a hospital only has to treat the patient within the hospital’ s capacity and capability. At least one court has held that a hospital that had no psychologist or mental health counselors on staff did not have the capacity to treat a psychiatric patient and therefore had satisfied its EMTALA obligations by performing a medical screening to determine if there was an organic cause for the psychiatric symptoms.

Q. Do EMTALA obligations end once a patient is admitted to the hospital?

A. Until 2009 most authorities on this subject were in agreement that EMTALA obligations ended when the patient was admitted into the hospital. However, in 2009, the Moses court shook up that commonly accepted wisdom with a decision that the key element for ending EMTALA responsibilities was not admitting the patient, but was “ stabilizing” the patient. The court reasoned that a patient could be admitted as an inpatient and still remain unstable and thus EMTALA could apply after a patient was admitted to the hospital. No other cases have followed or disagreed with this opinion to date and there has not been any further definitive CMS guidance on this issue.

Q. Can a patient be asked for their insurance information before the medical screening examination is performed?

A. Surprisingly yes, so long as taking the information does not delay the medical screening examination or treatment and there is no disparity in screening or treatment of the patient based upon the information collected.

Q. As a hospital on the receiving end of a transfer can I refuse to accept a transfer if there is a closer appropriate hospital with capacity to accept the patient?

A. No, you must accept the patient. The hospital can seek reimbursement for unfunded care for improperly transferred patients.

Q. If a physician knows of an EMTALA violation, is there any duty to report the violation?

A. Yes, violations must be reported to CMS within 72 hours of the violation.

Q. What if a patient presents that needs a specialist that is not available under the on-call schedule for the hospital, is transferring the patient an EMTALA violation?

A. EMTALA is vague on exactly what types of specialist must be on-call 24/7 at a hospital. Clearly, EMTALA accepts transfer agreements between hospitals as a means of covering on-call for specialists.

Q. Does EMTALA apply to physicians?

A. EMTALA is primarily geared towards hospitals, not physicians. EMTALA only imposes a penalty on a physician in the following circumstances: (1) the on-call physician fails to respond to an emergency situation; (2) a physician signs a certification to transfer where the physician knew or should have known that the certification was false; or (3) there can be direct liability for physicians working at specialty hospitals. However, lawyers being lawyers there are other ways to be sued that skirt around EMTALA either through retribution under a contract with a hospital that received a fine based upon the physician’s actions, or in a medical malpractice case where the claim is the failure to comply with EMTALA demonstrates failure to observe the usual and customary standard of care.

While it’s beyond the scope of this article, its worth pointing out that Florida has its own version of EMTALA called the Florida Access to Care and Emergency Treatment Act. Much of what is stated here about EMTALA is also true of the Florida Act. One unique provision to the Florida Act worth mentioning, however, is that Florida offers some immunity to physicians as an incentive to put patient quality first in making transfer decisions.

If you have any questions about EMTALA, please feel free to speak with an attorney at Smith & Associates.

Mounting a Successful Challenge to an Emergency License Suspension Order

Before an Emergency Suspension Order can be issued to suspend a medical license, the Department of Health must provide specific facts and reasons to support a finding of immediate danger to the public health, safety and welfare. The First District Court of Appeal recently released an opinion in which the Department failed this minimum requirement. In a unanimous decision, the court struck down an emergency order suspending the medical license of Alan Mendelsohn, a prominent ophthalmologist in Broward County.

The applicable standard of review for any Emergency Suspension Order (which allows suspension of a license without a prior hearing on the merits) is whether, “on its face, the order sufficiently states particularized facts showing an immediate danger to the public welfare.” Robin Hood Group, Inc. v. Florida Office of Insurance Regulation, 885 So. 2d 393, 396 (Fla. 4th DCA 2004). See also, Broyles v. Department of Health, 776 So. 2d 340 (Fla. 1st DCA 2001).

Instead of citing any facts which warranted the emergency license suspension, the Department of Health relied solely on a state statute and prior court opinion that permitted such emergency suspension orders where the licensee has committed a misdemeanor or felony under one of several federal statutes relating to Medicaid fraud. Previously, Dr. Mendelsohn, who was also a registered lobbyist, had entered a plea of nolo contendere in federal court to a charge of conspiracy to commit fraud upon the United States in violation of 18 U.S.C. 371 for allegedly using campaign funds for private use.

The statute relied upon by the Department – 456.074(1), Florida Statutes – specifically lists certain federal violations, including 18 U.S.C. 371, ending with the modifying term “relating to the Medicaid program.” Dr. Mendelsohn argued that the statute requires all of the listed violations be related to the Medicaid program in order for the Department to be excused from stating specific facts showing harm to the public. The Department argued that the modifier applied only to the offenses immediately preceding the modifier. The First DCA disagreed and, citing basic rules of grammatical construction and indicators of legislative intent, ruled the modifier applied to all of the listed violations. Since no facts were provided on the face of the emergency order to support a finding of immediate danger to public health, the order was stricken.

Historically, Florida courts have kept agencies from abusing the imposition of emergency moratoriums where immediacy of public harm is lacking or where the moratorium is not “narrowly tailored” to address the threat of harm. See e.g., St. Michael’s Academy, Inc. v. Department of Children and Families, 965 So. 2d 169 (Fla. 3rd DCA 2007) (allegations of isolated incidences were insufficient for emergency order suspending license because danger was not immediate and future harm was speculative); Henson v. Department of Health, 922 So. 2d 376 (Fla. 1st DCA 2006) (department’s emergency order suspending doctor’s license to practice osteopathic medicine because of narcotics violations quashed as broader than necessary to protect the public); Cunningham v. AHCA, 677 So. 2d 61 (Fla. 1st DCA 1996) (emergency suspension of psychiatrist’s license for over-prescribing narcotics to three patients was overly broad); Duabe v. Department of Health, 897 So. 2d 493, 495 (Fla. 1st DCA 2005) (emergency order to suspend petitioner’s license before administrative complaint was issued was unnecessary where petitioner stopped using an unapproved product on patients and destroyed his remaining supply before the emergency order was issued). Moreover, a demonstration of immediate serious harm to the public, and the consequent necessity for the emergency order, must be more than a general, conclusory prediction of harm. Bio-Med Plus, Inc. v. Department of Health, 915 So.2d 669 (Fla. 1st DCA 2005).

In Dr. Mendelsohn’s case, the Department currently has an administrative complaint pending with the Florida Board of Medicine to suspend or revoke Dr. Mendelsohn’s license. Unlike the Emergency Suspension Order, this course of action provides for a hearing on the merits before the license can be suspended. Even if an appellate court upholds an emergency suspension order, the licensee is entitled to an administrative hearing on the merits.

If you have any questions about Department of Health Emergency Suspension Orders and your rights to contest them, please feel free to speak with an attorney at Smith & Associates.

Price Transparency and Posting for Urgent Care Centers, Health Care Clinics, and Physician Practices

Chapter 2011-122, Laws of Florida (the “Act”) pertains to “health care price transparency” and took effect on July 1, 2011. The Act, which is ambiguous in various ways, was originally drafted to basically apply only to “urgent care centers” owned by hospitals. However, the Act was amended suddenly and substantially on the last day of the 2011 Session resulting in a much broader potential reach, additional ambiguity, and some surprise and lack of notice to the agencies, as well as the industry.

To better address the inherent ambiguities in the Act and answer key questions about the Act, the below will first quote the key provisions, than give a general overview of the Act, and finally specifically address key issues in a question and answer format.

  • THE ACT’ S KEY LANGUAGE

    The key new provisions of the Act are quoted below (all emphasis is added). The Act’ s provisions basically address three types of entities: (1) primary care providers (“PCPs”); (2) urgent care centers (“UCCs”); and (3) health care clinics (“HCCs”).

    PCPs –added to 381.026(2), (4), Fla. Stat. (Patient’ s Rights & Responsibilities):

    (2)(c) “Health care provider” means a physician licensed under chapter 458, an osteopathic physician licensed under chapter 459, or a podiatric physician licensed under chapter 461.

    (2)(d) “Primary care provider” means a health care provider [as defined above – a physician] licensed under chapter 458 [physician], chapter 459 [osteopathic], or chapter 464 [nurses, nursing assistants] who provides medical services to patients which are commonly provided without referral from another health care provider, including family and general practice, general pediatrics, and general internal medicine.

    (4)(c)3 A primary care provider may publish a schedule of charges for the medical services that the provider offers to patients. The schedule must include the prices charged to an uninsured person paying for such services by cash, check, credit card, or debit card. The schedule must be posted in a conspicuous place in the reception area of the provider’ s office and must include, but is not limited to, the 50 services most frequently provided by the primary care provider. The schedule may group services by three price levels, listing services in each price level. The posting must be at least 15 square feet in size. A primary care provider who publishes and maintains a schedule of charges for medical services is exempt from the license fee requirements for a single period of renewal of a professional license under chapter 456 for that licensure term and is exempt from the continuing education requirements of chapter 456 and the rules implementing those requirements for a single 2-year period.

    UCCs — Parts added to Chapter 395, Fla. Stat. (Hospitals):

    395.002 Definitions. – As used in this chapter:

    (30) “Urgent care center” means a facility or clinic that provides immediate but not emergent ambulatory medical care to patients with or without an appointment. It does not include the emergency department of a hospital.

    Section 3. Section 395.107, Florida Statutes, is created to read:

    395.107 Urgent care centers; publishing and posting schedule of charges. An urgent care center must publish a schedule of charges for the medical services offered to patients. The schedule must include the prices charged to an uninsured person paying for such services by cash, check, credit card, or debit card. The schedule must be posted in a conspicuous place in the reception area of the urgent care center and must include, but is not limited to, the 50 services most frequently provided by the urgent care center. The schedule may group services by three price levels, listing services in each price level. The posting must be at least 15 square feet in size. The failure of an urgent care center to publish and post a schedule of charges as required by this section shall result in a fine of not more than $1,000, per day, until the schedule is published and posted.

    HCCs — Parts added to Chapter 400.9935 Fla. Stat. (HCC Responsibilities):

    (1) [Each medical director or the clinical director shall:] …

    (h) Ensure that the clinic publishes a schedule of charges for the medical services offered to patients. The schedule must include the prices charged to an uninsured person paying for such services by cash, check, credit card, or debit card. The schedule must be posted in a conspicuous place in the reception area of the urgent care center and must include, but is not limited to, the 50 services most frequently provided by the clinic. The schedule may group services by three price levels, listing services in each price level. The posting must be at least 15 square feet in size. The failure of a clinic to publish and post a schedule of charges as required by this section shall result in a fine of not more than $1,000, per day, until the schedule is published and posted. …

    (6) … An entity seeking a certificate of exemption must publish and maintain a schedule of charges for the medical services offered to patients. The schedule must include the prices charged to an uninsured person paying for such services by cash, check, credit card, or debit card. The schedule must be posted in a conspicuous place in the reception area of the entity and must include, but is not limited to, the 50 services most frequently provided by the entity. The schedule may group services by three price levels, listing services in each price level. The posting must be at least 15 square feet in size. As a condition precedent to receiving a certificate of exemption, an applicant must provide to the agency documentation of compliance with these requirements.

  • OVERVIEW OF THE NEW LAW

    In short, the Act requires the posting of a “price board” for the top 50 most common procedures:

  • PCPs – Posting is optional. Has incentive benefit of waiving license fees, and CME requirements for those physicians and practitioners who voluntarily participate.
  • UCCs – Posting is mandatory.
  • HCCs – Posting is mandatory.
  • “Exempt” HCCs – Posting is mandatory for those who seek an exemption for first time–but not for HCCs which already have obtained exemption (per AHCA verbal interpretation).

The Florida Agency for Health Care Administration (AHCA) has partial regulatory oversight of the portions relating to just HCCs and hospital-based UCCs, whereas the Department of Health (DOH) has oversight as to PCPs. To the extent a PCP, UCC, or HCC is required to publish prices, each part of the Act requires exactly the same type of schedule to be posted. That is, the Act’ s language in each part provides that:

The schedule must [“may” as to PCPs] include the prices charged to an uninsured person paying for such services by cash, check, credit card, or debit card. The schedule must be posted in a conspicuous place in the reception area of the provider’ s office and must include, but is not limited to, the 50 services most frequently provided by the [provider, UCC, or entity]. The schedule may group services by three price levels, listing services in each price level. The posting must be at least 15 square feet in size.

Thus to the extent the Act applies to any facility, the price publishing requirements are the same: (1) publishing of a schedule of charges, (2) to uninsured persons who pay by cash, check, credit card, or debit card, (3) for the 50 most frequently performed medical services that are offered to the facility’ s patients, must be (4) posted in a conspicuous place in the reception area of the office, and (5) be at least 15 square feet in size. Accordingly, the Act apparently only requires prices to be posted as to uninsured patients who are paying cash or equivalent. It does not require posting of prices charged to those using insurance. As noted elsewhere herein, various ambiguities exist in the Act, including that it is unclear what is meant by “three price levels.” Some examples of price posting are mentioned in the final Staff Analysis to HB 935. See the following links: (1) http://www.solantic.com; (2) http://lwruc.com/selfpaycosts.shtml; and (3) http://walkincliniccoralsprings.com/feeschedule.html. Neither AHCA nor DOH have published any guidelines or begun a rule adoption process.

PCPs.The foregoing price publishing requirements are optional for PCPs. PCPs are defined to include physicians practicing in the fields of family and general medical practice, general pediatrics, and general internal medicine, advanced registered nurse practitioners and physician assistants.

UCCs.The price publishing requirements are mandatory for UCCs. The Act defines the term “urgent care center” so as to exclude emergent care and emergency departments of hospitals. Thus, a UCC is defined as follows: “a facility or clinic that provides immediate [but not emergent ambulatory] medical services to patients with or without an appointment. The definition is inherently ambiguous, in part due to the inherent ambiguity of the word “immediate” in this context, especially when juxtaposed with the phrase “with … an appointment.” The potential reach of this definition could include simple walk-in patients, convenience care patients seeking quick “immediate” treatment, and all even though they arrive for a pre-scheduled appointment. Given the ambiguity and the possibility of substantial fines, a conservative interpretation is in order, and so it should be assumed that the statute has a broad reach. Note that the failure of a UCC to post a schedule as required by the Act “shall result in a fine of not more than $1,000, per day,” until the schedule is posted. Moreover, hospitals and other health care facilities have a general duty under Medicare and other laws to fully comply with all state laws. However, it should be noted that AHCA, through its Hospital Unit, only has regulatory oversight jurisdiction over hospital-owned UCCs that bill on an outpatient provider based manner using the Hospital’ s provider number; (2) AHCA’ s HCC Unit will only enforce as to licensed HCCs; (3) even in those limited cases, AHCA intends to have a 6-month “grace period” until December 31, 2011 whereby fines will not be imposed for any violations.

Licensed HCCs.The price publishing is mandatory for licensed HCCs, and appears to apply whether or not the HCC meets the definition of a UCC, in that the Act simply states that the medical director or clinic director of a HCC licensed under the Florida Health Care Clinic Act, “shall” ensure compliance with specified publishing and posting requirement. Like UCCs, the failure of a licensed HCC to comply with the publishing and posting requirements results in a fine of not more than $1,000, per day, until the schedule of charges is published and posted as required.

HCCs that Prospectively Apply for Exemption. The price publishing is also mandatory for any facility that applies for an exemption from the Health Care Clinic Act. However, on its website, AHCA has recently taken the position that because the Act did not take effect until July 1, 2011, current exemption certificate holders who are not currently required to renew their certificate of exemption (because exemptions are indefinite in duration) are not required to comply. However, if the facility comes within the definition of urgent care center, it is independently required to comply as a statutory matter, although AHCA currently has no enforcement oversight to survey such an exempt facility. Thus, AHCA’ s position is that the Act requires that any facility which applies for an HCC exemption certificate must provide proof of compliance with the publishing and posting requirements of the Act prior to receiving the certificate of exemption. It is likely that AHCA’ s HCC Unit will only request documentation of proof compliance from applicants seeking exemption, and even after the exemption is obtained, there is no intent or plan to survey or monitor such exempt facilities.

HCCs that Are Already Exempt (Self-Determined Exemption, or Via Certificate). The price publishing requirement is optional for facilities that already have an HCC exemption. That is, there is no specific requirement in the Act that an HCC that is already exempt (whether an HCC possessing an exemption certificate, or one that has self-determined its exemption as permitted by the Health Care Clinic Act) comply with the price posting requirements set forth in the Act, and as noted above, AHCA has offered the interpretation that existing “exempt” facilities are not affected.

    KEY QUESTIONS AND ANSWERS

    • What is the definition of "Urgent Care Center" and does it include "walk-in clinics" and "convenient care clinics"?

    Answer: See above definition and the Part II “UCC” discussion. As noted there, the definition of a UCC is: “a facility or clinic that provides immediate [but not emergent ambulatory] medical services to patients with or without an appointment. This would appear to include “walk in clinics” and “convenient care clinics” that are operated by a hospital. If the “clinic” is actually a physician practice owned by a hospital, and the billing is under the physician billing numbers (as opposed to outpatient hospital) then it would be subject to the optional PCP requirement. A conservative interpretation is in order and absent a different policy, rule or ruling from AHCA, it should be assumed that the statute does reach walk-in-clinics and convenient care clinics that are owned and operated by the hospital. It should be noted that there are indications from AHCA that: (1) a hospital Unit only has regulatory oversight jurisdiction over hospital owned UCCs that bill on an outpatient provider based manner using the Hospital’ s provider number; (2) the HCC Unit will only enforce the Act as to licensed HCCs or those who apply for an HCC exemption certificate; (3) even in those limited cases, AHCA intends to have a 6-month “grace period” until December 31, 2011 whereby fines will not be imposed for any violations.

    • Generally, what is the impact of the new law on Health Care Clinics, and are all HCCs required to meet the fee schedule publication requirements of the statute or simply urgent care centers as defined above?

    Answer: See the above Part II “HCC” discussion. All licensed HCCs must meet the requirements. Also, any facility applying after July 1 for a HCC exemption certificate will have to document compliance with the Act as part of the application process. However, previously exempt HCCs (self-determined, or holding a certificate of exemption) are required to comply with the Act only if they meet the (broad) statutory definition of a UCC, but it should be noted that AHCA has indicated it has no regulatory oversight over such HCCs and will not attempt to survey or enforce that obligation. AHCA will exercise its regulatory authority over any HCC (exempt or licensed) that is provider based and bills through a hospital provider number.

    • Are primary care practices, with normal routine weekday schedules but open hours on Saturday morning, covered under UCC requirements?

    Answer: The Act is intended to make physician practice locations (PCPs) only subject to the optional requirement for PCPs. The Act does not make the applicability of the “optional” requirements for PCPs dependent upon the office hours of the practice, and whether they are open on Saturdays. Thus, if it is a PCP (physician practice), compliance with price posting would be optional. If the facility is a UCC — i.e. a facility that is owned and operated by a hospital and billing as outpatient hospital department services, then the mandatory UCC price posting requirements would apply.

    • Are primary care practices, with normal routine weekday schedules but which have open hours in the evening ("after-hours”), covered under UCC requirements?

    Answer: Probably not. The Act does not make the definition of a PCP dependent upon the hours of operation of the PCP (physician practice). It seems that the distinction between UCC and PCP will be whether it is operated as a physician practice or group practice, as opposed to an outpatient department of a hospital.

    • Under Section 3 of the Act, which requires schedules to include "the prices charged to an uninsured person … ” what is the definition of the "prices charged”? Is this the consistent price for each service or the amount expected to be paid after any uninsured discount by patient?

    Answer: While the Act does not speak directly to the difference between “charges” and “reimbursement” that is received from an uninsured patient, it appears that the intent is to post the amount that the uninsured patient will actually be required to pay for services. Therefore, if a consistent discount is offered, the price should include the amount after the discount.

    • Under Section 3 referenced above, if a practice has one established price for a service and offers various payer and uninsured discounts, is it appropriate to publish the established non-discounted price?

    Answer: It appears that the intent is to advise uninsured patients the amounts they will be expected to pay. However, there is nothing specifically stated in the Act that would prevent also publishing non-discounted prices. Whether to publish such non-discounted prices would be a business/operational decision.

    • Is an Urgent Care Center required to disclose such an uninsured discount policy?

    Answer: The Act requires posting of the price to be actually paid by the uninsured patient. There is nothing that requires (or precludes) a facility from publishing their policy on discounts for uninsured patients. Whether to disclose the discount policy would be a business judgment decision.

    • How often is a UCC required to update its pricing?

    Answer: There is no clear delineation in the Act on this issue. A reasonable approach would be to update the posting whenever prices substantially change so that the posted prices are no longer accurate.

    • If a UCC adopts a 3-tiered pricing model as the Act allows, is the 50 diagnosis requirement waived?

    Answer: No, there is no indication in the Act or the legislative staff analyses that the requirement of “50 services most frequently provided” can be waived in this or any other manner. Although the Act is not at all clear what is meant by the “price levels,” a reasonable interpretation would be that the 50 most common services could be grouped into “buckets” and that all services in the defined level would be at or below the stated price for that “bucket.” For example and by way of illustration only — Bucket A specifies the services (from the 50 most common) that are $50 or less; Bucket B specifies services (from the 50 most common) that are $100 or less; and Bucket C includes services (from the 50 most common) that are $150 or less. To meet the intent of fair notice to the patient in advance of delivering services, the patient should be informed of the price (of maximum) that could be expected for the specific service. Please note that the Act is unclear, and there may be other interpretation as to how to accomplish “price level” posting.

    • Under Section 1(4)(c)6 of the Act which references "Each licensed facility," what is definition of each licensed facility?

    Answer: It refers to a hospital as regulated by Chapter 395, Florida Statutes. That is, Section 381.026(2)(b) defines “health care facility” as “a facility licensed under chapter 395.” Also, note that the “Each licensed facility” language in the Act was not amended by the Act, but instead was pre-existing language included in the Act for context.

If you have any questions regarding this new Price Transparency law or issues relating to Urgent Care Centers, Health Care Clinics, or Primary Care Practice operations or regulations one of the attorneys at Smith & Associates will be happy to help you.

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.

Florida Trend Magazine Article

Florida Trend Article

Florida Trend Magazine article
highlighting comments from Susan Smith
of Smith and Associates, Attorneys and Counselors At Law

"We have a client right now that inadvertently paid a $5 fee late in a confusing regulatory scheme that caused her license as a speech pathologist to not be timely renewed, and because of it she is looking at losing over $30,000 in Medicaid billing (which is a substantial portion of her income for the year). She is a good provider that takes care of underprivileged children, and she may go out of business because of this regulation."