March 2012 Health Law Update

FEDERAL UPDATEInterim Fix to Medicare’s Sustainable Growth Rate Formula Averts Reduction to Physician Payments

On February 22, 2012, President Obama signed into law the Middle Class Tax Relief and Job Creation Act of 2012. The law temporarily averts a 27.4% reduction in Medicare’s physician payments based on the Sustainable Growth Rate (SGR) formula. Congress left for another day a permanent fix to the SGR formula.

Under the law, Medicare physician payments are extended at their current rates, but only through December 31, 2012. Among other things, the law also:

• Extends the baseline for that portion of the Medicare physician payment formula that takes into account the geographic area where the physician’s practice is located

• Reduces Disproportionate Share Hospital (DSH) payments under the Medicaid program

• Reduces by 2% payments for clinical laboratory services

• Permits independent laboratories that service eligible hospitals to bill directly

Without a permanent fix, Congress will again be required to address the SGR formula at the end of the year in a lame duck session and amid mounting pressure to reduce spending under various federal programs such as Medicare and Medicaid.

For additional information, contact:

John D. Fanburg | 973.403.3107 | [email protected] C. Lienhardt | 973.364.5203 | [email protected]

CMS Publishes Proposed Rule on Reporting and Returning Medicare Overpayments

The Centers for Medicare & Medicaid Services (CMS) recently published a proposed rule implementing sections of the health reform law regarding reporting and returning overpayments

under the Medicare program. The law requires a person who has received an overpayment to report and return the overpayment by the later of (i) 60 days after the overpayment was identified; or (ii) the date any corresponding cost report is due. The knowing and improper failure to return an overpayment imposes liability under the federal False Claims Act (FCA), exposing the provider or supplier to treble damages and penalties.

Under the proposed rule:

• A person would be considered to have “identified” an overpayment if the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment

• Where a provider receives information about a potential overpayment, such as from an anonymous tip through a compliance hotline, the provider would have a duty to investigate the information; if, after reasonable inquiry, the provider or supplier identifies an overpayment, it would then have 60 days from that time to report and return the overpayment

CMS also proposes a 10-year look-back period (i.e., the obligation to report and return an overpayment applies if the overpayment is discovered within 10 years of the date the overpayment was received), which is in alignment with the FCA statute of limitations. To facilitate this look-back period, CMS proposes to amend its regulations that generally limit the claims reopening period to 4 years to allow for a 10-year reopening period for claims resulting in a reported overpayment. Medicare Self-Referral Disclosure Protocol disclosures would also be subject to the 10-year look-back period.

Comments are due by April 16, 2012 and may be submitted by hand, regular or express mail, or electronically at http://www.regulations.gov.


Lani M. Dornfeld | 973.403.3136 | [email protected] John D. Fanburg | 973.403.3107 | [email protected]

In This Issue:

Proposed Rules for Reporting & Returning Overpayments

NJ Court Upholds Cullen Act Immunity

Proposed PIP Amendments Would Make Dramatic Changes

Bill Prohibits Discharge of Drugs into Sewer/Septic Systems

Brach Eichler in the News

HIPAA Corner

March 2012

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Joint Regulations Released Outlining Standards for Summary Benefits and CoverageThe Department of Health and Human Services, the Department of Labor and the Treasury Department recently released joint final regulations implementing the health care reform requirement that group health plans and health insurers provide participants with an accurate summary of benefits and coverage (SBC). The SBC is a uniform document that helps consumers better understand the coverage they have and allow them to easily compare different coverage options.

Insurance companies must comply with the SBC requirement beginning September 23, 2012, and the requirement applies to both grandfathered and non-grandfathered plans. The final regulations, template and uniform glossary are available through the Department of Health and Human Services at: http://cciio.cms.gov/programs/consumer/summaryandglossary/index.html.


Joseph M. Gorrell | 973.403.3112 | [email protected] Grelecki | 973.403.3140 | [email protected]

Hospital Violates NLRA with Policy Barring Nurses from Wearing Union Ribbons in Patient Areas and Limiting Off-Duty Access to Hospital

The National Labor Relations Board (NLRB), in St. John’s Health Center, ruled that a policy that prohibited employees from wearing union ribbons that read “Saint John’s RNs for Safe Patient Care” in patient care areas constituted an unfair labor practice. In its decision, the NLRB reminded employers that employees have the right to wear union symbols at work absent “special circumstances.” With regard to health care facilities, in immediate patient care areas, bans on all non-official insignia are presumptively valid, whereas bans in other areas of a hospital are presumptively invalid. The policy justification for the presumptively valid ban is that patients—in particular those who are seriously ill—need peace and quiet. However, a hospital that selectively bans certain union insignia is not protected. With the presumptively invalid ban in non-patient care areas, it is up to the hospital to show that the selective ban is necessary to avoid disruption of health care operations or disturbing patients. Because the hospital in this case allowed employees to wear a hospital ribbon that contained an almost identical message, the NLRB found the ban on the union ribbon was not supported by any special circumstances.

The NLRB also found the hospital’s policy, which barred off-duty employees from access to the interior of the hospital’s building or other work areas except to attend hospital-sponsored events,

such as parties and showers, was unlawful and not justified by any special circumstances as required by prior NLRB and U.S. Supreme Court decisions.


Anthony M. Rainone | 973.364.8372 | [email protected] M. Collins | 973.403.3151 | [email protected]

STATE UPDATE

The Cullen Act’s Civil Immunity Protection Successfully Tested in Court The Superior Court of New Jersey, Appellate Division, recently ruled in favor of a health care entity that was sued by a former employee after the entity provided negative reference letters. Senisch v. Carlino, No. A-6218-09T3, 2011 N.J. Super. LEXIS 211 (N.J. App. Div. Dec. 1, 2011).

In essence, this was a test of the civil immunity protection that the Health Care Professional Responsibility and Reporting Enhancement Act (also known as the “Cullen Act”) provides to entities that comply with the Act’s requirements. By way of background, hospitals are statutorily required under the Cullen Act to provide, in relevant part, “information about a current or former employee’s job performance as it relates to patient care.” In the case of a former employee, the entity must also disclose the reason for that employee’s separation. N.J.S.A. 26:2H-12.2c(a)(2).

In Senisch, the plaintiff was involuntarily terminated from his work as a physician assistant. During the process of seeking employment, the plaintiff’s former employers were requested to provide reference letters. The plaintiff then filed suit against those who provided the references, alleging defamation, tortious interference with economic advantage and violation of the Conscientious Employee Protection Act. In May 2010, the trial court granted the defendant’s motion for summary judgment. On appeal, the plaintiff argued that the trial court erred by concluding as a matter of law that the defendants acted in good faith and without malice—a requirement for obtaining the civil immunity protection under the Cullen Act. The Appellate Division agreed with the lower court’s finding that the plaintiff had failed to introduce any evidence to show that the references were provided in bad faith or with malice. Without such a showing, and because the health care provider followed the requirements of the law, the Cullen Act’s civil immunity protection prevented the plaintiff from succeeding in the lawsuit.


Kevin M. Lastorino | 973.403.3129 | [email protected] Todd C. Brower | 973.403.3103 | [email protected]

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DOBI Proposes Several Substantive Changes to New PIP Regulations Introduced Last AugustIn response to comments received by the New Jersey Department of Banking and Insurance (DOBI) to the new personal injury protection (PIP) regulations initially proposed on August 1, 2011, DOBI has made substantive changes published for public comment.

Significantly, DOBI has now proposed a separate fee schedule for services performed in a hospital outpatient surgical facility (HOSF), thereby distinguishing these services from procedures performed in ambulatory surgical centers (ASCs). According to DOBI, the newly proposed Exhibit 7 to the PIP fee schedule regulation reimburses HOSFs at higher amounts than ASCs and more accurately reflects the increased costs associated with surgical procedures performed in a hospital setting. Accordingly, the HOSF fee schedule is set at 300% of the 2011 geographically wage-adjusted Medicare Hospital Outpatient Department fees for Bergen County (northern NJ) and Atlantic County (southern NJ), and also permits certain outpatient surgical services that would not otherwise be eligible for reimbursement if performed in an ASC.

In addition, DOBI has also eliminated the previously proposed option for a Worker’s Compensation Managed Care Organization that would have permitted carriers to direct patients to networks for treatment. Further, DOBI has also deleted 117 CPT codes from the Physician’s Fee Schedule for low-frequency but high-cost procedures performed by neurosurgeons and spine surgeons.

The complete proposal published by DOBI for public comment may be viewed online at:http://www.state.nj.us/dobi/pipinfo/aicrapg.htm#21. Comments are due by April 21, 2012.


Keith J. Roberts | 973.364.5201 | [email protected] Mark E. Manigan | 973.403.3132 | [email protected]

Department of Banking and Insurance Proposes Managed Care Regulations

On February 21, 2012, the New Jersey Department of Banking and Insurance published proposed regulations that seek to reform and improve provider network requirements for managed care companies. These proposed rules establish standards for agreements between health care providers and insurance companies, health service corporations, hospital service corporations, medical service corporations, HMOs and organized delivery systems. Some of the key provisions include:

• A requirement that carriers credential providers within 90 days of the provider’s submission of an application

• A prohibition on “most favored nations” clauses in managed care contracts (i.e., clauses requiring the provider to maintain or reduce the rate specified in the agreement based upon a lower rate the provider has accepted or has agreed to accept from a third party for providing the same or a comparable service or supply)

• A prohibition on certain types of “unilateral amendments” that occur when carriers amend the terms of a contract without approval of the provider; any agreement that permits unilateral changes must provide that material terms will only be revised with sufficient advance notice to permit termination in advance of the effective date of the change

• Additional obligations on insurers to ensure that their provider directories remain up-to-date and available to current and prospective beneficiaries

Comments must be submitted by April 21, 2012, either by mail or by email to [email protected].

For additional information contact:

Mark E. Manigan | 973.403.3132 | [email protected] Grelecki | 973.403.3140 | [email protected]

Proposed Legislation Would Prohibit Health Care Institutions from Discharging Medications into Sewer and Septic Systems

Pending legislation in the New Jersey legislature (S81/A733) would prohibit hospitals and other health care institutions, or any employee, staff person, contractor or other person under the direction or supervision of the health care institution, from discharging, disposing of, flushing, pouring or emptying any unused prescription medication into a public wastewater collection system or a septic system, beginning 210 days after the date of enactment of the bill into law.

The bill would require:

• The Department of Environmental Protection (DEP) to issue recommendations for the proper disposal of unused medications within 90 days after the date of enactment of the bill into law

• Every health care institution, within 120 days after enactment, to submit to the New Jersey Department of Health and Senior Services and the DEP a plan for the proper disposal of unused prescription medications

• The DOHSS, in conjunction with its periodic inspection of a licensed health care facility, to ensure that the health care facility is in compliance with the plan submitted

We will continue to monitor the progress of the bill.


Kevin M. Lastorino | 973.403.3129 | [email protected] Joseph M. Gorrell | 973.403.3112 | [email protected]

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Members Todd C. Brower | 973.403.3103 | [email protected] Lani M. Dornfeld | 973.403.3136 | [email protected] D. Fanburg, Chair | 973.403.3107 | [email protected] Joseph M. Gorrell | 973.403.3112 | [email protected]

Carol Grelecki | 973.403.3140 | [email protected] M. Lastorino | 973.403.3129 | [email protected] C. Lienhardt | 973.364.5203 | [email protected] E. Manigan | 973.403.3132 | [email protected] J. Roberts | 973.364.5201 | [email protected]

You have the option of receiving your Health Law Updates via e-mail if you prefer, or you may continue to receive them in hard copy.If you would like to receive them electronically, please provide your e-mail address to [email protected]. Thank you.

Health Care Practice Group | 101 Eisenhower Parkway, Roseland, NJ 07068 | 973.228.5700

Counsel Richard B. Robins | 973.403.3147 | [email protected]

Associates Lindsay P. Cambron | 973.364.5232 | [email protected] Jenny Carroll | 973.364.5223 | [email protected] T. Cohen | 973.403.3144 | [email protected] Ehrenkranz | 973.364.5234 | [email protected] M. Jennings | 973.364.5204 | [email protected]

Leonard Lipsky | 973.364.5218 | [email protected] F. Murphy | 973.364.5214 | [email protected] Senthil | 973.403.3150 | [email protected] J. Yun | 973.364.5229 | [email protected]

Attorney Advertising: This publication is designed to provide Brach Eichler, L.L.C. clients and contacts with information they can use to more effectively manage their businesses. The contents of this publication are for informational purposes only. Neither this publication nor the lawyers who authored it are rendering legal or other professional advice or opinions on specific facts or matters. Brach Eichler, L.L.C. assumes no liability in connection with the use of this publication.

Brach Eichler In The News

Lani M. Dornfeld, Carol Grelecki and Debra C. Lienhardt will host the second annual New Jersey Women in Healthcare networking function on March 21 at The Palace at Somerset Park. This year’s event will focus on the changing landscape of healthcare, including consolidation in the marketplace, hospital-physician integration and ACOs. The keynote speaker will be Annette Catino, President & CEO of QualCare, Inc. For information, contact Alan Levine at [email protected] or 973-364-8389.

Richard B. Robins will be speaking at the Newark Dental Club on March 22, on legal issues concerning dentistry.

On April 30, Brach Eichler will sponsor “What You Don’t Know about the Board of Medical Examiners Can Hurt You: Regulations You Need to Know to Protect Your License,” at Brach Eichler’s offices at 101 Eisenhower Parkway, Roseland. Speakers will include Brach Eichler’s Joseph M. Gorrell and Dr. Gregory Rokosz, Senior Vice President for Medical and Academic Affairs, Saint Barnabas Medical Center and former President, New Jersey State Board of Medical Examiners. For more information, contact Alan Levine at [email protected] or 973-364-8389.

Todd C. Brower will be lecturing to OB-GYN residents at Saint Barnabas Medical Center on issues related to the business of medicine on April 13, May 4 and June 1.

HIPAA CORNERWe previously reported on the federal breach notification rule contained within the Health Information Technology for Economic and Clinical Health Act (HITECH Act). The Department of Health and Human Services’ (HHS) Office for Civil Rights recently set a March target date for release of the long-delayed final version of HITECH Act breach notification rule. (As of the date of this publication, we are still awaiting posting of the rules.) According to the Office for Civil Rights, they are also making efforts to publish rules on all of the remaining HITECH Act provisions so these important protections and expansions of individual rights under the HIPAA privacy and security rules can be made available uniformly to consumers across the country.

By way of background, the HITECH Act’s breach notification rule requires that covered entities (including most, if not all, health care providers) inform their patients when there has been a breach of their protected health information. The term “breach” is broadly defined as the unauthorized acquisition, access, use or disclosure of protected health information in a manner not permitted by the HIPAA privacy rule which compromises the security or privacy of such information. Detailed instructions and the time-frames within which breaches must be reported to the Secretary of HHS can be found at: http://www.hhs.gov/ocr/privacy/hipaa/administrative/breachnotificationrule/brinstruction.html.


Todd C. Brower | 973.403.3103 | [email protected] Lani M. Dornfeld | 973.403.3136 | [email protected]

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March 2012 Health Law Update