In this posting:

Was it the number 13?

There’s an old superstition about the number 13 being unlucky–and while the year 2013 may not have been entirely ill-fated, it was certainly more than a little bumpy for the healthcare industry. A study in contrasts, 2013 not only brimmed with the tensions of a sequester, a government shutdown, state debates and challenges over health reform and a very wobbly exchange rollout, but also the promise of a budget deal and a permanent Medicare doctor fix. It was a time when the healthcare industry was careful not to walk under any ladders.

Behind all of the year’s politics, legal challenges and headline-grabbing issues are the transformative changes and seismic shifts already underway in the healthcare landscape. Chief among these is a profound remodeling of payment structures and service delivery arrangements. As the Affordable Care Act worked through its third year of implementation, alignment strategies remained a key focus in 2013.

Trends spurred on by the Affordable Care Act, bolstered both by regulatory changes and a flow of federal grant dollars seeding reform, kept the spotlight on hospital-physician employment and integration activities for another year. As the industry moves toward shared accountability and comprehensive care management, hospitals continued efforts to solidify their affiliated physician networks through practice acquisitions, employment and co-management agreements. The upward trend in industry consolidation also continued as hospitals and other healthcare providers merged and partnered in response to squeezing payments, narrowing networks and other reform-related concerns.

In the “cross your fingers and touch wood” category, 2013 saw a number of high-profile healthcare fraud settlements fueled by the Affordable Care Act’s substantial cadre of fraud enforcement tools. In addition to a new law (Taxpayer Relief Act) that significantly altered overpayment recoupment, refunds, audits and claims appeal rights, the year ushered in a revised Provider Self-Disclosure Protocol and a finalized Physician Sunshine Act. However, 2013 may best be remembered as the time when groundbreaking civil False Claims Act cases predicated on Stark Law violations seemed to monopolize everyone’s attention.

On the privacy front, the publication of the long-awaited HIPAA omnibus final rule, which included the most sweeping changes to HIPAA since the release of the Privacy and Security rules, loomed large in 2013. While healthcare entities labored to super-size their compliance efforts, some found themselves responding to data breach incidents, many of which stemmed from lost or stolen unencrypted electronic devices. With the year’s surge in state attorney general involvement and class action litigation, covered entities also learned that breach responses may not end at notification.

A rabbit’s foot anyone?

The BakerHostetler Healthcare team knows that 2013 was another humdinger of a year for the healthcare industry, and we want to thank you for entrusting your legal and advocacy needs to us.

To better serve our clients, BakerHostetler keeps growing with the additions of former FTC Commissioner, Pamela Jones Harbour, FDA and Life Sciences practice group chair, Lance Shea and pharmacy and registered patent attorney and registered pharmacist, Lee Rosebush. A strategic combination with Woodcock Washburn that doubled our intellectual property practice strength also increased our geographic reach with offices in Atlanta, Philadelphia and Seattle.

As enhancement to the highly successful, biweekly Health Law Update e-mail newsletter, the Healthcare Industry team recently launched the Health Law Update blog as an added resource and news companion on health law and policy.

Looking ahead in 2014, the Healthcare team would like to share a representative sampling of the unique and complex matters we have addressed for our clients during the past year.

Antitrust and Competition

New addition to the BakerHostetler Antitrust and Competition team Pamela Jones Harbour served for seven years as a Commissioner of the Federal Trade Commission. As a Commissioner, Pamela took an active role in the FTC’s enforcement decision-making process in numerous actions involving competition among healthcare facilities, such as hospitals, clinics and clinical laboratories, joint contracting among physicians and clinical integration by physicians and other healthcare providers.

Administrative decisions of note during Pamela’s term as a Commissioner include Evanston Northwestern Healthcare Corporation and ENH Medical Group, Carilion Clinic, Inova Health Systems Foundation and Prince William Health System, American Renal Associates and Fresenius Medical Care Holdings, Alta Bates Medical Group. Inc., AllCare IPA, North Texas Specialty Physicians and Advocate Health Partners, to name a few.

Recognized by Global Competition Review, the world’s leading antitrust and competition law journal and news service, for having “a top team” of dedicated antitrust lawyers “working in the hub of antitrust law” in Washington, D.C.—BakerHostetler lawyers have advised and represented healthcare clients in a variety of antitrust matters, including provider networks, joint ventures and collaborations, FTC actions and investigations, pricing and distribution issues and antitrust compliance.

Policy, Advocacy and Legislative Strategy Development

BakerHostetler’s Healthcare Public Policy practice combines the efforts of experienced health law practitioners and policy professionals on behalf of clients seeking to resolve or avert public policy concerns through legislative or administrative action. This practice group works seamlessly to provide policy-focused services and solutions for a wide variety of clients including academic medical centers, hospitals, physician groups, trade associations, drug and medical device companies and pharmaceutical suppliers of healthcare-related goods.

Representing the nation’s major pediatric trade association, which includes more than 200 children’s hospitals in the country, BakerHostetler has worked to develop special national network options in Medicaid policy for children with complex conditions and has been engaged to provide national Medicaid policy advice; strategic advocacy in Congress, with CMS and the Administration; legislative language and substantive legal and policy support for the matter.

Our group has partnered with clients to develop delivery reform models and potential innovative models of care suitable for state and/or federal funding, including patient-centered medical homes and accountable care organizations.

This last year’s efforts also focused on representing Washington and Texas hospitals in a Medicaid disproportionate share hospital (DSH) dispute with CMS and state implementation of DSH audit rules relating to third-party payments under the DSH formula.

FDA and Life Sciences

BakerHostetler’s newly established FDA and Life Sciences practice has in-depth knowledge of health science information and long-standing experience in advising on and advocacy of health science information. Practice group members hold advanced degrees in health science disciplines and frequently practice before the FDA, DEA, EPA and other federal and state regulatory agencies.

Led by Lance Shea, M.S., J.D., who focuses his practice on product efficacy and safety issues that are resolved through regulatory science advocacy, the FDA and Life Sciences practice recently welcomed Lee Rosebush, Pharm.D., M.B.A., J.D., a patent attorney and registered pharmacist who focuses his practice on FDA, regulatory, compliance and enforcement issues pertaining to pharmaceuticals, biologics and medical devices.

Healthcare regulation capabilities of the FDA and Life Sciences practice include research integrity, clinical trials compliance and risk analysis, conflicts of interest or commitment in research, compliance risks, human subjects protection in research and laboratory safety in higher education. BakerHostetler lawyers advised and represented healthcare clients in a variety of FDA and life science matters, including:

  • Representing both pharmacies and academic medical centers during DEA audits and investigations;
  • Advising academic medical centers on developing policies and procedures for managing conflicts of interest and conflicts of commitment;
  • Representing pharmacies and wholesale distributors in front of numerous state boards for licensing and regulatory matters;
  • Advising pharmaceutical, medical device and biologic manufacturers on compliance risks and advertising claims;
  • Representing a compounding pharmacy during a recall of compounded medications following an FDA and State Board of Pharmacy inspection;
  • Advising pharmaceutical and medical device manufacturers in assessments of and response to safety signals of potentially life threatening conditions; and
  • Advising private equity funds during the diligence of both FDA manufacturers and licensed pharmacies.

Privacy and Data Protection

As one of the nation’s largest and most comprehensive practices in the area of data privacy and information security, BakerHostetler’s national Privacy and Data Protection team has helped clients recover from more than 600 data security events affecting tens of millions of individuals including some of the largest and most complicated that the healthcare industry has faced. Named by Law360 as a “Practice Group of the Year” in the area of privacy law, the Privacy and Data Protection team has handled over 100 healthcare data breaches in the last year and is currently working with healthcare organizations on approximately 30 open investigations with the OCR and other state regulatory agencies. Late last year, Privacy and Data Protection team co-leader Theodore J. Kobus III was individually named as a “Privacy MVP” by Law360.

Our lawyers provide critical assistance with breach analysis, federal and state notification obligations, crisis management advice, assistance and direction with investigation of the incident, regulatory compliance counseling, assistance with resolving patient complaints and defense and advocacy for our clients involved in regulatory investigations. In one such representation, the Privacy and Data Protection team worked with a large hospital system in connection with its data security response and subsequent investigations by the OCR and several state attorneys general offices. Following the discovery of the data security event, the Privacy and Data Protection team provided advice and counsel on breach analysis and coordinated the investigation of the incident, which ultimately led to notifications to federal and state agencies, as well as to millions of patients. The team also led the media and crisis management response.

Armed with the information OCR has gained through both its audit program and thousands of reported breaches, the agency indicates that it intends to continue its scrutiny of covered entities. With the issuance of the HIPAA omnibus rule in 2013, the Privacy and Data Protection team advised healthcare organizations on interpretation and compliance with the rule, including updating policies and procedures, business associate agreements and notices of privacy practices. As OCR dives more deeply into HIPAA privacy and security compliance issues, the Privacy and Data Protection team encourages healthcare organizations to continuously review their policies and procedures, periodically conduct privacy and security risk assessments and implement appropriate administrative, technical and physical safeguards for the protection of patient information.

Enforcement and Compliance

As the healthcare industry continues to face unprecedented regulation, we work to keep our clients out of the headlines and in compliance with today’s regulatory and statutory requirements, including federal and state anti-kickback statutes, Stark Law, False Claims Act, EMTALA, and U.S. export control laws, among others. Our national team works with clients to establish proactive compliance and auditing programs to place them in the best position to prevent, identify and deter violations of these laws. Should a potential violation arise, we work with clients to help resolve and settle disputes.

We also have significant experience in assisting clients with the evaluation of existing relationships and government investigations, including responses to civil investigative demands and administrative subpoenas issued by the HHS Office of Inspector General and the U.S. Department of Justice. If a client discovers that an arrangement may be in violation of the anti-kickback or Stark laws, BakerHostetler can assist with taking corrective action through a self-disclosure and settlement negotiation.

Our national Healthcare Litigation team–comprising nationally recognized healthcare lawyers, former U.S. Department of Justice healthcare fraud prosecutors and white collar defense attorneys–brings to bear a unique combination of skills and insight to methodically address the legal and reputational challenges arising from False Claims Act matters and to secure the best outcome for our provider clients. BakerHostetler has a track record of successfully resolving and defending False Claims Act investigations on behalf of a wide variety of healthcare providers, including academic medical centers, hospitals and health systems, physician groups, ancillary service providers and manufacturers and distributors of pharmaceuticals and medical supplies.

In a False Claims Act case brought by a former employee against a government entity, members of the Healthcare Litigation team defended allegations of misconduct related to federal grants and research. The team represented the client through the investigation phase of the False Claims Act case, where the government declined to intervene, then in the district court and the court of appeals, where the case was dismissed.

Transactions and Finance

Holding a singular position in the marketplace, our Healthcare Transaction Practice comprises a multidisciplinary team of lawyers with extensive experience in structuring complex business arrangements for the healthcare industry. Practice group members are experienced in representing both buyers and sellers and affiliation partners through the full life cycle of a transaction.

Intimately familiar with the Affordable Care Act, our transaction counsel has been deeply engaged in helping clients adapt to and capitalize on healthcare reform, knitting together the various legal challenges from an aggregate of perspectives.

BakerHostetler lawyers also routinely advise and represent clients in all areas of managed care contracting, including review, negotiation and analysis relating to narrow network issues, out-of-network usage nationally and the intersection of commercial managed care and governmental program oversight existing in the Medicare and Medicaid managed care areas.

We represent all types of healthcare entities across the country, including nonprofit and for-profit hospital organizations, health systems and academic medical centers, long-term care facilities, physician practices, imaging centers, infusion centers, pharmacies, dialysis providers, biotechnology and medical device companies, home health agencies, durable medical equipment providers, ambulatory surgery centers and other ancillary service providers, in structuring and closing acquisition and other change-of-control transactions.

Practice group members were engaged in a major integration of faculty practice plans for an academic medical center that included the establishment of a new entity to function as the sole multispecialty practice plan. The matter, which included a multitude of governance, organizational, tax and regulatory issues, involved the transition of 450 physicians and more than 20 separate for-profit and nonprofit entities.

We served as seller’s counsel in the acquisition of a minority interest in a regional nonprofit integrated healthcare system by an affiliated entity of a large faith-based organization. In addition to the traditional transactions aspects, BakerHostetler managed the negotiation of a “statement of common values” (relating to procedures and services that can be provided by the hospitals) that allowed the non-religiously affiliated client to abide to less restrictive ethical and religious directives than those applicable to a faith-based organization.

In a complicated transaction that resulted in the construction of a much-needed rural healthcare facility, we assisted the client in negotiating an agreement with the local community improvement corporation (CIC) to build a free-standing emergency facility that included a $5.5 million tax-exempt bond financing. According to the terms of the agreement, the CIC will construct the facility and lease it to the client on a long-term basis. The client will purchase the facility at the end of the lease term.

Reimbursement, Licensing and Certification

The Healthcare team continues to provide clients with comprehensive Medicare and Medicaid reimbursement, certification, enrollment and licensing advice. We served as healthcare regulatory counsel in a transaction involving the sale of a national specialty pharmacy business to a FORTUNE 500 company that required regulatory filings for nearly 300 pharmacy licenses, permits and Medicare and Medicaid applications. Given the companies’ roles in the marketplace and their connection to state and federal programs, the regulatory matters in this transaction were particularly complex and required substantial coordination among agencies.

The Healthcare team has advised and represented clients in a variety of reimbursement matters, including:

  • Working with several state agencies to address concerns and corrective action plan citations from both the Medicare and Medicaid programs to successfully avoid sanctions and to appropriately resolve controversy;
  • Interfacing with CMS on issues associated with the creation of accountable care organizations;
  • Creating provider entities within healthcare systems that work to coordinate patient care; and
  • Identifying and creating reporting mechanisms or waivers from reporting, within state and federal agencies to ensure the smooth start-up and operation of new delivery models.

Fraud and Abuse Laws

Our healthcare attorneys have broad experience with the multitude of transactions and arrangements in the healthcare industry, which gives us a unique perspective in helping clients structure arrangements in compliance with the anti-kickback and Stark laws, including joint venture arrangements, service contracts, equipment rental and lease arrangements, medical directorships and a variety of other arrangements. Our clients have included academic medical centers, hospitals and hospital systems, physician groups, laboratories, imaging centers and post-acute providers, such as home health agencies and DME suppliers.

We worked with a large academic medical center and outside consultant in developing a new compensation plan for employed faculty physicians to assure that it complied with Stark Law requirements for compensating employed physicians. The BakerHostetler team documented the new plan in Physician Employment Agreement templates, which varied by specialist, and collaborated with in-house counsel to address associated physician issues.

Tax-Exempt Organizations

BakerHostetler provides expertise and ongoing advice and services to healthcare systems and providers regarding various issues affecting tax-exempt organizations, including the structure of joint ventures, compliance with the requirements of the Affordable Care Act, annual information return reporting, state and local tax issues, including real property tax exemption, real property tax abatement and other business and operational issues.

Honors and Recognition

BakerHostetler is pleased to be listed among the top Ohio and Texas healthcare practices in the latest edition of Chambers USA. Five of our partners are listed in Chambers USA as being leaders in healthcare law.

Our healthcare practice received a 2014 “Best Law Firms” National Tier 2 Ranking in Health Care Law from U.S. News-Best Lawyers®, and received Tier 1 Rankings in Houston and Cleveland and Tier 3 in Cincinnati.

Additionally, seven BakerHostetler healthcare attorneys were selected by their peers for inclusion in The Best Lawyers in America© 2014 in the field of Health Care Law.

We thank our clients for recognizing the care and commitment we aim to provide. We are grateful for the pleasure of serving you and meeting your legal and advocacy needs.