HEALTH LAW SUPPLEMENT Summer 2004

STATE INSURANCE DEPARTMENT CONFIRMS WAIVER OF CO-PAYMENTS MAY CONSTITUTE FRAUD. In an opinion issued on February 24, 2004, the State Insurance Department confirmed that waiver of patient co-payments is fraudulent if the waiver could affect the amount the insurer would pay for the provider’s service, i.e., fee-for-service arrangements where the insurer pays or reimburses based on the amount the provider states was charged to the patient. Waiver of co-payments is also considered an illegal kick-back by practitioners (to patients) when patients are insured by Medicare or Medicaid. Because the amount of payments to providers by managed care companies is not affected by collection of co-payments, there may be no fraud involved in waiving such co-payments, but managed care contracts usually obligate providers to collect co-payments as a condition to payment by the company; the company may demand reimbursement if it discovers a pattern of waiver of co-payments.

HIPAA COMPLIANCE SOON TO ENSURE QUICKER MEDICARE PAYMENT. Effective July 1, 2004, claims submitted electronically to Medicare will be paid on the 14th day after receipt, while paper claims will be paid on the 27th day after receipt. Medicare will continue to process paper claims, but is formally imposing a 13-day delay (relative to HIPAA-compliant electronic claims) in paying them. Eventually Medicare will no longer process paper claims except for small providers not required to be HIPAA compliant.

PROPOSED NO-FAULT REGULATIONS WILL CHANGE FEE SCHEDULES AND SUPERVISION REQUIREMENTS. On March 24th, the State Insurance Department proposed amendments to Regulation 83. One would mandate that the fee schedule used be that of the actual treating provider, not of the billing employer. The Department contends that this would establish parity between independent providers and multi-specialty practices, and reduce over-utilization by the latter, which it characterizes as “mills.” Another amendment tightens the definition and scope of supervision; it must be on site and supervisees can number no more than four. The Department contends that this limitation would similarly prevent abusive over-utilization.

INSURANCE DEFENSE COVERAGE FOR PROFESSIONAL DISCIPLINE. Clients sometimes ask whether it is worthwhile to purchase from their malpractice insurer additional defense coverage for professional discipline. Most insurers include $5,000 of defense coverage (attorneys fees) as standard, but also allow insureds to purchase additional coverage of $25,000 or $50,000. In my opinion, the additional coverage is well worth the nominal cost, usually about $100. Mental health practitioners are more likely to face a professional complaint than a lawsuit during their careers, and if the complaint is one involving factual allegations and credibility, then a hearing may be necessary. Legal fees in such cases can easily reach into the tens of thousands of dollars. We have represented several clients who have felt compelled to accept an unsatisfactory settlement of a professional complaint because they believed they could not fund a full and vigorous defense.

THE NATIONAL PRACTITIONER DATA BANK. The National Practitioner Data Bank was created by Congress in 1986 as part of the Health Care Quality Improvement Act. The purpose of the NPDB is to improve the quality of health care by restricting the ability of health care professionals to change practice locations without the disclosure or discovery of their previous negligence or incompetence. The federal law assumes that malpractice awards and settlements, and certain sanctions of health care professionals by State Boards and health care institutions, are evidence of negligence or incompetence.
The law requires malpractice insurers to report to the NPDB and to the appropriate State Board all settlements and awards paid on behalf of health professionals. State Boards are required to report to the NPDB sanctions of health professionals involving professional incompetence or misconduct. (And New York State law requires health care institutions to report to State Boards adverse actions against health professionals.)

Reports to the NPDB include the name and address of the reporter; the name, address, license number and academic background of the health professional; a description of the acts or omissions of the provider on which the claim or sanction was based; and the amount of any settlement or disposition.

Information at the NPDB is not available to the general public, and, indeed, is considered confidential. It is available to hospitals and other health care institutions that have entered into or may enter into any type of affiliation with a health care provider; state licensing boards; professional societies that engage in formal peer review; health professionals who request information about themselves; plaintiff’s attorneys suing practitioners affiliated with a hospital for malpractice, who request information about the defendant in the action, but only if the attorney has evidence that the hospital failed to request information from the NPDB; and researchers, who will not, however, be provided with identifying data about practitioners.

Information at the NPDB can be a link between a malpractice action and a subsequent professional discipline complaint. Upon receipt of a report from the NPDB of a malpractice settlement against a licensee, a State Board may initiate an investigation and if it believes the situation warrants, a prosecution. Keep in mind though, that in New York State, a single act of negligence is not considered professional misconduct; “gross” negligence or multiple acts of simple negligence are required.

INFORMATION IN THIS NEWSLETTER IS NOT LEGAL ADVICE FOR ANY PARTICULAR CLIENT OR SITUATION. CONSULT WITH AN ATTORNEY INDIVIDUALLY FOR LEGAL ADVICE REGARDING YOUR CIRCUMSTANCES.

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