Health Law Pointers - Volume II, No. 3

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Federal Court Permits Erie County Operating Room Technician
To Present Age Discrimination Case to Jury

After "multiple warnings for errors in performance," Kenmore Mercy Hospital terminated a 78-year-old female employee allegedly for endangering patients’ lives after the employee is said to have failed to account for sponges while assisting during an operation in 1995. Before completing the surgery, the surgeon found and removed the sponges from the patient’s throat without incident. Similar incidents involving this same employee had previously occurred, resulting in disciplinary action, including reprimands and suspension.

The hospital performed an investigation of the 1995 incident and recommended that the employee be assigned to a position in the hospital unrelated to patient care or be terminated. The employee rejected the transfer of duties and the hospital terminated her.

The employee sued the hospital under the Age Discrimination in Employment Act ("ADEA"), claiming that the actual cause for termination by the hospital was age-related. Under the McDonnell Douglas Corp. v. Green test, a plaintiff alleging discrimination must show that the employer’s stated, non-discriminatory reason for termination is a pretext for discrimination. The employee presented sufficient evidence during a summary judgment proceeding to convince Judge Elfvin that the hospital’s reason for termination may have been a pretext for discrimination. She testified that other hospital employees remarked that she was too old to assist and that neither the surgeon nor the younger nurse supervising her during that final incident was investigated or disciplined.

The court denied the hospital’s request for summary judgment and will permit the employee to present her case to a jury.

Congress Considers Bill That Would Exempt Health Care Providers
From Antitrust Laws While Bargaining Collectively With Health Plans.

The House of Representatives is considering a Bill (H.R. 1304; that would afford physicians who collectively bargain with health care plans the same antitrust protection as that granted to labor organizations under the National Labor Relations Act.

States such as Texas and California have also taken steps to increase a physician’s bargaining power when negotiating contracts with health care plans. By providing Attorney General supervision over negotiations, a newly-adopted Texas law seeks to "level the playing field." Physicians and health care plans are now expected to negotiate contracts that are reasonable for both sides. The California legislature is considering a similar bill (See California Senate bill S.2504;

OIG Issues Special Fraud Alert On The Rental of Space in Physician Offices

In February, the Office of the Inspector General ("OIG") issued a warning to physicians renting space to persons and entities who could be considered "referral sources." The OIG is concerned that some rental arrangements may be a scheme to provide kickbacks to physician-landlords in return for patient referrals. To avoid anti-kickback law violations, lease arrangements should comply with the space rental safe harbor developed by the OIG.. (See 42 CFR 1001.952(b), amended by 64 FR 63518, Nov. 19, 1999).

Safe harbor protection requires that:

  • The agreement be in writing and signed by the parties;
  • All premises rented by the parties and covered by the agreement for the term of the agreement are specified in the agreement;
  • The aggregate space rented should not exceed that which is reasonably necessary to accomplish the commercially reasonable business purpose of the rental;
  • The agreement sets forth the specific schedule of access by the lessee determined by the parties if less than full-time, including the precise rent for each such period of time; and
  • The rental charge is determined in advance: fair market value, as determined in an arms-length transaction, without consideration for the value or volume of referrals or other business generated between the parties and paid for under the Medicare or State Health Care programs.

"Exclusive Credentialing" By Hospitals: A Problem?

The American Medical Association ("AMA") thinks so. On December 2, 1999, the AMA’s Executive Vice-President, E. Ratcliffe Anderson, sent a letter to the OIG requesting that the OIG issue a special fraud alert advising hospitals and physicians that "exclusive credentialing" arrangements present the potential for abuse under the anti-kickback statute.

According to the AMA, hospitals nation-wide, including six Pennsylvania hospitals, are requiring physicians to sign loyalty agreements in exchange for staff privileges. In many instances, the physicians must also end relationships with competing hospitals, even if patient care is sacrificed.

The AMA is particularly concerned about three exclusive credentialing practices that fall squarely within the anti-kickback prohibitions. The three arrangements most troublesome are those in which the hospital:

1) Requires a physician to give up active staff privileges and end relationships with competing hospitals;

2) Requires a physicians to perform 90 percent or more of his or her work at the hospital; or

3) Denies access to a physician who has a financial interest in a competing entity (could include ambulatory surgical centers as well as other hospitals).

The OIG is reviewing the AMA request. No timeframe for a response has been given. In the meantime, some states, like Texas and Oregon, are taking action to outlaw exclusive credentialing arrangements. Visit the AMA’s website at for related information.

Complying with FMLA

The Family and Medical Leave Act ("FMLA") requires private employers with 50 or more employees and all public employers to provide qualified employees up to 12 weeks of unpaid job-protected leave in any 12-month period. FMLA leave may be granted to an employee:

1) to care for a child born to the employee or placed for adoption or foster care by the employee;

2) because of a serious health condition of the employee;

3) because of a serious health condition of an immediate family member of the employee (parent, spouse, child).

Many employers find the FMLA to be a compliance nightmare. Here are four tips to help alleviate compliance worries:

1) Post the official FMLA notice poster in a conspicuous place.

Employers failing to post the notice for employees to see may be liable for fines.

2) Send FMLA notices and communications to employees in a timely fashion.

The employer should send notice of FMLA designation within two business days after the employee’s request. The Department of Labor has prepared a model notice for employers to use in designating an employee’s request for leave as FMLA leave. Using the Department of Labor’s model will ensure compliance. The model notice can be reviewed at

3) Decide which method to use to calculate allowable leave.

The employer must provide eligible employees with 12 weeks of leave for each 12-month period of work. The employer has three options to calculate the 12-month period:

  • Calendar year;
  • Anniversary date; or
  • Rolling period measured from the date of the last FMLA leave. (This method prevents "leave stacking"; the employee can take up to 24 consecutive weeks of leave under the calendar year and anniversary date methods).

Once you have decided on a specific method, apply it consistently for all employees.

4) Charge intermittent leave against total FMLA time off.

Consider counting an employee’s time off for a serious health conditions such as physical therapy appointments against the employee’s allotted FMLA time off. When doing so, you must count the actual time taken. It is not permissible to charge the employee’s FMLA leave bank for an entire day if the employee only took 2 hours off because of his or her health condition.

For more information, click on the Department of Labor website at or contact Ann E. Evanko or Anne M. Peterson at Hurwitz & Fine, P.C.

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