Health Law Pointers - Volume III, No. 2

The House may delay a vote on the Federal Patients’ Bill of Rights until after the August break. Despite the President’s efforts last week to persuade resistant GOP representatives to support a Republican-sponsored bill, which limits the patients’ rights to sue HMOs, there remains strong Republican support for a Democratic-sponsored bill that is similar to that passed by the Senate last month. Likewise, the House Democrats, who have the needed votes to support their bipartisan version of the patients’ bill of rights, are meeting with the Republicans backing their bill to ensure continued cooperation. Although there has not been a public announcement from either side, it is likely that Congress will not seek a vote on the patients’ bill of rights before the August break.

For up-to-date media coverage of the patients’ rights bill go to: http://dailynews.yahoo.com/fc/US/Health_Care_Debate/

Since the Internal Revenue Service (IRS) enacted its "check-the-box" regulations, an unincorporated business entity having a single member is disregarded as a separate entity unless the owner elects to be treated as a "corporation". Reg. 301.7701-3(c). A limited liability company (LLC) having a single member is therefore, for income tax purposes, disregarded as a separate entity. When there are two or more members, the IRS treats the entity as a "partnership" unless the entity elects to be treated as a corporation. See Reg. 301.7701-3(b)(1)(i). Federal tax laws, however, are not determinative when considering the treatment of certain entities under state law.

This distinction is evident under the New York Department of Taxation and Finance’s interpretation of the application of its sales and use tax to single-member LLCs. Recently, the Department had an opportunity to reconsider an advisory opinion it issued in 1999. In the 1999 opinion, the Department determined that a single member LLC must have its own sales and use tax account. The Department relied on the definitions of partnership and partner under New York Tax Law Section 2(6); "partnership" includes an LLC and "partner" includes a member of an LLC. In that opinion, the Department said that it logically follows that since a single-member LLC is nevertheless an LLC, the sole member must be treated as a "partner" for sales and use tax purposes. This case [Arthur Anderson, LLP, TSB-A-99(7)S, 1/28/99] can be viewed by clicking on the following link: http://www.tax.state.ny.us/pdf/Advisory_Opinions/Sales/A99_7s.pdf.

The Department upheld this analysis in an opinion issued last fall. [Underberg & Kessler LLP, TCB-A-00 (32)S, 9/7/00]. The Underberg & Kessler opinion was sought for the purpose of determining whether a single-member LLC operating as a subsidiary to its parent, a New York professional corporation, would have to pay tax on sales to its parent. Again, the Department treated the single-member LLC as a separate entity subject to the same rules as a partnership. This opinion may be viewed at: http://www.tax.state.ny.us/pdf/Advisory_Opinions/Sales/A00_32s.pdf.

These opinions demonstrate that it is important to consult with a tax professional in establishing and operating your business. If you have questions regarding your legal and tax structure, please contact Lawrence M. Ross at [email protected].

A few years ago, the local managed care organizations (MCOs) increased their auditing activities in an effort to increase physician compliance with applicable laws, rules and regulations and to lower costs. The MCOs appear to have concentrated their recent efforts on solo practitioners and small medical practices. These practices are less likely to challenge an auditor’s findings as they generally do not have the resources available to contest the auditor’s conclusions. Many practitioners also are unwilling to risk any confrontation with the local MCOs who have the authority to remove "intransigent" practitioners from their provider panels without cause simply by not renewing their physician participation agreement. As these small practices would rather pay than appeal, the MCOs are aggressively pursuing alleged overpayments.

If you are the subject of an audit by one of the local MCOs, consider the following before writing a check for any alleged overpayments:

1) Did the auditor fully explain the purpose and scope of the audit?

2) Are the auditor’s findings accurate and are the conclusions consistent with the results of prior audits and your understanding of the guidance provided by the MCOs?

3) Did the auditor properly extrapolate the projected overpayments? For instance, are the projected overpayments applied only to the period covered by the audit?

4) Did the audit apply only to services recently provided or did the audit review billing records that were reimbursed one, two, or three years ago? There may be a basis for appealing an audit that is untimely.

If you answered no to any of the above questions, you may have a basis for appealing the audit. Although the MCOs are well within their rights to perform limited "post payment" or "retroactive" audits the physician should not hesitate to contest the findings where he or she believes errors have been made. However, a successful appeal may require the expenditure of funds for legal assistance and the services of an outside consultant to evaluate the correctness of the auditor’s findings.

Thus, if you are considering appealing an audit you should consult with an experienced health care attorney. The health law attorneys at Hurwitz & Fine, P.C. are available to assist you. For more information, contact Lawrence M. Ross at [email protected] or Anne M. Peterson at [email protected].

Some physicians, responding to managed care audit allegations of "upcoding", deliberately choose to record patient office visits using a lower evaluation and management code. Beware! According to compliance guidance issued last year by the Office of the Inspector General (OIG) for single and small group practices, this practice of "clustering" is considered a coding and billing risk. According to the OIG, "[clustering] overcharges some patients while undercharging others." (emphasis added). Other risk areas include: (1) insufficient documentation; (2) improper inducements, kickbacks and self-referrals; (3) services that are not reasonable and necessary; and (4) improper coding and billing.

To view any of the OIG’s compliance guidelines or to read its official press releases go to: http://www.dhhs.gov/progorg/oig/modcomp/index.htm.

In some instances, it takes a significant period of time to negotiate a contract or settle a dispute. Some delay is inevitable. Communicating thoughts and ideas are only a part of the negotiation process. The resolution of any conflict or agreement is often delayed because of the human element – the ability of all parties to communicate effectively with one another. Occasionally, this is hindered by the various personalities involved.

Even when the parties involved are communicating effectively, there are other external causes that can delay the negotiation process. These external sources of delay can include:

► One or more of the parties desire or are required to involve other professionals such as consultants, accountants, appraisers, other attorneys, business partners or confidants.

► The contact person may not fully understand the proposal and as such is unable to properly convey the proposal to the decision-maker.

► The decision-maker is someone other than the contact person such as a Board of Directors, President or CEO.

► The decision-maker or contact person is unavailable to accept or approve the matter at the time it is presented.

► Additionally, although the parties may agree on the concept, the terms used to express the idea must be agreeable as well. In many instances delays arise because a provision is either drafted too narrowly or too broadly or is ambiguously worded and subject to various interpretations. In such instances, the initial documents must be revised.

Negotiating agreements and conflict resolution is not always as simple as a handshake. Comprehensive, well-written agreements sometimes take time to consummate, and in those instances it is good to remember that patience may be a virtue.