Health Law Pointers - Volume IV, No. 2

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    In March, the Department of Health and Human Services ("HHS") unexpectedly released a proposal to revise the HIPAA privacy rule. Realizing that its privacy regulations had unintended consequences that would hinder the provision of quality health care, HHS has revamped its burdensome privacy regulations. The changes, if adopted, will generally make it easier for providers to adhere to the privacy ruling requirements.

    The HHS proposed changes include:

► Elimination of the onerous "consent" requirement, which would have overly burdened treating physicians because patients could not have received treatment, even emergency care, without first giving consent to the disclosure of private health information;

► Tightened notice obligations, which require providers to make a good faith effort to obtain written acknowledgements from patients recognizing the practice’s privacy policy.

► Clarification that the "minimum necessary" rule will permit physicians to discuss patients in their offices and hallways without fear of violating the privacy rule. HHS also states that practices may continue to use patient sign-in forms and call patients by name in the waiting room.

► Addition of an obligation that would require practices to have patient authorizations prior to engaging in marketing activities.

    While the proposed revisions will make it easier for providers to comply with the privacy rule, much effort is still necessary to prepare for implementation of the rule. If you would like more information about the HIPAA privacy rule and HHS guidance, contact Lawrence M. Ross at [email protected] or Anne M. Peterson at [email protected].



    The Federal Trade Commission ("FTC") has issued an advisory opinion permitting a Denver based "independent practice association" ("IPA") to negotiate directly with managed care organizations. Unless properly organized, such arrangements may be viewed as illegal physician price fixing schemes under the federal antitrust law. In determining that this IPA arrangement was lawful, the FTC analyzed the group’s clinical integration plan to determine if the IPA members are sufficiently "integrated" to justify joint pricing. In 1996 the agency formally acknowledged that sufficient "clinical integration" might justify physician joint pricing as such integration could produce significant efficiencies or services not otherwise available. In this instance, the IPA’s integration plan proposed to:

bullet integrate services and deliver them "in a coordinated fashion";
bullet use a clinical resource management program, including the development of integrated clinical practice protocols;
bullet utilize predetermined goals to monitor and report individual performance in an effort to improve patient outcomes; and
bullet provide payors with a network of physicians that have agreed to participate, compete with other physicians and improve patient care.

    The FTC concluded that the IPA would be appropriately integrated if its members abide by its proposed plan. This opinion provides valuable guidance for IPAs in our community. The FTC, however, warns that there are several precautions to heed:

bullet the IPA cannot involve overly large percentages of providers in a specific specialty, which has the effect of representing market power;
bullet providers may not enter into exclusive contracts under the IPA arrangement with third party payors;
bullet the IPA may not coordinate pricing with outside providers; and
bullet IPA members may not decline to participate with a third party payor if the payor does not reach agreement as to pricing with the IPA.

    For questions or comments about the federal antitrust law and consolidation trends, please contact Lawrence M. Ross at [email protected].




    On March 4, 2002, the New York State Senate approved legislation that would require the licensing of four new mental health professions. The bill also provides more distinct definitions of "psychology" and "psychologist".

    Currently, individuals with little or no training are providing mental health services as counselors, therapists, and psychoanalysts. If enacted, the legislation will require the State Education Department to oversee the licensing of these professionals. In addition, the bill clarifies the parameters for the practice of psychology and limits the use of the title "psychologist" to those who are licensed psychologists under state law.

    To view the text of the bill, go to


    President Bush has nominated Elias A. Zerhouni, M.D., a John Hopkins University Medical Administrator to head the National Institutes of Health. The Senate Health, Education, Labor and Pensions Committee chaired by Senator Kennedy unanimously approved the nomination. the President also intends to nominate Richard H. Carmona, M.D., M.P.H., an  Arizona police officer and former special forces medic in Vietnam to be the U.S. Surgeon General.



    To review guidelines released this month by the Department of Health and Human Services for safeguarding commercial building ventilation systems from bio-terrorist attacks, go to:



    In an advisory opinion issued on April 4, 2002, the Department of Health and Human Services, Office of the Inspector General ("OIG") stated that it would not impose sanctions against a non-profit, charitable organization formed to deliver grants to indigent Medicare beneficiaries. Drug manufacturers and medical service suppliers will provide most of the organization’s funding. Donors may earmark their donations to support patients suffering from specific conditions or illnesses. Although the OIG determined that the proposed arrangement would violate the anti-kickback statute, it reasoned that because the donors and the beneficiaries are sufficiently shielded from specific information about each other the arrangement would not influence any beneficiary’s selection of a particular provider, practitioner or supplier.

    Under the proposed arrangement, the OIG found it particularly troublesome that the non-profit entity intends to report to its donors patient information as requested by the donor. The reports will provide the donor with aggregate statistical information about the patients suffering from the illnesses or diseases that the donor’s products are designed to treat. The OIG, however, determined that since the reports will not contain specific patient information the risk of fraud and abuse by the non-profit entity is minimal.

    To review OIG’s advisory opinion number 02-1, go to


    On April 23, 2002, the South Carolina Medical Association ("SCMA") filed a lawsuit on behalf of its 6,000 plus physician members against Cigna Health Corporation and several other health insurance companies. SCMA alleged in its suit that Cigna and the other insurers employ unfair and deceptive practices intended to delay, deny, impede and reduce lawful reimbursements to SCMA’s members for services rendered to the managed care enrollees.

    The physician group alleges in its complaint that the insurance companies’ abuses have resulted in the loss of millions of dollars in lawful compensation owed to the physicians. SCMA hopes that the lawsuit will put an end to the unnecessary burdens placed on its physician members by Cigna and the other managed care organizations. A group of physicians also sued the insurers seeking specific monetary damages.

    On April 27, 2002, the Tennessee Medical Association ("TMA") and its physician members commenced four separate lawsuits against Cigna Healthcare of Tennessee, Inc., Aetna U.S. Healthcare, Inc., BlueCross BlueShield of Tennessee, and United Healthcare alleging similar causes of action. Like SCMA, TMA claims that all alternative methods of resolving its differences with the managed care organizations have failed and it anticipates that litigation will level the playing field.

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