Health Law Pointers - Volume IX, No. 3

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Seven Business and Legal Concerns In
Establishing a New Business with Others


1.         Why would that person make a good partner?         

Is this individual needed for financing the business? Are his or her skills critical to the success of the business? Is this person to manage the day to day operations of the business?

2.         Do you know your partners personalities?    

What is their general business attitude? What is their reputation in the community? Are they good listeners? Do you think that they will compromise on issues?

3.         What is their level of commitment to the business?  

Are they irrevocably committed to making a success of the venture? What is their risk tolerance? What is their past “track record” on similar business enterprises?

4.         What is the role of your professional advisors (attorney and accountant)? 

Who is the client? (The business or one or more of its owners?) What are your professionals expected to do for you? Who is to lead discussions on the business formation?

5.         What constraints exist?

How much time do you have to form the business and get it operational? Have any financial or other commitments already been made? How much money do you have in reserve to live on?

6.         Are there any preconditions to forming the business?          

What things must happen first, before the venture is feasible?

7.         What about the Partnership Agreement?      

It is best to document your arrangements now, to the best of your ability. But how much time and effort are you willing to invest in the development of a sound business agreement (partnership or operating agreement, or shareholders agreement)?


The No-Fault Patient: Should a Physician
Routinely Accept An Assignment of Benefits?


On Monday morning a new patient advises that she has neck pain radiating into her upper right arm after being involved in a motor vehicle accident. The patient tells you that she has no-fault insurance coverage and provides the insurer’s name as well as her policy number.


Suddenly, you must decide how payment is to be received for the services and more importantly what you are going to do if the no-fault insurer denies payment for the claim. You have the ability to accept, if you choose, an assignment of benefits from the patient or an authorization to pay. Again, you may choose what you want to accept from the patient. You are not required to accept either of these options and can advise the patient that payment is due from the patient at the time of service.


In 95% of the arbitrations and lawsuits we handle involving no-fault claims, the medical provider chooses to take an assignment of benefits from the patient. This is a wise decision if you are prepared to take legal action to challenge the insurer’s denial of the bill. Yet, we routinely see medical providers assert a lien against the patient or make the patient and/or attorney sign an agreement to pay the outstanding bill from any personal injury proceeds. Thereafter, the medical provider will agree to release the assignment of benefits back to the patient so the patient can take legal action against the insurer. The medical provider patiently (sometimes) waits in the background to see if the patient is successful in the arbitration or lawsuit so that payment can be obtained.


There are glaring problems with this strategy. First, the medical provider is PROHIBITED from trying to recover the bill from the patient when it has accepted an assignment of benefits. A careful review of the assignment of benefits form that is routinely distributed to the patient provides in part:




Accordingly, the medical provider cannot accept an assignment of benefits from the patient and also demand that the patient sign another form in which she agrees that if she receives money from her personal injury action and the provider’s bill is denied by no-fault she will pay the bill from her personal injury proceeds. Likewise, the medical provider cannot assert a valid lien against the patient when the bill is denied so as to ensure recovery when the patient’s personal injury suit is either settled or tried.


The second problem with this strategy is that is that the medical provider is completely dependent upon the patient’s choice in counsel once it has released the assignment of benefits and chosen not to take control of the legal action challenging the denial. In many instances the patient is using their personal injury attorney to handle the no-fault arbitration or lawsuit. The statutes, regulations, and legal burdens pertaining to a no-fault claim are vastly different from those governing a personal injury claim. In essence, the medical provider has no idea if the patient’s attorney is experienced in no-fault or is merely dabbling in no-fault because his client is complaining that her medical bills are not being paid.


Ultimately, the medical provider may want to consider two alternative options in lieu of accepting an assignment of benefits from the patient:


1.      Require the patient pay for the services at the time they are rendered. Thereafter, the patient can submit the claim to the no-fault insurer for reimbursement.


2.      Accept an authorization to pay from the patient. An authorization to pay permits the medical provider to receive direct payment from the no-fault insurer yet collect the amount of the bill from the patient if the claim is denied by the insurer. In other words, the medical provider does not have to commence a legal action against the insurer or provide the patient with a release of assignment of benefits and wait for the arbitrator’s or jury’s decision. It must be noted that if the medical provider takes an authorization to pay it cannot take an assignment of benefits too.

The medical provider must choose one or the other.


To conclude, you have choices when it comes to patients who have no-fault insurance coverage. You are not relegated to only accepting an assignment of benefits. You can choose to have the patient pay for the service at the time it is rendered or accept an authorization to pay in order to receive direct payment from the insurer for the bill.


For questions regarding No-Fault matters contact No-Fault/SUM Arbitration and Litigation attorney Audrey A. Seeley at (716) 849-8900.


Eleven Principles in Evaluating a Legal Document


Lawyers frequently are asked by clients to evaluate legal documents drafted by others. This article highlights 11 principles of document review used by lawyers that may be applied by you in the review of any document.


            1.         Does the document have a good organizational scheme?

            2.         Does each provision have relevancy?

            3.         Is each provision clear?

            4.         Are the provisions internally consistent?

            5.         Is the active voice used, rather than the passive voice?

            6.         Does the document avoid ambiguity by using plain English?

            7.         Are shorter, declarative sentences used?

            8.         Are positive sentences used?

            9          Does the document use illustrations or examples to aid in clarity?

            10.       Are important terms underscored or otherwise highlighted?

            11.       Are some imperfections in the document ok?


Medical Device Litigation


Physicians and other practitioners should be aware of recent developments in medical device product liability cases, especially those involving implanted devices. Developments in this area can easily affect a physician’s surgical practice. A recent decision has again upheld the duty of the manufacturer to inform the physician-users of all known risks, or in the words of the court, “the most current knowledge available concerning the potential risks associated with the product, which is all the law requires.” The duty of the manufacturer is to the medical community, only, not to the patient. Specifically, the manufacturer’s duty is to provide the warning to “prescribing physicians who may be expected to have the least knowledge and experience with the product”.


The case is Malhall vs. Hannafin, a New York State Appellate Court decision released August 30, 2007. This case involved a claim that the manufacturer of the medical device, Smith & Nephew, did not adequately warn of a potential side effect from the use of their device. The defendant designed and manufactured a Suretac, a device resembling a thumbtack designed to be used during shoulder surgery to fix or stabilize the labrum to the bone and then, over time, to dissolve similar to absorbable sutures.

The plaintiff, who had been diagnosed with a torn labrum, underwent an arthroscopic procedure where a Suretac was used. Some three months after surgery the plaintiff suffered from a reduced range of motion which was diagnosed as acute localized reactive synovitis in the area of the Suretac. Follow up surgery was necessary.

The Court below dismissed all claims against the manufacturer other than failure to warn, which was the topic of appeal. The duty of a manufacturer in a failure to warn claim is to warn only of those dangers it knows of, or which are reasonably foreseeable.  The Court held that this knowledge of an “inherent danger is an essential factor and that lack of this knowledge is fatal to any claim for failure to warn.”

In the case, Smith & Nephew placed a warning on the packaging and conveyed to physicians using the product the most current available information concerning potential risks. The standard for distribution of a warning in New York, as noted above, is that the warning is to be given to the physician as the “learned intermediary.” The defendant had changed its warning label two years before the plaintiff’s surgery due to knowledge of a different risk. The defense claimed that there had been no documented reports of the type of adverse reaction claimed by the plaintiff. The court held the defendant demonstrated it did not have the requisite knowledge of the risk claimed by plaintiff and that the burden shifted to the plaintiff to demonstrate that the warnings were deficient.

Plaintiff had an expert opine that the type of adverse reaction suffered by the plaintiff was documented in various articles and studies. He did not, however, specifically identify these studies or articles. The Court referred to this failure to identify the studies or articles as “conspicuous” and gave the opinion no weight.

Plaintiff attempted to shift the burden back to the defendant by claiming that it was the burden of the defendant to prove the device was safe. The Court was not swayed and held that the defendant did not have a burden to prove a negative (establishing the lack of information for this potential side effect) but that the plaintiff had to prove defendant’s knowledge of potential side effects such that the warning was not adequate.

The case was dismissed by the Court as the risk was not one known to the defendant at the time of the surgery and thus the warning was adequate. Click here to link to the full text of the decision.


For Product Liability cases contact firm attorney David R. Adams at (716) 849-8900.


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