dallas medical journal april 2013

v o l u m e 9 9 • n u m b e r 4 • a p r i l 2 0 1 3

The Legal Issue

I n t h i s i s s u e :

Frequently Asked Questions - Healthcare law experts answer questions

Photos from First Tuesdays

6 5 • A p r i l 2 0 1 3 • D a l l a s M e d i c a l J o u r n a l

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A Texas Original

submit letters to the editor to [email protected]

About the Cover PhotoThis issue focuses on legal

matters that physicians face while running their practices. DCMS staff has worked with healthcare law specialists to provide answers to commonly asked questions.

67 President’s Page A Future of Possibilities

71 The Legal Issue: Medicine and the Law

72 Accommodations for Disabled Patients

72 Leaving a Physician Practice Group 73 Medical Record Retention 75 Steps Toward ICD-10 Compliance 76 Medicare Enrol lment 78 HIPAA, HB300 and Social Media 79 Preparing for a RAC Audit

81 The Texas Franchise Tax

82 F i rst Tuesdays at the Capitol Photos

84 The Legal Issue: Opinion Should I Join an ACO?

Dallas County Medical SocietyPO Box 4680, Dallas, TX 75208-0680Phone: 214-948-3622, FAX: 214-946-5805www.dallas-cms.orgEmail: [email protected]

DCMS Communications CommitteeRoger S. Khetan, MD ............................................. Cha i r Gene Beisert, MDSuzanne Corrigan, MDSeemal R. Desai, MD Gordon Green, MDRobert Gross, MD Steven R. Hays, MDC. Turner Lewis III, MDDavid Scott Miller, MDClifford Moy, MD

DCMS Board of DirectorsCynthia Sherry, MD ......................................... PresidentJeffrey E. Janis, MD .................................President-ElectJim Walton, DO ...............................Secretary/TreasurerRichard W. Snyder II, MD ........ Immediate Past PresidentMark A. Casanova, MDWendy M. Chung, MDChristopher A. Hebert, MDMichelle Ho, MDTodd A. Pollock, MDKim M. Rice, MDHampton Richards, MDErin Roe, MDChristian Royer, MD

DCMS StaffMichael J. Darrouzet .................. Chief Executive OfficerLauren N. Cowling ............................... Managing EditorSteven Harrell ............................. Asst. Managing EditorBearett Wolverton ...............................Advertising Sales

Articles represent the opinions of the authors and do not necessarily reflect the official policy of the Dallas County Medical Society or the institution with which the author is affiliated. Advertisements do not imply sponsorship by or endorsement of DCMS. ©2013 DCMS

According to Tex. Gov’t. Code Ann. §305.027, all articles in Dallas Medical Journal that mention DCMS’ stance on state legislation are defined as “legislative advertising.” The law requires disclosure of the name and address of the person who contracts with the printer to publish leg-islative advertising in the DMJ: Michael J. Darrouzet, Ex-ecutive Vice President/CEO, DCMS, PO Box 4680, Dallas, TX 75208-0680.

Dallas Medical Journal(ISSN 0011-586X) is published monthly by the Dallas County Medical Society, 140 E. 12th St, Dallas, TX 75203.

Subscription rates$12 per year for members; $36, nonmembers; $50, overseas. Periodicals postage paid at Dallas, TX 75260.

PostmasterSend address changes to:Dallas Medical Journal, PO Box 4680 Dallas, TX 75208-0680.

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Medicaid is a vital safety net that provides essential health services to low-income patients. But the stifling Medicaid bureaucracy, the unrealistic payments and the overzealous fraud-and-abuse investigations are curtailing the ability of physicians to participate in the programs. As a result, needy patients are promised coverage and possess an insurance card, but, in reality, have no access to services. The system is broken, and the downstream consequences of not providing appropriate health care affect all of us.

The 1115 Medicaid Waiver called for a transformation of healthcare delivery for the indigent population across Texas and is estimated to bring in $4 billion in supplemental funding to our region over the next four years. The waiver directs the funds to hospitals and directs the hospitals to create collaborative projects to improve overall healthcare quality.

Under the waiver, Project Access Dallas would have been transitioned into My Medical Home as a transformative collaborative adhering to the directives of the waiver. My Medical Home was envisioned as a quality-focused and affordable model for providing care for the working poor. It matched the goals of the waiver, providing improved access to physicians, care in more affordable settings than hospitals and ERs, and improved care coordination. To succeed, My Medical Home required a high level of collaboration and trust between physicians and hospitals. Unfortunately, the physician-hospital discussions broke down at the 11th hour, and area hospitals did not adequately support My Medical Home. Consequently, DCMS withdrew the My Medical Home proposal from the Department of State Health Services. Project Access Dallas was forced to cease operations, and the vision of My Medical Home will not become reality under the waiver. With the benefit of hindsight, we must look to future possibilities.

To provide healthcare to the uninsured, Medicaid expansion is one possibility on the horizon. The total expansion of funding in Dallas County is estimated to be $240 billion (!) over three years. Although the expansion of a broken system doesn’t make much sense, Texas cannot afford to reject the federal government’s offer to help us fund care for the working poor. However, we must have the flexibility to find innovative solutions for a redesign that will match the unique needs of Dallas.

The 2012 Dallas County Needs Assessment conducted by the Dallas/Fort Worth Hospital Council identified the local health priorities: more primary and specialty care physicians, more behavioral health services, more chronic disease support, lower Emergency Department usage and hospital readmissions, and better palliative care. The majority of these priorities can be accomplished only through effective collaboration between physicians and hospitals. Furthermore, the priorities reside largely in the outpatient realm and, therefore, it is critical to engage more community partners that provide mental health services, social services, pharmacy navigation, care transitions, wellness services, and home care.

DCMS is taking the lead and building the Blue Ribbon Task Force for the Indigent, a work group comprised of physicians, hospitals and community representatives. The group is charged with designing an innovative model of a multistakeholder healthcare plan for indigent care. The model truly would be transformative, quality-focused, accountable, and affordable. Plus, the use of funds would be balanced and directed at community needs, provide incentives for efficiency and good outcomes, and be fairly distributed. Again, success will depend on a trusting working relationship between the physicians and hospitals — one cannot succeed without the other, and one should not embark upon an innovative design without the other.

Assuming we create the work group and undertake this task, how will we build the trusting relationship between physicians and hospitals so we can work together effectively? World-renowned leadership expert John Kotter says that people who engender trust will maintain integrity, share vision and values, show respect for partners, focus on shared goals rather than alternative agendas, listen with an open mind, and demonstrate compassion. Physicians and hospitals need to embrace these qualities if we are to work together successfully.

Apropos to this situation, former US Secretary of State Henry L. Stimson remarked, “The chief lesson I have learned in a long life is that the only way you can make a man trustworthy is by trusting him, and the surest way to make him untrustworthy is to distrust him and show your distrust.” Both physicians and hospitals must be willing to make the leap of faith and try to re-establish mutual trust.

Cynthia Sherry, MD

A Future of PossibilitiesMedicaid Expansion and a new model to care for Dallas’ working poor

The chief lesson I have learned in a long life is that the only way you can make a man trustworthy is by trusting him, and the surest way to

make him untrustworthy is to distrust him and show your distrust.

Henry L. Stimson, former US Secretary of State

6 8 • 6 8 • A p r i l 2 0 1 3 • D a l l a s M e d i c a l J o u r n a l

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For information about Circle of Friends, contact Bearett Wolverton, Business Development Manager,

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CIRCLE OF FRIENDS


Frequently, DCMS staff serve as consultants

to DCMS members and assist with general

business issues related to running a practice.

Physicians question us about payment issues,

networks, staffing, policy, reform, insurance

carriers, Medicare, and Medicaid.

Inquiries also relate to legal topics. Some of

these questions fall under our expertise, but

many are more thoroughly answered by a legal

specialist or attorney.

This issue of the Dallas Medical Journal is dedicated to helping our

members answer some common legal questions.

Please take time to read these articles and enjoy this as one of the many

benefits of your DCMS membership.

If you have further questions, contact Anna Acuña, director of medical

practice strategies, at 214.413.1424 or [email protected].

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MEDICINE AND THE LAW


Do I have to provide a foreign language interpreter for patients who cannot speak English? What accommodations for disabled patients does the law require?

Physicians are required to provide interpreter services for all Limited English Proficiency patients, per Title VI of the Civil Rights Act of 1964. Title VI outlaws federal agencies and entities that receive federal funds from discriminating against people of a protected minority status. The 1974 case of Lau vs. Nichols expanded the civil rights protections to non-English speakers. By accepting Medicaid and/or Medicare, physicians and clinics are accepting federal funds, and thus are obligated to ensure that all patients receive effective communication about their medical care. This includes providing written healthcare materials in a language that patients can understand.

Further, the 1990 Americans with Disabilities Act makes legal provisions for hearing disabled patients. The ADA does not mandate the use of interpreters in every instance, and healthcare professionals may choose alternatives to interpreters as long as the result is effective communication.

Acceptable alternatives may include note taking, written materials or, if viable, lip-reading. Even with this freedom, courts have found an ADA violation where the healthcare professional does not use an interpreter, and there is evidence that the method used did not result in effective communication.

In both instances, the healthcare professional or facility responsible for the care must pay for the cost of an interpreter. Healthcare professionals or facilities cannot impose a surcharge on an individual with a disability directly or indirectly to offset the cost of the interpreter. For accounting and tax purposes, the cost of the interpreter should be treated as part of overhead expenses.

Family members of patients may act as interpreters, as long as they are effective, and the patients agree on this course of action with the knowledge that they have a right to a professional interpreter.

If I leave a physician practice group, can I take my patients or records with me? Can I notify my patients that I am leaving?

Not only can you notify patients, you must notify them. Patients who choose to go with you can then arrange to have their records transferred to your new practice. Physicians must comply with Texas Medical Board regulations governing the notice that must be given to patients any time a physician retires, terminates or otherwise leaves a group practice. These regulations are intended to help maintain continuity of patient care by giving patients sufficient notice to decide whether to stay with the practice, follow the departing physician, or go elsewhere. Patients who decide to follow their physician or otherwise not stay with the group must have the opportunity to obtain their records for themselves or request their records be transferred to the departing physician (or other physician not in the group). Additionally, departing physicians must notify the TMB of the date they are relocating, retiring or terminating practice and, therefore, no longer available to patients, and identify who has custody of the medical records and how they may be obtained.

Physicians are required to provide three types of notice to patients before they leave their group practice: newspaper, posted written notice in their office, and letters to patients. The newspaper notice must be published in the newspaper with the greatest circulation in each county in which you practice, as well as in a local paper serving the immediate practice area. The posted notice must be a conspicuous sign, in or on the office façade, which announces that you are terminating, relocating or selling your practice. It must be posted at least 30 days prior to your departure and remain posted until you leave. Letters must be sent to all patients you have seen in the past two years. You must submit a copy of the notice to the TMB within 30 days from the date of termination, sale or relocation.

The physician who is leaving (not the remaining group) is responsible for following these notice requirements. Depending on the circumstances of the departure, this may not be an issue. When the departing physician is retiring or moving out of state, for example, the group often takes care of the notices on his or her behalf. When departures are not so collegial, the regulations prohibit any interference by physicians remaining in the practice; they may not prevent the physician from posting notice and should not withhold information from the physician that is necessary for patient notification.

This is consistent with the Texas statute regarding noncompetition covenants in physician employment agreements. To be enforceable against a departing physician, the covenant not to compete must not deny the physician access to a list of patients he or she has seen or treated within one year and must provide access to the medical records of those patients upon patient authorization.

Although you are wholly responsible for giving proper notice, your patients are wholly responsible for authorizing the release and transfer of their medical records, which must be done in writing. Make it as easy as possible for them to do this — include in the letter you send them a Written Consent to Release Medical Record. I recommend that you essentially complete the form for them, providing old and new practice contact information, so that all each patient needs to do is fill in his or her name and sign the authorization. Transitioning your patients to your new practice should be relatively seamless.

Susan Murphy is counsel with Thompson & Knight’s Healthcare Practice Group in Houston and Dallas. She focuses her practice on health industry operational and transactional issues, including group practices, joint ventures and managed care organizations.


Legal requirements relative to medical records are vast and varied, depending on federal or state law, and the purposes for which records are being released or maintained. Accordingly, this response will touch on the “high points” of medical record release, storage and retention.

Release of Medical RecordsThe Department of Health and Human Services issued

the Privacy Rule to implement certain requirements of the Health Insurance Portability and Accountability Act of 1996. The Privacy Rule standards address covered entities’ use and disclosure of individuals’ Protected Health Information, which is all individually identifiable health information held or transmitted by a covered entity … in any form or media, whether electronic, paper or oral.

Every healthcare provider who electronically transmits health information in connection with certain transactions is a covered entity. A covered entity must obtain the individual’s written authorization for use or disclosure of PHI that is not for treatment, payment or healthcare operations, or otherwise permitted or required by the Privacy Rule. An authorization must be written in plain language and include specific information regarding the information to be disclosed or used, the person(s) disclosing and receiving the information, expiration, and right to revoke in writing.

The Texas Medical Records Privacy Act, which became effective Sept. 1, 2012, tracks HIPAA, but expands the definition of covered entities and imposes additional requirements regarding access to and use of PHI. It affects providers’ release of medical records by also requiring that, unless an electronic disclosure is made to another covered entity for purposes of treatment, payment, healthcare operations, HMO functions, or otherwise authorized or required by law, a provider may not electronically disclose PHI to any person without a separate written authorization for each disclosure. Additionally, unless a patient is willing to accept medical records in another form, a provider must provide electronic copies within 15 days of a proper written request.

This is the same as the long-standing Texas Medical Board rule on deadlines for release of records, both of which are more stringent than HIPAA’s 30-day response requirement.

Medical Record StorageBefore HIPAA, when medical records were paper, there

was no real authority on how they should be stored, other than requiring they remain confidential. HIPAA also has a Security Rule which requires a covered entity to maintain reasonable and appropriate administrative, technical and physical safeguards to ensure confidentiality and prevent intentional or unintentional use or disclosure of PHI. The Security Rule standards cover administrative practices, technical practices and procedures.

Early commentary by the Office of Civil Rights to the standards did address storage of paper records, noting

the use of locked and isolated files and/or records rooms and restrictions on the number and qualifications of individuals with access to those files. The Health Information Technology for Economic and Clinical Health Act of 2009 strengthened these requirements in an effort to help ensure that as more information is digitized, it will remain secure. The OCR has issued guidance on the only appropriate methodologies for rendering PHI secure: encryption or destruction. Providers can choose from approved technologies to encrypt PHI and render it unusable, unreadable or indecipherable to unauthorized parties. Providers should limit the collection of stored information to what is necessary to acquire and keep, and limit staff access to data systems to prevent unnecessary or unauthorized printing, e-mailing or downloading of PHI.

Medical Record RetentionTMB regulations require that physicians retain medical

records for the period of time imposed by the regulations or mandated by other state or federal law, whichever is longer. Generally, a Texas physician must maintain patient records for a minimum of seven years from the date the physician last treated that patient. If the patient were younger than 18 years old when last treated, the records must be kept for seven years or until the patient turns 21, whichever is longer. Medical records that relate to any civil, criminal or administrative proceeding must be retained until the physician knows the proceeding has been finally resolved.

HIPAA also recognizes that federal medical record retention requirements preempt state laws that require shorter periods. It requires a physician who bills Medicare to retain documentation for the longer of six years from the date of its creation or the date it was last in effect. Medicare managed care program providers must retain records for 10 years.

In the Medicaid program, all medical records should be kept for seven years. All financial records related to services must be kept for five years from the date of services or until all audit questions, appeal hearings, investigations, or court cases are resolved. Once the applicable retention period has been fulfilled, medical records should be destroyed. Recall that destruction is the only alternative to encryption for keeping PHI secure under HIPAA/HITECH. OCR guidance on destruction of media on which PHI has been stored or recorded requires that paper, film or other hard copy media have been shredded or destroyed such that the PHI cannot be read or reconstructed. Electronic media must be cleared, purged or destroyed consistent with National Institute of Standards and Technology guidelines such that it cannot be retrieved.

What are the legal requirements for medical record retention, release of information and storage? Are the laws different for EHRs?

Susan Murphy is counsel with Thompson & Knight’s Healthcare Practice Group in Houston and Dallas. She focuses her practice on health industry operational and transactional issues, including group practices, joint ventures and managed care organizations.

THE LEGAL ISSUE


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On Oct. 1, 2014, the healthcare industry will be required to use the ICD-10 code set to code all diagnosis and hospital inpatient procedures in administrative transactions and for various other uses. The following is an overview of the work and timeframes to help you complete the activities to implement ICD-10. The timeframes will guide you, but the amount of time it takes to complete the activities will depend on the size of your practice and availability of resources.

Step 1: Impact AnalysisEstimated time to complete: 3–6 monthsReview information about the ICD-10 code set in

order to gain a basic understanding of the changes from ICD-9 to ICD-10. This understanding will be needed in order to conduct an impact analysis, and determine how the move to ICD-10 will affect your business practices and systems. Complete an inventory of all your systems, electronic and manual, that use the ICD-9 codes; these systems will need to be upgraded to ICD-10. This activity should be started early.

Step 2: Contact your VendorsEstimated time to complete: 2–3 monthsContact your vendors for details on the installation of

the ICD-10 upgrades to your systems, including dates and costs. Ask your vendor if it will maintain updates to the ICD-9 and ICD-10 code sets during the transition period and if it will provide crosswalk tools between the two code sets.

Step 3: Contact your Payers, Billing Service and Clearinghouse

Estimated time to complete: 2–3 monthsContact your clearinghouse and/or billing service, if

you use either, and payers for preliminary information about when they expect their ICD-10 upgrades to be completed and when they will be ready to begin testing transactions using the ICD-10 codes. Contact them again when you have a date for the installation of your system upgrades.

Talk to your payers about contract negotiations that may be needed as a result of moving to the ICD-10 code set. Ask about any changes they may be making to their review, auditing, coverage, and medical policies, and how the changes will impact coverage decisions and reporting requirements.

Step 4: Installation of Vendor UpgradesEstimated time to complete: 3–6 monthsThe timing of the system upgrades will depend on

your vendor’s readiness, both with respect to product development and scheduling. Other systems not related to your administrative transaction systems, such as quality or public health reporting, will need to have any upgrades for ICD-10 completed, as well.

Step 5: Internal TestingEstimated time to complete: 2–3 monthsOnce the upgrades are completed, you will need to

conduct internal testing of your systems to ensure you can generate necessary transactions with the ICD-10 codes. Allow extra time to resolve any issues that arise, and work with your vendor to address these.

Step 6: Update Internal Processes Estimated time to complete: 2–3 monthsInternal processes used to support coding need to

be updated, such as “superbills,” encounter forms, quality data collection forms, and public health data collection forms. Take this time to review clinical documentation to ensure it captures the details of the patient’s diagnosis. Practices may want to look at the most common diagnoses reported in the practice.

Step 7: Conduct Staff TrainingEstimated time to complete: 2–3 monthsCoding staff will need training on the ICD-10 code set

prior to the compliance date. You may need to stagger staff training to prevent down time in the practice. Coding staff may wish to practice internally using the ICD-10 codes on sample claims, such as current claims.

Clinical staff also must receive training on ICD-10, although it does not need to be at the same detail as training for the coders. Due to the greater level of detail in the ICD-10 code set, clinical staff will need to provide sufficient details about the patient’s condition so the coder can accurately code.

Step 8: External Testing with Clearinghouses, Billing Service and Payers

Estimated time to complete: 6–9 monthsContact your clearinghouses, billing service and

payers to conduct external testing with them. Testing with your trading partners (e.g., clearinghouses and payers) will ensure that you can send and receive the ICD-10 codes in transactions.

Step 9: Make the Switch to ICD-10Oct. 1, 2014All services and discharges on or after Oct. 1, 2014,

must be coded using the ICD-10 code set. Transactions that continue to use the ICD-9 codes will be rejected. ICD-10 codes cannot be used before the Oct. 1, 2014, compliance date.

This information is gathered from the American Medical Association. For more resources, including the AMA’s “ICD-10 Project Plan Template” to track more specific activities for implementing the ICD-10, go to www.ama-assn.org and search “ICD-10.”

When does ICD-10 coding become a requirement? What steps can I take now to ensure that my practice will be compliant?

THE LEGAL ISSUE


Physician group practices seeking to bill Medicare for services rendered to Medicare beneficiaries must apply for participation in the Medicare program. The submission of applications and interaction with government agencies that make up the provider enrollment process are not overly complex. However, the room for error is small, and strict adherence to CMS procedure and careful attention to detail are required to avoid costly delays in obtaining Medicare enrollment. Physician groups in Texas will go through the provider enrollment process with Novitas Solutions, Inc., which serves as the state’s Medicare Administrative Contractor.

Provider EnrollmentThe first step in enrolling a group practice is obtaining

a National Provider Identifier specific to the group. The practice might be made up of several providers who have been assigned individual NPIs; however, a separate and distinct identifier must be created for the group. Applying for an NPI is relatively simple and can be accomplished online through the National Plan and Provider Enumeration System at www.nppes.cms.hhs.gov/NPPES/Welcome.do. A new NPI usually can be obtained within a few days.

The primary step in the enrollment process is the completion and submission of the appropriate CMS 855 enrollment form. A physician group practice that will bill for Medicare Part B services must submit a CMS-855B enrollment application. The application can be completed online using the Provider Enrollment, Chain and Ownership System (PECOS) or by paper application. The individual(s) responsible for drafting the group’s application must meticulously follow the form’s instructions to avoid any delay in the MAC’s review and approval of the group’s enrollment. Any mistake or omission can result in lengthy requests for additional information, return of the application, or even rejection.

The group practice will be required to produce information under the following sections of the CMS-855B application:

1. Type of Enrollment. The provider must indicate whether it is applying for a new enrollment, or changing or updating an existing enrollment. The group will provide its newly issued NPI in this section.

2. Identifying Information. This section requires information about the group practice’s legal entity, including its legal business name, EIN, IRS status, and entity type. The practice also will identify the location to which information from CMS or the group’s MAC should be sent.

3. Final Adverse Actions. Any final adverse legal action or conviction against the practice or any owner of the practice must be reported.

4. Practice Locations. The group must identify all practice locations utilized by the practice, including mobile or portable units. This information will be directly verified by the provider’s MAC. The provider must identify the locations to be used for remittance notices, special payments and medical record storage.

5. Ownership Interests. CMS has extended the ownership disclosure required in the 855B application to include information about any organization/individual that has a 5 percent or greater direct or indirect ownership interest of, partnership interest in and/or managing control of the group practice.

6. Billing Agent. If applicable, the group practice must disclose information about the billing agent that submits claims on its behalf.

7. Authorized Individuals. The group practice must appoint the following individuals in its enrollment application: a contact person who is responsible for answering questions during the application process, authorized officials who have the legal authority to enroll the practice or make any subsequent changes/updates to the enrollment, and officials (optional) whom the authorized officials have delegated to make changes/updates to the group enrollment.

8. Supporting Documents. The group practice may be required to include supporting documents necessary to verify the information in its application, including:a. CMS-855R Applications. Any physician or non-

physician practitioner in the group practice who will reassign his/her Medicare benefits to the group must complete a CMS-855R application and attach it to the group’s 855B application. In order to reassign their benefits, the practitioner must already be individually enrolled in the Medicare program. Physician and nonphysician practitioners apply for individual enrollment using the CMS-855I application.

b. IRS Verification of EIN. The group must confirm the EIN associated with its legal business entity by submitting an IRS CP-575 or similar document.

c. Electronic Funds Transfer Agreement CMS-588. This document identifies the financial institution and account information to which CMS can issue electronic payments directly to the group.

d. Medicare Participation Agreement CMS-460. The group must enter into a Participation Agreement with Medicare to accept Part B payment for its services at the approved charge amount determined by the MAC.

Once the group practice has assembled all the requested materials and drafted its initial 855B application, it will be submitted electronically or by mail to Novitas. The Medicare Program Integrity Manual puts the timeframe for a MAC’s processing of an initial 855B application at between 60–180 days. This timeframe depends on the accuracy and completeness of the application, and the number of “development requests” made by the MAC for additional or clarifying information on the group’s application.

Once the MAC has approved the enrollment application, it will send the group a letter that identifies the NPI and Provider Transaction Access Number assigned to the group, as well as instructions for use of the group’s Medicare identifiers. The practice then can retrospectively bill claims for services back to the effective date of the group’s enrollment, as described herein. Important Considerations

1. Effective Date of Billing Privileges. A physician group practice must pay close attention to the following timeframes to ensure that it can bill all of its possible claims to Medicare. The effective date upon which the group practice may bill for services is determined by the latter of the date the MAC receives and files the group’s enrollment application (later approved) or the date the enrolled practice began providing services at a new location.

How do I enroll my physician group practice in the Medicare program, and what are important considerations to remember in the enrollment process?


THE LEGAL ISSUE A group practice may be permitted to bill retrospectively for services up to 30 days prior to its effective date, if at the time of submission, it met all of the Medicare program requirements, and circumstances existed that precluded enrollment prior to the group’s provision of Medicare services. Based on the timeframes above, if a practice fails to file its 855B application within 30 days of providing Medicare services at its practice location, all claims prior to the MAC’s receipt of the application will be denied. As a result, it is imperative for the practice to quickly and accurately complete and submit its enrollment application prior to beginning services at its practice location.

2. Common Drafting Errors. The following common errors in drafting CMS-855 applications can result in returns and delays in a group’s enrollment process:a. Using an outdated enrollment form. An application

submitted on an outdated enrollment form will be rejected immediately.The most updated CMS-855 forms are on the CMS or MAC Web site. The current 855B form to be used for enrollment has a date of 7/11.

b. IRS form of legal business name. The group’s legal business entity name must match the name on the entity’s IRS tax documents. This includes removing any punctuation excluded by the IRS (i.e., John Doe, LLC would be written as “John Doe LLC”).

c. Signatures. An application will be rejected if a signature is missing, copied, stamped, or undated.

d. Missing Information. The most common error in drafting an enrollment form is failing to complete the application. An omission can result in a development request, return or rejection of the application.

3. Reporting Changes. To maintain its active enrollment status, the practice must timely report any changes in the group practice. Any change in ownership, final adverse legal action, or practice location must be reported to the group’s MAC within 30 days of the effective date of the change. All other changes to the group’s enrollment (e.g., change in authorized official or new address of an indirect owner) must be reported to the MAC within 90 days of the effective date of the change.

Scott Schardt is an associate at the Rogaliner Law Firm, a boutique healthcare firm in Dallas. He practices in the areas of healthcare operations and regulatory compliance, provider acquisitions and joint ventures, Medicare/Medicaid payor enrollment, and provider licensure.

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The healthcare industry in Texas is abuzz with news about the Health Insurance Portability and Accountability Act of 1996 and medical record privacy protections. There’s good reason for this, considering the 2009 HIPAA revisions in the Health Information Technology for Economic and Clinical Health Act (HITECH), the passage of House Bill 300 by the Legislature in 2011, and the publication in January of the HIPAA “Omnibus Rule,” implementing and interpreting the HITECH Act requirements. These laws and regulations impact the ways medical providers can use or disclose patient-specific “protected health information.” The increased focus on medical record privacy largely has occurred in conjunction with an increase in the use of electronic information in the healthcare industry. Physicians are under increasing pressure to connect with their patients by electronic means, including social media, but are obligated by law to protect the privacy of patient medical information.

The term “social media” itself is a broad concept, but generally it can be described as any internet-based or electronic-communication-based structure for people with common interests to interact. “Social media” usually refers to second-generation “Web 2.0” internet applications (such as Facebook, blogs, Twitter), as opposed to earlier internet tools such as physician practice Web sites. In the business context, social media usually involves one of two types of interactions: externally focused communication (and marketing) activities that are directed at a larger audience rather than to specific individuals, or person-to-person communications between patients and caregivers. The first type of social media activity may involve the development of a Facebook page to promote or provide information about a physician practice, or development of a YouTube channel for a larger provider group to publish explanatory and marketing videos for prospective or active patients.

With the exception of publishing videos showing the treatment of identifiable individuals (which would require patient authorization), most of these types of social media activities do not involve the use or disclosure of patient information. Although physician advertising rules apply (see Texas Occupations Code § 101.201, Texas Medical Board Rule 164 and TMB’s 1994 “Statement on Ethical Advertising,” for example), HIPAA and HB300 usually are not an issue. The second type of social media activity — communicating with specific individuals — likely would include patient-specific information, and, therefore, would implicate HIPAA and state privacy laws. The impact of HIPAA on any social media activity would depend on the specifics of the activity and would need to be reviewed on a case-by-case basis; however, a few overriding concepts generally are applicable. For purposes of this discussion, e-mail, patient portals and other tools for electronic communication with patients should be subject to the same analysis.

First, no physician practice that is a HIPAA-covered entity should engage in any social media activities without

ensuring the activity conforms to the practice’s HIPAA security policies and procedures. If your practice hasn’t performed a risk analysis and created such policies, you should do so immediately, and cease any new electronic communications or social media activities that involve the use or disclosure of PHI. Once a risk assessment has been done, any decisions regarding social media or electronic communications should be made in compliance with the practice’s policies and procedures. The practice will need to engage appropriate decision-makers to determine the activities to be undertaken, the safety measures to be implemented, and the responsible parties to implement such activities.

Second, proper and sufficient security measures should be implemented to protect any PHI that might be communicated. New policies and procedures may be necessary. Social media activities that do not contain patient information, such as the production of a Facebook or Twitter account or other public relations activities that do not involve specific patients, will require minimal security protections. Communication with patients or other social media activities that include patient data, however, will require specific security protections. The method of data transmission will impact the level of security needed; before sending an e-mail communication to a patient that includes health information, a medical practice seriously should consider whether the message should be encrypted. If the communication is via a patient portal, the portal’s security measures might be sufficient.

Third, before communicating with a patient via e-mail, patient portal or social media, the patient should be informed of the risks and given the opportunity to opt out. The practice must determine what types of communications might be acceptable and what security measures are appropriate, but because no security measures are foolproof, a patient should be informed of (and accept) the risks before such communications are initiated.

Finally, any practice using social media or other electronic communications tools should consider the need to retain a permanent record of the communication, and whether it would or should be considered part of the medical record. At a minimum, if the practice would have noted the communication in the medical record if it had been made via phone, the same communication via e-mail or other electronic communication must be included in the record. Additionally, before initiating e-mail correspondence with patients, a practice should review TMB telemedicine rules (TMB Rule 174). Direct e-mail correspondence may be considered telemedicine, and, if so, the practice must ensure the e-mail communications are sufficiently stored, maintained and incorporated into the patient’s medical record.

HIPAA allows for the use and disclosure of protected health information for treatment, payment and healthcare operations. To the extent social media is used for these purposes, such uses are allowed. However, safeguards must be implemented to reduce known or anticipated risks.

What are the legal impacts of HIPAA and HB300 in the age of social media? How can I best interact with patients and remain compliant with the law?


How can my practice prepare for a RAC audit?

THE LEGAL ISSUE In other words, HIPAA allows a medical practice to

communicate with a patient via e-mail or social media for treatment purposes, but the methods and means of communications must be subject to sufficient safeguards to reasonably protect the confidentiality of the communication. That is, HIPAA may allow a physician to converse with a patient via Facebook about treatment matters, but it might be impossible to do so in a way that reasonably would protect the confidentiality of the communication.

HIPAA and HB300 prohibit the use of patient information for marketing purposes (defined in HIPAA as communication intended to encourage the recipient to purchase or use a product or service), so if the social media use is for marketing purposes and if it uses protected health information, patient authorization must be received. Most marketing activities directed to the general public do not have specific patient information, but if patient-specific data is used to

determine who receives the marketing materials, then HIPAA marketing restrictions apply. Social media activities that do not involve patient information are safer, but practices still must ensure that they abide by applicable advertising rules.

As social media platforms become a greater factor in day-to-day American life, physicians will be expected to participate in those platforms for electronic communication. It is possible to do so, but only with careful consideration of the inherent risks.

Jeffery P. Drummond, JD, is a partner with Jackson Walker, LLP, and past chairman of the Dallas Bar Association’s Health Law Section. He is a frequent speaker on medical record privacy and security issues and HIPAA, and advises clients regarding compliance with those laws and regulations.

Compliance. An ounce of prevention is worth a pound of cure.

The Recovery Audit Contractor program was created through the Medicare Modernization Act of 2003 and made permanent by the Tax Relief and Health Care Act of 2006. This program is intended to recoup overpayments associated with services for which payment is made under part A or B of Title XVIII of the Social Security Act. RAC auditors are responsible for identifying overpayments and are reimbursed on a contingency-fee basis, meaning they receive a percentage of the improper amounts they correct. RAC auditors employ a staff of registered nurses, therapists, certified coders, and physician center medical directors. Nurses review claims, but are overseen by physicians. Overpayments are identified through proprietary software algorithms that search for patterns in coding and billing. The look-back period for an audit is three years from the date the claim at issue was paid, but no further than Oct. 1, 2007, and may include a “bonus” year.

The categories of review fall into four primary areas. 1. incorrect coding (mistake) 2. medical necessity (waste) 3. improper billing practice (fraud) 4. billing for services not provided (fraud)RAC auditors are required to post on their Web site

what they are targeting. Current trends show great increases in audits that relate to medical necessity and inpatient vs. outpatient provided services.

Additionally, Medicaid Integrity Group has trained thousands of state employees with 368 algorithms to test for suspect Medicaid payments. Recently, one state boasted that it had recouped $5 million after using only one of the algorithms.

The audits occur through direct provider audits and automated review of state claims. Often, the look back is generic to an issue rather than determined on a case-by-case basis. If the issue doesn’t pass muster, then all

payments for that issue (e.g., office injections of...) will be subject to recovery.

During an audit, reimbursements will be affected if a suspicious pattern is noted. For example, if your office/practice has trends or patterns of denials, then payments will be scrutinized, and reimbursements can be withheld or indefinitely delayed. Additionally, when employees copy files, they become subject to government employee interviews if the audit is done on site. Once a practice becomes a target, the risk/benefit analysis and the task of documenting to the satisfaction of the auditors is daunting.

A RAC audit can be avoided on the front end through good documentation and compliance. Comprehensive exam billing needs to have correlating documentation in the medical records. Coding correctly and conducting annual audits of billing and coding are essential to avoiding a RAC audit. Diligence in compliance may open unknown opportunities for diagnosis, treatment and collection, as well as avoid the adverse outcomes that affect the practice and payments. Consider hiring an independent, experienced coding consultant as he or she can better explain what CMS manuals require. There is an appeals process for RAC audit determinations with specific deadlines for appeal, and RAC auditors are required to return payment if they lose at any point in the appeals process. If your practice becomes subject to a RAC audit, obtain professional audit counsel. Professional liability insurers now offer RAC audit policies.

Diane K. Shaw, JD, has 25 years of trial experience focusing on medical malpractice defense, state and federal compliance with healthcare laws, tort and insurance reform, and general civil litigation. Her firm, Shaw & Associates, is based in Dallas.


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How is my practice classified under the guidelines for the Texas Franchise Tax? What is my legal obligation?

As a result of the prohibition of the corporate practice of medicine, physicians practicing in Texas are limited in the type of entities through which they may practice medicine. The corporate practice of medicine is a legal doctrine which generally prohibits corporations, entities or nonphysicians from practicing medicine. Certain exceptions exist; however, generally speaking, a physician may practice medicine only through a sole proprietorship, a limited liability partnership, a professional association, or a professional limited liability company. A professional association, a professional limited liability company, and a limited liability partnership are all subject to the margin tax. A general partnership and a sole proprietorship are exempt from the margin tax; however, these entities provide no liability protection to the physician.

A. What is the Margin Tax? In 2006, the Legislature enacted the most sweeping and significant revisions to the state’s franchise tax since 1907. The revisions altered the method of calculating the tax and broadened the tax base by expanding the types of business entities subject to the tax. Although Texas law still refers to the tax as a franchise tax, it commonly is referred to as the margin tax. The margin tax became effective on Jan. 1, 2008. Generally, the margin tax applies to any business organization that protects its owners from liability; thus, sole proprietorships and general partnerships are not subject to the tax because the owners are not protected from liability.

B. How Is the Margin Tax Calculated? Texas law includes both the standard method for calculating the margin tax and the “E-Z Computation,” a simplified method for small businesses.

1. Standard Computation As its name suggests, the margin tax is assessed on the entity’s profit margin. To calculate its taxable margin, the entity first determines its total revenue in Texas and then subtracts the greater of the following three deductions: cost of goods sold, total compensation, or 30 percent of the entity’s total revenue.

a. Total Revenue Total revenue is the total income reported for federal income tax purposes, plus dividends, interest, gross rents and royalties, capital gains, and income from related entities. Healthcare providers may subtract any revenue from Medicare, Medicaid, TRICARE, the Children’s Health Insurance Program (CHIP), and workers’ compensation commercial insurers or managed care plans, including copays and deductibles from these sources. Healthcare providers also may subtract costs for uncompensated care from total revenue.b. Deductions After calculating its total revenue, the entity then subtracts the greater of these three deductions: costs of goods sold, total compensation or 30

percent of the entity’s total revenue. The costs of goods sold deduction includes the direct costs of acquiring and producing real or tangible personal property and up to 4 percent of administrative or overhead costs. Because the goods must be sold in the ordinary course of business, service industries, such as a physician practices, typically are not eligible for this deduction. The total compensation deduction includes wages paid to owners, officers and employees (capped at $300,000 per person) and benefits deductible for federal income tax purposes, such as workers’ compensation, health care and retirement benefits. If neither the costs of goods sold deduction nor the total compensation deduction is greater than 30 percent of the entity’s total revenue, the entity may simply take that amount as a deduction. This deduction was included for those businesses that have little in the way of costs of goods sold or compensation.c. Margin Tax Rate The margin then is multiplied by the applicable tax rate. The margin tax rate for most entities is 1 percent.

2. E-Z Computation The E-Z Computation is an alternative method of calculating the margin tax for small businesses. If the entity had $10 million or less in gross revenue for the preceding year, it may elect to calculate the tax by multiplying total revenue by the apportionment factor by 0.575 percent. However, an entity that elects the E-Z Computation may not take the costs of goods sold or total compensation deduction.3. No Tax Due Texas law also sets a floor for assessment of the margin tax. For margin-tax reports due on or after Jan. 1, 2012, but before Jan. 1, 2014, entities with annualized total revenue of $1,030,000 or less owe no tax. Furthermore, an entity is not required to pay the margin tax if the amount due is less than $1,000.

C. When Is the Margin Tax Due? All taxable entities must file an annual margin tax report not later than May 15 of each year, even if they do not owe taxes. Nontaxable entities must notify the comptroller that they are doing business in Texas (if they have not done so). After the initial notification, non-taxable entities are required only to notify the comptroller if they no longer qualify as nontaxable.

Darrell Armer, JD, is a shareholder at Looper, Reed & McGraw, PC. His practice focuses on commercial transactions, with an emphasis in the healthcare industry.

THE LEGAL ISSUE


First Tuesdaysa t t h e C a p i t o l

M a r c h 5 , 2 0 1 3

Among the DCMS members at the March 5 First Tuesday are Drs. Richard W. Snyder II, Christian Royer, Chris Berry, Mark Casanova, Jennifer Massengale, Michelle Ho, Steven Cole, Lee Ann Pearse, Cynthia Sherry, Sarah Helfand, Don Read, Les Secrest, Steven Hays, Carolyn Evans, Ian Ratner, and Danielle Ford.

Drs. Lisa Swanson, Sarah Helfand and Steven Hays

DCMS President Cynthia Sherry, MD, and Mark Casanova, MDDrs. Danielle Ford and Steven Cole


Drs. Steven Hays, Chris Berry, Carolyn Evans, Michelle Ho, Steven Cole; Representative Villalba; Drs. Staci Benson, Don Read, Jennifer Massengale, Danielle Ford, Lee Ann Pearse, and Richard W. Snyder II

Drs. Chris Berry, Rajiv Rugwani, Steven Cole, and Carolyn Evans; Representative Ratliff; Drs. Steven Hays, Sarah Helfand, Jennifer Massengale, Danielle Ford, Don Read, Lee Ann Pearse, and Ian Ratner

Drs. Mark Casanova, Danielle Ford and Ian Ratner with Senator John Carona (R-Dallas)

Senator John Carona (R-Dallas) and Don Read, MD

TALKING WITHREPRESENTATIVE JASON VILLALBA

(R-DALLAS)

TALKING WITHREPRESENTATIVE BENNETT RATLIFF

(R-DALLAS)

TALKING WITHSENATOR JOHN CARONA

(R-DALLAS)


OPINIONWhat advice would you give physicians as they consider joining an ACO?

I’ll state the obvious before we begin — Accountable Care Organizations are a bad idea. I say this much in the same sense the Declaration of Independence was a bad idea because no one had any idea how it might possibly work, yet somehow, we pulled it off. As the founding fathers discovered over two centuries before, it is better to hang together than to hang separately. Then, too, it is easy enough to declare intentions to form something that doesn’t exist, and it is quite another matter working out the details of if, and how, it actually might work.

Forming or joining an ACO is the easy part. Devising a workable system to manage turf and egos, allocate revenue among a group of diverse providers, and measure quality outcomes are just some of the hundreds of problems yet to be ironed out.

The Center for Medicare and Medicaid Services is conducting ACO pilot programs which change the way Medicare pays for physician services. Measured against reimbursement rates of a bygone day, you probably are going to end up with the short end of the stick. The only consolation comes from the cold comfort offered by Samuel Shem’s 1978 satirical medical novel “House of God.” “Law VIII: They can always hurt you more.” According to a recent Forbes article, by 2019 further cuts in physician fee schedules will be "so draconian that payments become even lower than Medicaid, a system by which doctors already lose money and most refuse to accept patients."

ACOs are similar to the old HMO models which ration care under a capitated, or per-person, basis, with the new provision for rewarding success. If the ACO saves the government money, the group of providers that formed the HMO earns a bonus. As to quality metrics, it immediately is obvious that getting paid for better outcomes isn’t exactly a “double-blind” test. A life-long government cynic easily could imagine a government program where a physician is paid more depending upon which box (“better” or “worse”) he or she checks to describe the patient outcome.

It wasn’t always this way. In 1965 Congress took to seniors a package of Medicare benefits backed by the full faith and credit of the US Treasury. At that time, physicians were promised two things: the government would pay 80 percent of the usual and customary fee for services, and the government would not interfere with a physician’s judgment. Over time, the government found it couldn’t keep either promise. CMS has tried every method to bring down the costs of Medicare, from fee schedules, all-inclusive rates, mandatory bundling, global payments to hospitals, payment based upon diagnosis, refusal to pay for re-admits, RAC audits, fraud/waste/abuse enforcement — and still we can’t afford to keep Medicare solvent.

The good news about ACOs seems to be that there are no Stark Law worries, where the ACO group is paid per capita. It doesn’t matter if a physician owns an outside imaging center because he is paid the same, no matter how often he refers patients there. One could envision a land-grab of sorts, however, if it turns out members were to be apportioned a larger share of the income based upon who owns the imaging center or the diagnostic lab. The trouble with Stark comes not from referral of patients covered by the ACO but from the referral of everyone else. ACOs do not replace fee-for-service. Membership in an ACO likely is a “financial relationship” under definitions set forth by the Stark Law. Suppose the ACO is losing money and, in order to make a living, physicians need to refer non-ACO patients to each other. Will this Stark Law violation be waived?

ACOs are a tricky subject both in the halls of Congress and in the healthcare industry. Seniors seem to like the system the way it is and are leary of joining an ACO because of the potential to lose some freedom of choice. In the 1990s, HMOs in many parts of the country were abandoned due to having a “gatekeeper” with the authority to limit access or benefits, and it is political suicide for a lawmaker to introduce any such agency. It is not clear how CMS plans to encourage seniors to trade freedom of choice for what essentially is an HMO.

Historically, the government has sold physicians a new program (for example, HITECH) by making the initial deal too good to pass up. With ACOs, however, even in the beginning, the carrot doesn’t sound all that tempting. In fact, the greatest selling point for physicians may be the fear of being left out of an ACO, with a fee-for-service schedule set to plummet below Medicaid levels.

At this point, it is difficult to even know the right questions to ask. Fortunately, the American Academy of Family Physicians has published an excellent list of FAQs about ACOs subtitled “Everything you need to know about Accountable Care Organizations (in plain English).” It can be found on its Web site at www.aafp.org. The AAFP answers questions such as whether you should sell your practice to an ACO or be left out, whether the monetary incentives are sufficient to transform practice patterns, or whether ACOs are just a passing fad and what actions you can take immediately. As with any time of great transition, education and careful investigation of your options can be the greatest investment.

Martin Merritt, JD, is a health lawyer whose firm represents physicians, small practice groups and other providers with the primary goal of preventing a violation of Stark Law/AKS/FCA fraud and abuse laws. He can be found online at www.dallasphysicianlaw.com.

THE LEGAL ISSUE


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