New York Federal Court Takes Different Stance on Medical Staff Bylaws

On April 14, MedLaw Blog posted a comment about Villare v. Beebe Medical Center, a case in which a Delaware trial court granted summary judgment on the basis that the medical staff bylaws were held not to constitute a contract between the hospital and the individual physicians in Delaware.  Villare sited a New York case, Mason v. Central Suffolk Hospital as precedent that standard contract law does not create a contract based upon medical staff bylaws.  Note this is the minority position among the jurisdictions.

Ironically, a New York federal district court, the U.S. District Court for the Northern District of New York, has just decided a case which creates an interesting twist.  Although Kaufman v. Columbia Memorial Hospital is only a denial of a pretrial motion to dismiss, the case nevertheless holds that an employment contract between the physician and the hospital which incorporates the procedures of the due process procedures of the medical staff bylaws can make those due process procedures a contractual obligation, even if the medical staff bylaws are not a contract per say in the jurisdiction. 

Medical Staff Bylaws Are Not Contracts in Delaware

One of the fundamental issues in credentialing disputes is whether the Medical Staff Bylaws constitute contracts between the Hospital and the individual physicians.  If the Medical Staff Bylaws do constitute a contract, then the due process provisions contained in the Bylaws are guaranteed to the physician, regardless of the Health Care Quality Immunity Act (HCQIA).

We should note that HCQIA does not mandate due process.  Instead, HCQIA merely provides immunity to the Hospital for the credentialing process if it does provide due process.  The Hospital could choose to forego the immunity and provide no due process, unless of course due process is provided in the Medical Staff Bylaws and the Medical Staff Bylaws are a contract in that particular jurisdiction.

In Villare v. Beebe Medical Center, the Delaware Superior Court (which is a trial court in Delaware) granted summary judgment to the medical center on the basis that the Medical Staff Bylaws do not constitute a contract in Delaware.

The Delaware Court noted that there is a split among the jurisdictions on this matter, but opted to follow the New York position, which is expressed in the case of Mason v. Central Suffolk Hospital.

There are a host of cases on this issue reported on the Med Law Blog, and you can view them under the Credentialing and Peer Review title, or search using the search function.

CMS Releases 2012 Physician Payment Data; WSJ Allocates by Specialty


The 2 links above should connect you to the total physician payment information by individual and specialty.


Pennsylvania Federal Court Rules on Important Grane Healthcare ADA Case

In a recent decision that has been making headlines across the country, a Pennsylvania federal court held that a local Cambria County company conducted over 300 unlawful pre-offer medical exams in violation of the ADA.  Cambria Care Center (“CCC”) had purchased the former Cambria County owned nursing home and engaged Grane Healthcare (a separate, but related entity to CCC) to interview and hire employees for the new facility, which was set to open later in the year. All 300 of the former county nursing home employees were invited to apply for new employment.

As part of the hiring process, Grane conducted pre-offer drug tests and medical exams, which involved having the applicants provide documentation substantiating any medication the applicant was taking.  A third party nurse conducted the drug test and physical and provided a written determination as to whether the applicants could perform the essential functions of the position for which they were applying. Based upon the drug tests and medical exams, Grane offered future employment with CCC to only 225 of the 300 applicants.  A group of rejected applicants filed EEOC charges alleging Grane and CCC violated the ADA by conducting the pre-offer medical exams and/or rejected some applicants based upon perceived disabilities and the EEOC filed suit on the applicants’ behalves.

Pre-Offer Medical Exams Violate the ADA

The District Court for the Western District of Pennsylvania heard the case and ruled against Grane and CCC, holding that, “Before an offer of employment is extended, an employer may not ask a job applicant to undergo a medical examination or inquire as to whether he or she is an individual with a disability.”  Only once an offer is made can an applicant be asked to undergo a medical exam. Grane challenged the fact that some of the employees who were not hired were not even disabled and, therefore, contended they were not protected under the ADA.  The Court held that an individual, even if non-disabled, can assert a claim when he/she is subjected to an unlawful medical exam or inquiry.  Further, the Court warned that post-offer medical exams can be used in making an employment decision, but only if “… all entering employees are subjected to such an examination regardless of disability, the applicable confidentiality requirements are adhered to, and the results of the examination are used consistent with the [ADA].”

Court Limits Use of Pre-Offer Drug Tests

Employees who are currently engaging in the use of illegal drugs are not covered by the ADA and the ADA permits employers to conduct a pre-offer drug screen for detection of illegal drugs. In the Grane case, however, the “drug screen” was broader and detected the existence of both legal and illegal drugs and other medical indicia – such as glucose in the urine.  The Court cautioned that testing for the presence of both illegal and legal drugs or evidence of medical information is beyond the scope of the ADA’s narrow exception permitting tests for illegal drug use and Grane’s conduct violated the ADA.

Punitive Damages Recoverable for Employees Who Were Still Hired- and Suffered No Compensatory Damages

“A violation of the [ADA] occurs as soon as the employer conducts an improper medical examination or asks an improper disability related question, regardless of the results or response,” explained Judge Kim R. Gibson.  The Court noted that the employees could recover punitive damages based upon the mere fact that they were subjected to an illegal pre-offer medical exam – even if they employees could not show they suffered actual damages. For example, an applicant who underwent an illegal pre-offer medical exam, and was ultimately hired, would still be eligible to receive punitive damages based upon the fact that the employee had to undergo the illegal pre-offer medical exam.

Grane is “Agent” of “Future” Employer

Because Grane was only acting as the agent of the 300 applicants’ future employer, CCC (which was not yet open and was yet an employer), Grane argued it could not be held liable as an agent of a future employer. The Court rejected Grane’s argument and held that it did not matter if Grane was only the agent of the future employer at the time of the medical exams.  The Court held that the ADA does not make a distinction between whether an entity is a current or future employer and that Grane could be liable as the agent of CCC, which was destined to be covered by the ADA in the future.

In light of the Grane decision, employers or their temporary or placement agencies should not use pre-offer medical exams and should be cautious of drug tests that reveal overly broad results.  Damages for these types of violations can be severe even if the employer thinks no one was hurt, so “no harm, no foul.”  Finally, even if the company is not yet operational (and has no employees), ADA liability can still attach to the company’s agent and possibly the company.






President Obama Signs the Protecting Access to Medicare Act of 2014

President Obama Signs the Protecting Access to Medicare Act of 2014

On April 1, 2014, President Obama signed into law the Protecting Access to Medicare Act of 2014. This new law prevents a scheduled payment reduction for physicians and other practitioners who treat Medicare patients from taking effect on April 1, 2014. This new law maintains the 0.5 percent update for such services that applied from January 1, 2014 through March 31, 2014 for the period April 1, 2014 through December 31, 2014. It also provides a zero percent update to the 2015 Medicare Physician Fee Schedule (MPFS) through March 31, 2015.

The new law extends several expiring provisions of law. We have included Medicare billing and claims processing information associated with the new legislation. Please note that these provisions do not reflect all of the Medicare provisions in the new law, and more information about other provisions will be forthcoming.

Section 101 – Physician Payment Update – As indicated above, the new law provides for a 0.5 percent update for claims with dates of service on or after January 1, 2014, through December 31, 2014. It also provides a zero percent update to the 2015 Medicare Physician Fee Schedule (MPFS) through March 31, 2015. CMS is currently revising the 2014 MPFS to reflect the new law’s requirements as well as technical corrections identified since publication of the final rule in November. For your information, the 2014 conversion factor is $35.8228.

Section 102 – Extension of Work GPCI Floor - The existing 1.0 floor on the physician work geographic practice cost index is extended through March 31, 2015. As with the physician payment update, this extension will be reflected in the revised 2014 MPFS.

Section 103 – Extension of Therapy Cap Exceptions Process - The new law extends the exceptions process for outpatient therapy caps through March 31, 2015. Providers of outpatient therapy services are required to submit the KX modifier on their therapy claims, when an exception to the cap is requested for medically necessary services furnished through March 31, 2015. In addition, the new law extends the application of the caps, exceptions process, and threshold to therapy services furnished in a hospital outpatient department (OPD). Additional information about the exception process for therapy services may be found in the Medicare Claims Processing Manual, Pub.100-04, Chapter 5, Section 10.3.

The therapy caps are determined for a beneficiary on a calendar year basis, so all beneficiaries began a new cap for outpatient therapy services received beginning on January 1, 2014. For physical therapy and speech language pathology services combined, the 2014 limit on incurred expenses for a beneficiary is $1,920. There is a separate cap for occupational therapy services which is $1,920 for 2014. Deductible and coinsurance amounts applied to therapy services count toward the amount accrued before a cap is reached, and also apply for services above the cap where the KX modifier is used.

The new law also extends the mandate that Medicare perform manual medical review of therapy services furnished January 1, 2014 through March 31, 2015, for which an exception was requested when the beneficiary has reached a dollar aggregate threshold amount of $3,700 for therapy services, including OPD therapy services, for a year. There are two separate $3,700 aggregate annual thresholds: (1) physical therapy and speech-language pathology services combined, and (2) occupational therapy services.

Section 104 - Extension of Ambulance Add-On Payments – The new law extends the following two expiring ambulance payment provisions: (1) the 3 percent increase in the ambulance fee schedule amounts for covered ground ambulance transports that originate in rural areas and the 2 percent increase for covered ground ambulance transports that originate in urban areas is extended through March 31, 2015 and (2) the provision relating to payment for ground ambulance services that increases the base rate for transports originating in an area that is within the lowest 25th percentile of all rural areas arrayed by population density (known as the “super rural” bonus) is extended through March 31, 2015. The provision relating to air ambulance services that continued to treat as rural any area that was designated as rural on December 31, 2006, for purposes of payment under the ambulance fee schedule, expired on June 30, 2013.

Section 105 – Extension of Increased Inpatient Hospital Payment Adjustment for Certain Low-Volume Hospitals – The new law extends, through March 31, 2015, a provision that allowed qualifying low-volume hospitals to receive add-on payments based on the number of Medicare discharges from the hospital. To qualify, the hospital must have less than 1,600 Medicare discharges and be 15 miles or greater from the nearest like hospital.

Section 106 – Extension of the Medicare-Dependent Hospital (MDH) Program – The MDH program provides enhanced payment to support small rural hospitals for which Medicare patients make up a significant percentage of inpatient days or discharges. This provision extends the MDH program through March 31, 2015.




A HIPAA security risk assessment (SRA) tool was recently made available through HHS.  The tool was developed as a collaborative effort between the HHS Office of the National Coordinator for Health Information Technology (ONC), the HHS Office of Civil Rights (OCR) and the HHS Office of General Counsel (OGC).  This SRA tool is intended to help guide health care providers in small and medium sized offices to conduct the risk assessment required under HIPAA.  Such an assessment assists health care providers in identifying areas of vulnerability and weakness so that necessary improvements in security can be made.  The HHS Press Release and the  ONC Press Release each contain hyperlinks to the SRA tool, which is available for Windows and iOS iPAD.  While use of this specific tool is not a requirement under HIPAA, the SRA tool provides a very good option for small and medium sized providers to utilize in promoting compliance with HIPAA security.

Posted by:  Paul J. Welk, PT, JD

MGMA Special Alert – SGR Repeal

March 31, 2014 – Special Alert:


Senate approves House-passed SGR patch
Today, by a vote of 64-35, the Senate agreed to legislation passed by the House of Representatives, H.R. 4302, which delays for one year a 24% cut to Medicare physician payments resulting from the sustainable growth rate (SGR) formula. The legislation is expected to be signed into law by the President. In addition to the SGR provisions, the legislation:
  • Extends the 1.0 work Geographic Practice Cost Index (GPCI) floor and therapy cap exceptions process for one year
  • Delays the transition to ICD-10 for at least one year
  • Creates new Medicare policies for clinical diagnostic laboratory tests
  • Puts in place “appropriate use” criteria for certain imaging services
  • Creates a new process for identifying “misvalued codes” in the Medicare Physician Fee Schedule

MGMA did not support this bill and is disappointed Congress was not able to take advantage of the unprecedented bipartisan, bicameral efforts made this year to advance legislation to permanently repeal the SGR. Continuing the cycle of kicking the can down the road through the use of temporary, short-term solutions to this problem creates instability .

Latest SGR Repeal News from MGMA

March 27, 2014 – Special Alert


House passes one-year SGR patch 
Today the House of Representatives passed by voice vote H.R. 4302, which would temporarily delay the 24% cut to Medicare physician payments resulting from the sustainable growth rate (SGR) formula for one year. MGMA has joined with physician organizations in Washington to continue to advocate for a permanent SGR fix, and does not support what would be the 17th short-term patch Congress has enacted since the SGR’s inception.


Though the House has passed this legislation, the Senate must now act and choose to either take up full repeal of the SGR, or another temporary solution to this problem. MGMA will continue to update members on the status of the SGR through the Washington Connection.

Federation of State Medical Boards to Vote on Telemedicine Policy

The March 20th edition of Modern Healthcare reports on a “patient centered telemedicine policy” to be voted on by the Federation of State Medical Boards (FSMB).  I’ve attached links to both the article and to the FSMB model policy.  The model policy, if approved, will be a recommendation to state medical boards regarding telemedicine.

The Modern Healthcare article questions one holding of the policy, which maintains that physicians providing telehealth treatment to patients should be licensed in the state in which their patient is located.  The article suggests this will act as a barrier rather than a facilitator for telehealth. 

In my opinion, this will clearly be a barrier, but physician licensing within the various states or jurisdictions is clearly the purview of the state, and the medical boards created by the state.  Neither FSMB nor any other body has the authority to encroach upon what is traditionally known as the “police power” of the state to protect their citizens.  Unless the various states are willing to join together for some type of reciprocity or central telehealth licensing, this will always be an issue.

However, I think the proposed model policy is a crucial step with respect to adopting standards of care, and it addresses the following major issues:

  1. State Licensing – licensing is recognized as the purview of the state in which the patient is located. 
  2. Technology – the policy approves of the use of both synchronous and asynchronous (or store and forward) technology, but excludes the use of audio only (telephone), email or text messaging, or fax methods of communication. 
  3. Physician Patient Relationship – the policy recognizes that the physician patient relationship should be established by the substance of the agreement among the physician and the patient, and that it does not require a personal encounter, but acknowledges that this is a standard of care issue.
  4. Standard of Care – the policy acknowledges that the standard of care expected of the physician is not reduced by the use of telehealth, and makes it incumbent upon the physician to include the limitations of the technology with respect to the physician’s decision regarding diagnosis, treatment and prescription of medication. 
  5. Informed Consent – the policy recognizes that telehealth requires informed consent and not only with respect to the treatment, but also with respect to the use of the telehealth technology, and requires disclosure of the risks inherent in the use of the technology being used.
  6. Privacy and Security – the policy recognizes that the patients have the same rights to privacy and security of protected health information with respect to telehealth interactions as they do personal interactions, and part of the informed consent process is to require disclosure and consent if the technology provides less privacy and security that would be expected otherwise. 
  7. E-Prescribing – the policy imposes the same standard of care requirements on the prescription of medication as would be applicable to any other type of treatment.  This is a major recommendation because telehealth is now burdened by regulations of separate medical and pharmaceutical boards which, perhaps unintentionally, adopt different standards for diagnosis and treatment than they do for e-prescription of medication, which hampers the development of telehealth unnecessarily. 

Practical considerations to protect against being ‘out of network’

Practical considerations to protect against being ‘out of network’

The disengagement of Highmark and UPMC is looming on the horizon; most of the hospital participation agreements between these two competing healthcare systems end on December 31, 2014.  There are some hospital agreements that continue, such as those at Children’s and Magee, but the focus of this article is not the review of the various hospital participation agreements.

Instead, the focus of this article is the disengagement impact on physician productivity and compensation, and what, if anything, physicians might do to prepare for that impact.

The potential problem applies equally to the physicians employed by UPMC, physicians employed by Allegheny Health Network, and independent physicians, although from different perspectives, as follows:

  • Physicians employed by UPMC are faced with the loss of patient volume from patients with Highmark health insurance plans;
  • Physicians employed by Allegheny Health Network have already faced the loss of patients insured by UPMC, which is now out of network.  Now they also risk loss of patients whose coverage was provided by Highmark but through employers that might switch from Highmark to Aetna, Cigna or United Healthcare (“Unaffiliated Payors”) as fallout from the hospital participation disengagement (as noted in Bill Toland’s Pittsburgh Post Gazette article on Sunday, February 19, 2014);
  • Independent physicians could suffer similar volume decreases if current patients insured by Highmark are covered through employer plans that change affiliations to either UPMC or the Unaffiliated Payors, and could lose Highmark participation if they lack privileges at a Highmark network hospital as required by Highmark’s credentialing requirements.

Physicians employed by either UPMC or AHN, presumably have little control over the participation decisions of the systems.  The standard employment contracts of both uniformly require physicians to participate or not participate in the third party plans selected by the employer.  Those employed physicians should seek, or should have sought when they negotiated their employment contracts, compensation and productivity provisions in their employment contracts to account for loss of patient volume caused by the disengagement.

  • If those employment contracts provide compensation that is unrelated to volume or collections, or is guaranteed in some other way, then the loss of patient volume may not be problematic.
  • However, if physician compensation (either base or incentive compensation) is predicated on maintaining or attaining certain volume or collections, measured either by dollars or WRVUs, then protection would require provisions that waive productivity or collection volume requirements when the decreases are caused by these strategic disengagement decisions.

Simply stated, if a system decides not to participate or cannot participate with a certain third party insurer, and the physician is destined to lose 2,000 WRVUs because of that decision, then the physician should seek or should have sought contractual provisions to hold the physician harmless from that decision, by either reducing the productivity requirement, waiving the productivity requirement for a certain period of time, and/or providing for guaranteed compensation until either the physician or the system can replace that lost productivity.

Independent private practice physicians face a different dilemma.  Although those practices have the discretion and authority to participate with any third party payor, certain third party payors may decide not to participate with them or the hospitals at which they practice may not be able to participate with all of the third party payors.  In addition, volume they previously received from Highmark participation may decrease if, as mentioned in the Toland article, some major employers are shifting their insurance from Highmark to either UPMC or Aetna, Cigna or United Healthcare.

The entry or increased presence of these Unaffiliated Payors is a direct result of the UPMC strategic decision to disengage with Highmark.  During the last 10 years or so, Highmark paid UPMC handsomely, or at least handsomely enough to justify or encourage UPMC not to participate with these unaffiliated third party insurers.  In the past, these unaffiliated third party insurers faced significant problems trying to penetrate the Western Pennsylvania market, i.e.,

  • Without access to the UPMC physicians and hospitals, which was a very large network even 10 years ago, it was difficult for these third party insurers to sell insurance coverage if they were not included in the UPMC network, which is the same problem Highmark could be facing starting in 2015;
  • The significant Medicare and Medicaid populations, coupled with the Highmark domination of the commercial market (which was pegged at greater than 60% in prior years by the Post Gazette), left little in the way of available patient base to justify spending significant sums of money to try to participate in Western Pennsylvania, especially without the UPMC network as mentioned above.

Now that these unaffiliated third party insurers have been permitted to participate with UPMC, they will presumably become a larger presence in the market.  Private practice physicians must evaluate the benefit of participating with those third party insurers, and compare those fee schedules with the fee schedules of the payros with respect to the potential lost volume.

Independent private practices may find they do not have enough economic leverage to negotiate with the new unaffiliated third party insurers, although some local primary care practices and some specialty practices may have achieved enough leverage to at lest negotiate with the Unaffiliated Payors, and perhaps even Highmark and UPMC at this point.

Practice size has uniformly been seen as the leverage necessary to negotiate with third party insurers.  That has always been a problem in Western Pennsylvania because of the commercial domination by Highmark.  Very few practices in the past have had the size necessary to negotiate successfully in that context.  Perhaps they will have better success with the new insurers seeking to enter the market.

Finally, independent physicians whose practices are heavily concentrated at a hospital that may become “out of network” should obtain privileges at a hospital or hospitals that would be expected to participate in those insurance plans, both to protect their patient volume and to maintain their Highmark participation.