This post is the second in a series of weekly blog posts covering legal issues for consideration during the early stages of development of a health app and providing best practices to help guide you through a successful launch. Consideration of intellectual property (IP) protection early in the development of a health app is important. Otherwise you could lose the opportunity to do so in the future or be forced to change the name or other details of your app after you have already invested time and money in the app.
A New Jersey Supreme Court case earlier this summer has New Jersey lawyers re-examining their clients’ business structures under the State’s corporate practice of medicine doctrine.
Many states prohibit the corporate practice of medicine (“CPOM”) in order to prevent or limit a lay person from interfering with a physician’s independent medical judgment. In New Jersey, for example, the State Board of Medical Examiners’ regulations prohibit a licensee with a more limited scope of practice (e.g., physical therapists, chiropractors, nurse practitioners, etc.) from employing physicians.
In Allstate Ins. Co. v. Northfield Med. Ctr., P.C., 2017 BL 148804 (N.J. May 4, 2017), the New Jersey Supreme Court ruled that a chiropractor (and his attorney that advised on the structure) may have violated the Insurance Fraud Prevention Act because, under the structure, a chiropractor could terminate a physician’s employment at any time and had more control over the practice’s profits than the physician (who is required to own a majority interest of the practice in New Jersey). Thus, the court ruled that the medical practice was controlled by the chiropractor instead of the physician in violation of the New Jersey CPOM prohibition.
Submitting claims while a practice is structured in violation of the CPOM doctrine can lead to insurers recouping payments as false claims. Individual physicians, corporations, and attorneys can also face disciplinary action for their involvement in setting up or operating the fraudulent entity.
It is important that the organizational documents are set up to give the physician control over the practice, but this control should be exercised in reality and not just on paper. Physicians often have managers run many of the business aspects of the practice, but the physician should have the final say with respect to the medical and financial decisions of the practice and the hiring and firing of professionals. Courts may look past the face of the documents to see who is really calling the shots on a daily basis.
While this recent case is spurring attorneys to evaluate their clients’ structures in New Jersey, this is a good reminder to take a fresh look at CPOM restrictions in other states as well. Make sure your structure works at the outset and re-examine every so often to adapt with evolving laws and court interpretations of such laws.
On September 19, 2017, the Tennessee Department of Health (“TDOH”) granted the request for a Certificate of Public Advantage (“COPA”) from Wellmont Health System and Mountain States Health Alliance. This approval paves the way for the two entities to form a single corporate entity called Ballad Health. According to the TDOH, both health systems “agreed through the legislative process to meet a clear and convincing standard that their merger would create a public benefit to the residents of Northeast Tennessee that would outweigh any downsides of a monopoly of services.” Notably, the Department observed that a Terms of Certification document accompanying the approval “includes how active supervision by the state of the new entity will look.” This fact is important because the Federal Trade Commission (“FTC”), which is not a fan of COPA regulations, has made clear that it will closely analyze and challenge defenses based on asserted state action immunity where the state fails to provide adequate active supervision.
Continue Reading Tennessee Department of Health Grants COPA Request for Health Care Alliance
As Texas, Florida, and the Caribbean rebuild after the latest string of deadly hurricanes and prepare for the possibility of future storms, the U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR) reminded health care providers of the importance of ensuring the availability and security of health information during and after natural disasters. OCR’s guidance is a good reminder to all health care providers – regardless of where they are located – of the applicability of the HIPAA Privacy and Security Rules during natural disasters and other emergencies.
Our colleagues at ML Strategies have provided their Health Care Weekly Preview for the week of September 18, 2017. This week’s preview focuses on the prognosis for the Graham-Cassidy bill to block grant ACA funding to states, including potential roadblocks imposed by Senators John McCain (AZ), Susan Collins (ME) and Lisa Murkowski (AK). The Weekly Preview also touches on the discord between Senators Lamar Alexander (TN) and Orrin Hatch (UT), who chair the HELP and Finance committees, respectively.
Last week, Apple announced the new Apple Watch Series 3 which will feature an enhanced heart rate app. The app will notify you when it detects an elevated heart rate even when you are not working out. The sensor will also be able to analyze cardiac arrhythmia. According to one estimate, 165,000 health-related apps were available for Apple or Android smartphones last year. Forecasts predict that such apps will be downloaded 1.7 billion times by 2017. Without a doubt, health apps are turning into a big business presenting not only an opportunity for financial success but the potential to impact the health and wellness of millions of consumers. The success of a health app will depend on careful consideration of some key legal issues during the early stages of development. In a series of weekly blog posts, we will cover these issues and provide best practices to help guide you through the successful launch of your health app. Below is a preview of what this series will cover. Continue Reading Building a Health App? What You Need to Know
On Monday, September 11, our colleagues in the Antitrust Section published an alert describing a developing antitrust lawsuit against Franciscan Health System (“CHI Fanciscan”): State of Washington v. Franciscan Health System, et al. No. 3:17-cv-05690 (W.D. Wash. Aug. 31, 2017). The Washington State Attorney General’s office accuses CHI Franciscan of accumulating a controlling share of the “Orthopedic Physician Services” market through incremental acquisition which has led to substantial lessening of competition and illegal price fixing, in violation of Section 7 of the Clayton Act and Section 1 of the Sherman Act, respectively, as well as Washington State antitrust laws.
The alert cautions that health care provider acquisition strategies may come under antitrust scrutiny, even when acquisitions target multiple small physician practices, if the cumulative effect of such acquisitions results in substantial condensation of market share in a particular area of health care services.
For greater insight on this issue, read the full alert here.
Our colleagues at ML Strategies have provided their Health Care Weekly Preview for the week of September 11, 2017. This week’s preview focuses on Congress’ efforts to stabilize the ACA marketplaces, as well as the proposal from Senators Lindsey Graham (SC) and Bill Cassidy (LA) to use block grants to fund Medicaid expansion and private insurance subsidies.
Since our March 17th post about President Trump’s executive actions aiming to implement his deregulatory agenda, several important developments related to the so-called “2-for-1” Executive Order (E.O. 13,771) have occurred at the Executive Branch management level. In addition, of great interest to us is the fact that the Food and Drug Administration (FDA) took its first major public step toward implementing the goals laid out in the President’s directive. On September 8th, the FDA issued seven Requests for Information that solicit “broad public comment on ways [FDA] can change [its] regulations to achieve meaningful burden reduction while continuing to achieve [its] public health mission and fulfill statutory obligations.” As detailed below, FDA issued one notice for each major product-focused Center, and one specific to cross-cutting agency regulations.
This post outlines the backdrop for–followed by the details of–FDA’s public request for input about which regulations should be cut or modified. Continue Reading FDA Takes First Steps to Cut Regulations, Solicits Public Feedback
In a major public move that has been long-awaited by proponents of evidence-based stem cell science, FDA Commissioner Scott Gottlieb issued a lengthy statement on August 28, 2017 “on the FDA’s new policy steps and enforcement efforts to ensure proper oversight of stem cell therapies and regenerative medicine.” Continue Reading FDA Commissioner Announces Stem Cell Enforcement Shift, Plans to Develop Comprehensive Regenerative Medicine Policies