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COMPLIANCE CORNER: Private Equity In MI Healthcare Entities

Michigan healthcare providers contemplating a relationship with private equity investors must be aware of various legal considerations relative to such arrangements. Increasingly, private equity investors are becoming more interested in investing in healthcare entities. Such investments often present lucrative opportunities for healthcare providers, yet these arrangements implicate a myriad of legal issues. This article will focus on health law issues, however other legal issues including, without limitation, corporate, tax and real estate matters, must be considered when evaluating private equity investment in healthcare entities.

Michigan laws include a legal doctrine commonly referred to as the corporate practice of medicine (CPOM) doctrine. CPOM laws restrict who can own and control certain healthcare entities and employ certain healthcare providers. Specifically, Michigan law requires entities that provide professional medical services to be organized as professional corporations (PCs) or professional limited liability companies (PLLCs). Michigan PCs and PLLCs engaged in the practice of medicine may only be owned by individuals licensed to provide the professional medical services rendered by the entity, or by entities directly or indirectly solely owned by such licensed individuals (1). Further, all officers of PCs and managers of PLLCs must be licensed to provide the professional medical services rendered by the entity. Accordingly, a medical practice through which physicians perform professional medical services cannot be owned or controlled by non-physicians (with the exception of ownership by a non-profit hospital). Thus, Michigan’s CPOM laws do not generally permit a physician practice to be owned or controlled by non-physician private equity investors. Accordingly, relationships with private equity investors must be structured so that the providers retain ownership of the professional entity (2) when required by the Michigan CPOM laws. The result is usually a complex organizational structure that involves holding companies and management companies, some of which may include joint-ownership opportunities for the providers. Such structural considerations must also address any entities that are related to the professional practice but that are not governed or restricted by Michigan’s CPOM laws, as ownership of these entities may be transferred to private equity investors in certain cases, subject to federal and state fraud and abuse laws.

Federal fraud and abuse laws include, without limitation, the Anti-Kickback Statute (“AKS”) and the physician self-referral prohibition commonly referred to as the “Stark law.” (3) The AKS prohibits a person or entity from knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward the: (a) referral of an individual for the furnishing of any item or service that may be reimbursed under a federal health care program, or (b) purchase, lease, ordering or arranging for or recommending the purchasing, leasing or ordering of any item, facility or service that may be reimbursed under a Federal Healthcare Program (4). Protection of an arrangement under an AKS exception or safe harbor avoids treatment as a criminal offense under the AKS. Stark contains a ban on physician self-referral which generally makes it unlawful for a physician to refer Medicare or Medicaid patients (or present claims for payment to Medicare or Medicaid) for designated health services (DHS) to an entity with which the physician (or an immediate family member) has a financial relationship (5). If Stark is implicated, the arrangement must satisfy all elements of a Stark exception in order to comply with Stark. These laws must be evaluated by the parties to ensure previous and future compliance, particularly since the relationship between the healthcare entity and private equity investors often results in organizational restructuring involving multiple entities. For example, if the resulting organizational structure involves a management company and private equity ownership of related entities, the relationship between these entities and the professional healthcare entity must be evaluated for compliance under the AKS and Stark.

Similarly, Michigan fraud and abuse laws must be considered and include, without limitation, state self-referral laws, anti-kickback laws, and fee-splitting laws (6). Michigan’s fraud and abuse laws differ from Stark and the AKS in various ways and as applied to various healthcare providers. Whereas Stark and the AKS only apply to governmental healthcare programs, Michigan fraud and abuse laws also apply to services reimbursed by commercial payors such as Blue Cross Blue Shield of Michigan (BCBSM). Michigan fraud and abuse laws, in conjunction with the CPOM doctrine, may also be implicated in arrangements whereby physicians retain ownership of the professional entity but the private equity firm earns fees generated by professional medical services. In addition to state fraud and abuse laws, Michigan healthcare providers must comply with additional licensure-based laws. Healthcare transactions must also account for rules regarding changes in ownership of licensed healthcare entities, which often require prior or contemporaneous notice to, and approval from, relevant state agencies.

A crucial part of any private equity investment in a healthcare entity is the due diligence process. This process generally involves evaluating all aspects of the healthcare entity’s operations and structure. During the due diligence process, the healthcare entity’s current organizational structure, legal and billing compliance, licensure, operational and legal risks, contractual arrangements, tangible and intellectual property, prior and current litigation, financial information, and other relevant information and documentation is provided to and analyzed by the private equity investors. The due diligence process may reveal a variety of issues that the parties may decide to address prior to, contemporaneous with, or following closing, as appropriate. For example, in the event a non-professional entity owned by the private equity investor will assume the non-clinical assets of the physician practice, the parties may evaluate contractual restrictions (e.g., assignability of a lease) and other concerns related to such assets prior to closing. Typically, either during or after the due diligence process, the parties will begin to draft and negotiate the agreements and supporting documents necessary to effectuate the transaction. Legal review of these documents is imperative in order to protect the rights of the healthcare provider.

While private equity investments offer exciting opportunities for Michigan healthcare providers, these arrangements must be structured properly under federal and state laws. Private equity firms often invest in multiple healthcare providers nationwide and Michigan’s restrictive CPOM doctrine requires private equity investments in Michigan to be structured differently than in many other states. When considering a private equity investment, Michigan healthcare providers may first want to evaluate their current compliance with federal and state law, examine utilization patterns, and otherwise assess their practice in anticipation of the due diligence process and to mitigate compliance concerns that may impact the private equity investment. Once the private equity investor and healthcare provider agree to an investment, the parties must structure the arrangement to comply with complex federal and state laws including, but not limited to, Michigan’s CPOM doctrine, the federal AKS and Stark law, and Michigan fraud and abuse laws governing self-referrals, kickbacks, and fee-splitting. While non-compliance may result in business risk to both parties, healthcare providers face additional risks such as false claims liability, licensure sanctions, and termination from participation in Medicare, Medicaid, and commercial payor networks. Accordingly, a comprehensive legal review of private equity investments is necessary to evaluate compliance with federal and state law in light of the lucrative financial opportunities offered to healthcare providers.

1.MCL § 450.1283(2); MCL § 450.4904(1).
2.MCL § 450.1286; MCL § 450.4905(1).
3.42 USC § 1320a-7b(b); 42 USC § 1395nn.
4.42 USC § 1320a-7b(b).
5.42 USC § 1395nn.
6.See MCL § 333.16221; MCL § 400.604; MCL § 752.1004; MCL § 750.428.


With the ever-growing opioid crisis and the president’s call to action to address that crisis, primary care, pain management and behavioral health providers in particular may be faced with privacy issues dealing with a patient’s family, friends or others in relation to treatment for opioid abuse. What can a provider disclose to others in the aftermath of an overdose in order to assist a patient’s recovery efforts and prevent future incidents? What information can a provider share about a patient’s condition and treatment in such a situation?

The Health Insurance Portability and Accountability Act (HIPAA) prohibits disclosure of a person’s protected health information (PHI) to family members, friends or others involved in the patient’s care (or payment for care) without patient consent except for certain defined situations.

In the event an individual is disoriented, unconscious or otherwise incapacitated, a medical provider may provide information to others without the patient’s permission so long as sharing that information is: (1) in the best interest of the patient; and (2) the information shared is directly related to the patient’s care. Thus, a provider may exercise his or her judgment to advise family or others that an opioid overdose occurred, describe the patient’s condition and how the patient is being treated as a result.

However, when a patient possesses decision making capacity, a provider may only share information without the patient’s consent if sharing that information is for the purpose of avoiding or lessening an imminent threat to the patient’s health or safety. Put another way, a provider may disclose information about the patient’s opioid use or abuse to someone who the provider has a good faith basis to believe could reasonably lessen or prevent further harm from continued opioid use or abuse following the patient’s discharge. For example, a provider may share information with others in order to help prevent a future overdose, decrease ongoing dependence, or to assist in seeking treatment. Other appropriate discussions potentially include alternate treatment for pain management, efforts to break an addictive cycle, explanation and treatment of withdrawal symptoms and relapse prevention strategies. In contrast, a provider should avoid disclosing information about a patient’s history of substance abuse to a family member who the patient may live with but has no involvement in the patient’s care or treatment.

A patient’s decision making capacity is not static and may change during the course of care. For example, a patient may present to an emergency room in an unconscious or altered state such that at the time of admission, the patient lacks sufficient capacity to consent to sharing PHI. Nonetheless, sometime later, the patient may recover sufficiently to be alert enough to make informed decisions. During the initial period of incapacity, a provider may share information with family or others related to the patient’s condition or care without the patient’s consent following the guidance discussed above. Later, after a patient recovers, a provider may share information in order to prevent a future overdose even if the patient does not consent so long as the provider believes disclosure is in the patient’s best interest and the information shared is related to that person’s involvement in the patient’s health care.

Easier to address are situations involving powers of attorney or patient advocate designations involving express authorization to disclose PHI to a particular individual. Such documentation allows a provider to disclose information without fear of violating HIPAA. In addition, parents of minor children are generally considered authorized personal representatives who are entitled to obtain information about a child’s health care.

Also important to consider are state and federal guidelines on confidentiality or rules of medical ethics that would preclude disclosure of a patient’s PHI.

In conclusion, before a nurse, physician or even billing administrator discloses PHI regarding a patient’s opioid use or dependence, care must be taken to comply with HIPAA in the manner discussed above.

For guidance or training on this topic, feel free to contact the author at 248-433-7291 or kruppel@dickinsonwright.com.


Health Org: Prosecuting Lyon Could Cause ‘Threat’ Nationwide
A non-profit organization representing health agencies and public health professionals says holding state Department of Health and Human Services Director Nick Lyon criminally responsible for actions done in his professional responsibility could “cause a threat to public health nationwide.”

A second nonprofit organization disagreed with criticism of criminal accountability for the Flint water crisis.

The two statements came in amicus curiae briefs filed by the Association of State and Territorial Health Officials (ASTHO) and Community Based Organizing Partners (CBOP), respectively, just two days before Lyon learns if he will head to trial on felony criminal charges for decisions he made during Flint’s Legionnaires’ disease outbreaks in 2014 and 2015.

“This prosecution greatly concerns ASTHO and its members, who fear that the criminalization of professional, discretionary decision making will harm, not help, public health,” ASTHO’s attorney Jeffrey Muth, of Grand Rapids, says in a court filing. “. . . In seeking to punish public health officials for their administration of their professional responsibilities, this case could cause a threat to public health nationwide.”

Flint-based CBOP’s brief from East Lansing Attorney Mark A. Totten stated: “Several voices—the well-connected, who neither live in Flint nor experienced this horror—have publicly criticized the idea of criminal accountability for the Flint water crisis. CBOP . . . believes a thorough examination by the criminal justice system is fitting and necessary.”

The prosecution alleges the totality of its evidence shows Lyon had a “willful disregard” someone would get sick or die from Legionnaires’ disease and he failed to promptly notify the public when he first learned about the crisis in late January 2015.

The defense argued Lyon has no “personal, individualized legal duty by statute or otherwise” to notify the public about the outbreaks.

Lyon is charged with two counts of involuntary manslaughter in connection with the deaths of two men and misconduct in office for allegedly misleading and withholding information from Gov. Rick Snyder about the outbreak. He also is charged with a misdemeanor count of neglect of duty.

Flint District Judge David Goggins is expected to announce Wednesday whether Lyon will head to trial.

ASTHO, a national nonprofit organization representing health agencies and public health professionals, argues a cautious approach that considers the circumstances of the outbreak and the type of disease is needed.

CBOP, a nonprofit organization in Flint that includes members from more than 50 local organizations focusing on diverse issues including public health, education and civil rights, filed a brief to “assist the court in understanding the crime of misconduct in office,” and specifically notes the court filing isn’t assessing the prosecution’s evidence nor addressing the other crimes alleged.

CBOP said the crime of misconduct in office hasn’t receives extensive attention by the courts, yet it is a “critical means of government accountability.”

To prove that count, the prosecution must establish that the defendant is a public officer who committed misconduct in the exercise of official duties while acting with corrupt intent. Misconduct can take the form of malfeasance, misfeasance or nonfeasance.

“The offense is broad, covering a wide range of government actors who purposefully commit misconduct, including a failure to carry-out a non-ministerial duty,” Totten said. “As a first-hand witness to the havoc caused by the Flint water crisis, the amicus curiae believe this robust crime must be applied with thoroughness and rigor to determine criminal liability for this crisis.”

Pfizer Scores First ‘Good Jobs For Michigan’ Incentive
The state July 24 pulled the “Good Jobs For Michigan” (GJFM) tool out of its economic development toolbox for the first time since Gov. Rick Snyder signed the legislation in 2017 in an attempt to lure big corporate fish to Michigan.

The Michigan Strategic Fund (MSF) Board today approved a GJFM incentive worth $10.5 million for Pfizer to build a new facility in Portage to manufacture injectable drugs.

Last year, Snyder and a coalition of supporters convinced the Legislature to adopt what was dubbed the GJFM package, which would allow companies awarded the incentive to capture income tax withholdings off the created jobs if they pay above the average regional wage.

It was believed a driving factor behind the legislation was to lure the Taiwan electronics manufacturer Foxconn to Michigan. The company best known for being an Apple product supplier was dangling a facility to U.S. states that would employ thousands of people.

But on the same day Snyder signed the GJFM package, Foxconn announced Wisconsin as its site for its plant.

Under GJFM legislation, if a project creates 250 to 500 jobs, those jobs must pay wages that are 125 percent more than the average regional wage. For projects creating 500-plus jobs, those have to pay 100 percent or more of the average regional wage.

In Pfizer’s case, the company was granted 100 percent withholding capture for 354 new jobs, with the average wage of those jobs landing around $80,000. If the company didn’t end up paying high enough wages, it would affect the incentive it would receive.

The Pfizer project is expected to deliver 450 jobs within the next eight years and generate $465 million in private investment.

“Pfizer’s investment is a major boost to the state’s pharmaceutical industry and further diversifies Michigan’s business environment,” said Snyder in a press release. “I appreciate Pfizer’s long-term commitment and the economic benefits this will bring to the region and the people who live there.”

The GJFM coalition, which includes business and economic development, community and labor groups, released a statement today noting that the Pfizer project is “exactly the type of transformational project this latest tool was designed to attract—with hundreds of good-paying jobs and opportunities for Michiganders that will also help bolster communities, advance quality of life and build a strong, resilient economy for current and future generations.”

The $10.5 million awarded via the GJFM incentive comes on top of a $1 million performance-based grant awarded to Pfizer for the same project, also approved by the MSF Board.

Jeff Mason, CEO of the Michigan Economic Development Corp. (MEDC), said Pfizer has 13 facilities around the globe, so this project was competing with its other company sites, which necessitated the use of the GJFM package.

According to the MEDC briefing memo on the Pfizer incentive, for the project to be “cost competitive it must remain financially viable compared to other Pfizer sites, contracted manufacturing sites” and the company’s competitors.

U.S. Rep. Fred Upton (R-St. Joseph) also released a statement celebrating the Pfizer project.

Under the GJFM package, the MSF Board is allowed to execute up to 15 written agreements per calendar year, and the program has a $200 million cap and ends at the end of December 2019.

Lansing Lines is a cooperative feature presented by MIRS, a Lansing-based news and information service and Healthcare Michigan.

ON MEDICINE: The Death Of Private Practice, Maybe Not

Is there any life remaining in the longstanding and cherished method of healthcare delivery by staunchly independent, patient-centric physician entrepreneurs? Do those physicians relishing the autonomy of small businesses aligned around patient care still exist? Are the market and political forces evolving in ways not permitting independence for such physicians, and is their demise inevitable?

When examining the history of healthcare in the United States, at some point predicting that the private practice of medicine would be in peril now seems inevitable. Tax-exempt policy toward employer-based health insurance, the expensive cost-plus Medicare and Medicaid payment policy at the outset of those programs in the 1960s and first-dollar (no deductible) health insurance policies could not help but result in healthcare cost inflation. These are symptoms of what Justice Louis Brandeis dubbed the problem of “Other People’s Money.” With advances in technology and an aging demographic added to the mix, the seeds of healthcare inflation have long been sown.

Of course as these myriad poor decisions stoked inflation, action by the same decision makers who created the problems was deemed necessary. The result was pricing controls disguised within various schemes, a regulatory onslaught, burgeoning numbers of mandates and the two programs delivering the coup de gras, MACRA (Medicare Access and CHIP Reauthorization Act) and the ACA (Patient Protection and Affordable Care Act). Consider the forced incorporation of the EMR (Electronic Medical Record) with its promises of improved care and lower cost. There is little data to show improvements in care, costs have increased, physician productivity has suffered, physician morale has deteriorated and burnout has accelerated. But alas, some have suggested that several decades may need to pass before benefits result. These gifts to physicians have increased practice overhead and complexity without any appropriately commensurate increase in reimbursement.

Organized medicine has failed through its populist, politically correct persona. This has produced controversy avoidance and rendered physician advocacy impotent. The physician “elites” who were in charge of organized medicine when the flames of change first appeared and now their heirs, who have failed to respond or even recognize it, are now unlikely to be called upon to lead this profession.

Healthcare systems have consolidated to dominate markets, increase revenue and monopolize the ownership of ancillaries.

Physician failure to optimize Independent Practice Associations or Physician Organizations has been a huge missed opportunity, which has allowed the Independent Organized Medical Staff—with its critical physician-led oversight for hospital patient care—to languish and become subservient to hospital management.

Physician demographics are also problematic. Older doctors are simply saying “to hell with it” and becoming employees as they transition to retirement. Younger physicians have abysmal economic and business savvy, as there is virtually no educational exposure to business matters, a vital topic in today’s practice environment. Those physicians who previously were entrepreneurial mentors to new graduates are increasingly avoided and thus absent from the medical educational process.

Wow! With all of this appearing as an insurmountable headwind, it is reasonable to conclude that private practice is in its terminal stages and that all physicians will end up employees. But hospitals are tailing off on binge-hiring physicians, and some healthcare systems are even terminating physician employees. It seems the return on investment of generally less productive employed physicians was not as anticipated. If profitability is not there, the strength of employment models for doctors working in hospitals becomes suspect.

Autonomy over business and patient care along with being facile in a rapidly changing healthcare environment are proving to be desirable physician traits, especially when compared to bureaucratic hospital system megaliths with their layers upon layers of management (a 3,000 percent increase since the year 2000). And this is dawning on physicians. They can maintain their focus on outcomes, as they should, rather than be captive to the process obsession indelibly incorporated into the hospital business.

It seems the plausible is morphing into the obvious. The more responsibility physicians take for their futures, the better off they will be. Never will another party have the same concern for physicians than they have for themselves. There are no “white knights” out there dying to solve physicians’ problems and assume all business risk. Organizations, especially those under stress like hospitals, will always put their own interests first.

Private practitioners still exist with that traditional old American entrepreneurial spirit. Consultants are available, business education can be had, differential value can be marketed and innovation can occur. Forward thinking hospitals—unencumbered by the need for power—and other partners experienced in ancillaries are entering the market anxious to partner with physicians. They seek those physicians motivated to engage 100 percent to make their own businesses successful in these newly formed enterprises and reap the rewards for their effort.

Without question, venturing into the healthcare marketplace has risk, but it also has rewards. Albeit, the future challenges to the private practice of medicine are not entirely predictable since politics has increasingly infiltrated and finally infected healthcare. But given the public’s growing concern with the cost of healthcare, it is reasonable to see those major drivers of cost becoming the right targets for reform, first hospitals, then pharma, and then insurance companies. Physicians are not the drivers of cost. It is not the inputs into the system, but the price that is making the cost of healthcare escalate.

Can a profession exist at all without having major control over its own fate? In this new era of healthcare, one would assume there exists a desperate and spreading desire among physicians to preserve who and what they are. I, for one, cheer on the traditional physician entrepreneurial spirit.

Trump Loosens Restrictions On Short-Term Health Plans

Insurers will again be able to sell short-term health insurance good for up to 12 months under final rules released Aug. 1 by the Trump administration.

This action overturns an Obama administration directive that limited such plans to 90 days. It also adds a new twist: If they wish, insurers can make the short-term plans renewable for up to three years.

The rule will “help increase choices for Americans faced with escalating premiums and dwindling options in the individual market, said James Parker, a senior adviser to Health and Human Services Secretary Alex Azar.

But the plans could also raise premiums for those who remain in the Affordable Care Act marketplace — and the short-term coverage is far more limited.
“We make no representation that it’s equivalent coverage,” Parker said.

The Trump administration’s approach is expected to please brokers and the insurers that offer the coverage.

“To restore these to 364 days — as originally drafted — is exactly what we are looking for,” said Jan Dubauskas, general counsel for the IHC Group, speaking before the final rule was released. The IHC Group is an organization of insurance carriers headquartered in Stamford, Conn.

She said she expects IHC to offer 12-month versions as soon as the rule goes into effect, which will be 60 days after it is published.

Administration officials estimate plan premiums could be half the cost of the more comprehensive ACA insurance. They predict about 600,000 people will enroll in a short-term plan in 2019, with 100,000 to 200,000 of those dropping ACA coverage to do so.
Just over 14 million people are enrolled in ACA plans this year.

Short-term plans are less expensive because, unlike their ACA counterparts, which cannot bar people with preexisting health conditions, insurers selling these policies can be choosy — rejecting people with illnesses or limiting their coverage.

Short-term plans can also set annual and lifetime caps on benefits, and cover few prescription drugs.
Most exclude benefits for maternity care, preventive care, mental health services or substance abuse treatment.

Some policy experts, including those from the Center on Health Insurance Reforms at Georgetown University, warn that allowing increased use of the skimpier coverage offered by short-term plans could leave some patients in financial or medical difficulty.

“If you get cancer, your plan will not cover oncology drugs, which can cost an average of $10,000 a month” and “if you are pregnant, you will have to find another way to pay for the cost,” averaging about $32,000 for prenatal care and delivery, the center said in a recent post.

Allowing short-term plans to last longer is the latest move to change regulations issued by the Obama administration. In June, the administration released final rules on association health plans, which grants greater leeway to small businesses and sole proprietors to join together to purchase insurance that doesn’t have to meet all the ACA’s requirements, although AHP plans are more robust than short-term plans.

Those changes to Obama-era rules, and other congressional actions, are expected to impact the cost of coverage for individuals in the ACA marketplace.

Premiums for the average benchmark ACA plan rose by 34 percent this year, according to a recent Congressional Budget Office report.

Factors driving the increase include medical inflation, but the CBO also cited the administration’s decision last fall to drop payments to insurers for lowering deductibles for certain low-income policyholders.

That same report expects premiums for ACA plans to increase 15 percent next year, in part because many consumers may be less likely to buy coverage without the threat of a tax penalty. The tax bill approved last year by Congress stops this financial penalty as of 2019.

Short-term plans, if they appeal to many consumers, could also play a role.

By drawing younger or healthier consumers out of the ACA marketplace, the short-term plan expansion will add up to a 1.7 percent increase to premiums next year, according to the industry lobbying group America’s Health Insurance Plans.

Short-term plans have been around for decades, meant as a stopgap for job changers, students and others who found themselves without coverage.

Under the Trump administration directive, insurers also can renew the short-term coverage for the same amount of time as the original plan — maxing out at 36 months.

HHS officials said current law allows the plans to have this longer shelf life, although critics are likely to argue that — when you factor in the renewal option — a plan that lasts three years cannot be considered short-term.

Supporters of the new rules say the short-term plans won’t affect the ACA market as much as critics fear because the plans will mainly appeal to those consumers already sitting on the sidelines, or those who don’t get a subsidy.

Already the vast majority of people who buy ACA coverage through federal or state exchanges qualify for premium subsidies.

Brokers will likely be pushing the plans, as they often pay higher commissions than do ACA plans.

And, for insurers, profit margins tend to be higher for short-term plans compared with ACA coverage. The plans have limits on coverage. Also, insurers are not held to the ACA requirement that they spend at least 80 percent of premium revenue on plan members’ medical care.

Both supporters and critics of short-term plans say consumers who do develop health problems while enrolled could, in theory, hang on until the next open-enrollment period and buy an ACA plan during the sign-up period because the ACA bars insurers from rejecting people with preexisting conditions.

That part of the law is under threat, however, in a case brought by Texas and 19 other states that seeks to declare that provision and two other parts of the ACA unconstitutional.

In early June, the Department of Justice said it would not defend the law against the Texas case, which is on appeal and may eventually end up at the Supreme Court.

Meanwhile, the Trump administration’s new short-term plan rules do not change states’ regulatory authority.

A few, including California, are already considering tighter restrictions than what’s spelled out in the federal directive.

“States do have the authority to regulate,” said Randy Pate, director of the Center for Consumer Information and Insurance Oversight at the Department of Health and Human Services. “We do think some states will move to limit them and some will embrace them.”

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente. http://www.kaiserhealthnews.com

Medicaid Work Requirement Bill Signed

Able-bodied, adult Healthy Michigan recipients would need to work 80 hours a month or be in a job training program after Jan. 1, 2020 in order to keep their Medicaid coverage unless they fall under a handful of exemptions, under legislation Gov. Rick Snyder signed June 22.

Sen. Mike Shirkey’s (R-Clarklake) SB 0897 also strips Healthy Michigan recipients who chronically lie on their monthly work reports to lose their coverage for a year. The Department of Health and Human Services would receive an extra $5 million a year under the bill for the additional auditors needed to track these recipients.

The bill also restates in law a provision that legislative Republicans didn’t get in the original Healthy Michigan waiver to the federal government. It allows people to stay on Healthy Michigan for 48 months, after which they need to set aside 5 percent of their income for healthcare while also pledging to engage in healthy behaviors to stay in the program.

If the President Donald Trump administration doesn’t approve the federal waiver that would be needed to implement these policies, Healthy Michigan would end.

Snyder framed the bill signing as the preservation of his Healthy Michigan program, which has enrolled 670,000 Michiganders as of the most recent numbers.

“I am committed to ensuring the program stays in place and that Michiganders continue to live healthier lives because of it,” Snyder said in a statement.

During the legislative process, the Republicans joined the business community in support of legislation they saw as giving a push to the poor to pursue the training that would get them skilled employment. Shirkey said in response to the bill signing, “I’m glad it’s been signed. Now the real work begins. We will make this successful. It’s good for Michigan and the affected enrollees.”

But Michigan League of Public Policy President & CEO Gilda Jacobs said Snyder’s signature “betrays the plan he helped create.”

That this new law puts into place work requirements for Medicaid recipients, affecting Michigan’s “most vulnerable residents is inexcusable enough, but at the last minute even more disturbing elements—all of them thinly veiled punishments for people with low incomes were added,” she said.

“We are creating poorer people with this policy, people who need that money to pay for rent, gas food and child care,” Jacobs said. “This doesn’t make any sense.”

According to a 2016 State Budget Office report, 80 percent of adult enrollees are below 100 percent of the federal poverty level and 47 percent of adult enrollees are under the age of 35. Roughly 45 percent of all adults with income below 138 percent of federal poverty rules were on Healthy Michigan as of 2016.

House Minority Leader Sam Singh (D-East Lansing) lamented the way “this misguided and malicious legislation” was “rushed through” the House floor over the objections of House Democrats.

“If six years in the legislature taught me anything, it is that the tides turn swiftly and our constituents remember—they will surely remember this,” Singh said.

Democratic gubernatorial candidate Abdul El-Sayed said Snyder and Lt. Gov. Brian Calley “should be ashamed” of legislation he called “heartless and dishonest.”

“This administration is the worst kind of cowardly when it comes to standing up for the poor,” he said. “They get bullied by a strain of ideologues who blame the poor for the GOP’s failure to build a Michigan where Michiganders can find meaningful work in the first place.”

This story presented in cooperation with MIRS, a Lansing-based news and information service.


New Mental Health Parity Proposal

There should be no “discrimination of coverage” between mental health benefits and those paid out by insurance companies for physical health, says Rep. Martin Howrylak (R-Troy).

He introduced two bills in mid June,HB6109, and HB 6191, calling the mental health parity, requiring insurers to offer the same coverage for mental health services as traditional medical care.

“The big picture is that mental health treatment should be not subordinated to physical health because they are inextricably linked,” Howrylak explained. “They both represent heath care needs of individuals.”

He used the example of disorders like bulimia and anorexia. Left untreated, they obviously can lead to very significant health problems later on.

“If I were an insurance company, I would rather nip it in the bud because I would know that I might have to spend a little more money today but in the long run I’m going to save money,” he said. “If people are doing well mentally, they are most likely going to be doing better than they would otherwise physically. It is very antiquated to treat them separately and it is something that is not consistent with modern science.”

The issue is not new in Michigan.

Wendy Block of the Michigan Chamber of Commerce, which has opposed previous such proposals, said parity is already required in the federal Affordable Care Act.

True, said Howrylak, but there is a loophole in the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA) of 2008. That loophole is that if insurers offer mental health coverage, it has to be on par with physical health coverage. But insurers are not mandated to cover mental health. Howrylak’s bills would close that loophole. Ohio, Indiana and Illinois have passed similar bills, he noted.

“That’s not a parity bill then. That’s a health benefit mandate bill,” said Dominick Pallone, executive director of the Michigan Association of Health Plans.

His organization has not had an opportunity to review the Howrylak proposals yet, but he said similar legislation has been proposed on a variety of benefits, not just mental health. “In any given year there are probably a good dozen health benefit mandate attempts,” he said. Previous attempts to mandate benefits have included oral chemotherapy, prosthetics and autism.

“The federal law very clearly says that if a health benefit is offered, then it must be treated equally as far as cost shares, co-pays, deductibles and the like with physical health services. That’s parity. But the mandate side is whether or not a certain benefit is covered or not,” he said.

Federal law names 10 categories of benefits deemed essential for a health insurance policy, he explained. Mental health is not on the list, but many insurance companies already do include mental health in their coverage. It is then left to the purchaser to decide what level of coverage they want to buy, Pallone said.

He agrees with Howrylak that untreated mental health problems cause worse problems down the line.

“I think treating the whole person is ideal from the health perspective. I certainly agree that there are long-term societal impacts and certainly societal costs to the state if mental health services aren’t provided to individuals who need them. The state plays a crucial role in providing mental health services and paying for those mental health services. Yet we have seen lawmakers in previous years cut mental health funding at the state level,” he said.

“I would welcome any conversation with any lawmaker about the state paying for any health benefit mandate that they wish to promote,” Pallone concluded

Howrylak’s bills come in the wake of the House bipartisan mental health task force, named for its commitment to community, access, resources, education and safety. Task force members traveled throughout the state to listen to mental health experts, families, law enforcement professionals, addiction specialists and more. The group compiled a report containing recommendations about how to improve Michigan’s broken health care system.

HB 6109 and HB 6191 have been referred to the House Health Policy Committee.

This story presented in cooperation with MIRS, a Lansing-based news and information service.

ON POINT…WITH POs: Certification Overload

In last month’s column, I asked the question, “Why do physicians with a career history of providing high quality care have to continue to take board re-certification examinations every six years?” I guess the topic of certifications in general has me in a bit of a huff these days. Not physician certifications, necessarily; rather, the plethora of certifications that have sprouted in recent years for healthcare roles not directly related to personal, clinical care.

I recently came across a post on LinkedIn that noted 149 patient advocates were now certified through a board I won’t name, following the inaugural national certification exam for professionals working as patient advocates. I’m an advocate for advocacy in most forms, and certainly for patient advocates. Yet does an examination make them more qualified or effective than their non-certified patient advocate colleagues in the field? I use this only as an example, not to highlight the legitimacy of this particular board and/or certification.

In general, I believe there is mission creep when it comes to board certifications for professionals who work in the healthcare community yet are not providing direct clinical care. Is the goal of having an educated healthcare workforce being hijacked by non-profit or for-profit companies set up chiefly to create and promote new certifications? I’m as pro-business as the next person, but healthcare is a unique animal and the needs of the patient must always be front and center. I’m not convinced there’s a patient-first focus behind the proliferation of new certifications. Where is the evidence showing that certifications lead to better healthcare delivery and better outcomes?

Following this progression, the next likely certifications will be in telehealth. Certified in operating telehealth equipment?  (See “on” button.) Certified in understanding the psycho/social dynamics between patient and provider in a telehealth environment?  Okay, now I’m just getting silly, but you do see my point. Board certifications may be appropriate for some healthcare careers not directly involved in patient care, but they are likely the exception and should not be a substitute for the value of ongoing continuing medical education and interacting with peers and intra-disciplinary professionals as a way of gaining valuable knowledge that is job applicable.

What we seem to forget is that healthcare professionals require a state license to practice.  And this practice of licensing generally works well. In Michigan the Licensing Division, in conjunction with state licensing boards, regulates 25 health professions under the Michigan Public Health Code. That’s an impressive number, do we really need any more?

COMPLIANCE CORNER: Medicaid Work Requirements

In June, a controversial bill that would impose work requirements on Medicaid recipients in the state’s expanded Healthy Michigan Plan made its way through the Legislature. It is expected that Gov. Rick Snyder will sign this bill into law, which could affect hundreds of thousands of individuals enrolled in the Healthy Michigan Plan. The House Fiscal Agency estimates that 540,000 of 670,000 individuals in the Healthy Michigan Plan would be subject to the new work requirements, and 5 percent to 10 percent of those individuals could lose coverage.

As background, the Healthy Michigan Plan was approved by the Legislature in 2013. It provides health coverage to individuals between ages 19 and 64 with income at or below 133 percent of the federal poverty line that do not qualify for Medicaid or Medicare.

Under the proposed bill, beginning in 2020, able-bodied adults ages 18 to 62 would have to show workforce engagement averaging 80 hours per month to be eligible for the Healthy Michigan Plan, unless an exemption applies. Qualifying work activities include employment or self-employment, education, job training, vocational training, internships, participation in substance abuse treatment, and community service. An individual is exempt from the workforce engagement requirements in the following circumstances:  pregnant; receiving disability benefits; full-time student; medically frail; the caretaker of a family member under six years old, of a dependent with a disability who needed full-time care, or of an incapacitated individual; a recipient who met a good cause temporary exemption; a recipient with a medical condition that resulted in a work limitation; a recipient who had been incarcerated within the last six months; a recipient of unemployment benefits; or a recipient under 21 years old who had previously been in foster care.

The bill proposes that the Michigan Department of Health and Human Services (MDHHS) implement and enforce the new work requirements. MDHHS will be required to notify able-bodied adults 90-days in advance of the implementation of the work requirements. An individual is permitted three months of noncompliance in a 12-month period. However, an individual found to have misrepresented his or her compliance will be ineligible for the Healthy Michigan Plan for one year.

Because the bill would change the eligibility requirements for the Healthy Michigan Plan, Michigan will be required to seek federal approval of the work requirements. If the federal government fails to approve the waiver within 12 months or denies it, the Healthy Michigan Plan will be terminated, leaving hundreds of thousands of people without health coverage.  However, denial of the waiver seems unlikely under the current federal administration, which has approved 20-hour per week work requirements in four states – Kentucky, Indiana, Arkansas, and New Hampshire.  Seven other states have submitted waivers that are pending approval.

Currently, there is a legal battle heating up in Kentucky over Medicaid work requirements. In January, Kentucky residents filed a class action lawsuit against the United States Department of Health and Human Services (“HHS”) claiming that HHS exceeded its authority under federal Medicaid law when it approved Kentucky’s work requirements and that these requirements reduce access to healthcare for low income people. That case will be heard by a federal court in Washington, D.C.  In February, Kentucky Governor Matthew Bevin filed a counter lawsuit in federal court in Kentucky seeking to uphold the waiver. If the two courts reach different decisions on the legality of the work requirements, it could delay implementation of the waiver requirements in Kentucky.

Therefore, even if Gov. Snyder signs the Medicaid work requirements bill into law, the future of these requirements is far from certain.  For additional information, contact Sarah Hillegonds, Esq., of Wachler & Associates, P.C., at (248) 544-0888.

LEGAL LEANINGS: When Hospital Systems Crash

By Tim Gary
Electronic medical records have become vital to both hospitals and physician’s practices. They are a secure, electronic version of a patients’ medical history and often include all of the clinical data relevant to a patient’s care, including demographics, progress notes, problems, medications, vital signs, past medical history, immunizations, laboratory data and radiology reports. The EMR automates access to information and streamlines the healthcare provider’s workflow. When a hospital EMR crashes or is breached it can be catastrophic. There is a real risk of liability exposure if the clinical staff’s access to patient records is cut off and the clinician proceeds with treatment without having access to all of the relevant data. Having assisted a number of hospitals in acquiring, implementing and maintaining electronic healthcare record systems, I have witnessed some of the best and worst practices. Here are some guidelines on how to prepare for a crash, or loss of data, and what to do after it happens.

No Such Thing As A Failure-proof System
Normally there are several redundancies built into hospital computer systems and most Software as a Service (SAS) physician office EMRs in order to either prevent a crash or bring the system back up quickly. These include recovery programs and cloud-based storage systems to stop the loss of, or quick restoration of, access to critical information. If, however, ‘‘a perfect storm’’ occurs, and multiple, successive things go wrong, there could be a system shutdown. A smaller hospital may not have an effective crash-recovery system, and may have fewer resources it can dedicate to ensuring its systems aren’t vulnerable to a crash. For example, a larger facility may have two or more points of entry for their internet connection, while a smaller system may have only one, leaving it more vulnerable if that connection goes down. Crashes can and do happen.

Be Adaptable
Health-care providers are very dependent on electronic medical records that contain a patient’s treatment history, including what drugs a patient currently is taking and which ones may cause an adverse reaction. Losing access to that kind of information adds to the complexity of practicing medicine. Without this easy access to crucial information about patients, providers have to find other ways to access the data. This means doing it the ‘‘old-fashioned way.’’ Ensure your healthcare providers are practiced in asking patients and their families about their relevant medical histories and recording the information prior to making treatment decisions. Include imperative questions that must be asked of each patient at the beginning of the process.

Systems often include checklists for doctors and nurses and allow access to evidence-based tools that providers can use to make decisions about a patient’s care. Without those lists, they have to rely on their training and experience and think through the treatment process on their own. Before EMRs were in existence, most doctors did this as a matter of course. It was part of their muscle memory. Ensure that your doctors and nurses are adaptable and do not become overly reliant on technology to tell them ‘‘if A, then B.” Retain paper copies of the data, diagrams, and charts on the patient for documentation of the information gathering process when you decide to proceed with treatment.

Determining Liability
Just because the hospital’s system goes down, it does not mean that the provider is held liable for a less than optimal outcome. However, an adverse medical event that occurs during a period when a system is down will be examined under a microscope. Computer systems are facilitators of treatment. However, unlike the holographic physician on Star Trek Voyager, they don’t actually treat the patient. Clinicians are the care providers, so the question always will be whether the professional acted reasonably and in compliance with the standard of care, given the totality of the circumstances. Documenting what treatment was provided is not enough. The provider also needs to document the decision making process when an EMR system has failed. Remember, memories fade.

While crashes are unpredictable, it is important to have a plan in place to minimize disruption and data loss and maintain continuity of care. Training on these procedures should be a part of your compliance plan. For questions or comments, you may contact Timothy Gary at tgary@cruxstrategies.com.