The Florida Bar Health Law Section November/December 2012 Health Law Summaries

The following are brief summaries prepared by section volunteers of new developments in Florida and Federal health care law that may be of interest to members of the Health Law Section. The summaries are presented for general information only as a courtesy to section members and do not constitute legal advice from The Florida Bar or its Health Law Section.

You can download copies of the summaries using these links:

November/December 2012 Health Law Summaries (PDF)

November/December 2012 Health Law Summaries (DOC)


Off-Label use promotion of drugs

The Court of Appeals for the Second Circuit in Manhattan ruled that the FDCA (“The federal Food Drug & Cosmetic Act) does not prohibit a company or individual from using truthful statements to promote the off-label use of an approved drug.  Appellant Caronia contended that he was convicted for his speech–for promoting the off-label use of the drug Xyrem, an approved prescription drug–in violation of the First Amendment.  The Court declined “…to adopt the government’s construction of the FDCA’s misbranding provisions to prohibit manufacturer promotion alone as it would unconstitutionally restrict free speech.”  The Court concluded that the government cannot prosecute pharmaceutical manufacturers and their representatives under the FDCA for speech promoting the lawful, off-label use of an FDA-approved drug.   See United States v. Caronia, 2d Cir., No. 09-5006, 12/3/12.

Reported by Karina P. Gonzalez

Ohio Hospital and Physician Group to Pay $4.4 Million to Resolve False Claims Act Allegations

According to a Department of Justice (DOJ) Press Release, dated January 4, 2013, an Elyria, Ohio hospital and a physician group agreed to pay a total of $4.4 million to the United States to settle allegations that they violated the federal False Claims Act by performing unnecessary cardiac procedures on Medicare patients. The hospital, EMH Regional Medical Center (EMH) agreed to pay $3,863,857, while the physician group, North Ohio Heart Center (NOHC) agreed to pay $541,870. The Press Release indicated that the United States alleged that, between 2001 and 2006, “EMH and NOHC performed angioplasty and stent placement procedures on patients who had heart disease but whose blood vessels were not sufficiently occluded to require the particular procedures at issue.” The Press Release also indicated that “the claims resolved by this settlement are allegations only, and there has been no determination of liability.”

The matter was initiated by Kenny Loughner, the former manager of EMH’s catheterization and electrophysiology laboratory, who filed a qui tam or whistleblower complaint under the False Claims Act (FCA). The case is captioned United States ex rel. Loughner v. EMH Regional Medical Center, et al., Case No. 1:06-cv-2441 (N.D. Oh.). According to the Press Release, as a result of the settlement, Mr. Loughner will receive $660,859 of the United States’ recovery.

American Sleep Medicine to Pay $15 Million to Resolve Allegations of Improper Billing

Pursuant to a Press Release, dated January 3, 2013, the United States Department of Justice (DOJ) announced that American Sleep Medicine LLC (American Sleep), a Jacksonville, Florida-based sleep testing company, agreed to pay $15,301,341 to the United States to resolve allegations that it billed Medicare, TRICARE and the Railroad Retirement Medicare Program for sleep diagnostic services that were not eligible for payment. According to the Press Release, American Sleep owns and operates 19 diagnostic sleep testing centers throughout the United States and its primary business is to provide testing for patients suffering from sleep disorders such as obstructive sleep apnea. The Press Release stated that the United Stated contended that American Sleep submitted claims to Medicare and TRICARE that were false. More specifically, the Press Release stated that the United States alleged that the claims, which were submitted between January 1, 2004 and December 31, 2011, were false because “the diagnostic testing services were performed by technicians who lacked the required credentials or certifications, when it knew this violated the law.” According to the Press Release, the reimbursement of claims submitted for sleep disorder testing requires that initial sleep studies must be conducted by technicians who are licensed or certified by a state or national credentialing body as sleep test technicians.

The allegations covered by the settlement were raised in a lawsuit, United States ex rel. Daniel Purnell v. American Sleep Medicine LLC, no. 3:07-cv-12-S (W.D. Ky.), filed against American Sleep under the qui tam, or whistleblower, provisions of the False Claims Act by relator Daniel Purnell, who will receive $2,601,228 as part of the settlement. The Press Release stated that, in addition to the $15.3 million payment, American Sleep entered into a five-year Corporate Integrity Agreement (CIA) with the Office of Inspector. The Press Release notes that the CIA requires enhanced accountability and wide-ranging monitoring activities conducted by both internal and independent external reviewers.

The OIG Posts Advisory Opinion 12-21

On January 3, 2013, the Office of Inspector General (OIG) posted Advisory Opinion 12-21, which involved an arrangement (Arrangement) in which a Federally qualified health center (Health Center) sought to offer grocery store gift cards to certain patients in capitated managed care plans as an incentive to receive health screenings or other clinical services.

The State in which the Health Center is located engaged local managed care plans to provide managed care services for reimbursement on a capitated basis. In turn, some of the managed care plans selected the Health Center to serve as a contracted provider for the managed care plans’ Medicaid enrollees and pay the Health Center for these services on a capitated basis. Each managed care plan assigns its enrollees to specific contracted providers (such as the Health Center). Ordinarily, an enrollee must affirmatively elect to obtain reassignment to a different contracted provider before such reassignment would occur. Under the Arrangement, the Health Center would send letters to enrollees who either were newly assigned to the Health Center as their contracted provider, or were assigned to the Health Center as their contracted provider at least one year before and had not been seen by the Health Center in the past twelve months. The letters would offer such enrollees the opportunity to claim an incentive gift card redeemable for $20 in groceries from a major supermarket chain (the “Gift Card”) in exchange for a visit to the Health Center for a screening or any other clinical service. The award of the Gift Card would not depend on the individual’s selection of any particular screening or other clinical service, the Gift Card would not be redeemable for cash or for items or services from the Health Center, and each individual would be limited to a single Gift Card offer during any given twelve-month period. In addition, the Arrangement would not be advertised or marketed other than in the letters to individuals described above.

The OIG found that, while the Arrangement would implicate both the Civil Monetary Penalties Law (CMPL) and the Anti-Kickback Statute (AKS), the OIG would not impose civil monetary penalties under the CMPL and would not impose administrative sanctions under the AKS for a number of reasons. First, with respect to the CMPL, the OIG found that the remuneration would not be likely to influence beneficiaries to select the Health Center as their contracted provider for a number of reasons, including, without limitation, that the individuals assigned to other contracted providers would first have to affirmatively elect to obtain reassignment; that the Gift Card would be of relatively modest value and would not be redeemable for cash, or for items or services provided by the Health Center; and that the offer of the Gift Card would not be advertised or marketed, except to groups of beneficiaries already assigned to the Health Center.

Turing next to the AKS, the OIG found that the Arrangement would pose a minimal risk of fraud and abuse and, therefore, it would not impose administrative sanctions under the AKS for a number of reasons. First, the Health Center would offer the Gift Card only to eligible enrollees who would be enrolled in Medicaid managed care plans that are reimbursed on a capitated basis. The Health Center, in turn, would be compensated by the Medicaid managed care plans on a similarly capitated basis. Thus, the Arrangement would not result in increased costs to the Federal health care programs, nor would the Health Center have an incentive to provide unnecessary care which might result in harm to beneficiaries. Additional reasons noted by the OIG include that the Arrangement would not be advertised or marketed to the general public; the offer would be limited to one Gift Card of relatively modest value annually; and the Arrangement would provide a benefit to members of the largely poor and underserved community the Health Center serves.

The OIG Posts Advisory Opinion 12-22

On January 7, 2013, the Office of Inspector General (OIG) posted a favorable Advisory Opinion, AO 12-22, which involved an arrangement (Arrangement) in which a rural hospital would pay a cardiology group (Group) compensation under a three-year co-management agreement (Agreement) that would include a fixed fee, as well as a performance bonus which is based on the Groups implementing certain patient service, quality, and cost savings measures associated with procedures performed at the hospital’s four cardiac catheterization laboratories (Labs). The Group, which refers patients to the hospital for inpatient and outpatient procedures, does not provide cardiac catheterization services at any location other than the Labs.

Under the Agreement, the Group provides management and medical direction services for the hospital’s Labs in exchange for a management fee. The management fee is comprised of two types of fees, a guaranteed, fixed fee, and a potential annual performance-based fee, subject to an annual maximum. The performance fee consists of components relating to employee satisfaction, patient satisfaction, improved quality of care within the Labs, and the implementation of certain measures to reduce costs attributable to Lab procedures. Each of the components has a number of measures that would need to be met/implemented by the Group. Sixty percent (60%) of the performance fee would relate to implementing measures to reduce costs attributable to Lab procedures, the so-called “Cost Savings Component.” Most measures within the Performance Fee components incorporate three possible achievement levels that trigger payment. If the Group fails to achieve the lowest, baseline achievement level for a measure within a component, it receives no payment for that measure. The baseline achievement level for any measure reflects improvement over the hospital’s status quo performance for that measure prior to the effective date of the Agreement. If the Group meets the baseline achievement level for a measure within a performance fee component, it receives 50% of the total compensation available for that measure; if it meets the middle benchmark, it receives 75%; and if it achieves the highest benchmark, it receives 100%. To obtain the portion of performance fee allocable under the Cost Savings Component, the Group must reduce the cardiac catheterization costs per case as well as the average contrast costs per case.

In exchange for the compensation, the Group performs a number of duties, including, without limitation, overseeing Lab operations, providing strategic planning and medical direction services, developing the hospital’s cardiology program, providing assistance with financial and payor issues, and providing public relations services.

In reaching its favorable opinion regarding this Arrangement, the OIG first noted that the fixed fee, employee satisfaction, patient satisfaction, and quality components contained in the Arrangement do not involve an inducement to reduce or limit services and, therefore, do not implicate the Civil Monetary Penalties Law (CMPL). Next, the OIG found that, although the Cost Savings Component would implicate the CMPL, the Arrangement has several features that, in combination, provide sufficient safeguards so that it would not seek sanctions against the hospital for the Arrangement. The OIG noted, among other things, that the hospital certified that the Arrangement has not adversely affected patient care and that it monitors both the performance of the Group and the Group’s implementation of the Cost Savings Component to protect against inappropriate reductions or limitations in patient care or services. For example, the hospital’s Board of Directors, internal auditing staff, and certain hospital staff committees monitor the Group’s performance under the Arrangement, and the hospital uses an independent, external third-party utilization review firm to annually review data related to the components of the performance fee and the clinical appropriateness of the cardiac catheterization procedures performed at the Lab. In addition, the OIG found that the risk that the Arrangement will lead the Group’s physicians to apply a specific cost savings measure in medically inappropriate circumstances is low, due to, among other thing, benchmarks within the Cost Savings Component that allow the physicians flexibility to use the most cost-effective clinically appropriate items and supplies. Further, the OIG found that the financial incentive tied to the Cost Savings Component was reasonably limited in duration and amount, and that the Groups’ receipt of any part of the performance fee would be conditioned upon the Group’s physicians not: stinting on care provided to the hospital’s patients; increasing referrals to the hospital; cherry-picking healthy patients or those with desirable insurance for treatment in the Labs; or accelerating patient discharge.

Turning next to the Anti-Kickback Statute, the OIG stated that while the Arrangement could result in illegal remuneration if the requisite intent to induce referrals were present, the OIG would not impose sanctions for a number of reasons. These reasons include, without limitation, that the hospital certified that the compensation paid to the Group is fair market value for the services provided; the Group provides substantial services under the Agreement; the compensation paid to the Group does not vary with the number of patients treated; the specificity of the measures within the Arrangement helps ensure that its purpose is to improve quality, rather than reward referrals; the Agreement is limited in duration; and, because the hospital operates the only cardiac catheterization laboratories within a fifty-mile radius and because the Group does not provide cardiac catheterization services at any other location, it is unlikely that the compensation is an incentive for the Group’s physicians to refer business to the Labs instead of to a competing cardiac catheterization lab.

Reported by Lynn M. Barrett


New HIPAA De-identification Guidance

On November 27, 2012, the HHS Office for Civil Rights released useful information relating to de-identification methods.  The document, dated September 4, 2012, contains technical details on the two methods of de-identification under HIPAA, referred to as the “Expert Determination” and the “Safe Harbor.” The guidance confirms that certain types of data would be protected under HIPAA, including information indicating that an individual was treated as a certain clinic.  Dates associated with test measures, such as dates of lab reports, are also considered to be protected health information.

The guidance indicates that there are no specific professional degrees or certification programs required in order to designate someone as an “expert” who is qualified to determine that information has been rendered sufficiently de-identified.  These experts do not have to assess risk in any particular way.  They may want to put an expiration date on their certification statements, but this is not explicitly required.

Below is a link to the guidance.

Reported by: Shannon Hartsfield Salimone


On October 16, 2012, the U.S. Food and Drug Administration asked the Eleventh Circuit to dismiss its appeal and vacate a lower court’s judgment that the FDA did not have authority to regulate a Florida pharmacy’s practice of compounding animal products.  The case is USA v. Franck’s Lab, Inc., et al., case no. 11-15350, in the United States Court of Appeals for the Eleventh Circuit.  In their joint motion, the FDA and Franck’s informed the Eleventh Circuit that Franck’s sold all of its assets in July 2012, and was no longer operating as a compounding pharmacy, thus, rendering the FDA’s appeal moot.  In the underlying case, USA v. Franck’s Lab, Inc., et al., 816 F.Supp.2d 1209 (M.D. Fla. Sept. 12, 2011), the FDA sought to enjoin Franck’s from compounding animal medications following a 2009 incident in which a mathematical error in the preparation of a parenteral animal medication led to the death of twenty-one horses on the Venezuelan national polo team.  The district court granted summary judgment for Franck’s, finding that Congress, in enacting the Food, Drug & Cosmetic Act in 1938, “did not intend to give the FDA per se authority to enjoin the long-standing, widespread, state-regulated practice of pharmacists filling a veterinarian’s prescription for a non food-producing animal by compounding from bulk substances.”  Id. at 1256.

Reported by: Brian T. Guthrie

On December 11, 2012, Florida Attorney General Pam Bondi filed a Notice of Emergency Rule that outlaws certain drugs by classifying them as “Schedule I” under Section 893.03, Florida Statutes.  Schedule I drugs have a high potential for abuse with no currently accepted medical use in treatment.  The drugs referenced in the emergency rule, commonly called “bath salts,” “K2” or “Spice,” are sold in convenience stores, in specialty smoke shops, over the Internet, or from other retailers.  Attorney General Bondi stated that “synthetic cannabinoids have been linked to thousands of emergency department visits across the country . . . I am grateful to our law enforcement partners and the health care community for their continued dedication to protecting Florida’s youth from these horrible drugs.”  The Attorney General plans to ask the Florida Legislature to adopt legislation in the 2013 session to make this a permanent ban.

The full text of the emergency rule is available at:$file/ER+RuleOAGRuleCertification12-11-2012.pdf

Reported by: Shannon Hartsfield Salimone


Patient Confidentiality

For healthcare providers and patients and, therefore, for healthcare lawyers, the year 2012 ended with a significant decision by the Supreme Court of Florida. In Ramsey Hasan v. Lanny Garver, D.M.D. SC10-1361(Fla. 2012), the Supreme Court was asked to interpret a Florida statute that is fundamental separate and apart from HIPAA to the privacy of patient information.

Florida Statute § 456.057 is the general Florida healthcare information confidentiality statute. As a whole it is comprehensive, reflecting a state policy that seeks to protect the privacy of its citizens’ health information. That policy was re-enforced by our Supreme Court in Hasan, particularly as it relates to the physician-patient confidentiality requirements of § 456.057(8).

Although the underlying facts were not typical they did serve to frame the issue squarely. Hasan, a patient, filed a medical malpractice action against Dr. Garver. Hasan subsequently sought medical treatment from Jennifer Schaumberg, an oral and maxillofacial surgeon. In doing so he obviously established a physician-patient relationship between himself and Dr. Schaumberg.

Eventually, Dr. Schaumberg’s deposition was scheduled during pre-trial discovery in Hasan’s malpractice action against Garver. Prior to her deposition, Hasan learned that although Shaumberg was not a party to the underlying malpractice action against Garver, her insurance company had retained an attorney to consult with her and to conduct an ex-parte private pre-deposition conference with her. Schaumberg’s insurer also insured Garver. And, although different lawyers represented Garver and Shaumberg, the same insurance company (OMSNIC) selected, retained, and paid for both lawyers.

Hasan moved for a protective order in the trial court seeking to prohibit the ex-parte pre-deposition conference between Schaumberg and the attorney provided by OMSNIC. The trial court denied Hasan’s motion and the Fourth DCA denied Hasan’s petition for writ of certiorari with respect to the trial court’s ruling. Because of a conflict between the Fourth DCA’s denial on the one hand and a prior decision of its own, [Acosta v. Richter, 671 So. 2d 149 (Fla. 1996)] and decisions of the First DCA, the Supreme Court accepted jurisdiction.

After a discussion of the history of Florida Statute § 456.057(8), the Supreme Court quashed the decision of the Fourth District in Hasan and approved the conflicting decision by the First DCA. In doing so, the court held that:

Except in a medical negligence action or administrative proceeding when a health care practitioner or provider is or reasonably expects to be named as a defendant, information disclosed to a health care practitioner by a patient in the course of the care and treatment of such patient is confidential and may be disclosed only to other health care practitioners and providers involved in the care or treatment of the patient, or if permitted by written authorization from the patient or compelled by subpoena at a deposition, evidentiary hearing, or trial for which proper notice has been given.

§ 456.057(8) Fla. Stat. (2009) (emphasis supplied).

Hasan, therefore, both confirms and re-affirms Florida’s strong public policy that private healthcare information is, indeed, highly confidential and that that confidentiality will be steadfastly protected by Florida courts.

Reported by: Robert V. Williams, Burr & Forman, LLP, Tampa, Florida


Department of Health Suspends 81 Massage Therapists

The Department of Health issued 81 Emergency Suspension Orders (ESO) for massage therapist licenses. The ESOs are based upon the submission of forged transcripts by the massage therapists in support of their license applications. According to one news report, an employee of the Florida College of Natural Health falsified student transcripts, which were then used to obtain licenses from the Board of Massage Therapy. The Department is working with Florida massage therapy schools to assist them in developing best practices to prevent similar occurrences. The Department is also reporting the ESOs to the Federation of State Massage Therapy Boards.

Assessment of Costs in License Disciplinary Cases

The First District Court of Appeal, in its opinion in Chistopher J. Carlisle v. Department of Health, 37 Fla. L. Weekly D2403 (October 16, 1012), certified a conflict with the Second District Court of Appeal’s opinion in Georges v. Department of Health, 75 So. 3d 759 (Fla. 2d DCA 2011) in regard to the issue of what documentation is required in order for the regulatory boards within the Department of Health to assess attorney fees as part of the imposition of costs in administrative license disciplinary actions. The Georges opinion, which was previously reported in the January 2012 Health Law Summaries, found fundamental error where the DOH did not provide an adequate evidentiary basis in support of the attorney fees portion of the costs assessment imposed by the Board of Nursing in a disciplinary Final Order. In Carlisle, the First DCA held that only fair notice and an opportunity to be heard are required and no fundamental error occurred where the licensee was afforded notice and an opportunity, but failed to preserve the issue before the Board of Medicine in the Final Order proceeding.

Reported by: Michael L. Smith and Allen R. Grossman