Managing Your Practice

Business law critical to your practice

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Preventive law, like preventive medicine, can make all the difference



It is no surprise that the law is playing an ever more important role in the practice of medicine. Concerns about legal issues are a source of stress for ObGyns, including increasing worries about the economics of professional liability, the anxiety of defending a legal claim, and ambiguity about what is required for compliance.1 In this article my goal is to demystify some of the most important legal principles affecting your practice and provide suggestions for avoiding legal problems.

Medical malpractice: A form of negligence

Most ObGyns instinctively think first of medical malpractice when “legal problems” are mentioned—not an unreasonable response because obstetrics has a high incidence of malpractice claims. In one study, 77% of the American College of Obstetricians and Gynecologists (ACOG) Fellows reported that they have been sued.2

At its core, malpractice is a form of negligence, or, medical practice that falls below the quality of care that a reasonably careful practitioner would provide under the circumstances. When practice falls below that “standard of care,” and it causes injury, there may be malpractice liability. Insurance usually covers the cost of defending malpractice lawsuits and paying liability (although liability is the result of a minority of malpractice suits). There are, however, collateral consequences, including the time, stress, and disruption associated with defending the suit. In addition, malpractice may trigger review by the institutions with which the physician is associated, or in extreme cases, by licensing authorities. Large malpractice settlements or verdicts must be reported to the National Practitioner Database (sometimes colloquially referred to the “problem physician” database) or a similar state database.

The Business of Medicine: A new series

This article is the third installment of the new series, "The Business of Medicine," edited by Joseph Sanfilippo, MD, MBA. In September, David Kim, MD, MBA, MPH, offered marketing strategies using social media. Last month, Dr. Sanfilippo presented ways to ensure patient satisfaction and service excellence in your practice. Watch next time for "Accounting 101." Other featured topics will include investing in your practice, billing and coding, gaining the competitive advantage, understanding "best practices," and striving for cost-effective care.

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Regulation and reimbursement (“compliance”) policies

The practice of medicine is closely regulated by federal and state bodies. Many regulations apply through reimbursement policies related to Medicare and Medicaid. While malpractice liability may, at worst, result in a financial award (with the cost of defense and any award paid by insurance), regulatory problems may result in a number of unpleasant consequences, most of which are not covered by insurance. In addition to loss of reimbursement, civil penalties (even criminalpenalties in extreme cases), loss of hospital privileges, licensure discipline, and loss of Medicare-Medicaid eligibility may result from regulatory noncompliance.3

There are multivolume sets discussing these legal requirements, so here we will look only at a tiny tip of the regulatory iceberg by mentioning some common regulatory areas.

Fraud and abuse laws refer to a bundle of federal (and some state) statutes and regulations that are intended to ensure that public-funded programs such as Medicare and Medicaid are not cheated or overpaying for services. It is a violation to provide low-quality services to government-funded programs. Proper payment and coding and ensuring that services were actually performed by the professional listed (not someone else) are examples of traps for the unwary. Submitting inaccurate records may result in action to recover incorrect payments and in civil penalties. In extreme cases where there is intentional misrepresentation, there have been criminal charges and loss of future Medicare-Medicaid eligibility.

Anti-kickback, self-referral, and Stark limitations are intended to avoid unnecessary or overpriced services. When someone is receiving a benefit for ordering or recommending a product or service, it is reasonable to expect that an incentive might affect the decision to order it, likely resulting in unnecessary or suboptimal services. It is illegal to receive a kickback for using, ordering, or recommending a product or service (a pharmaceutical company could not pay a physician $10 for each prescription written for its product). It is also illegal for physicians to refer patients to other entities in which they have a financial interest (a physician could not refer a patient to a lab in which the physician has partial ownership). The Stark laws and state prohibitions on self-referral have complex series of “safe harbor” exceptions in an ocean of prohibitions.4

HIPAA and confidentiality regulations are intended to protect patient privacy. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) has extensive regulations concerning both privacy and security. The medical community is well-versed in HIPAA regulations and sensitive (perhaps hypersensitive) to its requirements. Most states have patient privacy regulations that apply in addition to HIPAA and are commonly less well known.

Protecting patient confidentiality is an ethical, legal, and licensure obligation. Protecting patient confidentiality is, therefore, general duty and not tied to a specific federal program.5

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Insurance Fraud is the private side of fraud and abuse. Submitting private insurance claims that are false or a misrepresentation of service is generally a violation of the contract between the provider and the insurance company. It may also be a crime—it is, after all, a form of theft. Serious fraud may result in the loss of the license to practice.

The False Claims Act and Whistleblower laws make it a civil offense (and, in extreme cases, a criminal offense), to present to the government a false claim for payment of services. It may be false in the sense that the service was not provided or in the sense that service was of inadequate quality. These statutes (both federal and state) also allow for a private whistleblower to receive some of the proceeds if he or she helps the government recoup wrongful payments. Disgruntled former employees are a common source of whistleblowing.6

Abuse-reporting statutes are part of every state’s law but vary considerably. They require certain professions, including physicians, to report known or suspected abuse of children, dependent adults, and often, other groups. The failure to make required reports can result in civil liability or even (rarely) criminal charges.

Read about how organizational law affects ObGyns.

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