CLIA program; simplifying CLIA regulations relating to accreditation, exemption of laboratories under a state licensure program, proficiency testing, and inspection--HCFA. Final rule

This final rule responds to selected comments received on a final rule with a comment period implementing the Clinical Laboratory Improvement Amendments of 1988, which was published in the Federal Register on February 28, 1992, in the areas of proficiency testing and inspections for clinical laboratories. In responding to these comments, we accommodate, when possible, the Administration's regulatory reform initiative by reducing duplicative material, emphasizing outcome-oriented results, and simplifying regulations. In that regard, we also are streamlining our regulations in the areas of State exemption, and granting deemed status to laboratories accredited by an approved accreditation organization.     

The new JCAHO patient safety standards and the disclosure of unanticipated outcomes. Joint Commission on Accreditation of Healthcare Organizations

This article looks at the newly-issued JCAHO standards and their increased focus on patient safety in performance standards for healthcare organizations. As part of these standards, hospitals are required to inform patients of outcomes of care, including unanticipated outcomes. This article examines this requirement and suggests varying interpretations of it. After looking at the current legal and ethical standards requiring disclosure of errors or negligent acts, the article suggests that hospitals are faced with many difficulties in implementing the standard. Specifically, the article argues that more details are necessary regarding what events must be reported and what hospitals are required to do when members of the medical staff refuse to inform patients of medical error.     

Medicare program; data, standards and methodology used to establish fiscal year 1992 budgets for fiscal intermediaries and carriers--HCFA. Final notice

This notice is published in accordance with sections 1816(c)(1) and 1842(c)(1) of the Social Security Act which require us to publish the final data, standards and methodology used to establish budgets for Medicare intermediaries and carriers. It announces that we are adopting as final without revision proposed data, standards, and methodology used to establish Medicare fiscal intermediary and carrier budgets for the fiscal year (FY) 1992, beginning October 1, 1991. It also contains our response to public comments on the proposal.     

Special report on health care reform. ERISA preemption, Traveler's and health care reform

Although S. 308 reportedly has some bipartisan support, its passage is by no means certain. ERISA has for years provided employers with the freedom to design their own benefit plans without state interference, as well as the ability to operate such plans in a uniform manner throughout the country. large employers are thus not likely to cede the advantages of ERISA preemption without a battle. When strong business interests are pitted against the states' equally strong interests in enacting health care reforms, the outcome cannot be predicted.     

Special report on taxation. IRS issues stricter guidelines for audits of tax-exempt hospitals

The new audit guidelines serve as yet another reminder to tax-exempt hospitals that great care must be taken in structuring and documenting business arrangements with physicians and executives so as to withstand scrutiny by the IRS with regard to exempt status. Since increased census and utilization, and enhancement of the hospital's financial position, are no longer acceptable justifications for such activities as physician recruitment incentives (being suggestive of payment for referrals), it is important that hospitals make an effort to ensure that board minutes, recruitment policies, internal memoranda, and other documentation set forth the reasons--other than the benefits to the institution's bottom line--for having entered into such transactions. Hospitals must establish and document a community need for each physician recruited. Hospitals that actively recruit should be armed with studies evaluating recruiting needs in each clinical area, based on objective criteria, taking into consideration managed care contracting needs and the provision of services to the poor and needy. Finally, hospitals should re-examine all joint ventures and other business relationships with physicians to determine whether such arrangements resulted from arm's length negotiation, involve fair market value for goods and services, and conform, insofar as possible, with the Medicare fraud and abuse safe harbor regulations. Under GCM 39862 and the new guidelines, "aggressive" arrangements may not only create exposure under fraud and abuse laws, but could jeopardize the provider's tax-exempt status as well.     

Special report on reimbursement. HCFA publishes proposed rule establishing new payment system for physicians

Whether any or all of these effects actually occur is presently a matter of conjecture. Over the long term, however, it is likely that RBRVS will lead to new opportunities to structure relationships between hospitals and physicians. In practical effect, DRG payments to hospitals, coupled with RBRVS fee schedules, are designed to promote patient care in outpatient settings. This means there will be new opportunities for joint ventures and practice/management arrangements between hospitals and physicians. As these new arrangements come to fruition, both hospitals and physicians must be aware of the financial implications of the new RBRVS codes.     

Special report on labor and employment. Provider obligations under the Drug-Free Workplace Act

In view of the sanctions that may be taken by government agencies against employers, all providers should take their obligations under the Act seriously. The first step for each provider is to determine if it is subject to the Act or to any analogous state statutes. If so, the provider should take steps, if it has not already done so, to comply with the Act or applicable state legislation. While the Act has been criticized as a matter of social policy for not going further to prevent substance abuse in the workplace--by, for example, mandating drug testing or requiring sanctions against employees without the prerequisite of a criminal conviction--there is no question that the penalties it authorizes against employers do go far enough to warrant careful compliance with the Act's provisions.     

Special report on reimbursement. Final Medicare fraud and abuse safe harbors are published

There has been great concern in the health care industry that business arrangements that do not comply with the Safe Harbors will automatically be deemed illegal. HHS has confirmed that this is not so; the commentary to the Regulations expressly states that "The failure of a particular business arrangement to comply with these provisions does not determine whether or not the arrangement violates the statute because...this regulation does not make conduct illegal. Any conduct that could be construed to be illegal after the promulgation of this rule would have been illegal at any time since the current law was enacted in 1977....This regulation is intended to provide a formula for avoiding risk in the future." 56 Fed. Reg. at 35955. In the final analysis, the majority of transactions will fall outside the Safe Harbors and thus will continue to be judged by the standards established by the Medicare antifraud statute enacted 14 years ago. Under these standards, as HHS states, "the degree of the risk [in any particular transaction] depends on an evaluation of the many factors which are part of the decision-making process regarding case selection for investigation and prosecution." Id. at 35954. Providers that are mindful of these criteria should therefore still be able to accomplish, with relative safety, transactions that do not qualify for Safe Harbor protection.     

Special report on labor and employment. Supreme Court upholds NLRB bargaining units rule

Providers should expect the number of union organizing campaigns to rise quickly in the wake of the Supreme Court's decision in AHA v. NLRB. Despite this increased activity, providers that offer good working conditions and maintain open lines of communication between employees and management, and that understand their legal rights in connection with such situations, will be much more likely to be effective in responding to union organizing activities.     

Special report on taxation. Prepare for impending legislation that could threaten your tax-exempt status!

With impending federal action, and the likelihood of "copycat" legislation at the state and local levels if a federal statue is adopted, nonprofit hospitals need to ensure that they will be in compliance if a mandatory charity care bill were to become law. Such facilities should take the initiative now, by clearly articulating their charity care policies and by describing their other undercompensated or uncompensated activities that are maintained in order to benefit their communities. They should also ensure that all of their activities that could be counted as charity care or community benefit are fully documented and quantified. Financial consultants and counsel may be helpful in this process. Exempt facilities also should, of course, closely monitor the progress of the bills discussed above. Most importantly, they should continue to test their charity care and community benefit statistics on a regular basis to determine if their facilities meet the thresholds specified in the bills as they proceed through Congress.     

Special report on liability and insurance. An update on assignment of patient benefits under ERISA

While the holdings in Davidowitz and Arkansas Blue Cross & Blue Shield arose in different contexts, they both reflect the courts' increasing willingness to consider the importance of cost containment in the health insurance arena, even though patient accessibility to health care may be restricted as a result. If the holding in Davidowitz is not successfully appealed, providers may need legislative relief in order to retain their ability to take valid assignments of patient claims for payment from ERISA plans. It is uncertain whether such legislation can be sought at the state level or must instead come from Congress due to ERISA preemption of state legislation. Clearly, the district court decision on remand in Arkansas Blue Cross & Blue Shield will be closely watched for any light it may shed on this question. On a pragmatic note, providers who have not entered into "participation" agreements with insurers or other private payors may now have a greater incentive to do so, and "nonparticipating" providers who continue to obtain assignments from patients in order to collect directly from insurers or other private payors should determine on a case-by-case basis whether the source of the patient's benefits is a group health plan--which is likely to fall under ERISA and may contain nonassignment provisions--or some other form of coverage. For an additional perspective on insurers' responses to copayment waivers, see Newsletter, Vol. 6, No. 10, October 1991, at 7.