The Bay State Boondoggle During a Time of Reform

By Amy Kaufman

On June 13, 2013, Senators Tom Coburn (R-OK) and Claire McCaskill (D-MO) sent letters to more than fifty senators urging them to support legislation to repeal Section 3141 of the Affordable Care Act (ACA). Under Section 3141, budget neutrality adjustments made to the Medicare hospital wage index based on the “rural floor” must be applied on a national, instead of a state-specific, basis. Established under the Balanced Budget Act of 1997 (BBA), the rural floor requires that the wage index for a hospital in an urban area of a State not be less than the wage index determined for that State’s rural area. The Hospital Payment Fairness Act of 2013, which Senators Coburn and McCaskill introduced in January, would restore the application of the “rural floor” adjustment to one that is state-specific.  State hospital associations have also called for the repeal of Section 3141. Most recently, twenty state hospital associations, along with the Rural Hospital Association, wrote a letter to President Barack Obama claiming that this provision creates an unacceptable windfall for Massachusetts hospitals at the expense of hospitals in other states and requested a reversal in policy.

The debate about the rural floor is not new. Rather, the discussion spawns from a long history of legislative action that has attempted to reform the broader hospital wage index adjustment under the Medicare inpatient prospective payment system (IPPS). The Secretary of the Department of Health and Human Services (HHS), the Medicare Payment Advisory Commission (MedPAC), and the Institute of Medicine (IOM), among others, have weighed in on the issue and, while many agree that change is necessary, few can confidently advocate for a specific plan for reform. This article examines how the debate about the rural floor, particularly about the application of budget neutrality, has progressed and has shifted over time, and predicts how Congress might address the issue, if at all, in the near future.

A.      History of the Rural Floor

The purpose of the hospital wage index under the IPPS is to adjust the IPPS standardized payment to reflect variations in wage levels in different labor market areas. This system is intended to help “hospitals which are disadvantaged by their current geographic classification because they compete with hospitals that are located in the geographic area to which they seek to be reclassified.”[i] Geographic classification was created under section 1886(d)(1) of the Social Security Act (the Act) (42 U.S.C. 1395ww(d)).

Section 4410(a) of the BBA provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is located in an urban area of a State may not be less than the area wage index applicable to hospitals located in rural areas in that State.[ii] This provision is referred to as the “rural floor.” Section 4410(b) of the BBA established a budget neutrality requirement by providing that the Secretary shall “adjust the area wage index referred to in subsection (a) for hospitals not described in such subsection in a manner which assures that the aggregate payments under section 1886(d) of the Social Security Act in a fiscal year for the operating costs of inpatient hospital services are not greater or less than those which would have been made in the year if this section did not apply.”[iii] The Secretary initially applied this budget neutrality requirement on a nationwide basis. As a result, rural hospitals and other urban hospitals that do not benefit from their state’s rural floor received reduced wage index adjustments.

In the FY 2009 IPPS Proposed Rule, the Centers for Medicare and Medicaid Services (CMS) proposed (and later finalized its proposal) to apply the budget neutrality requirement on a state-by-state basis and, as such, redistribute wage index adjustments within the borders of each state.[iv] CMS noted that the rural floor benefits a minority of states and negatively impacts a majority of states—primarily rural ones– when budget neutrality is applied on a national scale.[v]  Moreover, CMS reasoned that since one purpose of the wage index is to help hospitals in the same geographic area to compete, it seemed appropriate to make budget neutrality state specific. Under this new policy, hospitals in states without a rural floor wage index would no longer be negatively affected by the budget neutrality adjustment.[vi] At the same time, hospitals in states with a rural floor would in essence be responsible for funding the rural floor adjustment within the borders of their own state.

CMS anticipated that states with the majority of their hospitals in urban settings would be disadvantaged by this this new policy and that states with few urban hospitals would benefit.[vii] In states such as Connecticut and California, for example, CMS expected adjustments to go from 2.1 and .7 under the national adjustment status quo to -2.2 and -.8, respectively. In Wisconsin, currently one of the biggest proponents of returning to the state-specific system, CMS expected the adjustment to remain steady at -.1.[viii] Surprisingly, CMS expected the adjustment for Massachusetts, the state that is now being accused of reaping benefits from the application of a national adjustment, to increase from -.2 to .3.[ix] But, as explained below, that was before Nantucket Cottage Hospital converted from  a critical access hospital (CAH) to an IPPS facility, which dramatically changed the circumstances in the Commonwealth.

The ACA restored the budget neutrality adjustment to a uniform, national adjustment, beginning in FY 2011. During the Senate Finance Committee’s mark-up of the Affordable Care Act in December 2009, Senators Robert Menendez (D-NJ) and John Kerry (D-MA) proposed to amend CMS’s new application of state-specific budget neutrality and return to the previous , national policy.[x] According to a letter sent by the Massachusetts delegation to President Obama on January 31, 2012, the American Hospital Association urged House Speaker Nancy Pelosi and Majority Leader Harry Reid to keep in place the Kerry-Menendez amendment.[xi] Moreover, none of the more than 1,000 amendments offered during the markup period sought to stop the Kerry-Menendez amendment from being passed.[xii] As such, the amendment passed both the House and the Senate and was signed into law as Section 3141 of ACA on March 23, 2010.

B.       Lobbying for Change

The application of the national rural floor budget neutrality adjustment has been the topic of heated debate since CMS issued its first set of regulations implementing Section 3141 in July 2011. Much of the controversy has centered on the fact that Massachusetts hospitals have benefited greatly from returning to the pre-2009 policy, collectively earning between a $275 million and $367 million annual bonus as a result of the national adjustment.[xiii] While hospitals in Alaska, California, Colorado, Connecticut, New Hampshire, and New Jersey have also benefited from the new policy, Massachusetts has been by far the largest beneficiary of the policy (California, the second largest recipient, received half as much as Bay State).[xiv]  

Given that CMS had expected Massachusetts to benefit from the earlier shift from the national application of budget neutrality to the state-specific application in 2008, it is perhaps surprising that the state would be the biggest winner of all when the policy was reversed only a few years later.   A seemingly minor change in circumstances, however, caused this major shift to occur.

Nantucket Cottage Hospital, a fifteen-bed hospital located in Nantucket, Massachusetts that serves approximately 150 Medicare patients each year, was previously classified as a critical access hospital (CAH) (a provider that is paid based on reasonable costs, rather than on the IPPS system). In October 2011, the hospital obtained IPPS status (becoming the only rural hospital In Massachusetts with IPPS status) and, as such, “triggered” the rural floor exception for urban hospitals in the state of Massachusetts.[xv] Because wages at Nantucket Cottage Hospital are high (due to its remote location and high cost of living), the inclusion of Nantucket in the IPPS resulted in a boost in wages for urban hospitals in the Commonwealth. Due to the national adjustment in place under the ACA, hospitals across the nation, rather than only Massachusetts hospitals, footed this bill.

In response to the Massachusetts windfall, state hospital associations, primarily from states with more rural areas, have lobbied for change. For example, on January 18, 2012, a group of state hospital associations from around the country asked the Obama administration to examine the rural floor provision, alleging that this provision would allow Massachusetts hospitals to earn an additional $275 million or more per year in Medicare reimbursements. According to that letter, the change is “unfairly favoring one state’s hospitals and Medicare beneficiaries to the detriment of others.”[xvi] The letter also stated that:

If left uncorrected, hospitals in 49 states will experience reduced funding of more than $3.5 billion over the next ten years as a direct result of this manipulation of Medicare’s hospital wage index.  Hospitals nationwide are already struggling with reduced government payments and the potential for cuts through the federal deficient reduction discussions and health care reform. Scarce Medicare funding should reward value and efficiency in health care, not be diverted based on an artful manipulation of obscure payment formulas.[xvii]

On June 25, 2012, the Wisconsin Hospital Association sent a letter to Acting Administrator of CMS Marilynn Tavenner opposing the “continued application of a nationwide rural floor budget neutrality adjustment….”[xviii] The association asserted that hospitals in many states lose significant money to offset the Medicare payments in Massachusetts and requested that CMS implement wage index provisions in an equitable manner in FY 2013. The association highlighted that the Agency itself had expressed concerns about this issue in the CY 2012 Outpatient Prospective Payment System (OPPS) final rule (CMS-1525-FC), when it stated that “[i]n recent years, we have become concerned that hospitals converting their status significantly inflate wage indices across a State….Our concern is that the manipulation of the rural floor is of sufficient magnitude that it requires all hospitals wage indices to be reduced.” [xix]

On January 16, 2013, twenty state hospital associations, along with the National Rural Hospital Association, wrote a letter to President Obama, requesting that he include language in his FY 2014 budget to address Section 3141.[xx] Former administrator of CMS Donald Berwick is quoted therein as stating that “the entire way the payment…has become so complex and so susceptible to gaming and manipulation…what Massachusetts gets comes from everybody else.” [xxi] This letter brought the debate about the rural floor back to the national stage.

A select group of congressmen also became involved in this discussion. First and foremost, former senator John Kerry has continuously defended the national application of the budget neutrality adjustment and the fact that Massachusetts is one of the beneficiaries. In a letter dated January 31, 2012, Senator Kerry and the rest of the Massachusetts delegation urged President Obama to ignore requests from state hospital associations to revert back to the state-specific adjustment.[xxii] They explained that:

rural floor budget neutrality has historically been applied at the national level, just like all other Medicare budget neutrality provisions. Near the end of the Bush Administration in 2008, [CMS] for the first time, in unprecedented rule-making, reversed long standing policy and changed rural floor budget neutrality to apply on a within-state basis. It meant that though all other budget neutral provisions in the Medicare program would continue to be on a national basis, the rural floor would be singled out for a different approach. The rule conflicted with statutory intent, destabilized the wage index, and produced inequity among providers. It was, in effect, a manipulation of long standing Medicare reimbursement policy.[xxiii]

The delegation also adamantly asserted that there was no manipulation by the Commonwealth or its hospitals, and pointed out that nine of twenty-seven state associations that had signed onto a letter urging President Obama to support the state-specific adjustment had in fact lobbied against changing to the state-specific adjustment at an earlier time.[xxiv]

Senator Coburn is also very much involved in this discussion. During a U.S. Senate Finance Committee Hearing on the President’s Budget for FY 2013, on February 15, 2012, he asked Secretary Kathleen Sebelius why she permitted the “nice little trick that enhances [reimbursement for] Massachusetts to the tune of $3.5 billion over the next ten years at the expense of 49 other states….” [xxv] He later explained that he was most concerned about HHS’s decision to grant IPPS status to Nantucket Cottage Hospital since that move ultimately triggered the significant shift in reimbursement dollars around the country.

Earlier this year, Senator Coburn and Senator McCaskill introduced the Hospital Payment Fairness Act of 2013 (S.183), which would sunset section 3141 of the ACA. In a statement about the bill, Senator Coburn said that “[t]his policy is effectively a payment earmark inserted in a law without the American people’s knowledge or consent. No state should have a special exemption while others bear the costs for a provision designed to advance a special interest.”[xxvi] The bill has been referred to the Senate Finance Committee for consideration and, as of the date of this publication, the bill had sixteen Republican and nine Democratic co-sponsors. Although the senators are adamantly seeking additional support, it appears unlikely that the bill will move beyond the committee anytime soon.   

C.      The Bigger Picture: Wage Index Reform

The debate about the rural floor adjustment is only a narrow piece of the ongoing discussion about more comprehensive wage index reform. Congress began a review of the Medicare wage index system through Section 106(b)(1) of the Medicare Improvements and Extension Act, Division B of the Tax Relief and Health Care Act of 2006.[xxvii] This act required MedPAC to submit to Congress a report describing the wage index system applied in the IPPS and any alternatives methods for computing the wage index. MedPAC set forth its recommendations for reforming the wage index in its June 2007 report titled “Report to Congress: Promoting Greater Efficiency in Medicare.” The Report recommended the creation of a new hospital compensation index that:

  • uses wage data from all employers and industry-specific occupational weights;
  • is adjusted for geographic differences in the ratio of benefits to wages;
  • is adjusted at the county level and smooth large differences between counties; and
  • is implemented so that the large changes in wage index values are phased in over a transition period.[xxviii]

In addition, the Institute of Medicine (IOM) issued a report in 2011 that called for a new system based on the Bureau of Labor Statistics data “with a method for smoothing differences in wage indexes across adjacent payment areas. This new system “is intended to replace the system of geographic reclassifications that is currently in place.”[xxix]

The Secretary of HHS released its own “Report to Congress: Plan to Reform the Medicare Wage Index,” as required by section 3137(b) of the ACA, on April 11, 2012.[xxx] Section 3137(b) requires the Secretary’s report to include a plan to reform the Medicare wage index applied under section 1886(6) of the Social Security Act relating to the IPPS. Congress directed the Secretary to consider the goals that MedPAC described in its 2007 Report to Congress and to consult with relevant affected parties when it developed its plan.

The Secretary’s report analyzes recent efforts to reform the wage index system and describes the concept of a Community Based Wage Index (CBWI), which “takes into account hospital hiring patterns in calculating the wage index by using commuting data to establish a labor market area and wage index for each hospital (as opposed to labor market areas).” The CBWI would focus more on individual hospitals and is intended to create a system that is more accurate and less distorted.[xxxi]  The report also notes the pros and cons of transitioning to this type of system.

D.       Conclusion

At this time, it is not clear whether Congress will resolve the debate about the wage index this year. It only appears unlikely that the Hospital Payment Fairness Act will be the vehicle of choice.  Perhaps the introduction of a bill in the House of Representatives could be the next best move for proponents of the repeal of Section 3141. Until a resolution is reached, however, regardless of who makes the next move in the debate, this issue will continue to have a significant impact on hospital reimbursement nationwide.

 

Amy E. Kaufman represents clients in the health care industry on a wide range of fraud and abuse, regulatory, and reimbursement matters. She has in-depth experience advising clients on compliance with federal and state fraud and abuse laws, including the Stark law and Anti-kickback Statute, licensing matters, and pharmacy regulations.

Ms. Kaufman also counsels private equity clients on acquisitions of health care providers and suppliers. For instance, she assists clients by identifying strategic ways to structure acquisitions, conducting due diligence, drafting regulatory sections of purchase agreements, and keeping federal and state agencies informed of acquisitions as required by law. 

 


[i]  Medicare Program; Proposed Changes to the Hospital Inpatient Prospective Payment Systems and FY 2009 Rates; 73 Fed. Reg. 23528, 23618 (April 30, 2008).

[ii]  Balanced Budget Act of 1997, Pub. L. No. 105-33, §4410(a), 111 Stat. 251 (1997).

[iii] Id. at §4410(b).

[iv] 73 Fed. Reg. 23620.

[v] Id.

[vi] Id.

[vii] Id.

[viii] Id. at 23621.

[ix] Id. at 23621.

[x] See Letter from Mass. Delegation to President Barack Obama (Jan. 31, 2012) (on file with author), available at http://www.docstoc.com/docs/document-preview.aspx?doc_id=113351113.

[xi] Id.

[xii] See id.

[xiii] See Overly, Jeff, “Sens. Aim to Curb Medicare ‘Earmarks’ for Mass. Hospitals,” Law360 (Jan. 31, 2013), available at http://www.law360.com/articles/411755/sens-aim-to-curb-medicare-earmarks-for-mass-hospitals.

[xiv] Cheung-Larivee, Karen, “Mass. to Win $275M through Medicare Loophole, States Outraged,” Fierce Healthcare (Aug. 4, 2011), available at http://www.fiercehealthcare.com/story/massachusetts-win-275m-through-medicare-loophole-states-outraged/2011-08-04.

[xv] Letter from MedPAC to Donald M. Berwick, M.D., Jan. 17, 2011 (on file with author), available at  http://waysandmeans.house.gov/uploadedfiles/hospitals_letter.pdf.

[xvi] Letter from State Hospital Assn’s to President Barack Obama, Jan. 18, 2012 (on file with author), available at http://waysandmeans.house.gov/uploadedfiles/hospitals_letter.pdf.

[xvii]  Id.

[xviii] Letter from Wis. Hospital Assn., Inc. to Acting CMS Administrator Marilyn Tavenner  (June 25, 2012) (on file with author), available at http://www.wha.org/Data/Sites/1/medicare/WHAcommentNPRMIPPS6-25-12.pdf.

[xix] Id.

[xx] Letter from State Hospital Assn’s to President Barack Obama (Jan. 16, 2013) (on file with author).

[xxi] Id.

[xxii] Letter from Mass. Delegation to the President, Jan. 31, 2012 (on file with author), available at  http://www.docstoc.com/docs/document-preview.aspx?doc_id=113351113.

[xxiii] Id.

[xxiv] Id.

[xxv] The President’s Budget for 2013: Hearing Before the Committee on Finance, United State Senate, 112th Cong. (2012), http://www.finance.senate.gov/hearings/hearing/?id=b5d215d2-5056-a032-5250-72e99c9b44ad.

[xxvi] http://www.coburn.senate.gov/public/index.cfm/pressreleases?ContentRecord_id=5856c4e4-c8a6-4806-bfd1-8f25e9509803&ContentType_id=d741b7a7-7863-4223-9904-8cb9378aa03a&Group_id=7a55cb96-4639-4dac-8c0c-99a4a227bd3a.

[xxvii] Tax Relief and Health Care Act of 2006, Pub. L. 109-432, §106(b)(1) Div. B, 122 Stat. 2922 (2006).

[xxviii] Letter from MedPAC to Donald M. Berwick, M.D., Jan. 17, 2011 (on file with author), available at  http://www.medpac.gov/documents/06172011_FY12IPPS_MedPAC_COMMENT.pdf.

[xxix] Institute of Medicine, 2011. Geographic Adjustment in Medicare Payment: Phase I: Improving Accuracy. The National Academy Press, Washington, DC.

[xxx]   Secretary of Health and Human Services, Report to Congress: Plan to Reform the Medicare Wage Index (Apr. 11, 2012).

[xxxi]   Id. 

“Should I Tell Someone?” Permissible Disclosures by Massachusetts Health Providers and the Need for Greater Statutory Clarification

By William M. Mandell

In the wake of the recent Newtown shootings and the Boston Marathon bombings, a lingering question for health providers has been whether they ever have a duty, or the option, to disclose information derived from patient encounters if that information could help prevent an attack or a violent crime, help apprehend a suspect, or solve a criminal investigation.

Health care lawyers are frequently confronted with questions from hospitals, physicians and other providers about how to navigate and apply the conflicting legal and ethical duties to maintain and protect patient privacy rights but also to protect third parties and the general public from harm. Can medical groups proactively report to the police that a patient is mentally unstable and may have access to guns? May hospitals release information about victims of an attack to the police without consent?

This article summarizes current federal and Massachusetts law on the circumstances in which Massachusetts health care providers are authorized to share patient information with law enforcement and public safety personnel and agencies, notwithstanding patient privacy laws. This article also identifies some shortcomings under current Massachusetts law, and proposes a legislative solution to the confusion between HIPAA and a lack of clarity under existing applicable Massachusetts law.

A. Federal HIPAA Privacy Rule

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) Privacy Rule  established by the Office of Civil Rights (“OCR”) of the United States Department of Health and Human Services (“HHS”) does identify a variety of permissible urgent situations in which a health care provider may disclose patient health information.

Notwithstanding this fact, since the effective date of the HIPAA Privacy Rule in 2003, providers have had a greater reluctance to talk or report facts to law enforcement, either because of a failure to properly understand or apply HIPAA or a fear of liability.

Criminal and civil penalties can be imposed on both individuals and organizations under HIPAA for impermissible disclosures, but there are no such statutory penalties for failing to make disclosures to law enforcement or government agencies that HIPAA authorizes. Additionally, many states, including Massachusetts, have very strong and broadly established patient privacy rights over additionally protected areas of sensitive information but less clearly delineated exceptions for disclosures without patient consent for public safety and law enforcement reasons.Although it establishes a minimum level of privacy rights under federal law, the HIPAA Privacy Rule does not pre-empt any state laws that grant greater protections over patient health information. Thus, health lawyers must help provider clients harmonize the application of a HIPAA provision with a state law that may be more protective of patient health information.For example, HIPAA permits a hospital to release a patient record including HIV test results or psychiatric treatment communications upon a subpoena alone and without written patient authorization or a court order, if the discovering party can show it has meet certain procedural requirements ensuring that proper notice has been given to the patient’s counsel and no objections or motions for protective orders have been filed. However, Massachusetts statutes covering HIV test results or psychiatric treatment communications  – more protective of patient rights and thus not pre-empted by HIPAA – require the presentation of either a written patient consent or a court order before that portion of a patient record may be disclosed.

OCR, in the Privacy Rule, attempted to strike the right balance between patient privacy and the need to protect public safety, and in doing so permits the use and disclosure of protected health information, without an individual’s authorization or permission, for twelve national priority purposes. OCR has noted that these disclosures are permitted, although not required, by the Privacy Rule in recognition of the important uses made of health information outside of the health care context. For each public interest purpose, OCR included specific conditions or limitations in the Privacy Rule to strike the right balance between the individual privacy interest and the public interest need for such information.

Among these 12 national priority purposes, the HIPAA Privacy Rule permits non-patient consented disclosures in the following circumstances:

  • To assist law enforcement in certain extreme situations
  • To avert serious threats to health or public safety
  • To protect national security
  • To protect the public health

          1. Assist Law Enforcement

HIPAA permits providers to disclose patient health information without permission from the patient for a law enforcement purpose to a law enforcement official in the following situations:

Providers can disclose health information to comply with federal or state reporting laws, including laws that require the reporting of certain types of wounds or other physical injuries.

In response to a law enforcement official’s request for information for the purpose of identifying or locating a suspect, fugitive, material witness, missing person, a provider may disclose the following:

(1) Name and address;

(2) Date and place of birth;

(3) Social security number;

(4) ABO blood type and rh factor;

(5) Type of injury;

(6) Date and time of treatment;

(7) Date and time of death, if applicable; and

(8) A description of distinguishing physical characteristics, including height, weight, gender, race, hair and eye color, presence or absence of facial hair (beard or moustache), scars, and tattoos.

However, DNA or DNA analysis, dental records, or typing, samples or analysis of body fluids or tissue can only be released upon issuance of a court order, warrant, or written administrative request.

In response to a law enforcement official’s request for patient information about an individual who is or is suspected to be a victim of a crime if the individual is incapacitated, or there  are other emergency circumstance, as long as:

(A) The law enforcement official represents that such information is needed to determine whether a violation of law by a person, other than the victim, has occurred, and such information is not intended to be used against the victim;

(B) The law enforcement official represents that immediate law enforcement activity that depends upon the disclosure would be materially and adversely affected by waiting until the individual is able to agree to the disclosure; and

(C) The disclosure is in the best interests of the individual as determined by the provider, in the exercise of professional judgment.

          2. To Avert Serious Threats to Health or Public Safety

The HIPAA Privacy Rule also permits providers, acting consistent with applicable law and standards of ethical conduct, to disclose patient health information without consent where the provider in good faith believes the use or disclosure:

Is necessary to prevent or lessen a serious and imminent threat to the health or safety of a person or the public; and is to a recipient reasonably able to prevent or lessen the threat, including the target of the threat; or

Is necessary for law enforcement authorities to identify or apprehend an individual:

(A) Because of a statement by an individual admitting participation in a violent crime that the provider reasonably believes may have caused serious physical harm to the victim; or

(B) Where it appears from all the circumstances that the individual has escaped from a correctional institution or from lawful custody.

The information provided must not be more than what meets the minimum necessary standard. For purposes of identifying or apprehending an individual, the information authorized to be disclosed is limited to the same eight basic identifying items that can be disclosed in response to a law enforcement official’s request for information for the purpose of identifying or locating a suspect, fugitive, material witness, missing person.

HIPAA presumes that the disclosing provider in these instances has acted in good faith with regard to the belief of the necessity for such public safety disclosures.

          3. National Security and Intelligence Activities

Providers may also disclose protected health information to authorized federal officials under the HIPAA Privacy Rule for the conduct of lawful intelligence, counter-intelligence, and other national security activities authorized by the National Security Act and implementing authority.  Those activities can include efforts to create counter-terrorism intelligence databases, including health records.  Thus, the reporting of possible or suspected terrorists or terrorist activity by a provider is not necessarily prohibited under HIPAA and a provider meeting the minimally necessary standard could share its suspicions with federal and state law enforcement agencies without violating the HIPAA. The bigger question is whether such a disclosure would run afoul of more protective state laws protecting patient privacy, and whether a provider could be subject to a lawsuit for invasion of privacy or patient rights under Massachusetts law.

          4. Public Health Protection

The HIPAA Privacy Rule also allows unauthorized disclosures of protected health information to public health authorities to carry out their mission to protect the public’s health and safety.

The Privacy Rule permits – but does not require – providers to disclose protected health information, without authorization, to public health authorities who are legally authorized to receive such reports for a variety of widely accepted public health functions such as: the reporting of a disease or injury; reporting vital events, such as births or deaths; and conducting public health surveillance, investigations, or interventions. Also, covered entities may, at the direction of a public health authority, disclose protected health information to a foreign government agency that is acting in collaboration with a public health authority.  Covered entities who are also a public health authority may use, as well as disclose, protected health information for these public health purposes.

Generally, covered entities are required reasonably to limit the protected health information disclosed for public health purposes to the minimum amount necessary to accomplish the public health purpose. However, covered entities are not required to make a minimum necessary determination for public health disclosures that are made pursuant to an individual’s authorization, or for disclosures that are required by other law.  Since most public health disclosures are made by providers under specific mandatory reporting laws established by both federal and state agencies the minimum necessary rule under HIPAA is often not applicable when a provider is fulfilling a mandatory reporting obligation. Furthermore, the HIPAA Privacy Rule also allows covered entities to reasonably rely on a minimum necessary determination made by the public health authority when it initiates a request for protected health information.

Permissible public health disclosures under HIPAA also cover mandatory or suggested disclosures to authorized third parties who have a need to know, such as to the police in the case of known or suspected abuse or neglect of children or the elderly, or victims of domestic violence or rape. Similarly, if state law allows providers to warn third parties of exposure to a communicable disease HIPAA also allows the same disclosure as necessary to carry out public health interventions or investigations to prevent or control the spread of the disease.

B. New OCR Guidance

Following the Newtown tragedy, the HHS Office of Civil Rights published a letter to the nation’s healthcare providers in January, 2013 to make them aware of their ability under HIPAA to disclose information and their ethical “duty to warn” when they believe a patient poses a serious and imminent threat.

The OCR letter clarifies that the HIPAA Privacy Rule permits disclosure when a health care provider believes in good faith that a warning is necessary to prevent or lessen a serious and imminent threat to the health or safety of the patient or others.  If the disclosure is made consistent with applicable law and standards of ethical conduct, the provider may alert those persons whom the provider believes are reasonably able to prevent or lessen the threat. The provider is presumed to have such a good faith belief when the provider warns and discloses upon obtaining actual knowledge of facts from interaction with the patient or in reliance on a credible representation by a person with apparent knowledge or authority, such as a friend or family member of the patient.

The OCR letter further states that a health care provider may disclose patient information, including information from mental health records, to law enforcement, family members of the patient, or any other persons who may reasonably be able to prevent or lessen the risk of harm.

Thus, if a mental health professional has a patient who has made a credible threat to inflict serious and imminent bodily harm on one or more persons, HIPAA permits the mental health professional to alert the police, a parent or other family member or others who may be able to intervene to avert harm from the threat.

Such disclosures are not only permitted by HIPAA, but are also advisable under state tort laws following the duty to warn standard  first recognized by the 1974 California Supreme Court in Tarasoff v. the Regents of the University of California. Tarasoff established a common law duty upon health care providers to warn potential victims and the authorities, notwithstanding patient privacy rights, when an individual makes a credible threat of violence.  The Tarasoff rule can be best summarized in its most often quoted passage: “The protective privilege ends where the public peril begins . . . .”

C. Massachusetts Law on Patient Privacy and Disclosure

In sharp contrast, the scope of permitted disclosures to warn third parties or avert possible imminent harm to possible victims is more limited under Massachusetts law. Furthermore, Massachusetts law articulates very stringent privacy and confidentiality protection and duties to maintain patient confidentiality, with only a handful of stated exceptions related to public safety. Unlike other state’s patient privacy laws, Massachusetts does not have a single comprehensive statutory act governing all facets of health care information confidentiality and permitted disclosure.  Instead, the law of patient privacy and confidentiality in Massachusetts is comprised of a patchwork of different sources: constitutional, statutory, common law, and a variety of state agency regulations.

Generally, the right of privacy in Massachusetts is either implicitly or explicitly recognized and protected under the state constitution, Opinion of Justices, 375 Mass. 795, 806-9 (1978), by common law, Commonwealth v. Wiseman, 356 Mass. 251 (1969), and by statute.  Massachusetts Gen. Laws c. 214, § 1B provides for a general right to privacy (“[a] person shall have a right against unreasonable, substantial or serious interference with his privacy”) and authorizes a civil tort action to recover damages for any interference with that privacy right.

Specific to health information, Mass. Gen. Laws c. 111, §§  70 and 70E (the “Massachusetts Patient’s Bill of Rights”), and Mass. Gen. Laws c. 112 § 12CC , and a variety of other statutes and licensing board regulations, establish the right of patients of  Massachusetts hospitals, licensed facility, physicians and other practitioners to the confidentiality of all records and communications.

In addition, the Massachusetts Supreme Judicial Court has ruled that physicians have an affirmative duty to maintain the confidentiality of patients’ medical information, and a breach of patient confidentiality can result in tort liability for the physician as well as the discovering party.  Alberts v. Devine, 395 Mass. 508 (1985).

The Massachusetts Legislature has also implicitly recognized the general legal and ethical obligation not to release medical information without patient consent by enacting several statutes establishing qualified evidentiary privileges protecting certain medical information and by authorizing and immunizing particular non-consensual disclosures.  These statutes (and the cases interpreting them) comprise the body of medical information confidentiality laws in Massachusetts.

Generally, absent written patient consent or an appropriate court order or subpoena, Massachusetts health providers are not explicitly permitted to divulge medical information to the police or other law enforcement agencies.

 Under the Massachusetts statutory version of the Tarasoff  rule, Mass. Gen. Laws c. 123, § 36B, licensed mental health professionals have a professional duty to take reasonable precautions to warn or protect a potential victim or victims of a patient (and are granted immunity against invasion of privacy claims) in the following circumstances:

The patient has communicated to the licensed mental health professional an explicit threat to kill or inflict serious bodily injury upon a reasonably identified victim or victims and the patient has an apparent intent and ability to carry out the threat or,

The patient has a history of physical violence which is known to the practitioner and the practitioner has a reasonable basis to believe that there is a clear and present danger that the patient will attempt to kill or inflict serious bodily injury against a reasonably identifiable victim or victims.

In such instances, licensed mental health professionals are authorized to disclose confidential patient communications by taking one or more of the following reasonable precautions:

Communicate the threat to the reasonably identified victim or victims;

Notify the appropriate law enforcement agency in the vicinity where the patient or potential victim resides;

Arrange for voluntary hospitalization, or initiates proceedings for involuntary commitment.

In situations where Massachusetts providers, other than a mental health practitioner, believe that failure to disclose patient information will result in serious danger to the patient or others, they have tended to make the disclosure. Even without explicit statutory authority these disclosures are usually made by hospitals, physicians and other non-psychotherapist providers from a risk management and general common law standpoint to disclose limited information to prevent serious and imminent danger. The Massachusetts Supreme Judicial Court has recognized a “serious danger exception” to a physician’s common law duty to maintain patient confidentiality.

Massachusetts providers have generally disclosed only that information necessary to prevent serious danger, but there have been many instances where police departments, hospitals and other providers have disputed whether and to what extent such disclosures are allowed without a court order or written patient authorization.

While the right of privacy is not absolute under Massachusetts law and it is the unreasonable interference that is actionable, the specific statutory exceptions for mandatory reporting (e.g. bullet wounds) and permissible public safety disclosure are confusing under the variety of applicable Massachusetts legal sources, and as noted above beyond psychotherapists are not governed explicitly by a state statutory exception for hospitals and physicians to report instances of serious and imminent danger and granting them immunity for doing so.

D. Recent Tragic Events Should Compel Massachusetts to Take Legislative Action

Massachusetts is in need of comprehensive, consolidated legislation on the balance between patient privacy rights and permissible and necessary limited disclosures to protect the public.   Such legislation should contain explicit statutory provisions applicable to all classes of providers, in order to delineate and provide clear guidance on what type of public safety disclosures are permitted, and in what circumstances.

The Massachusetts Legislature could ease the confusion among providers and lessen the risk of future preventable tragedies by having Massachusetts law adopt and follow the permissible HIPAA public safety exceptions described above, and grant immunity under state law for providers who follow these HIPAA permissive disclosures. HIPAA’s limited pre-emption of state law still leaves it to state governments to identify when they want to be more protective of patient rights and limit disclosures that may be otherwise permitted under HIPAA   Providers in Massachusetts would be better served by such a state statute law, as it would diminish the current uncertainty and case-by-case effort hospitals, medical practices and other providers must regularly engage in when they balance their legal and ethical duties to patients against the safety of the general public.

 

Bill Mandell is a founding member and co-managing partner of Pierce & Mandell, P.C.. He represents health care providers in regulatory and transactional matters, including practice start-ups, buy-ins and buy-outs, hospital-physician relationships, risk management, professional contracts and regulatory compliance. He also represents non-profit organizations, corporate executives, start-ups, and small and family businesses.  He serves frequently as a neutral hearing officer and advisor to medical staff hearing panels for medical staff disciplinary action and peer review appeals.

United States v. Caronia – “A Tale Full of Sound and Fury”

By Ara B. Gershengorn
The author appreciates the assistance of Judith Gallant and Maria Amichetti in the preparation of this article.

In December 2012, the U.S. Court of Appeals for the Second Circuit vacated the conviction of Alfred Caronia, a pharmaceutical sales representative, for off-label promotion in a ruling that raised more questions than it answered.   For decades, the phrase “off-label promotion” has struck fear — and confusion — into the hearts of pharmaceutical companies everywhere, especially here in Massachusetts where a thriving life sciences industry operates in close proximity to an aggressive U.S. Attorney’s Office with substantial experience prosecuting healthcare companies for unlawful promotional activities.

Through the years, companies have paid hundreds of millions of dollars to settle both civil and criminal investigations involving off-label marketing.  In July 2012, GlaxoSmithKline paid $3 billion to settle civil and criminal charges relating in part to its unlawful promotion of Paxil and Wellbutrin.[1]  In December 2012, less than two weeks after the Second Circuit’s decision, Amgen agreed to pay $762 million as part of a guilty plea to marketing illegally its drug Aranesp.[2]   Settlements or pleas have come from nearly every major pharmaceutical company, including Pfizer,[3] Warner-Lambert,[4] Serono,[5] Schering-Plough,[6] Bristol-Myers Squibb,[7] Eli Lilly,[8] Cephalon,[9] AstraZeneca,[10] Merck,[11] and Novartis.[12]  Many of these investigations, including those of GSK and Pfizer, have been conducted by the U.S. Attorney’s Office in Massachusetts,[13] and even those pursued in other districts, such as the investigation of Amgen, sometimes received assistance from the federal prosecutors in Boston.[14]  As the Boston Federal District Court judge said at the sentencing of Merck in April 2012 (where she imposed a more than $300 million fine on the company for its off-label promotion and marketing of Vioxx), she had seen a “barrage” of off label marketing cases.[15]

Background on the FDCA

Off-label marketing is typically prosecuted as a violation of the Food, Drug and Cosmetic Act (“FDCA”).[xvi]  The FDCA sets out a regulatory scheme that requires drugs to be approved by the Food & Drug Administration before they may be introduced into interstate commerce.  In particular, the statute provides that “[n]o person shall introduce or deliver for introduction into interstate commerce any new drug, unless an approval of an application, filed pursuant to subsection (b) or (j) of this section is effective with respect to such drug.”[xvii]  A “new drug” is defined in the statute as “any drug . . . the composition of which is such that such drug is not generally recognized, among experts qualified by scientific training and experience to evaluate the safety and effectiveness of drugs, as safe and effective for use under the conditions prescribed, recommended, or suggested in the labeling thereof . . . .”[xviii]

The statute sets out the requirements for the application for a new drug, including reports of investigations into the safety of the drug; the components and composition; the methods used in, and the facilities and controls used for, the manufacturing, processing and packaging of the drug; and the indication of the drug.[xix]  Samples of the drug and the proposed labeling for the drug must also be submitted to the FDA.[xx]  When the FDA approves a drug, the approval is for an “approved” use (or uses), with particular labeling for each use.

Off-Label Use of Drugs

As the statutory scheme makes clear, the fact that a drug is approved and labeled for a particular use does not mean that its actual use is so restricted.  Instead, prescription drugs can lawfully be prescribed by physicians for both “approved” uses and unapproved — or “off-label” — uses.  Title 21 explicitly states, “[n]othing in this chapter shall be construed to limit or interfere with the authority of a health care practitioner to prescribe or administer any legally marketed device to a patient for any condition or disease within a legitimate health care practitioner-patient relationship,”[xxi] and, as the Supreme Court recognized in connection with medical devices, off-label use “is an accepted and necessary corollary of the FDA’s mission to regulate in this area without directly interfering with the practice of medicine.”[xxii]   Nevertheless, the statute also recognizes that “[t]his section shall not limit any existing authority of the Secretary to establish and enforce restrictions on the sale or distribution, or in the labeling, of a device that are part of a determination of substantial equivalence, established as a condition of approval, or promulgated through regulations.  Further, this section shall not change any existing prohibition on the promotion of unapproved uses of legally marketed devices.”[xxiii]  Thus, as the courts have explained: “Although a doctor is free to prescribe drugs for off-label uses, FDA regulations forbid pharmaceutical companies from initiating discussions of such uses with physicians and from marketing a drug for anything other than an FDA-approved use.”[xxiv]

The government typically threads this needle by prosecuting “misbranding,” or “the introduction or delivery for introduction into interstate commerce of any . . . drug that is . . . misbranded.”[xxv]  A drug is “misbranded” if its labeling does not include “adequate directions for use.”[xxvi]  Adequate directions for use are “directions under which the layman can use a drug safely and for the purposes for which it is intended.”[xxvii]  FDA regulations define “intended use” by reference to “the objective intent of the persons legally responsible for the labeling of drugs,” which may be demonstrated by “oral or written statements by such persons or their representatives.”[xxviii]  It is on this misbranding theory that the government has investigated and prosecuted scores of cases, including one against Orphan Medical and its sales representative, Alfred Caronia.

Orphan Medical and Xyrem

The Caronia/Orphan Medical case revolved around the sale and marketing of the drug Xyrem.  Xyrem, manufactured by Orphan Medical, was approved with a first indication in July 2002 as a “central nervous system depressant” to treat symptoms of narcolepsy. [xxix]  It was initially indicated for the treatment of cataplexy (suddenly weak or paralyzed muscles when people who have narcolepsy feel strong emotions). [xxx]  The on-label indication was expanded in November 2005 to include excessive daytime sleepiness (EDS) in people who have narcolepsy. [xxxi]

Xyrem has serious side effects, including “difficulty breathing while asleep, confusion, abnormal thinking, depression, nausea, vomiting, dizziness, headache, bedwetting, and sleepwalking.”[xxxii]  Moreover, the active ingredient in Xyrem is gamma-hydroxybutryate, or GHB, commonly known as the “date rape drug.”[xxxiii]  The FDA required a “black box” warning for Xyrem, the most serious warning placed on medication labels.[xxxiv]

Orphan Medical hired Alfred Caronia in March 2005 as a Specialty Sales Consultant to promote Xyrem.[xxxv]  In July 2005, Caronia started Orphan Medical’s Xyrem “speaker programs” which enlisted physicians to speak to other doctors about the product’s on-label uses.[xxxvi]  Orphan Medical subsequently hired Dr. Peter Gleason, a psychiatrist, as one of its physician speakers.

In the Spring of 2005, the government began an investigation of Orphan Medical focusing on the off-label promotion of Xyrem.  Caronia and Gleason were recorded as they had off-label discussions with Dr. Stephen Charno, a physician cooperating with the government who posed as a potential Xyrem prescriber.  In one of the recorded conversations, Caronia, according to the government, promoted Xyrem for a variety of off-label conditions:

[Caronia]: And right now the indication is for narcolepsy with cataplexy . . . excessive daytime . . . and fragmented sleep, but because of the properties that . . . it has it’s going to insomnia, Fibromyalgia[,] periodic leg movement, restless leg, ahh also looking at ahh Parkinson’s and . . . other sleep disorders are underway such as MS.

[Charno]: Okay, so then so then it could be used for muscle disorders and chronic pain and . . .

[Caronia]: Right.

[Charno]: . . . and daytime fatigue and excessive sleepiness and stuff like that?

[Caronia]: Absolutely.  Absolutely.  Ahh with the Fibromyalgia.[xxxvii]

Caronia was also recorded discussing an unapproved subpopulation for Xyrem with physician-customers.[xxxviii]

In July 2007, the government charged Orphan Medical with misbranding Xyrem, claiming that “ORPHAN sales representatives and medical professionals retained by ORPHAN to speak in support of Xyrem, engaged in a scheme to expand the market for Xyrem by promoting the drug to physicians for ‘off-label’ medical indications, including fatigue, insomnia, fibromyalgia . . ., chronic pain . . ., weight loss, depression bipolar disorders and movement disorders such as Parkinson’s Disease.”[xxxix]  The Company pleaded guilty to felony misbranding, agreed to pay $20 million, and entered into a Corporate Integrity Agreement.

The government also charged David Tucker (a former Orphan Medical sales manager), Gleason, and Caronia with felony misbranding and other criminal violations.  Tucker pleaded guilty to a single felony misbranding count.  In August 2008, the government reduced its charges against Caronia and Gleason to misdemeanors.  Gleason pleaded guilty to one count of misdemeanor misbranding, while Caronia proceeded to trial on counts of misdemeanor misbranding and conspiracy.[xl]

In October 2008, Caronia was tried before a jury and convicted of conspiracy to commit misdemeanor misbranding.[xli]  He was sentenced to one year of probation, 100 hours of community service, and a $25 special assessment.[xlii]

Caronia appealed, arguing that he was convicted for his speech in violation of the First Amendment.  On December 3, 2012, the Second Circuit agreed and vacated his conviction by a 2-1 vote.

Second Circuit’s Decision

In vacating Caronia’s conviction, the majority opinion emphasized that the government had prosecuted Caronia for his off-label promotional speech.  “The government, in its summation and rebuttal, repeatedly asserted that Caronia was guilty because he, with others, conspired to promote and market Xyrem for off-label use. . . .  Thus, the government’s theory of prosecution identified Caronia’s speech alone as the proscribed conduct.”[xliii]

The court drew a distinction between the statutory offenses with which Caronia had been charged of misbranding (or conspiracy to misbrand) on the one hand, and off-label promotion on the other.  The former, the court noted, does not necessarily “criminalize speech,” whereas the latter would.  In order to avoid constitutionally invalidating a federal statute, the court construed the FDCA “as not criminalizing the simple promotion of a drug’s off-label use.”[xliv]  The statute itself, the court held, was not constitutionally infirm because it did not criminalize speech.  A prosecution for off-label promotion, on the other hand, which would criminalize speech, was constitutionally impermissible.

In so holding, the majority relied heavily on the recent Supreme Court decision in Sorrell v. IMS Health, Inc.[xlv]  In Sorrell, the Second Circuit noted, the Supreme Court had held that speech in aid of pharmaceutical marketing “‘is a form of expression protected by the . . . First Amendment.’”[xlvi]  Applying Sorrell, the Second Circuit determined that criminalizing off-label promotion would be both content-based and speaker-based restrictions of speech, meaning that a statute that criminalized off-label promotion would be drawing distinctions and thereby approving or disapproving speech based both on what the speaker was saying (because only on-label promotion but not off-label promotion was permissible) and who was speaking (because only manufacturers are so limited, whereas others, such as doctors, are permitted to discuss off-label uses).  Accordingly, the court found that the restriction was subject to a higher form of constitutional scrutiny.[xlvii]

The court then applied the four-prong test of Central Hudson.[xlviii]  The court found that the first two prongs — that the speech is not misleading and concerns lawful activity and that the government’s interest is substantial — were “easily satisfied.”[xlix]  The speech was not misleading in and of itself,[l] and the government’s interest in assuring drug safety and public health was substantial.  As to the third prong, however, (directly advancing the government interest) the court determined that regulating off-label speech did not directly advance the government’s interest.  To the contrary, the court found that prohibiting manufacturers from conveying truthful information about off-label uses might in fact hamper the government’s interest and “inhibit, to the public’s detriment, informed and intelligent treatment decisions.”[li]  “The government’s construction of the FDCA essentially legalizes the outcome — off-label use — but prohibits the free flow of information that would inform that outcome.”[lii]  Finally, the court found that the fourth prong (narrow tailoring) was also not satisfied.  The restriction consisting of a complete and criminal ban on speech was more extensive than necessary to achieve the government’s interest.[liii]

Because the FDCA defines misbranding in terms of whether a drug’s labeling is adequate for its intended use, the Second Circuit assumed, without deciding, that the government could prove intended use by reference to promotional statements made by drug companies and their representatives.  The court left open the possibility that prosecutors may use evidence of off-label promotion as a means of establishing the intended use of a drug.  Even if this use of evidence of speech were permissible, however, the Second Circuit determined that this was of little help to the government in this case because Caronia was not prosecuted on that basis.  “Rather, the record makes clear that the government prosecuted Caronia for his promotion and marketing efforts. . . .  [T]he government’s summation and the district court’s instruction left the jury to understand that Caronia’s speech was itself the proscribed conduct.”[liv]

After Caronia

The Second Circuit’s decision was quickly hailed by some as a sea change.  The New York Times declared it a “victory” for drug companies.[lv]  Bloomberg’s headline read “U.S., Barred From Prosecuting Off-Label Sales of Drugs.”[lvi]  Thomson Reuters asked “Seismic Fallout from Ruling on Drug Marketing and Free Speech?” and whether a “blockbuster ruling” by the Second Circuit would “turn off the spigot of false claims billions from the pharma industry?”[lvii]  Some waited anxiously to find if the FDA would seek further review of the ruling, either by an en banc court of the Second Circuit or by the Supreme Court.

But almost two months after the decision, on January 23, 2013, the FDA declared that it would not seek further review:

“FDA does not believe that the decision will significantly affect the agency’s enforcement of the drug misbranding provisions of the Food, Drug & Cosmetic Act. The decision does not strike down any provision of the FD&C Act or its implementing regulations, nor does it find a conflict between the act’s misbranding provisions and the First Amendment or call into question the validity of the act’s drug approval framework.”

Although perhaps surprising at first glance, the FDA’s decision not to appeal was actually quite predictable for a number of reasons.  Despite some of the hype immediately following the decision and the dire forecast of the dissent that “the majority calls into question the very foundations of our century-old system of drug regulation,”[lviii] the ruling arguably left in place a number of avenues for prosecution.  First, it left open the possibility that one can be prosecuted for conveying false or misleading information.  As discussed above, the majority opinion noted that the prosecution had not contended either at trial or on appeal that the promotion by Caronia was either false or misleading.  “[O]f course, off-label promotion that is false or misleading is not entitled to First Amendment protection.”[lix]  Thus, after Caronia, the government still can prosecute for false or misleading statements and arguably could claim that a statement that a drug is safe for off-label use could be found to be false or misleading if there is insufficient support (such as studies) to demonstrate such safety.[lx]

Second, the Caronia decision still permits the government to prosecute using evidence of off-label activities as evidence of intent.  The Caronia decision explicitly left open this possibility, although in a footnote, the court questioned how the government would identify criminal misbranding from communications between drug manufacturers and physicians who could prescribe drugs for off-label use.[lxi]

Third, the decision has limited reach.  The Second Circuit covers only Vermont, New York, and Connecticut, and therefore, the court’s decision is binding only on federal courts within those states.  Importantly, the decision does not bind either of two very active U.S. Attorney’s Offices – Massachusetts and Pennsylvania — neither of which, it is important to bear in mind, is limited to prosecuting companies in their own backyard.  Because of the wide reach of companies and their often national, if not global, sales and marketing practices, the U.S. Attorney’s Offices in both Massachusetts and Pennsylvania have prosecuted, and continue to prosecute, companies located across the country and the globe.

While some have contended that the Caronia decision’s limited geographic reach may have been a significant factor in the FDA’s decision to decline further review, it seems more likely that prosecutors, like the FDA itself, will not affirmatively argue that the decision is wrongly decided and should be limited to the Second Circuit, but will instead simply seek to construe it narrowly.  This view was expressed by the U.S. Attorney for the Eastern District of Pennsylvania, Zane Memeger, whose office, along with the District of Massachusetts, has been at the forefront of healthcare prosecutions.  “‘The Second Circuit decision is not binding on other areas, but it can be relied upon for guidance,’ Memeger said. . . . . Memeger said his prosecutors will continue to focus on finding evidence [of] misbranding, which remains illegal, and the more commonly understood term – lying.  ‘There is no right of a company or an individual to make false and misleading statements about the use of a drug,’ Memeger said.  ‘I don’t see a difference in prosecuting our cases as vigorously as we have.  You want to make sure you have proof and not just a simple statement.’”[lxii]

Finally, government prosecutions often involve not only misbranding but other accompanying allegations such as violations of the anti-kickback statute or the alleged filing of false claims neither of which have been narrowed through the Caronia decision.  The U.S. Attorney for the District of Massachusetts, Carmen Ortiz, noted this recently, speaking to attendees at the CBI Pharmaceutical Compliance Congress at the end of January of this year.  Ortiz stated “‘You should not view this decision as a green light to engage in conduct that could be in that gray area that may be covered. . . .   When I think of all the prosecutions we’ve done in my office, I can’t think of any that would be covered by the Caronia decision. . . .  I don’t think you want to test it.’”[lxiii]

This statement of course highlights the conundrum faced by companies that might want to challenge whether they fall into this gray area:  the risks for them, their boards of directors, executives, and shareholders are simply too great to “test it.”  For a time, Par Pharmaceuticals, faced with an investigation in New Jersey, raised a First Amendment challenge in a separate action it brought against the FDA in federal court in the District of Columbia.[lxiv]  Par sought a declaratory judgment that the FDA’s intended use regulations violate the First Amendment and run counter to the FDCA.  But in March 2013, Par reached a settlement with the Justice Department in which Par agreed to pay $45 million; enter into a five-year Corporate Integrity Agreement;[lxv] and, as a condition of the settlement, drop its lawsuit.[lxvi]

Given the extremely high stakes involved with fighting a prosecution and bringing a First Amendment challenge — criminal penalties, shareholder lawsuits, Medicare exclusion — it seems unlikely that any corporate defendants will be willing to find out whether the Caronia decision came in like a lion, but has gone out like a lamb.  For now, such tests will be left to individual defendants, like Alfred Caronia, if to anyone at all.

Ara Beth Gershengorn is a partner with Foley Hoag LLP with a practice focused on government investigations, data security and privacy, and complex civil litigation.  Ara has represented a variety of companies and officers in criminal, civil, congressional, and regulatory investigations against allegations involving whistleblower actions, such as the federal False Claims Act, healthcare fraud, including off-label promotion, kickbacks, and product safety, and antitrust, environmental crimes, and securities fraud.  Prior to joining Foley Hoag, Ara was an Assistant United States Attorney, where she successfully prosecuted federal criminal trials and conducted investigations of health care fraud, securities fraud, tax crimes, and education fraud.


[1] See “GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data,” Department of Justice (“DOJ”) Press Release, July 2, 2012.

[2] See “Amgen Inc. Pleads Guilty to Federal Charge in Brooklyn, NY.; Pays $672 Million to Resolve Criminal Liability and False Claims Act Allegations,” DOJ Press Release, December 19, 2012.

[3] See, e.g., “Justice Department Announces Largest Health Care Fraud Settlement In Its History,” DOJ Press Release, September 2, 2009; see also DOJ Press Release, “Pfizer Agrees to Pay $55 Million for Illegally Promoting Protonix for Off-Label Use,” December 12, 2012.

[4] See “Warner-Lambert to Pay $430 Million to Resolve Criminal & Civil Health Care Liability Relating to Off-Label Promotion,” DOJ Press Release, May 13, 2004.

[5] See “Serono to Pay $704 Million for the Illegal Marketing of AIDS Drug,” DOJ Press Release, October 17, 2005.

[6] See “Schering to Pay $435 Million for the Improper Marketing of Drugs and Medicaid Fraud,” DOJ Press Release, August 29, 2006.

[7] See Bristol-Myers Squibb to Pay More Than $515 Million to Resolve Allegations of Illegal Drug Marketing and Pricing,” DOJ Press Release, September 28, 2007.

[8] See “Eli Lilly Agrees to Pay $1.415 Billion to Resolve Allegations of Off-Label Promotion of Zyprexa,” DOJ Press Release, January 15, 2009.

[9] See “Pharmaceutical Company Cephalon to Pay $425 Million for Off-Label Drug Marketing,” DOJ Press Release, September 29, 2008.

[10] See “Pharmaceutical Giant AstraZeneca to Pay $520 Million for Off-Label Drug Marketing,” DOJ Press Release, April 27, 2010.

[11] See “U.S. Pharmaceutical Company Merck Sharp & Dohme to Pay Nearly One Billion Dollars over Promotion of Vioxx®,” DOJ Press Release, November 22, 2011.

[12] See “Novartis Vaccines & Diagnostics to Pay More Than $72 Million to Resolve False Claims Act Allegations Concerning TOBI,” May 4, 2010; see also “Novartis Pharmaceuticals Corp. to Pay More Than $420 Million to Resolve Off-label Promotion and Kickback Allegations,” DOJ Press Release, September 30, 2010.

[13] See supra, n. 3 (“The criminal case is being prosecuted by the U.S. Attorney’s Office for the District of Massachusetts and the Civil Division’s Consumer Protection Branch.”); supra, n. 5 (“This case was handled by the Justice Department’s Civil Division and the U.S. Attorney’s Office for the District of Massachusetts.”).

[14] See supra n. 4 (listing attorneys from offices including the District of Massachusetts).

[15]  See “U.S. Pharmaceutical Company Merck Sharpe & Dohme Sentenced in Connection with Unlawful Promotion of Vioxx,” DOJ Press Release, April 19, 2012.

[xvi] 21 U.S.C. § 331(a), et seq.

[xvii] 21 U.S.C. § 355(a).

[xviii] 21 U.S.C. § 321(p).

[xix] 21 U.S.C. § 355(b).

[xx] Id.; see also http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplic ations/NewDrugApplicationNDA/ (visited 4/10/2013).

[xx] 21 U.S.C. § 396.

[xxi] 21 U.S.C. § 396.

[xxii] Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 350 (2001).  The statement in Buckman has been applied to drugs as well as devices.  See, e.g., In re Neurontin Marketing and Sales Practices and Products Liability Litigation, 2010 WL 3169485 (Aug. 10, 2010), at * 4 (stating that “Doctors are permitted to prescribe drugs off-label” and indirectly citing Buckman).

[xxiii] 21 U.S.C. § 396.

[xxiv] United States ex rel. Carpenter v. Abbott Laboratories, Inc., 723 F.Supp.2d 395, 398 (D. Mass. 2010); see also United States ex rel. Poteet v. Lenke, 604 F. Supp. 2d 313, 316 n.3 (D. Mass. 2009) (“the federal government discourages off-label prescription use by imposing FDA restrictions on the dissemination of information about potential off-label therapies and by restricting Medicaid from reimbursing health care providers for off-label uses.”)

[xxv] 21 U.S.C. § 331(a).

[xxvi] 21 U.S.C. § 352(f).

[xxvii] 21 U.S.C. § 201.5.

[xxviii] 21 C.F.R. § 201.128.

[xxix] Caronia, 703 F.3d at 155.

[xxx] Approved labeling for Xyrem, http://www.accessdata.fda.gov/drugsatfda_docs/label/2012/021196s013lbl.pdf (visited 4/11/2013)

[xxxi] Xyrem Medication Guide,  http://www.xyrem.com/images/Xyrem_Med_Guide.pdf (visited 4/11/2013).

[xxxii] Caronia, 703 F.3d at 155.

[xxxiv] 21 C.F.R. § 201.57(c)(1); see also New Jersey Carpenters Pension & Annuity Funds v. Biogen Idec Inc., 537 F.3d 35, 42 (1st Cir. 2008) (describing the black box warning as the “strictest warning the FDA can require”).

[xxxv] Caronia, 703 F.3d 155-56.

[xxxvi] Caronia, 703 F.3d at 156.

[xxxviii] Caronia, 703 F.3d 156-57 (“Caronia stating that “there have been reports of patients as young as fourteen using it and obviously greater than sixty-five.  It’s a very safe drug” when the black box labeling indicated that Xyrem’s safety and efficacy were not established in patients under 16 years and that the drug had “very limited” experience among elderly patients).

[xxxix] United States v. Orphan Medical, Inc., U.S.D.C., Eastern District of New York, Cr. No., 07-531 (ENV), docket entry 6 (Information) (July 7, 2007).

[xl] Caronia, 703 F.3d at 158.

[xli] Caronia, 703 F.3d at 159.  Caronia was acquitted of the other charges.

[xlii] Caronia, 703 F.3d at 160.

[xliii] Caronia, 703 F.3d at 158, 159.

[xliv] Caronia, 703 F.3d at 160.

[xlv] Sorrell v. IMS Health, Inc., 131 S. Ct. 2653 (2011).

[xlvi] Caronia, 703 F.3d at 161-62 (quoting Sorrell, 131 S. Ct. at 2659, 2667).

[xlvii] See Caronia, 703 F.3d at 161-63.

[xlviii] Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. 557, 563-64 (1980).  Central Hudson established a four-prong test used in determining whether commercial speech is protected by the First Amendment.  See id. at 566.  (1) The speech must not be misleading and must concern lawful activity; (2) the government interest must be substantial; (3) the regulation must directly advance the government interest; and (4) the regulation must be narrowly drawn and may not be more extensive than necessary to serve the interest.”  Id.

[xlix] Caronia, 703 F.3d at 165.

[l] The court noted that the government was not contending either at trial or on appeal that the speech was misleading or false.  See id. n. 11.

[li] Caronia, 703 F.3d at 166.

[lii] Caronia, 703 F.3d at 167.

[liii] Caronia, 703 F.3d at 167-68.

[liv] Caronia, 703 F.3d at 161 (emphasis in original).

[lv] See, e.g., Katie Thomas, “Ruling Is Victory for Drug Companies in Promoting Medicine for Other Uses,” NY Times, Dec. 3, 2102

[lvi] Margaret Cronin Fisk, “U.S. Barred From Off-Label Sales of Drugs,” Bloomberg News,  http://www.bloomberg.com/news/2012-12-04/u-s-barred-from-prosecuting-off-label-sales-of-drugs.html

[lvii] Allison Frankel’s On the Case, “Seismic Fallout from Ruling on Drug Marketing and Free Speech?” December 4, 2013, Thomson Reuters News & Insight, http://newsandinsight.thomsonreuters.com/Legal/News/2012/12_-_December/Seismic_fallout_from_ruling_on_drug_marketing_and_free_speech_/.

[lviii] Caronia, 703 F.3d at 169 (Livingston, J., dissenting).

[lix] Caronia, 703 F.3d at 166.

[lx] In United States v. Harkonen, Nos. 11-10209, 11-10242 (9th Cir. March 4, 2013), 2013 WL 782354, submitted to the Ninth Circuit Court of Appeals mere days after the Caronia ruling and anxiously watched in the aftermath of Caronia, the Ninth Circuit upheld, in an unpublished decision, the conviction of a physician charged with wire fraud for issuing a fraudulent press release on the purported survival benefits of Actimmune.  Harkonen had claimed that the press release expressed a scientific view and that he should be protected under the First Amendment, but the court found that his statements were not protected by the First Amendment because the jury had determined that the press release was fraudulent.

[lxi] Caronia, 703 F.3d at 162 n.10.

[lxii] David Sell, “Philly U.S. Attorney: Caronia court decision won’t impact pharma prosecutions (locally, for now),” Feb. 12, 2013, http://www.philly.com/philly/blogs/phillypharma/Philly-US-Attorney-says-court-decision-wont-impact-drug-prosecutions-for-now.html.

[lxiii] Erica Teichert, “Drug Misbranding Investigations Remain Top Priority: DOJ,” Jan. 29, 2013,  http://www.law360.com/articles/411149/drug-misbranding-investigations-remain-top-priority-doj.

[lxiv] Par Pharmaceutical, Inc. v. United States, District of Columbia, District Court, No. 11-cv-01820.

[lxv] “Par Pharmaceuticals Pleads Guilty and Agrees to Pay $45 Million to Resolve Civil and Criminal Allegations Related to Off-Label Marketing,” DOJ Press Release, March 5, 2013, http://www.justice.gov/opa/pr/2013/March/13-civ-270.html.

[lxvi] Letter dated January 3, 2013, from Office of the U.S. Attorney for the District of New Jersey to John Nassikas, et al., re: Plea Agreement with Par Pharmaceutical, http://pharmarisc.com/wp-content/uploads/2013/03/Par-Pharmaceutical-Plea%20Agreement-1.pdf.

 

Policymaker Profile: Secretary Polanowicz

By Emily Armstrong  

For many years, John Polanowicz led a helicopter assault unit on overseas missions as a company commander in the United States military.  Now the West Point graduate and Stanford business school alum will bring his leadership experience and healthcare expertise to his new role as Secretary of the Executive Office of Health and Human Services (EOHHS).  Appointed by Governor Deval Patrick in January 2013, Secretary Polanowicz will oversee 15 different departments and divisions, including the Department of Public Health, the Department of Elder Affairs, the Board of Registration in Medicine, the Department of Children & Families, the Department of Veterans’ Services and the Commonwealth’s Medicaid Program, MassHealth. Further, as a member of Governor Patrick’s cabinet, Secretary Polanowicz will offer advice and policy guidance regarding how Massachusetts can maintain its global reputation for excellence in healthcare while also maximizing efficiency and controlling costs.

On behalf of the Boston Bar Association’s Health Law Reporter I had a chance to speak with Secretary Polanowicz about his interesting background and vision for healthcare in the Commonwealth.

Question

You have a really interesting background.  Can you tell our readers how a graduate from West Point and officer in the military embarks on a career in health care?

Answer

It is actually a little bit of a different path to health care. When I left the military I had just given up my company command in Panama.  I was a company commander for the Blackhawks.  At that point in time, there were a lot of firms that recruited junior military officers, and several of us ended up working at pharmaceutical firms as pharmaceutical representatives.  I had the opportunity to work for a company called Stryker Endoscopy which was a quasi start-up out in Sunnyvale, California.  Stryker had just developed a new technology – a three chip camera that was used for minimally invasive surgery – which was just starting to take off (which dates how long ago that was).  At first I worked in operations, and then, because the company was so small, the CEO asked if I could also act as the CIO because I had some computer background from West Point and everyone was doing a little of everything.  After a few years, I decided to pursue a business degree at Stanford, where I met a number of physicians.  I became good friends with some of my physician-classmates so I decided to start taking some health care classes with them.

Allen Tobin, who was one of the original proponents of managed care and worked as a consultant with a health care company with expertise in operations improvements, similar to McKinsey or Bain but health care specific, offered me a position with his group.  I ended up working with that company after I graduated from Stanford.  I did health care consulting for a couple of years.  As a health care consultant, I worked with a number of academic medical centers, primarily doing operations work but also some strategic planning.  My last client was the University of Massachusetts.  When I got to UMass, I was ready to get off of the consulting bandwagon because I had two very small children.  At that time UMass asked me to put together an internal consulting group.  I built a small group of nurses, management engineers, and finance folks to do operations improvement and quality improvement on the UMass quality operations.  Eventually the UMass system merged with the Memorial System.  After I worked at UMass, I took a position as the CEO of Marlborough Hospital, which is a part of the UMass system, for approximately eight years.  I came to Boston to be the president of St. Elizabeth’s Hospital, which is the flagship for the Steward System in Massachusetts.  In January of this year I received a call from the Governor’s Office which asked me to come and work as his Secretary of EOHHS.

Question

Prior to receiving that call in January, had you worked with Governor Patrick before?

Answer

When Governor Patrick first ran for office, I was the CEO out in Marlborough.  Congressman Jim McGovern called and asked me if I would give Mr. Patrick a tour of the hospital.  At the time the congressman explained that Mr. Patrick was planning on running for governor, and that Congressman McGovern planned on endorsing him.  The congressman further explained that Mr. Patrick was making an effort to meet lots of folks in the industry.  I gave Mr. Patrick a tour.  Later, I received a call from the Governor’s campaign who stated that Mr. Patrick was putting together his platform committees and wanted me to serve as co-chair for the health care committee.  At that point, Judy Ann Bigby and Don Berwick were also committed to chairing the committee, and, frankly speaking, as a relative youngish CEO from a small community hospital I signed up right away to work with them and Mr. Patrick, who I already knew, and I appreciated his approach and ideals.  The Governor and I stayed in touch over the subsequent years.

Question

You have served in a variety of types of hospitals, from the University of Massachusetts, to a small community hospital, to a for-profit system.  How do those varying experiences assist you in your current role?

Answer

My past work at a large academic medical center that has a medical school associated with it, a small community hospital with a pluralistic medical staff, and a smaller academic medical center on the for-profit side, helps me as we are going through reforms and health care regulations to have a perspective on how things my office decides here impact hospitals of various sizes and types.  I know where the leaders are coming from in most of these organizations, whether it is a small community hospital or academic medical center, I have had those same types of issues when in the other positions I have served in.

Question

Your career started in public service and then took a turn to the private sector before you returned to public service again.  What do you see as the benefits and challenges of leaving the private sector?

Answer

One of the reasons why the opportunity to work in this position was really attractive to me is that I think what the public sector is doing is so important.  Certainly there are times when public employees are vilified, but I can tell you from working in the public sector, even for a short period of time, the dedication of public sector employees and how hard people are working on behalf of the entire Commonwealth should really be commended. People are not taking these jobs in public health to get rich and famous.

For me, it is important to help make whatever it is that we are doing here in the secretariat a little bit better.  If at the end of my role here as the Secretary I can look back and feel like we made things better, in a number of different areas, whether it involves access to services, protection for our children in foster families, or the coverage we are providing for the disabled – if we have made things better for those people it will absolutely be worth coming back and helping out.

Question

With the passage of the Accountable Care Act you are in a critical position at a fascinating time for health care.  What do you anticipate are changes that may come through or receive some direction from your office?

Speaker

It’s that old Chinese proverb “may you live in interesting times” and we certainly are.  Within the secretariat there are a number of areas we are trying to focus on within the time that I am here.  We need to get the Affordable Care Act right.  As the rules are promulgated at the federal level, we have a lot of work to do in the Commonwealth.  As people know Chapter 58 served as a blue print for the Affordable Care Act, but there is still a lot of work for us to be in compliance with the federal requirements.

We are spending a lot of time taking a look at the requirements of the ACA and evaluating what the impact will be on the state.  With a population with about 98 percent covered, we are in a very different position than a lot of other states and we need to make sure that we do not have unintended consequences from the federal legislation that is coming down.  Everything that is happening, we are looking at it from our lens, which is a large scale coverage model for the population, and we need to look at how that is being implemented here.  As a result, we asked for time to transition because we believe that our rating factors worked very efficiently and we need to make the necessary adjustments, as opposed to just having it be a light switched make that change immediately.

Question

For our readers who are primarily health law attorneys representing hospitals and other providers, is there any particular message or issue that you want those folks to know about from this office?

Answer

We are trying to be effective communicators and be as transparent as we can with respect to the work that is going on in this office.  We have a lot of people who have been doing health care and health care-related services here in the office for some time, but we also know that we have an incredible bounty of individuals here in the Commonwealth with depths of knowledge that we should be leveraging.  As a result, when we reach out to boards and commissions, or conduct studies, we are making an effort to ask outside experts to become involved.  It is in our collective best interest to get the best solution we can for the entire Commonwealth.

Question

What are your goals while in this office?

Answer

Certainly, as we already discussed, the Affordable Care Act is too important and too big for us not to get it right.  I would say there are two other things. One is around program integrity across the entire secretariat.  Program integrity is critical for our MassHealth population, or our Department of Transitional Assistance, as well as other departments that provide access to benefits – whatever those benefits might be.  Program integrity includes ensuring that everyone who is eligible for benefits – whatever those benefits might be – has access to those benefits.  In the alternative, it also means preventing those who are not eligible for receiving benefits from accessing those benefits.

Then finally I think that the last area of focus is addressing the Department of Public Health.  The first task is finding the next leader of the Department of Public Health.   Also, we need to find ways for the Department of Health to keep performing the great work that it does while also working more consistently with the secretariat.  We need to address the issues of silos within the Department of Health.  The focus of the new Department of Health leader should be how the department can work together with constituents and customers, while at the same time ensuring the public health and public safety.

Question

So you have been in this role for three months now. Have there been any big or small surprises?

Answer

Nearly every day I hear some story that feeds the soul somehow.  We often hear about work that’s been accomplished by our staff in one of the different agencies or commissions, or the really heartwarming stories that come up at our listening sessions.  We heard one the other day at a DTA listening session about a young single mom, with four kids, who uses the transitional assistant benefits to help feed her kids while she is studying to get her college equivalence degree.  At the end of the day those are the kinds of things that keep you coming back, because you know that what you are are doing is right.  That does not mean we cannot always strive to do better and be more efficient, whether it is from the Commonwealth’s perspective or from the viewpoint of a not-for-profit or for-profit hospital system, but it is really nice to hear those stories about how your staff is making a positive impact in people’s lives.

Emily Armstrong is an Associate General Counsel in the Office of the General Counsel at Beth Israel Deaconess Medical Center (“BIDMC”).  Prior to joining BIDMC, Emily worked at the Massachusetts Office of the Attorney General in the Consumer Protection Division investigating and prosecuting violations of the Massachusetts False Claims Act and Consumer Protection Law.  Emily started her legal career as a litigation associate at Goulston & Storrs, after graduating from Boston College Law School.  

Health Law Case Brief: Metroplex Pathology Associates v. Horn

By Patrick Kilgore

In Metroplex Pathology Associates v. Horn,[1] the Massachusetts District Court interpreted whether two physicians violated certain confidentiality and non-competition clauses within their respective employment contracts.  Ultimately the Court denied plaintiff Metroplex Pathology Associates’ (“Metroplex”) motion for a preliminary injunction restricting defendant physicians Thomas Horn and Lisa Cohen—as well as their employer MGPO Dermatopathology Associates (MDA)—from engaging in activities allegedly prohibited by Horn and Cohen’s respective employment agreements . The court determined that Metroplex was unlikely to succeed on the merits because it could not show that the defendants had in fact violated any provisions of their employment agreements with Metroplex, and suggested that the non-competition and non-solicitation provisions of the employment agreements may even be unenforceable under Mass. Gen. Laws ch. 112 § 12X [2].

Metroplex alleged that that Cohen and Horn signed employment agreements as part of the 2007 sale of their practice to Caris Diagnostics, Inc.  Under the terms of his employment, Cohen agreed not to disclose any confidential information[3] to third parties—for five years following termination. The agreement also included a non-competition provision stating that Cohen could not “directly or indirectly take any action that results or may reasonably be expected to result in owning any interest in, leasing, operating, managing, extending credit to, or otherwise participating in the business (including without limitation, as a medical director, contractor, or consultant) of a Competitor in the Restricted Area” for two years following the agreement.[4] This provision, however, explicitly allowed Cohen to be employed on a salaried basis limited to the review and interpretation of dermatopathology slides.  Finally, Cohen agreed not to solicit employees of Carisfor two years after termination of the agreement.[5]

Similarly, Horn’s employment agreement prohibited him from disclosing the identities of Caris’ referring physicians to third parties, as well as attempting to solicit certain parties associated with Caris from terminating their relationships with the company for one year following the termination of the agreement.[6]

Cohen and Horn each left Caris to join MDA in 2011..[7] Horn, who joined MDA before Cohen, claimed that he was not aware that Cohen was planning on joining MDA until her hiring was announced. Both Cohen and Horn contended that their roles at MDA were limited to comply with the restrictions imposed by their previous employment agreements. Specifically, the defendants claimed that Cohen has played no role in the operation or management of MDA, and that all marketing and solicitation was handled by an employee who did not report to or interact with Horn or Cohen. [8]

The Plaintiffs, successors in interest to the physicians’ contracts, alleged that: (a) Horn and Cohen, along with MDA, operated a new dermatopathology practice in breach of the confidentiality, non-solicitation, non-competition, and non-disparagement provisions in their respective contracts; (b) Horn and MDA wrongfully hired several former employees, including Cohen; and (c)  MDA improperly used Horn’s and Cohen’s names, images, and biographical information on its marketing and promotional materials and is directly soliciting Metroplex’s clients using confidential information provided by Cohen and Horn.[9]

The district court denied Metroplex’s request for an injunction on the basis that the plaintiff could not show that Horn or Cohen had violated their respective employment agreements. The court noted Metroplex bore the burden of showing a substantial likelihood of success on the merits, observing that “if the moving party cannot demonstrate that he is likely to succeed on his quest, the remaining factors [considered for a preliminary injunction] become matters of idle curiosity.[10]”  The district court determined that Metroplex did not present evidence that either doctor disclosed or used confidential information obtained from Caris, solicited any of Caris’ employees, or solicited any of Caris’ clients.  Each physician joined MDA independently of the other, and without encouraging other parties to leave Metroplex.   The court further found that Cohen’s contract with Metroplex explicitly permitted her employment by MDA for the purposes of reviewing and interpreting dermatopathology slides.

On a broader policy note, the court ultimately questioned whether the non-competition and non-solicitation provisions of Cohen’s contract were valid, observing that “M.G.L. c. 112 § 12X renders void and unenforceable ‘any restriction of the right of [a physician] to practice medicine in any geographic area for any period of time after the termination’ of an employment relationship.[11]” In a footnote, the court rejected Metroplex’s assertion that § 12X should be read narrowly to cover only physicians who deal directly with patients and not doctors who—like Cohen and Horn—work in a lab.[12]

Patrick Kilgore is a 2012 graduate of Boston University School of Law and a member of the BBA. He is currently works for Boston University Technology Development and is joining the Chicago firm Rakoczy, Molino, Mazzochi, Siwik LLP in May.


[1]Metroplex Pathology Assoc. v. Horn,  2013 WL 22197 (Mass. Dist. Ct. 2013).

[2] Mass. Gen. Laws ch. 112 § 12X  states that “[a]ny contract . . . with a physician . . . which includes any restriction of the right of such physician to practice medicine in any geographic area for any period of time after [] termination . . . shall be void and unenforceable with respect to said restriction. . . .”

[3] “Confidential information” included the identity of Caris’ customers and personnel as well as company business and marketing plans. Metroplex at 1.

[4] Metroplex Pathology Assoc., 2013 WL 22197, *1­ (Mass. Dist. Ct. 2013).

[5] See id.

[6] See id. at *2.

[7] See id.

[8] See id. at *3.

[9] Id.

[10] New Comm Wireless Servs., Inc., v. SprintCom, Inc., 287 F.3d 1, 9 (1st Cir.2002).

[11] Metroplex, WL 22197, at *4.

[12] See id. at *4 n.7.

Health Law Case Brief: Louise Morrison v. Dr. Julian Harris, Director, Office of Medicaid

Author: Patrick C. Cento, Esq.

In Morrison v. Harris, the Massachusetts Superior Court reinforces the discretionary authority of agency hearing officers in the adjudication of disputes regarding financial eligibility for Massachusetts Medicaid (“MassHealth”) benefits.  Specifically, the decision, authored by Associate Justice Curran, confirms this administrative discretion with respect to agency determinations of the value of services rendered to MassHealth applicants by family members prior to an application for MassHealth benefits.  Compensation to such family members for care provided can, as happened here, be classified as “impermissible transfers,” and limit eligibility for MassHealth.  The opinion holds that this administrative discretion extends, at least in part, to the methodology of calculating the value of services, as well as to the underlying determination of the fair market value of the care provided, including whether family-provided care is skilled or unskilled labor.

Factual and Procedural Background

In 2003, an aging Louise Morrison moved into a rental unit within the home of her daughter, Lisa Ohlson.[i]  Between 2003 and 2006, Ms. Ohlson provided certain housekeeping and custodial services to her mother.[ii]  In 2006 Mrs. Morrison was diagnosed with Alzheimer’s disease and the scope of services provided increased.[iii]    On September 5, 2007, Mrs. Morrison and her daughter entered into a “Care Employment Agreement,” under which Ms. Ohlson would act as a caretaker for her mother in exchange for regular monthly payments of $750 for rent, and $14,904 for “services described in this agreement.”[iv]  Mrs. Morrison made these payments from September 2007 until July 2008, though Ms. Ohlson continued to provide services to her mother until June 2009, at which point Mrs. Morrison was admitted to a nursing home.[v]

After being admitted to the nursing home, Mrs. Morrison applied for MassHealth long-term care benefits, and on September 28, 2009, MassHealth denied her application on the basis of financial ineligibility.[vi]  Specifically, MassHealth cited Mrs. Morrison’s transfer of $155,536 between September 2007 and July 2008 as constituting “impermissible transfers for less than fair market value under 130 Code Mass. Regs. § 520.018.”[vii] In particular, 130 CMR 520.018, states that MassHealth will deny an application for nursing facility services if that resident transfers “countable resources” (i.e., financial resources) for less than fair market value during a look-back period.[viii]            Mrs. Morrison then requested and received a hearing with the Office of Medicaid Board of Hearings, at which Ms. Ohlson and her husband testified and gave evidence that payments from Mrs. Morrison to Ms. Ohlson were in exchange for services provided and that the hourly rates for such services were at the same rates charged by adult care companies providing similar services.[ix]  On March 24, 2010, the hearing officer denied Mrs. Morrison’s appeal in part and approved it in part, finding that the transfers for services were disqualifying transfers, but that the rent payments were permitted transfers.[x]

On April 23, 2010, Mrs. Morrison filed a complaint for judicial review in Massachusetts Superior Court under G.L. c. 30A § 14, and a motion for judgment on the pleadings.[xi]  In its opinion on June 10, 2011 (the “2011 Superior Court Decision”), the court allowed in part and denied in part Mrs. Morrison’s motion, recognizing that the contract between Mrs. Morrison and her daughter was valid and that Ms. Ohlson had provided valuable services.[xii]  The court vacated the hearing officer’s determination and remanded the matter for the purpose of determining the fair market value of Ms. Ohlson’s services and the appropriate eligibility date based on the value of those services.[xiii]

After allowing Ms. Morrison and MassHealth to submit new evidence on the issue of fair market value, and denying a motion by Mrs. Morrison to reconvene the hearing, the hearing officer issued a remand decision reducing the impermissible asset transfer to $59,403.68 and a disqualification period of 217 days.[xiv]  This determination was made using the wages paid to unskilled caregivers employed by MassHealth under the Personal Care Attendant program, rather than using the rates paid to professional home caregivers offered by Ms. Morrison.[xv] Ms. Morrison appealed this decision, alleging that the Office of the Medicaid Board of Hearings’ estimation of the value of services Ms. Ohlson provided to her was arbitrary and capricious and an abuse of discretion.[xvi]

The Court’s Decision

The Court noted the standard of review under G.L. c. 30A, § 14, including the fact that the Court may affirm, remand, set aside, or modify the agency decision if it determines that the rights of any party may have been prejudiced because the agency decision is unconstitutional, in excess of the agency’s authority, based upon an error of law or unlawful procedure, unsupported by substantial evidence, or arbitrary or capricious, an abuse of discretion, or otherwise not in accordance with law.

The Court then addressed Mrs. Morrison’s first contention: that the calculations used by the hearing officer in determining the fair market value of Ms. Ohlson’s services contravened the 2011 Superior Court Decision and as such, are arbitrary, capricious, and unsupported by substantial evidence.

The 2011 Superior Court Decision indicated that Ms. Ohlson provided the services from September 2007 until Mrs. Morrison’s admission to the nursing home in 2009 and that, from the second month’s payment to the final payment, the payments can be viewed as payments for services rendered in the previous month.  The hearing officer on remand, however, excluded Ms. Ohlson’s September 2007 hours when calculating the total value of her services.  Mrs. Morrison argued that this exclusion was an abuse of discretion by the hearing officer because it violated the 2011 Superior Court Decision.  The court observes that “[w]hile the hearing officer’s calculation may have misinterpreted the direction of the prior Court decision, the impact on the total value is de minimis (and actually in Mrs. Morrison’s favor).”[xvii]  In footnote 4 of the opinion, the court points out that to follow Mrs. Morrison’s logic and include the value of services rendered in September 2007, the hearing officer would be required to include the value of compensation for hours of service rendered in July 2008 (which were not actually included, as there was no compensation in August 2008).  Given the difference in the relative value of services rendered in September 2007 and July 2008, such a calculation would actually overvalue Ms. Ohlson’s services and result in an additional 7 days of ineligibility for Mrs. Morrison.  The court definitively states that such a slight aberration in the hearing officer’s methodology, and one benefiting Mrs. Morrison, does not rise to the level of an abuse of discretion.[xviii]

Mrs. Morrison’s second argument was that the hearing officer’s use of the Personal Care Attendant program rates in estimating the fair market value of Ms. Ohlson’s services was unsupported by substantial evidence and contrary to MassHealth regulations.  The court cites MassHealth regulations indicating that fair market value is based upon an estimate of the “prevailing price” at the time of the transfer and indicates that the “only question . . . is whether there is substantial evidence that the value assigned to Ms. Ohlson’s services by the hearing officer is a reasonable estimate of the value based on the prevailing price” at the time.[xix]  The court states that while “Ms. Ohlson may offer services beyond those of a completely unskilled provider, it is also undisputed that she has no certification or education that would qualify her as a nurse or care provider.”[xx]  Accepting the hearing officer’s determination that Ms. Ohlson was more akin to an unskilled home care provider than a provider at a commercial home health services company, “the Court defers to the discretionary authority and expertise of the agency charged with making [the] determination.”[xxi]

Lastly, the court dismisses Mrs. Morrison’s argument that by not reconvening the hearing for further testimony upon remand, her procedural due process rights were violated.  The court noted that on remand, there “was no real factual issue considered” because the number of hours of services provided to Ms. Morrison by her daughter was accepted; and according to the court, the “only matter to be decided” by the hearing officer on the remand was “how to properly value those services.”  The court determined that because Mrs. Morrison was given the opportunity to submit evidence on this issue, she was afforded due process of law, and it was within the hearing officer’s administrative authority and discretion to make a determination based upon the evidence presented regarding the value of the services and deny Mrs. Morrison’s request to reconvene the hearing.

Patrick Cento is a 2012 graduate of Boston University School of Law, and preparing to begin a position as an attorney with the City of New York Human Resources Administration in the Medical Insurance and Community Services Administration (MICSA) Division.  Since graduating from law school, Patrick has worked as a law clerk for Brookline District Court Judge Mary White, as a legal fellow at the City of Boston Law Department, and has been active in the New Lawyers Section of the Boston Bar Association.  He is admitted to the Massachusetts Bar and is awaiting admission in New York. 


[i] Morrison v. Harris, 2013 WL 424883 at *1 (Mass. Super. Jan. 5, 2013).

[ii] Id.

[iii] Id.

[iv] Id.

[v] Id.

[vi] Id.

[vii] Id. at 2.

[viii] 130 C.M.R. §520.018(B) (2009).

[ix] Morrison v. Harris, 2013 WL 424883 at *1 (Mass. Super. Jan. 5, 2013).

[x] Id. at 2.

[xi] Id. at 2.

[xii] Id.

[xiii] Id.

[xiv] Id.

[xv] Id.

[xvi] Id. at 3.

[xvii] Id.

[xix] Id. at 4.

[xx] Id..

[xxi] Id.

Health Law Case Brief: Rabelo v Nasif

By Anna Gurevich

On December 27, 2012, the Massachusetts Superior Court, Worcester recognized that a cause of action based on “negligent credentialing” could be brought against Massachusetts hospitals.  In Rabelo v. Nasif et al., 30 Mass.L.Rptr. 547 (2012), the plaintiff, Julio Rabelo, sued defendants Ronald Nasif, M.D. (“Dr. Nasif”), Milford Regional Medical Center, Inc. (“Milford Regional”), and Parkway Orthopedics and Sports Medicine, Inc., for medical malpractice.[i]  The plaintiff specifically alleged that Milford Regional negligently credentialed Dr. Nasif, and the hospital subsequently filed a motion to bifurcate and stay all discovery on that claim until the medical malpractice claim against Dr. Nasif was adjudicated.  Ultimately, the court denied the defendant hospital’s motion to stay discovery on the negligent credentialing claim, and reserved for a decision by the trial judge the part of the hospital’s motion to bifurcate the negligent credentialing claim from the medical malpractice claim against the defendant doctor.

The court first noted that although Massachusetts had not explicitly recognized claims for negligent credentialing, it would recognize such an action where a hospital grants privileges to an unqualified physician, even though the physician is not an employee or agent of the hospital.  In coming to this conclusion, the court drew a comparison to the recognized causes of action for negligent retention and negligent hiring.[ii]  The court expressed that under those doctrines, many jurisdictions find that “liability exists on the part of the employer entirely independent of the employer’s liability under the principles of respondeat superior.”[iii]  Specifically, the court noted that a special relationship between the employer and the customer may imply an employer’s duty to safeguard those customers from incompetent or dangerous employees.[iv]  The court further noted that a key consideration in determining whether a special relationship exists is whether the defendant could reasonably foresee that it was expected to act affirmatively to protect the plaintiff from incompetent or dangerous employees, and that the failure to do so could reasonably cause harm to the plaintiff.[v]  The court reasoned that because hospitals can reasonably foresee that they are expected to protect patients from incompetent or negligent surgeons, and that failure to do so will likely cause harm to the patients, the hospital is therefore bound by this special relationship.[vi]  The court thus recognized a cause of action for negligent credentialing in the context of physicians with hospital privileges.

The court next deferred defendants’ request to bifurcate the trial with respect to the claim of negligent credentialing, noting that bifurcation is solely within the discretion of the trial judge.[vii]  The court expressed that the law generally disfavors bifurcation, as it results in extended adjudication and greater expense to the litigants.[viii]  The court did note that although in some cases there may be grounds for bifurcation where a party can show that adjudicating claims together might be prejudicial,[ix] Milford Regional did not make any such arguments for prejudice.[x]

Last, the court denied the part of Milford Regional’s motion to stay discovery on the negligent credentialing claim.  First, the court noted that information relating to the hospital’s negligent credentialing of Dr. Nasif might be valuable to the plaintiff’s malpractice action against him.  Second, the court held that discovery and admission of that information would not be prejudicial to the claim against the hospital.[xi]  The court further noted that any information related to negligent credentialing would have been created before the occurrence of the event that formed the basis of the medical malpractice claim against Dr. Nasif.[xii]  Thus, discovery on the negligent credentialing claim may in fact produce information prejudicial to Dr. Nasif in the underlying malpractice claim.

Anna Gurevich is a third year law student at the Boston University School of Law, where she is a writer on the American Journal of Law and Medicine. She received her undergraduate degree from New York University.


[i] Rabelo v. Nasif et al., 30 Mass.L.Rptr. 547 (2012). The claim additionally named two unknown defendants, John Doe and Jane Roe.

[ii] A claim for negligent hiring requires that the plaintiff allege (1) that the person whose action forms the basis of the complaint was an agent or employee of the defendant; (2) that the agent or employee came into contact with the public during the course of the employer’s business; (3) that the employer failed to use reasonable care in selecting, supervising, or retaining that agent or employee; and (4) that the failure to use such reasonable care proximately caused harm to the plaintiff.  Rabelo v. Nasif et al., 30 Mass.L.Rptr. 547 (2012) (citing Limone v. United States, 497 F.Supp.2d 143, 233 (D.Mass. 2007)).

[iii] Rabelo, 30 Mass.L.Rptr. at 547 (citing Foster v. Loft, Inc., 26 Mass.App.Ct. 289, 290 (1988)).

[iv] Id. at 548.

[v] Id. (citing Coughlin v. Titus & Bean Graphics, Inc., 54 Mass.App.Ct. 633, 639 (2002)).

[vi] Id.

[vii] Id. (citing Dobos v. Driscoll, 404 Mass. 634, 645 (1989)).

[viii] Id.

[ix] In Shilling v. Humphrey, 916 N.E.2d 1029, 1036 (Ohio 2009), the court bifurcated the claims of negligent credentialing and medical malpractice where the defendant doctor argued that it would be prejudicial not to. Specifically, the doctor argued that any evidence related to past problems with his conduct that was admitted in the negligent credentialing claim against the defendant hospital might prejudice the doctor in the medical malpractice claim.

[x] Rabelo, 30 Mass.L.Rptr. at 548.

[xi] Id. at 549.

[xii] The court draws a parallel to staying discovery in unfair insurance settlement claims, where discovery is usually stayed to protect the claim-related work product of insurers from being admitted into the trial of the underlying claim (citing to Kai v. Kim-Son, Appeals Court No. 98-M-65 (Feb. 11, 1988)).

Health Law Case Brief: Conrad v. Abbott Laboratories, Inc.

By Jeffrey Hoffmann

On February 25, 2013, the U.S. District Court for the District of Massachusetts (“Court”) dismissed a qui tam suit brought by Constance A. Conrad (“plaintiff”) alleging that twenty-four different drug manufacturers, distributors, and labelers (collectively “defendants”) violated the False Claims Act (“FCA”).[i]  Specifically, the suit alleges that the defendants fraudulently misrepresented their products as having been a) approved as safe and effective by the U.S. Food and Drug Administration (“FDA); and b) eligible for reimbursement under Medicaid, resulting in the defendants’ improper receipt of in excess of $500 million in reimbursements.[ii]  In granting the defendants’ motion to dismiss, the Court found that it lacked subject matter jurisdiction under the FCA’s so-called “public disclosure bar”[iii] because the qui tam action was based on an alleged fraud that was previously publicly disclosed through qualifying sources.[iv]  The FDA’s public disclosure bar states:

No court shall have jurisdiction over an action under the False Claims Act based upon the public disclosure of allegations or transactions in a…hearing,… administrative… report, or from news media… unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.[v]

The Court began by considering whether the alleged fraud was previously publicly disclosed.[vi]  The Court noted that for a disclosure to constitute a public disclosure, the relevant disclosure must present either a direct allegation of fraud, or else both a misrepresented state of facts and a true state of facts such that the recipient may infer fraud.[vii]  In finding that the alleged fraud was previously publicly disclosed, the Court noted the lack of a prior public disclosure directly alleging fraud, but agreed with the defendants’ position that the misrepresented facts and true facts were publicly disclosed and available for consideration.  In particular, the defendants noted the data available in CMS’ drug product data files, state drug utilization data files, the FDA’s Orange Book, the FDA’s National Drug Code Directory and published Fedral Register Notices.  [viii]  The plaintiff argued that the omission of the defendants’ products from the sources listing the FDA-approved products did not constitute public disclosure.[ix]  However, the Court held that requiring an “‘affirmative and explicit disclosure’ of fraud or misrepresentation would add new words to the statute Congress enacted.”[x]

The Court next found that the sources publicly disclosing the alleged fraud qualified as administrative reports, placing the alleged fraud within the scope of the FCA public disclosure bar.[xi]  The plaintiff argued that the CMS data files revealing the misrepresentations were not administrative reports because they “contain[ed] no analysis.”[xii]  However, the Court concluded that the data files fell “within the ordinary meaning of the term “report””.[xiii]

Finally, the Court considered whether the qui tam action was based on the alleged fraud previously disclosed through qualifying sources.[xiv]  In finding that the qui tam action was based on the alleged fraud, the Court relied on precedent establishing that claim is considered based on previous public disclosures if the claim is “substantially similar to allegations or transactions already in the public domain at the time.”[xv]  The Court found that the plaintiff’s claim met this standard because the plaintiff’s allegations were substantially similar to the inconsistency between the misrepresented facts in the CMS data files and the true facts in the Orange Book, Federal Register and National Drug Code Directory..[xvi]

The plaintiff argued that dismissing the suit under the public disclosure bar would frustrate the purpose of the FCA because it would discourage citizens with the ability to detect fraud that is difficult to recognize from bringing such actions.[xvii]  The court, however, found that the FCA’s purpose is to reward whistleblowers with first-hand knowledge, not hard work and expertise.  Otherwise, “anyone with time and the relevant expertise could have combed through the public sources…, discovered drug manufacturers who were out of compliance, and filed the same suit.”  The court noted that the data-mining of publicly available information is “a classic example of the ‘opportunistic’ litigation that the public disclosure bar is designed to discourage.”

Jeffrey Hoffmann is a student at Boston University School of Law concentrating in health law.  He earned his B.A. from Columbia University, during which he worked at the U.S. Senate, Brooklyn District Attorney’s Office, and Manhattan Attorney General’s Office.  He has since been a paralegal at Willkie Farr & Gallagher in New York City and has worked as a legal intern for Common Cause Massachusetts and the Joslin Diabetes Center.  Mr. Hoffmann is currently a member of the American Journal of Law and Medicine for which he will serve as Note Editor in the coming year.


[i] 31 U.S.C. § 3729; U.S. ex rel. Conrad v. Abbott Labs. Inc., No. 02-11738-RWZ, 2013 WL 682740, at *1 (D. Mass. Feb. 25, 2013).

[ii] Conrad, 2013 WL 682740, at *1.

[iii] 31 U.S.C. § 3730(e)(4)(A)

[iv] Conrad, 2013 WL 682740, at *2-3.

[v] 31 U.S.C. § 3730(e)(4)(A)

[vi] Conrad, 2013 WL 682740, at *3-4.

[vii] Conrad, 2013 WL 682740, at *4-5 [citing United States ex rel. Poteet v. Bahler Medical, Inc., 619 F.3d 104, 109 (1st Cir. 2010; and also United States ex rel. Ondis v. City of Woonsocket, 587 F. 3d. 49, 54 (1st Cir. 2009).

[viii] Id.

[ix] Id. at *5-6.

[x] Id.

[xi] Id. at *4-5.

[xii] Id.

[xiii] Id.

[xiv] Id. at *6.

[xv] Id. at *6 (citing U.S. ex rel. Ondis v. City of Woonsocket, 587 F.3d 49, 58 (1st Cir. 2009)).

[xvi] Conrad, 2013 WL 682740, at *6.

[xvii] Id. at *6-7.

IN THIS ISSUE: Health Law Reporter Fall/Winter 2012

Sontag, DavidJerry Tichner Bio photoDavid Sontag and Jerry Tichner, Co-editors

In light of national and local focus on electronic health record-related and medical privacy issues, BBA Health Law Section Members and readers of the Health Law Reporter have increasingly expressed interest in articles relevant to the world of eHealth and electronic medical information.  Through their contributions to this issue, a number of our authors address these topics head on.  In particular, this issue features articles discussing the Massachusetts Health Information Exchange, recent privacy-related enforcement actions, and a policymaker profile of the Director of Massachusetts’ eHealth Institute.

Not to be overshadowed, this issue also includes insightful articles addressing the significant growth of the Medical-Legal Partnership model (which involves collaboration between health care and legal aid providers) and a recent CMS demonstration project addressing individuals dually eligible for Medicare and Medicaid coverage.  These articles, combined with four case briefs addressing recent decisions, further our efforts to keep our readers up-to-date as to current trends and issues in our industry.

We thank each of our authors for their significant efforts and contributions!

Opinion Pieces:

The Massachusetts Healthcare Information Exchange – An Inside Look at the Policy and Technology
By:  John D. Halamka MD, CIO Beth Israel Deaconess Medical Center; Manu Tandon, CIO EOHHS; Micky Tripathi, CEO, Massachusetts eHealth Collaborative; and Laurance Stuntz, CEO, Massachusetts eHealth Institute.

HIPAA Enforcement Trends: Growing Civil Enforcement
By: Cassandra H. Arriaza and Sarah W. Walsh (LibbyHoopes, P.C.)

From Practice to Theory: Medical-Legal Partnership Enters its Third Decade
By:  Samantha Morton, Executive Director, Medical-Legal Partnership | Boston 

The “Dual Eligibles” Demonstration: Massachusetts Becomes First in the Nation to Implement a New Health Care Model for Medicare-Medicaid Beneficiaries
By: Margaretta Homsey Kroeger, Esq.

Policymaker Profile:

Laurance Stuntz, Director of the Massachusetts eHealth Institute.
By:  David Sontag, Associate General Counsel, Beth Israel Deaconess Medical Center

Case Briefs:

Boston Medical Center Corporation & Another vs. Secretary of The Executive Office Of Health and Human Services (and a Consolidated Case ). 463 MASS. 447 (denying multiple hospitals’ claims alleging that EOHHS has failed to adequately reimburse for services rendered to MassHealth)
By: Andrew Rusczek (Verrill Dana)

Commonwealth vs. Dung van Tran (463 Mass 8) (discussing the application of the psychotherapist-patient privilege, and the standards for waiver of that privilege, in the context of a Murder trial)
By: Margaret Schmid (Donoghue, Barret & Singal)

Paula Tartarini vs. Department of Mental Retardation (82 Mass. App. Ct. 217) (discussing the mental capability standards for determining eligibility for DMR services).
By: Devin Cohen (McDermott Will & Emery)

Joseph A. Grocela, M.D., et. al. vs. The General Hospital Corporation dba Massachusetts General Hospital et al. (30 Mass. L. Rep. 176) (denying Plaintiff’s claims that the Hospital’s application of its intellectual property Policy resulted in unfair restraint on trade and violations of privacy.)
By: Sophie Wang (Choate, Hall & Stewart)

The Massachusetts Healthcare Information Exchange – An Inside Look at the Policy and Technology

Introduction:

In December of 2011, John Halamka’s wife visited a suburban community hospital for a diagnostic mammogram.   The study was highly suggestive of a tumor and she wanted to follow-up with a treatment team of oncologists, surgeons, and radiation oncologists at a downtown academic medical center.   She was told that there is an information superhighway in Massachusetts – the Mass Pike.   For 25 cents a page she could get a copy of her medical records on paper and then drive them into Boston.

In September of 2012, John’s mother broke her hip and because the hospital had no access to her outpatient records, she was placed on 22 different medications based on pill bottles John’s father collected.   She takes only 2 medications, which are clearly documented in her primary care physician’s electronic health records.

Both of these scenarios illustrate that we do not have a healthcare system in the United States.  Rather, we have a disconnected set of information silos – hospitals, clinics, labs, and pharmacies – that lead to redundant, unnecessary and error prone care.

But there is hope.

On October 16, 2012 at 11:35am Governor Deval Patrick officially “flipped the switch” on the Massachusetts state Healthcare Information Exchange, called the HIWay, enabling electronic records to be sent from provider to provider  throughout the Commonwealth with patient consent.

This event, held in the Ether Dome of the Massachusetts General Hospital, was the culmination of years of hard work by many stakeholders and experts in the Commonwealth.   Here is their story.

Historical Efforts:

In 1995, Massachusetts stakeholders convened through the Massachusetts Health Data Consortium (MHDC) to found the Chief Information Officer (CIO) Forum. The CIOs from payers, providers, and employer groups, agreed to meet on a monthly basis to discuss the use of IT to streamline health care commerce, reduce costs, and enhance care delivery processes. Early work included common privacy/security guidelines, common data sets for describing clinical encounters, and early discussions of how organizations could collectively address HIPAA compliance issues as a region rather than a series of disjoined efforts.

In 1997, at an MHDC-sponsored security conference, several CIOs of the payers and providers of Massachusetts gathered at dinner to discuss the creation of a network for the exchange of claims, referrals, and benefits/eligibility transactions in Massachusetts. The group named the effort the New England Healthcare Electronic Data Interchange Network or NEHEN.

Three provider organizations (Partners Healthcare, CareGroup, and Lifespan) and two payer organizations (Tufts Health Plan and Harvard Pilgrim Health Care) worked together to formally create NEHEN LLC as an independent organization. Computer Sciences Corporation (CSC) was hired to manage a region-wide administrative data exchange effort, and by October 1998, with prior patient consent, eligibility data began flowing among these early NEHEN members. Boston Medical Center joined in December 1999. University of Massachusetts Memorial and Boston Children’s Hospital joined in February 2000. As of 2012, more than 100 million administrative health care transactions in Massachusetts flow over the collaborative NEHEN network annually.

This early work on transaction exchange built trust among the CIOs and established a business model that all could understand — cost avoidance. Before NEHEN, administrative transactions such as claims cost $5.00 each in labor to submit via paper, fax, phone and e-mail. After NEHEN, these transactions could be exchanged electronically for pennies apiece. The payers and providers in the Commonwealth recognized that IT collaboration reduced costs for everyone.

Over the past 5 years, NEHEN added e-prescribing and clinical data exchange functionality, enabling data to flow among more than 60 institutions in the commonwealth.

Over the same time period, advances in technology and incentives from the American Recovery and Reinvestment Act funded Meaningful Use stimulus program encouraged practices of all sizes to install electronic health records.    NEHEN was optimized for larger organizations with significant IT resources and was generally perceived as too expensive for small practices and providers in the rural parts of the Commonwealth.    Additionally, State government was not involved with NEHEN as officials feared conflicts of interest while serving as a board member of a private multi-stakeholder organization.  NEHEN needed to evolve into a state-wide, low cost, government engaged model.

Creating the Massachusetts HIWay:

In September of 2011, the Secretary of Health and Human Services Dr. JudyAnn Bigby created the HIE-HIT Advisory Committee as a mechanism to channel advice and recommendations to the HIT Council, the healthcare information technology governance body established by Chapter 305 of the Acts of 2008. Comprising 24 public and private sector experts from a broad range of perspectives, and 92 individuals in its working groups, the Advisory Committee has provided substantive advice to the HIT Council in a wide variety of areas, including architecture, phasing, technical specifications, consumer priorities and concerns, provider adoption, financing of the statewide HIE, and legal/policy considerations.

The 5 working groups were as follows:

•     Consumer & Public Engagement Work Group – To raise awareness of the HIT-HIE program among consumers, to engage consumers in the program, and to ensure that consumer input is considered for all critical recommendations and Advisory Committee decisions.

•     Provider Engagement & Adoption Work Group – To raise awareness of the HIT-HIE program among providers, to encourage adoption of HIT-HIE among providers, and to ensure that provider input is considered for all critical recommendations and Advisory Committee decisions.

•     Technology & Implementation Work Group – To plan and develop technical and operational requirements and approaches for statewide HIE activity conducted through publicly-funded or -supported programs. To develop strategies, standards, and requirements for an enhanced statewide HIE architecture that leverages existing networks, shared services, and standardized regional services to enable broad adoption and use of statewide HIE services

•     Finance & Sustainability Work Group – To recommend financing and business models for implementing and sustaining statewide HIE infrastructure and services.

•     Legal & Policy Work Group – To plan and develop a governance model and legal and policy framework for statewide HIE activity conducted through publicly-funded or -supported programs.

Many people put in many hours in September 2011 to engage stakeholders, create a unified statewide HIE plan, suggest a funding model, define requirements, and broadly communicate the strategy.

In October of 2011, three of us that had worked with these early efforts – Manu Tandon (the CIO of the Executive Office of Health and Human Services), Micky Tripathi (the CEO of the Massachusetts eHeath Collaborative), and John Halamka (CIO of Beth Israel Deaconess Medical Center) visited CMS to discuss a powerful idea.   We proposed a single state operated infrastructure connecting all payers, providers, and patients using national standards at low cost.    In Massachusetts, where 100% of the hospitals serve Medicaid patients and   80% of the ambulatory providers serve Medicaid patients, development of this infrastructure could be a game-changer.   Medicaid 90/10 matching funds could be applied for the first time to the construction of a statewide health information exchange.   The state would contribute $5 million and Medicaid would match it with $45 million to create an infrastructure that all stakeholders could use.  The private sector would pay its fair share and every stakeholder would pay a subscription fee that related to the value they derived from healthcare information exchange and their ability to pay.

CMS was impressed by the core elements of the proposed strategy that included:

•     Three-phase HIE plan beginning with creating the statewide Information Highway as a foundation for richer applications and services from 2012-2014.

•     Alignment with national interoperability standards and emerging Meaningful Use (MU) stage 2 requirements[1]

•     Maximization of Medicaid SMHP/Medicaid Management Information System (MMIS) 90/10 Federal Finance Participation (FFP) funding

In January of 2012, CMS approved the funding and work began on the Requests for Proposal to support an open, transparent, competitive bidding process for vendors to provide the products and services needed by the HIE.

The Plan:

The three phase plan was based on stakeholder requirements, the maturity of available technology, and the likelihood that the needed policies would be supported by payers and providers.

The first phase leverages existing workflow and processes used to release medical records today.  In a paper-based healthcare world, patients request/consent that their information be disclosed to another party and then the information is sent (we use the term “pushed” to another organization).   Information would continue to be “pushed” from one organization to another, but we would replace all these paper flows with secure, fully electronic ones. Such a workflow supports coordination of care between primary care givers and specialists; hospitals and primary givers; providers and payers.

The second phase uses this new “push” technology to send data from provider offices and hospitals to registries and data warehouses for quality measurement and population health analytics.

The third phase envisions a solution for the “unconscious in the Emergency Department” problem.  You arrive in the Emergency Department with only a wallet and no ability to communicate.  Using only your name, gender, and date of birth, information from clinician offices and hospitals where you have previously consented to disclose your data make that information available to the emergency physician.

The Technology:

These three phases require an array of technology components and policies.   For the first phase, we implemented 5 components.

  1. A transmission gateway – just like email, a server is needed to send and receive pushed data between organizations.  As part of the Federal stimulus program for electronic health records, a set of standards for exchange of data, called Direct, is required.   We needed to create appropriate hardware and software to support the state’s efforts to enable secure transmission between EHRs.
  2. A provider directory – just as email has an address book, we needed an address book of every provider organization in the Commonwealth and its members.
  3. Certificate management – to send data securely between organizations, there needs to be appropriate encryption over the wire.   Digital certificates enable us to prove the provenance of the sender and ensure only the rightful recipient organization can unencrypt the message.
  4. Skilled nursing facility/long term care interfaces – we received a grant to accelerate adoption of data sharing in post-acute facilities that often do not have an EHR.
  5. Webmail – for those organizations without EHRs, we needed a method of sending and receiving secure messages.  A secure webmail portal meets those requirements.

All of these were competitively bid and procured from a single vendor (Orion) and then, implemented over the Summer of 2012.

In 2014, we will complete a statewide consent repository.  Each institution will record opt-in consent for disclosure of that institution’s data and that consent will be forwarded to a statewide registry, which will store patients’ consent preferences.  At any time a patient may opt-out of disclosing data from an institution.  To support stored consent function, we will need a secure, statewide citizen index.  We will also need this index to support patient-matching of medical records across organizations.  For other phases in the future, we will need other additional components.

The Policies:

Before we could send patient identified data between organizations over this infrastructure, we needed policies to delineate roles/responsibilities, support business associate agreements, and ensure patient consent is obtained and patient privacy preferences are respected.

We assigned roles and responsibilities as follows:

  • Executive Office of Health and Human Services (EOHHS) – provides the infrastructure, the overall project governance, and manages the participation agreements/business associate agreements.   A new HIT Council, as enumerated in the Healthcare Cost Containment Bill (Chapter 224 of the Acts of 2012), will serve as the ongoing governance body.   Advisory workgroups will continue to engage community and other stakeholders to provide input to the HIT Council.
  • Massachusetts eHealth Institute (MeHI) provides the connections from EHRs to the state HIE via its “last mile” program, which offers grants to vendors to develop interfaces, incentives to providers to implement connectivity to the HIE, and community-based collaborative working groups to encourage adoption that fits the needs of the local healthcare community..
  • Massachusetts eHealth Collaborative – provide Last Mile Management Office support to MeHI and facilitation support to other stakeholders and agencies.  Part of that facilitation included running the 5 HIT Council Work Groups that suggested initial policies and procedures.

EOHHS created a single participation agreement that included business associate language.   Each stakeholder that wants to use the state HIE must first sign this common participation agreement.   The Participation Agreement defines key aspects of roles and responsibilities of EOHHS and participants, especially those relating to maintaining patient privacy and technical data security, including audits and investigations of suspected incidents or breaches.

Highlights of this Phase 1 (pushing of information only) Participation Agreement include:

  • Permitted Users and Uses:  Initial participation is open to Massachusetts-licensed providers and entities, Massachusetts-licensed health plans, Commonwealth agencies, and certain employees and agents of the foregoing who are authorized as users. Use of the Massachusetts HIWay is limited to exchanges of information that are allowed by law and that are related to treatment, payment, or healthcare operations as defined by HIPAA. EOHHS may, if it determines, in its sole discretion that such actions are in the public interest:
    • allow additional participants and/or authorized users;
    • allow additional uses;
    • deny or suspend participation, or use, for any organization or individual
  • Delegated Authority:  Each Participant must execute a Delegated Administration Agreement before being granted access to the Massachusetts HIWay.  Each Participant must identify at least one individual to serve as an Access Administrator, as provided in the Delegated Administration Agreement.  Each Participant’s Access Administrator is responsible for administration of the Participant’s Authorized Users and must sign the Access Administrator Agreement.
  • Patient Privacy and Consent:  Each Participant is responsible for obtaining any and all necessary patient consents and authorizations relating to the use and exchange of patient information, including without limitation consent to release HIV test results, genetic test information, substance abuse information, and as otherwise required by law.  In addition, the Participant and/or the Authorized User is responsible for obtaining patient permission to share patient information over the Massachusetts HIWay.  It is the responsibility of the Participant to maintain these consents and permissions as required by law and their policies. The method by which the Participant maintains the consents will be determined by the Participant but proof of consent may be subject to audit by EOHHS.

As noted above, standard practice is that health records are only disclosed from one organization to another when the patient has signed his or her written consent to such a release.  We adopted the same approval to disclose (oral, written) that is in place in healthcare workflows today.   All that changes is that phone, fax, email, and paper is replaced by secure electronic transmission.

The end result of obtaining common participation agreements among all the providers in the Commonwealth over a single secure infrastructure governed by the underlying principle of achieving patient consent to disclose before transmission creates a fabric of trust that protects patient privacy.

Acquiring Customers:

With policies in place and technologies under construction, we could begin acquiring customers.  In the Summer of 2012 the Advisory Committee supported efforts to recruit and prepare early adopters to go live with the statewide HIE on its launch date or “Golden Spike” event. A large number of early adopter organizations have come forward to participate including Atrius Healthcare, Baystate Healthcare, Beth Israel Deaconess Medical Center, Boston Children’s Hospital, Greg Harris MD, Holyoke Medical Center, Network Health Plan, Partners, Tufts Medical Center, and Vanguard Health Systems representing a significant portion the Commonwealth’s active providers.

The “Golden Spike Group” began meeting in August to review, react to, and help refine the statewide HIE participation agreements, pricing, and technical interfacing requirements.

The Go Live:

In front of the press and leaders of Massachusetts, I accessed my wife’s actual hospital records, with her consent, and sent them electronically to her actual doctor’s office, a payer, a private primary care provider affiliated with another hospital, and the Massachusetts eHealth Collaborative (a quality measurement and analytics service provider).  We broke down silos, demonstrating that care coordination, population health, and quality analytics based on healthcare information exchange is now possible in Massachusetts.  The electronic records involved included an institution’s home-grown electronic medical record, eClincialWorks, a custom payer system, and self built analytic applications.

Other transactions followed.

With patient consent, Tufts New England Medical Center sent patient-identified summaries to and received summaries from Vanguard Health Systems New England illustrating a primary care physician-to-specialist closed loop workflow.  EHRs included Siemens Soarian and Meditech.

Also with patient consent, Boston Children’s sent pediatric patient-identified summaries to Atrius Healthcare, a multi-specialty group, illustrating tertiary hospital-to-primary care giver coordination.

All were successful and were documented in real time on the Twitter stream.

The Governor distributed golden spikes made from actual railroad spikes salvaged from rail near Promontory Point, Utah, the site of the original transcontinental railroad connection.

Conclusion:

Just as the original Golden Spike in 1869 issued in a new era of connectedness, so does the Massachusetts healthcare information exchange change business as usual in Massachusetts. Over the next year, we will be building new “bridges,” ensuring that every payer, provider, and payer can send transition of care summaries with patient consent.

This achievement, although conceived in Fall of 2011 and completed in the Fall of 2012, builds upon over 15 years of trust building, early experiences with healthcare information exchange, and an array of public/private investments along the way.

Simple policies – a common participation agreement and consent to disclose complemented by simple technologies – gateways that support secure transmission, a provider directory, and a digital certificate infrastructure, funded by both Medicaid funds and private sector contributions, make the Massachusetts a first-in- the-country model for the rest of the U.S.   We look forward to breaking down healthcare information silos over the coming months.  Never again will issues such as those which affected John’s wife and mother be caused by the lack of healthcare information superhighway in Massachusetts.

AUTHORS:

John D. Halamka MD, CIO Beth Israel Deaconess Medical Center

Manu Tandon, CIO EOHHS

Micky Tripathi, CEO, Massachusetts eHealth Collaborative

Laurance Stuntz, Director, Massachusetts eHealth Institute


[1] Medicare and Medicaid Programs; Electronic Health Record Incentive Program—Stage 2, 77 Fed. Reg. 53,968 (September 4, 2012).