From Business Opportunities to Compliance Risks:
Healthcare Expectations in 2021
Jim Anliot:
Healthcare is a very, very highly regulated environment. If you’re entering into this industry, understand that that regulatory environment is very complex, and you need sound advice from trusted sources to navigate your way through that environment successfully — and we can help with that.
Intro:
Hello, and welcome to Integrity Through Compliance: AMI’s Business Success Series. This podcast was created by seasoned compliance experts at Affiliated Monitors to speak practically to your business needs. During this series you will hear from AMI’s experts who will provide their observations on industry trends, geared to raise your awareness and to protect your brand. So grab a cup of coffee and join us as we guide you and your business to integrity through compliance.
Jesse Caplan
Hello everyone. My name is Jesse Caplan, and I’m Managing Director of Corporate Oversight at Affiliated Monitors. I’m joined today by two of my colleagues, Dionne Lomax, who is our Managing Director of Antitrust and Trade Regulation. And Jim Anliot, who is our director of healthcare compliance services. Today, we’re going to discuss what to expect in the healthcare industry in 2021 and beyond. We’re going to look particularly at the expansion of healthcare services and healthcare coverage, and the entrepreneurial opportunities this expansion presents. And we’re going to be focusing not only on the business opportunities, but the compliance risks, and how to mitigate those risks. But before we begin, I’d like Dionne and Jim to introduce themselves. Dionne?
Dionne Lomax
Thank you, Jesse, and hello everyone, and of course it is delightful to be here with my esteemed colleagues. So as the Managing Director of Antitrust and Trade Regulation, I am essentially responsible for setting the overall strategy for client matters involving antitrust, trade regulation, competition, all those things in the healthcare industry — as well as a variety of other industries. And so I would just say, I look forward to discussing these very important issues with both of you.
Jesse Caplan
Great. Thank you, Dionne. And Jim?
Jim Anliot
Thank you, Jesse. Pleasure to be here this morning. My background is: I’ve been Director of healthcare compliance services for Affiliated Monitors since our inception in 2004. Prior to that, I had served as legal counsel to a number of different professional licensing boards in Massachusetts for about 16 years, and before that had been a specialist in the healthcare facility licensing division in the state department of public health. So I come to this with more than 35 years worth of experience in government regulation to the healthcare industry. And my responsibilities at Affiliated Monitors have been primarily in terms of independent monitoring of individual and group healthcare practices and the assessment and development of internal compliance programs for healthcare providers.
Jesse Caplan
So over the past year, and in large part due to the COVID pandemic, we’ve seen an expansion in the use of new technologies and new strategies for delivering healthcare and expansion in insurance coverage for those services, and I don’t think I’m going out on a limb to predict that with the new Biden administration, we’re going to see even more expansion of who will have access to healthcare, and more taxpayer funded coverage for individuals. This has created and continues to create opportunities for new and innovative approaches to the delivery of healthcare services. So I’m going to start with you, Jim, can you tell us some more about, or some examples of the expansion and innovation you’ve seen over the past year, and what we can expect in the near future?
Jim Anliot
Well, I think clearly the biggest expansion that’s taken place, of course, has been the rapid expansion of telehealth services largely in response to the pandemic. And the interesting thing is, the federal regulators have essentially relaxed a lot of the restrictions that used to apply to telehealth services. You don’t need to be in a rural area to receive them anymore. The scope of the services that can be provided via telehealth technology has been greatly expanded, and the feds have equalized federal program reimbursement for healthcare services provided by telehealth technology with those that are provided in person. There have been some challenges involved in this, particularly for state regulatory authorities, because they’ve had to deal with the question of whether it is permissible for someone who is licensed in one state to deliver services, via telehealth, to a patient who might be located at another. And that’s forced them to look very carefully at things like licensure by reciprocity, licensure by endorsement; how do we make licenses essentially mobile across state lines to facilitate all of this? And the interesting thing is that the new administration — it looks as though there’s going to be legislation in Congress this year to make a lot of these various changes permanent. The result is that this has created a lot more opportunities for entrepreneurial, innovative kinds of approaches to healthcare service delivery, but it would be a mistake for anybody to think that because these restrictions have been relaxed to some extent, that that regulatory environment in which they work has disappeared entirely. And that’s particularly a big risk for new entrepreneurs who are looking at new systems of delivering healthcare.
Jesse Caplan
Yeah, that’s really interesting, Jim. I know from my own experience that my most recent (or at least over the last year) physician appointments have basically been all virtual, and using platforms that I’d think in the past probably would not have been permitted. And I’ve always wondered, is this going to last? And I guess we’ll see, but I think history tells us that whenever you see an expansion in services in healthcare, and particularly greater coverage and access to Medicare and Medicaid funds to pay for those services, you’re going to see fraudsters trying to take advantage. So, Jim, what are the regulators seeing this time, in terms of potential fraud?
Jim Anliot
Well, what’s really interesting is that the federal sources we’ve been talking to have said that they’re not seeing any new types of healthcare fraud schemes. What they’re seeing, essentially, is the old types of healthcare fraud schemes applied to new streams of revenue, sort of like old wine in new bottles. For example, they went after a Tennessee outfit recently, in which there was a set of call centers that had been set up. And the people in the call centers were impersonating medical professionals, obtaining patient health information and prescription data, and persuading these patients to buy services that were more expensive than what they needed, or products or services that would be reimbursable under Medicare or Medicaid, and then billing the federal healthcare programs for those services. The feds are certainly paying attention to situations in which patients are being referred for telehealth services or for products delivered via telehealth technology, and the question of whether there are illegal or improper payments being made to those individuals for referring those patients. We’re also seeing some improper use of telehealth in soliciting prescriptions for medically unnecessary durable medical equipment, and improper billing for clinical services which have claimed to be provided in person, but were, in fact, never furnished. One of the things that they’re watching — particularly in terms of physician delivery of healthcare services — has to do with physicians billing for a volume of patient encounters that would be physically impossible; they could not possibly have delivered them in the time they were working.
Dionne Lomax
So Jim, these all sound rather alarming, also some stark examples of outright fraud on the healthcare system. And so I’m curious: what about those companies and entrepreneurs that have legitimate services and innovations? So my experience, if they are new to healthcare or they’re new to depending on revenue coming from government programs, they don’t always appreciate (the way that we do), they don’t always appreciate the complexity and the risks from government regulation. Is that your experience as well?
Jim Anliot
Oh, absolutely. I mean, I’m reminded of a case we handled for a client several years ago. The client had sort of an interesting concept. They were going to use vans with fluoroscopy equipment on board, and go to nursing homes and do evaluations of patients who might have swallowing difficulties, rather than forcing the nursing homes to send those residents out to hospitals for that kind of testing. But what they didn’t understand before they began this process was: (1) the level of physician supervision that Medicare was going to require on the performance of those tests, and secondly (and more importantly), how to bill properly for those services. They were going to have to get the money, in most cases, on a payment from the nursing homes that they served, rather than being able to bill the Medicare Part B program. They didn’t understand all of these complexities. So one morning the owner wakes up, he goes to his office ,and he discovers that the office is surrounded by about a dozen heavily armed FBI agents with automatic weapons, who are not letting anybody into or out of the building. He was charged with healthcare fraud. As part of his settlement with the government, he was forced to divest himself of his ownership interest in the company. He was allowed to sell it — interestingly enough — to his wife, whose prior business experience consisted, almost entirely of running daycare programs. She knew nothing about the healthcare industry, and for more than two years, she required some very intensive support from us in terms of developing an internal compliance program meeting the billing requirements; figuring out how she had to document her services and so forth. Ultimately, the company failed, because the business model wouldn’t work. The amount of Medicare reimbursement that they would get for each patient that they saw was about 40% of what it would actually cost them to comply with all the regulatory requirements that apply. So my big message to everybody out there is, if you’re entering into this industry, understand that that regulatory environment is very complex and you need sound advice from trusted sources to navigate your way through that environment successfully.
Jesse Caplan
So, Jim, that’s really interesting that example that you gave. So what are the lessons learned from that, that you can offer other entrepreneurs who are entering the healthcare space and may not be that familiar with the complexities, and the regulatory environment?
Jim Anliot
Well, as I said, I think the most important thing for new entrepreneurs who are trying to enter the industry, is to understand that healthcare is a very, very highly regulated environment. You really have to understand what those regulatory requirements are, and you need to get sound advice, as I say, from a trusted resource as to how you can navigate your way through that process. And we can help with that here at Affiliated Monitors.
Jesse Caplan
Dionne, I’d like to turn to you. You have a rich experience of representing healthcare companies and private equity firms. What’s your prediction as to the prospects for merger acquisition and joint venture activity in the healthcare industry in the coming months and years?
Dionne Lomax
First, let me start by backtracking for a moment and talk about what happened once the pandemic hit a year ago (still can’t believe it’s been a year, but yes, a year ago). So, shortly after the pandemic hit, you had the Department of Justice and the Federal Trade Commission come together to issue a joint statement that essentially acknowledged that unprecedented cooperation is — would likely be — required, not just among federal and state agencies to battle the pandemic, but potentially between healthcare providers and others in the healthcare industry to ensure the continuity of supply, to help ensure certain sectors or populations receive services, and that customers in various geographic areas are covered efficiently, et cetera. And so as a result, they instituted policies to relax some of the regulatory requirements. They relaxed some of the regulatory requirements around pre-merger notification filings, or what we call in the antitrust world Hart-Scott-Rodino, or HSR filings.
They also relaxed some of the regulatory requirements around the merger review process, and they developed some expedited procedures and processes for the review of proposed collaborations for parties that wanted to come together, but may have had some concerns from an antitrust perspective. So they allowed for an expedited review of a business review letter procedure at the DOJ, and of an advisory opinion from the FTC. And part of that guidance also noted various ways that health industry participants work together, right? Yes, this is very important to the pandemic. We’re trying to get at it and solve it efficiently. But yeah, you can work together, but you can do it without violating the antitrust laws. And so, although I will say I haven’t tracked it specifically, just based alone on the sheer number of merger challenges that occurred last year — which were fairly significant — I think it’s a strong indication that there was in fact, an uptick in collaborative activity in the industry. And so, any type of collaboration among industry participants — whether it’s a merger, a joint venture, or some other arrangement — is going to raise compliance risks in general, especially for new entrants in the healthcare sector, or perhaps even those who are less experienced with government healthcare programs. And I think that with the turn to the Biden administration (pandemic notwithstanding), I think that we are gonna continue to see robust enforcement in the healthcare space.
Jesse Caplan
So what would you counsel healthcare providers (particularly those not as familiar with the healthcare regulatory environment), to do to protect their investments from compliance risks? As an antitrust expert, I know you have particular insights into hedging against antitrust enforcement risks, but I suspect that advice would also translate well into protecting against other healthcare compliance risks.
Dionne Lomax
That’s absolutely right. And I think the best way to answer that is to just share a few practical tips for healthcare companies, particularly those who plan to collaborate with competitors. A lot of this advice is advice I used to give when I was in private practice. There are a number of practical steps that I think parties can take to a collaborative arrangement that will help ensure that their joint efforts with a competitor don’t run afoul of the antitrust laws (and like you said, some of these things that I say, I think can also be extrapolated beyond even antitrust). But first and foremost: make sure that there is a legitimate reason to collaborate in the first place. You don’t want to try to use COVID-19 as a subterfuge for something that you couldn’t do otherwise, either from an antitrust perspective or from a fraud abuse perspective or what have you.
So you really want to make sure — the parties should make sure that all of the activities that they are proposed, that they are engaging in, are designed and tailored to fulfill the precise objectives of the venture as you outline them from the start of the joint venture arrangement, or collaboration, or whatever it is. So the bottom line is that you — at least from an antitrust perspective — you want to be certain that there’s a procompetitive purpose for the underlying venture. And that’s just a starter. The second thing you want to do is: you really want to make sure (and this is more from an antitrust perspective) is you want to make sure that the meetings or discussions that are occurring regarding the collaboration or the venture document the purpose for each and every meeting and instance where you’re coming together with a rival. You want to make sure that there’s an appropriate agenda, and that the meeting participants actually adhere to that agenda so that if questions arise later, you have contemporaneous evidence of the purpose, and what presumably occurred at that meeting. You also want to make sure that executives or employees who participate in those meetings have an understanding of how to extract themselves, so to speak, from a conversation that veers off into some type of a red flag area. In my experience, I used to counsel clients to make a noisy exit, , spill coffee on somebody. Pound the table and say, “this is a problem! I’m leaving now!” At the end of the day, you just want to make sure that if there’s ten other people in the room, that they all remember who left the meeting, and which company they were affiliated with. And then finally, I think you want to also remember that there is a limited purpose to the joint activity usually — well, I shouldn’t say usually. In some situations, joint collaborations or joint arrangements, (particularly if it’s around COVID), there’s a time limit to that, right? And so parties should remain mindful of this, and make sure that they steer clear of using that joint collaboration to do other things, or engage in things that are unrelated to the purpose and objective of that collaboration. I always say, hey, set an end date. Make sure there’s a clear deadline for when the collaboration will end, and once the purpose for that underlying collaboration or that venture are met, then the parties should cease their joint activity and go on about their normal business. And so even as I say this, I can hear someone thinking, okay, okay, how can a provider demonstrate that they are encouraging an enterprise-wide antitrust compliance culture, for example? How do you do that?
Well, three quick tips. First, you want to do that by making sure that everyone within the organization is committed to adhering to the law — whether that’s antitrust laws, fraud and abuse, what have you — you’re committed to adhering to the law, everyone from the board of directors, to senior management, to sales representatives, human resources. Everyone should know about the content of the program — the compliance program — how important compliance is to the company, how important antitrust compliance is, or other compliance. And they should understand the importance of the role that they play in ensuring the compliance program’s effectiveness. They should also make sure that they are actively documenting their compliance efforts all along the way. In the antitrust world, for example, if you have sales reps that are going to different conferences and trade shows, one way to do that is to have them — particularly trade shows where there are lots of rivals present — you would have them log or report their plans to attend an upcoming trade show, and then make sure that they received some type of periodic, or updated antitrust training prior to attending…just as one example. And then thirdly, you want to conduct — and this is important because this is the world we live in, Jesse and Jim — you want to conduct routine audits and antitrust risk assessments to test the program’s effectiveness. You can do that on your own. You can hire an independent outfit, someone like an AMI, to just make sure that…you’re kicking the tires to make sure that the program is effective. And I think that this will help a provider, or anyone in the healthcare industry, tweak the program as necessary to ensure its ongoing effectiveness.
Jesse Caplan
Well, that’s great, Dionne. And I am actually going to kind of veer in a little bit of a different direction, but still on the same overall topic. And that is that — you know, an issue that I know you both are very familiar with, and that arises whenever we see new and innovative healthcare services…is the question of who should be permitted, who should be prohibited, from providing those services. I’m talking specifically about professional licensure, and what’s called scope of practice issues. These questions implicate state professional licensing boards, and I know you know, Jim. You worked very closely with state professional licensing boards, and it also involves the antitrust implications of licensing board decisions that seemingly reduce or eliminate competition for certain services — something that Dionne, I know you’re very familiar with. So first with Jim. Can you tell us a little bit about the role of the professional licensing boards, and regulating scope of practice issues, and who usually makes up those boards?
Jim Anliot
The state professional licensing boards in most states are comprised of a combination of practitioners in the field, and some public members. Now, in most state licensing boards, the members of the profession dominate the membership of the board. There are oftentimes no more than one or two public members on a licensing board, and that has implications — which Dionne, we’ll talk about a little bit more in a moment — but the principal role of the licensing boards in each state are to define and regulate the scope of practice for the practitioners that they license. They do that in accordance with state legislation, and in accordance with regulations that they develop themselves. For example, a state medical board will define the scope of practice for physicians. They’ll also define, for example, what records a physician needs to keep about their patients, and that’s sort of an important issue right now, because the federal government has basically allowed physicians to bill for their services based on the amount of time they’re spending with their patients. But be very careful about that, because the federal programs still expect that those medical records will provide you with a complete picture of what happened with that patient, and why. And state medical licensing boards have not necessarily changed their medical record documentation requirements to fit what the feds have decided to do.
But the other issue that comes up with state professional licensing boards is, when they get into the business of trying to decide whether their practitioners can do certain things, or whether other practitioners in other fields are allowed to do the things that their practitioners are allowed to do. And those have raised some very, very interesting antitrust implications, and Dionne’s going to speak to that for a while.
Jesse Caplan
Yeah, so Dionne, as Jim mentioned, the actions of state licensing boards can have a real impact on the competitive environment in a particular healthcare practice area. What’s the view of the federal antitrust enforcers on that?
Dionne Lomax
Okay. Okay. Yes. So state licensing boards — basically by definition — they’re restricting competition when they limit or restrict who can practice in a particular area of healthcare, and what services they can provide. Just by definition, they are restricting competition. Now that being said, if decisions on scope of practice are made appropriately, they can protect the health and wellbeing of consumers, and they will be (and should be) immune from any antitrust enforcement under something called the State Action Immunity Doctrine. However, if state licensing scope of practice and enforcement decisions are not made appropriately, or made for the wrong reasons (like protecting the financial interests of the practitioners they license and oversee, for example), well then, that can raise serious antitrust issues, and could be subject to an antitrust enforcement action. And so typically, the Federal Trade Commission has — well, the DOJ and the federal trade commission — but the FTC has always had a bee in their bonnet for many years about how the State Action Doctrine has been treated in the courts.
And so there’s a very recent Supreme Court case: North Carolina State Board of Dental Examiners v. FTC, that is a good example. So let me just describe that case briefly. So in the North Carolina dental case, the Supreme Court essentially held that the North Carolina Board of Dental Examiners (which is a state agency, right?) was not exempt from federal antitrust laws when it basically prohibited non-dentists from providing teeth whitening services in competition with the state’s licensed dentists. So the court concluded that the antitrust laws apply to state agencies and regulatory boards when those entities are comprised of market participants, if the board’s challenged conduct I say, quote/unquote “challenged conduct”) is not actively supervised by the state. And so in the wake of that Supreme Court decision, various state officials have— you know, of course they were all up in arms about it, as you might imagine, Jim. So you had a number of state officials like— the phones were blowing off the hooks at the FTC, because they want to know, “wait a minute, we need advice regarding antitrust compliance for our board. What are the parameters? How can we make sure that we’re not going to get caught by antitrust, given our various activities?” And so on in response to those requests, just a few months after the Supreme Court decision was issued back in October of 2015, the FTC staff issued some guidance addressing the parameters of quote/unquote “active supervision” — this active supervision requirement — under the State Action Doctrine and its proper application that included things like the staff’s perspective on when a state regulatory body requires active supervision in order to invoke the state action defense, as well as various factors that, from the FTC staff’s perspective, are relevant to determining whether the active supervision requirement is in fact satisfied.
Jesse Caplan
So that’s a really interesting story and case. There’s an old adage that bad facts make bad law. I’m not suggesting that the Supreme Court decision was bad law, but boy, dentists getting together and trying to outlaw anyone else but dentists to provide teeth whitening seems like truly was handing the FTC —
Dionne Lomox
A golden ticket!
Jesse Caplan
— a great case to let that bee out of their bonnet and try to hold these licensing boards to account. And I was actually general counsel to the Massachusetts Health and Human Services Agency when this decision came down, and our agency oversaw the medical board in Massachusetts (and there are other agencies that oversaw other professional licensing boards), and we had to scramble to address this case. And in fact, the, uh, the governor of Massachusetts actually had to issue an executive order that provided a level of active state supervision for decisions made by these boards that could impact competition. So it really — it had a real world impact, I think, probably on many boards in all 50 States.
Jim Anliot
There are lots of implications in that North Carolina Dental Board case, Jesse (some of which you’ve already touched upon), but one of the interesting facts in the North Carolina Dental Board case that, uh — and it’s hard to know how much of an impact this had on the Supreme Court’s decision of the North Carolina Dental Board members — eight of the nine members of the board are dentists — are licensed dentists. All eight of those licensed dentists are elected to the board from the State Dental Society. So the — essentially, the state dental professional trade association controls the board and —
Dionne Lomax
Jim, I think that’s what the Supreme court was getting at. That’s this whole market participants issue, yeah.
Jim Anliot
Right, exactly. So one of the implications for state licensing boards is, how are your boards composed? What’s the composition of that board look like? And to what extent does the governor or the legislature (as opposed to a professional trade association) control membership of market participants on that licensing board?
The second implication of course, is that when these licensing boards are making major policy decisions or enforcement decisions, they have to make sure that they are articulating some public protection interest in that decision. They cannot simply base those decisions on what might be best for the profession. My own experience, back when I was at the Division of Professional Licensure, included some very lengthy discussions with the Federal Trade Commission about one of my licensing boards that was not particularly anxious to make records or prescriptions for contact lenses available to their patients, and there were a lot of antitrust implications involved in that one — preceded the North Carolina Dental Board case by a good 15 to 20 years. So there’s a long history of this, and the question for state licensing boards is to make sure that they toe the line on these kinds of issues, or they run the risk, frankly, of having the Federal Trade Commission intervene as sort of a super-professional licensing board and changing their policy directions.
Jesse Caplan
Well, that’s really interesting, Jim and Dionne, and, I think we could probably do a whole other podcast (and maybe we will) on the North Carolina dental decision, and the pros and cons of state licensing boards. And I’m sure, Jim, you’re not suggesting that practitioners on state licensing boards are looking out for their financial interests as opposed to the health and safety of their patients.
Jim Anliot
Not as a general rule, no. [laughter]
Jesse Caplan
So I think we’re going to wrap it up. I know we’re scheduled to follow up with a podcast next month, and we plan to have a guest attorney who is an expert on representing healthcare companies with issues before both federal and state enforcement agencies. So I think we’re going to wrap it up here, and look forward to seeing you all for our next podcast. Thank you, Dionne, and thank you, Jim.
Dionne Lomax
Thank you guys.
Jim Anliot
Thanks very much, Jesse.
Outro
Thank you for joining Affiliated Monitors’ podcast, Integrity Through Compliance: AMI’s Business Success Series. Today’s segment is just a sample of the subject matter expertise captured by AMI’s compliance professionals. Go to our website at www.affiliatedmonitors.com to view the comprehensive list of industry and in-house talent AMI has available to enhance professional and business integrity programs and controls. Also, connect with us on LinkedIn to receive updates and trends in the areas of enforcement and compliance. If you have any questions about today’s podcast or would like to learn more, please contact us at podcast@affiliatedmonitors.com. Our Affiliated Monitors podcast production team of Deloris Saad, our compliance associate, and Dan Barton, our editor and podcast music composer, look forward to you joining us again for our next installment of Integrity Through Compliance: AMI’s Business Success Series.
