In a previous video, we talked about what a Privacy Program is. In this video, we look at six reasons why your organization needs a privacy program.
Reason No. 1 – To Comply With the Law
A privacy program may be essential for your organization to comply with federal and state law.
Medical records
Education records
Disability information
Employer background checks
Financial records
No matter what business you are in, you likely collect, use, store, disclose and share a lot of personally identifiable information that is protected by law.
To comply with the law, you may need a designated privacy officer and policies in place to protect the privacy and security of that data.
Reason No. 2 – To Meet Industry Standards
Your organization may have agreed to abide by industry standards.
Take credit cards, for example. The credit card industry requires everyone who accepts credit cards to comply with the Payment Card Industry Data Security Standard (PCI DSS).
You’re required to protect your network, protect stored credit card information, apply strong access controls measures, regularly monitor and test your network, and create security policies for employees and contractors.
Are your policies compliant? Don’t assume so.
A privacy program will ensure that all standards applicable to your organization are properly addressed.
Reason No. 3 – It’s a Business Differentiator.
The news is replete with examples of companies that squandered consumer trust.
In the first three months of 2024, there have been over 700 million records breached in 658 publicly disclosed incidents.
And that’s just the breaches we know about.
A well-run privacy program keeps you out of the news for data breaches and reinforces positive customer relationships.
Reason No. 4 – It Protects Your Business Data Too.
Good security practices not only protect consumer data, they protect your business data too.
Lax privacy and security controls can lead to loss of proprietary business data.
The same techniques employed by threat actors to steal consumer data, can compromise your business plans.
Improving security controls not only protects customers’ privacy, but also your organization’s secrets.
Reason No. 5 – It Enables You to Scale and Grow.
A good privacy program creates a foundation for your organization to grow.
Every state has it’s own privacy laws, and every country has it’s own regulatory scheme.
With a privacy program in place, you may already satisfy the laws in those other jurisdictions. But if not, you are not starting from scratch.
With concepts like privacy by design integrated throughout your organization, you can more easily adapt to the laws in new markets, even if those markets are on the other side of the globe.
Reason No. 6 – It’s the Right Thing to Do.
Respecting privacy is a fundamental aspect of maintaining trust with your customers and employees.
Data breaches can harm customers financially, reputationally, and emotionally. It leads to identity theft and the feeling of being violated.
A robust privacy program helps ensure that personal data is handled responsibly and ethically, further strengthening the bond between your organization and its stakeholders.
Semaglutide weight loss drugs are quite literally saving people’s lives. There are so many health benefits to losing weight that demand for the drugs is off the charts. Demand is so high that the manufacturer can’t keep up and the drugs are in short supply.
Where there is money to be made, there will be people willing to step in. Enter compounding pharmacies, who are catering to the demand by creating supposed duplicates of the drug.
But not all semaglutide is created equally, and concerns are rising that some pharmacies are creating inferior versions of the drug that are, at best, less effective or, at worst, dangerous.
How does semaglutide work?
Ozempic was approved by the U.S. Food and Drug Administration (FDA) in 2017 for use in adults with type 2 diabetes. After patients reported significant weight loss, Novo Nordisk rebranded the drug as Wegovy and received FDA approval in 2021 for use in chronic weight management in adults.
Semaglutide, the active ingredient for both drugs, mimics the function of a hormone that is naturally produced in the body. This hormone, released into the blood after you eat, helps lower blood sugar by stimulating insulin production, decreasing the amount of glycogen created in the liver, and ultimately making you feel fuller longer.
In short supply
These drugs work really, really well. So well, in fact, physicians prescribe Ozempic, the diabetes drug, “off-label” for weight loss. The manufacturer cannot make them fast enough due to a shortage of semaglutide. Both Ozempic and Wegovy have been on the FDA shortage list since March 2022.
This creates an attractive opportunity for compounding pharmacies. As long as the drugs stay on the official shortage list, they can be copied by compounders without fear of patent infringement.
And copy them they do. But how well?
Base or salt?
Ozempic and Wegovy use the base form of semaglutide. The base form has been approved by the FDA for the treatment of diabetes and obesity. But some compounding pharmacies are using different forms of semaglutide, known as semaglutide “salts,” that are chemically different from the base version.
Semaglutide salts have not been approved by the FDA, leading some authorities to caution patients about the efficacy or safety of the variant.
The FDA has received adverse reports from some patients after using the compounded semaglutide, which prompted them to send a public letter to the National Association of Boards of Pharmacy expressing agency concerns with the use of the salt forms of the compounded products. Some state pharmacy boards have also voiced concern.
The manufacturer of the brand-named drugs is making waves, too, and in some cases, threatening and filing lawsuits against pharmacies compounding the drugs and the health care providers administering them.
Best practices
Although the manufacturer is trying to step up production, the demand for semaglutide products will likely continue to outstrip the supply for the foreseeable future. Undoubtedly, many patients and their providers will turn to compounded variants to meet demand.
A physician’s responsibility goes beyond just prescribing the drug. They should understand how the drug is compounded and investigate the efficacy and safety of the salt forms of the product. Then decide if the salt form is appropriate for their patients.
If it is, providers should inform their patients. The Texas Medical Board considers the administration of non-FDA-approved drugs to be a form of alternative medicine. Medical board rules require that patients be informed that the drug is not FDA-approved and be told of the risks associated with the drug.
Pharmacies, too, play a key role as the backbone of our medication dispensing infrastructure. They should stay abreast of the regulations governing the compounding of semaglutide and the ethical considerations of preparing a medication for an individual patient.
They should follow the United States Pharmacopeia (USP) standards. Maintain a clean and safe environment, train personnel, appropriately label the medications, accurately identify the active ingredients, and provide accurate use instructions.
Patients have a responsibility, too. Talk to your doctor and discuss the risks and benefits of the compounded drug. If you and your doctor decide the drug is right for you, keep the lines of communication open with your physician and disclose any adverse reactions as soon as possible.
The future
The demand for these weight loss drugs will remain high for the foreseeable future. Until supply catches up with demand, growing pains will be felt in all corners of our healthcare delivery system.
From the companies that manufacture and compound the drugs to the physicians who prescribe them, the patients who take them, to the insurers who will be asked to pay for them – everyone has a responsible role to play.
I’m going to let you in on a little secret. Most med spas in Texas are not compliant with Texas law.
Either they are formed as the wrong legal entity type, they lack proper ownership or oversight, they are not following the standard of care, or all of the above.
The consequences can be significant for everyone involved.
For med spa owners, the Texas Medical Board can shut down your business. In extreme cases, you could be charged with practicing medicine without a license. If a patient gets injured, you could face civil liability. If your MedSpa is not formed or owned in compliance with Texas law, the insurance company could deny coverage, leaving you you holding the bag.
Physicians associated with non-compliant med spas can be disciplined by the Texas Medical Board. Those physicians are literally putting their medical licenses at risk.
Med Spas Provide Medical Services
I’m using the term med spa to describe several types of businesses—traditional med spas, IV hydration or IV therapy businesses, medical weight loss clinics, those types of retail medical services.
It should come as no surprise that the “med” in med spa stands for medical. We call them med spas because many of the services they provide are considered medical services. Botox injections, microneedling, dermaplaning and dermablading, cool sculpting, medium and deep chemical peels, are all considered non-surgical medical cosmetic procedures by the Texas Medical Board.
IV hydration and therapy, medical weight loss injections, and hormone therapy are also considered medical services. If a procedure involves injecting a patient or removing living tissue, it is probably a medical procedure.
Med Spas Must Be Formed Correctly
Because med spas provide medical services to the public, they must comply with Texas law just like any other medical practice, and that means they must be formed as an appropriate legal entity.
In Texas, medical practices can only be formed as professional associations, professional limited liability companies or PLLCs, or partnerships with other licensed physicians.
Many med spas in Texas today are incorrectly formed as corporations or regular LLCs. This is not allowed. Corporations and LLCs cannot be medical entities. The other requirement is proper ownership.
Med Spas Must Be Owned by Physicians
Medical entities, like med spas, cannot be owned by non-physicians. They must be owned by persons licensed to practice medicine in Texas.
Let me say that again.
Med spas cannot be owned by non-physicians. They must be owned by persons licensed to practice medicine.
A physician is a person licensed by the Texas Medical Board as a medical doctor, an MD, or a doctor of osteopathy, a DO.
But all is not lost. There is a way to structure a med spa correctly, even if you are not a physician.
Management Model
Through the magic of the management model, non-physicians can run a med spa and share in the profits.
Here’s how it works.
We still create a medical practice, like a PLLC, that will be owned by a physician, but we also create a management company owned by you that will run and manage the medical practice. You will be responsible for running the practice, but you do it through your your management company.
When patients pay for MedSpa services, that money is deposited into the Medical Practices Bank account. You, as the manager, have access to the Practices Bank account and you will pay all the business expenses from that account—rent, supplies, payroll, utilities, insurance, for example. What’s left over is paid to your management company as a management fee for your work in running and managing the practice.
So, in the management model, a physician still owns the medical practice, but you own the management company that runs the medical practice, and you take the profits as a management fee.
Special Arrangements
Let me pause here and say that if you happen to be a physician, things are more streamlined. We don’t have to use a separate management company. Physicians, of course, can own the medical practice.
If you are a podiatrist, chiropractor, or optometrist, there still must be a physician owner, but we don’t have to use a separate management company. You can jointly co-own the medical practice with the physician.
If you are a physician assistant, Texas does allow you to co-own the medical practice with a physician. However, you can only be a minority owner and the physician must be the majority owner.
Nurse practitioners unfortunately do not have the same opportunity as physicians. physician assistants. Nurse practitioners cannot co-own any part of a medical practice with a physician. The same is true for registered nurses.
So, if you’re a business person, a nurse practitioner, or a registered nurse, you must use the management model to operate a med spa.
Good Faith Exams
We have talked about the correct legal entity type and the correct ownership. Now let’s talk about an operational issue, the good faith exam.
A good faith exam is a medical examination conducted by a physician or a mid-level provider, like a physician assistant or a nurse practitioner, to assess a patient’s current condition and develop a plan of treatment. If you’ve ever been to a doctor, you have received a good faith exam.
Some med spas hire mid-levels on a part-time or as-needed basis to come into the med spa to perform these good faith exams. Other med spas use telehealth exams. Patients will schedule a telehealth exam prior to a med spa visit. The mid-level will perform a good faith exam and rule out contraindications and then write an order for a med spa treatment like IV infusion or a Botox injection.
Common Questions
That covers some of the requirements for Texas med spas. Now let me answer some common questions I get from clients.
Question 1. No one else I know is doing it this way. Are you sure this is right?
Yes, I’m sure. It’s unfortunate that many med spas are not formed or operating correctly. If you have researched med spas, you know how difficult it can be to get straight answers.
The problem is there is a lot of misinformation on the internet. Much of it is incomplete or just plain wrong. Some of it might be right for other reasons. states, but not in Texas.
It’s important to understand that each state has its own laws that apply to med spas. It’s no wonder there is so much confusion. The information I’m giving you is correct for Texas, but it won’t apply to other states.
Question 2. I don’t want the physician to have access to the business. How can I protect my business?
Well, I don’t blame you, and because of that, we build in certain protections into the documents.
We specify that the physician cannot sell or transfer their interest to any other person without your permission.
We give you access and control to the bank accounts for the medical practice. In that way, you control the money. We create a process to change physicians if that ever becomes necessary. If the physician some day decides they want to move on, we don’t have to create a brand-new medical practice.
We just transfer ownership of the existing medical practice to a substitute physician.
Finally, the management company that you own will own your med spa’s brand and name. The management company will license that name to the medical practice. The medical practice can’t use it without your permission. In that way, you always maintain control of your brand.
Question 3. How does the physician get paid?
The physician gets paid a flat fee every month for supervising the mid-level provider.
In Texas, mid-level providers must be supervised by a physician. The Texas Medical Board has established rules for this supervision. Physicians who don’t properly supervise the mid-level provider can be disciplined by the medical board.
The physician usually doesn’t see the patient. They supervise the mid-level provider who does see patients and for that they get paid a monthly flat fee somewhere in the range of $1,000 to $3,000 per month.
Question 4. What kind of insurance do I need?
You need a general liability policy for slip and falls and you need a professional liability policy for hypothetical malpractice claims.
Physicians and mid-level providers probably already have a malpractice policy. Sometimes you can add the MedSpaw as an additional insured to those policies.
My preference is that you get the med spa its own malpractice policy that covers every practitioner who works works for the med spa. That way, you don’t have to depend on others to have the right amount of insurance for your business.
Question 5. Are there any legal risks for the physician?
There is always some level of risk. A patient who has a bad experience can file a complaint with the Texas Nursing Board or the Texas Medical Board. If that happens, the provider will have to justify the services they provided to that patient.
For the physician, it’s important that they take seriously their responsibilities to supervise the mid-level provider. There must be a supervising agreement between the physician and the mid-level. The physician needs to review a sample of patient charts every 30 days and address any concerns with the mid-level, and the physician needs to be available to answer the mid-level’s questions as they come up.
For the mid-level provider, it’s important that they are thorough when performing the good faith exams and that they keep good medical records. What are the next steps?
Conclusion
I’ve covered a a lot of information. I would encourage you to watch this video more than once. You will probably key in on new information each time.
Well, that’s it. Best of luck to you. You’re on an exciting journey. I look forward to the opportunity to help you along the way.
The U.S. Department of Health and Human Services’ Office for Civil Rights (OCR) updated its guidance to regulated entities when using online tracking technologies. These technologies, used to collect and analyze user interaction with websites or mobile applications, must comply with HIPAA rules if the information gathered includes protected health information (PHI). Unauthorized disclosures of PHI to tracking technology vendors, such as for marketing purposes without compliant authorizations, are deemed impermissible.
The update emphasizes that regulated entities should ensure they disclose PHI only as expressly permitted or required by the HIPAA Privacy Rule. It provides guidance on the application of HIPAA rules to the use of tracking technologies on user-authenticated webpages, unauthenticated webpages, and within mobile apps. For instance, tracking technologies on user-authenticated webpages generally have access to PHI, and tracking technology vendors are considered business associates if they handle PHI.
Unauthenticated webpages, which do not require user login, usually do not have tracking technologies that access PHI. However, in cases where PHI is accessible, HIPAA rules apply. For mobile apps offered by regulated entities, information collected is generally considered PHI, and the entity must comply with HIPAA rules for any PHI the app uses or discloses. However, HIPAA does not protect information users voluntarily enter into non-regulated mobile apps.
Disclosures of PHI to tracking technology vendors must be specifically permitted by the Privacy Rule. If the vendor is a business associate, a business associate agreement (BAA) must be established. The use of tracking technologies should be addressed in the entity’s Risk Analysis and Risk Management processes. If there’s an impermissible disclosure of PHI, breach notification to affected individuals and the Secretary is required. OCR is prioritizing compliance with the HIPAA Security Rule in investigations into the use of online tracking technologies.
Look better. Feel better. Fountain of youth promises are making med spas one of the fastest-growing segments in healthcare. Botox injections, laser hair removal, IV hydration and therapy, medical weight loss, and hormone therapy seem to be available on every corner.
But most med spas are not compliant with Texas law. Either they are formed as the wrong entity type, they lack proper oversight and ownership, or all the above.
The consequences can be significant for everyone involved.
Med spa owners face potential civil and criminal liability for the unauthorized practice of medicine. Physicians associated with those med spas could find themselves subject to disciplinary action from the Texas Medical Board. And patients are caught in the middle.
The “med” in med spa stands for medical because many of the services they provide are medical in nature. Botox, Disport, Juvederm, and Kybella injections, microneedling, chemical peels, laser hair removal, dermaplaning, and CoolSculpting are considered “nonsurgical medical cosmetic procedures” by the Texas Medical Board.
IV hydration and therapy, platelet-rich plasma injections, medical weight loss injections, and hormone therapy are also medical services. If a procedure involves injecting a patient intravenously or subcutaneously, it is probably a medical procedure.
Before any medical procedure, a physician or midlevel provider (like a physician assistant or nurse practitioner) must perform a good faith exam, establish a medically appropriate treatment plan, and document everything in a medical record.
Midlevel providers must be supervised by a physician under a Prescriptive Authority Agreement. The physician must review a sample of the charts regularly and generally be available to the midlevel if they have questions.
This does not happen in many med spas.
Then there’s the business side. The practice of medicine in Texas is regulated by the Texas Medical Practice Act, the Texas Medical Board, and administrative rules. Because med spas provide medical services to the public, they must comply with all these rules just like any other medical practice.
Med spas must be formed as an acceptable legal entity type. In Texas, medical practices are limited to professional associations (PAs), professional limited liability companies (PLLCs), and general partnerships with other licensed physicians. Many med spas are incorrectly formed as corporations or regular LLCs.
This is not just a technical problem. It leads to improper ownership. Medical entities, like med spas, cannot be owned by non-physicians. They must be owned by persons licensed to practice medicine in Texas.
There is a lot of information on the Internet, much of which is incomplete or wrong.
Texas is a “Corporate Practice of Medicine” state, which means that physicians cannot be employed to provide medical services by companies not owned by licensed physicians. In practical terms, a non-physician cannot start a company and then hire a physician to provide medical services to patients of that company. With very few exceptions, medical services can only be provided through professional entities owned by physicians.
These same prohibitions apply to midlevel providers like Physician Assistants and Nurse Practitioners. Physician Assistants can co-own a medical practice with a physician only if the physician controls a majority interest in the practice. Nurse Practitioners cannot own any percentage of a medical practice.
These are just a few of the compliance issues for Texas med spas. There are also in-office and website disclosure requirements, registration requirements, reporting requirements, and restrictions on the type of marketing or advertising the practice can engage in.
Patients are caught in the middle. Those injured at a non-compliant med spa may not know where to turn.
These types of complaints to the Texas Medical Board are growing at an alarming rate. If the non-compliant med spa has a Medical Director, the Board can discipline the physician for inappropriate supervision or unprofessional conduct. Physicians associated with non-compliant med spas are putting their medical licenses at risk.
For the unlicensed med spa owner, the Medical Board can shut down their business. In extreme cases, the unlicensed med spa owner could be charged with practicing medicine without a license. If the patient suffers a physical or psychological injury, the owner could be charged with a third-degree felony which carries jail time of two to ten years and a fine of $10,000.
If the patient hires an attorney to sue for malpractice, the med spa’s insurance company may deny coverage if the med spa was not formed or owned in compliance with Texas law.
Med spas are big business and growing rapidly. But with great reward comes great responsibility. Entrepreneurs owe it to themselves and patients to set up the med spa the right way, with the right supervision, and the right ownership.
The American Med Spa Association defines a medical spa as a hybrid between an aesthetic medical center and a day spa” with four core elements: (1) the provision of non-invasive (i.e. non-surgical) aesthetic medical services; (2) under the general supervision of a licensed physician; (3) performed by trained, experienced and qualified practitioners; (4) with onsite supervision by a licensed healthcare professional. AmSpa – Med Spa FAQ
While that definition is technically accurate, it obscures the point that because med spas offer medical services, they are considered medical practices in Texas and must comply with the rules and regulations that apply to traditional doctor’s offices.
What kinds of services do med spas offer?
In addition to providing aesthetic cosmetic treatments common in many spa settings, med spas provide services that cross the line into the practice of medicine. A small sample of these services include:
Laser Hair Removal
Botox injections and other dermal fillers
IV infusions
Platelet-Rich Plasma injections
Hormone therapy
Cosmetic surgeries
The Texas Medical Board refers to these types of services as Nonsurgical Medical Cosmetic Procedures and requires that an appropriately trained physician, or properly supervised midlevel practitioner, perform an appropriate patient assessment and issue an order for the medical cosmetic procedure. Title 22, Texas Administrative Code, Section 193.17, Nonsurgical Medical Cosmetic Procedures
What legal structure must med spas have?
Because med spas are medical practices, they must follow the requirements of Texas law regarding professional entities. Medical practices can only be structured as professional limited liability companies (PLLC) or professional associations (PA). Texas Business Organizations Code, Section 301.003(3)
They may not be formed as corporations or regular limited liability companies (LLC).
That means that nurse practitioners or unlicensed persons cannot form a “partnership” with physicians to own a med spa. Said another way, unless you are a physician, chiropractor, optometrist podiatrist, or physician assistant (in limited situations), you cannot own a med spa. This too is a violation of the Corporate Practice of Medicine.
Can a non-physician co-own a med spa with the physician?
In certain circumstances, non-physicians can co-own a medical practice with the physician. The only allowances are for podiatrists, chiropractors, optometrists, and sometimes physician assistants. Texas Business Organizations Code, Sec. 301.012 That means that nurse practitioners, registered nurses, estheticians, or unlicensed persons cannot form a “partnership” with physicians to own a med spa. Said another way, unless you are a physician, chiropractor, optometrist podiatrist, or physician assistant (in limited situations), you cannot own a med spa. This too is a violation of the Corporate Practice of Medicine.
Can a dentist be the “medical director” of a med spa?
I’ve seen mention that the Texas State Board of Dental Examiners allows dentists to use Botox for dental esthetic and dental therapeutic purposes. I cannot confirm that policy, but it would not be surprising as there are several therapeutic dental uses for Botox: high lip lines, Temporomandibular Joint Disorder, Bruxism, and dentures no longer fitting due to shifting jaw muscles. However, Botox for facial cosmetic purposes would not be in a dentist’s scope of practice.
In my view, dentists can only prescribe Botox and fillers for dental purposes. I do not think dentists can provide Botox for purely cosmetic purposes. The other issue is that since cosmetic Botox is a medical service, and dentists are not medical doctors, they cannot own or co-own a medical practice. Neither are dentists qualified to serve as “Medical Director” since they are not licensed to practice medicine in Texas.
What are some of the risks of a non-compliant med spa?
It is a violation of Texas’s Corporate Practice of Medicine doctrine for corporations or standard LLCs to provide medical services. Doing so could bring civil and criminal penalties. Texas Occupations Code, (Medical Practice Act), including sections 155.001, .003, 157.001, 164.052(a)(8),(13), and 165.001, .051, .101, .151, .156
Is the physician required to be on-site or at mid-level required to be on-site?
Either the midlevel or the physician can do the good-faith exam via telehealth or in person. They must be the ones to write the order for the medical procedure.
How often should a med spa perform good faith exams on patients?
At a minimum, a Good Faith Exam (GFE) should be performed annually, but may be required more often depending on the circumstances.
The good faith exam should be performed on any patient receiving treatment for the first time. From this GFE, the provider develops a treatment plan which will often include multiple treatments over several sessions. A GFE does not need to be performed for each session included in that treatment plan.
With that said, a new GFE should be performed:
If a patient seeks additional services not anticipated during the initial GFE, or not included in the initial treatment plan;
The patient discontinues the treatment plan, but then desires to resume treatment after a substantial delay; or
A patient’s health changes materially, either during the course of a treatment plan or thereafter.
There is no hard and fast rule. It is a question of the applicable medical standard of care. When in doubt, a physician or midlevel should decide if a GFE is required.
This is a four-part series on Handling Licensing Board Investigations from Complaint to SOAH Hearing. In preparation for this series, I talked to several of the staff attorneys and investigators for the Texas Medical Board, the Board of Nursing, and the Board of Chiropractic Examiners. I asked them what advice they would give lawyers practicing before their boards. Some of the suggestions throughout this series come from the staff attorneys and others come from trial and error on my part through years of representing clients before these boards.
The series will present issues associated with the phases of the investigation and resolution:
Part III – The Informal Settlement Conference (ISC)
Part IV – The SOAH Hearing
The purpose of this series is to give licensees and their attorneys a greater understanding of the complaint and investigation process. Of course, each board is different and each investigation is driven by the issues and personalities involved. Licensees and their attorneys are encouraged to understand the rules and processes applicable to the relevant board. Further materials about the complaint, investigation, and hearing process are available on board websites.
Part II of this series explores the investigation and the discovery issues involved.
The Big Picture
The investigation process starts with a complaint. The complaint goes through a preliminary evaluation process and may be dismissed. If it passes this preliminary evaluation, the board will open a formal investigation during which a board investigator will gather information about the case, including medical records and witness statements.
When the investigation is complete, the information will be presented to a review committee. The committee will either refer the matter to litigation or be dismissed. The terminology of “referral to litigation” is most often used by the Texas Medical Board and simply means that the matter is assigned to one of their staff attorney for further handling, with the assistance of the investigator.
At this point, the matter could still be dismissed, but most likely will proceed to some type of Informal Settlement Conference (ISC) or proposed Agreed order. If it’s not resolved at this more informal stage, the matter goes to the State Office of Administrative Hearings (SOAH) for a more formal proceeding.
There is a big difference in terms of tone and focus from the complaint and the informal settlement conference, and the SOAH hearing. The first part of the investigation is more of an informal process. A SOAH proceeding has a much different tone, similar to a lawsuit. A judge will preside, without a jury, listen to testimony, and rule on evidence. After the SOAH proceeding, the judge will issue a ruling with findings of facts and conclusions of law. The licensing board will consider the ruling and take appropriate action.
The Complaint
Having explained the process in general, let’s get into the details of each step.
Complaints can be initiated in several ways. There is an online form or a written complaint form that can be downloaded. There is a complaint hotline that patients can call. Most complaints come from patients, but they can be initiated by the licensee’s fellow practitioners. Practitioners are required to report their peers if they feel like their conduct is a threat to public safety. Finally, complaints can be initiated by the board itself. This most often occurs if the licensee gets arrested or charged for a crime – e.g. driving while intoxicated.
Once a complaint has been initiated with the Texas Medical Board, there are no takebacks. The patient cannot withdraw it if they change their mind. That is not the case with the chiropractic board or the board of nursing, where they can be withdrawn. At some point, the ability to withdraw a complaint becomes moot because the complaint has progressed into the formal investigation phase where the investigator has likely have found other issues and does not the complaint to continue the process.
The complainant’s identity is confidential, with certain rare exceptions. But complaints cannot be anonymous. Anonymous complaints are dismissed without further action. See 22 Tex. Admin. § 178.4.
The Preliminary Evaluation
Once the complaint is filed, an investigator will be assigned to the file and they will communicate with the complainant as part of their preliminary evaluation.
The preliminary evaluation is not a detailed review of all the allegations and supporting facts. It is a narrow evaluation to determine if the licensing board has jurisdiction over the complaint.
The preliminary evaluation must be conducted within 45 days. Within 45 days, the board will know whether they have jurisdiction over the matter. It has been my experience that if the board determines they have jurisdiction, the matter will most likely be referred to a staff attorney to direct the handling in conjunction with an investigator to gather facts.
At the beginning of the preliminary evaluation, the licensee is notified and allowed to respond.
It is difficult for the licensee to adequately respond. While the licensee is told generally about the nature of the complaint, it is typically vague.
This is a letter from one of my cases before the Texas Medical Board. You will note that the letter includes general statutory allegations such as unlawful advertising, practice, inconsistent with health and health and welfare, and unprofessional conduct, which you will see in every case involving non-therapeutic prescribing or treatment.
That gives us the gist of the complaint, but it does not tell us much about the context. At least we know it has something to do with advertising. So in this case that’s all the information we received when they invited the practitioner to respond.
In hindsight, the complaint involved advertising IV infusions that could allegedly prevent COVID. This was long before the vaccinations existed. The licensee was trying to imply that her vitamin-enriched solutions would make you more healthy which would make you less susceptible to contracting COVID. The medical board was not pleased.
The challenge is how do you respond to such vague allegations?
This is where licensees typically make a series of mistakes. They fail to get a lawyer involved and casually send responses to the board, usually by email, and often with a tone of informality.
It is important to understand that the scope of the investigation is not limited by the complaint. If the board finds other potential violations, they can and will broaden their investigation. Neither the practitioner nor the investigator knows what information is going to be relevant.
In my view, the best course of action is to respond very narrowly and succinctly. You will have plenty of time as you go through this process to respond further.
If you are counsel representing a practitioner, it is also a good idea to call the investigator to try to get more information about the allegations. The chiropractic board, for example, has a policy of trying to give as much information to the licensee as possible while respecting the bounds of confidentiality. Not all boards may be quite as forthcoming. It depends on the board and the investigator, but it does not hurt to ask. Some boards want to facilitate this communication. They want to get as substantive of response as they can, so they can make that preliminary evaluation.
Is the Complaint Jurisdictional?
The key question in the preliminary evaluation is whether the complaint is jurisdictional. What does that mean?
The issue is whether this particular licensing board has the authority to handle the complaint and impose a penalty on the practitioner if warranted. The first question then is whether the complaint is about one of the board’s licensees.
This is not always a simple issue. Patients do not always know who the provider is. In some practices, the patient may never see the doctor. Perhaps the patient is treated by a nurse practitioner or physician assistant. The physician may not be on-site. Supervision is accomplished by reviewing samples of charts sometime after the care is provided. Not understanding the relationship, the patient may complain to the medical board about the nurse practitioner, or they may complain to the nursing board about the physician. In the case of a med spa, where a physician acts as the medical director, the patient may complain to the nursing board because they talked to a nurse practitioner.
Providers should be careful about blurring the lines about who is responsible for the care. If your client is in one of these multidisciplinary practices, make sure the website is clear about who is providing what care.
The next question is whether the complaint if taken as true states a violation of the board statute or board rule. Complaints can be dismissed because the subject of the complaint is not a violation. With that said, almost any complaint can constitute “unprofessional conduct” depending on the context. Many of the board rules are written to include a broad range of conduct.
If there is no jurisdiction, the board will dismiss the complaint. Depending on the allegations, the board may also refer the matter to the appropriate licensing board or state agency.
One exception is the Texas Medical Board. If they do not have jurisdiction over the practitioner, but feel like the practitioner is practicing medicine without a license, they will issue Cease and Desist letter.
Here’s an example of one such letter. This was sent to a nurse practitioner. The medical board felt like she was practicing beyond the scope of her delegation.
The letter is a notice of a hearing inviting the nurse to explain why a Cease and Desist Order should not be issued. The burden is on the practitioner, and in most cases, the Cease and Desist Order is issued.
Following an investigation, the complaint will be dismissed because the practitioner is not licensed by the Texas Medical Board. The board cannot issue penalties against a non-licensee, but it can issue a Cease & Desist Order because the board does regulate the practice of medicine. The board can also refer the matter to the Travis County District Attorneys’ office for possible criminal charges for the unauthorized practice of medicine.
Formal Investigation
If the board determines it has jurisdiction, the complaint is officially filed and a formal investigation is opened. The same investigator who conducted the preliminary evaluation will also handle the investigation. The transition from evaluation to investigation is just a continuation of the process. They just keep going with their investigation.
The licensee is now called the Respondent. Both the Respondent and the complainant are notified within this 45-day window of the result of the preliminary evaluation.
This is a notice letter from the Texas Medical Board that a formal investigation has been opened.
This is another example of a notice layer, but this one is a formal investigation for a cease and desist hearing.
Discovery Tools
Once a formal investigation is opened, the board will use various discovery tools to investigate the matter. They will interview witnesses, request documents through subpoena power, and refer the matter for expert review, if necessary.
This is an example of the Texas Medical Board using its subpoena power.
The investigation remains confidential. See 22 Tex. Admin. § 178.4. The respondent will not see the transcripts of interviews with the complainant or witnesses unless it reaches a SOAH hearing. These investigations can last some time.
The board is required to give you notice every 90 days that the investigation is ongoing. Understand that many of these cases are complex and take time. You may get several of these letters, especially from the medical board, especially if standard of care issues are involved and the board engages an expert to review the records.
Initial Requests
When the board opens a formal investigation, they will send the Respondent a request for a narrative and one or more requests for documents. In the example above, the medical board requires the respondent to explain in detail how supervision of the mid-level practitioner by the physician is accomplished at this clinic (Item #2). The board wants copies of supervision agreements (Item #3, with reference to a forthcoming 14-day subpoena) and a narrative about the services provided at the clinic (Item #4).
The board can require the practitioner to provide a narrative and provide documents. One of the obligations of licensure is that the licensee agrees to cooperate in formal investigations. Failure to respond is itself a violation that will result in a penalty. It is customary for the Board of Nursing to file “Formal Charges” with SOAH if the licensee does not respond.
Subpoenas
When asking for documents, the board will provide a standard form subpoena and a standard business records affidavit they require the provider to sign, notarize, and return. The subpoena will require a response by a certain date. In my experience, however, the investigators are willing to grant additional time to respond.
When responding to the subpoenas, have your clients produce the records directly to you. Then have a frank conversation with them to make sure you have been provided all the responsive documents. It will be easy for them to produce electronic records. However, there may be other hard-copy records in storage. You must produce those documents too.
Review the documents for obvious errors, altered records, or recent additions. I’ve had clients change dates or create records after the fact, including very descriptive exam notes or supervision logs. Board investigators review a lot of records and will notice alterations. The cover-up is always worse than the initial mistake.
Narrative Responses
If the licensee has hired an attorney, the attorney should draft the narrative response with factual assistance from the practitioner. Attorneys should be advocates for their clients, but recognize their audience is the investigator, the investigation committee, and ultimately the ISC panel members. You are not advocating to an unbiased jury. Most of the ISC panel members are providers too. They will see right through your spin. Put them in your client’s position. Let them see the situation through your client’s eyes.
As with the documents your client provides to you, take what your client says with a grain of salt. On rare occasions, clients will flat-out lie to you. Sometimes they will spin the facts or convince themselves of a fact that is not entirely accurate. Most of the time, they think they did not do anything wrong and so they want to put themselves in the best light possible. Be very cautious about the statements you make back to the licensing board. Make sure you have a very upfront and blunt conversation with your client.
You should also limit your narrative as narrowly as possible. The scope of the investigation is not limited by the complaint. Answer what you have to, but do not go beyond the issue. You could be inadvertently opening additional lines of investigation. This is not your only chance to speak. You can always submit a supplemental narrative response later in the process, such as before the ISC or a SOAH hearing.
Expert Review
If there is a standard of care issue, the board will send the matter out to up to three experts for review. They will send the results of the investigation out to two experts. If both experts come back with the same opinion, it stops there. If they have different opinions, one finding a fault and another not, then they’ll send it to a third expert.
That’s not the case with all boards. The nursing board and the chiropractic board, only send materials out to one expert. I’m told by the medical board staff attorneys that the vast majority of these types of reviews come back with no finding of a violation of the standard of care. I think that is probably true, but it doesn’t mean that that stops the investigation. Just because the licensee’s conduct did not violate the standard of care does not mean the practitioner did not violate a board rule or that there was no unprofessional conduct.
If the expert reports indicate there is a violation of the standard of care, you should review consider obtaining your own expert review and report in opposition. It might be persuasive to the ISC panel members and can be used in a SOAH trial if that is in your future.
Up Next: The Informal Settlement Conference
In Part III: The Informal Settlement Conference, I’ll review the informal settlement process employed by the board and how Agreed Orders are negotiated.
This is a four-part series on Handling Licensing Board Investigations from Complaint to SOAH Hearing. In preparation for this series, I talked to several of the staff attorneys and investigators for the Texas Medical Board, the Board of Nursing, and the Board of Chiropractic Examiners. I asked them what advice they would give lawyers practicing before their boards. Some of the suggestions throughout this series come from the staff attorneys and others come from trial and error on my part through years of representing clients before these boards.
The series will present issues associated with the phases of the investigation and resolution:
Part III – The Informal Settlement Conference (ISC)
Part IV – The SOAH Hearing
The purpose of this series is to give licensees and their attorneys a greater understanding of the complaint and investigation process. Of course, each board is different and each investigation is driven by the issues and personalities involved. Licensees and their attorneys are encouraged to understand the rules and processes applicable to the relevant board. Further materials about the complaint, investigation, and hearing process are available on board websites.
Part I of the series will help licensees and attorneys who are new to board investigations get their bearings and understand the rules and processes involved.
Phases of Licensing Board Complaints
Licensing board complaints and investigations usually follow two general phases. There’s the informal phase from the filing of the complaint to the informal settlement conference and agreed order. If a licensee chooses not to accept the board’s resolution, the practitioner can request a more formal hearing before the State Office of Administrative Hearings (SOAH).
The strategies of each phase are very different. In the informal phase, you deal with a panel of 3 members of the licensing board. There is no impartial third party like a judge. Licensing boards are not impartial. I’m not suggesting they are unfair, but they are not impartial. They have an obligation to police their licensees and hold them accountable. The panelists come into an Informal Settlement Conference (ISC) with the intent to serve that purpose. ISCs are much more like mediations where you have a dialogue with panelists and a staff attorney and try to convince them to dismiss the complaint or to minimize the scope and degree of the violation and penalty.
If you get to the more formal SOAH hearing, there will be an administrative law judge, but no jury. The judge is impartial, but depending on the board involved, has varying degrees of authority in the outcome of the matter. After the hearing (like a trial), the judge will make findings of fact and conclusions of law. Most boards do not have to accept those findings and conclusions. And all the boards have the flexibility to take disciplinary action despite the findings.
TMB Statistics
I’ll give you some context about the scope of licensing board complaints with a few statistics. These are statistics from the Texas Medical Board (TMB) only. I have not included other licensing boards.
There are roughly 9,000 complaints that are filed annually. If you do the math that translates to about 750 complaints per month, about 25 complaints each day. The TMB tells me that about 90% of these complaints are dismissed, either on jurisdictional issues or because they do not pass a preliminary evaluation. Roughly 10% of those complaints, or 900, continue beyond the preliminary evaluation phase and into a phase where the board is considering some type of sanction or penalty.
Those that continue are relatively significant matters. Many practitioners think that any complaint against them must be bogus and therefore all they need to do is tell the board their version of the events and it will all go away. I will no go away. The board has already determined that the allegation, if true, is significant enough for them to impose some kind of sanction. The complaint can still get dismissed, in this phase, but that is the exception rather than the rule.
Most of these 900 complaints are ultimately resolved by agreed order either before or after an informal settlement conference. The vast majority are resolved by agreed order. If they are not resolved by agreed order, then they proceed to the State Office of Administrative Hearings (SOAH) for trial.
Types of Violations
Before we dive into the different phases of a complaint, I want to give you an idea of the types of violations that the practitioners can find themselves facing.
It could be quality of care issues where the allegation is that the practitioner has violated the applicable standard of care. It could be impaired physician issues where the physician’s ability to practice is compromised by substance abuse.
The complaint could also allege business issues like over-billing, deceptive advertising, or breaches in confidentiality. Maybe they did not close the doors of their practice appropriately and face allegations of patient abandonment. Or perhaps the practitioner failed to provide required disclosures to their patients.
Licensing boards are seeing an increase in what’s called, "boundary cases.”These are situations in which the provider has crossed a professional line by attempting to engage in an inappropriate personal relationship with the patient. Pro-tip: Practitioners, do not friend your patients on Facebook. Nothing good will come of it.
Finally, in almost every case, there will be an allegation of unprofessional conduct, which is kind of a catch-all. It’s very broad and very common.
Disciplinary Actions and Outcomes
There is a slew of possible outcomes from a board investigation. The panel can recommend dismissal of the complaint at any stage. I have had complaints dismissed before and after Informal Settlement Conferences, but it is not common.
If disciplinary action is warranted, the board has several tools available. They can revoke or suspend a license. They can put the licensee on probation. They can impose monetary fines, continuing education, monitoring, and reporting. When an agreed order is proposed, the board will often recommend several of these options.
All agreed orders will impose continuing education which will include, at a minimum, a Texas jurisprudence course. Depending on the findings of the panel, they will also require topical subjects like medical decision-making, nursing judgment, documentation, supervision of mid-levels, or understanding board orders. These classes are available online and usually take 2-6 hours each to complete. The agreed order will give the licensee a time period to complete the courses, during which the licensee remains on probation. If continuing education is the only disciplinary action, then the probation ends when the courses are complete.
The agreed order might also require monitoring and reporting. The licensee is required to check in with a monitor at regular intervals. The monitor will then report to the board the status of the licensee’s progress. For example, for nurse practitioners under the supervision of a physician, the Board of Nursing may require the supervising physician to file certain quarterly performance assessments.
I’ll discuss the process of negotiating agreed orders in Part II – The Informal Process.
Once a panel makes its recommendation, the matter will be considered by the full board at its next quarterly meeting. Agreed orders are not final until approved by the entire board.
The licensing board will publish the outcome of the investigation in its quarterly newsletter and online. The disciplinary action will also be reported to the National Practitioner Data Bank.
As you can see, licensed healthcare providers are subject to the oversight of the board that issues their license. These boards have similar, but separate, rules for handling complaints and imposing disciplinary actions.
All of the board rules are published in Title 22 of the Texas Administrative Code, Examining Boards. Many of the rules also refer to the relevant statutory authority.
I have been practicing health law for more than 25 years and have had the benefit of working with a lot of healthcare providers. My clients will often repeat myths about the practice of healthcare they have heard from their colleagues. There are also occasions when my fellow attorneys will make assumptions about healthcare law that are not accurate.
There is a lot of confusion and misinformation floating around about the legalities of healthcare. Let’s debunk the top 10 myths right now.
Myth No. 1: Everyone is doing it, so it must be okay.
Truth: There is no strength in numbers. The more people doing things the wrong way, the more they attract the attention of enforcement agencies and licensing boards.
This is perhaps the most pervasive myth there is. I can’t tell you how many times I explain to clients how their business should be structured or some restriction or requirement they must observe. They will often ask how their competitors are getting away with doing things differently.
The truth is, they probably misunderstand what their competitors are doing. Some healthcare providers have only a vague understanding of how their business is structured. Just because some other provider told you their business functions a certain way doesn’t mean it is true.
But even if other people are doing things a certain way, that doesn’t make it correct or legal. Remember the question your mother would ask you: “If everyone was jumping off a cliff, would you do it too?” The truth is, many people are jumping off the proverbial cliff. Don’t follow them.
This is particularly important when it comes to governmental billing. CMS has established the Center for Program Integrity that uses big data to identify fraudulent billing. If everyone else is doing something wrong, Medicare is more likely to take notice.
Myth No. 2: If you don’t see Medicare patients, you can’t violate the Anti-Kickback Statute or the Stark Law.
Truth: You can violate the fraud and abuse rules even if you don’t see Medicare patients.
People are rightfully concerned about submitting false claims to the federal government given the significant civil and criminal penalties involved. However, too many providers think they are safe from these penalties if they don’t see Medicare patients.
The truth is there are other federal laws, and even state laws, which carry civil and criminal penalties that apply to all patients, even if they are not Medicare beneficiaries.
Consider the Federal Travel Act. The use of the Travel Act in healthcare prosecutions is a hot topic nationally, and especially in North Texas following the Forest Park Medical Center case.
The Travel Act was passed in 1961 at the behest of Attorney General Robert F. Kennedy to combat the prevalence of organized crime and racketeering syndicates. Despite the name, you don’t have to travel to violate the Travel Act. The Travel Act makes it a federal crime to use facilities of interstate commerce to promote, manage, establish, or carry on specific, statutorily defined “unlawful activity.”
These unlawful activities are can be any state law crime. As it relates to healthcare fraud and abuse, state crimes such as commercial bribery can form the basis for Travel Act liability. By co-opting these state law offenses, the Travel Act effectively federalizes state law violations.
State also have their own laws which apply. The Texas Patient Solicitation Act (TSPA) is sometimes called the Texas Anti-Kickback Statute or the Texas Stark Law because it has elements of both. You violate the TPSA by offering to pay or agreeing to accept anything of value to secure or solicit a patient or patronage for or from a licensed professional. Called an “All-Payor” statute, a TPSA violation is not limited to referrals for services paid by government health programs.
By default, a TPSA violation is a Class A misdemeanor, but it can become a third-degree felony if the person has violated the TPSA previously or was employed by a federal, state, or local government at the time of the offense.1
Just because you don’t see Medicare patients, or your arrangement doesn’t involve Medicare patients, don’t think you are beyond the reach of anti-referral laws.
Myth No. 3: Sales representatives are a good source of legal advice
Truth: Sales representatives are not attorneys and may not be familiar with the latest developments in health law. Plus, they are incentivized to sell products and don’t necessarily have your best interests at heart.
I’m not disparaging sales representatives. I am admonishing the providers to beware of their motivations. Their job is to sell you supplies and equipment, and like any good sales representative, they will put their product in the most favorable light. They do not necessarily have the legal expertise to analyze the legalities of reimbursement, business structures, patient disclosures, or your licensing board requirements.
Invariably, the sales representative will start the conversation by saying, “I’m not an attorney but…”, then they proceed to give the provider legal advice regarding a complex application of an Anti-Kickback Safe Harbor. I have been on phone calls where the sales representative provided the client with incorrect advice and which I had to gently correct.
Even in the best of situations, legal advice in the healthcare context can be complex and nuanced. Coupled with the fact that most of the sales representatives are not attorneys and you’ve got a recipe for confusion and misinformation. Providers should consider the source of any legal advice they receive and discerning about the advice they choose to accept.
Myth No. 4: All lawyers are well-versed in healthcare law, or the corollary, that health law is just like business or corporate law.
Truth: Healthcare is the most regulated industry. As a result, health law is expansive and nuanced. Many attorneys are not equipped to offer comprehensive advice on health law topics.
This myth manifests itself in several ways. Some providers have business or family attorneys (or CPAs) they rely on for advice on various health law issues. Perhaps, that is better than no advice at all, but oftentimes healthcare issues turn on a complicated framework of federal and state statutes and regulations. Most attorneys do not take health law classes in law school and are therefore not familiar with all of the issues at play.
I’ve also seen this issue arise with unscrupulous businesses who, to entice physicians to enter into a deal, will hire lawyers to draft “opinion letters” that the deal is legal. Some of these opinion letters are nothing more than marketing propaganda. As with sales representatives, you should consider the source of the information. Recognize that the attorney is being paid to write the letter and does not represent you. If you get into trouble, that attorney will be nowhere to be found.
At the very least, providers should have their own health law attorney review the arrangement rather than taking someone else’s word for it.
Myth No. 5: Non-compete provisions are not enforceable against physicians.
Truth: Non-compete provisions are enforceable against physicians and other healthcare providers. Do not sign any restrictive covenant without the advice of competent counsel.
Noncompete provisions are common in healthcare and are routinely enforced. Unfortunately, some physicians think the opposite is true and incorrectly reason they can agree to anything without fear of repercussion.
Perhaps this myth stems from a unique statute in Texas. Based on the theory that a private contract should not unreasonably restrict a patient’s right of access to the physician of their choice, Texas has some unique requirements for noncompetes to be enforceable. One such requirement is that the noncompete must include a buyout provision, meaning, the physician must be allowed to pay a fee to “buyout of” the restriction.2
Texas also limits the scope and geographic area of noncompetes to the most narrow restriction necessary to accomplish the business purpose of the restriction. If the restrictions are reasonable, courts will enforce the provision. If the restrictions are not reasonable, courts have broad discretion to revise them as appropriate.
Myth No. 6: Medical school prepares physicians to handle the business and legal aspects of practicing medicine by themselves.
Truth: Legal concepts in healthcare are complex and dynamic. Great physicians are not necessarily great lawyers.
Schools do a great job educating healthcare providers to provide healthcare. And while many of them also offer courses on business and Texas jurisprudence, it is simply impractical to instill in the provider all the information he or she will need to navigate the legalities of modern healthcare. Even lawyers who specialize in health law must constantly stay up-to-date on recent developments.
I’ve met some wonderful physicians over the years, but a common trait among them is that they will sign or enter into an agreement without reading the agreement or truly understanding what they are getting themselves into.
I once came across a physician who tried to sell my client her medical practice, not realizing she had sold it to someone else. Two years prior, she sold the practice to a “management company” and didn’t realize she was just an employee and not the owner. This example may be extreme, it is a consistent theme.
The practice of law is as technical as the practice of medicine. Lawyers shouldn’t practice medicine and physicians shouldn’t practice law. You will save yourself a lot of money and heartache if you retain competent legal counsel rather than trying to go it alone.
Show me a physician who tries to handle legal problems themselves and I’ll show you a physician who is going to be a great client. It’s much better to avoid the problem in the first place than to fix the problem after the fact.
Myth No. 7: There is a way around any legal prohibition or restriction.
Truth: The government has broad discretion to prosecute fraud and abuse. The Department of Justice will closely scrutinize arrangements designed to circumvent the law.
It is not uncommon for initial conversations with clients to begin, “I want to practice ethically and do everything above board, but is there a way around… [fill in the blank.]” This attitude is dangerous.
Federal and state healthcare and reimbursement statutes are broad and sweeping. The anti-kickback statute, for example, applies to any remuneration, that is, anything of value. And it applies to both sides of the transaction whether soliciting kickbacks or paying kickbacks. The government has broad discretion to review business arrangements and identify possible kickbacks. You may find yourself on the wrong side of a civil or criminal prosecution because the result of your arrangement is to pay you or someone else for the volume or value of referrals.
The Stark Law has a special penalty for “circumvention schemes” designed to avoid technical violations of the law. The Texas Patient Solicitation Act applies even more broadly than its federal counterparts.
The point is that you should avoid getting too clever with the types of arrangements you enter into. There are ways to structure deals legally, but there are also deals that can’t be structured in any way to make them appropriate.
Providers are right to want to stay above board, but that means saying no to certain questionable arrangements.
Myth No. 8: The government has better things to do than to focus on a single provider.
Truth: The government will investigate individual providers, but even if they don’t investigate you, your own employees may start legal action against you.
This is a corollary to the myth about strength in numbers. Once the government identifies the providers who have been involved with a particular scheme, they can and will go after single healthcare providers. Small clinics or large practices. It doesn’t matter. The government will target anyone who has been involved in the scheme.
But even if the government doesn’t seek you out, your employees are incentivized to turn you in.
The government provides incentives to turn people in who have submitted false claims to the government. Qui tam actions, also called “Whistleblower” actions, allow a citizen to file a lawsuit on behalf of the government and share in the money recovered. In the healthcare context, the False Claims Act allows private persons and entities with evidence of fraud against federal programs to sue the alleged wrongdoer on behalf of the government.
For 2018, the Department of Justice recovered over $2.5 billion in fraud judgments and settlements in the healthcare industry. $1.9 billion came from these whistleblower actions.
Don’t think your employees won’t turn you in. Disgruntled employees or competitors are rich sources of qui tam actions or unsolicited complaints to the government.
The government makes it easy to report fraud via various fraud hotlines. I have had clients whose disgruntled employees sent emails to the authorities outlining all the alleged fraudulent conduct. Just do a Google search on whistleblower attorneys in your area. You will be surprised at how many attorneys advertise this type of representation.
Don’t think for a minute that the government won’t focus on your small clinic. It will. But perhaps the government is not your biggest concern. Your employees or competitors can turn you in as well.
Myth No. 9: A new treatment, drug, or protocol, will make you a lot of money quickly.
Truth: There are no shortcuts to a profitable healthcare business. Watch out for those pushing such schemes.
One of the greatest joys of my practice is to be able to help healthcare providers be successful in their practices. Whether it is a new business venture or an ongoing practice, it’s great to see healthcare providers be successful. But there are times when clients think they are on the cusp of the next big thing. All we have to do is set up a business and do this or that, and they will catch the wave to financial prosperity.
There are very few get-rich-quick opportunities. That is even more true in healthcare. Because it’s so highly regulated, new and innovative products, treatments, or drugs often become the subject of fraud and concern. Even if it is effective, it takes years for the standard of care and the law to catch up. Coupled with the fact that the FDA monitors devices and drugs, and that the Texas Medical Board is concerned about unapproved treatments, being on the cutting-edge is usually not desirable.
A great example is stem cell therapies. Stem cells offer great promise. However, the science is still developing and many of these products are not yet approved by the FDA. The Texas Medical Board has taken a unique interest in stem cell therapies and the types of representations been made to the public about their efficacy.
Be very skeptical about embracing the “next big thing.” Focus on marginal improvements in your practice and business that compound over time to yield outstanding results. Address the legal liabilities and pitfalls immediately in front of you rather than taking on an entirely new set of risks.
Myth No. 10: If someone files a complaint against you with your licensing board, all you need to do is send a letter to the Board and explain your side of the story. The complaint will go away.
Truth: Providers often make the situation worse by failing to appreciate all the rules and regulations governing the practice of medicine in Texas.
The unfortunate reality of being a professional is that you may one day be faced with a complaint filed against you by a patient. Complaints are filed for many reasons. Sometimes, providers fall short of the expected standard of care. Other times, clients file complaints because they are angry about some aspect of their treatment or want their money back. Whatever the reason, complaints must be taken seriously and responded to timely and appropriately.
I’ve been called more than once by providers who tried to handle it themselves. They fired off an answer to the Board only to make the situation worse. Now, instead of facing a minor complaint, they are dealing with a more serious violation.
Besides the legal aspects of the case, there are practical considerations. As the provider, you may not be able to look at the situation objectively. You may not recognize some important element of the complaint, or appreciate how a casual explanation can raise questions about other statutes and regulations. I’ve had several clients who thought they were helping themselves by explaining their side of the story, but all they did was create additional questions about other potential violations.
Most providers don’t realize that once the Board starts an investigation, they are not limited to the specific complaint. Like the Camel’s nose, once they are in a little, they are all in. Nothing is off-limits. The Board will review all aspects of your practice and your care. While defending yourself against one violation, you might inadvertently admit to another.
Even if you feel like the complaint has no merit, you should hire experienced counsel to represent you throughout the complaint process. Your attorney can make sure you meet all the applicable deadlines and put you in the best position possible for a favorable outcome.
Also, an experienced attorney has been through the complaint and hearing process before and understands the expectations of the Board and what resolution is possible.
Conclusion
These are just a few health law myths. It is unfortunate that there is such misinformation. Healthcare practice in today’s environment is challenging enough, but doing so with the wrong understanding makes it more difficult.
Finding a good health law attorney to help you avoid costly mistakes can make your practice more profitable and less stressful.
For much of the past decade, peripheral neurostimulator devices have been used liberally by some practitioners to treat chronic pain. In addition to pain relief, any manufacturers also promise providers that these devices are reimbursable by Medicare.
This combination of relief and reimbursement has proven irresistible. Why not use a device that gives patients relief from chronic pain? The fact that Medicare reimburses roughly $6500 for a device that only costs $250 – $700 makes it even more attractive.
The problem is that this simply is not true. Medicare rules do not allow for reimbursement of these devices and never have. Providers who submit these neurostim claims to the Centers for Medicare and Medicaid Services (CMS) are submitting false claims to the government.
The government has taken notice and is cracking down.
If you have billed Medicare for electro-acupuncture devices, such as P-Stim, ANSiStim, or Stivax, you will be audited by CMS or prosecuted by the OIG. If you have not yet been contacted by the government, there are proactive steps you can take to try to minimize your exposure. If you have been contacted by the government, you need experienced counsel. Contact Wade Emmert at wemmert@ccsb.com or (214) 855-3040 for experienced advice.
Types of Nerve Stimulation
Using mild electrical current to treat nerve pain is not new. There are several treatment modalities designed to focus electrical signals at pain-causing nerves to interfere with the way nerves relay information about pain to the brain.
One method is called TENS, which has been in use for decades and is well-proven. TENS stands for Transcutaneous Electrical Nerve Stimulation. Transcutaneous simply means that the electrical pulse is transferred across the depth of the skin.
TensUnits.com
Another modality is PENS, or Percutaneous Electrical Nerve Stimulation, which combines the concept of TENS with acupuncture. Percutaneous means that the electrical pulse is transferred through or into the skin by way of a needle. Instead of transferring the electrical pulse across the skin, PENS uses small needles to penetrate into the skin and deliver current closer to the nerves or the muscles beneath the skin, making the nerves less sensitive to pain. PENS is less proven and many insurance companies consider percutaneous neuromodulation therapy (PNT), to be investigational.
Patient getting electro dry needling on his back in clinic via IslandLifeAcupuncture.com
Auricular Peripheral Nerve Stimulation (APNS) takes the concept of PENS a step farther. With APNS, acupuncture needle electrodes are inserted into the patient’s ear to direct electric pulses to the nerve cluster in the ear.
Unlike PENS, where the needle electrodes are placed in proximity to the nerve serving the area of chronic pain, in APNS the placement of the needles is based on the flow of the person’s life-giving force called ‘qi’ (pronounced ‘chee’).
In concept, the ear has different zones and the placement of the needle electrodes in a particular combination of zones can treat conditions such as migraines, neck pain, occipital neuralgia, pelvic pain, insomnia, knee pain, tinnitus, TMJ pain, low back pain, mid back pain, post-surgical pain and edema, complex regional pain syndrome, shoulder pain, sphenopalatine ganglion neuralgia, chemical-induced peripheral neuropathy, chest wall / intercostal pain, foot pain, fibromyalgia, elbow pain, chronic fatigue, depression, and smoking cessation.
ANSiStim by DyAnsys is worn behind to relieve chronic pain without narcotics or side effects. Treatment typically takes ten to twelve weeks. (PRNewsFoto/DyAnsys)
The device is designed to be worn by the patient for several days. It is affixed by an adhesive behind the ear, on the neck, or shoulder. Electrodes run from the device to the patient’s ear where they are placed into the skin and secured by an adhesive covering. The protocols vary, but each device remains affixed for 4-14 days and patients can receive multiple devices in sequence over time.
APNS devices are sold under brand names like P-Stim™, ANSiStim®, and Stivax.3 Many of these devices are considered investigational, though a few have received marketing clearance by the U.S. Food and Drug Administration’s (FDA) for use in treating acute or chronic pain by a qualified practitioner of acupuncture.
That does not mean, however, that they are reimbursable by Medicare.
Obfuscation and Deception
The FDA classifies PENS and APNS devices as electro-acupuncture devices. Medicare does not cover acupuncture for any condition other than chronic low back pain.4 But that did not stop manufacturers from implying, or outright misrepresenting to providers, that these devices were legally reimbursable.
Providers were encouraged to use certain codes to report APNS to Medicare:5
CPT 64555
CPT 63663
CPT 95970-95972
HCPCS L8679
Unfortunately, none of these codes properly describe APNS because none of these procedures or devices involve implantation and because Medicare does not reimburse for electro-acupuncture.
CPT Code 64555
CPT Code 64555 is the procedure code for percutaneous implantation of the neurostimulator electrode array. This is the code to claim reimbursement for the physician to perform the procedure. Practitioners would bill around $1,000 per procedure using this code.
The American Medical Association (AMA) defines Code 64555 as a “percutaneous implantation of neurostimulator electrode array, peripheral nerve (excludes sacral nerve).” A percutaneous procedure is any procedure or method where access to inner organs or other tissue is performed via needle-puncture of the skin, rather than by using an “open” approach where inner organs or tissue are exposed (typically with the use of a scalpel.6
This diagnostic procedure which involves stimulation of peripheral nerves by a needle electrode inserted through the skin is performed only in a physician’s office, clinic, or hospital outpatient department. Therefore, it is covered only when performed by a physician or incident to physician’s service. If pain is effectively controlled by percutaneous stimulation, implantation of electrodes is warranted.
PNS refers to the placement of a lead by a physician (via open surgical or percutaneous approach) near the known anatomic location of a peripheral nerve. … It is preferable that the physicians performing the PNS trials will also perform the permanent implant. If the physician implanting the trial PNS does not or cannot implant the permanent neurostimulator(s), the patient should be informed of this in writing and given the name of the referral surgeon who will implant the permanent neurostimulator(s).
Neurostim treatments are recoverable only when the electrodes are implanted percutaneously by a physician, typically performed in an outpatient setting at an ambulatory surgical center. Even then, such procedures are recoverable only when other, less invasive procedures have failed.
APNS devices are never percutaneously implanted and therefore do not meet the definition for CPT 64555.
CPT 63663
CPT Code 63663 is the procedure code for the revision or replacement of percutaneous spinal neurostimulator electrodes. With spinal cord stimulation (SCS), mild electrical stimulation is delivered to nerves along the spinal column, modifying or blocking nerve activity to minimize the sensation of pain reaching the brain.
The pulse generator for SCS is a small device that is implanted near the spine in the same way a cardiac pacemaker might be implanted to treat abnormal heart rhythms.
As we discussed regarding CPT 64555, electro-acupuncture devices are not implanted and have little involvement with the spine. They do not meet the description for CPT 63663.
CPT 95970–95972
These procedure codes allow for the electronic analysis of implanted neurostimulator pulse generators/transmitters. As we discussed regarding CPT 64555, electro-acupuncture devices are not implanted. Since they are not implanted, providers cannot bill for analysis of the devices as if they were. These codes are not appropriate for electro-acupuncture devices.
HCPCS L8679
HCPCS Code L8679 is the device code for an “implantable neurostimulator, pulse generator.”7 This is the code to claim reimbursement for the device itself. The device was priced at $10,000 for which Medicare reimbursed around $6,500.
Incidentally, these devices cost the provider only $250-$700 per device.
Similar to CPT 64555, to be reimbursable, the neurostimulator must be “implantable.” Again, neither the electro-acupuncture device nor the electrodes are implanted.
Some providers would also add Modifier 25 to Code L8679 procedures to increase reimbursement even more. Modifier 25 is defined as “a significant, separately identifiable Evaluation and Management (E/M) service by the same physician or other qualified health care professional on the same day of the procedure or other service.”8 It allows a provider to capture a separate, significant procedure performed on the same day as another procedure that would not otherwise be reimbursed.
Even if electro-acupuncture was properly coded as L8679, Modifier 25 would not be appropriate.
Providers in the Dark
Sales representatives for these electro-acupuncture devices knew they could sell more devices if the providers thought they could get reimbursed. When the providers started asking questions, some manufacturers doubled-down. They brought in consultants to coach providers on how to document the procedure in the medical records and code the treatment so that Medicare would pay the claim.
One sales representative, in response to “several inquiries recently from clients across the country regarding Stivax coding” offered a memo as “a way to proceed forward.” He stated:
After working closely with our compliance team over the past few weeks we are very happy to announce a new coding set that is to be used effective immediately.
The memo, entitled, “Coding for the Stivax Stimulator,” suggested tracts for Medicare billing using the codes previously debunked: L8679, 95970-95972, and 63663.
Other sales representatives suggested billing for the implantation of the electrodes rather than the device, by using CPT code 63650 and supply code E1399. Those codes require implantation too, which the APNS electrodes are not.
I have represented several providers who were duped into believing that these devices were legally reimbursable. While they were enticed by the opportunity to make money, none of them understood that these codes were improper. Some went as far as to hire a “compliance consultant” who was to make sure that everything they were doing was legal. Unbeknownst to them, this “compliance consultant” was also working with the manufacturer.
Medicare Crackdown
Based on these “stealth coding” practices advocated by some manufacturers, Medicare reimbursed many providers as if they had performed an implantation procedure of an implanted device.
CMS was slow to recognize the improper coding but responded early enough that manufacturers and sales representatives knew that these procedures and devices were not reimbursable by Medicare.
The CPT code 64555, does not describe the procedure of auricular acupuncture stimulation and it should be coded using the NOC CPT code 64999 – unlisted procedure, nervous system.
Novitas noted that the FDA classifies APNS as “electro-acupuncture devices” because they stimulate auricular acupuncture points. As such, they “are non-covered by Medicare in that Acupuncture is not a covered Medicare benefit[.]”
The article directs providers to bill these devices only with the CPT procedure code 64999, which describes an unlisted procedure for the nervous system. Using this CPT code properly conveys to Medicare that the service provided is not otherwise classified (NOC). In practice, this means that the procedure will not be reimbursed.
More recent CMS publications have warned against claims based on the other codes.
The Centers for Medicare & Medicaid Services (CMS) is aware that some providers are submitting claims incorrectly to Medicare using HCPCS code L8679. This article reminds providers of Medicare policy regarding these devices. Make sure your billing staff are aware of the correct policy. …
Providers are inappropriately coding electro-acupuncture devices as implantable neurostimulators (HCPCS L8679 – implantable neurostimulator, pulse generator, any type), which are Medicare-covered devices that require surgical implantation into the central nervous system or targeted peripheral nerve, and are usually implanted via procedures performed in operating rooms (see CMS Publication 100-03, National Coverage Determination (NCD) Manual, Section 160.7). While both devices can be used to treat chronic pain, the electro-acupuncture devices are non-invasive (that is, do not require surgical implantation and/or an incision), and have an external battery source. Electro-acupuncture devices and implantable neurostimulators are two separate devices, and coding electro-acupuncture devices as implantable neurostimulators is incorrect.
This article is to notify providers of the initiation of a widespread service specific targeted review for Healthcare Common Procedure Coding System (HCPCS) L8679, implantable neurostimulator, pulse generator, any type. The article further provides instruction on the use of the Noridian Medical Review website to facilitate proper submission of appropriate records and Medical Review contact information.
Recoveries by the Department of Justice and Office of Inspector General
CMS, the Department of Justice (DOJ), and the Office of Inspector General (OIG) have initiated False Claims Act prosecutions to recoup payments for electro-acupuncture treatments. The number and frequency of these actions are increasing.
In most cases, recoupment starts with a CMS audit of medical and billing records for claims involving CPT 64555 and HCPCS L8679. At the conclusion of the audit, CMS will either request recoupment of funds or turn the matter over to the OIG who, with the assistance of the DOJ, will prosecute a civil action (though sometimes criminal action) against the provider.
An Assistant United States Attorney assigned to the matter will issue one or more Civil Investigative Demands (CID) to the provider. A CID is a discovery device used to obtain written answers and documents relevant to their investigation or prosecution. These CIDs are often hand-delivered by OIG or FBI agents directly to the provider in the provider’s office.
The provider will need to hire competent legal counsel if they have not already done so. The provider’s attorney will either work to resolve the matter as cost-effectively as possible or prepare the case for trial.
In False Claims Act cases, the government can seek three times the amount of the Medicare reimbursement plus penalties per claim. For example, if the provider was reimbursed $500,000 for 80 devices, damages at trial could be:
Depending on the facts of the case, the government will usually start settlement discussions at double damages with little or no penalties. With the specter of trial and significant damages, many providers are motivated to resolve the matter prior to trial.
The reported number of settlements over the past two years is steadily increasing and Texas has become fertile ground for recoveries. These types of cases have proven irresistible to politically motivated U.S. Attorneys as the cases involve significant recoveries and public opinion is on the government’s side.
February 2021, U.S. Attorney’s Office for the Southern District of Texas. Chiropractor in an integrated practice agreed to pay $273,000 to settle allegations that he improperly billed. Medicare for implantation of ANSiStim and Stivax devices.
January 2021, U.S. Attorney’s Office for the Northern District of Texas. Chiropractor in an integrated practice agreed to pay $90,000 to settle allegations that he improperly billed Medicare for implantation of ANSiStim and Stivax devices.
January 2021, U.S. Attorney’s Office for the Eastern District of Texas. Clinic agreed to pay $330,898 to settle allegations that it improperly billed Medicare for the implantation of 41 neurostimulator devices in an office setting.
September 2020, U.S. Attorney’s Office for the Eastern District of Pennsylvania. A neurosurgery practice, its surgeon and director agreed to pay more than $1 million to resolve allegations that the practice, among other things, billed Medicare for the implantation of the P-Stim and Stivax devices. The neurosurgeon has since sued the marketers who allegedly pushed him to bill federal healthcare programs for the use of these devices.
August 2020, U.S. Attorney’s Office for the Southern District of Georgia. A medical practice had been ordered to pay more than $4.3 million, and the practice’s owner and chiropractor ordered to pay $700,000, to resolve claims that they billed Medicare for implantation of hundreds of P-Stim devices.
Medicare rules do not allow for reimbursement of electro-acupuncture devices and never have. Providers who file these claims with CMS under the guise of implanted neurostimulators are submitting false claims to the government. The government has taken notice and is actively targeting providers to recoup payments. The number of False Claims Act settlements has increased and there is no reason to believe they will slow down.
If you have billed Medicare for electro-acupuncture devices, such as P-Stim, ANSiStim, or Stivax, you will be audited by CMS or prosecuted by the OIG. If you have not yet been contacted by the government, there are proactive steps you can take to try to minimize your exposure. If you have been contacted by the government, you need experienced counsel.
Contact Wade Emmert at wemmert@ccsb.com or (214) 855-3040 for experienced advice.
