Fitch Ratings reports that the Federal Trade Commission’s (FTC) new rule banning non-compete clauses could cause staffing issues for not-for-profit (NFP) hospitals already grappling with wage increases. The rule, which is set to take effect 120 days after its April 30, 2024, publication in the Federal Register, has already faced legal challenges. It could potentially increase wage pressure and introduce operational instability due to higher staff turnover, especially in smaller or rural NFP hospitals. The impact of the rule, if it survives court challenges, is expected to be felt in 2025. This development, along with other factors like minimum wage laws and increased scrutiny of hospital mergers and acquisitions, could sustain pressure on the sector.
Tag: Restrictive Covenants
Summary of article from Nelson Mullins Riley & Scarborough LLP, by Candace Friel, Denise Gunter, Carrie Hanger:
The Federal Trade Commission (FTC) has finalized a rule banning most non-compete agreements, with the rule set to take effect 120 days after its publication in the Federal Register. The rule applies to all workers, regardless of title, job function, or compensation, excluding “Senior Executives” as per a narrowly defined term. Non-profit organizations are exempt from the rule. The rule is expected to significantly impact industries such as healthcare where non-compete agreements are common. Legal challenges to the rule have already been initiated, with the U.S. Chamber of Commerce announcing its intention to sue the FTC and a lawsuit filed on April 23, 2024.
Summary of article from Ars Technica, by Jon Brodkin:
The Federal Trade Commission (FTC) has issued a final rule banning noncompete clauses, rendering most existing clauses unenforceable, citing that they are an unfair method of competition and a violation of Section 5 of the FTC Act. The rule will take effect 120 days after its publication in the Federal Register, affecting approximately 30 million US workers currently bound by such clauses. The rule will not apply to senior executives, defined as those earning more than $151,164 annually and in policy-making positions. The FTC argues that noncompete clauses suppress wages, innovation, and economic dynamism, and believes businesses can protect trade secrets through other means like nondisclosure agreements. The US Chamber of Commerce intends to sue the FTC, claiming the rule undermines the competitiveness of American businesses.
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Top Ten Health Law Myths
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.
There is no strength in numbers, only exposure. If you need any convincing, read my recent article on the government’s attempts to recoup funds paid out for neurostimulators.
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.