Episode Transcript
Speaker 0 00:00:00 Hello everyone. My name is Jesse Caplin and I'm managing director of corporate oversight at affiliated monitors. I'm joined today by two of my colleagues, Dion Lomax, who is our managing director of antitrust and trade regulation. And Jim Ann, Leon, who is our director of healthcare compliance services. Today, we're going to discuss what to expect in the healthcare industry in 2021 and beyond. We're going to look particularly at the expansion of healthcare services and healthcare coverage and the entrepreneurial opportunities, this expansion presents. And we're going to be focusing not only on the business opportunities, but the compliance risks and how to mitigate those risks. But before we begin, I'd like Deon and Jim to introduce themselves Dionne,
Speaker 1 00:00:45 Thank you, Jesse, and hello everyone. And of course it is the light full to be here with my esteemed colleagues. So as the managing director of antitrust intrigued regulation, I am essentially responsible for setting the overall strategy for client matters involving, and I trust Trey regulation, competition, all those things in the healthcare industry, as well as a variety of other industries. And so I would just say, I look forward to discussing these very important issues with both of you.
Speaker 0 00:01:16 Great. Thank you, Dionne and Jim,
Speaker 2 00:01:19 Thank you, Jesse pleasure to be here this morning. My background is I've been director of healthcare compliance services for affiliated monitors since our inception in 2004. Prior to that, I had served as legal counsel to a number of different professional licensing boards in Massachusetts for about 16 years. And before that had been a specialist in the healthcare facility licensing division in the state department of public health. So I come to this with more than 35 years worth of experience in government regulation to the healthcare industry. And my responsibility is that affiliated monitors have been primarily in terms of independent monitoring of individual and group health care practices and the assessment and development of internal compliance programs for health care providers.
Speaker 0 00:02:11 So over the past year, and in large part due to the COVID pandemic, we've seen an expansion in the use of new technologies and new strategies for delivering healthcare and the expansion in insurance coverage for those services. You know, and I don't think I'm going out on a limb to predict that with the new Biden administration, we're going to see even more expansion of who will have access to healthcare and more taxpayer funded coverage for individuals. This has created and continues to create opportunities for new and innovative approaches to the delivery of healthcare services. So I'm going to start with you, Jim, can you tell us some more about, or some examples of the expansion and innovation you've seen over the past year and what we can expect in the near future?
Speaker 2 00:02:55 Well, I think clearly the biggest expansion that's taken place of has been the, the rapid expansion of telehealth services largely in response to the pandemic. And the interesting thing is the federal regulators have essentially relaxed a lot of the restrictions that used to apply to telehealth services. You don't need to be in rural area to receive them anymore. The scope of the services that can be provided via telehealth technology has been greatly expanded. And the fed to re equalized federal program reimbursement for healthcare services provided by tele-health technology. With those that are provided in person, there have been some challenges involved in this, particularly for state regulatory authorities, because they've had to deal with the question of whether it is permissible for someone who is licensed in one state to deliver services via telehealth, to a patient who might be located at another. And that's forced them to look very carefully at things like licensure by reciprocity, licensure by endorsement.
Speaker 2 00:03:59 How do we make licenses essentially mobile across state lines to facilitate all of this? And the interesting thing is that the new administration, it looks as though there's going to be legislation in Congress this year to make a lot of these various changes. Permanent. The result is that this has created a lot more opportunities for entrepreneurial innovative kinds of approaches to healthcare service delivery, but it would be a mistake for anybody to think that because these restrictions have been relaxed to some extent that that regulatory environment in which they work has disappeared entirely. And that's particularly a big risk for new entrepreneurs who are looking at new systems of delivering healthcare.
Speaker 0 00:04:48 Yeah, that's really interesting, Jim. I know from my own experience that, you know, my most recent or at least over the last year, uh, physician appointments have basically been all virtual and using platforms that I'd think in the past probably would not have been permitted. And I've always wondered, is this going to last? And I guess we'll see, but I think history tells us that whenever you see an expansion in services and healthcare and particularly greater coverage and access to Medicare and Medicaid funds to pay for those services, you're going to see fraudsters trying to take advantage. So, Jim, what are the regulators seeing this time in terms of potential fraud?
Speaker 2 00:05:29 Well, what's really interesting is that the federal sources we've been talking to have said that they're not seeing any new types of healthcare fraud schemes. What they're seeing essentially is the old types of healthcare fraud schemes applied to new streams of revenue, sort of like old wine and new bottles. For example, they went after a Tennessee outfit recently in which there was a set of call centers that have been set up and the people in the call centers were impersonating medical professionals, obtaining patient health information and prescription data and persuading these patients to buy services that were more expensive than what they needed, or products or services that would be reimbursable under Medicare or Medicaid, and then billing the federal healthcare programs for those services. The feds are certainly paying attention to situations in which patients are being referred for telehealth services or for products delivered via telehealth technology.
Speaker 2 00:06:33 And the question of whether there are illegal or improper payments being made to those individuals for referring those patients. We're also seeing some improper use of tele-health and soliciting prescriptions for medically unnecessary, durable medical equipment and improper billing for clinical services, which have claimed to be provided in person, but were in fact, never furnished. One of the things that they're watching, particularly in terms of physician delivery of healthcare services has to do with physicians billing for a volume of patient encounters that would be physically impossible. They could not possibly deliver them in the time they,
Speaker 1 00:07:13 So Jim, these all sound rather alarming, also some stark examples of outright fraud on the healthcare system. And so I'm curious what about those companies and entrepreneurs that have legitimate services and innovations? So in my experience, you know, if they are new to healthcare or they're new to, depending on revenue coming from government programs, they don't always appreciate the way that we do. They don't always appreciate the complexity and the risks from government regulation. Is that your experience as well?
Speaker 2 00:07:48 Oh, absolutely. I mean, I'm reminded of a case we handled for a client several years ago. The client had sort of an interesting concept. They were going to use vans with fluoroscopy equipment on board and go to nursing homes and do evaluations of patients who might have swallowing difficulties rather than forcing the nursing comes to send those residents out to hospitals for that kind of testing. But what they didn't understand before they began, this process was one, the level of physician supervision that Medicare was going to require on the performance of those tests. And secondly, and more importantly, how to bill properly for those services, they were going to have to get the money. In most cases on a payment from the nursing homes that they served, rather than being able to bill the Medicare part B program, they didn't understand all of these complexities.
Speaker 2 00:08:45 So one morning the owner wakes up, he goes to his office and he discovers that the office is surrounded by about a dozen heavily armed FBI agents with automatic weapons, you know, who are not letting anybody into or out of the building. He was charged with healthcare fraud as part of his settlement with the government. He was forced to divest himself of his ownership interest in the company. He was allowed to sell it. Interestingly enough, to his wife whose prior business experience consistent, almost entirely of running daycare programs. She knew nothing about the healthcare industry and for more than two years, she required some very intensive support from us in terms of developing an internal compliance program meetings, the billing requirements, figuring out how she had to document her services and so forth. Ultimately, the company failed because the business model wouldn't work. The amount of Medicare reimbursement that they would get for each patient that they saw was about 40% of what it would actually cost them to comply with all the regulatory requirements that apply. So my big message to everybody out there is if you're entering into this industry, understand that that regulatory environment is very complex and you need sound advice from trusted sources to navigate your way through that environment successfully.
Speaker 0 00:10:09 So, Jim, that's really interesting that example that you gave, uh, you know, so what are the lessons learned from that, that you can, you know, offer other entrepreneurs who are entering the healthcare space and may not be that familiar with the complexities and the regulatory environment?
Speaker 2 00:10:26 Well, as I said, I think the most important thing for new entrepreneurs who are trying to enter the industry is to understand that healthcare is a very, very highly regulated environment. You really have to understand what those regulatory requirements are, and you need to get sound advice. As I say, from a trusted resource as to how you can navigate your way through that process. And we can help with that here, affiliated monitors,
Speaker 0 00:10:55 Deon, I'd like to turn to you, you have a rich experience of representing healthcare companies and private equity firms. What's your prediction as to the prospects for merger acquisition and joint venture activity in the healthcare industry in the coming months and years
Speaker 1 00:11:10 First, let me start by backtracking for a moment and talk about what happened once the pandemic hit a year ago. Still can't believe it's been a year, but yes, a year ago. So shortly after the pandemic hit, you had the department of justice and the federal trade commission come together to issue a joint statement that essentially acknowledged that unprecedented cooperation is, would likely be required not just among federal and state agencies to battle the pandemic, but potentially between healthcare providers and others in the healthcare industry to ensure the continuity of supply to help ensure certain sectors or populations receive services. And that customers in various geographic areas are covered efficiently, et cetera. And so as a result, they instituted policies to relax some of the regulatory requirements. They relapsed some of the regulatory requirements around pre-merger notification filings or what we call in the antitrust, rural Hart, Scott Rodino, or HSR filings.
Speaker 1 00:12:13 They also relaxed some of the regulatory requirements around the merger review process, and they developed some expedited procedures and processes for the review of proposed collaborations for parties that want it to come together, but may have had some concerns from an antitrust perspective. So they allowed for an expedited review of a business review letter procedure at the DOJ and in an advisory opinion from the FTC and part of that guidance also noted various ways that health industry participants, you know, work together, right? Yes, this is very important to the pandemic. We're trying to get at it and solve it efficiently, but yeah, you can work together, but, but you can do it without violating the antitrust laws. And so, although I will say I haven't tracked it specifically just based alone on the sheer number of merger challenges that occurred last year, which were fairly significant. I think it's a strong indication that there was in fact, an uptick in collaborative activity in the industry. And so any type of collaboration among industry participants, whether it's a merger I joint venture or some other arrangement is going to raise compliance risks in general, especially for new entrance in the healthcare sector, or perhaps even those who are less experienced with government healthcare programs. And I think that with the terms of the Biden administration pandemic, notwithstanding I think that we are gonna continue to see robust enforcement in the healthcare space.
Speaker 0 00:13:46 So what would you counsel healthcare providers, particularly those not as familiar with the healthcare regulatory environment to do, to protect their investments from compliance risks, you know, as an antitrust expert, I know you have particular insights into hedging against antitrust enforcement risks, but I suspect that advice would also translate well into protecting against other health care compliance risks.
Speaker 1 00:14:08 That's absolutely right. And I think the best way to answer that is to just share a few practical tips for healthcare companies, particularly those who plan to collaborate with competitors. A lot of this advice is advice I used to give when I was in private practice, there are a number of practical steps that I think parties can take to a collaborative arrangement that will help ensure that their joint efforts with a competitor don't want to follow the antitrust laws. And like you said, some of these things that I say, I think can also be extrapolated beyond even antitrust, but first and foremost, make sure that there is a legitimate reason to collaborate in the first place. You don't want to try to use COVID-19 as a subterfuge for something that you couldn't do otherwise either from an antitrust perspective or from a fraud abuse perspective or what have you.
Speaker 1 00:14:58 So you really want to make sure the party should make sure that all of the activities that they are proposed, that they are engaging in are designed and tailored to fulfill the precise objectives of the venture. As you outline them from the start of the joint venture arrangement or collaboration or whatever it is. So the bottom line is that you, at least from an antitrust perspective, you want to be certain that there's a pro competitive purpose for the underlying venture. And that's just the starter. The second thing you want to do is you really want to make sure, and this is more from an antitrust perspective is you want to make sure that the meetings or discussions that are occurring regarding the collaboration of the venture document, the purpose for each and every meeting and instance where you're coming together with a rival, you want to make sure that there's an appropriate agenda and that the meeting participants actually adhere to that agenda.
Speaker 1 00:15:52 So that if questions arise later, you have contemporaneous evidence of the purpose and what presumably occurred at that meeting. You also want to make sure that executives or employees who participate in those meetings have an understanding of how to extract themselves. So to speak from a conversation that veers off into some type of a red flag area. In my experience, I used to counsel clients to make a noisy exit, you know, spill coffee on somebody, you know, pound the table and say, this is a problem. I'm, you know, I'm leaving now at the end of the day, you just want to make sure that there's 10 other people in the room, but they all remember who left the meeting, which company they were affiliated with. And then finally, I think you want to also remember that there is a limited purpose to the joint activity usually.
Speaker 1 00:16:41 Well, I shouldn't say usually, and some situations, joint collaborations or joint arrangements, particularly if it's around COVID, there's a time limit to that, right? And so parties should remain mindful of this and make sure that they steer clear of using that joint collaboration to do other things or engage in things that are unrelated to the purpose and objective of that collaboration. I always say, Hey, set an end date, make sure there's a clear deadline for when the collaboration will end. And once the purpose for that underlying collaboration or that venture are met, then the parties should cease their joint activity and go on about their normal business. And so even as I say this, I can hear someone thinking, okay, okay. How can a provider demonstrate that they are encouraging an enterprise wide antitrust compliance culture? For example, how do you do that? Well, three quick tips.
Speaker 1 00:17:38 First, you want to do that by making sure that everyone within the organization is committed to adhering to the law, whether that's anti-trust laws, fraud, and abuse, what have you, you're committed to adhering to the law, everyone from the board of directors to senior management, to sales representatives, human resources, everyone should know about the content of the program, the compliance program, how important compliance is to the company, how important I trust compliances or other compliance. And they should understand the importance of the role that they play in ensuring the compliance programs effectiveness. They should also make sure that they are actively documenting their compliance efforts all along the way in the anti-trust world. For example, if you have sales reps that are going to different conferences and trade shows, one way to do that is to have them particularly trade shows where there are lots of rivals present.
Speaker 1 00:18:32 You would have them law, the report, their plans to attend an upcoming trade show and then make sure that they received some type of periodic or updated. And I trust training prior to attending just as one example. And then thirdly, you want to conduct, and this is important because this is the world we live in Jesse and Jim, you want to conduct routine audits and antitrust risk assessments to test the programs. The fact of, if you can do that on your own, you can hire an independent outfit, someone like an AMI to just make sure that you're kicking the tires to make sure that the program is effective. And I think that this will help a provider or anyone in the healthcare industry tweak the program as necessary to ensure that it's ongoing that
Speaker 0 00:19:16 Well, that that's great Dion. And I actually going to kind of veer in a little bit of a different direction, but still on the same overall topic. And that is, uh, you know, an issue that I know you both are very familiar with. And that arises whenever we see new and innovative healthcare services is the question of who should be permitted more, who should be prohibited from providing those services. I'm talking specifically about professional licenser and what's called scope of practice issues. These questions, implicate state professional licensing boards. And I know, you know, Jim, you worked very closely with state professionalizing boards and it also involves the antitrust implications of licensing board decisions that seemingly reduce or eliminate competition for certain services, something that Dion I know you're very familiar with. So first with Jim, you know, can you tell us a little bit about the role of the professional licensing boards and regulating scope of practice issues and who usually makes up those boards?
Speaker 2 00:20:16 The state professional licensing boards in most States are comprised of a combination of practitioners in the field and some public members. Now in most state licensing boards, the members of the profession dominate the membership of the board. There are oftentimes no more than one or two public members on a licensing board, and that has implications, which Dion we'll talk about a little bit more in a moment, but the principal role of the licensing boards in each state are to define and regulate the scope of practice for the practitioners that they license. They do that in accordance with state legislation and in accordance with regulations that they develop themselves. For example, a state medical board will define the scope of practice for physicians. They'll also define, for example, what records a physician needs to keep about their patients. And that's sort of an important issue right now because the federal government has basically allowed physicians to bill for their services based on the amount of time they're spending with their patients, but be very careful about that because the federal programs still expect that those medical records will provide you with a complete picture of what happened with that patient and why, and state medical licensing boards have not necessarily changed their medical record documentation requirements to fit what the feds have decided to do.
Speaker 2 00:21:47 But the other issue that comes up with state professional licensing boards is when they get into the business of trying to decide, you know, whether their practitioners can do certain things or whether other practitioners in other fields are allowed to do the things that their practitioners are allowed to do. And those have raised some very, very interesting antitrust implications. And Diane's going to speak to that for a while.
Speaker 0 00:22:12 Yeah. So Dion, you know, as Jim mentioned that actions of state licensing boards can have real impact on the competitive environment in a particular healthcare practice area. What's the view of the federal antitrust enforcers on, on that.
Speaker 1 00:22:27 Okay. Okay. Yes. So state licensing boards, basically by definition, they're restricting competition when they limit or restrict who can practice in a particular area of health care and what services they can provide just by definition, they are restricting competition. Now that being said, if decisions on scope of practice are made appropriately, they can protect the health and wellbeing of consumers and they will be, and should be immune from any antitrust enforcement under something called the state action immunity doctrine. However, if state licensing scope of practice and enforcement decisions are not made appropriately or made for the wrong reasons, like protecting the financial interests of the practitioners, they license in oversea, for example, well then that can raise serious antitrust issues and could be subject to an antitrust enforcement action. And so typically, you know, the federal trade commission has it well, the DLJ and the federal trade commission, but the FTC has, has always had a bee in their bonnet for many years about how the state action doctrine has been treated in the courts.
Speaker 1 00:23:41 And so there's a very recent Supreme court case, North Carolina state board of dental examiners versus FTC. That is a good example. So let me just describe that case briefly. So in the North Carolina dental case, the Supreme court essentially held that the North Carolina board of dental examiners, which is a state agency, right, was not exempt from federal antitrust laws when it basically prohibited non dentists from providing teeth whitening services and competition with the States licensed dentists. So the court concluded that the antitrust laws apply to state agencies and regulatory boards. When those entities are comprised of market participants, if the boards challenged conduct, I say, quote, unquote, challenge conduct is not actively supervised by the state. And so in the wake of that Supreme court decision, various state officials have, you know, the, of course they were all up in arms about it, as you might imagine, Jim, so you had a number of state officials like, you know, the phones were blown off the hooks at the FTC because they want to know, wait a minute, we need advice regarding anti-trust compliance for our board.
Speaker 1 00:25:01 You know, you know, what are the parameters? How can we make sure that we're not going to get caught by antitrust Yemen, our various activities? And so on in response to those requests, just a few months after the Supreme court decision was issued back in October of 2015, the FTC staff issued some guidance addressing the parameters of quote unquote active supervision, this active supervision requirement under the state action doctrine and its proper application that included things like the staff's perspective on when a state regulatory body requires active supervision in order to invoke the state action defense, as well as various factors that from the FTC staff's perspective are relevant to determining whether the active supervision requirement is in fact satisfied.
Speaker 0 00:25:54 So, you know, that's a really interesting story in case, you know, there's an old adage that bad facts make bad law. I'm not suggesting that the Supreme court decision was bad law, but boy, you know, dentists getting together and trying to outlaw anyone else, but dentists to provide teeth whitening seems like truly, uh, was handing the FTC, you know, a great case to let that be out of their bonnet and try to hold these licensing boards to account. And I was actually general counsel to, uh, the Massachusetts health and human services agency when this decision came down and, and our agency oversaw the medical board in Massachusetts, and there are other agencies that oversee other professional licensing boards and we had to scramble to address case. And in fact, the, uh, the governor Massachusetts actually had to issue an executive order that provided a level of active state supervision for decisions made by these boards that could impact competition. So it really, it had a real world impact, I think probably on, on many boards in all 50 States,
Speaker 2 00:27:03 There are lots of implications in that North Carolina dental board case, Jesse, and some of what you've already touched upon, but one of the interesting facts in the North Carolina dental board case that, uh, and it's hard to know how much of an impact this had on the Supreme court's decision of the North Carolina dental board members, eight of the nine members of the board are dentists are licensed dentists, all eight of those licensed dentists are elected to the board from the state dental society. So the, essentially the state dental professional trade association controls the board and Jim, I think that's what the Supreme court was getting at. That's this whole market participants issue. Yeah. Right, exactly. So one of the implications for state licensing boards is how are your boards composed? What's the composition of that board look like? And to what extent does the governor or the legislature, as opposed to a professional trade association control membership of market participants on that licensing board?
Speaker 2 00:28:10 The second implication of course, is that when these licensing boards are making major policy decisions or enforcement decisions, they have to make sure that they are articulating some public protection interest in that decision. They cannot simply base those decisions on what might be best for the profession. My own experience back when I was at the division of professional, licensure included some very lengthy discussions with the federal trade commission about one of my licensing boards that was not particularly anxious to make records or prescriptions for contact lenses available to their patients. And there were a lot of anti-trust implications involved in that one preceded the North Carolina dental board case by a good 15 to 20 years. So there's a long history of this. And the question for state licensing boards is to make sure that they towed the line on these kinds of issues, or they run the risk, frankly, of having the federal trade commission intervene as sort of a super professional licensing board and changing, um, their policy directions.
Speaker 0 00:29:19 Well, that's really interesting, uh, Jim and Dion and, uh, I think we could probably do a whole nother podcast and maybe we will on the, you know, the North Carolina dental decision and the pros and cons of state licensing boards. Uh, and I'm sure Jim, you're not suggesting that practitioners on state licensing boards are looking out for their financial interests as opposed to the, uh, the health and safety of their, of their patients. Uh, not as a general rule. So I think we're going to wrap it up. You know, I know we're scheduled to follow up with a podcast next month and we plan to have a guest attorney who an expert on representing healthcare companies with issues before both federal and state enforcement agencies. So I think we're going to wrap it up here and look forward to seeing you all for our next podcast. Thank you, Deon. And thank you, Jen. Thank you guys. Thanks very much, Jesse.
