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Do I need a Business Associate Agreement?

Your healthcare entity may need to enter into a signed Business Associate Agreement with certain vendors and contractors that you have contracted with depending on the type of services that will be provided to your healthcare entity. Failure to produce a signed Business Associate Agreement could lead to fines and/or penalties by the Office for Civil Rights (“OCR”) in connection with potential HIPAA violations.

 

What is a Business Associate?

A business associate is one that creates, receives, maintains or transmits protected health information (“PHI”). Companies that only store encrypted PHI are also considered Business Associates. Subcontractors may also have to sign a Business Associate Agreement if they create, receive, maintain, or transmit PHI on behalf of a business associate.

A healthcare provider is not considered a business associate if disclosure of PHI is required for treatment. A covered entity participating in an Organized Health Care Arrangement (“OHCA”) that performs a function or activity for or on behalf of the OHCA is not a business associate if it is acting on behalf of the OHCA as a whole.

 

Business Associates Restrictions and Requirements

Business associates may use or disclose PHI only as permitted or required by the Business Associate Agreement or as required by law. Business associates will be directly liable under the HIPAA Rules and subject to civil and criminal penalties for failing to comply with the Business Associate Agreement or the HIPAA Security Rule.

If a Business Associate becomes aware of a security incident they must report it. A “security incident” includes “attempted or successful unauthorized access, use, disclosure, modification, or destruction of information or interference with system operations in an information system.”

Business Associates are governed by rules that provide specific guidance regarding the sale of patient information. For example, information can be sold for public health, treatment and payment, or for the sale of an entity. Additionally, information can be sold for research, but compensation must be reasonable and cost-based. Any information or data that is sold must be de-identified to remove any and all identifiers of the individual, relatives, employers, or household members.

 

Business Associate Agreement Requirements

The following is a list of items that must be addressed in a Business Associate Agreement:

  1. Establish the permitted and required uses and disclosures of PHI by the business associate.
  2. Provide that the business associate will not sue or further disclose the information other than as permitted or required by the contract or as required by law.
  3. Require the business associate to implement appropriate safeguards to prevent unauthorized use or disclosure of the PHI, including compliance with the Security Rule for ePHI.
  4. Require reporting to the covered entity of any improper use or disclosures including breaches.
  5. Require the business associate to make PHI available for access and amendment and require information for accounting.
  6. Require Privacy Rule compliance to the extent applicable.
  7. Require business associates to make books and records available to HHS.
  8. Require the business associate to return or destroy PHI at termination if feasible.
  9. Require the business associate to ensure that subcontractors agree to the same restrictions and conditions.
  10. Authorize termination of the contract by the covered entity if the business associate violates a material term.

 

Business Associate Agreement Regulatory Compliance

Periodically, Business Associate Agreements should be reviewed and updated as necessary to ensure that they are compliant with HIPAA and the HITECH Act or any other related laws.

OCR is responsible for auditing and only provide healthcare entities a narrow window to produce a list of its business associates. Therefore, it is critically important to maintain a list of business associates.

 

Things to consider

This is not an exhaustive list of a few things to consider when negotiating a BAA:

  1. Is this entity a Business Associate? If so, what will this BA be doing and does HIPAA allow for it?
  2. Do you want a stand alone BAA or will it be incorporated into other contracts?
  3. Has there been a discussion about indemnification and how much is required?
  4. Is a confidentiality agreement required for other information?
  5. Should we have a privacy official to design, implement and oversee privacy policy and procedure practices, including risk analysis and risk mitigation?

 

There are several other items to consider when drafting, negotiating and executing a Business Associate Agreement. If you have questions about Business Associate Agreements and how they work or whether yours incorporates the most recent legal requirements you should contact us today.

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This post was authored by Jamaal R. Jones, Esquire  Jones Health Law, P.A. for more information contact me at (305) 877-5054; email me at JRJ@JonesHealthLaw.com, or visit our website at www.JonesHealthLaw.com.

 

It should be noted that I am not your lawyer (unless you have presently retained my services through a retainer agreement). This post is not intended as legal advice, it is purely educational and informational, and no attorney-client relationship shall result after reading it. Please consult your own attorney for legal advice. If you do not have one and would like to retain my legal services please contact me using the information listed above.

 

All of the information and references made to laws, regulations, and advisory opinions were accurate based on the law as it existed at this time, but laws are constantly evolving. Please contact me to be sure that the law which will govern your business is current. Thank you.

Healthcare Provider Marketing and Management Arrangements

Healthcare providers interested in entering into marketing or management arrangements with companies must structure these arrangements in such a way that they don’t violate any federal or Florida healthcare laws. Providers should avoid entering into any marketing and management arrangements, which gives the impression that they offered, paid, or solicited cash, or any other type of remuneration in exchange for referring patients to that provider. Failure to do so may result in an Anti-Kickback violation if the arrangement does not fit squarely within an Ant-Kickback Statute Safe Harbor.

Safe harbors that might be available to a healthcare provider, depending on the terms of the marketing or management arrangement, include, but, are not limited to the (1) referral; (2) personal services and management contract; and (3) referral arrangements for specialty services.

Providers may want to consider establishing relationships with lead generation companies for advertising purposes, rather than referral arrangements with marketing companies because they typically face less scrutiny than the latter.

Any payments made to the marketing and management companies must be for fair market value for the services that will be provided. Payments to the management and marketing companies must not fluctuate based upon the expectation or referrals or business that will be paid in whole or in party by a federal healthcare program.Percentage-based arrangements are looked at unfavorably by regulators and face significant scrutiny. Therefore, it is always safer to agree to fixed-fee or flat-fee (non-variable) compensation for management and marketing services.

Many providers believe that if they are not paying the management company directly that they are safe from potential liability. That is simply not true. Especially if the marketing or management company is also the owner of a healthcare clinic that benefits from the arrangement. These types of relationships look highly suspect. Providers must not enter into any contract with a practice management company if that management company receives any financial incentives form the referring provider for increasing outside referrals for designated healthcare services.

This informational article provides a brief overview of factors to consider prior to entering into these types of arrangements. However, there are many additional factors to consider. At Jones Health Law we careful scrutinize all potential marketing and/or marketing arrangements that our clients are contemplating. We counsel our clients on structuring the arrangement in such a way that it fits within an Ant-Kickback Statute Safe Harbor or an exception to the Stark Law (i.e. “Fair market value compensation” or “indirect compensation arrangement”). Further, we analyze whether the proposed arrangement could potentially violate any additional Health Law, business law, or agency rules. Additionally, we will help you draft a marketing and management agreements that best suits your needs.

Which Business Structure is Best for my Medical Practice?

Which Business Structure is Best for my Medical Practice?

Over the years many providers have come to my office expressing an interest in owning a medical practice, healthcare facility, or healthcare business. During these meetings, it is important to obtain pertinent background information about the healthcare entity followed by a discussion about some of the regulatory and licensing issues that may arise. Equally important is determining how the healthcare entity should be structured for asset protection and tax purposes. A corporate healthcare attorney like myself can determine whether it is best for you to create a corporation, LLC, or an LLP. Admittedly, some of the more complex tax issues should be discussed with an attorney that specializes in tax law. Here is an overview of some of the basic differences between the different business entities.

Sole Proprietorship

An individual who does not create an entity.

  • No taxes are imposed on the entity. Instead, the individual owner reports the income and pays the income taxes.

Professional Corporation (a/k/a “P.A.”):

A corporation in which one or more shareholders must be licensed professionals (or entities that themselves are wholly-owned by licensed professionals). The P.A. can be taxed either as an S Corporation or as a C Corporation.

 

Corporation:

A corporation whose owner is not limited solely to licensed professionals. The corporation can be taxed either as an S Corporation or as a C Corporation.

  • C Corporation: Unless it elects otherwise, a corporation must report its own income and pay its own income taxes, under Subchapter C of the Internal Revenue Code.
    • A C Corporation is also subject to Florida’s state corporate income tax at a rate of 5.5%. Any distributions of its earnings to its shareholders requires the shareholders to recognize dividend income, resulting in a second layer or taxation.
    • Many professional C Corporations attempt to avoid distributing dividends by paying all income as compensation (because although it is still taxable to the recipient employee/shareholder, the C corporation gets a deduction for such compensation, resulting in one-layer of taxation).
    • If a C corporation pays excessive compensation, the IRS may try to treat some of the compensation as a dividend distribution and deny the deduction to the corporation with respect to such imputed dividend.

LLLP

A limited liability limited partnership comprised of at least one general partner and at least one limited partner, which is created by filing a Certificate of Limited Partnership and indicated LLLP status in such certificate. The status provides a general liability shield for all of the general partners.

S Corporation

No tax generally imposed on a corporation that elects to be treated as an “S Corporation” under Subchapter S of the Code. Rather, the tax consequences flow-through to the shareholder(s).

  • Each shareholder reports his or her pro rata share of the tax consequences based on his or her ownership in the S corporation and pays the income tax at his or her effective personal income tax rate.
  • Any distribution to the shareholder(s) is not treated as a dividend, but rather first is a return of basis and then excess is capital gain: provided, however, if the S corporation was formerly a C corporation within the past 10 years and had earnings and profits, then a portion of the distributions of the S corporation could be subject to tax as a dividend (Rather than a return of basis).
  • Shareholder distributions:
    • must be made in the ratio or ownership;
    • can be abused to “save” payroll taxes applicable to compensation; and
    • lack the asset protection potential of compensation payable to the head of a family under Florida law.
    • A P.A. generally should elect to be taxed as an S corporation, preferably from inception.
    • If a corporation has already been taxed as a C corporation, then conversion to S Corporation status must be carefully considered to ensure that the “built-in gains” tax on unrealized receivables can be handled through proper accrual and payment of accounts payable and compensation.

Professional Limited Liability Company (a/k/a “P.L.”)

A limited liability company in which one or more members must be licensed professionals (or entities that themselves are wholly-owned by licensed professionals). The P.L. can be taxed either as a disregarded entity (if there is only one member), as a partnership (if there is more than one member), or an S Corporation (whether it has one or more members.)

LLC

A limited liability company whose ownership is not limited solely to licensed professionals. The LLC can be taxed either as a disregarded entity, a partnership or an S corporation.

General Partnership

An entity that is comprised of two or more general partners. No written document is necessary to create a general partnership.

LLP

A limited liability partnership is comprised of two or more general partners, which registers with the state by filing a Statement of Qualification. The registration provides a general liability shield for all of the partners.

Limited Partnership

An entity comprised of at least one general partner and at least one limited partner, which is created upon the filing of a Certificate of Limited Partnership with the state.

There are many factors to consider when deciding how to structure your medical practice or healthcare entity. You should obtain an in-depth analysis of the various business structures so that you can choose the best one suited for your needs. While it is not impossible to change from one business entity type to another, it is always best to choose the best structure from the very beginning. A capable attorney at Jones Health Law, P.A. would be happy to guide you through this process.

***This blog post does not constitute legal advice and is only intended for educational purposes. You should consult a licensed attorney in the State of Florida that specializes in healthcare law.***

What to Consider When Negotiation Physician Employment Agreements

Physicians employed by hospitals, group practices, or any other type of healthcare facility usually enter into the business relationship by signing a Physician Employment Agreement unless the physician is an independent contractor. At Jones Health Law, we instruct all of our physician clients to carefully review their Physician Employment Agreement prior to signing.

Many physicians believe that they can’t negotiate the contract. THIS IS NOT TRUE. Every section of the contract can be negotiated by your attorney. If you don’t approve of some of the terms contained therein you have to power to ask your prospective employer to change that provision so that it better suits you and your needs. Of course, the prospective employer may be unwilling to revise some of the terms of the contract, and at that point you have a very important decision to make. You have to decide whether these terms are deal breakers or not. Only you can decide whether you are going to take it or leave it.

There’s no secret that there’s a shortage of physicians and it’s even more difficult to find physicians adequately suited and licensed in certain specialties. Use that to your advantage when you enter the negotiation process. Younger physicians may have more difficulty with negotiating contracts but it is not impossible. You want to place yourself in the best situation possible even if it means walking away from a prospective employer.

Physicians must realize that while working for a specific healthcare facility may initially be a dream job it can turn into a nightmare later on. Terms of the contract can pose limitations on the physician for several years after their employment with that particular employer has concluded.

What to Look for When Negotiating Physician Employment Agreements

Physicians employed by hospitals, group practices, or any other type of healthcare facility usually enter into the business relationship by signing a Physician Employment Agreement unless the physician is an independent contractor. At Jones Health Law, we instruct all of our physician clients to carefully review their Physician Employment Agreement prior to signing.

 

Many physicians believe that they can’t negotiate the contract. THIS IS NOT TRUE. Every section of the contract can be negotiated by your attorney. If you don’t approve of some of the terms contained therein you have to power to ask your prospective employer to change that provision so that it better suits you and your needs. Of course, the prospective employer may be unwilling to revise some of the terms of the contract, and at that point you have a very important decision to make. You have to decide whether these terms are deal breakers or not. Only you can decide whether you are going to take it or leave it.

 

There’s no secret that there’s a shortage of physicians and it’s even more difficult to find physicians adequately suited and licensed in certain specialties. Use that to your advantage when you enter the negotiation process. Younger physicians may have more difficulty with negotiating contracts but it is not impossible. You want to place yourself in the best situation possible even if it means walking away from a prospective employer.

 

Physicians must realize that while working for a specific healthcare facility may initially be a dream job it can turn into a nightmare later on. Terms of the contract can pose limitations on the physician for several years after their employment with that particular employer has concluded.

 

Some physicians don’t bother to read the contract thoroughly if the financial incentives are very appealing. Yes, making $175,000 is a great salary, but here are a few things to consider that might not make that salary look so good after all:

 

  • Restrictive Period and Geographic Location: Physician Employment Agreements usually have a Covenant not to Compete clause that imposes limitations on certain actions that the physician can or cannot engage in. Many times the time and geographic restrictions are very lengthy and far-reaching. For example, a physician employment agreement may state that “You cannot solicit for current and past referral sources, or own, manage, operate, control or be employed by a medical practice or health care provider for a period of three (3) years within ten (10) miles of any of our office locations.” This becomes problematic if your employer has offices in every county in South Florida.

 

  • Transparency of Care: Many practices require that you follow the Practice Guidelines and Company Policies but don’t specifically identify any actions that can be taken against you or the procedure that follows if any of those guidelines and policies are violated.

 

  • Performance Evaluations: Negative performance evaluations may become a part of your employment record and may be used against you at subsequent PEER Review hearings, during litigation, or future contract negotiations. You want to determine who will be conducting the performance evaluations and whether that party will do so in a neutral and objective manner. This is very important because these evaluations can give rise to “for-cause” termination, which may negate your employer’s requirement to compensate you in accordance with the contract. Also, if you were to fail their performance evaluation you want to determine what its effect is and what recourse would be taken (i.e. mandatory education courses, termination, suspension, etc.)?

 

  • Conflicts, Confidentiality, and Nondisclosure: These paragraphs are usually drafted very broadly and in many cases they are too broad. For example, language in this section may preclude you from engaging in any type of business activity that could potentially interfere with the business of your employer. The employer may require that you obtain express written consent from them prior to engaging in any other type of business activity. This means that if your wife wants to open a dance studio and you want to be a co-owner you would first have to seek approval from your employer. Failure to do so might result in a breach of contract. Typically, the employer grants herself a lot of authority in this section and it will remain that way unless you negotiate a change.

 

  • Covenant not to Solicit Employees of Employer: For example, “You many not directly or indirectly orally or in writing solicit any Employee of Employer to work for another healthcare provider rendering the same or similar services to the services of the Employer.” This is one clause that causes a lot of physicians because they don’t realize that “stealing” an employee from a former employer may be actionable in court. Additionally, this clause as written is broad and means that you cannot place ads in any form of media while looking for employees of your practice if the employees of the employer could potentially see it. If you do so, and the employee is hired by your company you may have to pay the employer thousands of dollars for each violation. The reason for this is because an ad may be viewed as an indirect written solicitation even if the Employee wasn’t targeted specifically.

 

  • Effects of Termination: This is arguably the most costly section of any Physician Employment Agreement. I’ve seen agreements that state if a physician terminates the employment agreement prior to its natural expiration the physician will be responsible for paying to the employer six months of your base salary. In other words, if you resign from your employment and you are earning $150,000 base salary you would have to pay a whopping $75,000 to your employer.

 

  • Continuation of Contract: Many employers require advance notice that you don’t intend to extend the contact for another term period. Some employers require as much as six months written notice before the expiration of the agreement. Failure to do so may be actionable and they might seek damages. I advise my clients to reduce the requirement to three months notice at most because business opportunities may arise within that six month window.

 

  • Employer May Assign Agreement: Businesses are bought and sold all of the time and medical practices are no different. Many agreements state that the employment agreement will belong to the new owner and you are bound by the terms of the agreement during the remaining term period. I tell my physicians to negotiate this clause so that they have the option to terminate this employment agreement without triggering the Effect of Termination clause should the employer choose to assign its interest to a successor.

 

These are just a few of the problematic clauses that I typically encounter in Physician Employment Agreements but this is by no means an exhaustive list. The terms in Employment Agreements vary from one employer to the next. I strongly advise you to contact Jones Health Law so that an experienced healthcare attorney can review the contract and negotiate it on your behalf.